Mullen and De Bry
[2006] FMCAfam 561
•20 October 2006
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MULLEN & DE BRY | [2006] FMCAfam 561 |
| FAMILY LAW – Injunctions – Mareva type orders – power to make orders for the preservation of assets – principles – scheme – asset dissipation – wife overseas – money moving overseas – sale of property – refusal to give undertaking. |
| Real Property Act 1900 (NSW) Family Law Act 1975 (Cth), ss.34(1) and 114(3) Federal Court Act, 1976 (Cth), s.23 Income Tax Assessment Act, 1936 (Cth), s.177A(1) Companies Act, 1920 (Tas) |
| Australian Broadcasting Corp v Lenah Game Meats Pty Ltd (2001) 185 ALR 1 Coolstar Holdings Pty Ltd v Cleary & Ors [2006] FMCA 1442 Donnelly v Porteous [2001] FCA 345 Frigo v Culhaci (unreported, NSWCA, CA 4014/98, 17 July 1998) Matther v Luttrel Limited and Others [2003] FMCA 62 Wily v O'Brien [2006] FMCA 941 | ||
| Applicant: | SCOTT BERNARD MULLEN | |
| Respondent: | ADRIANA JOAN DE BRY |
| File Number: | SYM 3056 of 2005 |
| Judgment of: | Lucev FM |
| Hearing date: | 12 October 2006 |
| Date of Last Submission: | 12 October 2006 |
| Delivered at: | Perth (by telephone to Sydney) |
| Delivered on: | 20 October 2006 |
REPRESENTATION
| Counsel for the Applicant: | Ms Knox |
| Solicitors for the Applicant: | Milne, Berry, Berger, Freedman |
| Counsel for the Respondent: | Ms Oakley, Solicitor |
| Solicitors for the Respondent: | Etheringtons |
ORDERS
The application for interim orders be dismissed; and
The Applicant Husband to pay the Respondent Wife’s costs as agreed between the parties, and failing agreement to be taxed and having heard counsel with 28 days to pay.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYM 3056 of 2005
| SCOTT BERNARD MULLEN |
Applicant
And
| ADRIANA JOAN DE BRY |
Respondent
REASONS FOR JUDGMENT
Introduction
This case concerns a woman, who now lives in Scotland, selling a house she owns in Surry Hills, a Sydney suburb (“the Surry Hills property”).
The woman’s former husband has not stopped the sale of the Surry Hills property. Rather, he seeks to prevent a substantial part of the proceeds of sale being placed in his former wife’s hands, so as to protect his alleged contribution interest in the Surry Hills property.
The substantive application
The substantive application made by Scott Mullen (“the Husband”) seeks orders that the Surry Hills property be sold on terms and conditions which are relatively standard for orders of this Court.[1]
[1] Application filed 2 May 2006 (“the Application”).
The respondent to the Application is Adriana De Bry (“the Wife”).
She seeks that the Application be dismissed, with costs.[2]
[2] Response filed 13 July 2006 (“the Response”).
Husband’s application for interim orders
On 6 October 2006 the Husband filed an application for interim orders to be heard on short notice (“Interim Orders Application”).
The Interim Orders Application seeks orders to preserve part of the proceeds of the sale of the Surry Hills property, by way of statutory injunctions under s.114(3) of the Family Law Act, 1975 (Cth) (“Family Law Act”) pending determination of the Application. The Interim Orders Application was heard on 12 October 2006.
Husband’s evidence in support of interim orders application
In support of the Interim Orders Application the Husband relied upon:
a)a Financial Statement filed by the Husband on 2 May 2006 (“the Husband’s Financial Statement”);
b)a Financial Statement filed by the Wife on 20 July 2006 (“the Wife’s Financial Statement”);
c)an affidavit sworn on 6 October 2006 by the Husband’s solicitor, Harry Norman Freedman (“Freedman’s Affidavit”); and
d)an exchange of letters between the Wife’s solicitors (Exhibit ‘A’) (“Wife’s Solicitors 11 October 2006 Letter”) and the Husband’s solicitors (Exhibit ‘B’) on 11 October 2006 (“Husband’s Solicitors 11 October 2006 Letter”).
The husband’s evidence
The Husband’s Financial Statement reveals that the Husband is an architect employed by a New South Wales based firm, and at the time of swearing the affidavit in Part A of the Husband’s Financial Statement he was in Dubai in the United Arab Emirates.[3]
[3] Husband’s Financial Statement, Part A, Affidavit and items 3-7. I was told at hearing by the Husband’s counsel that the Husband was still out of the jurisdiction.
The Husband’s Financial summary indicates as follows:
a)a total average weekly income of $2,398;
b)total personal expenditure of $1,074 per week;
c)property owned to a total value of $46,240;
d)total gross value of superannuation estimated at $22,230;
e)total liabilities of $10,712; and
f)total financial resources of “NIL”.[4]
[4] Husband’s Financial Statement, item 2.
The Husband’s Financial Statement indicates that there was property signed over (under mortgage) to the Wife in the 12 months before separation or since separation, and that the Husband received no monies for that property.[5]
[5] Husband’s Financial Statement, item 59.
The Husband says that he believes that the Surry Hills property was valued at approximately $550,000 with a mortgage to the ANZ Bank securing a loan of approximately $150,000.[6]
[6] Husband’s Financial Statement, item 7.
Freedman’s Affidavit, sworn on behalf of the Husband, asserts that:
a)the Surry Hills property is the “most significant asset of the parties”, but one registered in the sole name of the Wife;[7] and
b)to the best of Freedman’s knowledge and belief the Wife “took steps to list the [Surry Hills] property for sale” after the commencement of the substantive proceedings, the only evidence thereof being a copy of an internet advertisement dated 5 September 2006 for the Surry Hills property.[8]
[7] Freedman’s Affidavit, paras 4 and 5.
[8] Freedman’s Affidavit, para 9. The internet advertisement is Annexure ‘B’ to that Affidavit and bears an imprint date of “05/09/2006”, which I have taken to be 5 September 2006.
On 5 September 2006 the Husband’s solicitor wrote to the Wife’s solicitors indicating that the Husband had not been “given any indication” that a sale was to occur “and bearing in mind the fact that she [the Wife] resides overseas our client [the Husband] has grave concerns that she may seek to transfer all her funds offshore making him incapable of being able to make any claim against your client [the Wife] pursuant to these proceedings.”[9]
[9] Freedman’s Affidavit, para 11 and Annexure ‘C’.
The Husband’s 5 September 2006 letter also sought, amongst other things, an undertaking from the Wife that she would retain a sum of $200,000 in an interest bearing account in the names of the parties and their solicitors pending resolution of the Application, and put the Wife on notice that were she not to provide the undertakings that an application would be made to “the Court seeking a restraining order in similar terms.”[10]
[10] Freedman’s Affidavit, para 11 and Annexure ‘C’.
A month later, on 5 October 2006, no response having been received to the Husband’s 5 September 2006 letter, the Husband’s solicitors again wrote to the Wife’s solicitors advising that the Husband was “now filing an urgent Application at the Family Court seeking Orders restraining the distribution of any monies received from the sale of the [Surry Hills] property.”[11]
[11] Freedman’s Affidavit, Annexure ‘C’.
The Interim Orders Application having been made on 6 October 2006 the Wife’s solicitors wrote to the Husband’s solicitors on 11 October 2006 seeking an adjournment to allow “a reasonable opportunity to take instructions” from the Wife “particularly having regard to the fact that … [she] resides in Scotland.” An adjournment of one week was sought.[12]
[12] Wife’s Solicitors 11 October 2006 Letter, Exhibit ‘A’, paras 4-5.
The Husband’s solicitors responded on the same day (11 October 2006) advising that they would be seeking to proceed to have the Interim Orders Application determined on the return date (12 October 2006).[13]
[13] Husband’s Solicitors 11 October 2006 Letter, Exhibit ‘B’, para 3.
The Husband’s Solicitors 11 October 2006 Letter further says that:
“With all due respect, we find it extraordinary that:
(a)You have had the opportunity of obtaining instructions regarding the sale of the property and the sale price being $680,000.00;
(b)That on two occasions prior to the filing of any Application we sought your client’s agreement to withhold monies from the proceeds of sale and received absolutely no positive response.
(c)You have not disclosed to us who is acting in relation to the sale and it is clearly a strange situation that you require instructions from your client when we have written to you on two previous occasions. Obviously your client has not provided you with instructions to agree to the Orders being sought.
(d)You then presume that a normal settlement period applies without going to the effort of telling us what the terms of the Contract are and providing us any other information to satisfy our client’s obvious concern that the one significant asset in the jurisdiction of Australia has been sold without consultation or notice to him and without your client’s agreement to hold funds here. There are many reasons why our client may well suffer prejudice in light of the absence of any legitimate information to satisfy those concerns”.[14]
[14] Husband’s Solicitors 11 October 2006 Letter, Exhibit ‘B’, para 2.
The Surry Hills property was originally purchased in the names of both Husband and Wife, and transferred into the name of the Wife on
18 October 2004.[15]
[15] Freedman’s Affidavit, para 19 and Annexure ‘E’.
A true copy of a Transfer under the Real Property Act, 1900 (NSW) indicates that the Transferor (the Husband) acknowledged the receipt of “$NIL” for the transfer to the Transferee (“the Wife) of an estate in fee simple in the Surry Hills property.[16]
[16] Freedman’s Affidavit, Annexure ‘E’.
The Husband asserts that from the time of the commencement of the relationship in December 1994 the Husband and Wife resided in a property in Alison Road in Coogee, another Sydney suburb (“the Coogee property”). The Husband says that the Wife owned the Coogee property, but that payments for the mortgage of the Coogee property were paid from joint accounts that the Husband and Wife had opened. The Coogee property was sold, and the proceeds of the sale put towards the purchase of the Surry Hills property.[17]
[17] Freedman’s Affidavit, paras 13-16.
The Husband says that he provided various architectural services for the improvement of the Surry Hills property including “design, documentation, contract negotiation, procurement of all materials, equipment, fixtures and fittings and supervision of tradespeople as well as his own labour.”[18]
[18] Freedman’s Affidavit, paras 22 and 23.
The Husband asserts that those contributions increased the value of the Surry Hills property.[19]
[19] Freedman’s Affidavit, para 24.
The Husband asserts that following the marriage breakdown there were negotiations to attempt to resolve financial matters between Husband and the Wife. The Husband says he was not represented and did not obtain legal advice.[20]
[20] Freedman’s Affidavit, para 25.
According to the Husband, the Wife has proposed a settlement by way of a payment of $40,000 to the Husband, but refuses to set aside $200,000 pending the outcome of the substantive proceedings.[21]
[21] Freedman’s Affidavit, para 27.
The Wife filed a Financial Statement sworn on 12 July 2006 (“Wife’s Financial Statement”), and this was relied on by the Husband.
The Wife’s financial summary disclosed the Wife’s Financial Statement is as follows:
a)total average weekly income of $0 per week;
b)total personal expenditure of $260 per week;
c)that the total value of property owned by the Wife is $520,035;
d)the total gross value of the Wife’s superannuation is $60,000;
e)the total of the Wife’s liabilities is $45,000; and
f)the total of the Wife’s financial resources is $0.[22]
[22] Wife’s Financial Statement, item 2. Interestingly, in the Wife’s Financial Statement, item 17 she says her present 38 year old husband’s gross income is an average of $74,000 per week (or $3,859,847 a year).
The Wife asserts that the value of the Surry Hills property is $500,000, and that she owns a 100% share of that property, subject to a mortgage with the ANZ Bank over the Surry Hills property, with a balance of $45,000 owing.[23]
[23] Wife’s Financial Statement, items 23, 36, 46 and 47.
[25] Wife’s Financial Statement, para 30.
The wife has an account with the ANZ Bank for which a branch BSB and account number are given, with a current balance of $35.00.[24]
The Wife also has an ANZ Bank visa card, but says that no money is payable weekly on that card.[25][24] Wife’s Financial Statement, item 37.
The Surry Hills property seemingly sold on 7 October 2006 for $680,000.[26]
[26] Exhibit ‘A’ para 2. It seems to be common ground that the Surry Hills property has “sold”, but that settlement has not yet occurred.
The wife’s evidence
The Wife led no evidence on the Interim Orders Application, instead relying on the alleged failure of the Husband to prove why an injunction under s.114(3) of the Family Law Act was required.
The power to make orders for the preservation of assets
Section 114(3) of the Family Law Act provides as follows:
“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.”.
Section 114(3) of the Family Law Act, on the preponderance of authority, [27] provides for the Court to make Mareva type orders[28] to preserve assets.
[27] I say on the preponderance of authority because in Jukes v Doyle (2005) 32 FamLR 617 at 623 Coleman J noted, rightly in my view, that the use of “just” and “convenient” in s.114(3) might provide alternative bases for granting injunctive relief, but that the weight of authority suggested otherwise (as to that authority see below). I am bound by that authority: In the Marriage of Maisey (1980) 6 FamLR 180 at 183 per Evatt LJ and Marshall SJ, and therefore can take the matter no further.
[28] The preferred reference is to “Mareva orders” not injunctions, as it “avoid[s] confusion as to … [the] doctrinal basis for a Mareva order: Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at 401 per Gauldron, McHugh, Gummow and Callinan JJ, [1999] HCA 18 at para 42 per Gaudron, McHugh, Gummow and Callinan JJ (“Cardile”). In situations such as s.114(3) of the Family Law Act the term “injunction” nevertheless takes its content from the provision of the particular statute: Cardile CLR at 394 per Gaudron, McHugh, Gummow and Callinan JJ, HCA at paragraph 29 per Gaudron, McHugh, Gummow and Callinan JJ.
The general principles applicable in determining whether a Mareva type order ought issue are:
a)that the applicant show an arguable case that judgment against the other party or parties will be obtained;[29]
b)that the applicant demonstrate by real evidence, and not mere assertion, that a refusal to make the order involves a real risk that judgment in the applicant’s favour would remain unsatisfied because of concealment or dissipation of assets;[30] and
c)that the balance of convenience requires the making of an order.[31]
[29] Clout v Anscore Pty Ltd [2000] FCA 727 at para [6] per Drummond J (“Clout”), Donnelly v Porteous [2001] FCA 345 at para [9] per Stone J (“Donnelly”), Wily v O'Brien [2006] FMCA 941 at par [9] per Barnes FM (“Wily”).
[30] Donnelly at par [9] per Stone J, Frigo v Culhaci (unreported, NSWCA, CA 4014/98, 17 July 1998) at pp.11 and 16 per Mason P, Sheller JA and Sheppard AJA (“Frigo”), Wily at para [9] per Barnes FM, Matther v Luttrel Limited and Others [2003] FMCA 62 at para 30 per McInnis FM.
[31] Pearce v Waterhouse [1986] VR 603 at p.605 per Vincent J, Wily at para [9] per Barnes FM.
In relation to the principles applicable to Mareva type orders I further note that the orders are:
a)discretionary;[32]
b)a drastic remedy not to be granted lightly and therefore requiring close scrutiny of the available evidence;[33] and
c)if granted, only granted to the minimum extent necessary.[34]
[32] Patterson v BTR Engineering Australia Limited (1989) NSWLR 319 at p.321 per Gleeson CJ (“Patterson”).
[33] Wily at para [9] per Barnes FM, Frigo at pp.10-11 per Mason P, Sheller JA and Sheppard AJA. See also R. Meagher, D Heydon and M Leeming, Meagher, Gummow & Lehane’s Equity, Doctrines and Remedies (4th Edn) (Sydney: Butterworths Lexis Nexis, 202) pp.800-801, par [21-445]. In Cardile it was said to require “a high degree of caution” before an order was issued: Cardile CLR at 403 per Gaudron, McHugh, Gummow and Callinan JJ, HCA at para 50 per Gaudron, McHugh, Gummow and Callinan JJ.
[34] Frigo at p.12 per Mason P, Sheller JA and Sheppard AJA, Clout at par [6] per Drummond J, Wily at par [9] per Barnes FM.
In Marriage of Waugh[35] the Full Court of the Family Court found that there “may be a distinction” between proceedings at law for debt or damages in which a Mareva type order is sought, and proceedings in which a spouse claims to have made a relative contribution.[36]
[35] (2000) 158 FLR 152, [2000] FamCA 1183 (“Waugh”).
[36] Waugh, FLR at 161 per Lindenmayer, Coleman and Brown JJ, FamCA at para 31 per Lindenmayer, Coleman and Brown JJ. The claim for relevant contribution is under s.79(4)(a), (b) or (c) of the Family Law Act.
That distinction related to the “essential connection between the property and the proceedings”, a connection which might not usually exist in non family law proceedings.[37]
[37] Waugh, FLR at 161 per Lindenmayer, Coleman and Brown JJ, FamCA at para 31 per Lindenmayer, Coleman and Brown JJ.
Having said that the distinction is one which “may” exist, the Full Court of the Family Court then observed that it “is constructive … to have regard to the principles … developed in other jurisdictions, in relation to the grant or refusal” of Mareva type orders.[38]
[38] Waugh, FLR at 161 per Lindenmayer, Coleman and Brown JJ, FamCA at para 32 per Lindenmayer, Coleman and Brown JJ.
Having considered the leading authorities[39] the Full Court of the Family Court identified “the fundamental question” as being “whether there was any evidence of an intention … to dispose of any assets pursuant to any scheme to defeat any judgment which … might [be] obtain[ed] in the substantive proceedings”.[40]
[39] Including Jackson v Sterling Industries Ltd (1987) 162 CLR 612 (“Sterling Industries”); Cardile; and Patterson.
[40] Waugh, FLR at 165 per Lindenmayer, Coleman and Brown JJ, FamCA at para 46 per Lindenmayer, Coleman and Brown JJ. I note the reference to “scheme” and will turn to that later in this judgment.
In Waugh:
a)the affidavit material was replete with the applicant’s (respondent on appeal) fears of asset disposal; [41]
b)there was no evidence of any asset disposal or liability incurred other than in the ordinary course of business operation;[42]
c)there was evidence of:
i)removal of the wife as a signatory to various trusts and company bank accounts[43];
ii)the effective exclusion of the wife from the operation of the trusts and access to business records;[44]
iii)the husband allegedly saying to the wife (which the husband denied) that:
“I’m not going to tell you [the wife] anything. I have instructed my lawyer not to reply. I will do what I like. I will let it all go and you will get none of it. It can all go to tax and the bank.”[45]
[41] Waugh, FLR at 168, FamCA at para 53 per Lindenmayer, Coleman and Brown JJ.
[42] Waugh, FLR at 168 per Lindenmayer, Coleman and Brown JJ; FamCA at para 53 per Lindenmayer, Coleman and Brown JJ.
[43] Waugh, FLR at 168 per Lindenmayer, Coleman and Brown JJ; FamCA at para 54 per Lindenmayer, Coleman and Brown JJ.
[44] Waugh, FLR at 168 per Lindenmayer, Coleman and Brown JJ; FamCA at para 55 per Lindenmayer, Coleman and Brown JJ.
[45] Waugh, FLR at 168 per Lindenmayer, Coleman and Brown JJ; FamCA at para 56 per Lindenmayer, Coleman and Brown JJ.
The above evidence was not sufficient for the Full Court of the Family Court to conclude that it supported an inference that the husband was likely to dissipate assets to defeat the wife’s claim.[46]
[46] Waugh, FLR at 168 per Lindenmayer, Coleman and Brown JJ; FamCA at para 57 per Lindenmayer, Coleman and Brown JJ.
The Full Court also found that the husband’s case was not to be considered on the basis that he was simply resisting the claim and offering nothing by way of security. Indeed, in that case an undertaking offering substantial security was proffered by the husband’s counsel in the course of the matter.[47]
[47] Waugh, FLR at 168-169 per Lindenmayer, Coleman and Brown JJ; FamCA at para 58-60 per Lindenmayer, Coleman and Brown JJ.
In Deputy Commissioner of Taxation v Kliman[48] the majority of the Full Court of the Family Court did not deem it appropriate to determine whether the question raised in Waugh as to whether s.34, and not s.114(3), of the Family Law Act, is the source of power to make asset preservation orders (and if not in all, then at least in some cases).[49] Rather, they were content to state that “the purpose of such a power is to prevent abuse or frustration of the processes of the Court.”[50]
[48] [2002] 29 FamLR 301; [2002] FamCA 629 (“Kliman”).
[49] Kliman, FamLR at 312 per Ellis ACJ and Finn J, FamCA at para 50 per Ellis ACJ and Finn J.
[50] Kliman, FamLR at 312 per Ellis ACJ and Finn J, FamCA at para 51 per Ellis ACJ and Finn J, citing Sterling Industries CLR at 617, Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) (1998) 195 CLR 1 at 32-33, Cardile at 393-394, Australian Broadcasting Corp v Lenah Game Meats Pty Ltd (2001) 185 ALR 1.
The third member of the Full Court of the Family Court, Coleman J, having quoted extensively from the judgment of Gaudron, McHugh, Gummow and Callinan JJ in Cardile[51] observed that:
a)s.34(1) of the Family Law Act was “virtually identical” to s.23 of the Federal Court Act;[52] and
b)in relation to s.114(3) of the Family Law Act what was said by the High Court in Cardile had force where a remedy was not otherwise available, and where what was sought to be protected was a judgment debt.[53]
[51] Kliman, FamLR at 331-333 per Coleman J, FamCA at paras 132-133 per Coleman J.
[52] Kliman, FamLR at 333 per Coleman J, FamCA at para 134 per Coleman J.
[53] Kliman, FamLR at 333-334 per Coleman J, FamCA at para 135 per Coleman J. In Kliman the Deputy Commissioner of Taxation had had judgment entered against the husband for $1,324,250.86 plus interest of $33,069.05: Kliman, FamLR at 305 per Ellis ACJ and Finn J, FamCA at para 17 per Ellis ACT and Finn J.
In my view it seems that in determining whether to grant an “injunction” under s.114(3) of the Family Law Act the general principles applicable in relation to issuing Mareva type orders[54] are applied, but so as to focus on the “fundamental question” formulated in Waugh.[55] Due regard might also be had, in appropriate circumstances, to the principle expounded by the Full Court of the Family Court in Blue Seas Investment Pty Ltd v Mitchell (1999) 25 FamLR 65, namely, that where a party is impecunious and unable to offer an undertaking as to damages, it might be unconscionable in family law proceedings not to grant an injunction where all other requirements for the grant of an injunction are present.
[54] Those set out above at paras 33 and 34 above.
[55] Set out at para 38 above.
Pursuant to any scheme
The fundamental question, as to whether there is any evidence of an intention to dispose of assets, requires it to be “pursuant to any scheme” to defeat judgment.[56]
[56] Waugh, FLR at 165 per Lindenmayer, Coleman and Brown JJ, FamCA at para 46 per Lindenmayer, Coleman and Brown JJ.
The phrase “pursuant to” means “in accordance with” or “consequent and conformable to”.[57]
[57] Garbin v Wild [1965] WAR 72 at 76 per Wolff CJ and Jackson J.
The word “any” is a word of wide import: it “ordinarily excludes limitation or qualification and … should be given as wide a construction as possible.”[58]
[58] Victorian Chambers of Manufactures & Ors v Commonwealth & Ors (1943) 67 CLR 335 at 346 per Williams J. See also Collins v Repatriation Commission (1980) 32 ALR 581 at 595 per Fisher J.
The words “pursuant to” and “any” preceding “scheme” cast a broad scope within which there might be a scheme, but there must be a “scheme”.
What is a “scheme”?
“Scheme” means to “make plans, plan esp. in secret or underhand way or artful way”.[59]
[59] Concise Oxford Dictionary, 7th Ed. p.937.
In Australian Consolidated Press Ltd v Australian Newsprint Holdings Ltd[60] Dixon CJ in the context of a scheme involving the transfer of shares said:
“‘Scheme’ is a vague and elastic word. Doubtless it connotes a plan or purpose which is coherent and has some unity of conception.”[61]
[60] (1960) 105 CLR 473 (“Australian Consolidated Press”).
[61] Australian Consolidated Press at 479 per Dixon CJ. In the context of the relevant section of the Companies Act, 1920 (Tas) Dixon CJ went on to say that “the rest of the section shows that it is dealing with some plan, proposal or project”.
In Commissioner of Taxation v Bidencope[62] Barwick CJ said:
“The description of a scheme as a plan or concerted action is facile enough in expression but it seems to me most difficult in application.”
[62] (1978) 140 CLR 533, (1978) 8 ATR 639.
The Chief Justice went on:
“The argument in the present case is illustrative. If a taxpayer, for reasons of his own, were to purchase at a discount a debt due by another who at the time looked unlikely to be able to pay it, but doing so in the firm expectation that in course of time the debtor might be able to pay in full, the gain made on such payment could scarcely be said to constitute income. Nor could it be said, in my opinion, that the decision to buy and the expectation of ultimate payment was a scheme, plan or undertaking. It would be what it purported to be – a straight out purchase with a view to ultimate gain by realisation in due course of the value of the asset: in other words, an investment.”[63]
[63] Bidencope CLR at 540-541 per Barwick CJ, ATR at 642-643 per Barwick CJ.
Barwick CJ also issued a salutory caution:
“It would be unsatisfactory to resort to the description of ‘scheme, plan or undertaking’ on insufficient examination and analysis.”[64]
[64] Bidencope CLR at 543 per Barwick CJ, ATR at 644 per Barwick CJ.
Whilst a scheme may be constituted by a series or repetition of acts, it need not be so: a scheme can be constituted by a single act.[65]
[65] Bidencope CLR at 547 per Gibbs J, ATR at 647 per Gibbs J, CLR at 556 per Jacobs J, ATR at 652-653 per Jacobs J. I note that a similar conclusion was reached in Commissioner of Taxation v Hart & Ors (2004) 217 CLR 216, [2004] HCA 26 but in that case in the context of the statutory definition of “scheme” in s.177A(1) of the Income Tax Assessment Act, 1936 (Cth): see CLR at 236 and 240 per Gummow and Hayne JJ, HCA at paras 43 and 55 per Gummow and Hayne JJ; CLR at 259-261, per Callinan J, HCA at paras 87-89.
In a different context, that of town planning, a “scheme” has been described as:
“A programme of action” concerning “land [etc] … which has the general object of improving and developing such land etc to the best possible advantage.”[66]
[66] Costa v Shire of Swan (1982) 52 LGRA 145 at 147 per Olney J.
In short, it seems that in order to demonstrate that there is a “scheme” it needs to be demonstrated that there is a plan, whether consisting of a single act or successive acts. To be satisfied that there is a scheme requires sufficient examination and analysis of the facts.
Evidence of a scheme to defeat judgment by asset dissipation
What evidence is there of a scheme to defeat judgment, in this case by asset dissipation?
Wife overseas
The Husband relies on the fact that the Wife resides overseas, in Scotland. That is not unusual; indeed, the Husband also possibly resides, or at least works, overseas.[67]
[67] See para 8 and footnote 3 above.
The Wife’s residence overseas is seemingly in consequence of her marriage.[68] Marrying and moving overseas is not evidence, without more, of a scheme, or part of a scheme, to defeat judgment by asset dissipation.
[68] Seemingly to a very high income earning husband: see footnote 22 above.
Moving money overseas
The Husband asserted that the proceeds of the sale of the Surry Hills property (“Sale Proceeds”) might be moved overseas. The Husband says that the Surry Hills property represents some 87% of the available asset pool.
There is no evidence of any statement by the Wife evincing an intention to move the Sale Proceeds overseas.
In Waugh, where the husband allegedly made a statement (which the husband denied) that:
“You [the wife] will get none of it, it can all go to tax and the bank,”[69]
the Full Court of the Family Court held that there was insufficient evidence to support an inference of asset dissipation.[70]
[69] Waugh, FLR at 168 per Lindenmayer, Coleman and Brown JJ, FamCA at para 56 per Lindenmayer, Coleman and Brown JJ.
[70] Waugh, FLR at 168 per Lindenmayer, Coleman and Brown JJ, FamCA at para 57 per Lindenmayer, Coleman and Brown JJ.
In L & C (No 1)[71] Ryan FM (as she then was) made orders where the respondent husband had “exclusive control of any assets of value”, and that fact, combined with conversations in which the husband told the wife that she would “not even [get] one dollar” if she did not withdraw her “complaints” and sign papers giving the husband all the money from the marriage, was sufficient for Ryan FM to determine that there was a real risk of asset dissipation to defeat judgment.[72]
[71] [2002] FMCAfam 55.
[72] L & C (No 1) at paras 14 and 15 per Ryan FM.
In Tandler & Cooper[73] Ryan FM (as she then was) made orders for asset preservation where a trustee, in breach of trust, paid monies out of trust, on the instruction of only one party, where the money was held on trust for a money of persons.[74]
[73] [2004] FMCAfam 246 (“Tandler”).
[74] Tandler at paras 7 and 10-12 per Ryan FM.
In Coolstar Holdings Pty Ltd v Cleary & Ors[75] I declined to make a Mareva type order in general federal law proceedings where evidence was led that a named person had been informed that the first respondents in those proceedings had evinced an intention to leave Australia and to transfer monies from Australian accounts to a trust account in England. In context, the evidence was unsatisfactory – the named person not otherwise being identified by position, and no time nor place being given for the alleged provision of the information.[76]
[75] [2006] FMCA 1442 (“Coolstar”).
[76] Coolstar at paras 29, 34-36 per Lucev FM.
In this case there is no evidence of an expressed intention by the Wife to do anything, let alone anything untoward, with the Sale Proceeds, let alone move them overseas. Nor is there anything from which I can legitimately infer that that might be the Wife’s intention.
There is no evidence of the existence of overseas bank accounts into which the Sale Proceeds might be paid. Indeed, the evidence in the Wife’s Financial Statement (on which the Husband expressly relied) reveals that the Wife has one bank account, with the ANZ Bank.[77]
[77] Wife’s Financial Statement, item 37.
A branch BSB number is given. No doubt the most basic enquiries by the Husband’s solicitors might reveal whether it is an overseas branch of the ANZ Bank (assuming for present purposes that that might take the money out of the jurisdiction), and that if it were, the Husband might have led evidence to that effect. However, the Husband led no evidence about the ANZ Bank account (beyond what was in the Wife’s Financial Statement). And, nothing was said, and no evidence was led, either direct or indirect, as to any enquiries which had been made or which might have otherwise assisted in determining whether the Wife had an overseas bank account[78] or whether the Sale Proceeds might be transferred to some other account overseas.
[78] Compare Coolstar at paras 36-37 per Lucev FM.
The evidence in the Wife’s Financial Statement also reveals that the Wife’s mortgage is with the ANZ Bank, and that she has a Visa credit card with the ANZ Bank.[79] Nothing in relation to that evidence can lead to an inference that the Wife might intend to transfer the Sale Proceeds overseas.
[79] Wife’s Financial Statement, paras 23 and 30.
I do not consider it possible for me to find, either expressly or by inference, that there is evidence of a scheme to transfer the Sale Proceeds to an overseas bank account.
Sale and notice of sale
The evidence shows that the Surry Hills property was for sale as at
5 September 2006,[80] and has seemingly sold as at 7 October 2006.[81]
[80] Freedman’s Affidvit, para 9, Annexure ‘B’.
[81] Exhibit ‘A’ para 2.
The Husband’s solicitors assert that the sale was “without consultation or notice” to the Husband.[82] However, as Ms Oakley for the Wife, pointed out in argument, the evidence does not disclose when the Surry Hills property was put onto the market for sale, and whether that was before or after the Application was made.
[82] Exhibit ‘B’ para 2(d).
Despite having had more than a month from the time of becoming aware that the Surry Hills property was for sale there was no evidence from the Husband as to when the property went on sale,[83] or of any enquiries being made in that regard of, or by, any person.
[83] Something which might be readily ascertained from a search of newspaper real estate columns, or by formal or informal enquiry to the selling agents (for example, by inspecting the house when it was open for inspection, and asking the question how long it has been on the market).
The evidence of lack of notice or consultation about the sale is very limited: it is a bare assertion contained in a letter from the Husband’s solicitors to the Wife’s solicitors the day prior to the hearing.[84]
This hearsay evidence is so limited that the weight attached to it must be minimal, and without more, it affords no real basis to come to a conclusion that there was a scheme to defeat judgment by asset dissipation.
[84] Husband’s Solicitors 11 October 2006 Letter, Exhibit ‘B’, para 2(d).
What then of the sale itself? The Surry Hills property sold for substantially more than either Husband or Wife estimated as its value.[85] Once the mortgage is discharged, there will be a substantial sum remaining. Whilst there might potentially be risk of asset dissipation in these circumstances, in my view the Husband has not demonstrated, either expressly or inferentially on the available evidence, that by reason of the sale and non notification to him of the sale there is a real risk of asset dissipation, and certainly not that there is a scheme to defeat judgment by asset dissipation. The sale of the Surry Hills property seems just that: the sale of property.[86]
[85] See paras 10 and 27 above.
[86] Compare Bidencope CLR at 540-541 per Barwick CJ, ATR at 642-643 per Barwick CJ.
Refusal to give an undertaking
An undertaking was sought that the Wife set aside $200,000 from the Sale Proceeds, to be put in trust, pending the outcome of the Application.[87]
[87] See para 13 above.
The Wife did not respond to the initial request, or a follow up request, albeit the latter was a month later and only a day before the Interim Orders Application was made.[88]
[88] See paras 14 and 15 above.
Ultimately, however, the Wife’s solicitors did write to the Husband’s solicitors, albeit only a day before the return date of this hearing, disclosing the fact of the sale on 7 October 2006 (that is four days before), and the sale price.[89] The Wife’s solicitors asked for an opportunity to obtain instructions, and sought an adjournment of the return date, but only for one week.[90]
[89] Wife’s Solicitors 11 October 2006 Letter, Exhibit ‘A’, para 2.
[90] Wife’s Solicitors 11 October 2006 Letter, Exhibit ‘A’, paras 3-5.
In L & C (No 1) an undertaking was sought from the husband not to dispose, encumber or deal with assets, because of the wife’s “anxieties”.[91] No undertaking was given.[92] In deciding to grant orders for asset preservation Ryan FM had regard to:
a)the husband’s exclusive control of assets; and
b)certain conversations evincing the husband’s intention to withhold monies unless his wife withdrew “all complaints”.[93]
No regard was seemingly had to the Husband’s failure to give an undertaking.[94]
[91] L & C (No 1) at para 14 per Ryan FM.
[92] L & C (No 1) at para 14 per Ryan FM.
[93] L & C (No 1) at para 15 per Ryan FM.
[94] I note that the matter was heard ex parte.
The failure to give an undertaking upon request might demonstrate a potential risk of asset dissipation. Equally, however, it might in the circumstances of this case, demonstrate a reluctance to give anything away until an application for interim orders was actually filed.[95] In this case, the latter might be more likely by reason of the Wife’s Solicitors 11 October 2006 Letter which seeks a reasonable opportunity to obtain proper instructions from the Wife, resident overseas, and a very short adjournment. Had an adjournment been sought for a much longer period it might have been easier to infer a risk of asset dissipation.
[95] Not a course to necessarily be encouraged, but one which, in reality, might be adopted, and on the face of it, might have been adopted here.
I do not consider that the failure to give an undertaking, in the circumstances I have outlined, is sufficient, without more, to warrant a finding, either expressly or by inference, that the failure demonstrates a real risk of asset dissipation, or a scheme to defeat judgment by asset dissipation.
Concerns
In the Husband’s Solicitor’s Letter of 5 September 2006 to the Wife’s solicitors, the Husband’s solicitors expressed the Husband’s “grave concerns” about the possible overseas transfer of the Sale Proceeds.[96]
[96] Freedman’s Affidavit, Annexure ‘C’, para 1.
In the Husband’s Solicitor’s 11 October 2006 Letter the Husband’s “obvious concern” about the sale of the Surry Hills property without consultation or notice or agreement to retain funds in Australia is mentioned.[97]
[97] Exhibit ‘B’, para 2(d).
I do not think it appropriate to place any weight on the self-serving hearsay remarks of the Husband’s solicitors. In any event, feelings of mistrust and anxiety, likewise concern, do not suffice to warrant injunctive intervention.[98]
[98] L & C (No 1) at paras 14 and 15 per Ryan FM; Setchell & Setchell [2006] FMCAfam 396 at para 26 per Brown FM.
I therefore consider that the “concerns” manifested on the Husband’s behalf by his solicitor do not constitute evidence of a scheme to defeat judgment by asset dissipation.
Delay
The Husband’s solicitors first became aware that the Surry Hills property was for sale on 5 September 2006.[99] The Husband’s solicitors wrote a letter to the Wife’s solicitors.[100] The Husband’s solicitors heard nothing, and did nothing, for a month. Then on 5 October 2006 the Husband’s solicitors wrote another letter to the Wife’s solicitors,[101] before making the Interim Orders Application on 6 October 2006.
[99] Freedman’s Affidavit, para 9.
[100] Freedman’s Affidavit, Annexure ‘C’.
[101] Freedman’s Affidavit, Annexure ‘B’.
In circumstances where, apart from the fact that the Surry Hills property was for sale as at 5 September 2006, the Husband seemingly knew nothing else about the Wife’s activities concerning the Surry Hills property, I think I am entitled to form the view that if there was perceived to be a real risk of asset dissipation, the Husband through his solicitors, would have acted with more haste, or taken more or other steps within that month. The delay weighs against the Husband’s Interim Orders Application.[102]
[102] Coolstar at para 51 per Lucev FM.
Conclusion
I have endeavoured to analyse, examine and weigh the evidence concerning the possibility of asset dissipation pursuant to a scheme to defeat any judgment which might ultimately issue in these proceedings.
Having done so I have concluded that the sale of the Surry Hills property is just that: a sale of property. There is no, or no sufficient, evidence of a scheme to defeat judgment attaching to the sale of the Surry Hills property, or the Sale Proceeds whenever they might become available to the Wife.
In the circumstances, it is appropriate that I dismiss the Interim Orders Applications.
Orders
I make the following orders:
a)the application for interim orders be dismissed; and
b)the Applicant Husband to pay the Respondent Wife’s costs as agreed between the parties, and failing agreement to be taxed.
I certify that the preceding ninety-one (91) paragraphs are a true copy of the reasons for judgment of Lucev FM
Associate:
Date:
2
20
5