CAO & HONG
[2018] FamCA 196
•28 March 2018
FAMILY COURT OF AUSTRALIA
| CAO & HONG | [2018] FamCA 196 |
| FAMILY LAW – PROPERTY – INTERIM – Application to be restored as a Statutory Supervisor in Taiwanese corporation dismissed – Orders made for financial statements for entities to be produced to assist with engagement process of Single Expert without specific confidentiality order – further directions |
| Family Law Act 1975 (Cth) |
| Cao & Hong [2015] FamCA 884 Hong & Cao [2018] FamCA 40 |
| APPLICANT: | Ms Cao |
| RESPONDENT: | Mr Hong |
| FILE NUMBER: | BRC 5044 | of | 2015 |
| DATE DELIVERED: | 28 March 2018 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Baumann J |
| HEARING DATE: | 23 March 2018 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr P Hackett |
| SOLICITOR FOR THE APPLICANT: | Accuro Legal (Sydney) |
| COUNSEL FOR THE RESPONDENT: | Mr K Wilson QC |
| SOLICITOR FOR THE RESPONDENT: | Bespoke Family Lawyers Pty Ltd |
Orders
That the Respondent forthwith provide the financial statements for the Taiwanese entities as listed herein to P Accountants (“PA”) to assist with the cost estimates and engagement process of PA to value the Taiwanese interests and at the same time provide a copy to the solicitors for the Applicant:
(a) B Development;
(b) Company FF;
(c) B Incorporated;
(d) B Limited;
(e) H Incorporated;
(f) C Incorporated;
(g) B Development Incorporated;
(h) C Incorporated;
(i) B2 Co;
(j) F Pty Ltd;
(k) G Pty Ltd; and
(l) B Enterprises Pty Ltd.
That the Applicant forthwith provide the financial statements for the Taiwanese entities as listed herein to PA to assist with the cost estimates and engagement process of PA to value the Taiwanese interests and at the same time provide a copy to the solicitors for the Respondent:
(a) J Pty Ltd; and
(b) End of Liquidation Report for I Pty Ltd
That by 5 April 2018 the parties shall provide an updated joint letter of instruction (including any instructions that may be given by the Court) to the nominated Single Experts, but if the parties are unable to agree or for any reason the joint instructions cannot be obtained, then each party shall provide a letter of instruction to the Single Experts.
That the Orders dated 31 January 2018 of Senior Registrar Spink be discharged.
That Order 21 of the Orders dated 12 July 2016 of Registrar Stoneham be varied to substitute the amount of $1,500,000 for the amount of $500,000.
That each party have leave to issue up to eight (8) subpoenae for the production of documents without firstly having to seek leave of the Court.
That the parties shall complete disclosure as ordered on 12 November 2015 by 16 April 2018.
That the Applicant’s application to be restored as a Statutory Supervisor be dismissed.
That the wife’s Application in a Case filed 23 December 2016 be otherwise dismissed, with the costs of both parties reserved.
That these proceedings be adjourned for further mention and directions before the Honourable Justice Baumann at 9.30am on 5 September 2018 in the Family Court of Australia at Brisbane.
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 Cao & Hong 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 BRISBANE |
FILE NUMBER: BRC 5044 of 2015
| Ms Cao |
Applicant
And
| Mr Hong |
Respondent
REASONS FOR JUDGMENT
Introduction
These property adjustment proceedings were commenced in the Federal Circuit Court of Australia by the Applicant wife Ms Cao on 4 June 2015 and were transferred to this Court on 7 August 2015. The Applicant claims that significant property interests of over $200 million exist with approximately $27 million of those interests being situated in Australia. The Respondent in the substantive proceedings is the husband Mr Hong. Numerous interlocutory applications have been dealt with previously, however for context, the following orders are important to record:
a)On 22 October 2015 Forrest J made orders (see Cao & Hong [2015] FamCA 884 delivered 22 October 2015) as set out in full at Appendix One to these Reasons, and for the purposes of the current dispute Order 4 was made as follows:
4. That each party is restrained, whether by themselves or through their servants or agents or by corporate entities controlled by them, from removing themselves or the other party from any office held by him or her in any of the entities within the [B Group] or their Taiwanese interests, without firstly obtaining the written consent of the other party or an order of the Court.
Order 1 made 22 October 2015 identifies nine Australian corporate entities forming the “B Group”, whilst Order 2 identifies 13 Taiwanese entities forming “their Taiwanese interests”
b)On 12 July 2016 Registrar Stoneham made orders by consent in respect of inter alia; the appointment of Court Experts; mediation; disclosure and after discharging Order 12 made by Forrest J, substituted a fresh order enabling the parties to draw funds from their corporate entities, for legal costs. This order, permitting the parties to each draw an additional $500,000 to be utilised for the payment of his or her legal costs, was further varied by consent by Order of Senior Registrar Spink made 31 January 2017 increasing the figure to $800,000 each;
c)On 9 May 2017 Hogan J heard a contested Application by the husband that the wife’s property proceedings in Australian be stayed on the basis that Australia is a clearly inappropriate forum. On 2 February 2018, Hogan J ordered the husband’s Application be dismissed and further made an anti-suit injunction restraining the wife from continuing with or commencing legal proceedings in Taiwan against the husband for dissolution of marriage and/or any matters arising from their marriage (see Hong & Cao [2018] FamCA 40). Relevantly to the current Application, the Orders of Hogan J included the following further orders:
5. The Application in a Case filed by [Ms Cao] on 23 December 2016 by which she seeks orders compelling [Mr Hong] to provide financial statements of those entities named within it to [PA] Taiwan so as to facilitate the valuation of various entities is adjourned to the judicial duty list on a date to be advised
6. The Amended Application in a Case filed by [Ms Cao] on 2 May 2017 whereby she seeks orders to compel [Mr Hong] to reinstate her as a “statutory supervisor” of [C] Incorporated is adjourned to the judicial duty list on a date to be advised.”
The said Orders contained the following notation, namely:
B. It is noted that, whilst the parties told the Court on 9 May 2017 that they were basically agreed about the provision by Mr Hong of documents to [PA] so as to facilitate the valuation of various corporate entities, the Court has made Order (5) in case any discrete dispute about this matter requires judicial determination…
A discrete issue has arisen.
Issues requiring determination
As Mr Hackett of Counsel for the wife and Mr Wilson of Queen’s Counsel for the husband agreed, the issues arising from the pending Applications in a Case (including a further cross Application in a Case by way of an amended Response) filed by the husband on 16 March 2018, that are not otherwise the subject of agreement, have narrowed to:
a)provision of documents to experts;
b)appointment of wife as supervisor; and
c)increase in costs cap.
There is broad agreement as to the directions necessary to move this matter forward (including to a mediation to take place by the order of Registrar Stoneham), however the text of the directions is disputed.
I deal with each of these important, yet narrow issues, sequentially noting that I had the benefit of brief oral submissions together with written submissions from both parties (which identified the Affidavits and material relied upon by the parties).
Provision of documents to experts
Although the parties have now agreed on a joint letter of instruction to P Accountants Taiwan, with both parties asserting the other party or other issues are to blame for the delay, the husband by a letter to the joint expert of 22 March 2018 indicated that:
We note that [PA] requires financial statements from the parties in relation to each Taiwanese entity that is to be valued in order to provide a fee estimate and better identify the scope of work to be carried out in this matter.
Prior to our client providing the Financial Statements for the entities in which he holds an interest, he has requested that a confidentiality agreement be provided by [PA] to ensure the confidential nature of those documents and the information contained therein prior to [PA] being formally engaged in the matter by way of a costs Agreement.
The Court has been told the indicative fee for the expert is $374,000. The wife says that there is no demonstrated need for terms of confidentiality in addition to those contained in the PA “Terms of Business” document provided to the parties in October 2016, where clause 3 provides:
“3.1 Confidential information – We and you agree to use the other’s confidential information only in relation to the services, and not to disclose it, except where required by law or regulation, or where requested by a professional body of which we are a member, or for the need of our internal risk/information management. However, we may give confidential information to other [PA] Firms (as defined in clause 7.1 below) or relevant subcontractors as long as they are bound by confidentiality obligations and to the extent it is not prohibited by the applicable law.”
The wife seeks an order for the production of the financial statements, without reference to a confidentiality issue as set out in the Application in a Case filed 23 December 2016.
In response the husband contends that:
a)the husband, as early as 1 December 2016 indicated that if the Australian proceedings continue he is agreeable to providing PA with the financial statements to assist in assessing their fee, however the husband requires a confidentiality undertaking from PA before providing it with sensitive company information;
b)a number of other shareholders interested in the companies are not parties to these proceedings, so it is not unreasonable to seek such an undertaking from the expert; and
c)in written submissions made, the husband conceded that on 20 March the wife’s solicitors said that if the husband requires a confidentiality undertaking “it is open to him to negotiate the same with [PA]”, and that the husband’s solicitors have started the process of obtaining the undertaking.
The Court is not assisted by any evidence as to the remedies available under Taiwanese law for a breach of contract – specifically the confidentiality obligation in the “Terms of Business”. The Expert is arguably outside the jurisdiction of this Court – even if appointed as a Single Expert under Rule 15.45. In these proceedings the parties have selected and appointed a Single Expert under Rule 15.44(1), subject it seems to them being satisfied as to fees the Single Expert will charge.
The Court may make orders in relation to the appointment of, instruction of, or conduct of a case involving a Single Expert witness (Rule 15.46).
I am not satisfied that the protections the husband says he seeks by confidentiality undertaking are necessary when the “Terms of Business” are so clear, and as a result, in the exercising of the discretion prescribed by Rule 15.46, to attach the condition sought by the husband that he obtain a confidentiality undertaking in addition to the terms of business conditions. Furthermore, there is no evidence before the Court that any “other shareholders interest in the companies” raise any similar concerns to those raised by the husband.
In the circumstances I will order for the husband to produce the documents, in terms of the wife’s proposed order amending the date for the updated joint letter of instructions to 5 April 2018.
appointment of supervisor
The wife contends in her written submissions at [15], based entirely on the husband’s evidence contained in his Affidavit filed 21 March 2018 that:
15. There appears to be no dispute about the following facts:
(a) [C Incorporated (CI)] is wholly owned by the Husband and Wife; 84% and 16% respectively and they are its two directors;
(b) [CI] wholly owns [C2 Incorporated] ([C2I]);
(c) [CI] is the Statutory Supervisor of [C2I];
(d) [CI] nominated the Wife as the representative of the Statutory Supervisor with a term of 19 June 2014 to 17 July 2016 (Term);
(e) The Term expired during the currency of the restraints made by Justice Forest;
(f) In August 2016 the Husband as a director and majority shareholder of [CI] appointed a new representative of the Statutory Supervisor for [C2I].
The wife submits that the husband’s actions in not reappointing her as the Statutory Supervisor for C2I after the expiry of her term on 17 July 2016 “is contrary to the spirit of the above restraint” and that as a result, the husband should be ordered to reinstate the wife.
Although Queen’s Counsel for the husband said from the Bar Table that he had read the relevant Taiwanese corporations law and the Articles of Association for CEI, there is no evidence before the Court at this time, that enables the Court to be satisfied about:
a)Is it necessary to have just one Statutory Supervisor or can there be two?
b)What are the powers of a natural person as the representative of a Statutory Supervisor and of the Statutory Supervisor itself?
c)Has the wife used her previous appointment as the representative of CI to request financial records rather than seeking to obtain financial records through these proceedings? In this regard the Court notes, without any intended criticism of the wife considering the date of filing of the husband’s Affidavit, that she has not yet responded to many of the claims set out at paragraph 11 of the husband’s Affidavit.
d)At paragraphs 45 and 46 of the Reasons for Judgment delivered by Forrest J on 22 October 2015, and by reference to the injunctions made by Judge Coates on 7 August 2015 in similar terms (Order 3), Forrest J said:
45. In respect to the proposed extension of the injunctions to include restraints on the husband in respect of the parties’ Taiwanese interests that are no different to those imposed on the wife in respect of the parties’ Australian interests, counsel for the husband further submitted that the Court should not impose those on the husband as the evidence establishes that various third parties have interests in some of those Taiwanese entities that would be prejudiced by such restraints.
46. I accept, as was effectively submitted by counsel for the wife, that the extension of the injunctions to also restrain the husband in similar fashion to the wife is a just, convenient and appropriate way to protect the interests of the wife in the property adjustment proceedings without prejudicing the rights of third parties. To the extent that the husband is a director of Taiwanese companies in which there are third party shareholders, I am satisfied the ordinary and proper course of business exception provides for their interests to be protected. If there are companies in which the husband and wife are minority shareholders but in which the husband is a director, then Taiwanese law dealing with corporate control will, I expect, protect the rights of third party shareholders.
after noting (at [17]) “there is no dispute that Judge Coates’ orders principally impacted upon the wife controlling and limiting what she could do in respect of the parties’ Australian companies, including severely constraining her access to the funds of those companies, with no corresponding limitation or control on the husband in respect of their Taiwanese interests.”
The Reasons for Judgment do not indicate whether, when making the orders on 15 October 2015, Forrest J was informed that the wife’s appointment for CI (in its role as Statutory Supervisor for CEI) was to expire on 17 July 2016.
Further, the wife’s solicitor by letter dated 18 April 2017 (some nine months after the expiry of the appointment) says the wife recently discovered that since orders were made on 22 October 2015 the husband had removed her from the position as a statutory supervisor from C2 Incorporated and then filed an amended Application in a Case on 2 May 2017 seeking that the husband within seven days:
restore the wife to the position as a statutory supervisor of [C2] Incorporated
The Affidavits relied upon by the wife (being evidence by her solicitor Ms BB) does not explain the reason for the delay (nine months) in raising her concern.
The terms of the injunction made by Forrest J, on the evidence before me at this time, do not reveal that the husband did anything to “remove” the wife from the position as the representative of the Statutory Supervisor. I do not accept that by the husband doing nothing about the wife’s appointment that he has acted “contrary to the spirit of the above restraint”.
I agree that the effect of the wife’s Application is to seek discretionary relief, by way of a mandatory injunction, for the husband to reappoint the wife. The wife gives no evidence as to why such orders should be made other than, it seems, she wants to retain the position she earlier held.
I do not regard that as sufficient to persuade me that the order should be made. In particular, now that the wife’s appointment has expired and another person has been appointed (I infer as required by Taiwanese law that a corporate Statutory Supervisor must nominate a natural person as its representative/proxy), I have no evidence as to how the corporate operations could be affected or the role of the apparently duly appointed representative exercised conjointly with the wife.
For these reasons I dismiss the wife’s Application for her to be “restored” to the position she previously held.
increasing legal cap
It seems, by the time of submissions, that the positions of the parties were broadly the same, namely that:
a)the payment of any fees for the Single Expert (said to approximately amount to $374,000) will need to be met; and
b)the husband says his legal expenses have been higher than those incurred by the wife (see paragraph 13 of his Affidavit), and the cap that has been progressively increased should be increased again.
The amount of costs incurred by the parties to date, whilst substantial, needs to be seen within the context of the complicated issues that arise in these proceedings and the estimated pool of assets of $200 million.
The ability to access funds for legal expenses (all likely to be adjusted or taken into account in any final agreement or determination) was an exception to the general injunctions restraining the use of funds in the entities for other than normal business expenses.
Coming back repeatedly, on Applications in a Case, also incurs costs. In the circumstances I propose to make the order sought by the husband.
For the reasons given, I make the orders set out at the commencement of these Reasons, noting that in respect of the dispute as to the date the matter should return to the Court, I have set the 5th of September 2018 before me. I record that both Counsel agreed that the case management of this matter, at this stage, is best undertaken by a Judge. Of course, by the time the matter returns to my list, the Single Expert report would have been completed and mediation undertaken.
If at the next date those matters have been completed and the proceedings remain unresolved, then a hearing is likely to be required and the Court should try and facilitate that trial within a timeframe that does allow the Single Expert’s report to be forensically fresh.
I certify that the preceding twenty-nine (29) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Baumann delivered on 29 March 2018.
Associate:
Date: 29 March 2018
APPENDIX ONE
That for the purposes of these Orders, the term "the B Group" means all of the Australian corporate and/or trust entities which the Wife and the Husband have an interest in, including but not limited to the following entities:
(a)B Australia Pty Ltd ACN …;
(b)B Australia Holdings Pty Ltd ACN …;
(c)B Constructions Pty Ltd ACN …;
(d)B Property Pty Ltd ACN …;
(e)B Realty Pty Ltd ACN …;
(f)B International Holdings Pty Ltd ACN …;
(g)Hong Enterprises Pty Ltd ACN …;
(h)B Finance Pty Ltd ACN …; and
(i)C Australia Pty Ltd ACN ….
That for the purposes of these Orders, the term "their Taiwanese interests" means all of the Taiwanese corporate and/or trust entities which the Wife and the Husband have an interest in, including but not limited to the following entities:
(a)B2 Development Incorporated;
(b)Company EE;
(c)C Incorporated;
(d)B3 Limited;
(e)B3 Incorporated;
(f)C2 Incorporated;
(g)B Development Incorporated; and
(h)F Co. Ltd.
(i)G Pty Ltd;
(j)B Enterprises Pty Ltd;
(k)H Incorporated;
(l)I Co;
(m)J Pty Ltd.
That paragraphs 3 – 9 of the Order of Judge Coates of the Brisbane Registry of the Federal Circuit Court of Australia of 7 August 2015 are discharged.
That each party is restrained, whether by themselves or through their servants or agents or by corporate entities controlled by them, from removing themselves or the other party from any office held by him or her in any of the entities within the B Group or their Taiwanese interests, without firstly obtaining the written consent of the other party or an order of the Court.
That each party is restrained, whether by themselves or through their servants or agents or by corporate entities controlled by them, from dealing with, disposing of, transferring or selling any shares held in his or her name in any entity within the B Group or their Taiwanese interests, without firstly obtaining the written consent of the other party or an order of the Court.
That save as otherwise provided for in paragraphs 10, 11 and 12 hereof, each party is restrained, whether by themselves or through their servants or agents or by corporate entities controlled by them, from withdrawing funds in excess of ten thousand dollars ($10,000.00) per transaction from any bank account held by him or her personally or by any entity of the B Group or their Taiwanese interests, held in Australia, Taiwan or any other country, without firstly obtaining the written consent of the other party or an order of the Court.
That save as otherwise provided for in paragraphs 10, 11 and 12 hereof, each party is restrained, whether by themselves or through their servants or agents or by corporate entities controlled by them, from dealing with, disposing of, transferring or selling any assets, stock or shares held by each of them or by any entity within the B Group or their Taiwanese interests, without the written consent of the other party or an order of the Court.
That each party is restrained, whether by themselves or through their servants or agents or by corporate entities controlled by them, from increasing any liability held by each of them or by any entity within the B Group or their Taiwanese interests, beyond the current level, without firstly obtaining the written consent of the other party or an order of the Court.
That each party is restrained, whether by themselves or through their servants or agents or by corporate entities controlled by them, from increasing any salary, director’s fee or dividend received by him or her or any third person who is his or her son, daughter, former spouse, former de facto spouse, current partner, or the former spouse, de facto spouse or current partner of his or her son or daughter, from any entity within the B Group or their Taiwanese interests, without firstly obtaining the written consent of the other party or an order of the Court.
Exceptions to the preceding injunctions
This order does not prohibit either party from:
(a)dealing with or disposing of any of their assets or the assets of any of the entities of the B Group or their Taiwanese interests in the ordinary and proper course of business, including paying business expenses bona fide and properly incurred; and
(b)in relation to matters not falling within (a), dealing with or disposing of any of their assets in discharging obligations bona fide and properly incurred under a contract entered into before this order was made, provided that before doing so each party gives the other party, if possible, at least two working days written notice of the particulars of the obligation.
That notwithstanding the other provisions of this order, including paragraph 9, the Wife shall be entitled to draw from the accounts of any entity in the B Group in Australia or Taiwan, either by way of director’s fees or salary or director’s loan or dividend payment as she may be advised, a net amount that does not exceed $15,000 per calendar month for the payment of her personal and household expenses, with any amount in excess of such sum only to be drawn with the prior written consent of the Husband or an order of this Court.
That notwithstanding the other provisions of this order, including paragraph 9, the Wife shall be entitled to draw from the accounts of any entity in the B Group in Australia or Taiwan, and the Husband shall be entitled to draw from the accounts of any entity in their Taiwanese interests, either by way of director’s fees or salary or director’s loan or dividend payment as she or he may be advised, an additional net amount that does not exceed $200,000 to be utilised for the payment of his or her legal fees and costs incurred in the conduct of these proceedings, with any amount in excess of such sum only to be drawn by her or him for the payment of his or her legal fees and costs in these proceedings with the prior written consent of the other party or an order of this Court.
Disclosure
Each of the parties shall provide to the other on a monthly basis, in writing, details of the legal fees incurred in the previous month in respect of these proceedings and in respect of any amount paid towards those legal fees in that previous month, the amount of such payment and the source of such payment (identifying the source).
That within 21 days of the date hereof:
(a)The Husband file and serve an affidavit in which he deposes to all of the details surrounding the applications for the two lines of credit for C Incorporated in Taiwan, each in the sum of NT$100,000,000 one with the Bank H and the other with Bank I Co Ltd, to the extent that he has not already deposed to same, as well as full details of the use of any of the funds drawn down from those lines of credit in the last twelve months, and he shall exhibit to that affidavit any and all documents related to the matters he is required to depose to that he is obliged to disclose to the Wife that he has not already disclosed, and to the extent that he is unable to do so, he shall depose to the attempts he has made to obtain copies of any such documents; and
(b)The Wife provide such further disclosure or copies of documents requested to be disclosed by her in the letter that was made Exhibit 1 in the proceedings on Thursday, 15 October 2015 and to the extent the Wife is unable to do so, she file and serve an affidavit deposing to the attempts she has made to do so; and
(c)That each party otherwise provide to the other, copies of the documents contained in their respective Lists of Documents and any Supplementary Lists of Documents.
Costs
Each party’s costs of and incidental to the applications heard by the Court on 15 October 2015 are reserved.