Koppel & Tomova
[2024] FedCFamC1F 505
•29 July 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Koppel & Tomova [2024] FedCFamC1F 505
File number: SYC 2364 of 2023 Judgment of: CAMPTON J Date of judgment: 29 July 2024 Catchwords: FAMILY LAW – APPLICATION FOR REVIEW – Where two third-parties to the marriage were joined by a consent order as the second and third respondents to the substantive proceedings by a senior judicial registrar upon application of the wife, in circumstances where she is seeking final relief pursuant to s 106B of the Family Law Act 1975 (Cth) and other consent injunctive orders were made restraining the second respondent preserving property – Where the second respondent seeks to review those consent orders – Where such Application for Review was filed eight days out of time and therefore requires leave – Where the additional respondents are necessary parties pursuant to r 3.01 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) – Where the balance of convenience favours the making of the injunctive orders – Application for leave to file Application for Review out of time refused – Application for Review dismissed.
FAMILY LAW – NOTICE OF OBJECTION TO SUBPOENA – Where the second respondent objects to a subpoena issued by the wife to a bank seeking disclosure of the second respondent’s bank statements, on an absence of relevance – Where the wife makes compelling submissions as to the relevance of the documents engaging with issues in the proceedings – Notice of Objection dismissed.
FAMILY LAW – COSTS – Costs reserved by consent by the senior judicial registrar of the application for joinder and injunctive orders – Where no party engaged directly with that fact – Where it would not be just to determine those costs at this time – Costs of the hearing before the senior judicial registrar remain reserved – Costs of the Application for Review and Notice of Objection ordered in a fixed sum.
Legislation: Family Law Act 1975 (Cth) Pts VII and VIII, ss 79, 90XT, 106B and 117
Superannuation Industry (Supervision) Act 1993 (Cth)
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) ch 6, Pts 3.1 and 6.5, rr 3.01, 14.05, 14.07 and 15.06
Cases cited: Alister v R (1984) 154 CLR 404; [1984] HCA 85
Gallo v Dawson (1990) 93 ALR 479; [1990] HCA 30
Martin & Martin and Anor (No. 2) [2014] FamCA 232
Tsiang & Wu and Ors (2019) FLC 93-911; (2019) FLC 93-911
White & Tulloch & White (1995) FLC 92-640; [1995] FamCA 127
Division: Division 1 First Instance Number of paragraphs: 73 Date of hearing: 29 July 2024 Place: Sydney Solicitor for the Applicant: Litigant in person Counsel for the First Respondent: Mr Todd Solicitor for the First Respondent: Orbell Family Lawyers Pty Ltd The Second Respondent: Litigant in person The Third Respondent: Did not participate ORDERS
SYC 2364 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR VILLEGAS
Applicant
AND: MS KOPPEL
First Respondent
MR TOMOVA
Second Respondent
B PTY LTD AS TRUSTEE FOR THE B SUPERANNUATION FUND
Third Respondent
ORDER MADE BY:
CAMPTON J
DATE OF ORDER:
9 JULY 2024
THE COURT ORDERS THAT:
1.The undertaking as to damages as given by counsel for the wife on her behalf at the hearing today be filed and served on or before close of business today, 29 July 2024.
2.The Application for Review filed 3 July 2024 is dismissed.
3.The Notice of Objection to Subpoena directed to C Bank filed 18 July 2024 is dismissed.
4.Mr Villegas pay the costs of the wife of the Application for Review and the Notice of Objection to subpoena determined today fixed in the sum of $10,000, within 28 days of the date of these orders.
5.The costs reserved by the senior judicial registrar pursuant to Order 6 made 4 June 2024, remain reserved.
6.The matter remains listed for directions before a judicial registrar on 2 September 2024.
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 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonyms Koppel & Tomova has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
CAMPTON J:
These reasons determine:
(a)An Application for Review filed 3 July 2024 by Mr Villegas (“Mr Villegas”) of consent orders made by a senior judicial registrar on 4 June 2024; and
(b)A Notice of Objection to subpoena filed 18 July 2024, by Mr Villegas.
For the reasons that follow:
(a)The Application for Review is dismissed; and
(b)The Notice of Objection is dismissed.
BACKGROUND
By way of an Initiating Application filed 5 April 2023, Ms Koppel (“the wife”) the commenced proceedings between she and Mr Tomova (“the husband”) as to the adjustment of property pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”). By way of a Response to an Initiating Application filed 11 May 2023, the husband sought different orders as to the adjustment of property and sought orders as to parenting of their three children, X, Y, and Z, who are 16, 14, and 9 years old respectively, pursuant to Pt VII of the Act.
The husband and wife commenced cohabitation in early 2006, married in late 2006, separated on 22 April 2020, and were divorced in 2022.
The B Superannuation Fund (“the SMSF”) was established by deed in 2014. B Pty Ltd (“B Pty Ltd”) was incorporated in 2014. It is the trustee of the SMSF. The husband always has been, and remains, a director and shareholder of B Pty Ltd.
The wife contends that the property of she and the husband includes the husband’s member entitlements in the SMSF. That SMSF had or has substantial assets held in cryptocurrency.
The evidence to date records inconsistencies as to the date when Mr Villegas was appointed as a director of, and when he received his 50 per cent of the issued shares in, B Pty Ltd. Some documents records that he has been a director since 2015, and a shareholder since 2020. The evidence of the wife promotes the husband and Mr Villegas “backdating documents” on these subject matters.
By way of a deed of variation made in November 2019, in the shadow of the separation of the husband and the wife, Mr Villegas became a trustee and member of the SMSF.
On 27 September 2022 the husband by way of his then lawyers disclosed that he had member entitlements in the SMSF in the amount of $3,834,957.
By way of his annexures to his affidavit filed 9 July 2024, Mr Villegas contends that in mid‑2022 he submitted his resignation as a director of B Pty Ltd, and subsequently was removed as a member of the fund. In oral submissions he said he reached retirement age, giving him a capacity to access his member entitlements in the fund in 2020 and commenced to liquidate his member entitlement from the SMSF in mid-2021. There is issue between the parties as to the date of such removal of Mr Villegas as a member of the SMSF, and the date of his resignation from B Pty Ltd.
On 11 May 2023, a month after the wife initiated the s 79 proceedings, the husband’s solicitors wrote to the wife’s solicitors advising that “during a meeting on 27 October 2021 between [the husband] and his business partner ([Mr Villegas]), [Mr Villegas] informed [the husband] that he would exist the fund with [an amount of Cryptocurrency 1]. This was worth approximately $1,000,000.00AUD… [The husband] holds the balance and profits of the mining assets… These are worth approximately $200,000”.
On 15 August 2023, the husband’s solicitor sent a letter to the wife’s solicitors stating “to the best of [the husband’s] knowledge, the [SMSF] has never held more than [a certain amount of Cryptocurrency 1]” and indicating that subsequent to a 2021 tax audit, the husband and Mr Villegas became aware that the split between them was based on contributions, and therefore rather than a 1:1 split, the ratio was a 10:1 split in the husband’s favour. This caused Mr Villegas to choose to exit the fund with Cryptocurrency 1 and Cryptocurrency 2. The wife contends that this letter is the first time that there is any reference to Mr Villegas exiting the SMSF with Cryptocurrency 2.
The Financial Statements of B Pty Ltd in its capacity as trustee for the SMSF from 30 June 2015 to 30 June 2021 record the respective member entitlements of the husband and Mr Villegas at the end of each financial year, including but not limited to:
(a)As to the husband, as at 30 June 2015 with an entitlement of $104,875;
(b)As to Mr Villegas, his first member entitlement, as at 30 June 2018 of $75,517;
(c)As to the husband, as at 30 June 2021 with an entitlement of $3,828,723; and
(d)As to Mr Villegas, as at 30 June 2021 with an entitlement of $337,041.
On 22 September 2023 the wife caused three subpoena to produce documents to be issued, directed to D Accountants (accountants of the SMSF), Mr Villegas, and E Accountants (who performed audit services for the SMSF from 2017 to 2021). Some of the documents produced on subpoena include:
(a)On 18 March 2021 Mr Villegas sent an email to D Accountants with the husband copied in, which included “[the husband] is in the process of divorce and we will probably require an updated valuation of the fund”;
(b)On 15 June 2021 Mr Villegas sent an email to D Accountants indicating that the SMSF held an amount of Cryptocurrency 1 as at 30 June 2019. The wife says this is in stark contradiction to the husband’s disclosure on 15 August 2023 identified earlier in these reasons;
(c)On 21 February 2022 Mr Villegas sent an email to D Accountants with the husband copied in, which stated “[the husband]” is in divorce proceedings ATM. He will need a 20/21 figure for his share of the fund to give his lawyers etc.”;
(d)On 22 April 2022 the husband said he “noticed a major error” in the SMSF member balances. The wife says this too is in stark contradiction to the husband’s disclosure dated 27 September 2022 where he said his member entitlement was $3,834,957;
(e)On 26 April 2022 D Accountants sent an email to the husband stating that:
Looking at the prior years, it appears that the distribution has been the same allocation for yourself and [Mr Villegas]. These tax returns and reports have been externally audited and therefore should not be incorrect unless the original information provided was incorrect or a change has been made. Could you please specify the errors.
(Emphasis added)
(f)On 29 August 2022, Mr Villegas sent an email to the husband including a draft email to D Accountants attaching a spreadsheet that recorded that Mr Villegas had received a lump-sum withdrawal from the SMSF of $2,036,895;
(g)The draft financial statement and income tax return for the year ending 30 June 2022 disclosed the following:
i. The total value of the SMSF was $2,577,295.79 including '[Cryptocurrency 1]' with a listed value of $2,574,835.67;
ii. The Husband's withdrawal benefit as at 30 June 2022 was $2,367,993.01; and
iii. [Mr Villegas’] withdrawal benefit as at 30 June 2022 was $209,302.78.
No final financial statements have been produced by the SMSF from either 30 June 2022 or 30 June 2023.
The wife’s case is that Mr Villegas has withdrawn from the SMSF, by way of contended member entitlements, assets in the range of $2,605,757 that ought to have been available to the SMSF to satisfy the husband’s member entitlements as recorded in the SMSF’s 2021 Financial Statement.
On 27 June 2024 the husband filed a financial statement, in which he reported that the value of his member entitlement in the SMSF was $225,000.
The wife filed an Amended Initiating Application on 5 April 2024 seeking, amongst other things, relief pursuant to ss 90XT and 106B of the Act, being:
4An Order pursuant to 106B of the Family Law Act 1975 (Cth) that [Mr Villegas] shall transfer an amount to an account (being either a cryptocurrency or cash account as applicable) held in the name of [B Pty Ltd as trustee for the SMSF] and as follows:
4.1 The sum of $2,539,110 (or, in the alternative [Cryptocurrency 1]) and
4.2 The sum of $66,647 (or, in the alternative [Cryptocurrency 2])
5 That in the alternative to Order 4, [Mr Villegas] pay damages/ restitution/ equitable compensation to [B Pty Ltd as trustee for the SMSF] of $2,605,757, together with interest thereon.
…
7That upon compliance with Order 4 (or 5) and in accordance with s 90XT(4) of the Family Law Act 1975 (Cth) (‘the Act’), a base amount as calculated by the Court to give effect to a 70% division of net matrimonial assets is allocated to the [wife] out of the [husband’s] interest in the [B Superannuation Fund] (“the SMSF”), having regard to other assets, liabilities and superannuation to be retained by the Applicant, including the house proceeds of sale and other items pursuant to Order 16 below.
(Underline emphasis removed)
On 5 April 2024 the wife filed an Application in a Proceeding seeking:
1. An ORDER that [Mr Villegas] be joined as Second Respondent to these proceedings (‘the Second Respondent’).
2. An ORDER that [B Pty Ltd] as trustee for the [B Superannuation Fund] (“the SMSF”) be joined as Third Respondent to these proceedings (“the Third Respondent”).
3. Pursuant to Section 114 of the Family Law Act 1975 (Cth):
3.1 Except to give effect to Order 4 below, the Second Respondent be and is hereby restrained by injunction from transferring, dispensing or otherwise dealing with the sum of $2,605,757 (or cryptocurrency with an equivalent market value) received by him from the Third Respondent;
3.2 The First and/or Second Respondents be and are hereby restrained in their capacity as directors of the Third Respondent and members of the SMSF from:
3.2.1 transferring, dispensing or otherwise dealing with any assets of Third Respondent; and
3.2.2 doing anything necessary or signing any document to permit or cause the drawing down of any member balances held by either of them with the Third Respondent.
4. Within 48 hours of these Orders, the Second Respondent shall transfer an amount to an account (being either a cryptocurrency or cash account as applicable) held in the name of the Third Respondent and as follows:
4.1 The sum of $2,539,110 (or, in the alternative, [Cryptocurrency 1]) and
4.2 The sum of $66,647 (or, in the alternative, [Cryptocurrency 2]).
5. Pending the Second Respondent’s compliance with Order 4, the Second Respondent be and is hereby restrained from transferring, dispensing or otherwise dealing with the value of any assets (including, but not limited to cryptocurrency) up to the unencumbered value of $2,605,757.
6. Pursuant to Rule 6.18 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth), the First, Second and Third Respondents provide disclosure and produce documents in respect of:
6.1 Source documents evidencing the date of the Second Respondent’s resignation from the SMSF;
6.2 Source documents evidencing any transfer to and/ or withdrawal by the Second Respondent of cryptocurrency from the SMSF from 30 June 2021 to date;
6.3 Source documents evidencing all cryptocurrency in the name and/or control of the Second Respondent;
6.4 Source documents evidencing all cryptocurrency sold, transferred, gifted, traded, disposed of and/ or encumbered by the Second Respondent from 30 June 2021 to date, including source documents showing the use and application of any proceeds of sale received from the sale of any cryptocurrency between 30 June 2021 to date;
6.5 Bank statements for all accounts in the Second Respondent’s name (including any held jointly with another person or to which he is a signatory) for the period 30 June 2021 to date;
6.6 A list of assets, liabilities, superannuation and financial resources in the name of the Second Respondent, together with source documents showing the current market value of each item;
6.7 All correspondence/ communication (including but not limited to text messages, emails, letters and other electronic messages) between the First, Second and Third Respondent in relation to the resignation of the Second Respondent from the SMSF and his withdrawal of cryptocurrency from the SMSF;
6.8 Source documents showing whether the Second Respondent remains a Trustee and/ or member of the SMSF; and
6.9 All correspondence/ communication (including text messages, emails, letters and other electronic messages) between the First and Second Respondents in relation to the separation of the Applicant and First Respondent and/ or their family law negotiations/ proceedings.
7. The Conciliation Conference listed for 12 April 2024 be adjourned to a date to be advised by the Court and following determination of this Application.
8. That the requirement to comply with Practice Direction 2 of 2017 - Interim Family Law Proceedings be dispensed with.
9. That the Applicant have leave to rely on Exhibits in excess of that provided under the Rules and Practice Direction 2 of 2017 - Interim Family Law Proceedings.
10. Such further or other Orders as the Court deems necessary.
11. The First and/or Second Respondent pay the Applicant’s costs of this Application on an indemnity basis.
(As per the original)
On 22 April 2024 the Application in a Proceeding was listed to for interim hearing on 4 June 2024.
On 31 May 2024 Mr Villegas filed a Response to an Application in a Proceeding, in which he sought:
1. “[Mr Villegas] be not joined.”
2.In the first alternative, “Accountants / Auditors _______ be joined as fourth parties to indemnify [Mr Villegas] (and/or. in any event any of his costs and prospective liability toward costs).”
3. Additionally and in the second alternative, and as per all of the above,
“[Mr Villegas] is granted leave to counter-claim against Orbell and/or [the wife].”
4. Costs on a punitive or extraordinary basis as per [Mr Villegas’] eventual / further application for his costs.
(*added 29/5/2024 in 3rd attempt at filing this Response Document*)
5. In [Mr Villegas’] hypothetical or residual capacity as director of Proposed Third Respondent [B Pty Ltd] ("PTR"), which capacity [Mr Villegas] does not in any way affiirm, [Mr Villegas] be deemed for the purposes of this application to be no longer a director of PTR - and when at all procedurally possible in this proceeding via the eventual responses of [the husband] and/or accountants and/or auditors - all parties to take all appropriate actions to facilitate removal of [Mr Villegas] as director as a matter of record and with all due haste.
(As per the original)
The orders subject to review made on 4 June 2024 are:
IT IS ORDERED BY CONSENT AND PENDING FURTHER ORDER THAT:
1.[Mr Villegas] is joined as Second Respondent to these proceedings (“the Second Respondent”).
2.[B Pty Ltd] as trustee for the [B Superannuation Fund] (“the SMSF”) is joined as Third Respondent to these proceedings (“the Third Respondent”).
3. Pursuant to Section 114 of the Family Law Act 1975 (Cth):
3.1.The Second Respondent be and is hereby restrained by injunction from transferring, dispensing or otherwise dealing with [an amount of Cryptocurrency 1] (or cryptocurrency with an equivalent market value) received by him from the Third Respondent;
3.2.The First and/or Second Respondents be and are hereby restrained in their capacity as directors of the Third Respondent and members of the SMSF from:
3.2.1.transferring, dispensing or otherwise dealing with [an amount of Cryptocurrency 1] or any other assets received from the Third Respondent; and
3.2.2.doing anything necessary or signing any document to permit or cause the drawing down of any member balances held by either of them with the Third Respondent, other than for accounting auditing and necessary compliance fees, and taxation fees.
4.The Second Respondent be and is hereby restrained from transferring, dispensing or otherwise dealing with the value of any assets (including, but not limited to cryptocurrency) purchased with the cryptocurrency and/or funds received from the Third Respondent.
5.Within 28 days from the date of these Orders and pursuant to Rule 6.18 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth), the First, Second and Third Respondents provide disclosure and produce documents to the Applicant in respect of:
5.1.Source documents evidencing the date of the Second Respondent’s resignation from the SMSF;
5.2.Source documents evidencing any transfer to and/ or withdrawal by the Second Respondent of cryptocurrency from the SMSF from 30 June 2021 to date;
5.3.Source documents evidencing all cryptocurrency in the name and/or control of the Second Respondent;
5.4.Source documents evidencing all cryptocurrency sold, transferred, gifted, traded, disposed of and/ or encumbered by the Second Respondent from 30 June 2021 to date, including source documents showing the use and application of any proceeds of sale received from the sale of any cryptocurrency between 30 June 2021 to date;
5.5.Bank statements for all accounts in the Second Respondent’s name (including any held jointly with another person or to which he is a signatory) for the period 30 June 2021 to date;
5.6.A list of assets, liabilities, superannuation and financial resources in the name of the Second Respondent, together with source documents showing the current market value of each item;
5.7.All correspondence/ communication (including but not limited to text messages, emails, letters and other electronic messages) between the First, Second and Third Respondent in relation to the resignation of the Second Respondent from the SMSF and his withdrawal of cryptocurrency from the SMSF;
5.8.Source documents showing whether the Second Respondent remains a Trustee and/ or member of the SMSF; and
5.9.All correspondence/ communication (including text messages, emails, letters and other electronic messages) between the First and Second Respondents in relation to the separation of the Applicant and First Respondent and/ or their family law negotiations/ proceedings.
6.Each party’s costs of the Application in a Proceeding filed 5 April 2024 are reserved.
IT IS FURTHER ORDERED THAT:
7. By 4:00pm on 2 July 2024, the Second Respondent shall file and serve:
a.Response to Initiating Application setting out with precision the final orders sought;
b. Financial Statement;
c. Supporting affidavit in relation to the orders sought, if any;
d.Any other document required by the Federal Circuit and Family Court of Australia (Family Law) Rules 2021.
8.Pursuant to section 149 of the Federal Circuit and Family Court of Australia Act 2021 (Cth), this proceeding is transferred to the Federal Circuit and Family Court of Australia (Division 1).
9. All outstanding interim applications are marked as finalised.
10.The Directions Hearing listed before Judicial Registrar […] at 11:30am on 22 July 2024 is vacated.
11.All extant applications are adjourned to a Directions Hearing listed before Judicial Registrar […] at 9:30am on 22 July 2024 (by Microsoft Teams) in the Sydney Registry.
IT IS NOTED THAT:
A. The matter has been transferred to Division 1 for the following reasons:
i.The matter involves complex issues involving a third party and an application pursuant to section 106B of the Family Law Act 1975 (Cth) to set aside the transfer of cryptocurrency assets from a self-managed superannuation fund.
ii.If the matter proceeds to final hearing it is likely it would take more than 4 days of hearing time.
(Hyperlinks removed) (Underline emphasis added)
THE APPLICATION FOR REVIEW
The Application for Review as filed seeks to review the six consent and the five other orders made by a senior judicial registrar on 4 June 2024. At the hearing of the review, Mr Villegas withdrew his Application to Review Orders 7 – 11 made 4 June 2024, confirming that only Orders 1 – 6 were the subject to review.
The wife opposes the review. By way of her Case Outline document filed 25 July 2024 she seeks confirmation of the orders made by the senior judicial registrar on 4 June 2024.
The husband does not oppose or consent to the orders of the senior judicial registrar by way of injunction. However, he confirmed that he did not seek to review the order dismissing his interim relief for security for costs, the appointment of a court valuation expert, or directing the parties to mediation.
THE RULES
Rule 14.07 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) sets out that the power of the court on review from an order of a judicial registrar is to be exercised by way of an original hearing.
Rule 14.05 prescribes that a party may file an Application for Review within 21 days of the date of the order. That time limitation expired on 25 June 2024. The Application for Review was filed eight days out of time. Mr Villegas requires leave to file the review. The wife opposes such leave being granted. The husband said he did not consent to, or oppose, leave being granted.
The Court has a general power to grant an extension of time prescribed by the Rules within which to take a particular step (r 15.06(1)), including extending time to permit the later filing of an Application for Review of an exercise of delegated judicial power. The power to grant an extension of time maybe enlivened whether or not the time fixed by the rule or procedural order has passed (r 15.06(2)).
The relevant principles as to an exercise of the discretion to extend time is identified in the well-known statement of McHugh J in Gallo v Dawson (1990) 93 ALR 479 (“Gallo v Dawson”) where his Honour said at 480:
… The grant of an extension of time under this rule is not automatic. The object of the rule is to ensure that those Rules which fix times for doing acts do not become instruments of injustice. The discretion to extend time is given for the sole purpose of enabling the Court or Justice to do justice between the parties. This means that the discretion can only be exercised in favour of an applicant upon proof that strict compliance with the rules will work an injustice upon the applicant. In order to determine whether the rules will work an injustice, it is necessary to have regard to the history of the proceedings, the conduct of the parties, the nature of the litigation, and the consequences for the parties of the grant or refusal of the application for extension of time. When the application is for an extension of time in which to file an appeal, it is always necessary to consider the prospects of the applicant succeeding in the appeal. It is also necessary to bear in mind in such an application that, upon the expiry of the time for appealing, the respondent has “a vested right to retain the judgment” unless the application is granted. It follows that, before the applicant can succeed in this application, there must be material upon which I can be satisfied that to refuse the application would constitute an injustice…
(Citation omitted)
The issue for this matter is whether the strict application of the Rules would constitute an injustice.
The transcript of the hearing before the senior judicial registrar on 4 June 2024 (Exhibit 1) records the careful enquires of the delegated judicial officer confirming the consent of Mr Villegas to Orders 1 to 6 as made that day. Mr Villegas has not provided any, let alone a cogent, explanation as to when or why he changed his mind as to consenting to the identified orders. He said that the Application for Review was delayed and filed out of time due to difficulties with the court portal. A delay of eight days is not significant.
To the extent that Mr Villegas in his affidavit implies that he may have misunderstood the fact of joiner and injunctive orders being made, or there was some corruption to the fact of his consent, on the material before me such conclusions are difficult to sustain.
It is evident that Mr Villegas wishes to engage on review with the merits of the injunctive orders achieved by the wife. The prejudice cited by the wife centres on the unnecessary incurring of further costs.
Pursuant to r 14.07(2) leave is required for either party to rely on documents or evidence on review that were not before the delegated judicial officer. This is relevant to the issue of leave in that Mr Villegas did not adduce affidavit evidence before the senior judicial registrar. He now seeks to rely on an affidavit filed 9 July 2024. The wife also seeks to rely on material not before the senior judicial registrar on review, being her affidavit filed 25 July 2024 and an updated tender bundle (Exhibit 1). At the hearing of the review, leave was granted to the parties to rely on documents not before the senior judicial registrar. Those documents go to the crux of the matters in dispute and militate to the leave to extend time as sought by Mr Villegas.
Whilst there is an attraction to the wife’s submissions that the leave to file the review out of time ought to be refused where no explanation is proffered as to when or why consent to the orders made 4 June 2024 was withdrawn, on balance it is best to consider it with the merits of the injunctive order to do justice between the parties.
THE APPLICATION FOR JOINDER OF MR VILLEGAS AS SECOND RESPONDENT AND B PTY LTD AS THE THIRD RESPONDENT
The law
Part 3.1 of the Rules sets out the procedure for the joinder of a party to the proceeding. Rule 3.01 prescribes:
3.01 Necessary parties
A person whose rights may be directly affected by an issue in a proceeding, and whose participation as a party is necessary for the court to determine all issues in dispute in the proceeding, must be included as a party to the proceeding.
Example:If a party seeks an order of a kind referred to in section 90AE or 90AF of the Family Law Act, a third party who will be bound by the order must be joined as a respondent to the proceeding.
The rule mandates that a necessary party to a proceeding be joined. The rule prescribes satisfaction of two conjunctive thresholds, being:
(a)Firstly, that the party who is proposed to be joined has rights that will be directly affected by the proceeding; and
(b)Second, that their participation in the proceedings are necessary to determine all issues in dispute in the proceeding.
Consideration
If achieved, both Mr Villegas and B Pty Ltd as trustee for the SMSF will be bound by the orders as sought by the wife in her Amended Initiating Application filed 5 April 2024. They are therefore self-evidently necessary parties pursuant to r 3.01 whose rights may be directly affected by an issue in the proceeding, and whose participation as party is necessary for the court to determine all issues in the proceeding.
The review of the orders for joinder were always hopeless and doomed to fail.
THE INJUNCTIVE RELIEF SOUGHT BT THE WIFE
The law
The principles applicable to determine an application for an injunction to preserve the status quo are well known. The wife as the applicant for such relief must establish both an arguable case with sufficient likelihood of success to justify the preservation of the status quo, and that the balance of convenience favours the grant of the injunction, in that there is a danger or risk of dissipation of, or dealings with assets which will frustrate any judgment in favour of the applicant. In Tsiang & Wu and Ors (2019) FLC 93-911 the Full Court said:
20. The grant of an injunction is discretionary and the basis on which such an order is made is well established. A purpose, as in this case, is to preserve the status quo pending resolution of the controversy. An applicant must demonstrate first that there is a serious issue to be tried. 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. 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.
(Footnotes omitted)
The property of the husband and the wife contended to be available for adjustment include broadly the proceeds of sale of the former matrimonial home held in trust in the sum of approximately $900,000, the husband’s entitlement in the SMSF, his other accumulation superannuation interests valued at $30,005, and a superannuation accumulation interest of the wife of $89,830. As is self-evident, the recorded value of the husband’s member entitlement in the SMSF would be the lion’s share of the property of the parties amendable to adjustment. The wife seeks the proceeds of sale of the former matrimonial home, and a splitting order from the husband’s SMSF member entitlement to achieve 70 per cent of the property of she and the husband. The husband opposes the superannuation splitting order and seeks that the proceeds of sale of the former matrimonial home be divided equally between he and the wife. It is common ground between the husband and the wife that the wife should receive a property settlement such that it is just and equitable to adjust property between them.
The wife claims there is a risk of dissipation of assets and that her the injunctive relief as sought was necessary to preserve the status quo and the subject matter of the litigation pending final determination. She claims no direct interest in the husbands’ SMSF member entitlement. The relevant subject matter of the litigation is the wife’s right to claim orders for property adjustment under Pt VIII of the Act, particularly s 79, and the pool of assets to be the subject of that claim, of which the husband’s SMSF entitlement would form a part.
The wife in her written submissions, contends that it “appears by documents produced in the course of these proceedings under subpoena, and never disclosed by the Husband, that in fact [Mr Villegas] may have received a lump-sum withdrawal of [Cryptocurrency 1] entitlements worth in excess of $2,000,000” (emphasis added). The wife contends that she is concerned that Mr Villegas has “purported to receive funds from the SMSF to which he was not entitled in circumstances where the funds came from contributions made by [the husband] and I during our long relationship” (emphasis added). She contends that if the injunction sought is not made restraining Mr Villegas from transferring, dispensing, or otherwise dealing with the funds he received upon his exit from the SMSF, then it may not be possible to recover the assets from the SMSF which would form part of the property amenable to adjustment between she and the husband.
It is against this background that the wife’s claims to preservation of the subject matter of the litigation must be understood. That is, the wife argues for the need to preserve the cryptocurrency in specie, or the funds its liquidation has produced, held by Mr Villegas as part of the overall asset pool of she and the husband.
Although not clear from Mr Villegas’ affidavit evidence, he said at the hearing of the review that “we” (he and the husband by way of the SMSF) paid $7,500 each to acquire Cryptocurrency 1. He said they established two wallets holding equal quantities of Cryptocurrency 1 each in 2017.
Mr Villegas submitted that his decision to leave the fund was made a year before “any indication of significant distress” in the marriage of the husband and the wife. Mr Villegas stated that he started receiving member entitlements from the fund after the date of his “preservation age” in 2021. At the hearing of the review Mr Villegas said that he has no relationship to this matter or the SMSF, as the funds were not moved until the end of 2020, when they were moved due to a wallet change.
Mr Villegas in his affidavit said that he has “liquidated [an amount of Cryptocurrency 1] between 2021-2024” and that he has invested two amounts of Cryptocurrency 1 in separate investments. By way of contrast, he said during the hearing that he had received a greater amount of Cryptocurrency 1 from the SMSF in or around October 2022 by accessing “his wallet” generating cash when required, currently having an amount remain in his wallet. He said the price of Cryptocurrency 1 has been volatile, especially in 2021 and 2022, with substantial decreases in market value.
He further submitted:
- I have provided evidence demonstrating that the [Cryptocurrency 1] I purchased [has] been under my personal management since 2017.
- There was no commingling of funds as [B Pty Ltd] never had a single account or wallet where funds were kept post-2017.
- Significant errors exist in the methodologies used by the accountants to calculate allocations, which do not align with our annual disclosures, forming the basis of the applicant’s claims.
- While acknowledging administrative lapses in fund documentation during the COVID-19 years, both [the husband] and I have repeatedly affirmed the correctness of our statements in our respective affidavits.
In his affidavit Mr Villegas said the SMSF operated under a simple premise “not your keys, not your coins”. He said due to the “nascent nature of the involved technology”, “errors were inevitable”, and that he and the husband “continually identified significant inaccuracies in their calculations”.
He also said, “the manner in which allocations were structured was intended to allow accountants and auditors to reconcile these figures within existing forms and taxable thresholds.” Significant disquiet is generated from this evidence.
There is no reason at this time not to accept integrity of that as recorded in the published financial statements of the SMSF. They demonstrate that the wife has an arguable case so as to have a likelihood of success in achieving the s 106B relief as sought.
As to Mr Villegas’ bare assertions that:
(a)He has demonstrated that Cryptocurrency 1 he has purchased has been under his personal management since 2017, and that there was no commingling of these assets with the crypto assets of the SMSF; and
(b)There were “administrative lapses” in the SMSF’s documentation.
At the present time, as assertions, they carry little weight.
The onus rests with the husband and Mr Villegas to disclose, and if necessary to adduce into evidence, information and documents verifying the foundations for these contentions, especially as to those as recorded in these reasons that are inherently inconsistent.
Mr Villegas’ financial statement records that he is employed as a finance professional in another country, with his periodic income being not substantially dissimilar to his expenses, and that he holds property, being cryptocurrency and funds in his bank account, valued in the range of $298,000 and $63,000 respectively. He is currently in another country for an extended period caring for his elderly parents.
The tenor of Mr Villegas’ affidavit evidence is that he has applied at least some of the assets he has received from the SMSF to meet living expenses. He says the injunction sought will be prejudicial in that he will not be able to meet those periodic living expenses. He has not materially disclosed the receipt of, or use and application of, what he has received from the SMSF or documents verifying same. This additionally weighs in favour of the injunctive relief sought.
The balance of convenience substantially favours the injunctive orders sought by the wife at this time. Absent such orders, the substantive relief prosecuted by the wife will be prejudiced in that the property she seeks to recover is likely to be dissipated and lost absent any alternative avenue for recovery.
The disclosure failures to date of documents and information by Mr Villegas is self-evident for the reasons identified earlier. The obligations of disclosure pursuant to ch 6 of the Rules have application to all parties to a financial proceeding. The orders made by the senior judicial registrar as to disclosure implement the objectives of the Rules.
For all of the above reasons, the application for leave to file the review of the senior judicial registrar’s orders out of time will be refused. The Application for Review filed 3 July 2024 will be dismissed.
THE NOTICE OF OBJECTION
A subpoena to produce documents was issued to C Bank on 16 July 2024 at the request of the wife. The schedule to the subpoena required the production of documents relating to all statements and/or transaction listings for any and all accounts held by Mr Villegas for the period of 1 January 2020 to date, all applications for finance, credit facilities and charge facilities for Mr Villegas for the period of 1 January 2020 to date, and guarantees executed in support of any mortgages, finance, loans and/or credit cards made by or on behalf of Mr Villegas for the period 1 January 2020 to date.
By way of his Notice of Objection filed 18 July 2024, Mr Villegas seeks for the dates to be amended from “1 January 2020” to another date in 2020. Mr Villegas contends that date is the date which he reached preservation age and was permitted to access his superannuation, and therefore bank records prior to that date bear no relationship to these proceedings. Implicitly his objection to the earlier date to produce documents is by way of an absence of apparent relevance.
The wife seeks the dismissal of the Notice of Objection.
The husband did not wish to be heard on the objection. He made complaint as to the number of subpoena filed by the wife in the proceedings to date.
CONSIDERATION
A subpoena is an ex parte order of the court requiring the production of documents from a stranger to the proceedings. Part 6.5 of the Rules regulates the issue of a subpoena to produce documents.
Provided the subpoena has a legitimate forensic purpose, it will not be amended. A legitimate forensic purpose has been held to include “a sufficient apparent connection to justify the documents sought on production or inspection” (White & Tulloch & White (1995) FLC 92-640 at 708). It has further been determined that providing it is “on the cards”, being that the documents sought would bear upon and have some relevance to the substantive proceedings, the subpoena process ought to be completed (Martin & Martin and Anor (No. 2) [2014] FamCA 232 at [28], referring to Alister v R (1984) 154 CLR 404).
Whilst a document may appear irrelevant in isolation, its relevance may only become clear in the context of other evidence. The wife raises real concerns as to the husband’s disclosure, the use of SMSF by Mr Villegas, and the financial circumstances of B Pty Ltd and the SMSF. These reasons have canvassed the absence of disclosure by Mr Villegas as to the use and application of property he has received from the SMSF.
The wife’s case that the documents sought in the schedule in the subpoena are relevant is compelling, in that they go to facts in issue in the case, including:
(a)Whether the quantum of Cryptocurrency 1 entitlements withdrawn by Mr Villegas in or about 2021 were, in fact, member entitlements of the husband;
(b)Whether the conduct of the husband and Mr Villegas in the withdrawal of those cryptocurrency entitlements warrant the exercise of power under s 106B of the Act;
(c)The disposition by Mr Villegas of those cryptocurrency entitlements;
(d)As to the conduct of the husband and Mr Villegas, as trustees and members of the SMSF and directors and shareholders of B Pty Ltd, in contravention of the requirements of the SMSF pursuant to the Superannuation Industry (Supervision) Act 1993 (Cth) and the regulations; and
(e)As to the failure by the husband and Mr Villegas to make full and frank disclosure of their relevant financial circumstances.
The approach taken by Mr Villegas to the subpoena is either wholly misconceived or disingenuous. He seeks a preliminary determination on a summary basis of subsidiary factual matters relevant to a substantive issue in the proceedings. His Notice of Objection has no merit and will be dismissed.
COSTS
In the event the Application for Review and the Notice of Objection were dismissed, the wife sought party and party costs of the hearing before the senior judicial registrar on 4 June 2024 and of the hearing of the review and subpoena objection, fixed in the sum of $25,000. She sought for the costs to be considered in a “broad brush” approach, meeting the primary objectives of the Act to avoid the cost and delay of an assessment process.
The relevant principles as to costs are well settled. While the starting position established by s 117(1) of the Act is that each party pays their own costs, s 117(2) allows the Court to make such orders as to costs as it considers just if there are circumstances which justify it doing so. In considering what order for costs, if any, should be made, the Court is required to have regard to the matters set out in s 117(2A) of the Act and give weight as it considers appropriate to any relevant factor. It is well settled that no single factor in s 117(2A) has priority, nor must more than one factor be satisfied. Rather, any one factor may be sufficient.
The hearing on 4 June 2024 was sensibly compromised. All the parties agreed to reserve those costs at that time. In that circumstance and having regard to the parties not engaging directly with that fact, it would not be just to determine those reserved costs at this time. The costs of that hearing will remain reserved (see Order 6 made 4 June 2024).
Mr Villegas was unsuccessful in his application for leave to extend the time to file the Application for Review and his Notice of Objection to subpoena. Each application was misconceived, being always, on the evidence, absent merit. The circumstances justify a costs order in favour of the wife of and incidental to the hearing today.
Mr Villegas disputed the fact or reasonableness of the quantum sought by the wife. He submitted the costs sought by the wife “seem to be excessive”. He did not materially challenge the Court taking a “broad brush” approach to costs. Mr Villegas estimated that the quantum of costs for legal services incurred to date was in the range of $25,000, although any payment for them would be committed to a charity. He said that he could not meet an order for costs in the sum of $25,000 within 28 days.
Having regard to the scale of costs identified in Sch 3 of the Rules and the circumstances of the case, I find that it is reasonable that Mr Villegas pay the wife’s costs on the applications determined today fixed in the sum of $10,000 within 28 days.
I certify that the preceding seventy-three (73) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Campton. Associate:
Dated: 29 July 2024
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