Lishi & Fenge
[2022] FedCFamC1F 292
•29 April 2022
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Lishi & Fenge [2022] FedCFamC1F 292
File number(s): SYC 2088 of 2022 Judgment of: CAMPTON J Date of judgment: 29 April 2022 Catchwords: FAMILY LAW – PROPERTY – Urgent application for interim relief restraining the husband from dealing with anticipated proceeds of sale of a commercial property – Jurisdiction – Where the husband is located in China and did not participate in the interim hearing – Where an injunction is appropriate to preserve the status quo pending resolution of the controversy. Legislation: Family Law Act 1975 (Cth) ss 44, 72, 79, 112AD, 114 Cases cited: Anderson & McIntosh (2013) 49 Fam LR 316
Tsiang & Wu & Ors [2019] FamCAFC 128.
Division: Division 1 First Instance Number of paragraphs: 81 Date of hearing: 29 April 2022 Place: Sydney Counsel for the Applicant: David Maddox Solicitor for the Applicant: Lexsons Respondent: Did not participate ORDERS
SYC 2088 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS LISHI
Applicant
AND: MR FENGE
Respondent
ORDER MADE BY:
CAMPTON J
DATE OF ORDER:
29 APRIL 2022
THE COURT ORDERS THAT:
1.On the wife’s undertaking as to damages, pending further order:
(a)That the husband be restrained in his own capacity and his capacity as a director and/or shareholder and/or member of C Company and F Company (CR No. …) from doing any act or thing so as to cause, direct, facilitate or otherwise enable D Pty Ltd (ACN …) from distributing or paying or repaying a sum of $8,175,910.96 from the proceeds of sale of the property at G Street, Suburb K NSW, scheduled to complete on or about 2 May 2022 as due to C Company and/or F Company (CR No. …) from the said proceeds by way of repayment of shareholder loan or by way of dividend, save and except to cause such funds to be paid to the wife’s solicitors, Lexsons Law Firm, on trust for C Company and/or F Company (CR No. …), such trust account details being:
Bank: Australian and New Zealand Banking Group Limited
BSB: …
Account Number: …31; and …
(b)That the husband shall by way of injunction in his personal capacity and his capacity as a director of D Pty Ltd (ACN …) do all such things as are necessary to facilitate D Pty Ltd (ACN …) complying with Order 1(a) above.
2.That the husband and any other party to these proceedings, including but not limited as to F Company (CR No. …) or C Company or D Pty Ltd (ACN …) should they elect to intervene in these proceedings have liberty to apply on 48 hours’ notice, by email to my chambers (…@fcfcoa.gov.au) to vary or set aside Order 1 hereof, such liberty and email to be accompanied by a Minute of Order sought and a document identifying the evidence to be relied upon in support of such application.
3.That these proceedings be adjourned for further interim hearing by Microsoft Teams format at 2:15 pm on 10 June 2022 and in the event an interpreter is required by any party, an interpreter to be requested by email to my chambers no less than 7 days prior to that 4.
4.That the wife cause a sealed copy of these orders to be served as soon as possible by email to both the registered offices and to the legal representatives, if known, of each of the following:
(a)The husband, and in this regard, such orders be served upon B Lawyers, with a request that the solicitor forward a sealed copy of the orders to the husband;
(b)D Pty Ltd (ACN …), including upon its solicitors, M Lawyers;
(c)C Company;
(d)F Company (CR No. …).
5.I direct the husband within seven (7) days to file a Notice of Address for Service in Australia in accordance with the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
6.The husband file such Response to an Initiating Application, affidavit evidence upon which he seeks to rely, and a Financial Statement on or before 27 May 2022;
7.I reserve the wife’s costs of today.
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).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish 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 pseudonym Lishi & Fenge has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
EX TEMPORE REASONS FOR JUDGMENT
CAMPTON J:
INTRODUCTION
These are proceedings for urgent interlocutory injunctive relief for the preservation of property sought by Ms Lishi “(the wife”). The wife initiated proceedings in Division 2 of the Federal Circuit and Family Court of Australia by way of an Initiating Application filed on 29 March 2022.
By way of that Initiating Application, the wife sought orders on a final basis for property settlement, including for Mr Fenge (“the husband”) to transfer in her favour his legal interest in a property in Suburb N, New South Wales, (“the Suburb N property”) and for the husband to discharge the mortgage secured upon that property, for the husband to transfer to the wife his legal interest in a property in J Street, Suburb W in Sydney, and for the husband to transfer to the wife his legal interest in a specified property in City E in China. She additionally sought an order that the husband to pay to her, pursuant to s 79 of the Family Law Act1975 (Cth) (“the Act”), a sum of $18 million.
As an adjunct by way of interlocutory relief she also sought in the Initiating Application orders requiring the husband to maintain and preserve properties by way of meeting mortgage payments and other outgoings pending a final hearing, as to her exclusive occupation of the Suburb N property, as to she continuing to receive the benefit of rental income from the Suburb W property, for the husband to pay mortgage and other outgoings in respect to the City E property, for the wife to have occupation of the City E property to the exclusion of the husband and the rental income from that property, for the husband to pay outgoings in respect of a property at H Street, Suburb O, for the wife to receive rental income in respect to the Suburb O property, for the husband to pay to the wife by way of interim property settlement, a sum of five million dollars, and other orders to facilitate the payment of that five million dollars from the proceeds of sale of interests held by the husband in corporate entities on the anticipated completion of a real property disposal by a separate corporate entity, as referred to later in these reasons at Suburb K in Sydney, being scheduled to occur on Monday 2 May 2022, being the next business day after this hearing.
On 27 April 2022 orders were made by Judicial Registrar Turner in Division 2 of the Federal Circuit and Family Court of Australia listing the matter before me today and requiring the wife to file and serve on the husband an Undertaking as to Damages. She did so on 27 April 2022, and that document was marked as Exhibit W2 for the purpose of the hearing today.
By way of further orders made on 28 April 2022, the proceedings were transferred from Division 2 of the Federal Circuit and Family Court of Australia to Division 1 of the Federal Circuit and Family Court of Australia.
The relief agitated by the wife urgently today is as to the preservation of funds to be payable either to the husband or to corporate entities which he either controls or in which he has a beneficial interest, upon the anticipated completion of the sale of real property at G Street, Suburb K (“the Suburb K property”) by D Pty Ltd (“D Company”). The sale is due to complete on Monday, 2 May 2022, being the next business day after this hearing.
That relief was initially identified by way of order 3, as sought on an interlocutory or interim basis, in the Initiating Application. It was amended by way of a Case Outline document of the wife incorporating that amended relief, which became Exhibit 1 in these proceedings, and was provided to the husband by way of email last night. The wife further orally amended her interlocutory relief during the course of the hearing today. The remaining interlocutory orders as sought by the wife in her Initiating Application will be prosecuted at a future date.
THE DOCUMENTS RELIED ON BY THE WIFE
The documents relied upon by the wife for the purposes of the relief agitated today are:
(1)The wife’s Initiating Application filed on 29 March 2022;
(2)The wife’s affidavit filed on 29 March 2022;
(3)The affidavits of the wife’s solicitor, Ms P, filed on 21 April 2022 and 28 April 2022;
(4)The wife’s Financial Statement filed on 29 March 2022;
(5)The wife’s Financial Questionnaire filed on 29 March 2022;
(6)The wife’s Undertaking as to Damages, filed on 29 April 2022, and marked Exhibit “W2”;
(7)The letter from M Lawyers, being the solicitor’s for D Company to the wife’s solicitor’s, Lexsons, dated 28 April 2022, being Exhibit “W3”;
(8)The Response to an Initiating Application of the husband unexecuted but dated 29 April 2022, being Exhibit “W4”;
(9)The husband’s affidavit sworn today, 29 April 2022, being Exhibit “W5”;
(10)An ASIC search of D Company, dated 12 November 2021, being Exhibit “W6”.
(11)A Country AA corporate search of F Company (CR No. …) (“F Company”), dated 26 November 2021, being Exhibit “W7”.
NOTICE TO THE HUSBAND OF THE PROCEEDINGS AND THE HEARING TODAY
The affidavits of the wife’s solicitor, Ms P, filed on 28 April 2022 and 29 April 2022 give evidence as to the provision of notice to the husband of the fact of the filing of the Initiating Application and documents in support thereof, as to service of those documents on the husband by way of email, and by way of communications in response to those earlier emails initiated by the husband from China. Those exchanges include read receipt confirmations from the husband confirming receipt of the Initiating Application, the wife’s affidavit and the wife’s Financial Statement. The affidavit records that the husband has been provided with the orders made by Judicial Registrar Turner on 27 April 2022 and the wife’s Undertaking as to Damages filed on 27 April 2022.
At some time in the early hours of this morning, prior to the commencement of court, the husband caused to be forwarded to my chambers and to the solicitors for the wife a copy of the documents now marked as Exhibit W4 and W5. W5, being the husband’s affidavit was translated by Ms Q from the English language to the Mandarin language for the purposes of the husband’s affirmation of that document. It records that it has been prepared by Ms R, lawyer of B Lawyers, a law firm. I am told by counsel for the wife, and accept for the purposes of the hearing today, that B Lawyers operates a legal practice in Sydney Australia, that Ms R is a legal practitioner engaged in employment with that firm and that Ms R is currently in China.
At my request, the wife’s solicitors contacted B Lawyers in the course of the hearing before me today to inquire as to whether the solicitors are instructed by the husband, as to whether the solicitors have instructions to appear on behalf of the husband in the proceedings today and as to whether the solicitors will be the address for service of the husband in respect of these proceedings. I am told by counsel for the wife and accept that his instructing solicitors communicated with Ms S of B Lawyers at or about 11.00 am today and was advised by that firm that they were only instructed to prepare the husband’s documents that have been marked now as exhibit W4 and exhibit W5, that they have no instructions to appear in the proceedings listed for hearing today, and they are not instructed to be the husband’s address for service in respect of these proceedings.
I am satisfied in the circumstances that the husband has had adequate notice of the fact of these proceedings, and that he is aware of the nature of the relief to be agitated by the wife today.
In Exhibit W5 the husband gives evidence that I accept for the purposes of the determination made today, that he cannot personally engage in the hearing electronically from China as he does not have access to email on his mobile phone. As to the husband’s capacity to engage lawyers to appear on his behalf in these proceedings in Sydney today, notwithstanding his evidence contained in Exhibit W5, I am not satisfied, for the reasons later recorded, that he does not have any funds to pay for a barrister and solicitor to appear on his behalf electronically today. He did not give evidence as to why Ms R, the lawyer in China, cannot engage in these proceedings on his behalf electronically from China today, or as to why he could not instruct another lawyer at B Lawyers to appear on his behalf today.
THE ORAL APPLICATION OF THE WIFE TO FURTHER AMEND HER RELIEF TODAY
The amended relief sought by the wife today, as contained in her Case Outline sent to the husband by email last night, is in the following terms:
1.The Respondent Husband (and its associated entities being [F Company] and [C Company]) and [D Pty Ltd] (ACN […]), and his/its servants and agents, upon service of this order by delivery or by email, forthwith do all things to direct the sum that is 26.5% of the net proceeds payable to [D Pty Ltd] by the purchaser on settlement of the sale of the development site at [G Street, Suburb K], to the trust account of the Applicant Wife’s solicitor, being Lexsons Law Firm Trust Account BSB […] and account number […].
During the course of the hearing, counsel for the wife sought leave to further amend the relief as identified in the previous paragraph to delete, after the words on line 1 “the respondent husband” the word “and” and to replace it with the word “through” so as to now seek the following order:
1.The Respondent Husband (through his associated entities being [F Company] and [C Company]) and D Pty Ltd (ACN […]), and his/its servants and agents, upon service of this order by delivery or by email, forthwith do all things to direct the sum that is 26.5% of the net proceeds payable to [D Pty Ltd] by the purchaser on settlement of the sale of the development site at [G Street, Suburb K], to the trust account of the Applicant Wife’s solicitor, being Lexsons Law Firm Trust Account BSB […] and account number […].
In the circumstances of urgency identified in these reasons, the husband being aware of the nature of the relief sought by the wife today, the contents of the documents now tendered by way of exhibits and the husband’s capacity to have lawyers appear on his behalf today, I grant such oral application for further amendment.
THE BACKGROUND
The husband was born in 1954 and is aged 67. The wife was born in 1971 and is aged 50. The parties commenced cohabitation in China in November 1997 and married in 2020 in City E, China. There are three children from the marriage:
(a)Ms X, born in 1999, currently 23 years of age (“Ms X”);
(b)Mr Y, born in 2003, currently 18 years of age (“Mr Y”); and
(c)Z, born in 2007, currently 14 years of age (“Z”).
In or about 2005, the family was granted a visa and obtained permanent residence in Australia. The wife gives evidence as to she and the children permanently migrating to Australia and commencing to attend school in Australia in August 2009. The wife gives extensive evidence that prior to the family migrating to Australia, she and the husband or by way of corporate entities in which they held interests in China, purchased at least eight pieces of real property and engaged in significant and substantial projects by way of a number of corporations in China.
The husband’s affidavit, being Exhibit 5, records that at the time the parties married neither party had any substantial assets. He gives evidence as to the parties undertaking work and other endeavours to generate income in China, including starting with what he described as his own business in the building industry by way of a corporation, T Company, in or about 2000 and making significant profits through those enterprises. He gives evidence as to the parties migrating to Australia in 2005, and both parties working full time prior to that.
As part of his evidence, as contained in Exhibit W5, he also records that from or about 2005, the parties agreed that he would spend about half of the year in Australia and the balance in China. He gives evidence that between 2010 and significantly 2018 (the later being after the date of separation) that the parties hired nannies to assist in caring for the children. He says that his sister and the applicant’s parents (who also migrated to Australia) also assisted in caring for the children. I pause there to note that a number of aspects of the husband’s affidavit evidence, as contained in Exhibit W5, records continuing contributions by each of the parties subsequent to what I will identify later in these reasons as a divorce obtained in China, in 2015, and a contention as to the parties separating in either 2015 or 2016.
The husband gives evidence in Exhibit W5 that the parties, in 2009 and 2010, looked at properties in Australia and inspected the Suburb N property, which they acquired jointly. His evidence was that the monies used to fund its purchased were sourced from what he describes as “the earnings of my businesses”. The husband further gives evidence in his affidavit as to asking to see the children after the parties had separated whenever he was in Australia, and applicant refusing these requests.
The wife deposes to undertaking work in conjunction with the husband by way of corporate entities in the business activities of the corporations in China. It is her evidence that, subsequent to relocating permanently to Australia in August 2009, she did not engage in employment and adopted a role as primary parent to the children, being responsible for their day-to-day care, participation in school, engagement in extracurricular activities and sport. She too acknowledges in her affidavit that from 2010 until 2018, the parties hired nannies to assist her in housework and in caring for the children at home.
She gives evidence as to the parties jointly acquiring the Suburb N property in March 2010 for $8.5 million, funded by a $5 million mortgage loan with the Commonwealth Bank and the balance of the funds originating from the party’s corporate interests in China. She gives further evidence as to the acquisition of a property in J Street, Suburb W in 2008 for $980,000 and said that the funds used to acquire that property originated from the parties’ corporate interests China.
The wife gives evidence as to the parties, by way of corporate entities, acquiring, developing and selling real properties within Australia. She gives further evidence of the establishment of the L Family Trust on 22 September 2015, of which she is a personal trustee. That trust holds two real properties at Suburb O, one purchased for $13.4 million subject to an $8 million loan from the Commonwealth Bank, and a the second being acquired for $9.26 million subject to a $6 million loan from the ANZ Bank. The balance of funds to acquire each of the properties held by that family trust were sourced from the sale of properties in China.
The wife gives evidence in her affidavit as to the extensive real property and other interests of the parties. She gives evidence as to the acquisition of those properties with great particularity, including as to the sources of funds used to acquire those properties as originating from the efforts and labours of the parties both in China and Australia. She gives evidence in her affidavit as to an advance from her parents, between 2015 and 2020, of about $5 million to assist in living expenses, to meet the Suburb N mortgage payments, to reduce the mortgage and to otherwise assist in the support of the children. She gives evidence as to her parents requesting the repatriation of $3.9 million of their funds to enter an off the plan purchase of a real property in the near future. She gives evidence as to her parents transferring further monies from China by way of loan valued at approximately $1,927,000, and as to those funds being applied to make loan repayments to the ANZ in respect of trust properties, to pay legal fees in respect of disputes with tenants as to the Suburb O properties held by the trust, to make repayments of mortgage expenses in respect of the Suburb N property occupied by she and the children, and to meet some of the children’s education and extracurricular expenses.
The wife gives evidence in her affidavit of she and the husband obtaining what she has identified as a divorce in City E, China on 19 January 2015. The process by which that divorce was obtained is unclear at this point. It is the wife’s evidence, notwithstanding she and the husband applied for a divorce in China on 19 January 2015, that they did not separate on a final basis until February 2016. It is her evidence that in China, as far as she is aware, there is no requirement for a married couple to prove they have separated for a specific period of time prior to seeking a divorce. She says that a divorce can be obtained in China if both parties agree to apply for a divorce and, which she and the husband agreed to do on 19 January 2015.
Counsel for the wife submits, as recorded later in these reasons, that it is significant as to whether the divorce in China was by way of an order of a court in that jurisdiction or whether it was by way of some administrative process within that jurisdiction and this in turn is relevant to matters raised by the husband in Exhibit W4 . I will return to this matter later in these reasons.
The husband’s affidavit records that a divorce occurred in China on 19 January 2015. Remarkably, he concedes that he separated from the wife on 1 February 2016.
The wife in her affidavit gives evidence as to she and the husband entering a document she has described as a voluntary divorce settlement agreement dated 19 January 2015. That document, together with a certified translation of it from Mandarin to English, is an annexure to the wife’s affidavit. It records that the husband will pay to the wife a sum of RMB 3 million (contended to be by way of currency exchange in AUD 646,551) per year in child support for Ms X and Mr Y, but not including as to their son, Z, until they attain the age of 18 years, and that that money had been partially paid by the husband to a value of AUD 71,121. She further contends that the document records that the husband will “give up” his interests in the list of properties that were registered either in the wife’s name or in the names Ms X and Mr Y and the wife’s name jointly, but that the agreement does not include a list of the properties held by the husband. It is the wife’s case, her contention appearing to have some merit, that this document is not a financial agreement purporting to oust the jurisdiction of this Court pursuant to Part VIII of the Act.
The wife in her affidavit gives evidence as to a further supplementary agreement being entered by she and the husband on 17 May 2019. Again, that document together with a certified translation of it from Mandarin to English is an annexure to the wife’s affidavit. That document is contended to record the husband agreeing to pay AUD 5 million towards the Suburb N mortgage, AUD 8.04 million towards the trust mortgages secured upon the Suburb O properties, and an additional AUD 500,000 to the wife by 30 June 2020, together with an interest component if the moneys are not paid on time. It is the wife’s case, not put into contest by way of the husband’s affidavit in exhibit W5, that the husband has not complied with his obligations pursuant to this supplementary agreement. The wife contends that the supplementary agreement is not a document purporting to oust the jurisdiction of this Court pursuant to Part VIII of the Act. Again, at least on a prima facie basis, that contention appears to have some merit.
The wife gives evidence as to a further document entitled Letter of Commitment also being executed by the husband in May 2019, where it is contended the husband proposed that 10 per cent of whatever was described as his equity in the D Company would be distributed to the children in equal shares. That letter of commitment and a certified translation from Mandarin to English is annexed to the wife’s affidavit. The wife says that the husband has not complied with his commitments as identified in the letter.
It is the wife’s evidence that the husband has been ordinarily resident in China from February 2006 to date and that he had visited Sydney on an ad hoc basis, but generally about four times per annum prior to the separation in February 2016, and that he sporadically made indirect contact with the children subsequent to that date of separation.
The wife in her financial statement records her property and her contended values as to that property. As I understand the wife’s case, she contends that the overall value of the property of the parties, or either of them, both in Australia and outside Australia, is in the range of not less than AUD 100 million.
THE INTERRELATIONSHIPS BETWEEN THOSE INTERESTED IN THE URGENT RELIEF
Exhibit W6 records that D Company is an Australian proprietary company limited by shares incorporated on 3 March 2016. The registered office of that corporation from 3 March 2016 until 23 March 2016 was the former matrimonial home at the Suburb N property. The current registered office of the corporation is G Street, Suburb K, New South Wales, and the address for communications of the company for ASIC purposes is Post Office Box …, Suburb AA, New South Wales.
The directors of D Company as at 12 November 2021 were the husband and Mr U. The husband has been a director of D Company since 3 March 2016. There are 200,000 fully paid ordinary issued shares in D Company.
Exhibit W6 records that F Company, being a corporation domiciled in Country AA, beneficially holds 36,000 fully paid shares in D Company. This is the equivalent of 18 per cent of the issued paid-up capital in D Company. Exhibit W7 records that F Company was incorporated in Country AA on 18 August 1992, that it is a private company limited by shares and that the husband was the sole director of F Company as at 26 November 2021. Exhibit W7 records does not record the identity of the members or shareholders of F Company.
It is the wife’s case, and I accept for the purposes of these reasons for judgment, that F Company is wholly owned and controlled either legally and/or beneficially by the husband.
Exhibit W6 records that C Company (“C Company”) beneficially holds 17,000 fully paid shares in D Company. This is the equivalent of 8.25 per cent of the paid issued shares in D Company. The wife gives evidence as to the husband either holding all of the legal and/or beneficial interests in C Company.
On the evidence available, the husband, who does not put the wife’s evidence on this topic into issue in Exhibit 5, by way of either F Company or C Company holds 26.5 per cent of the issued shares in D Company.
The wife’s evidence records, corroborated by the husband in Exhibit W5, that D Company is the registered proprietor of the Suburb K property. It is uncontroversial that D Company has entered a contract to dispose of the Suburb K property and that the contract is scheduled for settlement on the next business day after this hearing, being Monday 2 May 2022.
It is the wife’s evidence that the proceeds of that sale payable to D Company will be in the range of $46 million and that the husband’s corporate entities, whether they be F Company or C Company, will receive from the proceeds of sale funds in the range of $12,190,000.
D COMPANY'S POSITION
The wife, in anticipation of the hearing today, by way of her solicitors, has provided some of the documents filed in these proceedings to D Company by way of its solicitors M Lawyers. Exhibit W3 is a letter from M Lawyers to the wife’s solicitors, Lexsons, dated 28 April 2022. That letter confirms that the said solicitors act for D Company, that the said corporation has received the sealed orders made by Division 2 of the Federal Circuit and Family Court of Australia on 27 April 2022, and that the corporation’s understanding of the interlocutory orders to be prosecuted by the wife at the interim hearing listed today.
Importantly, the corporation understands that the wife initially sought an order that D Company, itself or by way of its servants or agents, would direct 26.5 per cent of what was described as the net proceeds of the sale it would receive on completion of the disposal of the Suburb K property to be paid into a trust account of the wife’s solicitors, Lexsons, on behalf of the corporation. The letter confirms that M Lawyers do not act for the husband, do not act for F Company and do not act for C Company.
The letter records that D Company is aware that all shares held by C Company in D Company are the subject of a security interest granted by C Company to Mr U pursuant to a security deed dated 28 May 2020, and perfected by way of what was described as a Personal Property Securities Register entry. The fact of this security is identified in the husband’s affidavit, being Exhibit W5.
It is important to note for the purposes of these reasons that the security relates to the shares that C Company holds in D Company. On the evidence available to me as at today it does not relate to loan accounts.
Exhibit W3 further records that D Company has been funded by way of external borrowings in addition to loans advanced by shareholders and that the value of such loans are not necessarily proportionate to the respective shareholdings in D Company. The letter records that as at 28 April 2022 the total value of all shareholders’ loans obtained by D Company was $45.8 million and that of such sum, F Company and C Company had provided loans to D Company of $8,939,000. Of the total loans from what might be described as the husband’s entities, the letter records that the loan that had been made available by F Company was estimated to be $8,175,910.96. The letter further records that the company estimates that on settlement, after adjustments, it will receive approximately $45.3 million and that after payment of other expenses, external borrowings and costs on sale an anticipated net proceeds of sale in the range of $41.890 million will be made available to the company which will then be applied to repay shareholders’ loans on a pari passu basis. In those circumstances D Company made it clear to the solicitors for the wife that the relief as prosecuted by the wife in her Initiating Application would cause financial hardship to the company and to its shareholders and that there were other avenues available for the wife to protect her interests.
The letter records:
…in principle, the company has no objection to directing a sum of $8,175,910.96 to the trust account held by [the wife’s solicitors] from the sale proceeds of the sale of [the [Suburb K] property] at settlement (via the PEXA system or as may be discussed between our offices) provided that [D Company] is able to deal with such of those funds (in the proportion attributable to the respondent through the shareholdings of [F Company] and [C Company] in [D Company]) by direction to [the wife’s solicitors] in the ordinary and proper course of its business including paying genuine and properly incurred business expenses and any tax liabilities when raised. The proposed interlocutory order can be amended to reflect this consent.
As identified later in these reasons, any order made will in personam as against the husband. No order will be made by way of mandatory injunction directly requiring D Company to deal with the proceeds of sale. It is anticipated that D Company will have the benefit of identification by way of any orders made through communications and notice from the wife’s solicitors and as to the provisions of s 112AD of the Act.
THE HUSBAND’S CASE
The husband by way of Exhibit W4 records that his response and affidavit, Exhibit W5, are served under protest. It is his primary contention that this Court does not have jurisdiction to entertain the claim made by the wife as contained in her initiating application. The documents record that the husband “appears conditionally to make that objection”.
It is the husband’s contention that, in the alternative, this Court is a wholly inappropriate forum for the agitation of issues as to property adjustment between the parties, and in those circumstances the initiating application of the wife ought be permanently stayed or dismissed. He seeks a declaration that the proceedings have not been validly and lawfully served upon him in accordance with the relevant legal principles applicable in China or at all, and that any service, if accepted, of the proceedings and documents in support thereof upon him be set aside.
In the further alternative, he contends that the wife is required to obtain leave to commence proceedings for property adjustment out of time, in circumstances where a divorce “occurred on 19 January 2015 and that the applicant has not obtained that leave for the commencement of the proceedings”. It is his case that, absent leave pursuant to s 44(3) of the Act, the proceedings ought to be dismissed.
By way of further alternative, it is his contention that there is no warrant for adjustment pursuant to s 79 of the Act in any event.
He makes contentions as to the wife failing to achieve a threshold for spouse maintenance orders pursuant to s 72 of the Act, the husband implicitly identifying that some of the relief sought by the wife on an interlocutory basis for the payment of mortgages or other outgoings in respect of the property and otherwise by way of the wife receiving the benefit of rental income from specific properties either held by the husband or by way of trust or corporate entities relies upon an interlocutory spouse maintenance power.
He seeks dismissal of the wife’s application for interim injunctive relief pursuant to s 114 of the Act, preserving property either pending a determination as to jurisdiction or pending a determination of the wife’s substantive and/or interlocutory relief.
THE LAW AND RELEVANT PRINCIPLE
Section 114(3) of the Act provides:
(3)A court exercising jurisdiction under this Act in proceedings other than proceedings to which subsection (1) applies may grant an injunction, by interlocutory order or otherwise (including an injunction in aid of the enforcement of a decree), in any case in which it appears to the court to be just or convenient to do so and either unconditionally or upon such terms and conditions as the court considers appropriate.
The purpose of the injunction in this case is to preserve the status quo pending resolution of the controversy.
The grant of the injunction as sought by the wife is discretionary, and the basis upon which such an order for injunctive relief for the preservation of property pending a determination as to jurisdiction, or pending the determination of an interlocutory or final claim, is well established. Those principles were revisited by the Full Court in Tsiang & Wu & Ors [2019] FamCAFC 128.
20.An applicant must demonstrate first that there is a serious issue to be tried.4 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.
22.In Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319, Gleeson CJ said after discussing the discretionary nature of the remedy at 321–325:
… as a general rule a plaintiff will need to establish, first, a prima facie cause of action against the defendant, and secondly, a danger that, by reason of the defendant’s absconding, or of assets being removed out of the jurisdiction or disposed of within the jurisdiction or otherwise dealt with in some fashion, the plaintiff, if he succeeds, will not be able to have his judgment satisfied.
...
It is not difficult to imagine situations in which justice and equity would require the granting of an injunction to prevent dissipation of assets pending the hearing of an action even though the risk of such dissipation may be assessed as being somewhat less probable than not.
23.As McDougall J in Skyworks v 32 Drummoyne Road [2017] NSWSC 343 said:
24.The Court is required to undertake a qualitative evaluation of all the evidence that is available, to see if there is a sufficiently serious risk of frustration to justify the making of a freezing order. Further, the two considerations [namely, (1) whether there is a good arguable case and (2) whether there is a real risk of judgment frustration] should be analysed together (as each may impact on the other), and with an appreciation of both the underlying purpose of the rule and the relative risks of granting or withholding relief – the customary discretionary calculus.
27.As to the determination of the existence of the risk and its magnitude, in Palmer v Parbery [2019] QCA 27 McMurdo JA (with whom Fraser and Gotterson JJA agreed) said:
119.The determination of whether there exists a sufficiently serious risk of the dissipation of assets involves the evaluation of future possibilities, rather than the ascertainment of historical facts. The risk of dissipation might justify an order although the probability of the risk eventuating is less than 50 per cent. But, as the risk of dissipation must be a real and not merely a theoretical one, it must have an evidentiary basis. Where a fact is alleged by the plaintiff in support of its case about the risk, but there is contrary evidence from the defendant, must the fact be proved to the court’s satisfaction as if the application for the freezing order was the trial of the case? In my view, a plaintiff need not do so. A freezing order is interlocutory in nature; it does not involve a final determination of the parties’ positions. Usually it is made in circumstances of urgency in which the court is unable to conduct an extensive and conclusive factual inquiry in a way which is fair to both parties. Where the factual basis for the plaintiff’s case about the risk of dissipation is disputed,the risk will commonly have to be evaluated with the recognition that the factual basis for it is in doubt. Nevertheless, the possibility of the plaintiff’s evidence being correct, considered with other facts and circumstances, might mean that there is a sufficiently serious risk of the frustration of the satisfaction of a judgment as to justify the making of a freezing order. …
(Footnotes omitted)
I do not accept for the purposes of the urgent interim relief sought by the wife toady that this Court does not have jurisdiction to entertain the claim made by the wife as contained in her initiating application. The evidence is uncontroversial that the wife has been ordinarily resident in Australia since 2005. She and the parties’ children continue to live here. The parties engage in significant business operations by way of corporations within Australia, and have extensive personal, corporate and trust interests in Australia. Each of these facts ground the wife invoking a Part VIII jurisdiction.
I do not accept on the evidence at this time, especially when regard is had to Exhibit W5, that a summary determination is available in favour of the husband such that this Court is a wholly inappropriate forum for the agitation of issues as to property adjustment between the parties.
It is important to remember that it is not the role of the Court in determining the question of the injunction to in effect conduct a trial of the disputed evidence. In this matter, I am conscious of an evaluation of the future possibilities rather than the ascertainment of historical facts. I have not made a determination as to those issues of fact.
As to the husband’s contention of the wife requiring the indulgence of leave to commence Part VIII relief:
(a)I accept for the purposes of this determination that there may be significant merit to the submissions made on behalf of the wife as to the gravamen of the determination of the Full Court in Anderson & McIntosh (2013) 49 Fam LR 316. It is the submission of the wife that the limitation periods identified in s 44 of the Act have no application in circumstances where a divorce is obtained outside Australia. Putting it another way, the wife submits that the time limitation section for initiating proceedings for Part VIII relief within 12 months of divorce has no application to a foreign divorce. Counsel submits that the gravamen of that judgment identifies and references “divorce orders” as opposed to a processes whereby a divorce obtained outside Australia may be by way of administrative processes to which different conditions apply and that the Act has clearly provided for the limitation periods contained in the Act to apply as to Australian divorces only. That, of course, will be a matter for another day; and
(b)I am further mindful that, in the event counsel for the wife’s submissions on the requirement for s 44(3) leave are not accepted, the husband’s own evidence as contained in Exhibit W5 records continuing contributions of each of the parties post the expiration of the contended limitation period after the divorce obtained in China, that he and the wife have been engaged in a continuing enterprise by way of their respective properties and children subsequent to the divorce, including the wife’s contributions as identified in her affidavit and that the husband says he and the wife have been negotiating as to how to resolve their financial affairs both in China and Australia up until early 2022.
Each of these matters, on the evidence to date, support an indulgence of leave pursuant to s 44(3) of the Act if necessary and if sought by the wife.
The wife in her Case Outline drawn from her Financial Statement says that she controls assets of approximately $28.5 million subject to liabilities of approximately $4 million. She estimates on her calculations that she has access to about 12 per cent of the property of the parties in China, and approximately 13.5 per cent of the property of the parties in Australia, a total of about 25 per cent of the total property of the parties. Consequently, it is her case, and it does not seem to be put into issue by the husband in his material, that he controls in the range of 75 per cent of the remaining property of the parties. The wife say that amount may be in excess of $128 million. By way of further breakdown, she contends that the husband controls about 65 per cent of the parties’ property in China and about 10 per cent of the parties’ property in Australia.
It is the wife’s case that, in the event of there being a final property adjustment pursuant to s 79 of the Act, she will achieve well in excess of what she currently controls by way of the property of the parties and, as I apprehend it, at least, by implication, she would seek not less than 50 per cent of the property of the parties held both in Australia and outside Australia.
The husband in his limited material to date has not articulated the foundations by which he would contend that there would be no warrant for adjustment of the property of the parties if either his or the wife’s contentions are accepted. It is important to keep in mind for the purposes of this determination that the husband has not disclosed his current property, liabilities, superannuation and financial resources or the value of them. He will have the opportunity to do so by way of orders I propose to make.
I am satisfied on the evidence that the wife can demonstrate that there is a serious issue to be tried and has an arguable case which remains unresolved.
I am satisfied on the evidence that the wife demonstrates the balance of convenience favours the orders in the nature of those she has sought. As part of that integer, the wife identifies a risk that the evidence establishes, and it would appear supported by what is contained within Exhibit W5, that, absent the injunctive order being made, the moneys that the wife seeks to restrain will be sent by the husband through F Company to China. It is the wife's case that if the funds leave the jurisdiction, she will be unable to recover those funds out of China and hence will frustrate both the final and interim judgment sought in favour of the applicant.
The husband gives evidence in his affidavit about monies being required to be paid to C Company from the proceeds of sale of the Suburb K property. On the evidence as contained within Exhibit W3, it would appear that the loan payable by D Company to C Company is valued in the range of about $760,000. The husband says in Exhibit W5 that he has provided to Mr U, his co-director of D Company, a security agreement dated 26 June 2020 as to a debt and that the security for the debt is the shares held by C Company in D Company. He contends that the value of the debt secured by way of the shareholding is $4.25 million.
Annexed to the husband’s affidavit is what he identifies as a civil award from the City E People's Court on a date unknown in Mandarin. I am unable to read that award in Mandarin. It has not been translated. The husband contends that the value of the debt to which the shareholding provides security is $4.25 million. The wife puts into issue the contention as to the value of such debt at $4.25 million. It is her submission that if the debt exists, it is in the range of $3.8 million.
It was submitted in the wife's case that her evidence, if accepted, establishes that there is in excess of $12 million due to the husband's corporations, either by way of loans or on distribution to D Company members from the Suburb K property sale. She submits that the order she seeks to injunct $8.175 million will not frustrate the husband's capacity by way of his corporations to pay the co-director of D Company, Mr U, the $4.25 million contended to be due and payable. I am not confident that such analysis by way of the evidence contained in Exhibit W3 is correct, but in any event I take the submission into account.
The husband contends in his affidavit that he has financial losses and reputational damage that will be incalculable if C Company breaches its agreement with Mr U. He does not provide any particulars as to the foundations for that summary. He makes it clear in paragraph 28 of his affidavit that he proposes to apply the Suburb K property proceeds to "discharge at least part of the liabilities in China", supporting the gravamen of the wife's complaint as to funds leaving this jurisdiction and the necessity for those funds to be protected pending further hearing of the dispute between the parties.
The husband says in his affidavit that on or about 17 March 2022 he had engaged a Chinese lawyer, Ms V, for the purposes of negotiating a property settlement with the wife. He records that in March he needed time to seek advice from Australian lawyers and interpreters to translate documents that the wife had sent to him and that he was progressing negotiations about how the husband and the wife would resolve their financial affairs both in China and in Australia. He gives evidence as to a lockdown being imposed in his place of residence in City E in China at or about 17 March 2022 and that lockdown continuing, the lockdown pursuant to COVID-19, restricting his capacity to leave his home and obtain advice. He gives evidence as to being aware of the wife's application in this forum on or about 20 April 2022 and accessing his Chinese lawyer to send an email to the wife on 25 April 2022.
The husband, by way of Exhibit W5, gives evidence in paragraph 17 as to the wife applying for a freezing order to prevent him from selling a property in City E, China in January of 2022, that property being solely in his name. He does not give evidence as to the forum in which that freezing order was sought. He does not give evidence as to whether the freezing order was obtained. The wife has not disclosed in her affidavit material the fact of any litigation in a court in China. These matters will no doubt be the subject of disclosure in the course of these further proceedings.
The husband's contention in paragraph 27 of Exhibit W5 as to he not having funds to pay a solicitor and barrister to appear today stands in sharp contrast to his legal representatives being able to prepare and send this morning comprehensive documents to the Court on his behalf, such documents paying particular attention to complex legal principles and relevant jurisprudence for the purposes of the proceedings today. It also stands in sharp contrast of F Company receiving at least $8.175 million on Monday or soon thereafter from the proceeds of sale of the Suburb K property and the husband, even if he used $4.25 million from the $8.17 million payable to F Company, having capacity to pay lawyers to appear today.
It will be explained, no doubt, at some time in the future in these proceedings as to the source of instructions provided to M Lawyers on behalf of D Company for the purposes of the letter which has come into evidence by way of exhibit W3 and specifically whether those instructions originate by or on behalf of or through the husband alone or the husband in conjunction with Mr U.
I am mindful that it is not necessary for the wife to demonstrate a positive intention as to the husband dealing with property in a way so as to defeat her possible judgment or claim. It is necessary for the possibility of that event occurring to be established. I am satisfied in this matter that the risk as identified by the wife has an evidentiary foundation and that it is real and not merely theoretical. The balance of convenience in favour of the wife is sufficiently established by way of inferences drawn from the facts and circumstances of the case available in the wife's evidence, in the husband's evidence including exhibit W5 and from the contents of exhibit W3 including the concessions made therein by way of the directors of D Company, who appear to currently be Mr U and the husband.
On balance, having regard to the terms of the orders to be made, the detriment or harm contended by the wife, in my view at this time, substantially outweighs the detriment or harm contended by the husband. For the reasons identified earlier, properly considered, the husband’s contended factors militating against the making of the injunctive orders are, at their highest at this time, broad and summary absent further objective evidentiary foundation.
The nature and quantum of the interim injunctive order sought by the wife for the preservation of property pending a determination as to jurisdiction, or pending the determination of an interlocutory or final claim does not affect an adjustment of the proposed injunctive moneys in favour of the wife. It merely retains the moneys in a trust account facility until there can be a determination of any contention as to jurisdiction or at the wife’s interlocutory or final relief.
I am satisfied that the balance of convenience favours the making of injunctive orders restraining the husband but not in the precise terms as sought by the wife. They will be amended so as is just and equitable to preserve the subject matter in question pending determination as to jurisdiction. Importantly, the orders to be made carry with them a capacity of the husband or for other interested persons or corporations, if the wish to intervene, to apply for variation should he or they establish an evidentiary foundation to do so.
The husband will have obligations of disclosure that are absolute and are to be complied with in a timely and fulsome fashion pursuant to the rules of Court. He will have the capacity to obtain advice from his solicitors as to compliance with those obligations of disclosure and will be in a position to present a clear picture of his relevant financial circumstances and the impact of any injunctive order made in the near future. The wife will have the opportunity to issue a subpoena directed to D Company to produce further documents, including the settlement statement on completion of the sale of the Suburb K property, and to other corporations, persons and entities so as to trace how any proceeds of that sale are distributed by way of either loan or to shareholders of D Company by way of dividend.
For all of the above reasons, I make orders as set out in the forefront of this judgment.
I certify that the preceding eighty-one (81) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Campton. Associate:
Dated: 5 May 2022
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