Pethrick & Folmar
[2022] FedCFamC1F 905
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 of seven (7) days from the date of this Order, the solicitor for the husband be appointed and authorised to do all acts and things necessary to give validity and operation thereto.
3.In the event the real properties at H Street, Suburb C and/or W Street, Suburb Y are sold, the net proceeds of each sale be paid into a controlled moneys account to be held by the solicitor for the husband upon trust for the husband for a period of 14 days after each settlement and, in the event there is no application by the wife in relation thereto within such period(s), the net proceeds of each sale be thereafter forthwith released to the husband absolutely.
4.The Application in a Proceeding filed by the husband on 3 October 2022 and the Response thereto filed by the wife on 18 October 2022 be otherwise dismissed.
5.The costs of each of the parties in relation to the Application in a Proceeding and the Response thereto be reserved.
6.The proceedings otherwise be referred to the National Assessment Team for further directions.
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 Pethrick & Folmar has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
STRUM J:
By Application in a Proceeding filed 3 October 2022, the de facto husband, Mr Folmar (who is the respondent in the substantive proceedings) seeks orders that the de facto wife, Ms Pethrick (who is the applicant in the substantive proceedings), withdraw caveats lodged by her over properties at H Street, Suburb C (“H Street”) and W Street, Suburb Y (“W Street”), both in the State of Victoria, and consequential relief pursuant to s 106A of the Family Law Act 1975 (Cth) (“Act”) in default thereof.
By Response to an Application in a Proceeding filed 18 October 2022, the de facto wife, Ms Pethrick, seeks orders that the Application in a Proceeding be dismissed and, in the alternative, that H Street and W Street be sold and “the net proceeds of sale be paid into Court or into a controlled money account to be held on trust for the parties pending written agreement or Court order”
For ease of reference, I shall refer to the parties as the husband and the wife.
The husband’s Application is supported by an affidavit of his solicitor, Mark White, filed on 16 September 2022.
The wife’s Response is supported primarily by an affidavit by her filed on 18 October 2022. In that affidavit, she purports to rely also upon three other affidavits by her filed on 20 January 2020, 12 April 2021 and 27 April 2021. However, in her case outline dated 25 October 2022, she subsequently states that she relies only upon her affidavits filed on 18 October 2022 and 27 April 2021. In the course of the hearing before me, no reference at all was made to the affidavits filed on 20 January 2020 and 12 April 2021, and I shall have no regard them. In relation to her affidavit filed on 27 April 2021, she specifically refers to [62] - [72] thereof in her affidavit filed on 18 October 2022. In her written submissions, reference is also made to [16] and [24] and, in oral submissions, her solicitor further referred me to [74] thereof. Accordingly, I shall have regard to the evidence in those paragraphs. It must be recalled that r 5.08(1)(b) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 provides that the affidavits which may be relied on as evidence in chief at the hearing of an application for interlocutory orders include “one affidavit by each party”.
I was not taken by Counsel for the husband to any evidence by him in response to the specific paragraphs of the wife’s affidavit filed on 27 April 2021.
The affidavit filed on behalf of the husband in support of his Application and that filed on behalf of the wife in support of her Response are not helpful. The former is convoluted and confusing; the latter is largely devoid of relevant or admissible evidence.
Counsel for the husband and the solicitor for the wife each provided written submissions at the commencement of the hearing, which they supplemented with brief oral submissions.
By way of background, I note that on 28 July 2022 Judge O’Sullivan in Division 2 of the Court made a declaration pursuant to s 90RD(2) of the Act that the parties were in a de facto relationship for a period of at least two years comprised by the aggregation of the following periods: from January 2015 to January 2016; from May 2016 to August 2016; from September 2016 to January 2017; and from January 2018 to October 2018. His Honour’s reasons for judgment make for interesting reading (see Pethrick & Folmar [2022] FedCFamC2F 978)
Caveats
By amended Initiating Application filed 27 April 2021, in addition to the s 90RD declaration, the wife sought only one further substantive head of relief, namely, an order for “a just and equitable division of assets currently registered in the name of the Respondent in favour of the Applicant pursuant to section 90(SM) [sic] of the Act”. Notwithstanding the passage of 18 months, she has not seen fit to amend her application for relief under s 90SM of the Act to properly plead same. It was only during the course of the interlocutory hearing before me that her solicitor, who appeared on her behalf, sought an adjournment in order to file a further amended Initiating Application, which I refused for the reasons below. The order sought by the wife is meaningless; it is incapable of being made in that form. However, at least it does make clear that she invokes the Court’s jurisdiction to make an order altering the interests of the parties in their property pursuant to s 90SM of the Act: cf. Frost (deceased) & Whooten (2018) FLC 93-860.
The husband is and since 2003 has been the sole registered proprietor of H Street. He also is and since 2002 has been a registered proprietor of W Street as a tenant in common with his brother. Accordingly, the husband’s interests in the properties were acquired by him more than a decade prior the commencement of the parties’ de facto relationship. It is deposed on behalf of the husband that the wife made no financial contributions towards any of the real properties of which he is a registered proprietor, including H Street and W Street. That is disputed by the wife, who deposes to some, albeit modest, financial contributions to those two properties. Of course, the contributions contemplated by s 90SM(4)(a)-(c) are far broader in scope than direct financial contributions to specific property.
The only real property acquired during the parties’ de facto relationship is that at P Street, Suburb C, which is registered in the sole name of the wife. I was not taken to any evidence in relation to how that property was acquired.
The wife was a joint tenant with her brother of a real property in Queensland which was disposed of by them in 2020. She was also a joint tenant with her mother of a real property in Victoria which was disposed of by them in 2021. It is deposed on behalf of the husband, and the wife does not deny, that she disposed of her interest in both properties without notice to or consent by him. She deposes that she no longer has any of the proceeds of sale of those properties but does not particularise the amounts received by her from those sales.
Both of the caveats lodged by the wife are asserted to be on the grounds of “an implied, resulting or constructive trust”. In respect of W Street, she deposes that she lodged the caveat “to secure [her] interest in the property”.
The husband seeks the removal of the caveats as he wishes to sell H Street and W Street to pay debts and to fund legal fees for his defence in criminal proceedings, for which he has been gaoled on remand since mid-2022. His former wife, with whom he is also engaged in other proceedings in this Court, has similarly lodged caveats over both properties. However, it appears that she agrees for those properties to be sold, as does the husband’s brother in respect of W Street. The husband and his former wife commenced cohabitation in 1998; were married in 2002; separated in early 2015; and were divorced in 2018 – a far longer period than that of the husband and the de facto wife in these proceedings.
On 2 September 2022, the husband’s solicitor wrote to the wife’s solicitor, seeking for her to remove certain caveats on the ground that she did not have a “sustainable caveatable interest”. The wife was put on notice that, if she did not do so within seven days, application would be made to the Court.
On 5 September 2022, the wife’s solicitor responded to that letter. He did not expressly deny that she did not have a sustainable caveatable interest, stating rather that:
With respect, a submission from your office at a directions hearing [on 5 September 2022] that our client does not have a “sustainable caveatable interest” in the nominated properties, will be of little assistance to the Court insofar as the making of directions is concerned.
Further, the wife’s solicitor complained:
You have not provided any figures as to the estimated value of the properties (nor any reference price in the event of a sale), any information with respect to the amounts owing to any person or institution claiming an interest in the properties and, suffice to say, your client can encumber the properties at any given time so as to soak up the equity.
However, the wife’s solicitor advised that:
Our client has no objection to the nominated properties being sold and our client is happy to withdraw the caveats on the basis that any net proceeds from the properties be retained in an interest-bearing trust account to be held on behalf of our respective clients.
In her affidavit filed on 18 October 2022, the wife refers to that letter from her solicitor, deposes that no response was received thereto or to a subsequent letter and that, accordingly, she does “not believe [she] was in any position at that time or now, to accede to the request to remove [her caveats]”.
It appears from the matters to which I refer in the immediately preceding paragraphs that the wife and, more relevantly, her solicitor are of the belief that “details of the equity in the properties” were somehow relevant to her caveats. The details are not relevant and their belief is mistaken insofar as the caveats are concerned At issue is whether, as required by s 89(1) of the Transfer of Land Act 1958 (Vic), the wife is a “person claiming any estate or interest in land … [who] may lodge with the Registrar a caveat in an appropriate approved form …” (emphasis added).
She also deposes (at [17]) that she has “produced extensive documentation to the [husband’s] lawyers demonstrating direct and indirect financial contributions that [she has] made into [sic] the properties” such that:
I believe and I have been advised by my lawyers that I have a sound legal basis to have lodged the caveats over the various properties “i.e., pursuant to a constructive, resulting and/or implied trust”.
There was no submission or argument on behalf of the husband that, in so deposing, the wife may have waived legal professional privilege in relation to that advice.
In her written submissions at [14]-[16] the wife states as follows:
14.The Applicant accepts that the existence of a claim pursuant to the Act is not a caveatable interest of itself. The Applicant relies on the well established principle that equity will grant a proprietary interest in the land through a constructive trust in a family home or other properties if it would be unconscionable to deny the interest to the other spouse (Muschinski v Dodds @ 608, 620, 621; Baumgartner @ 147).
15.The Applicant relies further on a constructive trust arising by virtue of the conduct and words of the Respondent wherein the Applicant had been led to believe that, with a continuation of the relationship, she would obtain an interest in the property and thereafter acted or expected a continuation of the relationship by contributing to joint expenses (Muschinski v Dodds @ 608, 620, 621; Baumgartner @ 147).
16.The Trial Affidavit of the Applicant sworn 27 April 2021, (at paragraphs 16, 24 and 62-72 inclusive) sets out explicit direct financial contributions to both properties. In those circumstances, it could not be seriously contended by the Respondent that the Applicant does not have an interest in the land/properties on the grounds claimed. It therefore follows that the Applicant has the interest she claims and there is a serious question to be tried. The real issue, as it is capable of being discerned, is directed to the quantification of the Applicant’s claim.
Other than the acceptance in [14] that “the existence of a claim pursuant to the Act is not a caveatable interest of itself” and the unduly simplistic summary of the legal principles in Muschinski v Dodds (1985) 160 CLR 583 and Baumgartner v Baumgartner (1987) 164 CLR 137, I was not referred to any evidence which might sufficiently support the submissions in [15] - [16]. In the circumstances, the submission in [16] that “it could not be seriously contended by the [husband] that the [wife] does not have an interest in the land/properties on the grounds claimed” and that “it therefore follows that the [wife] has the interest she claims” is unsustainable. Indeed, in any event, she does not make a claim to such an interest.
It is trite that contributions do not, in and of themselves, give rise, without more, to an interest in property. If that were so, ss 79 and 90SM of the Act might well be otiose. Further, an order under those sections “altering the interests” of the parties to the marriage or the de facto relationship in their property or that of either of them does just that. It is well settled that those sections do not give a party any legal or equitable rights to, or interest in, property before an order is made under subsection (1) of either of those sections. In Fisher v Fisher (1986) 161 CLR 438 at 453, Mason and Deane JJ said that “orders made under s 79 do not give effect to antecedent rights arising in virtue of the marital relationship. Instead they perform a dual function by creating and enforcing rights in one blow, so to speak …”. This is so, no matter how likely it is that the Court will make an order under subsection (1) of either of those sections, as the power to do so is wholly discretionary.
In Hannah and Hannah; Tozer and Tozer (1989) FLC 92-052 at 77, 595, Elliott J said:
It has been recognised at least as early as the Full Court decision in Seiling and Seiling (1979) FLC ¶90-627 that a wife’s entitlement under sec. 79 is based upon an interest which builds up during the marriage (see at p. 78,264 per Evatt C.J. and Marshall J.); it was there described as an inchoate right against the other spouse which matures with the passage of time. Although from one point of view a wife’s entitlement may be seen as inchoate in the sense of being undeveloped, sec. 79 nevertheless makes it clear that a claim can be made at any time after the marriage. The “right” as such is really only a right to enliven the exercise of the discretion to effect a just and equitable division of property. It is not a right of the wife to a particular division. (See Strelys and Strelys; Lukaitis (Executor) (1988) FLC ¶91-961 at p. 76,964 per Nygh J.)
In Seiling and Sieling (1979) FLC 90-627 at 78,264 (to which Elliott J referred in the passage cited above), Evatt CJ and Marshall SJ said:
… once a marriage has broken down, a party’s right to bring proceedings under sec. 79 should be considered as an inchoate right, one which may mature by the lapse of time and by the commencement of proceedings for dissolution. Until those proceedings are commenced, it is a personal right against the other spouse.
Other than the unqualified assertion by the wife that she believes, and her hearsay evidence that she has been advised by her lawyers, that she has a sound legal basis to have lodged caveats over the various properties, namely, “pursuant to a constructive, resulting and/or implied trust”, nowhere in these proceedings has she sought a declaration, either under s 90SL or in the exercise of the Court’s accrued jurisdiction, that the husband holds any property upon trust for her, whether constructive or otherwise.
The wife’s solicitor, both in his written and oral submissions, focussed almost entirely upon the argument that she has an interest in H Street and W Street pursuant to a constructive trust in her favour.
The learned authors of Jacobs’ Law of Trusts in Australia (LexisNexis Australia, 8th edition, 2016) at [13-01] describe a constructive trust as follows:
The constructive trust differs in essential respects both from the express and the resulting or implied trust. It differs from the express trust in that it is raised by operation of law often without reference to the intentions of the parties concerned and indeed largely contrary to the desires and intentions of the constructive trustee. Further, a constructive trust arises without satisfaction of the requirements as to writing which statute imposes in respect of express trusts, both testamentary and inter vivos. The constructive trust differs from the resulting or implied trust in that, although a resulting or implied trust also arises by operation of law in the case of presumed resulting trusts as distinct from automatic resulting trusts, the courts presume that a trust was actually intended and in the face of evidence to the contrary, may conclude that the presumption has been rebutted. In the case of a constructive trust, the inquiry is not solely as to the actual or presumed intentions of the parties, but as to whether, according to the principles of equity, it would be a fraud for the party in question to deny the trust. As Cardozo CJ put it, ‘When property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee’. It has been said that the trust is constructive in the sense that equity construes the circumstances by explaining or interpreting them; equity does not construct the trust, rather it attaches legal consequences to the circumstances. Moreover, the constructive trust demands the staple ingredients of express and resulting or implied trusts: subject matter, trustee, beneficiary and personal obligation attaching to the trust property.
(Footnotes omitted)
On the evidence to which I was referred in [16] of the written submissions on behalf of the wife, it is difficult to discern how a constructive trust might be said to arise in favour of the wife in this case. However, that is not to say that it may not be just and equitable to make an alteration of interests in favour of the wife pursuant to s 90SM(1), as required by s 90SM(3), taking into account her contributions and other factors specified in s 90SM(4) of the Act. That determination must await trial.
In any event, as referred to above, it was only during the course of the hearing, when it was pointed out to the wife’s solicitor that there was no claim by her in the proceedings to any interest pursuant to a constructive trust, that he sought an adjournment in order for her to bring such a claim. I refused the adjournment. The relief sought by the wife, to which I have referred above, has stood unamended since 27 April 2021; she has been aware of the husband’s demand that she remove her caveats since 2 September 2022; and his application therefor has been pending since 3 October 2022. In the circumstances, the request for the adjournment was too little, too late. The wife and her lawyer had been on notice for nearly two months that her caveats were said to be unsustainable. Her lawyer must be assumed to know the law and yet no steps were taken to found the caveats.
This is not the first occasion on which the husband has applied to a court for the removal of a caveat lodged by the wife. There was an application by him to the Supreme Court of Victoria in 2020, where the lodgement of a caveat by her was found to have been wrongful and which resulted in a costs order being made against her in the sum of $20,178, which remains unpaid.
As ss 79 and 90SM do not give a party to a marriage or de facto relationship any legal or equitable right to property before an order is made, a right to apply for an alteration of property interests is not a caveatable interest in real property: see, for example, Ioppolo v Ioppolo (1978) 5 Fam LN 27; Morling v Morling (1992) 16 Fam LR 161; Allan & Allan and Ors (No 2) [2012] FamCA 932; Trevi & Trevi [2015] FamCA 123; Lin and Ruan (2021) FLC 94-024.
In Trevi & Trevi, where Thornton J ordered a respondent wife to take all necessary steps to cause the relevant Registrar of Titles to remove caveats from the titles of various real properties, her Honour said at [57] (as may be said in this case):
I am satisfied that the wife has not claimed an equitable interest in the investment properties, apart from a conditional assertion by her counsel in submissions. It is unknown whether the wife will ever make or pursue such a claim and she has not advanced any claim to an equitable interest in any of these properties. Thus, at least at this stage, the wife has not established a caveatable interest in the Suburb A or Queensland properties.
The learned authors of Family Law (Thomson Reuters, 7th edition, 2022) in my view correctly state at [23.40]:
The personal right pursuant to s 79/90SM will not support a caveat based upon an existing interest in land unless the party can articulate an existing legal or equitable interest in the land. However, the right may be protected by injunction pending determination of the s 79/90SM proceedings…
For these reasons, I conclude that the caveats lodged by the wife over H Street and W Street were improperly lodged, are not sustainable and must be removed, and I will so order. Accordingly, I turn to the wife’s application in the alternative, namely, that H Street and W Street be sold and “the net proceeds of sale be paid into Court or into a controlled money account to be held on trust for the parties pending written agreement or Court order”.
Injunction
Whilst the wife’s solicitor did not point to the relevant statutory basis for the interlocutory injunction sought by her, it is tolerably clear that she relies inferentially upon ss 114(3) or 34(1) of the Act.
In circumstances where, unlike the husband, the wife is not a registered proprietor of H Street or W Street, and she has no pending claim to an equitable interest in either of those properties, it is unclear why (if restrained) the proceeds of sale thereof should be held in a controlled moneys account “on trust for the parties” pending written agreement or Court order. As the plurality of the High Court held in Stanford v Stanford (2012) 247 CLR 108 at [37], in proceedings for alteration of interests of property -
First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. So much follows from the text of s 79(1)(a) itself, which refers to “altering the interests of the parties to the marriage in the property” (emphasis added). The question posed by s 79(2) is thus whether, having regard to those existing interests, the court is satisfied that it is just and equitable to make a property settlement order.
Accordingly, if an injunction is to be made, it should be for the proceeds of sale to be held in a controlled moneys account on trust for the husband alone, pending written agreement or Court order. The proceeds will be his at law unless and until an adjustive order is made under s 90SM(1).
However, in Sieling and Sieling at 79,264, Evatt CJ and Marshall SJ recalled that the power to grant injunctions is a discretionary power, not to be exercised lightly, and said that the Court “will not lightly interfere with the rights of an owner of property on the basis of a vague or uncertain claim”.
The grant of an injunction is discretionary and the basis on which such an order is made is well established. An applicant must demonstrate, first, that there is a serious issue to be tried and, secondly, that the balance of convenience favours making the injunction sought: Tsiang & Wu and Ors (2019) FLC 93-911 at [20]-[21]. As to the first step, the wife asserts and the husband denies that she made contributions pursuant to s 90SM(4)(a)-(c) over the course of their relationship spanning some 2.5 years in total. In particular, as noted above, the husband deposes that the wife made no financial contributions towards any of the real properties of which he is a registered proprietor, including those the subject of these interim applications. Whilst the extent of the wife’s contributions may be in dispute, it seems unlikely (at this interlocutory stage of the proceedings) that she made no contributions whatsoever within the ambit of s 79 (4) (a)-(c), such that, prima facie, there is a serious issue to be tried. However, as part of the second step, 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: Tsiang & Wu at [21]. Prior to that case, this issue was considered by the full Court in Waugh and Waugh (2000) FLC 93-052 and Mullen and De Bry (2006) FLC 93-293.
In Waugh and Waugh, the Full Court said at [45]-[46]:
45.With respect to the trial Judge, it appears to us that he did not have in mind any of the principles enunciated by their Honours of the High Court in the cases to which we have referred when he came to determine the proceedings before him or, if he did, he did not consider or apply them to the facts of the case as disclosed by the evidence in those proceedings. In particular, we are unable to perceive, from anything said by his Honour in his reasons for judgment delivered on 9 September, 1999, or from anything which he said in the course of the hearing on 22 and 25 June, 1999, that he considered whether the injunctions which he ultimately granted were necessary, and went no further than necessary, to prevent the abuse or frustration of the court’s process in relation to the matter within its jurisdiction, particularly having regard to the nature of the wife’s claim in the property proceedings. Rather, in his approach to the proceedings before him, his Honour seems to have started from the position that the wife was entitled to have “proper security in relation to [ the husband’s] property which of course will all be on the table in the case” (transcript of 22 June, 1999 at Appeal Book p 176 line 5), and that it was his aim, unless “persuaded by one of [ the parties’ counsel] that there is something absolutely extraordinary about this case” to “secure the wife and let the husband to continue [sic.] to reasonably but not hazardously, trade”. (Appeal Book p 176 line 26).
46.Whilst his Honour certainly seems to have considered issues of balance of convenience and hardship between the parties, it seems to us, with respect, that he did not give consideration to the fundamental question whether there was any evidence of any intention by the husband to dispose of any assets pursuant to any scheme to defeat any judgment which the wife might obtain in the substantive proceedings, or whether he merely wished to continue to trade, as he always had done, prior to and since the separation of the parties.
The Full Court continued at [52]-[53] and [56]-[57] as follows:
52.Had there been some clear evidence given by the wife (even if denied by the husband) of some disposition of property by the husband, or other conduct by him from which an inference might reasonably be drawn that he had embarked, or was about to embark, upon a course of action which was designed to or, irrespective of design, would be likely to defeat any anticipated order in the substantive proceedings in the wife’s favour, then perhaps we might be persuaded to uphold his Honour’s orders notwithstanding his failure to identify the factual basis (whether attested to by the wife or inferred by his Honour) upon which he proceeded in so doing. However, in our respectful opinion, there was no such clear evidence.
53.The wife’s affidavit in support of her application was replete with statements that she “feared” the husband would do this or that with the property under his control, or with one or other of the trusts through which he conducts his business operations, but it contained no assertion that he had in fact disposed of anything or incurred any liability other than in the ordinary course of his business operations…
…
56.In paragraph 26 of her affidavit (at Appeal Book pp 67-68) the wife asserted a conversation with the husband in “mid May 1999” in which, in response to his request to her to remove a caveat which she had lodged over a property at Arthur Street, North Sydney, she requested certain information from him, to which he responded:—
“I am not going to tell you anything. I have instructed my lawyer not to reply. I will do what I like. I’ll let it all go and you will get none of it. It can all go to tax and the bank.”
57.That piece of evidence (denied by the husband in his affidavit — at Appeal Book p 161) represents the high water mark of the wife’s evidence, in so far as it might be relied upon as basis for an inference that the husband was likely to dissipate his assets, in order to defeat the wife’s claim in the substantive proceedings, unless restrained from doing so by order of the Court. However, in our view, that evidence is not sufficient to support such an inference, nor did his Honour make a finding that it did.
However, as was subsequently made clear by a differently constituted Full Court in Mullen and De Bry, those passages in Waugh and Waugh must be read in the context of earlier passages in that case at [30]-[31]:
30.… We consider that in seeking to apply, in proceedings under the Act, principles developed in other jurisdictions (including principles relating to grant or refusal of “Mareva” injunctions) care should be taken to ensure that sight is not lost of the essential differences which may exist between the proceedings in this Court to which it is being sought to apply those principles and the type of proceedings in other jurisdictions out of which those principles have sprung.
31.For example, we think that it is important to bear in mind that there may be a distinction to be drawn between proceedings at law for a debt or damages in which the plaintiff seeks a “Mareva” injunction to restrain the defendant from dissipating assets to which it is expected that resort might ultimately be had to enforce a judgment obtained in the proceedings, and proceedings under s 79 of the Act in which one spouse seeks an interlocutory injunction to restrain the other from dissipating assets which, although not the subject of a specific claim under s 79, represents property of the parties to the marriage, or one of them, to which the applicant spouse claims to have made a relevant contribution, under s 79(4)(a), (b) or (c) of the Act. In the latter case, there is an essential connection between the substantive proceedings and the relevant property, notwithstanding that the applicant spouse may not seek an order altering the parties’ interests in that property in his or her favour, but only the payment of a lump sum of money as a “settlement”. That essential connection between the property and the proceedings may not, and usually does not exist in the case of proceedings for a “Mareva” injunction in other jurisdictions.
In Mullen and De Bry at [41], Full Court said:
… we do not consider that the Full Court in Waugh intended to prescribe as a “fundamental” or “threshold” question whether a scheme to defeat judgment exists, to be answered in the affirmative on the balance of probabilities in every case, before an order preserving property is made.
In relation to the comments of the Full Court in Waugh and Waugh at [30]-[31], the Full Court in Mullen and De Bry said at [43(b)]:
… If anything, these remarks imply a more liberal approach in applications in the Family Court for preservation of property than at general law, rather than a more restrictive one, which, if what was said in paragraph 46 of Waugh was taken as laying down a threshold question to be answered in every case, is what such an approach would constitute.
Referring to the decisions of the High Court in Jackson v Sterling Industries Ltd (1987) 162 CLR 612 and Cardisle v LED Builders Pty Ltd (1999) 198 CLR 380, the Full Court in Mullen and De Bry said at [43(c)]:
… We see nothing in the examination in Waugh of these High Court decisions which amounts to the formulation of a principle that it must be established in all such cases that there is a scheme to defeat a judgment in substantive proceedings.
The Full Court in Mullen and De Bry further said at [44]:
Significantly, in our view, all that was said in Waugh in paragraph 46 was that the trial Judge did not consider “…the fundamental question whether there was any evidence of any intention by the husband to dispose of any assets pursuant to any scheme to defeat any judgment.”
Their Honours did not say that the trial Judge had to find on the balance of probabilities, as a matter fundamental to success, that there was such a scheme.
Put another way, all that the Court said in Waugh was that the trial Judge had taken a fundamentally flawed approach and ought have addressed the question of whether there was any evidence of intention, as part of an enquiry into the risk of disposal of assets to defeat judgment.
We acknowledge that the words emphasised were not included in the statement in paragraph 46 in Waugh. But for the reasons we have already given, and which follow, we do not think that the Court there meant what was said in paragraph 46 to be a complete statement of the test, but rather as descriptive of the error made in that case by the trial Judge.
(Emphasis in original)
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)
I have carefully read and considered the wife’s affidavit filed on 18 October 2022, in support of her Response to the husband’s Application in a Proceeding. Remarkably (for an affidavit drawn by a lawyer), it is entirely devoid of any evidence that would support the making of the interlocutory injunction she seeks. At its highest, her evidence (at [10]-[11]) is that, on 5 September 2022 and 27 September 2022, she instructed her lawyer to seek details of the equity in real property so that she could consider her position, as she considered she was unable to do so absent the provision of documentation; that there was no response by the husband; and that, accordingly, she does not believe that she was or is in any position to accede to his request for the removal of her caveats.
The wife’s solicitor’s written submissions do not further assist either her or the Court. As referred to above, at [16] thereof, after submitting that given the “explicit direct financial contributions to both properties” asserted by the wife, “it could not be seriously contended by the [husband] that the [wife] does not have an interest in the land/properties on the grounds claimed”, namely, a constructive trust, it is submitted that:
It therefore follows that the [wife] has the interest she claims and there is a serious question to be tried. The real issue, as it is capable of being discerned, is directed to the quantification of the [wife’s] claim.
As I have observed above, in relation to the caveats, nowhere in these proceedings has the wife claimed an interest in the H Street or W Street. Her only claim is to an unparticularised just and equitable division of unspecified assets pursuant to s 90SM of the Act.
It is submitted on behalf of the wife, in her solicitor’s written submissions at [22], that the husband “has explicitly articulated his intention to dissipate the proceeds of sale to third parties without it any explanation of the legal right to do so”. This submission is wrong in two respects.
First, the evidence on behalf of the husband is that, having been remanded in gaol since mid-2022, he has been unable to earn an income to pay his debts, including the increased interest rates in respect of his property loans and the private school fees for the child of his marriage; that he is indebted to his solicitors on the record in these proceedings in the sum of $260,561 and for counsel’s fees in the sum of $87,068; and that he wishes to sell H Street or W Street in order to realise funds necessary to pay his outstanding debts and for his defence in the current criminal proceedings which are listed for a contested mention in early 2023. In my view, that falls far short of the kind of dissipation to which the Full Court referred in Waugh and Waugh, Mullen and De Bry and Tsiang & Wu.
Secondly, as discussed above, the “explanation of the legal right” of the husband to so deal with the proceeds of sale of H Street and W Street is that he is the sole registered proprietor of the former property and a tenant-in-common, together with his brother, of the latter property and therefore entitled at law to the proceeds of sale of his interests in those properties.
Given the surprising absence of any evidence in support of the wife’s application for an injunction in relation to the proceeds of sale of the relevant properties, that application ought similarly to fail, but for one matter. In Waugh and Waugh at [40], the Full Court referred to Jackson v Sterling at p.617–618, where Wilson and Dawson JJ said, of the “limits of the remedy” of a Mareva injunction, as follows:
Its use must be necessary to prevent the abuse of the process of the court. As Ackner LJ pointed out in A J Bekhor & Co Ltd v Bilton [1981] QB 923 at pp 941–2 , the Mareva injunction represents a limited exception to the general rule that a plaintiff must obtain his judgment and then enforce it. He cannot beforehand prevent the defendant from disposing of his assets merely because he fears that there will be nothing against which to enforce his judgment nor can he be given a secured position against other creditors. The remedy is not to be used to circumvent the insolvency laws.
Nevertheless, for whatever reason, in the written submissions on behalf of the husband, it is submitted at [21] that he has “provided comfort to the [wife] that even if she can establish a claim under s 90SM there is still money available from which she can be paid”. Further, counsel for the husband tendered a letter dated 26 October 2022 to the wife’s solicitor (Exhibit DFH‑1) in which his solicitor similarly asserted twice that “there is sufficient equity to satisfy any claim” by the wife.
In this regard, I was referred by the solicitor for the wife and by counsel for the husband to [74] of the wife’s affidavit sworn on 27 April 2021 (filed on 28 April 2021), some 18 months ago, which commences: “To the best of my knowledge, the following is a table of our assets and liabilities with estimated values”. Other than a superannuation entitlement of the wife in the order of $3,000, she identifies, and ascribes value to, assets said by her to total $5,550,000 (but which, in fact, total $4,450,000). It is unclear whether she has erred in her calculation or has omitted an asset or assets to which she ascribes a total value of $1,100,000. Further, she identifies only two liabilities totalling approximately $640,000. Thus, on the wife’s evidence, the net value of the assets the subject of her s 90SM(1) claim is in the order of $3,810,000 (assuming the gross value of the assets is, in fact, $4,450,000, and not $5,550,000 as possibly mistakenly calculated in paragraph [74]), of which H Street’s value is estimated by her to be $800,000 (unencumbered) and the husband’s one-half interest in W Street is valued at $350,000, less his one half share of the mortgage in the order of $40,000.
However, in the letter dated 26 October 2022 (Exhibit DFH-1), the husband’s solicitor refers to evidence that is even more out of date, namely, his Financial Statement sworn and filed on 17 April 2020, more than 2.5 years ago, in which the husband ascribes materially different amounts to the value of assets and the quantum of liabilities and, in particular, a substantially lesser net asset pool.
In Waugh and Waugh, in setting aside the interlocutory injunction made by the primary judge, the Full Court said at [58] – [59]:
58.Moreover, the wife’s application did not fall to be considered by his Honour on the basis that the husband was simply resisting it and offering nothing by way of security to the wife in respect of her property claim. On the contrary, at the hearing on 22 June, 1999, the husband’s counsel, Mr Harding (at Appeal Book p 183), offered the following undertaking by his client, in support of his application to discharge the existing orders of the Judicial Registrar and dismiss the wife’s application, and for an order that she remove caveats which she had lodged over certain trust properties:—
“And that the husband, through me, would give an undertaking to the court, he being the director of the relevant company, that is 157 Pty Limited, that he would not, until further order, cause a company on behalf of the trust to enter into any unconditional contract for sale of the property 157 Anne Street Brisbane without giving to the wife’s solicitors 21 days notice in writing and that similarly until further order he would, as a director of the trustee company, not vote in favour of any increase or cause there to be any increase in the secured borrowings beyond the present level of 8.82, that is $8,820,000. We see, your Honour, the rationale there to be that that would give the wife a security in terms of value and real estate which would match, indeed slightly exceed, that which she is seeking by her application for final orders, the $500,000 in the Queen Street property plus $4,680,000 in the Anne Street property.”
The reference by counsel to “the Queen Street property” is a reference to a property acquired by the wife using the $560,000 paid to her by the husband under the partial settlement agreement previously referred to, in which it was estimated that she had an equity of about $500,000.
59.At the continued hearing before his Honour on 25 June, 1999, the husband’s then counsel (Mr Lloyd) went even further and amended the husband’s response in such a way as to actually seek an order restraining his client from causing, either the property at 157 Anne [sic.] Street, Brisbane, or the property at 10/122 Arthur Street, North Sydney, to be sold, transferred, further encumbered or otherwise dealt with without the consent in writing of the wife or an order of the Court (see Appeal Book p.209 line 40 to p.210 line 34 and p.214 lines 1-12). In addition (at Appeal Book p.212 line 30) Mr Lloyd advised his Honour that, if his Honour were minded to make orders in the form proposed by his client’s amended response, his client would also undertake “not to undertake any new projects”
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.
I certify that the preceding sixty-six (66) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Strum. Associate:
Dated: 17 November 2022
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