EMSDEN & EMSDEN

[2015] FamCA 1031

FAMILY COURT OF AUSTRALIA

EMSDEN & EMSDEN [2015] FamCA 1031

FAMILY LAW – INJUNCTIONS – Property – application by the wife for an interlocutory injunction to restrain the husband from disposing of property – where final property orders were made by consent in 2008 – where the wife seeks to have the final property orders set aside pursuant to s 79A of the Family Law Act 1975 – where the wife has established a prima facie case for relief under s 79A with respect to non-disclosure of the husband – interim orders made ex parte as sought by the wife – further listing of matter to allow the husband to file responding material

Family Law Act 1975 (Cth)

Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57; [2006] HCA 46
M & DB [2006] FamCA 1380
Waugh & Waugh [2000] FamCA 1183

APPLICANT: Ms Emsden

RESPONDENT: Mr Emsden

FILE NUMBER: MLC 4374 of 2007

DATE DELIVERED: 24 November 2015

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Macmillan J

HEARING DATE: 20 November 2015

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Wood

SOLICITOR FOR THE APPLICANT: Mills Oakley Lawyers

COUNSEL FOR THE RESPONDENT: N/A

SOLICITOR FOR THE RESPONDENT: N/A

Orders

IT IS ORDERED THAT

1. Until further order the Respondent, by himself, his servants, employees and agents be and is hereby restrained from selling, encumbering, transferring or disposing of any interest held by him in any and all real and personal property, whether held in Australia, or elsewhere, including but not limited to any chose-in-action and/or financial resource, and any and all interest in the following assets:

   (a)the real property of B Street, Suburb A or the proceeds of sale of same (save and except to complete settlement of the sale of such property and to complete settlement of the purchase by him personally, or any Australian entity he controls, of any alternative real property within Australia, which the Respondent personally, or any Australian entity he controls, has contracted to purchase);

   (b)C Pty Ltd and C Business Trust, save in the ordinary course of business;

   (c)D Limited, save in the ordinary course of business;

   (d)C Superannuation Fund; and

   (e)any cash at bank, whether held in Australia or elsewhere (including but not limited to Country I) save that the Respondent be permitted to access such sum as is necessary for the purpose of meeting his ordinary living expenses.

2. The Applicant forthwith cause her lawyers to personally serve on the Respondent sealed copies of the following documents:

   (a)these orders;

   (b)her Initiating Application filed 5 November 2015;

   (c)her Affidavit affirmed 4 November 2015 and filed 5 November 2015;

   (d)her Financial Statement affirmed 4 November 2015 and filed 5 November 2015; and

   (e)the Affidavit of Mr E affirmed 20 October 2015 and filed 5 November 2015.

3. The Applicant’s Initiating Application be adjourned to the Judicial Duty List at 10.00 am on 2 December 2015 for hearing in relation to paragraph 2 of the interim orders sought in that Application.

4. The reasons for judgment of the Honourable Justice Macmillan be reserved.

5. The Applicant forthwith cause her lawyers to personally serve on the Respondent a copy of those reasons for judgment upon the Respondent forthwith upon receipt of same.

6. Liberty to apply on short notice be reserved to the Respondent.

IT IS CERTIFIED THAT

1. Pursuant to Rule 19.50 of the Family Law Rules 2004 this matter reasonably required the attendance of counsel.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Emsden & Emsden 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 MELBOURNE

FILE NUMBER: MLC 4374  of 2007

Ms Emsden

Applicant

And

Mr Emsden

Respondent

REASONS FOR JUDGMENT

1. On 5 November 2015 the wife filed an Initiating Application seeking inter alia to set aside the final property orders made by consent on 15 December 2008 (“the final property orders”) and orders for spousal maintenance. The wife also sought interim orders in her Initiating Application and time was abridged for the hearing of paragraph 2 of her application for interim orders.

2. The matter was listed ex parte before me on 20 November 2015. On that date I made orders in the following terms:

   1.    Until further order the Respondent, by himself, his servants, employees and agents be and is hereby restrained from selling, encumbering, transferring or disposing of any interest held by him in any and all real and personal property, whether held in Australia, or elsewhere, including but not limited to any chose-in-action and/or financial resource, and any and all interest in the following assets:

   a)the real property of [B Street, Suburb A] or the proceeds of sale of same (save and except to complete settlement of the sale of such property and to complete settlement of the purchase by him personally, or any Australian entity he controls, of any alternative real property within Australia, which the Respondent personally, or any Australian entity he controls, has contracted to purchase);

   b)[C Pty Ltd] and [C Business Trust], save in the ordinary course of business;

   c)[D Limited], save in the ordinary course of business;

   d)[C Superannuation Fund]; and

   e)any cash at bank, whether held in Australia or elsewhere (including but not limited to Country I) save that the Respondent be permitted to access such sum as is necessary for the purpose of meeting his ordinary living expenses.

   2.    The Applicant forthwith caused her lawyers to personally serve on the Respondent sealed copies of the following documents:

   a)      these orders;

   b)her Initiating Application filed 5 November 2015;

   c)her Affidavit affirmed 4 November 2015 and filed 5 November 2015;

   d)her Financial Statement affirmed 4 November 2015 and filed 5 November 2015; and

   e)the Affidavit of [Mr E] affirmed 20 October 2015 and filed 5 November 2015.

   3.The Applicant’s Initiating Application be adjourned to the Judicial Duty List at 10.00 am on 2 December 2015 for hearing in relation to paragraph 2 of the interim orders sought in that Application.

   …

3. I reserved my reasons for making those orders. These are those reasons.

Background

1. The parties in this case were married in 1998 and separated in April 2006. The decree nisi of dissolution of their marriage became absolute in July 2007.

2. There are two children of their marriage, twins F and G who are 11 years of age. On 15 May 2015 the parties consented to final orders providing that the husband have sole parental responsibility for the children and that the children live with him. Those orders also provided that the husband have liberty to relocate with the children from Melbourne to Queensland. The children would spend time with the wife, subject to certain conditions specified in the orders, by agreement between the parties.

3. The wife’s case is that she and the husband came up with the idea of a board game in or about 2001 and both had input into its development. In July 2002 they registered C Pty Ltd (“C”) and the trademark “H the Board Game” (“the board game”). In January 2003 C registered the trademark “H the Board Game” in both the United States of America and internationally. In 2004 the husband contacted Mr E a quiz champion and they agreed to enter into a contract which provided for Mr E to write questions for the game in return for a 10 per cent royalty payment.

4. The wife deposes in her affidavit filed 5 November 2015 that by the time she and the husband separated in July 2007 “the creation, development and manufacture of the board game was well and truly underway and the board game was ready for release to the market”.

5. On 15 December 2008 final orders were made for property settlement which provided that the husband pay the wife the sum of $75,463.40 by way of 72 equal calendar monthly instalments of $1,048.10, the husband was to transfer a Honda CRV motor vehicle to the wife free of encumbrance and the wife was to retain the entirety of her MLC superannuation entitlements.

6. The husband was to retain all his right, title and interest in C, the board game, all monies derived by him prior to the date of the orders from the manufacture distribution and sales of the board game and/or C and his 4WD motor vehicle. The husband was to indemnify the wife in relation to any past, present or future liabilities of C including any tax liabilities.

7. It is the wife’s case that those orders were predicated upon the husband’s assertions that C had either a negative value or at best minimal value.

Legal Principles 

1. In Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57; [2006] HCA 46 at [65] Gummow and Hayne JJ said as follows:

   The relevant principles in Australia are those explained in Beecham Group Ltd v Bristol Laboratories Pty Ltd ^{- 69}. This Court (Kitto, Taylor, Menzies and Owen JJ) said that on such applications the court addresses itself to two main inquiries and continued:

   “The first is whether the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief … The second inquiry is … whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted.”

   By using the phrase “prima facie case”, their Honours did not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed; it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial. That this was the sense in which the Court was referring to the notion of a prima facie case is apparent from an observation to that effect made by Kitto J in the course of argument. With reference to the first inquiry, the Court continued, in a statement of central importance for this appeal:

   “How strong the probability needs to be depends, no doubt, upon the nature of the rights [the plaintiff] asserts and the practical consequences likely to flow from the order he seeks.”

   (Citations omitted)

2. In Waugh & Waugh [2000] FamCA 1183 at [46] the Full Court of this Court said in relation to an appeal against the granting of an interlocutory injunction for the preservation of property pending a final hearing as follows:

   Whilst his Honour certainly seems to have considered issues of balance of convenience and hardship between the parties, it seems to us, with respect, that he did not give consideration to the fundamental question whether there was any evidence of any intention by the husband to dispose of any assets pursuant to any scheme to defeat any judgment which the wife might obtain in the substantive proceedings, or whether he merely wished to continue to trade, as he always had done, prior to and since the separation of the parties.

   (Emphasis added)

3. This decision excited much debate, the suggestion being that it stood for the proposition being that an applicant seeking an interlocutory injunction of the kind the wife seeks in this case had to satisfy a threshold question as to whether there is evidence of a scheme to defeat judgment.

4. However, in M & DB [2006] FamCA 1380 Kay, Warnich and Boland JJ said as follows:

   41.However, we do not consider that the Full Court in Waugh intended to prescribe as a “fundamental” or “threshold” question whether a scheme to defeat judgment exists, to be answered in the affirmative on the balance of probabilities in every case, before an order preserving property is made.

   …

   44. … Significantly, in our view, all that was said in Waugh in paragraph 46 was that the trial Judge did not consider “…the fundamental question whether there was any evidence of any intention by the husband to dispose of any assets pursuant to any scheme to defeat any judgment.”

   Their Honours did not say that the trial Judge had to find on the balance of probabilities, as a matter fundamental to success, that there was such a scheme.

   Put another way, all that the Court said in Waugh was that the trial Judge had taken a fundamentally flawed approach and ought have addressed the question of whether there was any evidence of intention, as part of an enquiry into the risk of disposal of assets to defeat judgment.

   We acknowledge that the words emphasised were not included in the statement in paragraph 46 in Waugh.  But for the reasons we have already given, and which follow, we do not think that the Court there meant what was said in paragraph 46 to be a complete statement of the test, but rather as descriptive of the error made in that case by the trial Judge.

   (Original emphasis)

5. The Full Court went on to say in conclusion as follows:

   46.Finally, we think it helpful to recognise that the essential power being exercised in this case is simply described in s 114(3).

   “A court…may grant an injunction…in any case in which it is just or convenient to do so…”

   47. Ultimately, each case will involve an overall assessment of a number of factors to determine the just or convenient result.  Not all cases with the same identity of factors will necessarily produce the same result because of varying weight individually and comparatively.

   48. We perceive that a real, though perhaps subtle, difference exists between, on the one hand, establishing on the balance of probabilities a risk or danger of a disposal of property intended to defeat an order and, on the other hand, proving to the civil standard and as an independent issue that a scheme to defeat an order exists.

   49. In some cases, the possibility (based on some evidence) of an intention or scheme may, with other factors, be sufficient to establish the probability of an objective risk of disposal with intent to defeat an order.

   50. It follows that we do not say that, in addressing the question of whether there is a risk of disposal of assets to defeat an order, it is unnecessary to enquire whether there is any evidence of an intention, plan or scheme to dispose of assets.  But in an enquiry into the risk of disposal, the question of intention or scheme is but one of a number of factors relevant to the objective risk of disposition to defeat an order.

   51. Moreover, while ultimately a particular factor may overwhelm others, it is generally unwise to commence with a rigid focus on finding, to a particular standard of proof, one or more of a number of factors relevant only at a discretionary level and subsidiary to the ultimate question.

   (Original emphasis)

Discussion

1. The wife in her Initiating Application filed 5 November 2015 seeks orders pursuant to s 79A of the Family Law Act 1975 (Cth) (“the Act”) setting aside the final property orders made by consent on 15 December 2008 on the ground that, as a consequence of the husband’s failure to disclose relevant information, there has been a miscarriage of justice.

2. The wife’s case is that the husband failed to make full and frank disclosure during the negotiations which lead to the final property orders being made, information that she asserts was material to obtaining her consent to those orders. She says this is notwithstanding repeated requests for information and documentation which she would say the husband resisted. In particular the wife asserts that the husband failed to disclose that in February 2008 he established an entity know as D Limited (“D”) in Country I or caused that entity to be established to receive royalties from J Pty Ltd in the USA that would have otherwise have been paid to C. On 5 November 2015 the wife filed and relied upon the affidavit of Mr E in support of her assertion that the husband used D to divert royalty income paid by J Pty Ltd to C to D in Country I.

3. The wife annexed to her affidavit filed 5 November 2015 a copy of a Deed between C and D dated 15 May 2008 (“the Deed”) and an application to record the assignment of C’s Australian trademark for the board game. The wife deposes that the Deed was not disclosed by the husband. The Deed was signed by the husband on behalf of C and someone called Mr K on behalf of D.

4. The wife’s case is that D is the alter ego of the husband. The wife annexed to her affidavit company searches obtained from the Companies Registry in Country I which disclose that D has a share capital of US$1,000 and that its one issued share is held by L Ltd which is also the corporate director of D. During the 2015 financial year D appointed Mr M, who the wife says is a close friend of the husband, as an individual director.

5. The wife relied upon the evidence of Mr E in support of her case. Mr E deposed in his affidavit filed 5 November 2015 that he had no knowledge of or involvement in the establishment of D. He said that in April 2008 the husband sent him an email in which he asked him to render separate invoices for royalties for Australian and international sales. The invoices for royalties due from international sales of the board game were to be rendered to D.

6. Mr E also deposed that during 2010 and 2011 he was advised by the husband that D was engaged in a dispute with the USA distributor J Pty Ltd and in December 2011 that the husband had decided to settle the litigation by selling the board game to J Pty Ltd. Mr E says he was told by the husband that he would be paid US$50,000 in return for assigning his copyright in the board games “H” and “N” to J Pty Ltd. Mr E deposed that on 21 December 2011 he signed a Deed of Assignment with D and that on 27 December 2011 the husband sent him an email attaching the deed bearing the husband’s signature on behalf of D. 

7. The wife relied upon the copies of emails passing between the husband and Mr E which she says demonstrate that D is the alter ego of the husband and that he failed to make full and frank disclosure. For example on 18 April 2008 (Exhibit CGY-5 annexed to the  affidavit of Mr E filed 5 November 2015) the husband forwarded what he described as a Royalty Report to both Mr E and Mr O in which he said as follows:

   ...

   I have rescheduled to go to [Country I] on May 1 for 3 days. I will have bank accounts and new contracts executed for [D Limited]. I was at my IP lawyer this morning and have begun to transfer all IP rights from [C] to [D Ltd] effective today. This is needed in order to protect me from Blue Opal if they were to succeed in their litigation. The domestic rights may have to be transferred as well, but we’re sitting on that at the moment. So, for the next quarter, I’ll require two invoices from you.

   First will be to [C] for domestic sales. Second will be to [D Ltd] for international sales. Please note, [D Ltd] will be paying royalties in US dollars direct via EFT...

8. There are also copies of correspondence sent during 2009 by J Pty Ltd addressed to the husband care of D to a PO Box in Suburb P.

9. It is the wife’s case based upon the Financial Statement filed by the husband on 21 February 2014, both as to his financial circumstances generally and his evidence that he continues to be self employed by C, publicity put out by J Pty Ltd as to the success of the board game, statements made by the husband to mutual friends in relation to the sale of the rights to the board game and statements made by the children, that the husband has received many millions of dollars in royalties for the board game since the final property orders were made in December 2008.

10. Whilst the husband’s present financial circumstances alone or the fact that he has received substantial sums in royalties might not of itself be remarkable, it is the wife’s case that she consented to the final property orders on the basis of her understanding based upon assertions made by the husband that the shares in C were of no value and that its prospects were uncertain. The wife also consented to the orders in the absence of the information now available to her with respect to D.

1. The husband would appear to have no knowledge that the wife either intended or has filed an application seeking to set aside the final orders for property settlement and on that basis it follows logically that there is unlikely to be evidence of any intention on the husband’s part to dispose of any assets in order to defeat any judgment the Court might make. However it is submitted, based upon what are asserted to be the lengths to which the husband went to conceal the existence of D, that the Court should infer that not only might the husband take steps to defeat the wife’s claim but that he also, given his overseas contacts and business interests, has the demonstrated capacity to do so. Counsel for the husband directed me to and relied upon the wife’s detailed evidence as to the steps she had taken to obtain financial disclosure from the husband prior to the final property orders being made and the fact that it would appear based upon her evidence that the husband not only failed to disclose that information but actively avoided doing so.  

2. The wife is seeking to proceed ex parte and hence the husband has not had an opportunity to reply to the allegations made by the wife and it may be that the evidence will ultimately show that there was no failure to disclose or that even if the husband did fail to make proper disclosure the Court will decline to exercise its discretion to set aside the final property orders. However, I am satisfied that on the evidence as it presently stands that the wife has established a prima facie case that the husband has failed to disclose information that may have been material to her consent to the final property orders, that on that basis there may have been a miscarriage of justice and that she has demonstrated a sufficient likelihood of the success of her application to set aside the final property orders pursuant to s 79A of the Act. I am also satisfied that the evidence before me, albeit unanswered and untested at this stage, is sufficient to warrant the Court granting the injunctive relief the wife seeks on an interim basis in circumstances where the wife’s application is to be forthwith served upon the husband and the matter can be listed for hearing in the Judicial Duty List shortly thereafter.

3. In weighing up the prejudice to both the husband and the wife I am satisfied that the prejudice to the wife of any attempt by the husband to defeat any judgment the Court might make outweighs any prejudice the order may cause to the husband in circumstances where the matter can be listed in the Judicial Duty List on 3 December 2015.  I expressed some concern to counsel for the wife about making an order that might prevent the husband completing the sale of the property he owns in Suburb A or the purchase of any other property to which he has committed, particularly in circumstances where based upon the wife’s evidence it is clear that she would have no capacity to give any meaningful undertaking as to damages. However I am satisfied that the redrafted minute should allow the husband to settle any sale or purchase should he be required to do so pending the further listing of the matter in the Judicial Duty List. I also note that it is the wife’s understanding that settlement of the sale of the Suburb A property is not likely to occur until January 2016.  

4. Although I have acceded to the wife’s application I have done so having regard to the further listing of the matter and on the clear understanding that the Court will reconsider the matter once the husband has had an opportunity to file answering material.

I certify that the preceding twenty nine (29) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Macmillan delivered on 24 November 2015.

Associate: 

Date:  24 November 2015