THOMAS & THOMAS v THOMAS & THOMAS No. SCGRG-00-527 [2000] SASC 408

2 The first and second defendants are wife and husband. They married on 3 February 1973 and separated on 12 September 1998.

3 On 14 October 1998 the wife made an application in the Family Court of Australia for an order for property settlement.

4 On 4 November 1998 an order was made in the Family Court by consent in the proceedings in the following terms -

"1. That until further order the husband and the wife be restrained and an injunction be granted restraining them from assigning, transferring, selling, disposing of, mortgaging, encumbering or wilfully diminishing or in any way wilfully (sic) affecting either the husband or the wife's interest either at law or in equity in any and all assets in his or her sole name or under his or her control without the written consent of the other party or an order of this Honourable Court.

2. That until further order the husband and the wife be restrained and an injunction be granted restraining both of them from assigning, transferring, selling, disposing of, mortgaging, encumbering or wilfully (sic) diminishing or in any way wilfully (sic) affecting any of the assets owned by the partnership of J & D Thomas, The Dean Thomas Family Trust, D C Thomas Pty Ltd and Lyndoch Valley Investments Pty Ltd without the written consent of the other party or an order of this Honourable Court."

5 The first plaintiff is the daughter and the second plaintiff is the son of the first and second defendants.

6 Until 30 June 1998 the husband, the son and the husband's mother conducted a farming partnership under the name of J & D Thomas.

7 On 1 July 1998 the husband, his mother and the two plaintiffs formed a new partnership in the name of J & D Thomas.

8 D C Thomas Pty Ltd is a trustee company and trustee of the Dean Thomas Family Trust. The two plaintiffs are shareholders of the company, the first plaintiff having become a shareholder on 28 April 1998 and the second plaintiff becoming a shareholder on 28 June 1994.

9 D C Thomas Pty Ltd owns most of the land upon which J & D Thomas conducts a farming business. The second defendant owns the other land upon which the business is conducted.

10 It is the plaintiffs' case that the defendants made representations to the plaintiffs that the land and farm would become theirs if they worked upon the property unpaid. They say that it was always understood by the plaintiffs and the defendants that the first defendant would have no claim to the land.

11 The plaintiffs claim that they relied upon those representations to their detriment.

12 It is not explained how the husband and the wife could make representations of the kind alleged when they were neither the legal or beneficial owners of the land. That will, no doubt, be a live issue at trial.

13 Prior to March 1993 the first defendant was a partner in J & D Thomas partnership. A settlement agreement was entered into on that date whereby she resigned from the partnership in consideration of the sum of $100,000.

14 Apparently it is a term of the settlement agreement that all land either held in the name of D C Thomas Pty Ltd or Dean Colin Thomas shall be held by the husband's mother and the husband for their joint lives and survival of them with the plaintiffs being presently entitled to the remainder expectant in the land. That term would apparently be inconsistent with the representations the plaintiffs claim were made to them.

15 On 30 April 1999, apparently without notice to the wife, a special resolution was passed by the company resolving that the husband be removed as the director of the company and for the first plaintiff being appointed in his place as a director. The second defendant advised that meeting that in view of his removal as director of the company he would transfer his share in the company and that pursuant to the rules governing the company first option was given to existing shareholders, namely the plaintiffs.

16 At the said meeting of the directors of D C Thomas Pty Ltd it was also resolved "that the assets of the Dean Thomas Family Trust be vested in the plaintiffs".

17 The wife has brought proceedings in the Family Court seeking orders that those resolutions be set aside and an order that the husband pay to the wife the sum equivalent to 60 per cent of the net assets of D C Thomas Pty Ltd.

"1. That the husband do pay to the wife a sum equivalent to sixty per centum (60%) of the equity in the assets of the parties or either of them.

2. That the wife do retain the property situate at 14-16 Ramsay Street, Kadina in the State of South Australia being the whole of the land comprised and described in Certificate of Title Register Book Volume 5316 Folio 908 free from all claim and demand by the husband.

3. That the wife do retain her personal savings and investments, life insurance policies, superannuation, motor vehicle and furniture and personal effects currently in her possession or under her control free from all claim and demand by the husband.

4. That pursuant to Section 85 of the Family Law Act that the Court do set aside the following instruments and dispositions:

4.1 The transfer or assignment by the husband to ANTHONY DEAN THOMAS and CYNTHIA ANNE THOMAS of his one ordinary share in D C Thomas Pty Ltd on the 30th day of April 1999.

4.2 The special resolution of D C Thomas Pty Ltd on the 30th day of April 1999 whereby it was resolved that the husband's share in D C Thomas Pty Ltd be transferred to ANTHONY DEAN THOMAS and CYNTHIA ANNE THOMAS as joint tenants for the face value of one dollar ($1.00).

4.3 The special resolution of D C Thomas Pty Ltd on the 30th day of April 1999 whereby it was resolved to remove DEAN COLIN THOMAS as a director of D C Thomas Pty Ltd and appoint CYNTHIA ANNE THOMAS in his place.

4.4 To set aside the resolution that the DEAN THOMAS FAMILY TRUST DEED and the DEAN THOMAS FAMILY TRUST NO. 2 DEED be vested and terminated forthwith.

5. That the husband do pay to the wife a sum equivalent to sixty per centum (60%) of the net assets (including real property) of D C Thomas Pty Ltd.

6. That the husband do pay the wife's costs of and incidental to this application.

7. Such further or other orders as this Honourable Court deems fit."

19 It can be seen from the order sought that the wife relies on s 85 of the Family Law Act 1975 for orders setting aside the resolutions of 30 April 1999.

20 Section 85 of the Family Law Act provides:

"(1) In proceedings under this Act, the court may set aside or restrain the making of an instrument or disposition by or on behalf of, or by direction or in the interest of, a party, which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.

(2) The court may order that any money or real or personal property dealt with by any such instrument or disposition may be taken in execution or charged with the payment of such sums for costs or maintenance as the court directs, or that the proceeds of a sale shall be paid into court to abide its order.

(3) The court shall have regard to the interests of, and shall make any order proper for the protection of, a bona fide purchaser or other person interested.

(4) A party or a person acting in collusion with a party may be ordered to pay the costs of any other party or of a bona fide purchaser or other person interested of and incidental to any such instrument or disposition and the setting aside or restraining of the instrument or disposition.

(5) In this section, disposition includes a sale and a gift."

21 It is the wife's case in the Family Court that the resolution and transactions of 30 April 1999 were entered into to defeat an existing order of the Court, namely the order of 4 November 1998. The wife claims to be entitled to set aside that transaction pursuant to that section.

22 Section 85(3) is important. In making whatever order is necessary to presumably protect the integrity of the Family Court's processes the Court shall have regard to the interests of the person referred to in s 85(3).

23 In this case, of course, the plaintiffs in this matter are not bona fide purchasers. They are not purchasers at all but they may be persons interested.

24 In those circumstances it may be that the Family Court will have to have regard to their interests in making whatever orders the Court will make under s 85. That is a matter for that Court.

25 Mr Keen, who appeared for the plaintiffs, argued that the Family Court will have to have regard to the fact that the plaintiffs are entitled to the beneficial ownership of this land by virtue of the representations which were made by the husband and wife, and which they acted and relied upon to their detriment. In other words he said that the Family Court will have to have regard to the fact that the plaintiffs are entitled to the beneficial ownership of the land in any event.

26 That may or may not be so. I am not prepared to pass any opinion on that at this stage.

27 If, in fact, in due course it is determined that the plaintiffs are entitled to the beneficial ownership by reason of representations made by persons who are neither the legal or beneficial owners themselves then that will mean that the resolutions and transactions of 30 April 1999 were otiose.

28 What is important, however, in my opinion, the Family Court is entitled to protect its own procedures and is entitled, as soon as possible, to inquire into whether or not the resolutions and transactions of 30 April 1999 were entered into for the purpose of defeating the order of the Court made on 4 November 1998.

29 On 3 August 2000 a Judicial Registrar of the Family Court made orders joining the plaintiffs to these proceedings and D C Thomas Pty Ltd as parties in the proceedings between the husband and the wife. He also made orders in the notice of injunctions restraining these added parties from dealing with the land.

30 Those orders were made on an application filed by the wife on 26 May and in the same terms as the application. The application was in the following terms:

"1. That D C THOMAS PTY LTD, ANTHONY DEAN THOMAS born the 12th day of March 1975 and CYNTHIA ANNE THOMAS born the 11th day of March 1977 (hereinafter referred to as "Respondent 2, Respondent 3 and Respondent 4" respectively) be joined as parties to the within proceedings.

2. That until further order Respondent 2, Respondent 3 and Respondent 4 be restrained by way of injunction from assigning, transferring, selling, disposing of, mortgaging, encumbering or wilfully diminishing or in any way wilfully effecting either the husband or the wife's interests either at law or in equity in any and all assets including but not limited to the land comprised and described in Certificates of Title Register Book Volumes 2929 Folio 92, Volume 4080 Folio 945, Volume 5434 Folio 332, Volume 5343 Folio 393 and Volume 5343 Folio 536.

3. That Order 8 Rule 9 be dispensed with and this application be listed as a matter or urgency."

31 It can be seen that the wife sought to make the plaintiffs and D C Thomas Pty Ltd parties to the Family Court proceedings prior to the issue of these proceedings in this Court.

32 It will be argued, I think, in due course, as Mr Haines QC foreshadowed on this application, that the proceedings which have been brought in this Court were brought for the purpose of preventing the Family Court from inquiring into matters under s 85 of the Family Law Act.

33 The plaintiffs in these proceedings have sought the transfer of the wife's proceedings to this Court in the Family Court of Australia. That application has, I think, not been pursued. They have also sought a stay of the Family Court proceedings pending the disposal of these proceedings. They also sought to remove that application to the High Court.

34 They have also issued prerogative writs out of the High Court seeking orders restraining the Family Court from dealing with the wife's application upon the basis that s 85 of the Family Law Act is unconstitutional.

35 The second application has been refused by the Family Court. The final matter is pending in the High Court.

37 It is the plaintiffs' case that the wife's claim in the Family Court of Australia is inconsistent with the representations she and her husband had previously made.

38 The plaintiffs seek an order vesting in them the property held on trust for the Dean Thomas Family Trust.

39 The wife has filed a defence in which she refers to the proceedings in the Family Court of Australia. It is her case that the transactions entered into by the husband, the plaintiffs and D C Thomas Pty Ltd have been entered into for the purpose of defeating the orders sought by the wife in the Family Court proceedings and/or have the effect of defeating such orders irrespective of intention.

40 She denies that the plaintiffs are entitled to the relief sought and denies making any of the representations complained of or that the plaintiff relied on any such representations or that they have acquired any equitable interest in the land by reason of any contribution to the purchase or improvement of the assets.

41 In any event she says the plaintiffs could not be entitled to the relief sought because D C Thomas Pty Ltd is not a party to the proceedings and the relief sought would affect that company's interests.

42 It is asserted that on 3 August 2000 an order was made in the Family Court that D C Thomas Pty Ltd, Anthony Dean Thomas and Cynthia Anne Thomas be joined as parties.

43 A number of injunctions are in place to restrain the husband and those other parties from dealing with the assets adversely to the wife.

44 The matter came before a Master of this Court for the purpose of a settlement conference. The settlement was not achieved and immediately after the settlement conference closed an oral application was made by the wife's solicitor for an order that these proceedings be stayed on the basis that the issues involved in these proceedings will depend upon the same evidence that would be necessary to resolve the Family Court proceedings.

45 The application was opposed by the plaintiffs and the second defendant on the basis that it would be preferable to have these issues heard and determined in the Supreme Court and the decision of this Court applied in the Family Court.

46 The Master accepted that last mentioned submission and concluded that the matter could be dealt with quite simply and expeditiously in the Supreme Court. The application for a stay was dismissed.

48 The proceedings in this Court are not properly constituted. It would be necessary if the plaintiffs were to obtain the relief which they seek to join D C Thomas Pty Ltd as a party to these proceedings. Its interests would be affected by the relief sought.

49 The proceedings in this Court have not progressed beyond the pleadings. Indeed the husband, the second defendant, has not yet filed his pleadings.

50 It may be accepted, I think, because of the claims made by the plaintiffs that the second defendant will support the plaintiffs' case but the husband will need to file a pleading to that effect.

51 These proceedings were issued after the wife sought to join all parties to the proceedings in the Family Court. No reason has been advanced by the plaintiffs why the parties should be put to the expense of proceedings in both Courts concerning the same subject matter. No explanation was given why these proceedings were issued after an application was made by the wife to join all parties in the Family Court proceedings.

52 The proceedings, in this Court, will determine who is entitled to the legal and beneficial ownership of the land, but only in respect of the claim by the plaintiffs that their entitlement arises by reason of the representations. These proceedings will not decide whether the resolutions and transactions of 30 April 1999 were valid and effective.

53 Most importantly, these proceedings will not decide whether the resolutions and transactions of 30 April 1999 were entered into for the purpose of defeating the wife's claim in the Family Court.

54 The proceedings will not determine the issues between the husband and wife in relation to the disposition of their assets.

55 It is important, in my opinion, that this matter proceed in an orderly fashion. The parties should not be entitled to use the different jurisdictions for the purpose of tactical advantages and to the disadvantage of the other parties substantive rights.

56 I was directed to a decision of the Family Court; In the Marriage of Prince [1984] FamCA 7; (1984) FLC 91-501.

"The purpose of the stay is not to give any preference but to provide for an orderly determination of the issues in controversy. It seems to me that an orderly determination requires the proceedings in the Supreme Court to be heard and determined first. There was a discretionary power in a Court to stay or adjourn a proceeding in that Court to await some future event, such as an adjudication in another Court (see generally The Atlantic Star (1974) AC 438 at p.468; Castantho v Brown & Root (UK) Ltd (1980) 3 All ER 72 (at pp.91-92)."

58 With respect I agree with his Honour's observations. In my opinion, this case requires the orderly determination of the various issues raised in the separate jurisdictions.

59 The first issue, on any understanding of the matter, which must be determined is whether or not the resolutions and transactions of 30 April 1999 were entered into for the purpose of defeating the order of the Family Court made on 4 November 1998.

60 That matter must be decided in the Family Court. These proceedings must be stayed in this Court until such time as they are decided.

61 If, in due course, it is decided that the resolutions and transactions were not entered into for that purpose and the property has vested in the plaintiffs then these proceedings will not need to be determined, because the plaintiffs will be entitled to the legal and beneficial ownership of the land independent of the representations which were made to them.

62 If, on the other hand, the Family Court determines that those resolutions and transactions were entered into for the purpose of defeating the wife's claim in the Family Court then the Family Court will make whatever orders are appropriate. If one of those orders includes the setting aside of the resolutions and transactions then the next matter which will have to be decided is whether the plaintiffs are entitled to the beneficial ownership of the land held by D C Thomas Pty Ltd, having acted in reliance to their detriment upon representations made by the husband and the wife.

63 I pass no opinion as to whether that matter should be determined in this Court or the Family Court.

64 That is a matter for another day but after the s 85 matter has been determined.

65 It was put to me that the Master's decision not to order a stay was a matter of practice and procedure and I should, sitting on an appeal from such a decision, be very reluctant to overturn it; Adam P Brown Male Fashions Pty Ltd v Phillip Morris Inc [1981] HCA 39; (1981) 148 CLR 170 particularly at 177.

66 I am acutely conscious of the difference between the exercise of a discretion on a point of practice or procedure and an exercise of discretion which determines substantive rights.

67 On the face of it this is an exercise of a discretion on a matter of practice and procedure but the effect of it is to determine substantive rights. If the order for a stay was not made then, in my opinion, the wife may lose a substantive right which she presently enjoys and that is a right under s 85 of the Family Law Act.

68 I therefore, with respect, disagree with the Master's decision not to order a stay.

69 Mr Haines QC, who appeared for the wife, argued that this Court lacked jurisdiction to hear this matter relying upon the decision of the Full Court of this Court in Tansell v Tansell (1977) 19 SASR 165. That case involved a dispute between husband and wife. It did not have the complication of the other parties that this case has.

70 I do not need to decide whether this Court lacks jurisdiction because in my view, even if it does have jurisdiction, it should stay the proceedings in this Court so that the Family Court can exercise its jurisdiction in s 85. Such an order will avoid the unseemly result of different decisions in different jurisdictions.

71 In my opinion, the appeal should be allowed and the proceedings should be stayed until such time as the wife's application under s 85 of the Family Law Act is decided.

72 I will hear the parties as to the precise order.