Federal Circuit and Family Court of Australia
(DIVISION 1)
Pethrick & Folmar [2022] FedCFamC1F 905
File number(s): MLC 542 of 2020 Judgment of: STRUM J Date of judgment: 17 November 2022 Catchwords: FAMILY LAW – PROPERTY – Application for removal of caveats – Asserted constructive trust – Finding that caveats were improperly lodged –Orders for removal of caveats – Consideration of whether to make injunction – Limited injunction of short duration made Legislation: Family Law Act 1975 (Cth) ss 34, 79, 90SL, 90SM, 106A. 114
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 r 5.08
Transfer of Land Act 1958 (Vic) s 89
Cases cited: Allan & Allan and Ors (No 2) [2012] FamCA 932
Baumgartner v Baumgartner (1987) 164 CLR 137; [1987] HCA 59
Cardisle v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18
Fisher v Fisher (1986) 161 CLR 438; [1986] HCA 61
Frost (deceased) & Whooten (2018) FLC 93-860; [2018] FamCAFC 177
Hannah and Hannah; Tozer and Tozer (1989) FLC 92-052
Ioppolo v Ioppolo (1978) 5 Fam LN N27
Jackson v Sterling Industries Ltd (1987) 162 CLR 612; [1987] HCA 23
Lin and Ruan (2021) FLC 94-024; [2021] FamCACF 90
Morling v Morling (1992) 16 Fam LR 161
Mullen and De Bry (2006) FLC 93-293; [2006] FamCA 1380
Muschinski v Dodds (1985) 160 CLR 583; [1985] HCA 78
Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319
Pethrick & Folmar [2022] FedCFamC2F 978
Sieling and Sieling (1979) FLC 90-627; [1979] FamCA 23
Skyworks v 32 Drummoyne Road [2017] NSWSC 343
Stanford v Stanford (2012) 247 CLR 108; [2012] HCA 52
Trevi & Trevi [2015] FamCA 123
Tsiang & Wu and Ors (2019) FLC 93-911; [2019] FamCAFC 128
Waugh and Waugh (2000) FLC 93-052; [2000] FamCA 1183
Division: Division 1 First Instance Number of paragraphs: 66 Date of hearing: 27 October 2022 Place: Melbourne Solicitor Advocate for the Applicant: Mr Lennon Solicitor for the Applicant: Lennon Lawyers Counsel for the Respondent: Mr Sweeney Solicitor for the Respondent: White & Mason Lawyers ORDERS
MLC 542 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS PETHRICK
Applicant
AND: MR FOLMAR
Respondent
order made by:
STRUM J
DATE OF ORDER:
17 November 2022
THE COURT ORDERS THAT:
1.The wife forthwith do all such acts and things and sign all such documents as may be required, at her own expense, to withdraw all caveats lodged by her or on her behalf over the real properties situate at and known as:
(a)H Street, Suburb C in the State of Victoria and more particularly described in Certificate of Title Volume …, Folio …; and
(b)W Street, Suburb Y in the State of Victoria and more particularly described in Certificate of Title Volume …, Folio ….
2.Pursuant to s 106A of the Family Law Act 1975 (Cth), if the wife fails or refuses to comply with paragraph 1 and such failure or refusal continues for a period…
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- Pethrick & Folmar [2022] FedCFamC1F 905
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- [2022] FedCFamC1F 905
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CaseChat Overview and Summary
The Full Court of the Family Court of Australia, in the case of Pethrick & Folmar, addressed the question of whether an injunction should be granted to prevent the disposal of assets in circumstances where there was a risk of such disposal to defeat a pending legal order. The central issue was whether the lower court erred in its assessment of the balance of convenience or justice in granting an injunction, particularly focusing on the husband's concern about the potential sale of properties by the wife to thwart his claims. The Full Court examined whether the lower court had correctly balanced the factors required under section 114(3) of the Family Law Act 1975 (Cth). Specifically, the court considered whether the lower court had erred by focusing unduly on whether there was evidence of a scheme by the wife to remove assets, rather than on the broader question of whether there was a risk of asset disposal to defeat the order.
The Full Court concluded that the lower court had indeed erred by placing undue emphasis on the existence of a scheme to remove assets, rather than considering the broader risk of asset disposal. The Full Court emphasised that while the existence of a scheme or intention may be one factor, it is not the only factor to consider when determining the balance of convenience or justice. Instead, the court must assess a range of factors, including the probability of asset disposal, the constitution of the assets, and the potential inconvenience or prejudice to the other party if an injunction is granted. The Full Court noted that the lower court had failed to adequately consider all relevant factors, which led to an incorrect assessment of the balance of convenience.
In light of these findings, the Full Court allowed the appeal and re-exercised the discretion to grant an injunction. The court ordered that the net proceeds of sale of specified properties be held briefly upon trust by the husband’s solicitors, pending any further application by the wife within a specified period. The court also directed the wife to withdraw the caveats lodged over the properties and dismissed the husband's and wife's respective applications in a proceeding. Both parties' costs to trial were reserved, reflecting the complexity and importance of the issues in the case.
The Full Court concluded that the lower court had indeed erred by placing undue emphasis on the existence of a scheme to remove assets, rather than considering the broader risk of asset disposal. The Full Court emphasised that while the existence of a scheme or intention may be one factor, it is not the only factor to consider when determining the balance of convenience or justice. Instead, the court must assess a range of factors, including the probability of asset disposal, the constitution of the assets, and the potential inconvenience or prejudice to the other party if an injunction is granted. The Full Court noted that the lower court had failed to adequately consider all relevant factors, which led to an incorrect assessment of the balance of convenience.
In light of these findings, the Full Court allowed the appeal and re-exercised the discretion to grant an injunction. The court ordered that the net proceeds of sale of specified properties be held briefly upon trust by the husband’s solicitors, pending any further application by the wife within a specified period. The court also directed the wife to withdraw the caveats lodged over the properties and dismissed the husband's and wife's respective applications in a proceeding. Both parties' costs to trial were reserved, reflecting the complexity and importance of the issues in the case.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
The Full Court concluded at [46]-[52]:46.Finally, we think it helpful to recognise that the essential power being exercised in this case is simply described in s 114(3).“A court…may grant an injunction…in any case in which it is just or convenient to do so…”47.Ultimately, each case will involve an overall assessment of a number of factors to determine the just or convenient result. Not all cases with the same identity of factors will necessarily produce the same result because of varying weight individually and comparatively.48.We perceive that a real, though perhaps subtle, difference exists between, on the one hand, establishing on the balance of probabilities a risk or danger of a disposal of property intended to defeat an order and, on the other hand, proving to the civil standard and as an independent issue that a scheme to defeat an order exists.49.In some cases, the possibility (based on some evidence) of an intention or scheme may, with other factors, be sufficient to establish the probability of an objective risk of disposal with intent to defeat an order.50.It follows that we do not say that, in addressing the question of whether there is a risk of disposal of assets to defeat an order, it is unnecessary to enquire whether there is any evidence of an intention, plan or scheme to dispose of assets. But in an enquiry into the risk of disposal, the question of intention or scheme is but one of a number of factors relevant to the objective risk of disposition to defeat an order.51.Moreover, while ultimately a particular factor may overwhelm others, it is generally unwise to commence with a rigid focus on finding, to a particular standard of proof, one or more of a number of factors relevant only at a discretionary level and subsidiary to the ultimate question.52.In conclusion, we do not think that Waugh, properly understood, lays down any incorrect principles. However, we consider that Lucev FM erred by focussing unduly on whether the evidence established a scheme of the wife to remove assets to defeat an order in the substantive proceedings… (Emphasis in original) In granting leave to appeal, allowing the appeal and re-exercising the discretion, the Full Court said at [54]-[56]:54.Because his Honour did not find a scheme, he did not, as the grounds of appeal assert, move to consider the inconvenience or prejudice to the wife if an injunction was granted, yet that factor ought have been part of the overall assessment as to where the balance of convenience or justice lay.55.Again, the constitution of the assets, which on the husband’s case, saw the sale proceeds constitute at least 87per cent of the assets of the parties, was relevant.56.In our view, his Honour erred in principle and consequently failed to consider all relevant factors. In Tsiang & Wu, for reasons which are not apparent, the Full Court did not refer to its earlier and leading decision in Waugh and Waugh, notwithstanding that it remains good law. After referring at [22] - [23] to the decisions of Gleeson CJ in Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 and McDougall J in Skyworks v 32 Drummoyne Road [2017] NSWSC 343, the Full Court in Tsiang & Wu said at [24] - [27]:24.In this case the identified risk was that the wife might dispose of assets in Australia and in her name in order to defeat the husband’s claim and, equally it was asserted that there was a risk that the second and third respondents too might deal with the partnership assets in a way so as to defeat the husband’s possible judgment or claim to that entity.25.It is unnecessary to demonstrate a positive intention but merely the possibility of the event occurring. The determination about the balance of convenience may thus be an inference drawn from the facts and circumstances established by the applicant’s evidence.26.Nor is it the role of the judge determining the question of the injunction to, in effect conduct a trial of the disputed evidence to resolve those disputes (see Shercliff v Engadine Acceptance Corporation Pty Ltd [1978] 1 NSWLR 729).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)
Decision
Reasons for decision
In this case, however, notwithstanding the husband’s concession that the wife should have “comfort” that the sufficient funds will remain available to meet her claim, even after the sale of H Street and W Street, and the disposition of the proceeds of sale, she cannot take such comfort. Given the uncertainty as to the extent of such equity, including by reason of the passage of time since they each deposed to the value of assets and the quantum of liabilities, I shall order that the net proceeds of sale of each of H Street and W Street be held briefly upon trust for the husband by his solicitors for a period of 14 days after settlement of each of the sales of those properties and, in the event there is no application made by the wife in relation thereto within such period, they be released to him absolutely. The husband’s duty of ongoing disclosure applies to the proceeds of sale of those properties, which will put the wife in a position to make a considered decision in relation to how to proceed, if at all. Conclusion Accordingly, there will be orders for the wife to withdraw the caveats lodged by her over H Street and W Street and consequential relief pursuant to s 106A of the Act in default thereof; for the net proceeds of sale to be held briefly upon trust for the husband by his solicitors, pending any further application by the wife within that time; and for the husband’s Application in a Proceeding filed 3 October 2022 and the wife’s Response to an Application in a Proceeding filed 18 October 2022 otherwise to be dismissed. Given this outcome, I shall reserve both parties’ costs to trial.
Ratio Decidendi
Legal Principle Established
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