v Pty Ltd & Anor and Trellis & Ors

[2010] FamCA 695

FAMILY COURT OF AUSTRALIA

V PTY LTD AND ANOR & TRELLIS AND ORS [2010] FamCA 695

FAMILY LAW – JURISDICTION – Accrued

Family Law Act 1975 (Cth)

Philip Morris Inc v Adam Plaintiff Brown Male Fashions Pty Ltd (1981) 148 CLR 457
Marriage of Warby 28 Fam LR 443
Re Wakim; Ex Parte McNally ref Fencott (1983) 152 CLR 570
Re Wakim; Ex parte McNally (1999) 198 CLR 511
Australian Securities and Investments Commission v Edensor Nominees Pty Ltd (2001) 204 CLR 559
Marriage of Bishop (2003) FLC 93-144

FIRST APPLICANT: V Pty Limited

SECOND APPLICANT: Mr E Trellis

FIRST RESPONDENT: Ms Y Trellis

SECOND RESPONDENT: Mr P Trellis

THIRD RESPONDENT: B Holdings Pty Ltd

FOURTH RESPONDENT: G Pty Limited

FIFTH RESPONDENT: Mr N Trellis

SIXTH RESPONDENT: Ms A Trellis

FILE NUMBER: SYC 3598 of 2007

DATE DELIVERED: 6 August 2010

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

CORAM: Justice Ainslie-Wallace

HEARING DATE: 16 July 2010

REPRESENTATION

COUNSEL FOR FIRST & SECOND APPLICANTS:	Mr Barham
SOLICITOR FOR FIRST & SECOND APPLICANTS:	Boyd House & Partners
COUNSEL FOR FIRST RESPONDENT:	Mr Anderson
SOLICITOR FOR FIRST RESPONDENT:	McLaughlin & Riordan
COUNSEL FOR SECOND RESPONDENT:	Mr Roset
SOLICITOR FOR SECOND RESPONDENT:	Manion McCosker
SOLICITOR FOR THIRD RESPONDENT:	Harris Freidman Hyde Page
THE FOURTH RESPONDENT:	No appearance
THE FIFTH RESPONDENT:	No appearance
THE SIXTH RESPONDENT:	No appearance

Orders

1. That the Family Court of Australia declines to exercise jurisdiction in relation to the first respondent’s claim against the sixth and seventh respondents being contained in Orders 9.2 and 9.3 of the Amended Response to an Application for Final Orders filed on behalf of the wife on 26 March 2010.

2. That the wife’s claim as it relates to the sixth and seventh respondents be stayed pending the determination of the proceedings commenced by the applicants in the Supreme Court of NSW being proceedings 2009/….

3. Costs of all parties to the application are reserved.

IT IS NOTED that publication of this judgment under the pseudonym V Pty Ltd and Anor v Trellis and Ors is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER:  SYC3598 of 2007

V PTY LTD

First Applicant

E TRELLIS

Second Applicant

And

Y TRELLIS

First Respondent

P TRELLIS

Second Respondent

B HOLDINGS PTY LTD

Third Respondent

G PTY LTD

Fourth Respondent

N TRELLIS

Fifth Respondent

A TRELLIS

Sixth Respondent

REASONS FOR JUDGMENT

1. Mr E Trellis and V Pty Ltd (“the applicants”) seek orders that this Court decline to exercise jurisdiction in relation to a claim as between various respondents to the principal action or, in the alternative, a stay of proceedings in this Court pending determination of proceedings in the Supreme Court of NSW.

2. The respondents to the application are the wife Y Trellis, the husband P Trellis, B Holdings Pty Ltd (“B Holdings”), G Pty Ltd (“G Pty Ltd”) and the husband’s parents N and A Trellis.  The applicant E Trellis is the husband’s brother.  V Pty Ltd is a company of which he is the sole shareholder and director.

3. In respect of this application, the second respondent and the third respondent through its solicitors, whilst taking no part in the hearing, indicated that they would abide by the decision of the Court.

4. There was no appearance by or on behalf of the fourth, fifth or sixth respondents.

Background

1. The husband and wife were married and separated in March 2006.

2. There are two children of the marriage.

3. There are proceedings in this Court between them and B Holdings for property orders.

4. For many years the husband’s father, N Trellis owned and operated a successful business in Sydney.

5. During the course of the marriage, the husband, wife and E Trellis operated another business in Sydney in partnership.  The partnership was dissolved in about 2000.

6. In May 2001 B Holdings was incorporated.  There are four shares in that company.  The husband and wife hold one share each and two shares are held by G Pty Ltd.  The husband’s parents are the sole shareholders and directors of G Pty Ltd.

7. The major asset of B Holdings is a business in Sydney, “T Business” (“the business”).  B Holdings holds the lease of the property from which the business operates.  The husband and wife contributed financially to and in the running of the business as did N Trellis and his wife A Trellis.  The extent of those respective asserted contributions is to be determined in the final property hearing.

History to the present applications

1. N Trellis said that sometime before 2006, B Holdings was conducting T Business from premises in K Street Sydney (“the K Street premises”).  However, he believed that another location in R Street, Sydney presented a more advantageous location for the business.  N Trellis asserts that an agreement was reached with E Trellis and V Pty Ltd (“V Pty Ltd”) that he would take over occupation of the K Street premises.

2. E Trills opened a business at the K Street premises but did not have the benefit of a lease and eventually his right to occupy was terminated and the business was closed.

3. The effect of the agreement allowed B Holdings to enter into a lease of premises in R Street, Sydney which was a much more favourable location from which to operate a business and from which the T Business presently operates.

4. This arrangement favoured the interests of B Holdings, but was not particularly favourable to the applicants’ interests.

5. N Trellis further asserts that as a result of this arrangement, the family agreed that the shareholding of B Holdings would be adjusted to allow E Trellis a one-third interest in B Holdings.  The adjustment would necessarily reduce the other shareholdings.

6. Although it is said that this agreement was reached some years ago, N Trellis deposed that no action was taken on the agreement because of the marriage breakdown between the husband and the wife.

7. The wife denies being party to or having any knowledge of this agreement.

8. The asset pool as between the husband and the wife to be considered in the division of property comprises their respective shareholdings in B Holdings and an investment property.  That investment property is to be sold and the proceeds distributed between the parties and will be accounted for in the eventual disposition of the assets.

Applications

1. In late December 2009 V Pty Ltd and E Trellis as plaintiffs, by summons issued in the Equity Division of the Supreme Court of NSW, sought orders and declarations against the wife (first defendant), the husband (second defendant), G Pty Ltd (third defendant) and B Holdings (fourth defendant) for declarations that:

   a)there was such an agreement between E Trellis and B Holdings,

   b)there has been a breach of that agreement, and

   c)a declaration that B Holdings holds 1/3 of its shareholding in trust for E Trellis.

   The applicants, in the alternative, seek declarations that:

   a)there was an agreement between V Pty Ltd and the wife, the husband and G Pty Ltd that they would issue a further 2 shares in B Holdings and allot them to V Pty Ltd.

   The summons also seeks consequential orders, damages and costs.

2. On 26 March 2010 the wife amended her response to the application of the husband and B Holdings for final orders, joined the applicants and N and A Trellis and sought (relevantly to this aspect of the matter) the following orders:

   Interim orders that:

   “1.An order that the company [V] Pty Ltd (ACN […]) (“[V Pty Ltd]”) and [E Trellis] and any person acting as a deputy for him as a director of [V Pty Ltd] be restrained from taking any further step either by themselves, servants or agents in prosecuting Case No […] of 2009 in the Supreme Court of New South Wales Equity Division and any proceedings involving the same issues raised in those proceedings until determination of these proceedings in the Family Court.”

   The final orders sought by the wife were:

   “8.1That the husband and the second respondent be restrained without the prior consent of the wife or court order from doing any act or thing or giving any direction which might have the effect of:

   (i)altering any of the rights of any of the existing shareholders in [B Holdings] Pty Ltd;

   (ii)altering the memorandum of articles of association of [B Holdings] Pty Ltd;

   (iii)issuing any new shares in the capital of [B Holdings] Pty Ltd.

   8.2That until further order the husband and/or the second respondent be restrained from doing any act or thing as a shareholder or direct of [B Holdings] Pty Ltd (“the company”) without the consent of the wife or court order, and in particular from convening a general meeting or directors meeting of the company and voting in favour of any resolution of the company to procure the:

   (i)       allotment of new shares in the company;

   (ii)increase or decrease in the number of directors of the company;

   (iii)removal of the wife from the office of director of the company;

   (iv)increase in the remuneration or benefits obtained by the husband or any other shareholder from the company;

   (v)termination of employment of the wife by the company;

   (vi)decrease in the remuneration or benefits received by the wife from the company;

   (vii)termination of any lease held by the company other than in the usual course of business without the prior consent of the wife;

   (viii)entry into any lease or contract on behalf of the company without the consent of the wife;

   (ix)borrowing of any money by the company without the consent of the wife;

   (x)mortgaging, charging or encumbering any of the assets or properties of the company without the consent of the wife;

   (xi)issuing any securities by the company without the consent of the wife;

   (xii)the investment of any of the monies of the company without the consent of the wife.”

3. As against the applicants, the wife sought the following orders:

   “9.1.An order that the company [V Pty Ltd] and [E Trellis] and any person acting as a deputy for him as a director of [V Pty Ltd] be restrained from taking any further step either by themselves, servants or agents in prosecuting (the Supreme Court proceeding) pending determination of these proceedings in the Family Court.

   9.2.A declaration that [B Holdings] Pty Ltd is the sole owner of the business known as [T Business] at [R] Street Sydney and that consequently [V Pty Ltd] and [E Trellis] are not entitled to any interest or share by way of partnership or additional shareholding in [B Holdings] Pty Ltd in the said business.

   9.3.An order pursuant to s 106B and or s 90AE of the Family Law Act 1975 (and/or pursuant to the accrued jurisdiction of the Family Court that any agreement in October 2004, and/or December 2005 between [V Pty Ltd] and/or [E Trellis] and [B Holdings] Pty Ltd, [P Trellis], and [G] Pty Ltd or the directors and shareholders in [G] Pty Ltd namely [N Trellis] and [A Trellis], granting [E Trellis] a one third share in [T] business or granting [V Pty Ltd] two shares in [B Holdings] Pty Ltd be set aside;

   9.4.An order that the accounts of [B Holdings] be amended to reflect the recording of a loan from the wife in the sum of $100,456.75 and a loan to the husband in the sum of $426,734.75 in the accounts for the financial year ended 30 June 2008.

   9.5.An order that [B Holdings] and [N Trellis] and [P Trellis] as directors of the said company cause to be paid forthwith to the wife the sum of $100,456.75 to reduce her loan account in the said company to a nil balance.

   9.6.A declaration the [N Treills] and [P Trellis] breached their duties under sections 180, 181 and 182 of the Corporations Act 2001 in that they authorised payments to [G] Pty Ltd as management fees when any reasonable person in their position would have appreciated that [G] Pty Ltd’s entitlement to payment was at least arguable and improperly used their positions as directors of [B Holdings] Pty Ltd to gain an advantage for [G] Pty Ltd and thereby obtain an advantage for the benefit of [N Trellis] and [A Trellis] the parents of [P Trellis].

   9.7.An order that [G] Pty Ltd and or [N Trellis] and [A Trellis] cause to be repaid forthwith all the management fees received by the said company from [B Holdings] Pty Ltd to date.”

4. On 25 May 2010 the applicants filed an Application in a Case in which they sought orders that this Court decline to exercise jurisdiction in relation to the wife’s claim against them or, in the alternative, an order that the wife’s application be stayed until the claim in the Supreme Court of NSW has been determined or that so much of her claim as relates to them be dealt with as a separate issue.

5. On the application of the wife made in April 2010, the proceedings in the Supreme Court of NSW have been stayed until 7 October 2010 or until a determination of this issue in the Family Court of Australia.

Issues for determination

1. The argument on the applications concerned two issues:

   ·whether the orders sought by wife against the applicants attracted the accrued jurisdiction of the Court, and

   ·if so, whether the Court ought to exercise the jurisdiction so accrued.

Accrued Jurisdiction

1. In Philip Morris Inc v Adam Plaintiff Brown Male Fashions Pty Ltd (1981) 148 CLR 457 at 475, Barwick CJ defined accrued jurisdiction thus:

   “…when a court which can exercise federal jurisdiction has its jurisdiction attracted in relation to a matter, that jurisdiction extends to the resolution of the whole matter.  This accrued federal jurisdiction is not limited to matters incidental to that aspect of the matter which has in the first place attracted federal jurisdiction.  It extends, in my opinion, to the resolution of the whole matter between the parties.  This accrued jurisdiction carries with it the authority to make such remedial orders as are necessary or convenient for or in consequence of that resolution.  For this purpose, the court exercising federal jurisdiction may enforce rights which derive from a non-federal source.”

2. It is well settled law that the Family Court may exercise accrued jurisdiction to determine the non-federal aspects of a justiciable controversy of which the family law claim or cause of action forms a part.[1]

   [1] Marriage of Warby 28 Fam LR 443 at 79

3. There are a number of criteria by which courts have determined whether a single justiciable controversy exists.  It has been said that the determination of this is often a matter of impression because usually the issue will arise at an early stage of proceedings, perhaps before pleadings are closed or evidence is before the Court.[2]  However, the test was posited thus (footnotes omitted):

   “What is a single controversy ‘depends on what the parties have done, the relationships between or among them and the laws which attach rights or liabilities to their conduct and relationships’.  There is but a single matter if different claims arise out of ‘common transactions and facts’ or ‘a common substratum of facts’ notwithstanding that the facts upon which the claims depend ‘do not wholly coincide’. So, too, there is but one matter where different claims are so related that the determination of one is essential to the determination of the other, as for example, in the case of third party proceedings or where there are alternative claims for the same damage and the determination of one will either render the other otiose or necessitate its determination. Conversely, claims which are ‘completely disparate’, ‘completely separate and distinct’ or ‘distinct and unrelated’ are not part of the same matter.”

   [2] Re Wakim; Ex Parte McNally ref Fencott (1983) 152 CLR 570 at 608 per Mason, Murphy, Brennan and Deane JJ

4. For the respondent, it was argued that the dispute as it concerns the applicants arises from the same substratum of facts as the balance of the matters to be determined in the Family Court and properly considered, represents a single justiciable controversy.  The applicants contend that the issue as to their entitlement to a shareholding in B Holdings is discrete and severable from the resolution of the balance of matters in the Family Court.

Discussion

A single justiciable controversy?

1. The wife’s amended response in these proceedings seeks a wide spectrum of orders against the husband, B Holdings, N Trellis, G Pty Ltd, and the applicants.  Many of the orders sought, reach beyond the ordinary jurisdiction of the Court.

2. Counsel for the applicants argued that of itself, the wife’s amended response has created a number of separate and discrete issues which cannot admit of the characterisation of the matter as a single justiciable controversy.

3. Of the orders sought by the wife, only Orders 9.2 and 9.3 directly involve the applicants.

4. The resolution of the claim by the applicants to a shareholding in B Holdings is intrinsic to the resolution of the property claims as between the parties.  It is a dispute that will determine the extent of the parties’ financial interests and must be resolved before the Court can properly exercise its power pursuant to s 79 of the Act.

5. Although this case involves a number of different issues requiring determination, those issues involve the same parties and concern the parties association with the company B Holdings;  effectively the single asset of the parties at the centre of the controversy.  The financial dealings between the various parties as they relate to that central asset are interwoven.  It may well be said that the applicants’ claim could be severed from the other proceedings and heard separately as indeed was argued by counsel for the applicants.  However, that an issue could be separated does not of itself drive the conclusion that there is not a single justiciable controversy.

6. The authorities refer to the determination of this issue as being “a matter of impression” or one of “practical judgment”[3] because often, as here, the decision is made on incomplete pleadings and before any or any substantial evidence is put before the court.

   [3]Fencott v Muller (1983) 152 CLR 570 at 608

7. I am of the view that although there are a number of different claims which arise in this matter, at their heart they arise from “common transactions and facts”[4] and there is but one single justiciable controversy.  As a result, this Court is able to determine the non-federal aspects of the matter otherwise before it.

   [4]Re Wakim; Ex parte McNally (1999) 198 CLR 511 at 140

Should the jurisdiction be exercised?

1. In Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd [5] it was said:

   “This exercise of this jurisdiction, which for want of a better term I shall call “accrued” jurisdiction, is discretionary and not mandatory, though it will be obligatory to exercise the federal jurisdiction which has been attracted in relation to the matter.

   But I would add that there would need to be very good reasons why a court which could resolve the whole matter should refuse or fail to do so.”

   [5] ibid per Barwick CJ at 475

2. It was submitted that once jurisdiction has accrued the exercise of it is mandatory.  I do not accept that argument.  I have come to the view that the law does not demand that the jurisdiction be exercised.  In my opinion, the better view of the authorities is that it is a matter of discretion.

3. However, as was said in Australian Securities and Investments Commission v Edensor Nominees Pty Ltd[6] “jurisdiction once conferred is to be exercised” and in determining whether to exercise accrued jurisdiction, it is important to bear in mind what was said by the Full Court in the Marriage of Bishop[7];

   “We think some caution and a very careful examination of the facts needs to be exercised before applying the general notion that if a court has jurisdiction it ought to exercise it when dealing with claims involving third parties in family law cases.  That caution having been said, if, as in this case the facts support the exercise of accrued jurisdiction, the Court ought not to shy away from it.  It is a very important and necessary part of the Court’s powers.”

   [6](2001) 204 CLR 559 at 585 per Gleeson CJ, Gaudron and Gummow JJ

   [7] [2003] FLC 93-144 at 78,404

1. Clearly, the point of a single justiciable controversy is to enable one court to hear and resolve all of the issues between parties and facilitate the resolution of the issues in dispute between them.

2. While it is a matter ultimately of impression, and I readily concede that judicial minds might differ, in the circumstances of this case, I have determined that so far as the issue sought to be agitated by applicants’ proceedings in the Supreme Court is concerned, it is jurisdiction that ought not be exercised by this Court.

3. First, the issue of the applicants’ rights to a shareholding in B Holdings, once determined will in all practicality bind the parties and the determination of the matters in this Court.  The parties to the Supreme Court action are the same as in the Family Court.  The determination of the action in the Supreme Court of NSW will go a long way towards establishing the issues to be determined in the family law proceedings.

4. Secondly, of the orders sought by the wife against third parties, only those which seek to deny the rights being asserted by the applicants in the Supreme Court proceedings are relevant to the applicants.  To exercise the jurisdiction would engage the applicants in a wider, more expansive litigation in which many of the issues to be determined are irrelevant to their interests.

5. Finally, though persuasively, there was evidence before me that the application is likely to be resolved some time this year in the Supreme Court of NSW.   It was not argued that the whole of the litigation in this Court would be finalised in that time.

6. It was argued for the wife that to decline to exercise the jurisdiction would expose her to “double costs” in having to meet the same argument in two courts.  I do not accept that argument.

7. Whether the applicants’ claim is litigated in the Family Court of Australia or the Supreme Court of NSW, the wife will expend costs in opposing the order sought.  It was not suggested in any argument that if the applicants are successful in the Supreme Court, the decision would be re-agitated here.

8. It will better facilitate the swift determination of issues between the parties if the matter before the Supreme Court was allowed to continue on its course.

9. Therefore, I decline to exercise jurisdiction in relation to the wife’s claim against the applicants.

10. The question of costs of the application will be reserved to the conclusion of the proceedings in this Court.

I certify that the preceding forty-nine (49) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Ainslie-Wallace

Associate: 

Date:  6 August 2010