FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)Cirillo & Cirillo [2021] FedCFamC1F 118
File number(s): SYC 4192 of 2020 Judgment of: ALDRIDGE J Date of judgment: 8 October 2021 Catchwords: FAMILY LAW – PROPERTY – Interim application – Freezing orders sought against sale proceeds of primary asset – Where the husband has control of the assets – Significant asset pool – Where the husband sought to use the sale proceeds to pay various business expenses – Where the wife sought orders to prevent the dissipation of funds –
Orders made providing for adequate notice to be given to the wife of proposed payments of business expenses –
Partial property settlement.Legislation: Family Law Act 1975 (Cth) ss 75, 79 Cases cited: Cantrell & North and Anor (2020) FLC 93-976; [2020] FamCAFC 175
In the matter of B Pty Limited […] NSWSC …
Jackson v Sterling Industries Ltd (1987) 162 CLR 612; [1987] HCA 23
Marchant & Marchant (2012) FLC 93-520; [2012] FamCAFC 181
Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466; [2009] FamCAFC 166
Division: Division 1 First Instance Number of paragraphs: 56 Date of hearing: 6 October 2021 Place: Sydney (via video link) Solicitor for the Applicant: Mr Reeve of Marsdens Law Group Counsel for the First and Second Respondent: Mr Richardson SC Solicitor for the First and Second Respondent: Boyce Family Law & Mediation ORDERS
SYC 4192 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS CIRILLO
Applicant
AND: MR CIRILLO
First Respondent
B PTY LTD
Second Respondent
ORDER MADE BY:
ALDRIDGE J
DATE OF ORDER:
8 OCTOBER 2021
THE COURT ORDERS THAT:
1.The orders made on 1 October 2021 are varied by the addition of the following orders at the end of Order 3(c):
(d)In payment to the husband or as he directs in writing the sum of $1,500,000 by way of interim property settlement, of which $500,000 is to be used by the husband for the sole purpose of paying legal costs in relation to these proceedings;
(e)In payment of the expenses set out in Schedule A to the report of Mr A dated 22 September 2021;
(f) The balance then remaining to be deposited in a controlled monies account (“CMA”) operated by TT Lawyers (“TT Lawyers”) and, subject to Order 3(g) below, thereafter applied to all business, taxation and other expenses and liabilities properly incurred by B Pty Ltd, the D Trust and/or the husband or entities related to the husband that arise after the date of settlement and for no other reason unless agreed in writing between the parties, or further order of the Court;
(g) That the solicitor for the husband shall provide TT Lawyers and the solicitor for the wife written notification and copies of each invoice in respect of the expenses referred to in Order 3(f) to be paid from the CMA, and TT Lawyers shall be at liberty to apply such funds the CMA as necessary to pay the invoice fourteen (14)…
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- AGLC
- Cirillo & Cirillo [2021] FedCFamC1F 118
- Case
- [2021] FedCFamC1F 118
- Decision Date
CaseChat Overview and Summary
The case of Cirillo & Cirillo involved a dispute between a husband and wife over the division of substantial net assets, with the wife seeking freezing orders to prevent the husband from disposing of certain assets. The wife opposed the first two orders, though she acknowledged that some business expenses should be paid but disputed their quantum and timing. She proposed that the balance of the funds be held in trust by her solicitors and disbursed only with mutual written agreement or by court order. The wife contended that the net assets available for division were $140 million, while the husband believed the figure to be lower but agreed it was significant. The wife proposed that B Pty Ltd, as trustee for the D Trust, owned four properties with varying valuations and that the D Trust owed substantial sums to the husband and G Pty Ltd. Additionally, the wife claimed that the husband owned 12 properties in Country H worth approximately $9.6 million. The court had to decide on the appropriate application of freezing orders and whether they should be granted to prevent the husband from disposing of the assets in question.
The primary legal issues before the court were whether the wife had established a serious issue to be tried and whether the balance of convenience favoured granting the freezing orders. The court considered the general principles of freezing orders, which aim to prevent a defendant from disposing of assets to frustrate the court process and deprive the plaintiff of the fruits of any judgment. The court also had to determine whether the wife had demonstrated a real risk of dissipation of assets, which would justify the granting of such orders. In assessing these issues, the court examined the evidence presented regarding the substantial net assets available for division and the proposed management of these assets.
In deciding the matter, the court held that the wife had not established a serious issue to be tried. The court found that the wife had not demonstrated a real risk of dissipation of assets that would warrant the granting of freezing orders. The court emphasised that such orders should not be used to create security for the plaintiff or to introduce new vulnerabilities to imprisonment for debt. Instead, their purpose is to prevent a defendant from disposing of actual assets to frustrate the court process. The court also considered the balance of convenience and found that it did not favour granting the freezing orders. The wife’s proposal to hold the balance of the funds in trust and disburse them only with mutual agreement or by court order was deemed sufficient to manage the assets without the need for freezing orders. The court concluded that the wife had not met the necessary threshold to justify the imposition of such orders.
The court ultimately decided against granting the freezing orders. The wife’s proposals for managing the assets, including holding the funds in trust and requiring mutual agreement or a court order for disbursement, were considered adequate to prevent the dissipation of assets. The court found that there was no real risk of the husband disposing of the assets in a manner that would frustrate the court process or deprive the wife of her entitlement. The court’s decision was based on the evidence presented and the need to balance the interests of both parties in the equitable division of their substantial net assets.
The primary legal issues before the court were whether the wife had established a serious issue to be tried and whether the balance of convenience favoured granting the freezing orders. The court considered the general principles of freezing orders, which aim to prevent a defendant from disposing of assets to frustrate the court process and deprive the plaintiff of the fruits of any judgment. The court also had to determine whether the wife had demonstrated a real risk of dissipation of assets, which would justify the granting of such orders. In assessing these issues, the court examined the evidence presented regarding the substantial net assets available for division and the proposed management of these assets.
In deciding the matter, the court held that the wife had not established a serious issue to be tried. The court found that the wife had not demonstrated a real risk of dissipation of assets that would warrant the granting of freezing orders. The court emphasised that such orders should not be used to create security for the plaintiff or to introduce new vulnerabilities to imprisonment for debt. Instead, their purpose is to prevent a defendant from disposing of actual assets to frustrate the court process. The court also considered the balance of convenience and found that it did not favour granting the freezing orders. The wife’s proposal to hold the balance of the funds in trust and disburse them only with mutual agreement or by court order was deemed sufficient to manage the assets without the need for freezing orders. The court concluded that the wife had not met the necessary threshold to justify the imposition of such orders.
The court ultimately decided against granting the freezing orders. The wife’s proposals for managing the assets, including holding the funds in trust and requiring mutual agreement or a court order for disbursement, were considered adequate to prevent the dissipation of assets. The court found that there was no real risk of the husband disposing of the assets in a manner that would frustrate the court process or deprive the wife of her entitlement. The court’s decision was based on the evidence presented and the need to balance the interests of both parties in the equitable division of their substantial net assets.
Orders
Orders of the court
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Background
Background to the litigation
The wife opposed the first two orders, although in her submissions she accepted that some of the business expenses should be paid but queried the quantum and timing of others. She proposed that the balance of the funds be held by her solicitors in trust for the husband and the wife, and to be disbursed only with the written agreement of the husband and wife or by court order. The effect of this order is that, in the event of dispute, B Pty Ltd (or the husband) would be required to bring an application to secure such a payment.BACKGROUND In order to understand the applications, it is helpful to place them in a factual context. The wife contends that the net assets available for division between the parties are $140 million. The husband’s position is that the correct figure is less, but accepts that it is high. The parties jointly own a property at Suburb P. The wife says it is worth $17.5–$20 million, while the husband says it is worth $38–$40 million. Both parties agree that there is a mortgage on the property of $2 million. B Pty Ltd as trustee for the D Trust owns four properties, two of which were valued on 6 October 2020 and one on 4 February 2020 as follows:·LL Property - $66.8 million;·MM Property - $33.3 million; and·PP Property - $10.6 million. The wife asserts that the D Trust owes $20,113,785 to the husband and $53.6 million to G Pty Ltd which holds a mortgage over the assets of the D Trust. As can be seen from the sale of LL Property for some $11.5 million more than its valuation in October 2020, the above figures must be used with some caution. B Properties Pty Ltd (“B Properties”) is the trustee for the D Investment Trust which owns several properties in Country H and is said by the wife to have a value of $40 million. Again, the husband is the sole director and shareholder of B Properties and has control of D Investment Trust. F Pty Ltd is the trustee for the Cirillo Family Trust (No. 2) and owns the F Property in South Australia. It too is under the control of the husband. Finally, the wife asserts that the husband himself owns 12 properties in Country H with a value of approximately $9.6 million. Obviously, at a final hearing, a determination will be made as to what assets are available for division and what value each asset has. For present purposes it is sufficient to proceed on the basis that the net assets available for division total a very large sum, up to $140 million. As I understand it, whatever those assets may be, the parties accept that an equal division of those assets between them is appropriate.DISCUSSIONFreezing Orders It is convenient first to set out the general principles that apply to freezing orders. In Jackson v Sterling Industries Ltd (1987) 162 CLR 612, Deane J, with the agreement of Mason CJ, Wilson and Dawson JJ, said at 625:…when an order for the preservation of assets goes beyond simply restraining the defendant from disposing of specific assets until after judgment, it must be framed so as to come within the limits set by the purpose which it can properly be intended to serve. That purpose is not to create security for the plaintiff or to require a defendant to provide security as a condition of being allowed to defend the action against him. Nor is it to introduce, in effect, a new vulnerability to imprisonment for debt, or rather for alleged indebtedness, by requiring a defendant, under the duress of the threat of imprisonment for contempt of court, to find money, which he may or may not have (whether or not at some point of time it may have been available to him), to guarantee to a plaintiff that any judgment obtained will be satisfied. It is to prevent a defendant from disposing of his actual assets (including claims and expectancies) so as to frustrate the process of the court by depriving the plaintiff of the fruits of any judgment obtained in the action.
Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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