WENTWORTH v WENTWORTH SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL COLE JA 5 September 1994, 5 September 1994 [1994] NSWCA 346 Application under s7 of the Family Provisions Act. Cole JA It is now 10 past 5 on 5 September 1994 and I have been hearing throughout most of the day an application by Katherine Wentworth for a continuation of an injunction which I granted ex-parte on Friday last, 2 September, and which expired at 4:15pm today. The application before me, although the argument has ranged wide, is in quite narrow compass. I have before me a Notice of Motion which seeks an order, in essence, that the defendants, Peter Wentworth as executor of the estate of the late G M Wentworth and Recato Ten Pty Ltd be restrained from selling or otherwise dealing in any way with the shares in the second respondent, that is Recato Ten Pty Ltd, to the extent of $2 million, such sum to be in addition to a sum of approximately $830,000 which has already been placed with the court by the first respondent PFN Wentworth pursuant to previous court orders. Although the matter is in a comparatively narrow compass, it has a long history. Miss Wentworth, originally made application pursuant to s7 of the Family Provision Act. She was awarded the sum of $21,000 per annum as an annuity by Bryson J. From that decision she appealed to the Court of Appeal. There was there substituted an order for the provision of a capital sum of $100,000 in substitution for the annuity. There was an application for leave to appeal to the High Court from that order, which was refused. That was the initial application which she sought under the Family Provision Act. Whilst there was pending the application for leave to appeal to the High Court, and after the $100,000 ordered by the Court of Appeal to be paid had been paid, Miss Wentworth applied for an injunction. She sought then an injunction from Young J. His Honour's reasons at 3 of his judgment of 11 June 1992 disclose that at that time she was pressing for an order for $2.5 million to be frozen. There was offered then by the respondent Mr Wentworth an injunction over $1.5 million of assets. The matter was not resolved by agreement and his Honour determined in those circumstances that he would not grant the injunction sought. His Honour said at 7: "The plaintiff seeks protection in the sum of $2.5 million roughly split up into $1.5 million, being the further provision she considers will be made for her in the High Court and $1 million costs that will either be awarded to her on a superior basis than that which was ordered in the New South Wales courts, or, alternatively, which she will recover under s8 of the Act." That was in June 1992. In August or September 1994 the same matters are still being addressed. 2 UNREPORTED JUDGMENTS Subsequent to the refusal by the High Court to grant leave to appeal, there was heard by Santow J over a long period of time an application for additional provision to be made to Miss Wentworth pursuant to s8 of the Act. It has been put, correctly in my view, that this is to be regarded as a secondary application for additional provision on top of, or additional to that granted under the original application pursuant to s7, which was fixed by the Court of Appeal at $100,000. The basis of the application before Santow J was that there had been a deterioration in her financial circumstances and there had been a failure by her to successfully apply for admission to the Bar. These two circumstances were said to ground the jurisdiction to enable his Honour to make the orders sought pursuant to s8. His Honour made various orders which had the effect of him declaring the shares in the company, Recato Ten Pty Ltd, as notional property. In essence, his Honour charged that notional property with the orders which he thought it appropriate to make. The orders that his Honour made were, in essence, to confer upon Miss Wentworth an annuity in the sum of $36,838.. To secure that annuity he charged the notional estate, being the shares in Recato Ten. Provision was made by the orders for the provision of a lump sum of $675,300 in order to fund the purchase of the appropriate annuity. His Honour also made an order giving, in essence, Miss Wentworth the difference between her solicitor and client and party/party costs in certain litigation. Subsequent to that, there was yet further litigation dealing with his Honour's orders. That litigation commenced on 27 May 1994 and ultimately concluded on 7 July 1994. The history of litigation is set out in his Honour's judgment of 27 June 1994 appearing at 1111 of the Appeal Books. There was an ex-parte application for an injunction to prevent the company Recato Ten Ltd and the respondent Mr Wentworth from disposing of the principal asset of Recato Ten, namely, a property known as "Southlands". There was a hearing on 30 May, a further hearing on 2 June, and on 3 June. On 3 June it appears that the defendant, Mr Wentworth, made certain offers to provide other security for the orders that his Honour had made. He offered the provision of property at Bowral, which I shall refer to as the Bowral Brickworks site, and indeed, subsequently he offered, on 8 June 1994, to provide a charge over his home "Karringal" in Moss Vale Road, Buradoo to secure the sums in the order of $830,000, which were the sums necessary to be provided by way of capital sums to satisfy his Honour's orders for provision of a lump sum to provide the $36,000 annuity and to provide for the orders of costs which his Honour had in essence awarded to Miss Wentworth. His Honour recorded in his judgment of 27 June, when referring to the hearing on 8 June: "T also noted that the proposal to sell the shares in Recato Ten had evidently been in contemplation for sometime. This had, in fact, not been made explicit at the substantive hearing although there was some reference to the possible disposal of Southlands as such". There were further hearings on 17 June 1994 and 20 June 1994. His Honour delivered judgment on 27 June 1994. On 29 June 1994 there was an application on behalf of the respondents, for an order dissolving injunctions which his Honour had granted on 27 June 1994 and, in effect, seeking to substitute bank guarantees for the charge on the declared notional estate assets of the shares in Recato Ten. URJ WENTWORTH v WENTWORTH (Cole JA) 3 Ultimately, on 6 July 1994, orders were made which, in effect, withdrew or set aside the previous designation of the shares in Recato Ten as notional estate. That was done upon the respondent, Mr Wentworth, providing to the court security in the form of bank guarantees from Westpac to satisfy the substance of his Honour's orders, namely, the purchase of an annuity and the provision of a sum for costs. His Honour said in a judgment delivered on 7 July 1994: "Subject to the foregoing safeguards, I foreshadow that I would be prepared to substitute, pursuant to s30 of the Family Provision Act 1982, the two bankers undertakings for the property designated, being all original shares in Recato Ten Ltd held by the defendant on 7 July 1994, and I also foreshadow on the same basis that those shares would then cease to be subject to any injunction or undertaking." In essence that was the substance of the orders that his Honour made. The consequence was that from 7 July the shares in Recato Ten ceased to be subject to any injunction preventing their sale and the designation of those shares as notional property ceased in the sense that there was substituted for the notional property, the bankers guarantees. From the judgment of Santow J, indeed, from many of his judgments, there has been an appeal by both parties. The appeal of Miss Wentworth however, does not seek a reversal of the setting aside of the injunction that Santow J effected on 7 July, nor does it seek a setting aside of his Honour's orders substituting the bankers guarantees for the shares in Recato Ten as notional estate. It is said that that is because his Honour had made clear during argument on 27 June 1994, as appears at 917 and 921 of the Appeal Book, that any application to vary any terms or orders which his Honour was then contemplating making should be made to the Court of Appeal. The considered Notice of Appeal, being the amended Notice of Appeal in the Appeal Book, does not seek to set aside the orders made by his Honour on 7 July. There is little doubt, in my view, that the failure of Miss Wentworth to make any attempt to approach the Court of Appeal, if that was her desire, between 7 July 1994 and 30 August 1994 led those parties who were contemplating selling the shares in Recato Ten Pty Ltd to proceed. In the result, an application was filed on 30 August seeking additional restraint of assets of Mr Wentworth or Recato Ten in the sum of $2 million to which I have referred, and an ex-parte application was brought before me on Friday last, 2 September. It is necessary briefly to have regard to the proposed transactions. Recato Ten owns a property known as Southlands. There is a company called Southlands Ltd which intends as part of a complicated scheme to purchase that property, or, more accurately, to purchase all the shares in Recato Ten which owns the property Southlands and, as well, to purchase a number of surrounding or adjoining properties, and on that agglomerated group of properties to conduct operations relating to the conduct of a dairy and commercial retail facilities associated with it. It is clear from the evidence that critical to the proposal is the acquisition of the property Southlands owned by Recato Ten. There is a significant number of interlocking arrangements between Recato Ten and other neighbouring property owners, all of which are interdependent, so if the sale of Recato Ten shares to the company Southlands Ltd does not proceed, the whole transaction will not proceed. As Young J noted, the matter had been in contemplation for sometime when his Honour delivered a judgment more than two years ago. It has now reached a stage where those parties involved in the proposed transaction, 4 UNREPORTED JUDGMENTS including Mr Wentworth and Recato Ten, wish to sell the shares in Recato Ten and in that way transfer the property known as Southlands to Southlands Ltd. The property Southlands is subject to a mortgage to Westpac with a sum in excess of $800,000 and as part of the proposed transaction, it is necessary for the mortgage to be discharged in order that the property may be transferred in an unencumbered form to Southlands Ltd. It is proposed that once Southlands Ltd acquires the property Southlands by means of acquiring the shares in Recato Ten, and once it acquires the surrounding properties, also by means of acquiring shares in different companies and otherwise, the whole project will be floated. Initially, it is intended to offer certain shares in the project to professional investors and, thereafter, to float some shares to the public. Speaking generally, the arrangement between Southlands Ltd and Mr Wentworth is that he will sell the shares in Recato Ten for approximately $3.2 million, $1 million of which will be received by way of cash which will be paid to Westpac to discharge the mortgage which presently exists over the realty of Southlands. He will also receive $500,000 of shares in Southlands Ltd, they being 50 cent shares, but he will receive a number of shares calculated on the basis of a ten cent premium, the shares thus costing him 60 cents. In addition, he will provide but will be repaid $1.7 million by way of vendor finance, which sum becomes payable to him in discharge of the vendor finance only after completion of the public float. Further, he will receive options to take up shares in Southlands Ltd. The precise number of options is not clear, but it is more than 1.1 million 50 cent options. The proposal is that contracts will be exchanged with all of the vendors, they having terms not dissimilar in structure to those to which Mr Wentworth will be a party. After the provision of some funding by professional investors, the settlement along the lines that I have indicated will occur, but the vendor finance will not be paid out until after the public float. The present timetable indicates that would be unlikely to a occur until late November or early December. Accordingly, Mr Wentworth will be unlikely to receive any cash sum until that time although he will receive, no doubt, the shares to which I have referred and possibly the options. In relation to the $1.7 million, there is a provision in the draft agreement tendered before me for sale of the shares which permits there to be adjustment to the purchase price dependent upon liabilities of the company acquired. There has been debate before me as to what import CL4.2 of the sale of shares agreement means, namely; whether it would have the effect that all liabilities shown in the completion accounts will be deducted from the anticipated purchase price of $1.7 million, whether that relates to contingent liabilities, whether it relates simply to normal trading liabilities, or whether it relates, as Miss Wentworth suggests, to liabilities not only to Westpac of $850,000 odd, but also for a further $800,000 to $900,000 which are shown in a set of draft accounts as being due. It is in my view unnecessary to resolve that issue on these proceedings and I do not think that the material before me is sufficient to enable me to do so. The reason I have reached that view is because, in any event, Mr Wentworth will be receiving a sum of at least $500,000 worth of shares and additional options in the company Southlands Ltd. It is true, as Miss Wentworth suggests, that the company is undertaking a change in the nature of its operations in the sense that it is expanding. The evidence before me indicates it will become the second largest dairy producer in New South Wales. Whether it will be successful or not URJ WENTWORTH v WENTWORTH (Cole JA) 5 in its new venture it is impossible for me to decide. In addition to the assets which Mr Wentworth will receive, (whether there be $1.7 million in cash or as evidence before me indicates $1.7 million less the sum of $825,000, which is to be provided out of that sale price to Westpac to repay it for its provision of the guarantees or whether, as Miss Wentworth suggests, there will be yet a further deduction of some $800,000 in respect of other debts, meaning that there will be, in effect, no payment of cash) the evidence before me is that Mr Wentworth has other significant assets, being a property at Buradoo in which he resides having a value in January 1993 of some $830,000, being the price for which it was purchased, and also a property known as Bowral Brickworks having a value of some $600,000. The consequence is that on any view, quite apart from the value of the shares in Recato Ten Pty Ltd, he has assets in the order of some $1.4 million. It seems to me improbable in the extreme that he will receive nothing of value for the $3.2 million share price that he will receive on the sale of the Recato Ten shares. Accordingly, in my view, there is evidence before me that he is a person of significant assets. It has been said that there may be difficulties in the future if the court were of the view that it wished to increase the amount awarded to Miss Wentworth arising from the appeal from the decision of Santow J or, indeed, if at sometime in the future Miss Wentworth wished to make further applications pursuant to s8 for further additional sums by way of claimed entitlement under s8. I do not think that prospect is a sufficient inhibition to the Court to result in the view that the Court should, by making appropriate orders direct, in essence, that Mr Wentworth or the company retain their assets in their present form. There is no doubt, in my view, that the Court has a jurisdiction to grant the remedy which is sought by Miss Wentworth. So much appears from Jennings Construction Ltd v Burgundy Royale Investments Pty Ltd No 1 (1986) 161 CLR 681 in particular at 685. Smithkline and French Laboratories (Australia) Ltd and Ors v Secretary, Department of Community Services and Health (1990) ALR 417 in particular at 421 and Jackson v Sterling Industries (1986) 162 CLR 612 at 621 in particular. The question is whether, in the present circumstances, the Court should exercise its discretion to make the orders sought. In my view, having regard to the history which I have sought briefly to recite, I should not grant the relief sought. It seems to me that for a period of in excess of some two years now Miss Wentworth has been seeking to maintain that she has an entitlement either initially pursuant to s7, or subsequently pursuant to s7 coupled with applications under s8, for a sum in the order originally of $2.5 million and now a sum of $2 million coupled with the $800,000 odd already provided by way of bank guarantee. There has been a final determination of her initial entitlement under s7 and that has been fixed at $100,000. Whether she will succeed in her appeal in relation to the s8 application pursuant to which she is receiving the annuity of $36,000 together with an order in respect of some costs, is a matter on which I will make no comment other than to say that it is, at the least, arguable that she will not receive any increase from that sum and it has been suggested by counsel for the respondent that there is a significant argument that the sum ordered by Santow J should be reduced. That is one factor to be taken into account in deciding whether or not to exercise the discretion. A second factor in my view is the fact that, although judgment was given by his Honour on 7 July 1994, it was not until the end of August that application was made for a restraining order to seek to prevent Mr 6 UNREPORTED JUDGMENTS Wentworth and Recato Ten from either disposing of the shares in that company or the company disposing of the property Southlands. In that time some six or seven weeks passed whilst parties were engaged in bringing to fruition a project or scheme of some complication which had been in place for some years. I think that delay is a factor also to be taken into account in determining whether the relief should be granted. There is a third matter which, in my view, is of importance. Miss Wentworth has given an undertaking as to damages. It is clear beyond argument that there is no prospect of her meeting any such undertaking. There has been a finding in one of the judgments of Santow J which indicates that she has an excess of liabilities over assets in the order of $1.5 million and thus the undertaking as to damages is, in truth, worthless. Those three factors are, in my view, matters of significance, material to the exercise of the discretion of this Court. It was put in support of the application by Miss Wentworth that Mr Wentworth had been guilty of dissipating significant sums. It was argued that at the date of death of the deceased, being the father of Miss and Mr Wentworth, the estate was valued at some $8 million and that it now has a valuation at best of some $4 million, and thus it is said there has been a dissipation of some $4 million. The evidence before me in this regard is sparce. No specific provisions were drawn to attention with the exception of certain statements concerning the assets and liabilities of Recato Ten and Mr Wentworth, which became Exhibit D, at 631-635 of the Appeal Book. Whether or not there has been a disposition of assets by Mr Wentworth is a question which I do not think should be given great predominance in the exercise of the discretion which I must exercise. The reason I say that is because there has not been, so far as I am aware, any finding which has been made to suggest that any conduct on his part should attract what has been described as moral opprobrium attaching to any improper disposition. In those circumstances, bearing in mind the paucity of evidence in relation to both the value of the estate at a time of death and its present value, and the absence of any detailed evidence at all as to the circumstances in which or reasons for the sale or disposition of the assets, any disposition is a factor which I think should not weigh heavily in the discretion I must exercise. In the circumstances and for the reasons given, I decline to continue the injunction granted on 2 September 1994 and the Notice of Motion before me filed on 30 August 1994 is dismissed with costs. Appeal dismissed with costs. Counsel for the Appellant: K Wentworth in person Instructed by: Russo and Partners Counsel for the Respondent: MA Pembroke/G Davey Instructed by: Dunhill Madden Butler