VANDELAY & VANDELAY

[2011] FamCA 472

FAMILY COURT OF AUSTRALIA

VANDELAY & VANDELAY [2011] FamCA 472

FAMILY LAW – PROPERTY SETTLEMENT – Orders for interlocutory injunctive relief.

Family Law Act 1975 (Cth): s 79(6), s 114

APPLICANT: Ms Vandelay

RESPONDENT: Mr Vandelay

FILE NUMBER: PAC 833 of 2010

DATE DELIVERED: 17 June 2011

PLACE DELIVERED: Parramatta

PLACE HEARD: Parramatta

JUDGMENT OF: Coleman J

HEARING DATE: 2 June 2011

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Schonell SC

SOLICITOR FOR THE APPLICANT: Fairfax Lawyers

COUNSEL FOR THE RESPONDENT: Mr Richardson SC

SOLICITOR FOR THE RESPONDENT: Coleman & Greig

Orders

1. That by consent the Court makes orders in terms of paragraphs 1, 2 & 3 of Exhibit “X”.

1. That orders be made in terms of paragraphs 1, 2 & 3 of Exhibit “Y” noting:

(a)That paragraph 1(b) of Exhibit “Y” is deleted.

(b)That the words “(now received)” are added to Exhibit “Y” after the word “confirmation” in paragraph 1.

(c)That after the word “period” in paragraph 1(d) the words “of not less than three months” appear.

1. That the costs of the proceedings are reserved.

1. Note that the making of orders in terms of Exhibit “X” is not contingent upon compliance with the orders contained in Exhibit “Y”.

1. That within 42 days the husband file and serve an affidavit detailing all attempts made by him or on his behalf to secure an in principle agreement for the refinancing of the secured indebtedness of the parties and their corporate and trust entities to Westpac Banking Corporation and give verified discovery and inspection of all documentation issued by or on his behalf for that purpose and all documentation issued or received in response to such documentation.

1. That liberty be reserved to either party to apply by telephone on 72 hours notice for further directions but in any event direct that the matter be relisted for further directions preferably by telephone on a day suitable to Senior Counsel for the parties prior to 2 September 2011.

1. Note that the Court will publish Reasons for Judgment in relation to the opposed orders made this day in terms of Exhibit “Y”.

1. That the hearing listed for five days commencing on 6 June 2011 be vacated.

IT IS NOTED that publication of this judgment under the pseudonym Vandelay v Vandelay is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT PARRAMATTA

FILE NUMBER: PAC 833 of 2010

Ms Vandelay

Applicant

And

Mr Vandelay

Respondent

REASONS FOR JUDGMENT

1. On Thursday 2 June 2011, after hearing Senior Counsel for each of the parties, the Court made interlocutory injunctive orders pursuant to s 114 of the Family Law Act 1975 (Cth) (“the Act”), substantially in the terms sought by Mr Vandelay (“the husband”).

2. Whilst declining to make orders in the terms sought by Ms Vandelay (“the wife”), the Court then stood over her application for interlocutory injunctive orders, together with the balance of an application by the husband for further interlocutory relief. The urgent requirement to do so, if any injunctive orders made by the Court were to have any utility, led the Court to make orders on 2 June 2011 without then providing reasons for such orders. The Court made the orders it did on 2 June 2011 for the reasons which follow.

3. On 2 June 2011, the parties entered into consent orders with respect to the sale of a number of identified parcels of land being portions of what has been referred to as the “[B Property]”, the effect of which would be to generate approximately $2.1 million within the time frame therein referred to. Such sum would be paid to Westpac Banking Corporation (“Westpac”). It is not in doubt that receipt of that sum would be insufficient for Westpac to stay its hand with respect to the parties’ continuing defaults under their loan contracts with Westpac.

4. The husband and wife have for some time been engaged in contested proceedings for settlement of property. Without suggesting that it is the fault of either party, the trial of the substantive property settlement proceedings has been delayed on a number of occasions, the most recent being the trial which was scheduled to commence on Monday 6 June 2011.

5. Whilst the records suggest that the parties’ contribution based entitlements are controversial, it appears that the major impediment to the proceedings being heard and decided relates to determining the net worth of the parties’ not inconsiderable assets. Whilst at this stage not a great deal can with confidence be regarded as agreed, some matters appear to be uncontroversial for the purpose of determining the competing applications of the parties on 2 June 2011.

6. It is not in doubt that the parties and/or entities beneficially owned or controlled by them are indebted to Westpac in the sum of approximately $13 million. Nor is it in doubt that the parties are in default under the contractual arrangements in existence between themselves, their entities and Westpac.

7. It is not in doubt that, as a consequence of defaults under a number of loan agreements, Westpac is entitled to exercise an array of rights with respect to the properties of the parties and/or the entities through which they are held. In broad terms, Westpac is entitled to exercise its contractual rights to sell properties of the parties and to divest control of such sales from the parties.

8. It is not in doubt that, whilst the parties do not, and probably cannot agree on the net value of their assets and those of their associated entities, the figure of $15 million net emerges as indicative of the likely value of their assets. Even if the true net worth is millions less than that sum, that would not alter things for the purpose of the applications which required determination on 2 June 2011.

9. The wife’s interlocutory application essentially sought the sale of a large rural property, and, it would seem, water rights associated with that property. That property is M Station which is located near Town 1 in Central Western New South Wales.

10. The property was valued in January 2011 by Mr I of C Valuers of Town 2, a copy of whose report became an exhibit (Exhibit R2) in the proceedings on 2 June 2011. For reasons which he set out in considerable detail, Mr I was of the opinion that M Station was worth $6.9 million and that the water licences/entitlements attaching to M Station were worth $4.275 million.

11. On 2 June 2011 the wife, through her Senior Counsel, urged the Court to order the sale of M Station in order to forestall the potentially draconian impact upon the parties and their assets of Westpac exercising its entitlements.

12. The husband, who seeks that he be awarded M Station in specie in the ultimate determination of the substantive proceedings, opposed its sale.

13. The husband sought that the parties enter into arrangements with respect to what has been referred to as “the [Y] Joint Venture”, the practical effect of which can for present purposes be stated to be that the parties would accept a discounted payment of $2 million with respect to entitlements from the Y Joint Venture potentially worth $2.5 million, albeit $1.5 million of that sum might not have materialised until well after the end of this year. In essence, by gaining funds earlier, and with greater certainty, was asserted to justify a $500,000.00 discount.

14. The wife opposed the husband’s proposal with respect to the Y Joint Venture. Not insignificantly, Senior Counsel for the wife did not suggest that the loss of $500,000.00 potentially arising from the husband’s proposal with respect to the Y Joint Venture would be unlikely to be able to be reflected in the wife’s favour in the ultimate determination of the substantive proceedings by reason of a deficiency in the net assets of the parties of that magnitude were it held to be appropriate to do so.

15. It was readily, and with respect properly, conceded by Senior Counsel for the husband that, if the Court accepted the husband’s proposal, it would be open to the wife at trial of the substantive proceedings to argue that the $500,000.00 “discount” thereby resulting from its acceptance should be visited upon the husband. However, the wife having opposed it, the husband could potentially argue at trial that the husband contributed materially to conserving the parties’ assets.

16. Conversely, Senior Counsel for the husband placed on the record that, if the husband’s proposal was rejected, and the parties suffered loss as a consequence, the husband would raise that at the trial of the substantive proceedings.

17. Objectively, and as a reading of the transcript of the interlocutory applications on 2 June 2011 would confirm, whatever the Court did or declined to do with respect to the interlocutory applications before it on 2 June 2011, the rights of both parties to agitate the impact of the consequences of the Court’s orders at the trial of the substantive proceedings would be at large.

18. As is not in doubt, the orders of 2 June 2011 with respect to controversial matters requiring determination reflected the Court’s preference for the husband’s proposal to that of the wife. There are a number of reasons why that was so.

19. Significantly, particularly as such undertaking had such real worth, and would be able to be given effect to if necessary in the final determination of the substantive proceedings, the husband provided a written undertaking as to damages (Exhibit R3).

20. The Court’s power to make the orders sought by both parties on 2 June 2011 was not in issue, and sensibly in the Court’s view was that so. Nor was it in issue that the discretion to make interlocutory injunctive orders was enlivened. The issue was simply what orders should be made.

21. Whilst it may have been open to the Court to make the orders sought by the husband by way of interim settlement of property, as was submitted to have been the case by his Senior Counsel, the Court prefers to exercise its powers to grant interlocutory injunctive relief pursuant to s 114 of the Act.

22. That is essentially so for two reasons. The first is that, in reality, the threat posed by Westpac does render the situation one in which the discretion to grant interlocutory injunctive relief is realistically enlivened. On either parties’ case, absent some effective action by the parties, they will lose control of very valuable assets, and Westpac will gain control of them, in circumstances where Westpac will sell those assets, without necessarily having the best interests of the parties foremost in its thinking.

23. Senior Counsel for the wife did not appear to suggest that the relief sought on her behalf was in reliance upon any power other than the Court’s power to grant interlocutory injunctive relief, nor did he need to in the Court’s view.

24. The second reason why the Court would be disinclined to approach the husband’s application via s 79(6) of the Act relates to the complete inability of the Court to form even the most tentative of views as to entitlements, even accepting that, as the authorities make clear, such a determination is not necessarily required in the exercise of power under s 79(6) of the Act.

25. As observed earlier, the husband seeks to retain M Station in specie in the substantive proceedings. The wife seeks its sale. Whether the husband will be successful or not in that regard, and whether it will even be possible to forestall the sale of M Station until there is a final trial, it is clear that to order its sale now would pre-empt a decision as to whether or not the husband should have the opportunity to acquire M Station as a result of the determination of the substantive proceedings.

26. Quite properly in the Court’s view, Senior Counsel for the wife stopped short of submitting that the Court could find, on 2 June 2011 at least, that the husband could not possibly be successful in his application for the transfer of M Station to him, although he clearly submitted that the possibilities were to the contrary on the evidence. Thus, one party’s case involves potentially preserving an asset which a party to the marriage seeks to retain, whilst the application of the other party involves its irreversible alienation.

27. As noted earlier, to the extent that the husband’s proposal may have resulted in a loss to the parties in the order of $500,000.00 referrable to the discount with respect to the Y Joint Venture, the wife could not be disadvantaged by having done so. Conversely, it may ultimately be established that the loss of $500,000.00 is exceeded by the losses to Westpac which would be sustained had the husband’s proposal not found favour with the Court on 2 June 2011.

28. The wife’s proposal was put to Westpac by the wife’s attorneys on 31 May 2011 (Exhibit R1).

29. On 1 June 2011, D Law Firm, Westpac’s attorneys, responded to the wife’s attorney’s letter of the previous day (Exhibit R1). D Law Firm advised that the orders proposed by the wife, which included the sale of M Station:

    “…potentially delay and inhibit the exercise of the Bank’s rights under its security”.

    The letter concluded:

    “The Bank does not, at this stage, consent to the Proposed Orders and reserves its rights to proceed with the exercise of its rights under the security”.

30. It thus appears improbable that, if acceded to by the Court, the wife’s proposal would have forestalled action by Westpac in any event. There is, sensibly, no suggestion that Westpac is bound by any orders this Court could have made on 2 June 2011. That was a material factor in the Court’s disinclination to embrace the wife’s proposal on 2 June 2011.

31. Another letter from Westpac’s attorneys, which materialised during the course of proceedings on 2 June 2011, was also influential in the exercise of the Court’s discretion. As the transcript would confirm, the Court suggested to Senior Counsel for the husband that, whilst he could argue with some justification that Westpac would not accept the wife’s proposal, there was no admissible evidence suggesting that Westpac would accept the husband’s proposal.

32. D Law Firm’s letter transmitted to the parties by facsimile at 13:02 on 2 June 2011 outlined the husband’s proposal with respect to the Y Joint Venture and recorded:

    4.The Bank will agree not to take steps to enforce its security for the three month period up to 4pm on 2 September 2011 provided:

    4.1by 4 pm on 3 June 2011:

    4.4.1the Bank receives, in cleared funds, the sum of no less than $2 million;

    4.4.2unconditional contracts for the sale of the [B Property] are exchanged on the basis that:

    (a)the sale price is not less than $2.1 million;

    (b)the completion date is no more than 42 days; and

    (c)a 10% deposit is received on exchange;

    4.2all interest accruing on the debt continues to be serviced;

    4.3the Bank receives the sale proceeds from the sale of any other secured assets (for example, [G Property] in relation to which contracts have already been exchanged); and

    4.4none of the borrowers or the guarantors filed a debtors’ petition, are made bankrupt, become the subject of a creditors petition, become the subject of any form of external administration for the purpose of the Corporations Act or become the subject of any winding up proceedings.

33. The $2 million referred to in paragraph 4.4.1 of D Law Firm’s letter would be generated by successful implementation of the husband’s proposal, the essential terms of which have been outlined earlier. The $2.1 million referred to in paragraph 4.4.2 of D Law Firm’s letter would be generated by successful implementation of the orders made by consent on 2 June 2011 to which reference has earlier been made (paragraph 3).

34. The evidence before the Court was thus that, on the one hand the wife’s proposal was unacceptable to Westpac, whilst the combination of the husband’s proposal, and the orders which the Court had made by consent earlier on 2 June 2011, was.

35. In all the circumstances, the discretion to grant interlocutory injunctive relief having undoubtedly been enlivened, the Court considered the most appropriate, just and equitable approach to be that sought by the husband.

36. Sensibly, given that the husband’s proposal would not necessarily forestall Westpac, either until 2 September 2011 or at all, Senior Counsel for the wife requested, and the Court agreed, that her application for the sale of M Station ought not be dismissed, as she may wish and/or need to revive such application.

37. Nothing arising from the orders of 2 June 2011, or these reasons for those orders, should be taken as precluding the wife successfully reviving her application for interlocutory injunctive relief with respect to M Station. Indeed, if the orders of 2 June 2011 are not implemented, or their implementation is not in strict accordance with the terms of their arrangements with Westpac, a sale of M Station may become irresistible.

38. In the event of the wife’s application to sell M Station being relisted and re-agitated, the Court will deal with and determine it on the evidence then presented.

I certify that the preceding thirty eight (38) paragraphs are a true copy of the reasons for judgment of the Honourable Justice I R Coleman delivered on 17 June 2011.

Associate: 

Date:  17.06.11