Lan and Hao

[2015] FamCA 1149

FAMILY COURT OF AUSTRALIA

LAN & HAO [2015] FamCA 1149

FAMILY LAW – SECURITY FOR COSTS – Where the parties are engaged in litigation in both Australia and China – Where the respondent husband seeks that the applicant wife provide security for his costs – Where the husband provides inadequate evidence quantifying his anticipated costs – Where there has been delay in bringing such an application – Where the financial circumstances of the parties militate against such an order and would risk stifling the wife’s application – Application dismissed.

FAMILY LAW – INJUNCTIONS – Anti-suit injunction – Where the applicant wife seeks an order restraining the husband from continuing with litigation in China – Where there are assets in both Australia and China – Where an expert report indicates that the courts in China will not deal with property outside that country – Where the Court finds justice and equity as between the parties is more likely to be achieved in the Australian jurisdiction – Orders made as sought by the wife.

Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth) r 19.05

Chen & Tan [2012] FamCA 225
Luadaka & Luadaka (1998) 24 Fam LR 340

APPLICANT: Ms Lan

RESPONDENT: Mr Hao

FILE NUMBER: SYC 4184 of 2013

DATE DELIVERED: 18 December 2015

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Justice Stevenson

HEARING DATE: 16 November 2015

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr White SC

SOLICITOR FOR THE APPLICANT: Michael Conley Lawyers

COUNSEL FOR THE RESPONDENT: Mr Campton SC

SOLICITOR FOR THE RESPONDENT: Somerville Legal

Orders

1. That the husband’s Application in a Case filed on 7 September 2015 is dismissed.

2. That, pending final determination of all proceedings in suit number SYC4184/2013 in the Family Court of Australia at Sydney, including any appeal, the respondent Mr Hao is restrained from taking any further step in proceedings number ... in the Haidian Civil Court at Beijing, China, other than to discontinue those proceedings.

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

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 4184 of 2013

Ms Lan

Applicant

And

Mr Hao

Respondent

REASONS FOR JUDGMENT

The proceedings

1. Mr Hao (“the husband”) and Ms Lan (“the wife”), who are former spouses, are engaged in litigation in both Australia and China.  The present proceedings concern the wife’s Application in a Case filed on 23 December 2014, by which she sought to restrain the husband from continuing with litigation in China, and the husband’s Application in a Case of 7 September 2015, by which he sought that the wife provide security for his costs in relation to the Australian proceedings in the sum of $95,000.

Background

1. The husband and the wife, who are aged 54 and 52 respectively, began a relationship in 2004.  At this time the husband lived in Australia, having moved to this country from China in 1990.  The husband obtained permanent residency in approximately 1995 and Australian citizenship in 2005.  The wife is a citizen of China and lives ordinarily in Beijing.

2. After the parties commenced their relationship, the wife travelled to Australia and the husband to China to enable them to spend time together.  The parties married in Sydney in 2005 and separated in April 2011.  On the application of the husband, the Federal Circuit Court granted an order of divorce on 19 September 2013.  There are no children of the parties’ marriage.

3. In 2003 the husband purchased a property at B Street, Suburb A for $464,112.  The purchase was partly funded by a mortgage advance of $371,200.  During the marriage the wife provided sums totalling approximately $150,800 which the husband applied to reduce the mortgage on the Suburb A property.  The husband sold this property in 2007 for $457,000.

4. In April 2006 the husband purchased a property at C Street, Brisbane for $361,500.  A sum of $253,100 came from a Westpac Bank mortgage advance.  In May 2010 the husband purchased a 50 per cent interest in a property at D Street, Suburb E jointly with his current partner.  The total purchase price of the property was $825,000, which came in part from a mortgage advance.  The husband currently holds his interest in the Brisbane and Suburb E properties.

5. At the commencement of cohabitation the wife owned a residential property in Beijing, a 36 per cent interest in a Chinese company known as F Pty Ltd (“F Pty Ltd”), a motor vehicle and savings of some $10,000.  The wife was the holder of one of two issued ordinary shares in a company known as G Pty Ltd and also a director.  This company was deregistered on an unknown date.

6. On 23 December 2004 a company known as H Pty Ltd was incorporated, with the husband and the wife being equal shareholders and directors.  This company was deregistered on 30 July 2006.

7. On 23 September 2005 a company known as I Pty Ltd was incorporated by the wife and two business associates.  These three people were all shareholders and directors.

8. On 18 December 2008 the husband purchased a property at J Street, Suburb K for $460,000, using in part a mortgage advance from the Bank of Western Australia.  The husband sold this property for $520,000 in February 2010.

9. On 12 June 2011 the husband commenced proceedings in the People’s Court of Haidian District, Beijing for divorce and “partitioning” of the parties’ assets in China.  The husband withdrew his application for divorce in September 2011, apparently because of a Chinese law which prevents a male spouse from making application within six months of the termination of a pregnancy.  According to the husband the wife had suffered a miscarriage on 14 May 2011, after an attempt at IVF in Country L.

10. On 28 September 2011 the husband filed an application in the People’s Court for orders to the effect that four properties in Beijing were jointly owned by the parties.  A hearing took place on 30 November 2011, at which both the husband and the wife had legal representation.  In December 2011 the wife filed an application for orders for the transfer of the title to these properties to F Pty Ltd.  On 19 June 2013 four judgements were issued which determined that F Pty Ltd is the owner of the four properties.  The husband appealed against all four of these judgments in June 2013.  In approximately December 2013 two of the husband’s appeals were dismissed and he then withdrew the remaining two challenges to the orders of 19 June 2013.

11. In 2011 the wife challenged the jurisdiction of the People’s Court but this application was dismissed in February 2012.  The wife appealed to the

    
    

    No. 1 Intermediate Peoples Court of Beijing on 22 February 2012.  She withdrew her appeal on 12 June 2012.

12. On 11 April 2014 the husband filed a civil action in the People’s Court for divorce and division of property.  On 10 May 2014 the husband lodged a request to the No. 1 Intermediate People’s Court of Shanghai for recognition of the order of divorce pronounced by the Federal Circuit Court.  The application was rejected on the basis that the wife did not attend the hearing in the

    
    

    Federal Circuit Court on 19 September 2013.  Apparently the wife’s

    
    

    non-attendance before the Federal Circuit Court was sufficient cause for the People’s Court to refuse the husband’s application, although there was no requirement for her to attend the Australian hearing.

13. On 12 June 2014 the husband instructed his Chinese lawyers to re-lodge the application to the People’s Court of Haidian District, Beijing for divorce and division of assets.  On 20 July 2014 copies of this court documentation, together with notice of a hearing on 12 September 2014, were delivered by the “court courier” to the wife’s address in Beijing.  Service of the documents was not effected, with the wife claiming that she was absent from Beijing at that time.

14. On 11 September 2014 the husband filed an “Application for Addition of Claims” in the People’s Court of Haidian District.  The husband’s property application was listed in the People’s Court on 12 September 2014.  The wife did not appear in person or by a legal representative on this occasion.

15. On 13 September 2014 various court documents were delivered by the court courier to the address of the wife’s parents. On 30 September 2014 court documents and advice of a listing on 28 October 2014 were delivered by the court courier to the address of F Pty Ltd.  Apparently these documents were returned marked “the addressee has gone abroad”.  The hearing on 28 October 2014 was vacated because of non-service of court documents on the wife.

16. On 4 November 2014 the husband signed a document “for public announcement” in the presence of a Judge of the People’s Court which notified of a final hearing date of 26 February 2015.  On that date both parties were legally represented but the wife did not appear in person.  The husband sought orders for an audit and valuation of F Pty Ltd.  The court directed the wife to file evidence in relation to her financial circumstances but did not make the orders requested by the husband in respect of the company.  The proceedings were adjourned to 25 March 2015.

17. On 25 March 2015 both parties were legally represented before the People’s Court.  The wife’s lawyer disputed the validity of the marriage certificate produced by the husband and the manner of its certification in Australia.  The wife’s lawyer submitted to the court that she would file no response to the husband’s application in circumstances where the People’s Court could not dissolve the marriage, as the husband’s supporting documentation was not certified in a proper manner.  The wife did not appear before the People’s Court in person and the proceedings were adjourned to 10 April 2015.

18. On 10 April 2015 the wife’s lawyer submitted to the People’s Court that the marriage registration certificate should not be recognised and that the husband’s proceedings should be dismissed.  It seems that the court was able to entertain the proceedings on 10 April 2015 because, on 2 April 2015 the wife attended the Peoples Court with her lawyer and executed a “letter of proxy”.

19. The hearing in the People’s Court seems to have resumed on 29 June 2015 (Exhibit 2).  Both parties were present and legally represented on this occasion.  It would appear that the proceedings in China are as yet unresolved, with the parties awaiting judgment on either or both of the issues of recognition of the Australian divorce and “partitioning of property”.

Consideration and Conclusion

1. In his submissions senior counsel for the husband made clear that his application is intended to provide security for his costs of the entire Australian proceedings.  The application for security for costs was not confined to the wife’s anti-suit application in relation to the Chinese litigation.

2. Section 117(1) of the Family Law Act 1975 (Cth) (“the Act”) provides that, subject to certain exceptions, each party to proceedings under that Act bears his and her own costs. The Court may make such order for security for costs, in its discretion, as is deemed appropriate pursuant to section 117(2). Section 117(2A) sets out various considerations to which the court must have regard in determining whether to make an order pursuant to section 117(2). Section 117(2A) provides as follows:

   (2A)In considering what order (if any) should be made under subsection (2), the court shall have regard to:

   (a)the financial circumstances of each of the parties to the proceedings;

   (b)whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;

   (c)the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;

   (d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;

   (e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;

   (f)whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and

   (g)such other matters as the court considers relevant.

3. Rule 19.05 of the Family Law Rules 2004 (Cth) sets out eleven considerations to which the Court, in its discretion, may have regard in determining whether to make an order for security for costs. Rule 19.05 provides as follows:

   (1)A respondent may apply for an order that the applicant in the case give security for the respondent's costs.

   (2)In deciding whether to make an order, the court may consider any of the following matters:

   (a)the applicant's financial means;

   (b)the prospects of success or merits of the application;

   (c)the genuineness of the application;

   (d)whether the applicant's lack of financial means was caused by the respondent's conduct;

   (e)whether an order for security for costs would be oppressive or would stifle the case;

   (f)whether the case involves a matter of public importance;

   (g)whether a party has an order, in the same or another case (including a case in another court), against the other party for costs that remains unpaid;

   (h)whether the applicant ordinarily resides outside Australia;

   (i)the likely costs of the case;

   (j)whether the applicant is a corporation;

   (k)whether a party is receiving legal aid.

4. In Luadaka & Luadaka (1998) 24 Fam LR 340 the Full Court (Ellis, Finn and O’Ryan JJ) said:

   [62] The purpose of an order for security is to secure justice between the parties by ensuring that an unsuccessful party does not occasion injustice to the other. In considering whether or not to make an order, apart from those referred to in s 117(2A), matters which may be relevant include the following:

   [62.1] It may be relevant to take into account the means of an applicant to satisfy an order for costs if he or she is unsuccessful. Ordinarily the means of the applicant is not alone sufficient to justify an order for costs because of the rule that poverty should be no bar to justice. This is reinforced by s 117(1). However, the financial circumstances of the applicant do not prevent an order being made if there are other grounds which justify an order. Financial weakness may be relevant, for example, if the applicant is a company. In relation to the means of the respondent, who is the applicant for security, it was held by Goldstein J in In the Marriage of Alexander (above) and Gee J in In the Marriage of Raja Bahrin (above) that the question is whether or not the respondent is able to pay his or her costs. Section 117(2A)(a) requires consideration of the financial circumstances of both parties. However, we do not accept that it will only be in cases where the applicant for security does not have the means to meet his or her costs that an order would be made. In appropriate circumstances an order may be made even if the applicant for security has the means to pay his or her costs.

   [62.2] The prospects of success is a relevant matter to take into consideration: Parkinson & Co Ltd v Triplan Ltd (above).  However, ordinarily the court will not undertake a detailed assessment of the likelihood of the applicant’s success unless it can be demonstrated that there is a high probability of success or failure: Porzelack KG v Porzelack (UK) Ltd [1987] 1 WLR 420; Appleglen Pty Ltd v Mainzeal Corp Pty Ltd (1988) 79 ALR 634; Equity Access Ltd v Westpac Banking Corp (1989) ATPR 40-972. This is because of the lack of material at the time the application is dealt with. However, such an assessment may be possible in circumstances where, as in this case, affidavits have been filed in which the case sought to be made out is set out.

   [62.3] It is a relevant consideration whether the applicant’s claim is made bona fide, whether it is genuine and not trivial, vexatious or a sham:  Parkinson & Co Ltd v Triplan Pty Ltd (above); Lynnebry Pty Ltd v Farquhar Enterprises Pty Ltd (1977) 3 ACLR 133; J & M O’Brien Enterprises Pty Ltd v Shell Co of Australia Ltd (1983) 7 ACLR 790 ; 70 FLR 261.

   [62.4] It may be relevant to consider whether or not an order for costs would be oppressive or stifle the litigation. In Mantaray Pty Ltd v Brookfield Breeding Co Pty Ltd (1990) 8 ACLC 304 Byrne J said at 306:

   A factor in deciding whether security should be required is that the order may well mean that the action cannot proceed.  That prospect does not require refusal of the application but it is often a significant matter.

   See also Rosenfield Nominees Pty Ltd v Bain & Co (1988) 14 ACLR 467 and Sydmar Pty Ltd v Statewise Developments Pty Ltd (1987) 11 ACLR 616; 73 ALR 289 ; 5 ACLC 480.

   [62.5] It may be relevant to consider whether or not the litigation may involve a matter of public importance:  Equity Access Ltd v Westpac Banking Corp (above); Jodast Pty Ltd v A & J Blattner Pty Ltd (1991) 104 ALR 248. In Quick on Costs at [4.9440] it is said that this will militate against the making of an order.

   [62.6] It may be relevant to consider whether or not there has been delay in bringing the application. An application may be refused if there is delay in making the application and prejudice is caused to the respondent to the application: Buckley v Bennell Design & Constructions Pty Ltd (1974) 1 ACLR 301 and Loreva Pty Ltd v CEFA Associated Agencies Pty Ltd (1982) 7 ACLR 164.

   [62.7] Other relevant matters may include any difficulties of enforcing an order for costs and the amount of costs to be incurred.

5. The husband sought that the wife pay an amount of $95,000 as security for his costs.  The only evidence proffered in support of this sum was a copy of a letter dated 29 July 2015 from the husband’s solicitors to those who act for the wife in these terms:

   The sum required is our estimate of costs on a party/party basis to the end of the hearing and is calculated as follows:

Costs of anti-suit application billed to date: (including Counsel’s fees)	$36,600
Costs of anti-suit application unbilled to date:	$1,000
Joint Expert Report (50 per cent of estimated Y50,000)	$5,500
Transition Costs	$20,000
Estimate solicitors costs, professional fees to end of hearing	$16,500
Estimate of Counsel’s fees for preparation	$7,700
Estimate of Counsel’s for (sic) one day hearing	$7,700
Total	$95,000

Should your client’s agreement to provide security or satisfactory evidence not be received within 7 days of the date of this letter, we are instructed to file an application to be listed on an urgent basis seeking appropriate security and orders that the proceedings be stayed until such security is provided. …

1. This information is non-specific and, in my view, inadequate to support the husband’s quantification of his anticipated costs of the Australian proceedings in the sum of $95,000.  The husband offered no evidence of any costs agreement with his solicitors.  He offered no evidence of any costs agreement with a barrister.

2. The husband has delayed considerably in bringing his application for security for costs.  The wife filed her Initiating Application on 11 September 2014.  In that application she sought orders and declarations which would deal with the whole of the property of the parties, whether located in Australia or China.  Of course, certain of these orders are in personam in character.

3. The husband waited almost twelve months before he filed his application for security for costs.  His only explanation for this delay seemed to be that he has incurred greater legal fees than he anticipated at the commencement of the proceedings.  In the husband’s affidavit of 2 September 2015 he appeared to link his application for security for costs to the wife’s anti-suit proceedings.  He deposed:

   35.When I was served with the application in a case seeking orders preventing me from continuing my proceedings in China, I did not anticipate that I would incur the legal fees I have to date.  The financial burden is even greater by reason of the wife’s frustration of my legal proceedings in the Haidian Civil Court in China.

   36.The cost of the expert jointly appointed in these proceedings is significant and the translation fees are also significant such that my legal fees are higher than I had originally anticipated.

1. I have referred above to the letter from the husband’s solicitors to those of the wife dated 29 July 2015.  That letter required that the wife provide $95,000 as security for the husband’s costs, under threat of an application after seven days.  In fact, the husband filed his application after a delay of approximately six weeks.

2. In my view, the financial circumstances of each of the parties militate against an order for security for costs in favour of the husband.  In her Financial Statement of 11 September 2014 she deposed to an income of $500 and total expenditure of $377 per week.  In her affidavit of 9 November 2015 the wife deposed that there has been no change in her financial position since 11 September 2014.

3. In her affidavit of 9 November 2015 the wife deposed further that she has borrowed a sum equivalent to AUD$110,000 from her mother, of which an amount of some AUD$39,000 remained as at that date.  A copy of a document which, on its face, appears to be a loan agreement between the wife and her mother was annexed to the affidavit.

4. The wife’s Financial Statement of 11 September 2014 indicated that she owns property to the value of AUD$2,661,300.  I accept her evidence that “I cannot secure a mortgage against my property in circumstances where I do not have the capacity to make repayments given my income is AUD$500 per week.”

5. The husband offered no evidence as to his financial position. He deposed that he is employed by a travel agency in China and earned “RMB 5,000 per month”. It is known that he holds interests in two pieces of real estate in Australia but there was no evidence of their net value or any rental income. In these circumstances, it is impossible that I take into account “the financial circumstances of each of the parties” as required by section 117(2A)(a) of the Act.

6. Given the current financial position of the wife, I consider that there is a real prospect that an order for security for costs in favour of the husband will stifle her application.  I am of the view that she would not be able to fund her litigation if she is required to pay $95,000 or in the event that there is an order that she make available to the husband the balance of the money which she has borrowed from her mother.  The wife’s uncontradicted evidence was that her mother has no ability to advance additional funds to meet her legal fees.

7. As appears below, it is apparently the case that the husband could not enforce a costs order against the wife in China.  The single expert report (Exhibit 1) addressed the issue of enforceability of Australian orders in Chinese courts.  That matter, however, is but one consideration.  In any event, there are assets in Australia which are the subject of these proceedings and issues of costs could be considered in the context of their division between the parties.

8. A non-exhaustive list of considerations relevant to the wife’s anti-suit application was set out by Kent J in Chen & Tan [2012] FamCA 225 as follows:

   38 … Whether or not Australia is a clearly inappropriate forum depends on an assessment of the following (non-exhaustive) factors (derived from Lord Goff’s factors in Spiliada Maritime Corporation v Cansulex Ltd as approved of in Voth and as added to by Henry at 592-593):

   a)Factors of convenience and expense, such as the location of witnesses;

   b)Whether, having regard to their resources and understanding of language, the parties are able to participate in the respective proceedings on an equal footing;

   c)The connection of the parties and their marriage with each of the potential jurisdictions and the issues on which relief may depend in those jurisdictions;

   d)Whether the other potential forum will recognise Australian Orders and vice versa and the ease of enforcement in each country;

   e)Which forum may provide more effectively for a complete resolution of the matters involved in the parties’ controversy;

   f)The order in which each of the proceedings were instituted, the stage which they have reached and the costs incurred in each jurisdiction;

   g)The governing law of the dispute;

   h)The place of residence of the parties;

   i)The availability of an alternative forum; and

   j)Any legitimate juridical advantage to litigating in either jurisdiction.

   (Footnotes omitted)

9. Both parties now live in China, the husband having moved to that country in June 2015.  Presumably the husband retains his Australian citizenship.

10. It was common ground that Mandarin is the first language of each of the parties.  The husband claimed that he would be hampered in participating in the Australian proceedings by his “very basic” English.  I am somewhat sceptical at that suggestion, as he has lived and worked in Australia since 1990.  Notably, neither of his affidavits contained any indication that their English language contents were translated into Mandarin.

11. Each of the parties has connections to both jurisdictions.  The husband owns property in Australia, in relation to which the wife seeks orders in these proceedings.  The wife owns property in China, in relation to which the husband seeks orders in that country.

12. In my view, it is significant that the single expert report (Exhibit 1) indicates that courts in China would not normally deal with property outside that country.  The report read in part as follows:

    As Chinese courts do not have judicial authority outside its judicial district, and as there hasn’t been any civil judicial mutual assistance agreement signed between China and Australia, Chinese courts can’t check the specific situation of overseas assets (including the assets within Australia).  It is also impossible to implement it after the verdict was made.  Thus, Chinese courts don’t normally deal with properties outside the mainland areas of the People’s Republic of China.  This of course also includes the accounts opened outside China and the immovable properties within Australia.  This is a common way of doing things for judicial implementation in China.

13. The report read also as follows:

    Under normal circumstances, Chinese courts won’t deal with properties of both parties in Australia.  At the time of making a judgment, they won’t normally consider these.

    It was aforementioned that due to the restriction placed on the judicial power of China, Chinese courts won’t deal with the property of the husband or the wife outside the judicial areas of China.  That of course also includes the assets in Australia.

    In addition, at least up to the present moment, there isn’t any Chinese law that shows that Chinese courts need to consider the husband and wife’s overseas joint property owned by one party or both parties when dealing with the property of divorce matters and because of this, has to make changes when dealing with the partition of properties in China.

    (Original emphasis)

14. The single expert report dealt with the issue of enforcement of Australian orders in Chinese courts.  The report read in part as follows:

    Chinese courts can only recognise and implement the part in an Australian court verdict concerning the dissolution of the marital relationship.  They will not recognise the other parts in the judgment.

    Very unfortunately, as there is no bi-lateral civil judicial mutual assistance agreement signed between China and Australia, therefore, the courts in China can only recognise the divorce decree made by Australian courts based on the “Rule of the Supreme People’s Court concerning Chinese citizens applying for recognition of divorce decree procedure by overseas courts”. Judgments such as the partition of property are not binding to the courts in China.

    (Original emphasis)

15. It is true that evidence in relation to the value of the wife’s Chinese assets will need to be obtained in that country and translated into the English language.  It is also the case that each of the parties will require the assistance of interpreters for the purpose of conducting the proceedings in this jurisdiction.  These circumstances, however, are far from unique in relation to litigation in this Court.

16. In my view, it is significant that courts in China will have no regard to the husband’s Australian assets when “partitioning” the wife’s property in that country.  By contrast, both the wife’s Chinese property and the husband’s assets in Australia will be taken into account in the proceedings in this country.  With no intended disrespect, it seems to me that justice and equity as between the parties is more likely to be achieved in a forum in which all of their property is taken into account.

17. For all of these reasons, I will dismiss the husband’s application for security for costs.  I will accede to the wife’s application for orders to restrain the husband from continuing with his litigation in China.  I am alive to the irony that the wife may well be unable to enforce such an order in a Chinese court.  The financial consequences of a pursuit by the husband of his Chinese litigation in the face of such an order, however, could well become relevant to the outcome of proceedings in this jurisdiction.

I certify that the preceding forty-five (45) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Stevenson delivered on

18 December 2015.

Associate:

Date:  18 December 2015