Chea & Sok

Case [2022] FedCFamC1F 628

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Chea & Sok [2022] FedCFamC1F 628

File number(s): SYC 8551 of 2020
Judgment of: HARPER J
Date of judgment: 25 August 2022
Catchwords: FAMILY LAW – PROPERTY – Interim partial property settlement – Husband seeks discharge of injunctions restraining him from carrying out business activities – Where business was the key generator of wealth throughout parties’ relationship – Where business has been unable to trade for eighteen months – Wife seeks continuation of injunctions – No risk that final judgment would be frustrated – Injunctions discharged – Order made for husband to provide 21 days’ notice to wife of sale of properties – Dispute over application of proceeds of sale of property – Husband seeks discharge of further injunction in order to pay ATO debt – Wife does not accept legitimacy of tax liability – Where wife has been on notice of debts for significant period of time – Wife also seeks litigation funding order – Characterisation of order under s 79 and s 80(1)(h) – Where there is presently no clear identification of parties’ assets and liabilities – Property pool between $12 and $19 million – Orders made for litigation funding to the wife and balance of funds to be applied to ATO debt –
Proceedings stood over for further directions and preparation of draft joint balance sheet.   
Legislation: Family Law Act 1975 (Cth) ss 79 and 80(1)(h)
Cases cited:

Bing and Bing (2007) FLC 93-318; [2017] FamCA 418

Zschokke and Zschokke (1996) FLC 92-693; [1996] FamCA 79

Medlow & Medlow (2016) FLC 93-692; [2016] FamCAFC 34

Osferatu & Osferatu [2012] FamCA 408

Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578

Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466; [2009] FamCAFC 166

Tsiang & Wu and Ors (2019) FLC 93-911; [2019] FamCAFC 128

Wenz v Archer (2008) 40 Fam LR 212; [2008] FMCAfam 1119
Division: Division 1 First Instance
Number of paragraphs: 82
Date of hearing: 1 August 2022
Place: Sydney
Counsel for the Applicant: Mr Connor
Solicitor for the Applicant: Fox & Staniland Lawyers
Counsel for the Respondent: Mr O’Reilly
Solicitor for the Respondent: Barkus Doolan Winning

ORDERS

SYC 8551 of 2020

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN:

MS CHEA

Applicant
AND:

MR SOK

Respondent

ORDER MADE BY:

HARPER J

DATE OF ORDER:

25 AUGUST 2022

THE COURT ORDERS THAT:

1.Orders 6, 7, and 9 made on 9 December 2020 by Judge Kemp be discharged.

2.Within 10 days, the Respondent Husband (“the husband”) shall take all necessary steps, including executing any necessary documents or providing any necessary authorities, to cause the following amounts to be released and paid from the funds held by B Pty Ltd in ANZ account No…13:

(a)$386,904.01 by way of partial property adjustment in favour of the Applicant Wife (“the wife”) into the Fox & Staniland trust account BSB:…Account No…56 (Ref:…); and

(b)The balance to the Australian Taxation Office in discharge of existing taxation liabilities for the financial…

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AGLC
Chea & Sok [2022] FedCFamC1F 628
Case
[2022] FedCFamC1F 628
Decision Date

CaseChat Overview and Summary

In the matter of Chea and Sok, the Family Court of Australia considered the application of the husband, Chea, to discharge certain interim property settlement orders and injunctions. These orders had been made to protect the wife's, Sok's, financial interests during the pendency of the final property settlement proceedings. The husband sought to resume control of his business activities, which had been a primary source of the couple's wealth, but which had been unable to trade for eighteen months. The wife opposed the discharge, arguing that it would frustrate the final judgment.

The court identified two main legal issues: whether the injunctions should be discharged, and how the proceeds of a specific property sale should be allocated. The court also had to consider the wife's application for a litigation funding order. In deciding these issues, the court considered the financial control exercised by the husband during the marriage, the nature of the business activities, and the complexity of the financial structure of the husband's entities. The court concluded that there was no risk of the final judgment being frustrated if the injunctions were discharged. It also found that the wife had been aware of the husband's debts for a significant period of time.

The court discharged the existing injunctions, allowing the husband to resume his business activities, and ordered that the husband provide the wife with 21 days' notice of any intended sale of property. Regarding the proceeds from the sale of a property at O Street, the court ordered that a portion be paid to the wife as a partial property settlement, with the balance to be used to pay off taxation liabilities. The court also granted the wife a litigation funding order, with the proceeds to be applied to the husband's ATO debt and any remaining funds to be used for the wife's litigation costs. The proceedings were stood over to allow the parties to prepare a joint balance sheet.

Orders

Orders of the court

THE COURT ORDERS THAT:

1. Orders 6, 7, and 9 made on 9 December 2020 by Judge Kemp be discharged.

2. Within 10 days, the Respondent Husband (“the husband”) shall take all necessary steps, including executing any necessary documents or providing any necessary authorities, to cause the following amounts to be released and paid from the funds held by B Pty Ltd in ANZ account No…13:

(a) $386,904.01 by way of partial property adjustment in favour of the Applicant Wife (“the wife”) into the Fox & Staniland trust account BSB:…Account No…56 (Ref:…); and

(b) The balance to the Australian Taxation Office in discharge of existing taxation liabilities for the financial years ending 30 June 2019 and 30 June 2020 of:

(i) C2 Pty Ltd, C Unit Trust, C Pty Ltd, C1 Group;

(ii) D3 Pty Ltd;

(iii) D2 Pty Ltd;

(iv) E Unit Trust; and

(v) F Unit Trust.

in such order or priority as the husband may determine.

3. Within 14 days of compliance with Order 2, the husband shall provide to the wife copies of:

(a) Bank statements verifying the transactions referred to in Order 2; and

(b) Copies of updated ATO Portal Statements verifying receipt of the payment and reduction of the debts.

4. In the event the husband either personally or in his capacity as a director or officeholder of any entity intends to sell, encumber, dispose of or otherwise deal with any real property owned in his own name, or by any entity comprising the C Group, or otherwise:

(a) he shall provide the wife no less than 21 days prior notice in writing of the proposed sale, encumbrance, transaction or dealing;

(b) in respect of any sale of real property:

(i) prior to the settlement of sale of any real property, the husband shall provide to the wife a copy of the following documents in respect of the sale:

A. Contract for sale;

B. Settlement adjustment sheet; and

C. Bank statements, invoices, and other relevant documents showing how the proceeds of sale are intended to be used

(ii) after settlement, bank statements for the account/s into which the proceeds of sale including deposit are paid, showing receipt of the funds

(c) pending further order or written agreement of the parties, the husband, personally and in his capacity as a director or officeholder of any entity, be restrained from causing or permitting to be transferred out of or removed from the Commonwealth of Australia, any proceeds of sale or other funds arising from, or received as a result of, any sale, encumbrance, disposal or other dealing the subject of this order.

5. All questions of costs of the applications the subject of this judgment be reserved to final hearing.

6. The proceedings, including any outstanding interlocutory applications, be stood over to the MCFP List on 28 October 2022, at a time to be advised, for mention.

7. The parties collaboratively prepare a joint balance sheet (“the Balance Sheet”):

(a) setting out all assets, liabilities and financial resources which the parties assert are relevant to the determination of this matter;

(b) the balance sheet is:

(i) to be divided into clearly identified sections, specifying Assets, Liabilities, Superannuation, and Add-backs (if claimed);

(ii) give totals for each category, and subtotals in each category for each party;

(iii) in the event there is dispute about totals and subtotals, each party is to include the total or subtotal for which they contend

(iv) is to have footnotes which explain the differences between the parties in relation to any disputed items;

(c) if a party contends any item should be included as an “add-back”, the footnotes to the balance sheet must contain a brief description of the basis for the claimed add-back.

8. For the purposes of preparing the Balance Sheet and unless otherwise agreed, no later than 28 days prior to the next hearing date, the applicant provide to the respondent a draft Joint Balance Sheet, using the form available on the Federal Circuit and Family Court of Australia website, setting out the asset pool contended for by the applicant, and by no later than 14 days prior to the next hearing date, the respondent return the Joint Balance Sheet to the applicant having inserted the respondent’s contentions as to the asset pool, their asserted values, and footnotes to explain any disputed items.

Background

Background to the litigation

During the first listing on 13 April 2022, orders were made by consent setting down the parties’ competing interim applications for hearing on 1 August 2022.BRIEF BACKGROUND The parties commenced cohabitation upon their marriage in 2003. They separated on about 23 March 2018. A divorce order was granted on 15 November 2021. The husband describes himself in his financial statement as a Manager, however there is evidence that much of his income derives from property investment. The wife is presently unemployed. The parties’ wealth and the majority of husband’s income derive from his property development activities over approximately the last twenty years. He has incorporated businesses and trusts for this purpose, and is the director and shareholder of a number of corporate entities, including proprietary companies and trusts. Collectively, he refers to these entities as the C Group. This structure has some complexity. However, according to the husband, the C Group is mainly structured around three trusts:(a)G Pty Ltd ATF the Sok Family Trust. This trust has owned the main trading subsidiaries in the Group, being C Pty Ltd (for residential constructions) and C3 Pty Ltd ATF C Unit Trust (for commercial constructions). These trading entities provided the cash flow and resources to fund various property acquisitions and land investments;(b)H Pty Ltd ATF the H Trust established to fund investments around City J and City K; and(c)L Pty Ltd ATF the L Trust, established to fund investments in the City N and M Town areas. For the purposes of this judgment, it is unnecessary otherwise to set out in full the details of the entities comprising the C Group. I will refer to those details only to the extent necessary. In general terms, the husband explained in his affidavit filed on 21 July 2022 the operations of the C Group as follows:28. During the marriage, so that I could meet the running costs associated with each entity within the [C Group], I regularly sold assets (mainly properties) held by one entity and used profits generated to meet the expenses and capital associated with another. This resulted in multiple inter-company loans. This is my usual course of business to grow the companies, build their property portfolios, and increase income and available cash within the Group. There was no dispute that during the marriage and since separation, the husband has controlled the financial aspects and resources of the parties. A draft balance sheet tendered by him (Exhibit 2) shows this is the case. There was also no dispute that it has been the husband’s business activities conducted through the C Group which have produced the majority of the parties’ wealth. For the purposes of this judgment, it should be recorded that among the numerous entities and trusts comprising the C Group, B Pty Ltd (“B Pty Ltd”) is the trustee of the B Unit Trust. On 8 December 2020, the husband caused B Pty Ltd to sell a property at O Street, City J (“O Street”). In total, after settlement of the sale, net proceeds of $2,583,764.86 were received by B Pty Ltd inclusive the deposit (“the O Street funds”). These funds were paid into a B Pty Ltd account held at the ANZ bank. They continue to be held in that account presently totalling $2,362,210 (Exhibit 2). The difference between $2,583,764.86 and $2,362,210 arose because $100,000 was paid from these funds to each of the parties by way of partial property settlement, and for ongoing spousal maintenance to the wife pursuant to an order made on 13 December 2021, discussed later in these reasons.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

As outlined above, I propose to discharge the existing injunctions, and make orders broadly conforming to the orders proposed by the husband. Accordingly, I do not propose to discharge the existing orders for payment of spousal maintenance to the wife in the sum of $5417 per month.CONCLUSION There remain some aspects of the parties’ competing interlocutory applications to be determined, if they seek to press them. The proceedings will stood over to the MCFP List for mention. For the foregoing reasons, the orders set out at the commencement of these reasons will be made.

Ratio Decidendi

Legal Principle Established

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