Cirillo & Cirillo (No. 2)
[2021] FamCA 398
•17 June 2021
FAMILY COURT OF AUSTRALIA
Cirillo & Cirillo (No. 2) [2021] FamCA 398
File number(s): SYC 4192 of 2020 Judgment of: ALTOBELLI J Date of judgment: 17 June 2021 Catchwords: FAMILY LAW – PROPERTY – interim injunctions – significant asset pool available for distribution – where one party has sole control and operation of the parties’ relevant interests – sale of a primary asset pursuant to a loan agreement – whether listing property for sale constitutes a breach of an undertaking to the Court – assessment of risk – whether there exists an objective risk that joint property will be dissipated – exercise of the Court’s discretion – application dismissed – costs reserved. Legislation: Bankruptcy Act 1966 (Cth)
Contracts Review Act 1980 (NSW)
Personal Property Securities Act 2009 (Cth)
Cases cited: Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57; [2006] HCA 46
Downs Distributing Co Pty Ltd v Associated Blue Star Stores Pty Ltd (in liq) (1948) 76 CLR 463
In the Marriage of Omancini (2005) FLC 93-218; [2005] FamCA 195
Medlow & Medlow (2017) FLC 93-796; [2017] FamCAFC 159
Mullen and De Bry (2006) FLC 93-293; [2006] FamCA 1380
Palmer v Parbery (2019) 136 ASCR 26; [2019] QCA 27
Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319
Re Netherby Hall Pty Ltd (1974) CLC 40-110
Robertson v Grigg (1932) 47 CLR 257
Shercliff v Engadine Acceptance Corporation Pty Ltd [1978] 1 NSWLR 729
Skyworks v 32 Drummoyne Road [2017] NSWSC 343
Stockco Ltd v Gibson [2012] NZCA 330
Taylor v White (1964) 110 CLR 129; [1964] ALR 595
Trevi & Trevi (2018) FLC 93-858; [2018] FamCAFC 173
Tsiang & Wu and Ors [2019] FamCAFC 128
Number of paragraphs: 49 Date of last submission/s: 22 April 2021 Date of hearing: 22 April 2021 Place: Sydney Solicitor advocate for the Applicant: Mr Reeve Solicitor for the Applicant: Marsdens Law Group Counsel for the Respondent: Mr Richardson SC Solicitor for the Respondent: Boyce Family Law & Mediation ORDERS
SYC 4192 of 2020 BETWEEN: MS CIRILLO
ApplicantAND: MR CIRILLO
Respondent
ORDER MADE BY:
ALTOBELLI J
DATE OF ORDER:
17 JUNE 2021
THE COURT ORDERS THAT:
1.The Application in a Case filed on 25 February 2021 be dismissed.
2.The costs of and incidental to the Application in a Case filed 25 February 2021 be reserved for determination at the conclusion of these proceedings.
3.The matter be referred back to the Docket Registrar for further case management.
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 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to 17.02 Family Law Rules 2004 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Cirillo & Cirillo has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
ALTOBELLI J:
By way of an Application in a Case filed 25 February 2021, the Applicant wife asks the Court to make a number of interim orders the effect of which are to restrain the husband in his unfettered control of the parties’ business and real estate interests. In the husband’s Response to the Application in a Case filed 19 April 2021, he asks the Court to dismiss the wife’s application.
The orders sought by the wife at the interim hearing are found in her solicitor’s case outline document filed 19 April 2021, amended by way of a minute of orders provided during the course of the interim hearing, and are reproduced below:
D Trust and D Investment Trust
1. That pending further order, the Husband is restrained from exercising the power of appointment of the trustee of either D Trust or D Investment Trust or otherwise causing the removal B Pty Ltd as trustee of D Trust and the D Investment Trust.
2. That the Husband, other than with the wife’s consent or pursuant to court order, is restrained from:
2.1 Selling, causing the sale of, or otherwise disposing of the assets of D Trust and the D Investment Trust, save and except for in the ordinary course of doing business, including but not limited to:
2.1.1 Causing the repayment of any credit loan account of the Husband;
2.1.2 Causing D Trust or D Investment Trust to make a capital or income distribution to the direct or indirect benefit of the Husband.
2.2 That the Husband is restrained from disposing of his shareholding in B Pty Ltd and C Pty Ltd or issuing or causing the issue of further shares with the effect of diluting any shareholding of any class or kind whatsoever in B Pty Ltd and C Pty Ltd.
Cirillo Family Trust No. 2
3. That pending further order, other than with the wife’s consent or pursuant to court order, the Husband is restrained from exercising the power of appointment of the trustee of Cirillo Family Trust (No. 2), or otherwise causing the removal of F Pty Ltd as trustee of the Cirillo Family Trust (No. 2).
4. That the Husband other than with the wife’s consent or pursuant to court order is restrained from:
4.1 Selling, causing the sale of, or otherwise disposing of the assets of the Cirillo Family Trust No. 2 save and except for in the ordinary course of doing business.
4.2 Causing the Cirillo Family Trust No. 2 to make a capital or income distribution to the direct or indirect benefit of the Husband.
Overseas Holdings
5. That the Husband, other than with the wife’s consent or pursuant to court order, is restrained issuing or causing the issue of further shares with the effect of diluting any shareholding of any class or kind whatsoever in Cirillo Pty Ltd.
6. That the Husband, other than with the wife’s consent or pursuant to court order, is restrained from:
6.1 Issuing or causing the issue of further shares with the effect of diluting any shareholding of any class or kind whatsoever in the following entities:
6.1.1 U Company;
6.1.2 V Company; and,
6.1.3 W Ltd.
6.2 Selling, causing the sale of, or otherwise disposing of the assets of U Company, including but not limited to:
6.2.1 X Town - Trading Premise for Y Business
6.2.2 Z Area of the Municipality of X Town [Land with building]
6.2.3 DD Street, Suburb EE, J City (Two Apartments)
6.3 Selling, causing the sale of, or otherwise disposing of the assets of W Ltd, including but not limited to:
6.3.1 CC Street, BB Town, AA District (Land and Four Houses)
6.3.2 FF Street, Suburb GG, AA District (Land and One house)
6.3.3 Suburb HH, AA District (Land with Fruit Trees)
6.3.4 CC Street, BB Town, AA District (Vacant Land)
6.4 Selling, causing the sale of, or otherwise disposing of the assets of V Company.
7. That the Husband, other than with the wife’s consent, is restrained from selling, causing the sale of, disposing of, or otherwise encumbering the following real properties:
7.1 M Street, Suburb L, J City;
7.2 N Street, Suburb L, J City,
7.3 Land with three properties situated in T Town, K City,
7.4 Three Apartments situated on O Street, Suburb L;
7.5 Land and House situated in JJ Region;
7.6 Land with House situated in KK Region.
8. That the Husband pay the Wife’s costs of and incidental to this Application in a Case.
By way of background, the husband is 75 years old, and the wife is 70 years old. They married in 1975 and separated in 2020, after a marriage of 45 years. They have two adult children, and one grandchild. To adopt the husband’s language, he and the wife started their life together in Australia many years ago ‘from humble beginnings.’ According to the wife, the net value of their property pool is in the vicinity of $90 million. According to the husband, the main assets of the property pool consist of the matrimonial home in Suburb P, currently occupied by the wife, having an estimated net value of $28 million, real estate in Country H, as well as business interests there, and various business interests in Australia, held through a number of trusts. The husband has, historically (apart from a relatively short period) and currently, had the sole control of the parties’ business interests. He is the sole director and shareholder of B Pty Ltd as trustee for D Trust; B Properties Pty Ltd as trustee for the D investment trust and the F Pty Ltd as trustee for the Cirillo Family Trust (No. 2). The husband has at all relevant times been the appointor of D Trust. The D Trust is the entity that holds a beneficial interest in a series of commercial properties comprising LL Property in Q Street Sydney, MM Property at the corner of Q Street and R Street Sydney, PP Property on S Street Sydney, and QQ Property in South Australia. The D trust also holds the real estate on which LL Property and MM Property are located.
The husband and the wife have been involved in complex litigation, not just in this Court but also in the Supreme Court of New South Wales. The latter proceedings involved their adult children. A brief summary of this litigation provides useful background to the present application. The case is a decision of Black J in the Equity – Corporations List, and is reproduced at page one of the exhibit bundle to the husband’s Affidavit of 16 April 2021. The case was heard over six days. The plaintiffs were the parties’ two adult daughters. The husband was the first defendant/first cross claimant. B Pty Ltd and C Pty Ltd, as well as the husband of one of the adult daughters, were also parties to the proceeding. The husband successfully set aside a deed of assignment of a loan that was owed to him by the trust pursuant to the Contracts Review Act 1980 (NSW). The assignment of the loan was to his two adult daughters and, at the time, the loan was $18.5 million. There were some consequential issues about his actions in seeking to remove the trustee. In short, the husband was successful in the litigation. His actions were vindicated.
It is not only palpably apparent from the evidence that they have both placed before the Court, but also readily conceded in submissions, that the husband and wife no longer trust each other notwithstanding their very long marriage, and their spectacularly successful migrant story. The Court is left with a profound sense that the present application by the wife is simply a continuation of the earlier proceedings in the Supreme Court, but under a different guise. This is potentially another chapter in this family’s saga. On one view, in chapter one, the husband and the wife achieved spectacular success in business and developed considerable wealth under the stewardship of the husband. In chapter two, unhappiness beset this family, and other family members sought to take over control of the business empire. In chapter three, the husband successfully wrenched back control through proceedings in the Supreme Court of New South Wales. Chapter four is being played out in various applications before this Court. The power struggle continues.
On 11 January 2021, the husband gave the following undertaking to the Court:
Pending the hearing of the Applicant Wife’s Application in a Case filed 23 December 2020, the Husband undertakes to the Court that he will not do any act or thing, or permit any act or thing to be done, to have the assets of the Trust dealt with, other than in the ordinary course of business.
THE EVIDENCE
In the wife’s case, she sought to rely on the following documents:
(a)Her Application in a Case filed 25 February 2021;
(b)Her Affidavit filed 6 April 2021 and corresponding exhibit book C-6;
(c)A Case Outline document filed 19 April 2021;
(d)An Undertaking as to Damages tendered during the hearing as exhibit A1; and
(e)An amended minute of orders sought, marked by the Court as exhibit A2.
In the husband’s case, he sought to rely on the following documents:
(a)His Response to an Application in a Case filed 19 April 2021;
(b)His Affidavit filed 16 April 2021 and corresponding exhibit bundle;
(c)A Case Outline document filed on 20 April 2021; and
(d)A letter dated 3 February 2021 tendered during the hearing as exhibit R1.
THE APPLICABLE LAW.
The orders sought by the Wife are interim injunctions. In Tsiang & Wu and Ors [2019] FamCAFC 128 the Full Court has helpfully summarised the relevant law at [20]- [27]:
20. The grant of an injunction is discretionary and the basis on which such an order is made is well established.2 A purpose, as in this case, is to preserve the status quo pending resolution of the controversy.3 An applicant must demonstrate first that there is a serious issue to be tried.4 While that statement has been the subject of various iterations, in essence it requires the demonstration of an arguable case or as was said in Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 at [65], the applicant must “show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo”.
21. Next the applicant must demonstrate that the balance of convenience favours making the order sought.5 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 judgment in favour of the applicant.
22. In Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319, Gleeson CJ said after discussing the discretionary nature of the remedy at 321–325:
… as a general rule a plaintiff will need to establish, first, a prima facie cause of action against the defendant, and secondly, a danger that, by reason of the defendant’s absconding, or of assets being removed out of the jurisdiction or disposed of within the jurisdiction or otherwise dealt with in some fashion, the plaintiff, if he succeeds, will not be able to have his judgment satisfied.
...
It is not difficult to imagine situations in which justice and equity would require the granting of an injunction to prevent dissipation of assets pending the hearing of an action even though the risk of such dissipation may be assessed as being somewhat less probable than not.
23. As McDougall J in Skyworks v 32 Drummoyne Road [2017] NSWSC 343 said:
24. The Court is required to undertake a qualitative evaluation of all the evidence that is available, to see if there is a sufficiently serious risk of frustration to justify the making of a freezing order. Further, the two considerations [namely, (1) whether there is a good arguable case and (2) whether there is a real risk of judgment frustration] should be analysed together (as each may impact on the other), and with an appreciation of both the underlying purpose of the rule and the relative risks of granting or withholding relief – the customary discretionary calculus.
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 judgment or claim to that entity.
25. It is unnecessary to demonstrate a positive intention but merely the possibility of the event occurring.6[1] The determination about the balance of convenience may thus be an inference drawn from the facts and circumstances established by the applicant’s evidence.7
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).
27. As to the determination of the existence of the risk and its magnitude, in Palmer v Parbery [2019] QCA 27 McMurdo JA (with whom Fraser and Gotterson JJA agreed) said:
119. The determination of whether there exists a sufficiently serious risk of the dissipation of assets involves the evaluation of future possibilities, rather than the ascertainment of historical facts. The risk of dissipation might justify an order although the probability of the risk eventuating is less than 50 per cent. But, as the risk of dissipation must be a real and not merely a theoretical one, it must have an evidentiary basis. Where a fact is alleged by the plaintiff in support of its case about the risk, but there is contrary evidence from the defendant, must the fact be proved to the court’s satisfaction as if the application for the freezing order was the trial of the case? In my view, a plaintiff need not do so. A freezing order is interlocutory in nature; it does not involve a final determination of the parties’ positions. Usually it is made in circumstances of urgency in which the court is unable to conduct an extensive and conclusive factual inquiry in a way which is fair to both parties. Where the factual basis for the plaintiff’s case about the risk of dissipation is disputed, the risk will commonly have to be evaluated with the recognition that the factual basis for it is in doubt. Nevertheless, the possibility of the plaintiff’s evidence being correct, considered with other facts and circumstances, might mean that there is a sufficiently serious risk of the frustration of the satisfaction of a judgment as to justify the making of a freezing order. …
Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170; Cardile v LED Builders Pty Ltd (1999) 198 CLR 380.
Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at [9]–[12], [15] (per Gleeson CJ) and [245] (per Callinan J).
Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 at 153-154; Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at 328–329; Blueseas Investments Pty Ltd v Mitchell and McGillivray (1999) 2-856 at [56].
Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 at [19].
Mullen and De Bry (2006) FLC 93-293 at [49].
THE WIFE’S CONTENTIONS
In short, the wife contended that the husband had acted in a wanton manner detrimental to their financial interests, had breached his own undertaking given to this Court, had generally disregarded this Court’s authority, and was willing to and had misled the wife to her detriment. The evidence relied on to support these contentions is contained in the wife’s Affidavit sworn 6 April 2021 and corresponding annexures.
THE HUSBAND’S CONTENTIONS
In short, the husband contends that he has at all relevant times acted in the best interests of the parties in managing their financial affairs, consistent with the entire period of the marriage. He contends that he has safely stewarded the trust assets for over two decades, to the benefit of the parties. If the injunctions are granted, the husband contends that it will prejudice not just his individual position, but the entire matrimonial pool, thus ultimately to the disadvantage of the wife.
THE CONTENTIONS EXAMINED IN LIGHT OF THE APPLICABLE LAW
It is important to recognise that each party seeks an equal division of the net matrimonial property pool. Implicit in the wife’s case is a concern that the husband’s actions may have the effect of reducing the size of the pool available for distribution to them. The Court notes that, even if that were the case, it would not necessarily mean that she would be limited to receiving half of the value of a diminished pool, depending on the reasons for the reduction in the value of the pool of assets: See, eg, In the Marriage of Omancini (2005) FLC 93-218; Trevi & Trevi (2018) FLC 93-858. . This may perhaps, and depending on the other evidence, be one reason for declining to exercise discretion in the wife’s favour. Nonetheless, the Court is comfortably satisfied that, even on the limited material available before it in the context of the present application, she has established a prima facie case against the Respondent husband.
The wife must show that there is an objective risk of dissipation of the assets, or of dealings with assets which will frustrate her claim. The wife sought to prove this on a number of different bases.
The wife contended that the husband had manifested a cavalier attitude towards Court orders. He had, for example, failed to comply with directions as to the filing of documents, and the making of financial disclosure. She contended, and the Court accepts as a general proposition, that the gravity of these actions is magnified in a case where he has total control of the parties’ finances and complete access to all the relevant documentary records. She further contended that the husband had acted unilaterally, had misled her about the existence of valuations of trust assets, the refinancing of trust borrowings, and the listing for sale of one of the property assets. She alleged that the husband had made a raft of serious threats against her, both personally and to dissipate their assets. One of the most serious allegations made was that he had breached his undertaking to the Court.
In the context of an interim hearing, all the Court can do is form impressions from the material presented before it.
The impression formed is that the husband has, indeed, failed to comply with directions as to the filing of documents. Nonetheless, as his senior counsel quite properly submitted, the financial affairs of the parties are complex, and span across Australia and Country H. It was understandable that the husband would need time to provide to the wife the documents she legitimately sought. Tardiness to comply with directions as to filing is not, of itself, evidence establishing risk. There are other remedies available.
The impression formed is that the husband has, indeed, struggled to provide timely and complete financial disclosure. This is partly explicable to the complexity of their financial affairs, and partly explicable to complex parallel litigation involving the husband, wife and family members, in the Supreme Court of New South Wales. The parties caused to be prepared a comprehensive schedule of financial documents requested and provided. This schedule pertains to documents requested in letters dated 29 October 2020 and 13 November 2020. What is clear from this schedule, however, is that many documents remain to be produced, up to six months after request. That appears, prima facie, to be an unreasonable delay particularly in circumstances where the impression is formed that the husband has formidable resources available to assist him. Nonetheless, nondisclosure on its own is not, of itself, necessarily indicative of risk. Once again, there are other remedies available.
The impression created is that the husband may well have misled the wife about the existence of valuations of trust assets, refinancing, and the listing for sale of one of the commercial properties. His senior counsel points out, however, that historically, and both as a matter of law and practice, the husband has had complete control of the parties’ business assets. Moreover, his actions need to be understood in the context of the Supreme Court proceedings, and his ultimate vindication in that regard. Whilst these matters are accepted, the assessment of risk involves the evaluation of future possibilities, rather than the ascertainment of historical facts. The separation of parties who have been in a relationship for many years often results in a radical reorientation of the trust aspects of their relationship, particularly after litigation is commenced. This is compounded when their financial affairs are complex, as is the litigation between them. The impression created is that the husband has, indeed, acted in a unilateral and at times arbitrary fashion, though not necessarily to the detriment of the wife and their joint assets. His actions are indicative of risk, though the lack of obvious detriment to the wife may well go to the question of discretion.
The wife contended that risk was established, and therefore an injunction was warranted, because the husband had made a raft of serious threats against her, both directed to her personally and to dissipate their assets. The evidence of these threats is found at paragraphs 23 – 27 of the wife’s Affidavit sworn 6 April 2021. It is curious that the husband did not seek to traverse these allegations. The Court infers in all the circumstances of this case that he does not put these allegations seriously in contention. This evidence does add to the risk profile asserted on behalf of the Wife.
If the husband has, indeed, breached his undertaking given to the Court, this too may be indicative of risk. The relevant terms of the undertaking are that “…the husband undertakes to the Court that he will not do any act or thing, or permit any act or thing to be done, to have the assets of the trust dealt with, other than in the ordinary course of business.”
The first issue is to understand the wife’s case as to how, precisely, the husband breached this undertaking and, specifically, how the trust assets were dealt with after the making of the undertaking on 11 January 2021. The wife’s case seems to be that the relevant dealing was the attempt by the husband to list for sale one of the commercial properties operated by the trust. It is common ground that the commercial property is, in fact, on the market for sale, and moreover it is required to be sold pursuant to the terms of a refinance agreement that the husband entered into, secured over the assets of the trust. Accepting for the moment that an actual sale would constitute a breach of the undertaking, does the listing for sale on the public market constitute a dealing proscribed by the undertaking?
Consistent with the view of the trial judge, and seemingly of the Full Court, in Medlow & Medlow (2017) FLC 93-796 (see [34]-[37] of the Full Court’s reasons) the term ‘dealt with’ should receive its ordinary meaning, albeit in the context of the undertaking given by the husband to the Court. In the 8th edition of the Macquarie dictionary, ‘deal with’ is defined relevantly as: ‘to do business with; to occupy oneself…with; to take action with respect to’. Thus, from this Court’s perspective, when the husband listed one of the trust assets on the public market for sale, he ‘dealt with’ the trust asset. There is nothing in the context of the wording of the undertaking given by the husband to the Court that would detract from this interpretation, other than the reference to the ordinary course of business.
The focus turns to whether the husband acted ‘in the ordinary course of business.’
There is, perhaps surprisingly, little assistance in the jurisprudence about the meaning of this phrase specifically in a family law context. The phrase is used in both the Bankruptcy Act 1966 (Cth) and the Personal Property Securities Act 2009 (Cth), which both have clear business and commercial contexts. It seems that no exhaustive definition or explanation of the phrase “in the ordinary course of business”, if indeed such a thing were possible, has been given by Courts in interpreting this legislation. In each case it is a question of fact: Downs Distributing Co Pty Ltd v Associated Blue Star Stores Pty Ltd (in liq) (1948) 76 CLR 463; Robertson v Grigg (1932) 47 CLR 257; Taylor v White (1964) 110 CLR 129; Re Netherby Hall Pty Ltd (1974) CLC ¶40-110.
In Taylor v White (1964) 110 CLR 129, Dixon CJ held at [136]:
13.1. ‘I do not doubt that ‘in the ordinary course of business’ refers to ‘business’ as a general conception and is not restricted to the conduct of any particular business such as the business carried in a shop or merchant’s office or the like, but is referring to the transaction of business as a known and recognised activity pursued by anybody engaged in an attempt to win or earn or ‘make’ money or a living in a systematic or regular way’
The goal of the phrase, at least in a commercial context, is that it “must be interpreted in a way which meets the commercial objective of facilitating commerce without undermining the equally important commercial objective of ensuring that those who provide credit on the security of the debtor’s goods are not unfairly deprived of the benefit of that security”: New Zealand Court of Appeal in Stockco Ltd v Gibson [2012] NZCA 330. The family law context is quite different. In the commercial and business world parties generally enter into transactions at arm’s length and for valuable consideration. In family law, transactions between parties who have, or have had, a relationship, are often characterised by inequality of knowledge and bargaining power. Nonetheless, the Court accepts that the phrase is to be interpreted on a case-by-case basis and by reference to the evidence before the Court.
Based on the husband’s own evidence, D Trust appears to operate a number of commercial properties on either freehold, or leasehold properties. At paragraph [20] of the decision of Black J in the New South Wales Supreme Court, his Honour refers to the cross examination of the husband noting that he “acknowledged…that he had substantial experience in making business judgements, especially in relation to the sale and purchase of commercial properties”. This is the best evidence that the Court has about what is the ‘ordinary course of business’ of the trust. It includes, therefore, the sale, purchase and operation of commercial properties.
This Court therefore concludes that, on the limited evidence available to it, the husband did not breach the undertaking that he gave to the Court not to deal with the assets of the trust otherwise than in the ordinary course of business. Even if the Court were wrong to characterise the business of the trust as selling, buying and operating commercial properties, it would still have concluded that merely listing one of the property assets of the trust for public sale was not necessarily an action that adds to the risk contended for on behalf of the wife.
Overall the question is whether the Applicant wife has established to the reasonable satisfaction of the Court that there is a danger that, by reason of the Respondent husband dissipating or otherwise dealing with the assets, she will be prejudiced in her claim for property distribution
The wife’s claim in this regard is for half of the net assets available to the parties and according to her, and not disputed by the husband in his evidence, he has indicated that she will receive a one half share. In context, this means a half share of an asset pool that is estimated to be approximately $90 million in value.
In context, the main issue between the husband and the wife appears to be not whether the commercial property in question needs to be sold, because it clearly does. The dispute between the parties is as to whether it should be sold for $60 million, as the wife contends, or for more than that, as the husband contends. He asserts, based on a valuation available to him, that the commercial property in question, including the freehold, has a value of $65,300,000. It may well be that, ultimately, the market decides on the value of the commercial property in question. The impression of the evidence in its totality, including the reasons for judgment of Black J in the Supreme Court of New South Wales, is that the husband is trying to maximise the sale proceeds of the commercial property in question.
Despite what might be loosely described as his conduct, described above, it is still hard to see how the husband is seeking to dissipate any of the relevant assets, or act contrary to the best interests of the family as a whole, including the wife.
The risk or danger to the wife is theoretical, not real. This is not a case where the level of risk warrants the intervention that the wife proposes.
But even if the husband were to be found, at a final hearing, to have acted capriciously such that an asset was realised for less than its market value, the wife would have available to her a number of submissions which would result in any perceived loss to her being adjusted in her favour: See, eg, In the Marriage of Omancini (2005) FLC 93-218; Trevi & Trevi (2018) FLC 93-858
Accordingly, this Court concludes that the wife has not reasonably satisfied the Court that her claim to the matrimonial pool could not be satisfied as a result of the husband’s actions on which she relies. The Court would not grant the injunction that she seeks.
Even if the Court is wrong in its assessment, however, it would still, in the exercise of its discretion, decline to grant the injunction. The balance of convenience does not fall in favour of the granting of the injunction. There are a number of reasons for reaching this conclusion.
The impression created by the evidence in its totality is that the husband has successfully, and to their mutual benefit, controlled the parties’ assets, for all of the marriage. Black J referred to the husband’s ‘understandable pride in his business achievements’ at [20]. His Honour described submissions made on behalf of B Pty Ltd (the trustee company of which the husband is the sole director and shareholder) to the effect that the husband ‘is a successful businessman who had accumulated enormous wealth’, as being a submission made with substantial force: at [144]. Black J seemingly accepted this submission. This Court observes that the above matters are largely self-evident from the parties’ own evidence.
In the wife’s case, she conceded that for as long as the trust, and the husband, were bound by the terms of a secured loan facility agreement with its lender, G Pty Ltd, she was in effect, protected. Indeed she is. The onerous obligations on the trust, and the husband, to conduct the business in a manner that not only protects its interests, but the lenders interests, are self-evident from the terms of the agreement. The Court accepts that this finance agreement is scheduled to conclude in December 2021. Indeed, it could conclude earlier as a result of the sale of a commercial property. In theory, the wife’s derivative protection would cease at that time, but she could always bring a fresh application if the evidence so warranted.
The Court is concerned that the making of the orders proposed by the wife would constitute an event of default pursuant to clause 14.1 of the secured loan facility agreement. Clause 14.1 defines events of default stating that an event of default occurs, whether or not it is within the control of the Obligor, …if the husband ceases to control the Obligor. The Obligor is B Pty Ltd. The Court is satisfied that, at the very least, order 1 proposed by the wife, could have the result of the husband losing control, thus constituting an event of default. In this regard, the loan facility agreement defines control in clause 1.1 in expansive terms to mean, in the context of the husband, the possession directly or indirectly of the power to control the entity or to otherwise directly or indirectly direct or cause the direction of the management, policies or activities of the entity.
Another reason advanced by senior counsel for the husband as to why the Court would not exercise its discretion in favour of the wife relates to her participation in the matters that led to the hearing before Black J in the New South Wales Supreme Court. A close examination of the judgment of Black J shows that the wife was not directly implicated in the husband’s signing the deed of assignment of the loan owed to him by the trust to the parties’ adult daughters. Indeed, as the judgment reveals, the wife was financially prejudiced by the deed because a specific legacy in her favour of $6 million was adeemed as a result of the purported assignment. It is possible that she was not aware of this at the relevant time. Nonetheless, Black J was at least partly critical of the wife (referred to as Ms Cirillo) because of her subsequent actions
Thus, the impression formed is that whilst the wife could not be directly implicated in the husband’s signing of the deed of assignment of the debt owed to him by the trust, her subsequent actions certainly demonstrated that she supported this. It should be noted that as a result of the attempted creation of the charge referred to in paragraph [76] of the judgment, the trust’s then bankers, NAB, appointed receivers at considerable cost to the business. Moreover, the wife supported a sale of the commercial property at what the husband considered to be an undervalued price.
Senior counsel submitted that the wife’s conduct, for want of a better term, contraindicated the exercise of discretion in her favour. The Court agrees. With great respect to the wife, she can hardly be heard to complain about the risk of the husband dissipating assets, when she was seemingly supportive of a purported deed of assignment, in favour of her daughters, that would have depleted the trust assets to the tune of $18.5 million at that time.
THE ORDERS SOUGHT BY THE WIFE
In orders 1 and 2 sought by the wife, the injunctions sought relate to D Trust and D investment trust.
In order 1 the wife proposes that the husband be restrained from exercising the power of appointment of the trustee of either of the named trusts, or otherwise causing the removal of B Pty Ltd as trustee of the named trusts. There are insurmountable obstacles in the way of making this order. On the one hand, the making of such an order would probably constitute an event of default under the relevant finance agreement, because it would fetter the husband’s control of the trusts. On the other hand, so far as the finance agreement is concerned, if the husband were to in fact exercise the power of appointment in the manner contended by the wife, it would be a clear event of default under the finance agreement. Lastly, the Court is not satisfied that there is any evidence before it to suggest that there is even the least risk of the husband doing what the wife seeks to proscribe in order one. In any event, and in a hypothetical sense even if he were to do so, such action would be fraught with difficulty given the present litigation.
In order 2.1 , the wife proposes that other than with her consent, or Court order, the husband be restrained both in his personal capacity and as director of the relevant companies from selling, causing the sale of, or otherwise disposing of the trust assets except in the ordinary course of business and, specifically, causing the repayment of any credit loan account of the husband, and causing the said trust to make capital or income distributions to the direct or indirect benefit of the husband. At order 2.2 the husband is to be restrained from disposing of his shareholding in the named companies or otherwise causing the said shareholding to be diluted. Once again, the obstacles to the making of this order include the absence of evidence to support the same, the fact that most of the conduct in question is proscribed under the finance agreement anyway, and the discretionary consideration arising from the fact that the impression created from the evidence is that the last person complicit in dealing with the husband’s credit loan accounts in the trusts was the wife herself. Perhaps the greatest impediment to the making of this order, however, is that it precludes the sale of the commercial property in question, without the wife’s consent, even though the sale of that commercial property is explicitly required under the finance agreement.
Orders 3 and 4 relate to the Cirillo Family Trust (No. 2). The restraints themselves are in similar terms to orders 1 and 2. There is no evidence to justify the making of the orders proposed. Arguably, given the very broad interpretation of the clauses of the finance agreement, such actions may constitute an event of default of the finance agreement.
Orders 5 and 6 relate to overseas holdings. There is no evidence to justify the making of the orders. The wife sought to rely on a number of financial transactions predating separation relating to overseas assets to somehow suggest impropriety on the husband’s part. This does not assist the wife.
Order 7 deals with the real estate in Country H. Again, there is simply no evidence to justify the making of these orders.
Accordingly, the wife’s Application in a Case must be dismissed. I will reserve costs for determination pending conclusion of the matter. The matter should thereafter be referred back to the Docket Registrar for further case management and I will make an order to that effect.
I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Altobelli. Associate:
Dated: 17 June 2021
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