Chang & Song

[2021] FamCA 652

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

DIVISION 1

Chang & Song [2021] FamCA 652

File number(s):

SYC 4261 of 2018

Judgment of:

HENDERSON J

Date of judgment:

26 August 2021

Catchwords:

FAMILY LAW – PRACTICE AND PRODUCE –Urgency not established – adjournment granted  

Legislation:

Family Law Act 1975 (Cth) s114

Cases cited:

Australian Broadcasting Corporation v O’Neill [2006] 227 CLR 57

In the Marriage of Sieling (1979) 4 Fam LR 713

Division:

Division 1 First Instance

Number of paragraphs:

33

Date of hearing:

26 August 2021

Place:

Sydney

Counsel for the Applicant:

Mr McInerney SC

Counsel for the First Respondent:

Mr Campton SC

Solicitor for the Second, Third and Fourth Respondents:

Mr Gray

ORDERS

SYC 4261 of 2018

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)

BETWEEN:

MR CHANG

Applicant

AND:

MS SONG

First Respondent

E PTY LTD

Second Respondent

MR F SONG (and another named in the Schedule)

Third Respondent

ORDER MADE BY:	HENDERSON J
DATE OF ORDER:	26 AUGUST 2021

THE COURT ORDERS THAT:

1.The adjournment application made by the wife and supported by the second, third and fourth respondents is granted.

2.This matter will be allocated a hearing date of 2 days on a date to be fixed after the new listing arrangements are settled.

3.Within 2 weeks from the date of these orders, the husband file and serve a consolidated affidavit together with an affidavit setting out his financial circumstances, in accordance with the rules, upon which he intends to rely.

4.Within 7 weeks from the date of these orders, the wife file and serve an affidavit in response together with affidavit setting out her financial circumstances, in accordance with the rules, upon which she intends to rely.

5.Within 9 weeks from the date of these orders, the second, third and fourth respondents file and serve an affidavit in response, in accordance with the rules, upon which they intend to rely.

6.Within 11 weeks from the date of these orders, the husband file and serve any documents in reply upon which he intends to rely.

7.Liberty be granted to the parties to issue as many subpoena as deemed appropriate

8.Each party’s costs of today be reserved.

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

Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).

Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Chang & Song is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

EX-TEMPORE REASONS FOR JUDGEMENT

1. In the matter of Chang & Song. I know I’m pronouncing those names incorrectly, and I apologise at the outset.

2. This is an application by the husband for urgent injunctions on the basis of what he said was urgency and that the Court should move quickly. The wife and the second to fourth respondents dispute the urgency and seek an adjournment of the application so that they can properly plead in a fulsome manner the matters they say are essential for Court to be cognisant of in making orders.

3. The matter was only listed on 18 August for hearing today and has come on quickly on the basis of the assertion by the husband of urgency.

4. The husband filed an application in a case and two affidavits on 16 August 2021 and 26 August 2021.

5. A case outline on 25 August 2021.

6. The wife filed a response and an affidavit on 25 August 2018.

7. A case outline on 25 August 2021.

8. The second to fourth respondents filed a case outline on 26 August 2021 and relied on the affidavit of the wife.

9. Mr McInerney, senior counsel, represented the husband, Mr Campton, senior counsel, the wife, and Mr Gray, solicitor, the second to fourth respondents.

10. This is a complicated matter, and I have no intention today of going through all the issues in the long and convoluted chronology.  The matter concerns property only, involves businesses, trusts, shareholdings and real estate.  The matter involves not just the husband and wife.  It involves the wife’s parents, potentially the husband’s parents, and various third parties who have nothing to do with the marriage, but are business partners involved in these extensive companies, groups, trusts, holdings and the like.  The husband seeks what I can only describe as an extraordinary raft of injunctive and other orders against the wife and the second to fourth respondents.

11. He seeks the wife be restrained from selling, transferring, assigning, encumbering, alienating shares in any entities she has an interest in being, K Pty Ltd, L Pty Ltd, M Pty Ltd and all the properties that she has an interest in at, Suburb C, Suburb N, Suburb Q, Suburb O, Suburb P, Suburb R; S Street, Suburb BB; T Street, Suburb V, and seeks that the wife be restrained from resigning from any office she holds in any of the companies aforementioned.

12. In relation to the second respondent, which is the trust company E Pty Ltd, the husband seeks restraints from, selling, transferring, assigning, et cetera, interests or shares that they have in seven entities: K Pty Ltd, M Pty Ltd, U1 Pty Ltd, U2 Pty Ltd, U3 Pty Ltd, U4 Pty Ltd Suburb BB, or in dealing with their interests in the properties at Suburb O, Suburb P and Suburb R.

13. That the wife, second and the fourth respondents, who are her parents, be restrained from doing any act or thing which causes or authorises a sale, transfer, assignment or apportionment of the rights of K Pty Ltd to the master franchise agreement, a very important document. The KPL or company as it is referred to, is part of the W Company franchise which sells those type of products in various locations in Suburb BB. That franchise, I am told by the wife in her affidavit, is coming up for renewal in January 2022 and negotiations are under way in respect of that renewal. That document is not before me.

14. Further that the wife, the third and fourth respondents be restrained from dealing with properties at S Street, Suburb BB, and Suburb V.

15. That the third respondent be restrained from exercising an asserted power or appointment to place the second respondent as the trustee of the E Family Trust, or voting in favour of this happening.

16. That the wife, and fourth respondent be similarly restrained.

17. That there be a restraint in the ordinary course of business of declaring a dividend which exceeds $250,000 per financial year, a restraint on loans to directors et al., a restraint in any increase in salary and wages, any sale of stock to franchisees other than in accordance with the agreement, unless and pursuant to orders 13 through to 15, the husband seeks to be appointed as a shadow director or to have some involvement in the day to-day running of these various groups and entities aforementioned. An extraordinary raft of orders sought.

18. The main business stems from the operation of the W Company franchise which is operated by K Pty Ltd, and I will just use that form of letters at the moment.

19. This company is run and controlled by a trust, and this company and the many various other companies involving the wife and the wife’s parents and third parties, is a very complicated structure. A web, you might call it.

20. The husband asserts urgency because he asserts the wife and second to fourth respondents are depleting the asset pool of the parties, including the businesses of K Pty Ltd, and thus the value of the E Family Trust, which appears at first blush to be the trust at the centre of these complex business and company structures. He says on 2 July 2021 that he was advised by the valuer who is valuing this group of companies, which valuation hopefully will be ready in two to three weeks, that K Pty Ltd no longer operated stores in Suburb V, Suburb BB and Suburb DD and that another franchisee had taken over the operation of those stores or shops.

21. Secondly, that the W Company Group had not yet accepted a renewal of the existing franchise, which end date is in January 2022. This is referred to as the master franchise agreement. That for these reasons there was significant urgency to minimise what he said was a depletion of potentially the matrimonial pool.

22. As I read his material and despite the plethora of orders and his extensive affidavit, this is the only aspect of the matter as pleaded by the husband which contains any hint of some urgent requirement by a court to intervene or in some way interpose in the day-to-day business and operation of a hitherto successful company – or group of companies. I also note the husband has not been involved for over four years in the running of these businesses. I accept that some, or perhaps many, of the assets contained within this group, or the wealth-generating assets in the group, are well capable of being regarded as matrimonial property.  The husband asserts a value of some 70 million.  However, I cannot accept that mere assertion and a valuation of this web and the value of the companies and the wealth-creating assets in the companies will be provided in two or three weeks by a registered valuer.  That has been a tortuous process itself.  It appears this process started in 2019, and we are towards the end of 2021, thus one can see the complexity here.

23. There is no other evidence that I can see in the husband’s material of a recent nature pleaded by him that the wife is intending to sell or deal with in any way her extensive property portfolio. That the wife or second and fourth respondents are not actively applying and entering into negotiations to renew the master franchise or have not continued to conduct the business profitably.  In fact, one of the husband’s assertion is the wife earns significant income.  Rather, his assertion is a depletion or potential depletion of the matrimonial pool based upon the letter of 2 July 2021, to which I will later refer.  There may well be issues that need addressing on an interim basis.  However, the wife has just had a baby, and the second and fourth respondents, who are not parties to the marriage, need time, as does the wife, to respond fulsomely to the myriad of assertions and allegations made by the husband in his material.

24. The husband proffered an undertaking in support of his injunctions.  However, I am not satisfied on his material as filed he can make good that undertaking if by any injunction I make now I will interfere with or stop or hinder in some way the wife and second to fourth respondents from running, managing, conducting their businesses, and perhaps most importantly, interfere with the franchise negotiations. There is some reference to that concern in the fourth respondent’s material. 

25. The injunctions sought by the husband cast a very wide net, and I have not referred to all the orders. For example, he seeks from paragraph, 7 to about paragraph 14 of his minute of orders, that he in some way have some control or overarching control over how the business is conducted in regard to the information he requires the wife and second to fourth respondent provide him on a weekly basis.  This is sought in circumstances where the husband has not had any involvement with the day to day operation of this business for at least four years and there is a factual dispute about his involvement prior to that time.

26. The information regarding the U Company stores at Suburb DD, Suburb BB and Suburb V no longer being operated by U Pty Ltd was only received, the husband tells me, from a letter dated 2 July 2021.  However, that horse has bolted because the letter is clear these events have happened and are in the past.  These events are not a prospective thing; it has happened.  U Pty Ltd no longer operates those stores.

27. The husband may have become concerned, but without a fully pleaded response by the wife and second to fourth respondents, I do not see urgency now as it is clear franchise negotiations are ongoing, something the husband seeks to continue, and for a Court to restrict third parties to a marriage to negotiate ongoing businesses arrangements, run ongoing businesses, deal with the day-to-day operation of business should only be undertaken in the most extreme of circumstances, and the husband has not, on the evidence, made out a prima facie case that I would act in this matter on an urgent basis.

28. It is imperative that the Court have available to it the best possible evidence to enable a just, equitable and appropriate decision to be made on an interim basis and the husband does not really know about the day-to-day running of this business, where negotiations are at, and, for example, as Mr Campton SC submitted, at minimum, I might need to see this master franchise agreement or the wife might need to see it so she can make her submissions on what is happening.  There needs to be evidence, as Mr Campton SC submitted, from the chief financial controller of these various companies setting out what it would mean for a Court to make the orders sought by the husband, for example he being provided with bank statements of various bank accounts each seven days ongoing.

29. As stated in In the Marriage of Sieling (1979) 4 Fam LR 713, the injunctive power must not be exercised lightly, and this is particularly so where, as here, third parties’ interests and rights are also involved.  I must be cautious.  As provided in Mr McInerney SC’s case outline, in the case of Australian Broadcasting Corporation v O’Neill [2006] 227 CLR 57, a prima facie case need not show it is more probable than not something will occur or be made out. It is sufficient to show a likelihood of success to justify the preservation of the status quo. That is the very fact in issue here.

30. The husband has not made out a prima facie case that he is justified in preservation of a status quo because, quite frankly, I don’t know what the status quo is at this stage. That is something that the wife and second to fourth respondents will, no doubt, flesh out and provide to the Court in their affidavits. The husband does not have any knowledge of or involvement in the day-to-day running of the business.

31. Further, I am concerned regarding the husband’s case and his presentation of his case for the following.

32. He continues to assert he is not a beneficiary under the E Trust deed, yet in their defence filed in these proceedings, the second to fourth respondents admit he is and admitted the same again in their case outline, and thus I must act cautiously on his one side of the story, which is effectively what I have today.

33. Importantly, the value of this web of businesses, if I can use that description, will be known in two to three weeks when the valuation is provided, and this is also a crucial piece of information, not only for the parties, but also for the Court in making a decision a party asks the Court to make.  In those circumstances, the adjournment of this urgent application is granted.

I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Henderson.

Associate:

Dated:       26 August 2021

SCHEDULE OF PARTIES

SYC 4261 of 2018
Respondents
Fourth Respondent:	MS Z