E Pty Ltd and Ors and Klearchos

[2016] FamCA 258

FAMILY COURT OF AUSTRALIA

E PTY LTD & ORS & KLEARCHOS [2016] FamCA 258

INJUNCTIONS – Where the applicant companies are seeking orders to discharge various injunctions restraining them from dealing with property – Where the companies assert that their ability to trade is hampered by the restraints – Where the injunctions were made ex parte – Where the wife contends that the assets of a family trust are “property of the parties to the marriage” within the meaning of s 79 – Where the wife contends that the husband effectively controls a family trust – Where the wife asserts, in effect, the companies are asking the Court to summarily dismiss an argument that the wife would put at final hearing – Where the husband asserts he is a mere beneficiary of the family trust – Where in order to maintain the injunctions, the wife must show that she has a “good arguable case” or that there is a serious question to be tried – Where the wife has established such – Where the balance of convenience is in favour of the wife – Where it is appropriate to order that the injunctions continue – Application dismissed.

Family Law Act 1975 (Cth)

ABC v Lenah Game Meats Pty Limited [2001] 208 CLR 199
Cardile v LED Builders Pty Ltd (1999) 198 CLR 380
Davidson and Davidson (1991) FLC 92-197
Glenwood Management Group Pty Limited v Mayo [1991] 2 VR 49
Harris v Harris [2011] Fam CAFC 245
Hurst v Werner [2012] Fam CA 469
In the Marriage of Kelly [No 2] (1981) 7 Fam LR 762
Kennon v Spry (2008) 238 CLR 366

1st APPLICANT: E Pty Ltd

2nd APPLICANT: Q Pty Ltd

3rd APPLICANT: R Pty Ltd

RESPONDENT: Ms Klearchos

FILE NUMBER: SYC 2977 of 2013

DATE DELIVERED: 22 April 2016

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Johnston J

HEARING DATE: 8 July 2015

REPRESENTATION

COUNSEL FOR THE APPLICANTS: Mr Lockhart, SC with Mr Balafoutis

SOLICITOR FOR THE APPLICANTS: Argyle Lawyers

COUNSEL FOR THE RESPONDENT: Mr Dickson, QC

SOLICITOR FOR THE RESPONDENT: Lander & Rogers

Orders

1. That the Amended Application in a Case filed on 6 May 2015 be dismissed.

IT IS NOTED that publication of this judgment by this Court under the pseudonym E Pty Limited & Ors & Klearchos has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 2977 of 2013

E Pty Ltd

1^st Applicant

And

Q Pty Ltd

2^nd Applicant

And

R Pty Ltd

3^rd Applicant

And

Ms Klearchos

Respondent

REASONS FOR JUDGMENT

1. The applicants in these proceedings are three companies, E Pty Ltd (“E”), Q Pty Ltd (“Q”) and R Pty Ltd (“R”).  For convenience I shall refer to them as “the companies”.  By an amended application in a case filed on 6 May 2016 the companies are seeking orders to discharge various injunctions restraining them from acting in the manner specified in the injunctions, which were made ex parte by this Court on 14 June 2013.

2. The companies are parties to proceedings between Ms Klearchos and Mr Klearchos to whom for convenience I shall refer as “the wife” and “the husband”.  Those proceedings are property and related financial proceedings. 

3. The application by the companies to discharge the injunctions is opposed by the wife and she seeks that the application be dismissed.

4. The injunctions are contained in paragraphs 8, 10 and 12 of the ex parte orders made by this Court on 14 June 2013 and are as follows:

   8.Each of the husband and [E] be and are hereby restrained by injunction from doing any act or thing that may interfere with the wife’s use and occupation of the [Suburb G] property including all the furniture, furnishings, art work and household effects, and motor vehicles situated at or in the [Suburb G] property.

   …

   10.Each of the husband and [E] be and are hereby restrained by injunction from doing any act or thing that may interfere with the wife’s use and occupation of the [I Town] farm including all the furniture, furnishings, art work and household effects, and motor vehicles situated at or in the [I Town] farm. 

   …

   12.The husband and each of the companies [E, Q and R] be and is hereby restrained by injunction:

   12.1from selling, transferring, assigning, encumbering or alienating their shares and/or interest of any nature whatsoever in any company;

   12.2from doing any act or thing that may cause the assets of the companies to be disbursed, sold, transferred, assigned, further encumbered, alienated or leased in any manner whatsoever other than in the ordinary course of business;

   12.3from doing any act or thing to cause the winding up of any of (sic) any of the companies;

   12.4from doing any act or thing to cause or permit any of the companies to fail to meet their liabilities as and when same fall due;

   12.5from selling, mortgaging, assigning, alienating any real property of which it is the registered proprietor, including but not limited to drawing further funds against any existing security;

   12.6from further encumbering or entering into any transaction which would further encumber any of them including but not limited to drawing further funds against any existing security, other than in the ordinary course of business as properly documented in the records of the companies, and after having given the wife not less than 21 days’ notice in writing of their intention to do so;

   12.7from doing any act or thing from preventing the wife from lodging and maintaining caveats over the interest of the husband, the companies or any of them in any real property.

5. Paragraph 12.1 of the orders was varied by order on 24 July 2013 by adding to the end thereof the words “other than in the ordinary course of business”.

6. The amended application in a case seeks discharge of the injunctions only insofar as they relate to the companies, and not to the husband.

7. On 25 October 2013 the companies filed an application in a case seeking to vary the orders of 14 June 2013 to make provision for appointment of an administrator for E.

8. That application came before Aldridge J on 18 November 2013.  His Honour noted that E was seeking to discharge paragraphs 8, 10 and 12 of the 14 June 2013 orders.  But his Honour fixed for hearing on 16 December 2013 E’s application to vary the orders of 14 June 2013 to enable an administrator to be appointed.  On 16 December 2013 that application was adjourned to 7 March 2014.

9. But in the meantime, the directors of E passed a resolution on 30 January 2014 that E was either insolvent or likely to become insolvent. The directors appointed an administrator and the powers of E’s directors became suspended from that date by operation of s 437C of the Corporations Act 2001 (Cth).

10. On 19 May 2014 E entered into a Deed of Company Arrangement which provided a method of disposal of some assets of the company being the company’s property at OO and such other of the company’s properties (I Town, QQ Town and the CBD Property Sydney) as would be necessary to pay specified unsecured creditors.

11. From the time of E entering into the Deed, control of E reverted to its directors.

12. On 23 June 2014 various orders were made by consent including orders apparently to facilitate the sale of the OO property such as an order that the wife withdraw a caveat which she had caused to be lodged against this property.  But there were numerous other orders including that the directors of E, Mr ZK and Mr HH, be restrained from resigning as directors of E without giving six days prior written notice to the wife’s lawyers.  Significantly, E and its directors were restrained from paying any money whatsoever to DG Business (“DG”), S Company. (“S”), HL Business (“HL”), H Pty Ltd (“H”) or any other overseas entity or person before 20 December 2016 without the written consent of the wife.  There was also an injunction which restrained E and its directors from selling, further encumbering or leasing E’s assets without providing the wife 14 days prior written notice.

13. There was agreement between the wife, the husband and the directors of E that the I Town farm be sold.  Consent orders were made on 8 September 2014 to provide the machinery orders to enable such sale.  Those orders were modified to some extent by orders made on 26 February 2015 but the orders for sale remained in place.

14. On 31 March 2015 H served on E a default notice pursuant to s 57(2)(b) of the Real Property Act 1900 (NSW). This asserted that E had failed to pay land tax and called on E to pay such within one month.

15. On 1 May 2015 the solicitors for H wrote to E referring to the default notice, noting that the outstanding land tax had not been paid and asserting that E was in breach of its obligations under the mortgage to H.  The solicitors informed E that H demanded immediate repayment of the loan in full together with interest, the total being $10 351 095.89.

16. E subsequently negotiated a land tax payment arrangement with the Office of State Revenue.

17. On 6 May 2015 E and the other companies filed an Amended Application in a Case seeking to have paragraphs 8, 10 and 12 of the 14 June 2013 orders discharged insofar as they relate to the companies.

18. E is a wholly owned subsidiary of Q.  Q is the corporate trustee of the Klearchos Family Trust.  Mr ZK, the husband’s brother, is the appointor of the Trust.  Q’s directors are Mr ZK and the accountant Mr Mr HH.  Mr HH is also the company secretary.  Q’s shareholders are Mr HH and Mr SK.  They are equal shareholders.  Mr SK is the son of Mr ZK. 

19. Mr HH asserts that both he and Mr SK hold the legal and equitable interests in their shares and do not hold the shares on trust for the husband. 

20. The beneficiaries of the Klearchos Family Trust include the husband and Mr ZK, the husband’s two children from previous relationships, the two children of the husband and the wife and the two children of Mr ZK and his wife.

21. The husband was a director of Q until 31 October 2010 and a shareholder thereof until 19 September 2012.

22. R is a wholly owned subsidiary of E and therefore an asset of the Trust.

The Case of the Applicant Companies

1. The submissions on behalf of the applicant companies were as follows.

2. The effect of the injunctions is that the companies cannot deal in any way with any of their property, including by further encumbering, selling, disposing of, or assigning it.

3. E’s ability to trade continues to be hampered by the injunctions.

4. E is the registered proprietor of the following properties:

   1.F Street, Suburb G;

   2.FF Street, I Town;

   3.Sydney CBD property; and

   4.Retail Arcade, Town QQ.

5. Suburb OO, a property previously owned by E was sold in September 2014.

6. The injunctions were made ex parte and the companies were given liberty to apply on 48 hours’ notice to the Court and to the wife to discharge, vary or modify the orders for the injunctions.  If a freezing order is made on an ex parte basis, then a party who is affected by it has a right to apply to discharge the order made in his or her absence.  The High Court warned in Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at 403 that a freezing order “requires a high degree of caution on the part of the court … An order lightly or wrongly granted may have a capacity to impair or restrict commerce…”.

7. In terms of the onus on such an application, the wife bears this because an application to discharge an ex parte order is in effect a rehearing of the initial application.

8. The wife must establish the following:

   –that she has a prima facie case against the husband;

   –that there is a danger that, by reason of the husband’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 wife, if she succeeds, will not be able to have her judgment satisfied and

   –in the case of a freezing order sought against third parties, the order may be appropriate if either

   (a)the third party holds, is using, or has exercised or is exercising a power of disposition over, or is otherwise in possession of, the assets of the judgment debtor or

   (b)some process may be available to the judgment creditor by which the third party may be obliged to disgorge property or otherwise contribute to the funds of the judgment debtor to satisfy the judgment.

9. In the present case, the wife appears to be arguing that the assets of the Trust are “property of the parties to the marriage” within the meaning of s 79 of the Family Law Act 1975 (Cth) (“the Act”). The High Court (French CJ, Gummow and Hayne JJ in Kennon v Spry (2008) 238 CLR 366 support the proposition that the assets of a discretionary trust will be matrimonial property only if one of the parties to the marriage has the legal power under the trust to distribute the assets of the trust and one of the parties to the marriage is an object of the discretionary trust.

10. In Harris v Harris [2011] Fam CAFC 245 the Full Court found that there was no evidence that the husband indirectly controlled the relevant trust, in the sense that the person with the legal control of the trust was the “puppet” of the husband. The Full Court did not find that the assets of the trust were matrimonial property.

11. There is a consistent line of authority including Kennon v Spry (above), Harris and Harris (above) and Hurst v Werner [2012] Fam CA 469 that in order to prove that the assets of a discretionary trust are matrimonial property the court must be satisfied that one of the parties to the marriage controlled the distribution of the trust’s assets and that one of the parties was a beneficiary of the trust.

12. In the present case neither the husband nor the wife have the power to control the assets of the trust. They are not the appointors, nor the directors nor shareholders of the trustee company Q.  The Trust was established by the husband’s father and is a discretionary trust.  The husband is only one of many persons who are objects of the Trust.  There is no evidence that the husband has ever received a distribution from the Trust.  Even if control is interpreted as indirect control, there is no evidence to support a finding that the husband is in indirect control of the Trust.

13. The wife has failed to establish, even on a prima facie basis, that the assets of the Trust are matrimonial property. Accordingly, a condition for the grant of the freezing order has not been satisfied.  Moreover, the wife has failed to diligently and promptly prosecute the substantive proceedings and this would support a discharge of the injunction.

14. If the wife was able to establish that the degree of control of the Trust by the husband, other than by legal capacity as trustee or appointor, was such that the Court could conclude that he controls the Trust, the Court might be able to take some or all of the Trust assets into account as a financial resource. This was the situation in In the Marriage of Kelly [No 2] (1981) 7 Fam LR 762. But this would not bring the assets within the description of property against which the Court could make orders pursuant to s79 of the Act. Therefore such assets could not support an injunction freezing the Trust’s assets.

15. The injunctions have caused E to incur substantial legal costs, in excess of $344 000, in relation to the appointment of an administrator and in relation to the orders for sale of the I Town farm.

16. E’s indebtedness includes:

    -    National Australia Bank (“NAB”) a secured creditor - $5.9M outstanding secured over four E properties;

    -    H a secured creditor over the Suburb G property approximately US$10M.

    -    Three unsecured creditors:

    1.   DG - $4.8M

    2.   HL - $2.2M

    3.   S - $6.1M

17. Unless the injunctions are lifted E will continue to experience difficulties with ongoing cashflow and the directors will consider handing E back to the administrator.

The Wife’s Case

1. The submissions on behalf of the wife were as follows.

2. Since separation the husband has been taking steps to distance himself from Q, E and other companies in which he had an interest and through which he holds the parties’ wealth in Australia. He has done this by resigning as a director and transferring shares to relatives and business associates.

3. At the time the wife says that she and the husband separated, namely August 2010, the husband and Mr JJ, a long time business associate of the husband, were the shareholders of Q.  The husband was Q’s company secretary.  At this time the husband and the chartered accountant Mr HH, were Q’s directors.  Mr HH, had been appointed a director in March 2010, that is, a matter of months prior to the date when the wife says the parties separated.  Prior to that time the husband was the sole director of Q.

4. On 31 October 2010 the husband resigned as a director of Q.  The husband’s nephew Mr SK was appointed a director on 6 July 2011. The husband’s brother Mr ZK became a director on 18 June 2013.

5. On 19 September 2012 there was a transfer of Q’s shares from the husband and Mr JJ to Mr HH and the husband’s nephew Mr SK.  The wife will endeavour at trial to establish a case that these shareholders hold their shares on trust for the husband.  Amongst other matters, the wife points to the fact that the Australian Securities and Investments Commission lodgement forms for registration of the relevant changes to Q’s shareholders on 19 September 2012 show Mr HH and Mr SK as not holding the beneficial interest in their respective shares.  Mr HH said in his affidavit that this was a clerical error in his office which he proposes to correct.  The wife proposes to explore this matter at trial.

6. There has been no explanation by the husband about why he resigned as a director of relevant companies and why other persons close to him were appointed as directors.  Nor has there been any explanation about why shares in companies in which he previously held an interest were transferred at approximately the time when the wife says she and the husband separated, or in the case of Q approximately two years after that time.  And there has been no explanation by Mr JJ about why he transferred his share in Q.

7. The wife does not accept that the husband is not the appointor of the Klearchos Family Trust and wants her opportunity at trial to endeavour to demonstrate that in reality the husband has a level of control over the trust which would enable him to direct the trust assets to himself.  The court could then treat such property as matrimonial property in accordance with accepted cases such as Davidson and Davidson (1991) FLC 92-197.

8. In support of her submission that the husband has control of the Trust the wife points to certain documents in records of the NAB.

9. For example, when the NAB offered E a facility for $5.6M by letter dated 19 March 2013 the letter was addressed to the husband.  It also listed as security a “Guarantee and Indemnity” of $5.91M given by GF Pty Ltd, Q as trustee for The Klearchos Family Trust, R and personally by the husband.  Yet notwithstanding such personal guarantee, the husband asserts he is a mere beneficiary of the Trust.

10. Learned senior counsel for the wife also referred to documents produced on subpoena by the NAB going back quite some years which demonstrated that over many years the husband had given personal guarantees to secure loans to E by the NAB.  And in the documents produced, no other individual had offered a personal guarantee for borrowings by E.  In 2005 the NAB were recording the husband as “the principal of E” and plainly regarded him as its customer.  NAB referred to the husband and said he “is the ultimate owner of [E]”.  In one of the NAB records in 2010 it is noted “[Mr Klearchos] who ultimately owns [E] (through his ownership of the parent company [Q]) arrived in Sydney last week.”.  Learned senior counsel for the companies said objection would be taken to this material on the basis that it is hearsay.

11. The wife also points to involvement by the husband in the funding arrangements for the H loan to E the details of which it is unnecessary to set out here except to say that it would appear that the husband gave a guarantee in respect of some of the funds.

1. Learned senior counsel for the wife referred to Harris & Harris [2011] Fam CAFC 245 where the Full Court (Finn and Strickland JJ.) made reference at [64] to a passage in the judgment of French CJ in Kennon v Spry (2008) 238 CLR 366 at 394 which is as follows:

   The beneficiary of a non-exhaustive discretionary trust who does not control the trustee directly or indirectly has a right to due consideration and to due administration of the trust but it is difficult to value those rights when the beneficiary has no present entitlement and may never have any entitlement to any part of the income or capital of the trust.

   (bold emphasis added)

2. Finn and Strickland JJ assumed at [66] that French CJ, by referring to “indirect” control of a discretionary trust by a beneficiary, was referring to a “puppet” situation in the sense that the person with legal control of the trust is a puppet of the beneficiary.  It was submitted that in fact, this is the situation in the present case namely, that the husband’s brother Mr ZK, although the appointor of the Klearchos Family Trust, is in effect the puppet of the husband.  It was submitted that this was because Mr ZK has never made any decision in relation to the trust, the husband being the person who has made all of those decisions and therefore the husband is the person in real control of the Trust. 

3. In relation to the alleged indebtedness of E, the wife does not accept that H is an arm’s-length creditor.  Firstly the loan agreement was dated 27 June 2011, that is, after the date the wife asserts the parties separated.  The mortgage which secured the loan was not registered until July 2013, so Mr MM, a business associate of the husband whom I understand the wife suspects might no longer be the owner of H, gave an unsecured US$10M loan for something like two years.  The relevant loan agreement provided not only for H to have a first ranking legal charge over the Suburb G property but also E undertook to procure for H a first ranking legal charge over the husband’s property in Country J and over shares owned by RR Partners in K Ltd Mining.  The husband conceded such shares were owned by him.

4. The wife seeks orders in the substantive proceedings to set aside the loan agreement between H and E as well as the H mortgage secured over the Suburb G property, pursuant to s 106B of the Act.

5. The wife also does not accept that the large debts alleged to be owing by E to DG, S and HL are at arm’s length.  She says that these are related parties.

6. The wife also asserts that the husband is the principal beneficiary of the U Trust, a trust formed by Mr MM in the Caribbean.  The wife will endeavour to demonstrate this at trial.  The husband denied (in his affidavit filed 9 July 2013) that he was in control of or had ever been in control of, or been the beneficial owner of, The U Trust, H or HL. 

7. Mr MM deposed that there had been numerous discussions between him and the husband about the husband acquiring The U Trust and H.  He said he thought this had been “a done deal” but the husband had ultimately rejected or reneged on his proposal saying that instead he proposed to form a V Foundation.

8. The wife says that there is material including an email message from Mr MM which tends to put these assertions by the husband into real issue in relation to H and The U Trust. 

9. An email from an Ms MF of HG Solicitors to Mr MM informs him that the husband would like to transfer “the following entities” into his recently established V Foundation - RR Partners and H.

10. An entity, VY Ltd comes under The U Trust.  An email dated 8 October 2010 from Ms MF to the husband asked him whether he would confirm that he was happy to leave the beneficial ownership of VY Ltd with The U Trust.  An email from Ms MF to a Ms FJ stated:

    As you may know, we act for [Mr Klearchos].  It has been decided to transfer the ownership of [VY Ltd] from the Trustees of [The U Trust] to a new [V Foundation] called the [EU Company].  [Mr Klearchos] is the principal beneficiary of this Foundation and so there is accordingly no change of ultimate beneficial ownership.

11. In an “indemnity letter” signed by the husband dated 31 March 2014 the husband described himself as principal beneficiary of the U TRUST.

12. It is submitted that these matters strongly suggest that the husband is the principal beneficiary of the U Trust notwithstanding his protests that he is not and that he has never had control of it.  It is submitted that this would give the Court real concern about the husband’s assertions about his lack of control of The Klearchos Family Trust and E.

13. Mr HH said that on 6 July 2015 Mr JJ and he attended the NAB to discuss borrowing $400 000 for E to meet an alleged $400 000 cash flow shortfall.  The wife says that Mr JJ is a longstanding business friend of the husband.  It was submitted that Mr JJ’s involvement with E was said to have ceased when he transferred his share in Q and that he is not a director of any of the relevant entities.  It was submitted that in these circumstances, and noting that Mr JJ had been sitting in the back of the courtroom during these proceedings, the inference was raised that Mr JJ was attending the NAB with Mr HH to represent the husband.

14. In effect the application by the companies to discharge the injunctions amounts to the Court being asked to summarily dismiss the wife’s argument which she would be putting at trial that the assets of the Klearchos Family Trust are in reality the property of the husband.

15. For completeness, in written submissions received after the hearing learned senior counsel for the wife indicated that the wife also proposed to raise at trial an argument to the effect that the only money contributed to the Trust comes from the husband and the wife and that this made the Trust property amenable to s 85A of the Act. There has not been appropriate opportunity for the companies to respond to this and therefore, I do no more than note counsel’s intention to argue this at trial.

Arguable Case

1. In my view, for the wife to be able to establish the jurisdictional requirement in order to maintain the injunctions she must show that she has a “good arguable case” or that there is a serious question to be tried.  And she must show that there is a risk that if the injunctions are not maintained, the property the subject of the injunctions would not be available to fulfil a proper order of the court in the substantive proceedings.

2. In Glenwood Management Group Pty Limited v Mayo [1991] 2 VR 49 Young CJ said as follows:

   … “a good arguable case” is the minimum which a plaintiff must show to invoke the jurisdiction of the court to grant a Mareva type injunction: see Ninemia Maritime Corporation v Trave SG. m.b.H. und Co. KG. (The Niedersachsen) [1983] 1 WLR 1412, at 1417.

3. And in ABC v Lenah Game Meats Pty Limited [2001] 208 CLR 199 Callinan J said at page 296 as follows:

   It is important to keep in mind that the order against which the appellant appeals is an interlocutory injunction, an order to preserve the status quo until the hearing of the main action.

   …

   Because the proceedings are interlocutory “the Court does not undertake a preliminary trial, and give or withhold interlocutory relief upon a forecast as to the ultimate result of the case” … .  Just what measure of success an applicant for an interlocutory injunction must establish is not completely settled … .  In my opinion, the correct test is whether the applicant can demonstrate either a reasonably arguable case on both the facts and the law, or that there is a serious question to be tried.  These tests it seems to me are to the same effect.

4. As indicated above, the wife asserts that during the course of the marriage, in fact the husband has been the person in control of the Klearchos Family Trust.  She is concerned that he has acted in a manner from shortly prior to the time of separation and since separation to bring about changes to the governance and ownership of relevant companies to achieve a position where he now holds no office in them by reason of which it could be said that he has some control of the Trust.

5. During his above submissions learned senior counsel for the wife referred to some of the matters which it is said support the wife’s case in this regard.

6. If the wife was successful in having various appointments, resignations and transfers about which she is concerned, set aside by the court, then the position would be that the husband would again be the director and shareholder of Q which counsel for the wife submitted would “put him much more squarely in the frame as controller of the current trustee ([Q])”.  I note that the wife’s Amended Initiating Application filed on 30 June 2015 does not specifically seek such orders although it does seek a declaration that Mr HH and Mr SK hold their respective shares in Q on trust for the husband.  But I seem to recall counsel indicated that the wife proposed to amend her application to seek such orders.

7. The wife wishes to have her opportunity to explore these matters at trial and to endeavour to persuade the court to set aside the relevant changes of directors and shareholdings. She says that the husband effectively controls the Trust and that the appointor Mr ZK is his puppet. She submits that in all such circumstances the husband, being in control of the Trust and a beneficiary, would be able to use his control to direct the Trust assets to his own use and benefit. These assets would then fall within the meaning of “property of the parties to the marriage or either of them” for the purposes of s 79 of the Act.

8. In my view, on the basis of the above and the matters contained in the wife’s submissions, the wife has established that there is a serious question to be tried or a “good arguable case” despite the very strong submissions on behalf of the companies.

9. The next matter to determine, therefore, is balance of convenience.

10. If the injunctions were discharged E would no longer be restrained from interfering with the wife’s occupation of the Suburb G home and from selling or further encumbering its assets, including the home.  As indicated above E asserts that its ability to trade is hampered by the restraints.  It also asserts a very high level of indebtedness and would wish to be able to sell assets.  So it would be likely that the Suburb G home would be sold the consequence being that the wife and children would have to somehow find other accommodation. 

11. If E was to sell or encumber its assets and the wife was able to persuade the court at trial that in fact E’s assets were property of the husband within the meaning of s 79, there might not be any property, or perhaps insufficient property, for a substantive order in favour of the wife to be fulfilled. This is because these trust assets which are potentially assets of the marriage could be the only property available in Australia.

12. In relation to balance of convenience concerning E, it is asserted that E has a high level of indebtedness and a problem with cash flow, and that this is making it difficult for E to trade.  This has been referred to above.  In relation to the secured loan from the NAB I understand that this had been $5.9M but that upon sale of the OO property the net proceeds were used to reduce this loan.  My understanding is that the balance of that loan is at a point at which upon sale of the I Town property, which as indicated above, has been agreed to by the wife, the net proceeds are expected to be sufficient to pay the outstanding balance.

13. As indicated above, the wife challenges the genuineness of the alleged three unsecured loans namely $4.8M from DG, $2.2M from HL and $6.1M from S, as not being at arm’s length.

14. In any event, there is no challenge to the injunction of 23 June 2014 which restrains E from paying any of these unsecured loans before 20 December 2016 without the written consent of the wife.

15. So the remaining loan is that of H.  As indicated above, the wife takes issue with E about whether this alleged loan is at arm’s length or whether in fact the husband is behind the loan.  She is seeking orders to set aside this loan.  If the wife is incorrect in her assertions it would appear that E could be in breach of its obligations under this loan. 

16. The other matter relevant to balance of convenience is that it has been said on behalf of E that continuation of the injunctions would cause E to have difficulty with cash flow.  In my view, this assertion has not been established on the evidence. 

17. In my view, for the above reasons, the balance of convenience is in favour of the wife.

18. In relation to the submission that the wife has failed to diligently prosecute her substantive application, I reject this.  As I indicated during the hearing, I had fixed hearing dates for the substantive proceedings and made directions for appointment of a single expert.  Well prior to the dates fixed for hearing, the husband applied to have the hearing dates vacated because the parties had not been able to agree on how the single expert would be paid.  I do not attribute to the wife any particular fault or lack of diligence about this. 

19. For these reasons, the application by the companies for discharge of the injunction will be dismissed.

I certify that the preceding eighty-four (84) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Johnston delivered on 22 April 2016.

Associate:     

Date:              22 April 2016