Hien and Cui & Ors

[2020] FamCA 557

FAMILY COURT OF AUSTRALIA

HIEN & CUI AND ORS [2020] FamCA 557

FAMILY LAW – PROPERTY – litigation with all of the hallmarks of litigation that will get out of control and be conducted at disproportionate expense requiring a disproportionate amount of court time.

FAMILY LAW – PRACTICE AND PROCEDURE – obligation identified in Harman v Secretary of State for the Home Department [1983] 1 AC 280 not to use information disclosed in proceedings for any other purpose

Family Law Act 1975 (Cth)

Ainsworth & Hanrahan [1991] 25 NSWLR 155
Fotopoulos & Commonwealth Bank (2017) VSC 461
Harman v Secretary of State for the Home Department [1983] 1 AC 280
Hearne & Street (2008) 235 CLR 125
Joint Practice Direction 1 of 2020 – Core Principles in the Case Management of Family Law Matters of 28 January 2020

APPLICANT: Ms Hien

1^st RESPONDENT: Mr Cui

2^nd RESPONDENT: Ms Wern

3^rd RESPONDENT: Mr Loy

4^th RESPONDENT: Mr Phang

5^th RESPONDENT: B Pty Ltd ACN …

6^th RESPONDENT: Cui Pty Ltd ACN …

7^th RESPONDENT: Loy Pty Ltd ACN …

FILE NUMBER: MLC 4292 of 2018

DATE DELIVERED: 3 June 2020

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Bennett J

HEARING DATE: 3 June 2020

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Laidlaw CSC

SOLICITOR FOR THE APPLICANT: Boon Legal

COUNSEL FOR THE 1^ST RESPONDENT: Not Applicable

SOLICITOR FOR THE 1^ST RESPONDENT: Hiways Australia Pty Ltd

COUNSEL FOR THE 2^ND RESPONDENT: Not applicable

SOLICITOR FOR THE 2^ND RESPONDENT: Kennedy Partners

COUNSEL FOR THE 3^RD , 5^TH & 7^TH RESPONDENT: Not applicable

SOLICITOR FOR THE 3^RD , 5^TH & 7^TH  RESPONDENT: Ashurst Australia

COUNSEL FOR THE 4^TH , 6^TH RESPONDENT: Mr Tesoriero

SOLICITOR FOR THE 4^TH , 6^TH  RESPONDENT: Wonders Legal

Orders

1. Any or any further affidavit material in support of or in opposition to the applicant's Application in a Case dated 17 April 2020 (Hien Application), the third respondent’s Application in a Case dated 30 March 2020 (Loy Application) or the fourth and sixth respondent's Application in a Case dated 17 April 2020 (Phang Application) be filed and served by 4.00pm on 24 June 2020.

2. The third, fifth and seventh defendant are to file their amended response to the initiating application by no later than 4.00pm on 24 June 2020.

3. Any affidavit material in reply is to be filed and served by 4.00pm on 8 July 2020.

4. The applicant file and serve a written outline of submissions on its application in a case dated 17 April 2020 (the Hien Application) by 4.00pm on 15 July 2020.

5. The third respondent file and serve a written outline of submissions on its application in a case dated 30 March 2020 (the Loy Application) by 4.00pm on 15 July 2020.

6. The fourth and sixth respondents file and serve a written outline of submissions in support of their application in a case dated 17 April 2020 (the Phang Application) by 4.00pm on 15 July 2020.

7. The second Respondent file and serve a written outline of submissions in support of her application in a case dated 2 June 2020 (the Wern Application) by 4.00pm on 15 July 2020.

8. The parties file and serve any written outline of submissions in response by 4.00pm on 22 July 2020.

9. The husband and the wife file an updated Financial Statement (including Part G as to their household expenses) by not later than 24 June 2020.

10. The Hien Application, Loy Application, Phang Application and Wern Application be listed for further hearing on 22 September 2020 at 10.00 am in the Judicial Duty List.

11. If the applications referred to in the preceding order, or any of them, resolve and the parties consequently do not require time in the Judicial Duty List, a minute of order to that effect may be sent to my Chambers before 19 September 2020.

12. The costs of this day be reserved.

13. There be liberty to the parties to apply and if necessary to liaise with my Associate – email … – in relation to case management issues for which the appointment of a further mention date is sought.

IT IS DIRECTED:

1. That the notes of the hearing this day be marked Exhibit “C1” and remain on the Court file and a copy be sent to each practitioner who appeared this day.

2. That the minute of consent orders as amended be marked Exhibit “A” and remain on the Court file.

3. The document “Joint Practice Direction 2: JPD 2 of 2020: Special Measures in response to COVID-19 Electronic filing, Viewing of Subpoenas, Annexures to Affidavits, Signatures on Documents and Affidavits, and Fees” be sent to counsel and practitioners who appeared this day.

4. My reasons for decision this day be transcribed and when settled be placed on the Court file and a copy provided to the parties.

AND IT IS NOTED:

A. That the parties were informed this day of the Court’s Arbitration List and that this matter would appear to be suitable for inclusion in that list.

B. That the parties will convene a private mediation following completion of discovery.

Note: The form of the order is subject to the entry of the order in the Court’s records.

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

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 r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 4292 of 2018

Ms Hien

Applicant

And

Mr Cui

1^st Respondent

And

Ms Wern
2^nd Respondent

And

Mr Loy
3^rd Respondent

And

Mr Phang
4^th Respondent

And

B Pty Ltd ACN …
5^th Respondent

And

Cui Pty Ltd ACN …
6^th Respondent

And

Loy Pty Ltd ACN …
7^th Respondent

EX TEMPORE REASONS FOR JUDGMENT

1. This matter comes before me as the return date of proceedings from a judicial duty list earlier this year where it was envisaged that by this time the parties would have attended a mediation.  No mediation has taken place due to discovery issues and issues concerning a number of respondents. 

2. At the moment, there are seven respondents, and, in my view, it will be of assistance to judicial officers before whom this matter subsequently comes if I set out briefly the information which was imparted by practitioners for parties or formed responses to direct questions by me this day. 

3. The appearances on behalf of the applicant and seven respondents are recited on the front page of these reasons.  The hearing was conducted by Microsoft Teams, and each client participated in the Microsoft Teams hearing.  The electronic platform allowed a written record of gathered information to be shared between my Legal Associate, the Court and the practitioners and parties as it was being typed and amended during the hearing.  That document was ultimately marked Exhibit “C1” and remains on the Court file.  A copy has been provided to counsel or solicitor appearing as counsel.

   RECORDED  :  NOT TRANSCRIBED

Dramatis personae

1. The wife has joined six respondents in addition to the husband.  I set out below who the respondents are and how they relate to one another.

2. The wife is the applicant for a final alteration of property interests, being an application filed by her on 20 April 2018.  The first respondent is the husband.  The wife is currently 54 years of age, having been born on … 1966.  She is not employed outside the home.  Her last statement of financial circumstances filed on 20 April 2018 says that she is in receipt of “nil” income and that her weekly expenses are $9600 including mortgage payments for the former matrimonial home in which she and the youngest child of the marriage reside.  Such mortgage instalments are $1250 per week to National Australia Bank.  The former matrimonial home is the property at C Street, Suburb D, which is jointly owned by the husband and the wife, and has a current market value, she says, of $1.5 million encumbered by a mortgage to National Australia Bank against which there is $950,000 owing.  The wife says that she is supported by her family by way of loan advances sent from China. 

3. The husband is 55 years old having been born on … 1965.  He describes his occupation as that of a businessman, and details that as being in property development for projects in Suburb R and Suburb Q.  In his last financial statement filed 2 July 2018, his income is shown as $3800 per week and his expenses at $3520 per week.  He resides at E Street, Suburb D, with his partner, Ms Wern, who is the second respondent in the proceedings.

4. The children:

   a)The youngest child of the husband and wife is Y, born … 2003.  Y resides with the mother in the former matrimonial home.  She is now 17 years old and studying VCE at a high school which is a government-funded co-educational select secondary school, located in the Melbourne suburb of Suburb F. 

   b)The oldest child of the husband and the wife is Mr Z, born … 1991.  Mr Z is 29 years old, and lives independently of the parties overseas and is employed in the finance industry.    

5. The second respondent is Ms Wern.  Ms Wern is 40 years old, having been born on … 1980.  She is a director of G Pty Ltd which is an import/export entity for products from Australia to China.  She says that she met the husband in late 2016 and commenced a relationship with him in January or February 2018.  They commenced to reside at her property at E Street, Suburb D, in February 2020. 

6. The second respondent says that she bought the E Street property in January 2017 which is a date subsequent to the date upon which the husband alleges that he and the wife were separated.  The husband and wife agree that they commenced to cohabit in China in June 1990 and they had no assets of significant value at that time.  They married in China on … 1991, in City H.  The husband says that he and the wife separated in 2016 on “no specific” date.  The wife puts the date of separation at 6 January 2018. 

7. The second respondent said the purchase price for the E Street property was provided as to $840,000 by mortgage finance through J Bank;  $210,000 from her father and sister who live in City H;  and funds from an investment, K Group, of $206,709.  The conveyancing was done by L Conveyancing at Suburb D.  She was joined to the proceedings by the wife. 

8. The second respondent alleges that she lent approximately $1 million to the husband between late 2016 and late 2018 of which some $700,000 has been repaid.  Both the advance and the repayments are the subject of electronic transactions for which there are bank statements.  The second respondent and the husband say that they entered into a loan agreement which was drafted by her then solicitors, M Lawyers, and executed by the husband and the second respondent (but not witnessed) on 8 October 2018.  The document bears the date 8 October 2018.  The loan agreement will be produced.

9. As indicated, the second respondent was joined by the wife.  The wife asserts, inter alia, that the husband has purchased a car for the second respondent, the second respondent denies same.  The second respondent says she bought a Motor vehicle 1 for $62,500 from N Motors in Suburb O on 2 September 2017 and that she holds a receipt for same. 

10. The wife alleges that the car was then worth approximately $100,000, and therefore the consideration stated in the receipt is not commensurate with the value of the vehicle at the time of purchase, and, in any event, the second respondent has not provided any source for the funds that she says were paid in cash.  Today, her representative said that the cash monies had been held by the second respondent in a bank account with Westpac in Australia and other monies which she brought to Australia in cash from China. 

11. The second respondent has had three solicitors in these proceedings.  She was initially subpoenaed to produce documents at the behest of the wife in 2018 at which time M Lawyers acted for her.  Once joined in the proceedings, M Lawyers continued to act for her from October 2019 to February 2020.  P Lawyers, solicitors, then acted for her from February 2020 to April 2020.  Since April 2020 Ms Wang of Kennedy Partners has acted for the second respondent.

12. The third respondent is Mr Loy.  He is 49 years old and a business associate of the husband in property developments in both Suburb Q and Suburb R.  He is currently present in City H, China, and not able to leave the country due to COVID-19 restrictions.  He resides at S Street, Suburb T in Australia.  The third respondent is the company director of B Pty Ltd, who is the fifth respondent, and of Loy Pty Ltd, who is the seventh respondent. 

13. The third respondent has circulated a response to the wife’s application initiating proceedings which, I was informed, steps through certain transactions relevant to the proceedings.  However, he now seeks to amend that response to include further and other details which have come to light. 

14. The wife joined Mr Loy to the proceedings because she asserts that Mr Loy received from the husband a benefit of a 40 per cent shareholding in a company called U Development Pty Ltd, the consideration for which was not clear.  The third respondent asserts that U Development Pty Ltd was incorporated as a special purpose vehicle for development of a property at U Street, Suburb Q, but not used as such and is now a company without assets.

15. The fourth respondent, Ms Phang, is a friend of the husband.  She is 35 years old.  She is not employed outside the home, and she resides in City H in China.  On 18 March 2018 Ms Phang received 100 shares in Cui Pty Ltd (the sixth respondent) from the husband who also appointed her as a director of that entity.  She paid no consideration for the shares.  The wife asserts that Ms Phang had the sixth respondent company deregistered on 28 March 2020, but Ms Phang’s counsel today informed the Court that deregistration was referable to non-payment of ASIC fees. 

16. At the behest of the wife, ASIC has now reinstated the sixth respondent as of 18 May 2020.  Ms Phang seeks to transfer the shares back to the husband, and to resign her directorship of the sixth respondent and to sign documents in that regard.  The husband has not signed the documents.  The husband has proposed to the wife that once Ms Phang is no longer a director or shareholder of the sixth respondent she can be unjoined from these proceedings, but the wife is not prepared to release her at this stage. 

17. On 17 April 2020, Ms Phang made an application to the Court by way of an application in a case to be unjoined from the proceedings.  The wife wants Ms Phang to comply with her obligations under extant orders for discovery before considering whether she can cease to be a party to these proceedings.  That seems to be an application which is eminently settleable. 

18. The fifth respondent is a corporate entity, B Pty Ltd which is owned by the third respondent, Mr Loy.  Mr Loy is the secretary and sole director of the fifth respondent.  The shareholding is in the hands of four persons.  There are 100 issued shares.  Mr V Cui (specified not to be related in any way to the second respondent) holds 19 per cent of the shares.  His sibling, Mr W Cui, holds 19 per cent of the shares.  Loy Pty Ltd (seventh respondent) holds 51 per cent of the shares, and Cui Pty Ltd (sixth respondent) holds 11 per cent of the shares.

19. The fifth respondent is a trustee of the B Unit Trust.  Units in the trust are held in the same proportion and by the same persons as is the shareholding.  The fifth respondent is a specific purpose vehicle for the development of the property at Suburb R which are a series of apartments which are only about 80 per cent complete.  The land on which the development is taking place was purchased for $3 million without any obvious mortgage finance. 

20. There is a financial agreement between shareholders/unitholders dated 4 October 2019 and includes a record that the husband contributed some $377,958.  Those monies, says the husband, as to $300,000 came from his friend Mr AA in City H in China.  It is not clear whether it was a loan or what the nature of the payments were.  The balance of some $78,000 came from the husband’s “own resources”.

21. The sixth respondent is Cui Pty Ltd.  That is an entity which is owned by Mr Phang who is the fourth respondent.  Mr Phang is the sole director, secretary and shareholder of the entity.  It is the trustee of the Cui Family Trust, the beneficiaries of whom are Mr Cui (the husband) and the additional beneficiary is Ms BB Cui (the oldest daughter of the husband and wife).  The wife is a person who is excluded from being a beneficiary.  The appointor of the trust is the husband.  The only asset and use of the trust is to hold the 11 per cent share-unit holding in the fifth respondent which relates to the development of the apartments at Suburb R. 

22. The seventh respondent is Loy Pty Ltd which is, effectively, owned by Mr Loy who is the third respondent.  Mr Loy is the secretary, sole director and sole shareholder of the seventh respondent.  The seventh respondent is a trustee to the Loy Family Trust, the appointor of which is not known.  The beneficiaries are the third respondent and his wife, Ms CC, and their child, X.  The principal assets or use of the seventh respondent is to hold the Suburb Q property development.  

23. Mr Loy (the third respondent) asserts that it was originally the intention of the husband and himself that the husband would control 60 per cent of the Suburb Q property development through U Pty Ltd.  However, when the husband was required to contribute 60 per cent of the deposit he was unable to do so, and instead, Mr Loy says, the husband paid only $14,000 and that Mr Loy paid the balance of $396,000 toward the deposit.  In due course, the seventh respondent became the registered proprietor of the Suburb Q site and paid all or most of the remaining purchase price. 

24. As far as the husband is concerned, he says that he cannot recall paying $14,000 towards the deposit and says that he has not made any contribution to the overall purchase price of the Suburb Q development.  As far as the wife is concerned, she joined the seventh respondent.  The wife asserts that on 30 March 2017 the second respondent, Ms Wern, who is the partner of the husband, signed a contract to purchase the Suburb Q land for $4.1 million, and then subsequently on 5 October 2018, Ms Wern made a nomination in favour of the seventh respondent.

Applications

1. There are four outstanding applications to which the parties have directed attention for procedural orders which are sought by consent. 

2. I commend the parties for turning their mind to the procedural orders which are, essentially, to extend the time for discovery, and to provide each with opportunities to put in amended applications where necessary and then for responses to be filed.  However, it seems to me that there is a lot of fuss about not much at the moment and that the parties are entirely capable of sorting out the matters in issue with the result that the applications will not need to be determined. 

3. The applications are as follows:

   a)The Phang application is filed on 17 April 2020 seeks to set aside the transfer by the husband to Ms Phang of the shares and for Ms Phang to no longer be joined as a part to the proceedings.

   b)The Hien application is an application in a case filed 17 April 2020 in which the wife seeks orders for discovery.

   c)The Loy application is an application filed by the third respondent on 30 March 2020 in relation to discovery.

   d)The Wern application is filed by the second respondent on 2 June 2020, and she seeks an order restraining the wife’s solicitors from providing documents to their client on the basis that the wife has previously misused documents which have come into her possession and control during the course of these proceedings.  The wife denies that’s the case.  However, it’s deposed by the husband that documents were given to the Chinese Authorities which caused he and the second respondent to be detained in China for questioning. 

RECORDED  :  NOT TRANSCRIBED

1. A number of parties allege that the wife has misused information from documents discovered in this proceeding to their embarrassment and peril. This includes leading the husband and the second respondent to be taken into custody in China and held for questioning. An application has been made by Mr Loy, the third respondent, filed 30 March 2020. He seeks under s 102PH of the Family Law Act 1975, which provides for applications to be made for a suppression order or a non-publication order as those terms are respectively defined in the Family Law Act 1975, for the suppression of evidence or the non-publication of the proceedings.  I have provided my preliminary view to the parties that the application is misconceived.  First, nothing is in evidence.  Second, parties and their practitioners are prohibited from using information discloses in these proceedings for any other purpose.  

2. I have discussed with the parties the obligation described in Harman & Secretary of State for the Home Department [1983] 1 AC 280. This case is often referred to as giving rise to the “Harman undertaking”, although it is now considered a substantive obligation and not strictly an undertaking. In Hearne & Street (2008) 235 CLR 125, [2008] HCA 36, Hayne, Heydon and Crennan JJ (96) stated:

   Where one party to litigation is compelled, either by reason of a rule of court, or by reason of a specific order of the court, or otherwise, to disclose documents or information, the party obtaining the disclosure cannot, without the leave of the court, use it for any purpose other than that for which it was given unless it is received into evidence. 

3. The principle in Harman’s case covers various documents as well as copies of those documents and information derived from the documents, including:

   …documents inspected after discovery, answers to interrogatories, documents produced on subpoena, documents produced for the purposes of taxation of costs, documents produced pursuant to a direction from an arbitrator, documents seized pursuant to an Anton Piller order, witness statements served pursuant to a judicial direction and affidavits.

   (see Fotopoulos & Commonwealth Bank (2017) VSC 461).

4. Only the Court can release a party from the obligation recognised in Harman’s case, even if the other party is giving clear and informed consent to the use of the document (which is not contemplated to be the case here). 

5. Importantly, a breach of the obligation, as I’ve discussed, is punishable as a contempt of court (Ainsworth & Hanrahan [1991] 25 NSWLR 155, [168-9] and Hearne’s case [96]).  Ignorance of the obligation discussed in Harman’s case is not a defence.

ORDERS DELIVERED

1. I have mentioned to the parties the advantage of arbitration in a matter such as this, particularly if they want to secure confidentiality of information.  Arbitration has many other benefits as well including selecting the arbitrator, having control over the timing of litigation, and importantly, certainty of when a decision will be delivered

2. As indicated, it seems that all of the applications in a case are capable of being resolved by agreement, and there seems some confidence in the practitioners that would be the case.

RECORDED  :  NOT TRANSCRIBED

Assets

1. The wife’s substantive application is financial.  She seeks an alteration of property interests.  It has taken some time to define who the parties are and how they relate to one another.  The next step is to do a similar exercise with the relevant assets.

Case management

1. When the assets are identified, the parties but most particularly the wife must make an assessment based on proportionality.  That is, what is an appropriate amount of costs to incur given what assets can actually be proved to exist and at what value.

2. On 28 January 2020 the Chief Justice released Joint Practice Direction 1 of 2020 – Core Principles in the Case Management of Family Law Matters. The second Core Principle is:

   The overarching purpose to be achieved is to ensure the just, safe, efficient and timely resolution of matters at a cost to the parties that is reasonable and proportionate in all the circumstances of the case, having regard to the significant impact of family law disputes on children and families.”

   This applies as much to property and financial proceedings as to parenting matters.

3. I permitted this matter to come back to me from a Judicial Duty List matter because it bears all the hallmarks of litigation which is out of control (and out of proportion).

4. It would be easy to think that a mediation or arbitration may be a good forum for resolution of this matter.  Core Principle 4(c) in the Joint Practice Direction 1 of 2020 states that effective case management of all cases relies on the use of both internal and external Alternative Dispute Resolution (ADR), including private mediation, family dispute resolution, conciliation conferences and arbitration in property disputes for as many appropriate cases as possible.  However, mediation and arbitration are premature, and a potential waste of money, until such time as all parties are content with the discovery process, or should be content.

5. Understandably, this matter is not allocated to a judicial docket.  Unless the interim applications can be resolved sensibly, I suggest that the next judicial officer before whom this case comes considers referral to the Case Management Judge for early inclusion in a judicial docket to enforce some proportionality in the use of the court’s resources.

6. The parties seek a return date, and I have adjourned the matter to 22 September 2020 in the judicial duty list.  That list is, at the moment, assigned to Wilson J who is, coincidentally, the judge in charge of this court’s arbitration list - which the parties may bear in mind for if or when arbitration is a feasible option for this case.

I certify that the preceding forty-four (44) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Bennett delivered on 3 June 2020.

Associate: 

Date:  13 July 2020