Cabelo and Cabelo - [2020] FamCA 552

FAMILY COURT OF AUSTRALIA

CABELO & CABELO

[2020] FamCA 552

FAMILY LAW – INJUNCTIONS – Preservation of property – where the wife sought interlocutory injunctive relief pending the final hearing of this matter – where the parties have a complex farming business – where the wife alleges that the husband has failed to provide full and frank disclosure – where the wife alleges the husband has entered into a number of loan agreements with a third party without her knowledge or consent – where the matter is adjourned for the husband and a third party the wife seeks be joined to the proceedings to file material in response and that date is only weeks away – where this is a significant factor when weighing up the balance of any hardship and the convenience of the orders as between the parties – where injunctions are made in the terms sought by the wife

Family Law Act 1975 (Cth) s 114

Mullen and De Bry (2006) FLC 93-293
Shercliff v Engadine Acceptance Corporation Pty Ltd [1978] 1 NSWLR 729
Tsiang & Wu and Ors (2019) FLC 93-911

APPLICANT:

Ms Cabelo

RESPONDENT:

Mr Cabelo

INTERESTED PARTY:

Mr B Cabelo

FILE NUMBER:

MLC

3263

2018

DATE DELIVERED:

10 July 2020

PLACE DELIVERED:

Melbourne

PLACE HEARD:

Melbourne

JUDGMENT OF:

Macmillan J

HEARING DATE:

11 June 2020

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Werner

SOLICITOR FOR THE APPLICANT:

Johnston Family Lawyers

COUNSEL FOR THE RESPONDENT:

Mr McCormick

SOLICITOR FOR THE RESPONDENT:

Goldsmiths Lawyers

COUNSEL FOR THE INTERESTED PARTY:

Mr Marchetti

SOLICITOR FOR THE INTERESTED PARTY:

Grice Legal

Orders

IT IS ORDERED UNTIL FURTHER ORDER THAT

Pursuant to paragraph 4 of the Orders made on 11 June 2020 the husband personally and in his capacity as officeholder of any company is further restrained from selling, encumbering or otherwise altering his interests in any other real estate or water licenses save for and with the prior written consent of the wife.
The husband be restrained from entering into or extending any loan facility or borrowing funds either personally or in his capacity as an officeholder of any corporate entity save for in the ordinary course of business, with capital works, capital improvements, land development and purchase of plant and equipment exceeding $5,000.00 in value being deemed not to be in the ordinary course of business.
The husband personally and in his capacity as an officeholder of any company be restrained from entering into any transaction which has the effect of creating a debt, or increasing the level of indebtedness, in favour of Mr B Cabelo or any company or trust in which Mr B Cabelo holds an interest.

Costs

By 4.00pm on 27 July 2020 the parties file and serve any written submissions in support of an application for costs arising out of or incidental to the Amended Application in a Case filed 10 June 2020.
By 4.00pm on 10 August 2020 the parties file and serve any written submissions in reply to the application for costs.
That any submissions as to costs should be limited to 10 pages.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Cabelo & Cabelo has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 3263 of 2018

Ms Cabelo

Applicant

And

Mr Cabelo

Respondent

REASONS FOR JUDGMENT

This matter was listed for hearing before me in the Judicial Duty List on 11 June 2020. The parties and the husband’s brother Mr B Cabelo, whom the wife seeks to join as a party to the proceedings, all agreed that there should be an adjournment to allow for the husband and the proposed second respondent to file answering material. However, there remained issues to be determined with respect to the interlocutory injunctive relief or holding orders sought by the wife pending the proposed adjourned hearing.
A number of orders were made by consent including orders restraining the husband personally or in his capacity as an officeholder of any company from selling, encumbering or otherwise altering his interests in three parcels of land at C Town in New South Wales, orders for the production of files held by Goldsmith Lawyers in relation to loan documentation subject to any claim for privilege and orders for the production of documents identified in a list attached to the wife’s application.
There were three further orders sought by the wife pending the further hearing upon which the parties could not agree. The orders proposed by the wife were as follows:
a)Until further order the husband personally and in his capacity as officeholder of any company be restrained from selling, encumbering or otherwise altering his interests in real estate or water licences save for with the prior written consent of the wife;
b)Until further order the husband be restrained from entering into or extending any loan facility or borrowing funds either personally or in his capacity as office bearer of any corporate entity save for in the ordinary course of business with capital works, improvements, land development and purchase of plant and equipment exceeding $5,000 in value being deemed NOT to be in the ordinary course of business; and
c)Until further order the husband personally or in his capacity as office holder of any company be restrained from entering into any transaction which had the effect of creating a debt, or increasing the level of indebtedness, in favour of Mr B Cabelo or any company or trust in which Mr B Cabelo holds an interest.

Background

The husband in this case is 48 years of age and is a farmer. The wife who is 46 years of age is not in employment. The husband and wife were married and commenced cohabitation in 2000. They separated in August 2017 and were divorced in 2020.
There are two children of their marriage one of whom is an adult. He and the other child who is now 14 live with the husband. Neither of the children see or communicate with the wife.
The wife commenced proceedings in the Federal Circuit Court of Australia on 27 March 2018 and the matter was transferred to this Court on 28 January 2020.

Legal Principles

Pursuant to s114(1) of the Family Law Act 1975 (Cth) (“the Act”) this Court has the power to “make such order or grant such injunction as it considers proper with respect to the matter to which the proceedings relate including for the purposes of this application”… an injunction in relation to the property of a party to the marriage.”
If the court is asked to make an injunction restraining a party from dealing with his or her property it must be satisfied that the party seeking that injunction has a reasonable claim for orders altering property interests and that the success of that claim may be prejudiced if an injunction is not granted. Relevant to the circumstances of this case this Court has the power to preserve the status quo until such time as it is in a position to decide whether the circumstances warrant the continuation of that injunction. It was not suggested by counsel for either the husband or Mr B Cabelo that the wife did not have a claim for property settlement.
However the Full Court of the Family Court of Australia (“the Full Court”) summarising relevant principles in Tsiang & Wu and Ors (2019) FLC 93-911 (“Tsiang”) said further as follows:
21.Next the applicant must demonstrate that the balance of convenience favours making the order sought. As part of this, the applicant must show that there is a “danger” or risk of dissipation of or dealings with assets which will frustrate any judgement in favour of the applicant.
…
24.In this case the identified risk was that the wife might dispose of assets in Australia and in her name in order to defeat the husband’s claim and, equally it was asserted that there was a risk that the second and third respondents too might deal with the partnership assets in a way so as to defeat the husband’s possible judgement or claim to that entity.
25.It is unnecessary to demonstrate a positive intention but merely the possibility of the event occurring. The determination about the balance of convenience may this be an inference drawn from the facts and circumstances established by the applicant’s evidence.
26.Nor is it the role of the judge determining the question of the injunction to, in effect conduct a trial of the disputed evidence to resolve those disputes (see Shercliff v Engadine Acceptance Corporation Pty Ltd [1978] 1 NSWLR 729).
In weighing up the balance of convenience, the court must also consider the extent to which the injunctive relief will restrict the party affected by the injunction in the operations of his or her business, imposing only those restrictions that may be necessary to protect the applicant’s claim for orders altering the parties property interests and the rights of any third parties.

Discussion

In this case the matter is being adjourned to enable both the husband and Mr B Cabelo to file answering material and the wife’s evidence in these circumstances, at least for the purposes of the matters I must determine, is unchallenged.
The basis of the wife’s case is that the husband has not been meeting his obligations with respect to full and frank disclosure and that it has recently come to her attention that in September 2017, without the prior knowledge or consent, the husband and Mr B Cabelo established five separate loan facilities for a total of $13,543,000. The funds advanced were in each case based upon the same security which included unlimited guarantees and indemnities provided by both the husband and Mr B Cabelo, D Pty Ltd and G Company, general security agreements (which charged all present and after acquired property) owned by each of the named borrowers and D Pty Ltd, first registered mortgages secured over the properties registered in the husband’s name, the properties owned by D Pty Ltd and the properties owned by Cabelo Group Pty Ltd. It was her evidence that the practical effect of these agreements being that all of the husband’s assets have been used to secure his debt as well as Mr B Cabelo’s debt. It is her case that if correct, this would be likely to have a significant impact upon the size of the asset pool for the purpose of the property proceedings.
The wife further deposed that it was not until 3 June 2020 that she received a tranche of documents which included seven loan agreements executed by the husband as borrower and Cabelo Investments Pty Ltd an entity controlled by Mr B Cabelo, as lender, advancing funds repayable within 30 days of a written demand by the lender. These documents had not previously been disclosed by the husband, notwithstanding that each agreement had been prepared by Goldsmith Lawyers the husband’s solicitors in these proceedings.
The wife further deposed that although the husband gave notice of his intention to sell three parcels of land to Mr B Cabelo as the orders made 16 April 2018 required, these properties were being transferred at less than their value and that these sales would likely impact on the operations of the parties farming enterprise which is yet to be valued.
The wife also referred to what she has described as uncommercial transactions including the invoice raised by Mr B Cabelo for $300,000 which is purported to represent 10 years of accounting fees and the agreement for water pumping charges between Cabelo Investments Pty Ltd, Cabelo Group Pty Ltd and the husband and Mr B Cabelo.
Finally the wife’s case is that although the husband had deposed to having transferred his 50% shareholding in F Pty Ltd to an entity controlled by Mr B Cabelo for $50,000 she had been unaware until recently when the husband disclosed the financial accounts for F Pty Ltd that in addition to agreed goodwill of $100,000, F Pty Ltd had net assets of $929,593 as at 30 June 2016 and gross income from sales that year of approximately $26 million. On that basis it was the wife’s case that $50,000 did not reflect the market value of the husband’s interest and he had transferred his interest to his brother for less than market value.
The husband’s case was that the wife already has the protection of the previous order but the husband also submitted that he would be prepared to consent to an undertaking in the terms of the first of the additional orders sought by the wife albeit on similar terms as the order made by consent on 16 April 2018 which restrained him from dealing with any property without first giving the wife 21 days written notice save and except in the ordinary course of business.
With respect to the second and third of the further orders sought by the wife, the husband submitted that these orders were not warranted and would interfere with the husband’s capacity to run the farming operations. The husband further submitted that the limitations proposed by the wife with respect to the $5,000 limit on transactions proposed by the wife was unrealistic given nature of those farming operations and that without loans from his brother the husband would not be able to continue those operations. Counsel for the husband submitted that if an order were to be made they should include an exception for any transactions in the ordinary course of business.
In Tsiang the Full Court referring to the decision of the Full Court in Mullen and De Bry (2006) FLC 93-293 and whether there is a risk of property being disposed said at [25] as follows:
It is unnecessary to demonstrate a positive intention but merely the possibility of the event occurring.
I am not in a position to make any findings of fact and it may be that when the husband has the opportunity to file his answering material that the Court will determine that the transactions upon which the wife now relies are just part of the day to day operations of the business. However, I am satisfied on the balance of probabilities on the basis of the wife’s evidence that there is a prima facie case as to the possibility of these transactions defeating her claim for property settlement.
In any event although the husband did not consent to the making of the orders the wife sought the dispute was primarily in relation to the balance of the convenience and the terms of those orders. The fact that there is a matter of weeks until the further hearing is in my view a significant factor when weighing up the balance of any hardship and the convenience as between the parties. In these circumstances, I do not accept as submitted by the husband that he will not be able to continue to operate his farming operations or that even if the orders are to provide for the husband to give the wife notice in similar terms to the 2018 orders that the husband would repeatedly be required to give the wife notice with respect to either the sale of real property or water licences, capital works, capital improvements, land development, the purchase of plant and equipment or any further borrowings. If there is a legitimate need for any of these transactions in the time between now and the further hearing in my view it is always open to the husband to notify the wife and seek her consent.
On that basis and in circumstances where I am being asked to make holding orders until the Court has the opportunity to consider all of the evidence, I propose to accede to the wife’s application.

I certify that the preceding twenty-two (22) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Macmillan delivered on 10 July 2020.

Associate:

Date: 10 July 2020