Qian & Xue
[2022] FedCFamC1A 93
•21 June 2022
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1) APPELLATE JURISDICTION
Qian & Xue [2022] FedCFamC1A 93
Appeal from: Xue & Qian [2021] FedCFamC2F 695 Appeal number(s): NAA 91 of 2021 File number(s): BRC 11124 of 2019 Judgment of: ALDRIDGE J Date of judgment: 21 June 2022 Catchwords: FAMILY LAW – APPEAL – Application for leave to appeal – Appeal against an order which required the appellant to pay a sum of money to the trust account of the solicitors for the respondent and an indemnity costs order – Interim freezing order – Where the appellant received a sum of money and transferred the majority of it to her family members – Where the freezing order exposed the appellant to the risk of punishment for contempt in the event it was not complied with – Freezing orders operate to preserve the status quo – Error of law – No basis for the indemnity order upon the success of the appeal – Leave to appeal granted – Appeal allowed – Relevant orders set aside – Respondent to pay the costs of the appellant in a fixed sum. Legislation: Family Law Act 1975 (Cth) Cases cited: Blueseas Investments Pty Ltd v Mitchell and McGillivray (1999) FLC 92-856; [1999] FamCA 745
Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18
Deputy Commissioner of Taxation v Huang (2021) 395 ALR 616; [2021] HCA 43
Jackson v Sterling Industries Ltd (1987) 162 CLR 612; [1987] HCA 23
Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar the Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42
Medlow & Medlow (2016) FLC 93-692; [2016] FamCAFC 34
Metwally v University of Wollongong (1985) 60 ALR 68; [1985] HCA 28
National Australia Bank Ltd v Bond Brewing Holdings Ltd [1991] 1 VR 386
Suttor v Gundowda Pty Ltd (1950) 81 CLR 418; [1950] HCA 35
Teo & Guan (2015) FLC 93-653; [2015] FamCAFC 94
Number of paragraphs: 54 Date of hearing: 7 June 2022 Place: Sydney (via video link) Counsel for the Appellant: Mr Hackett Solicitor for the Appellant: Evans Brandon Family Lawyers Counsel for the Respondent: Mr Alexander Solicitor for the Respondent: Hey Family Law ORDERS
NAA 91 of 2021
BRC 11124 of 2019FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
DIVISION 1 APPELLATE JURISDICTIONBETWEEN: MS QIAN
Appellant
AND: MR XUE
Respondent
ORDER MADE BY:
ALDRIDGE J
DATE OF ORDER:
21 JUNE 2022
THE COURT ORDERS THAT:
1.The appellant is granted leave to appeal.
2.The appeal is allowed.
3.Order 2(c) and Order 5 made on 22 November 2021 are set aside.
4.The appellant deposit the sum of $100,000 into the trust account of [W Law Firm] to be held on trust for both parties and not disbursed without further court order or written agreement between the parties.
5.The respondent is to pay the appellant’s costs fixed in the sum of $5,436.56.
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).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Qian & Xue has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
Amended pursuant to r 10.14(b) of the Federal Circuit and Family Court of Australia (Division 1) Rules 2021 (Cth) on 22 June 2022
ALDRIDGE J:
INTRODUCTION
This is an application for leave to appeal and if leave be granted, to appeal against an order made by a judge of the Federal Circuit and Family Court of Australia (Division 2) on 22 November 2021, which required the appellant, Ms Qian (“the wife”) to pay $850,000 to the trust account of the solicitors of Mr Xue (“the husband)” within seven days.
The parties are engaged in property settlement proceedings which have been on foot since late 2019. The above order was part of a suite of interim freezing orders dealing with the proceeds of a shareholders’ dispute between the wife and a third party over their interests in B Pty Ltd. The wife received the sum of $850,000 from the third party on 30 August 2021. On 1 September 2021, she transferred $735,000 to her brother, sister and father, all of whom live in China, in varying amounts.
The complete order was:
2. That in the event the [wife] has received any settlement funds, personally or in her capacity as director of [B] Pty Ltd … or as trustee for the [X] Family Trust, the [wife], in all said capacities, shall:
a. Be restrained by injunction hereby granted from disbursing, distributed, or otherwise dealing with the said funds;
b. Forthwith provide full and frank disclosure of application of any funds received, either on a partial or final basis, inclusive of deposits slips, receipts and statements of accounts; and
c. Within 7 days of todays’ date the [wife] pay to the trust account of Hey Family Lawyers the sum of $850,000.
3. That all funds received to the Hey Family Trust Account be held upon trust for both parties and not disbursed without further Court Order or written agreement between the parties.
Although the appeal is more widely drafted, it is effectively only against Order 2(c).
There was no issue that the balance remaining in the wife’s hands should be held pending the trial. The wife also appeals against Order 5, which is the indemnity costs order which required her to pay $18,476 to the husband.
Leave to appeal will be granted and the two orders are set aside for the following reasons.
BACKGROUND
The parties met in 2012 and lived together for a short period in 2013. The parties were married in late 2015 and separated in early September 2017 (according to the husband) or in early October 2017 (according to the wife).
Despite the shortness of the relationship and the fact that at its commencement neither party had any significant assets nor earned any income of great significance, the parties managed to acquire several properties whilst it subsisted, often with the help of their relatives.
The husband’s evidence was that a property at Town C was purchased in July 2018 for $1,050,000 and registered in the wife’s name. The husband says that the wife sold the property in December 2018 to a friend of her father for $800,000, without informing the husband.
The wife agreed that the property was sold for $800,000 and that she transferred $667,00 from the sale proceeds to her parents in repayment of loans made prior to and during the marriage (Wife’s affidavit filed on 20 November 2019, paragraph 9(v)).
The husband filed an Initiating Application seeking property settlement orders on 16 September 2019.
The husband deposed that he became aware on 17 August 2021 that the Supreme Court of Queensland proceedings over the shareholding in B Pty Ltd had been resolved (Husband’s affidavit filed on 24 August 2021, paragraph 4) and that as a result the wife was to receive a payment of $850,000. The wife’s solicitors were asked to confirm this by a letter sent on 19 August 2021. There was no reply and on 24 August 2021 the husband filed an Application in a Case seeking an urgent injunction restraining the wife from dealing with the proceeds of the action.
For reasons that are not apparent, no application for interim ex parte relief was made, for which, in the circumstances, there would have been justification and instead, rather perplexingly, the application was listed for hearing on 22 November 2021. At that hearing, an oral application was made so as to expand the application to include the order for the return of the funds.
The wife received $850,000 on 30 August 2021. The next day she withdrew $15,000 and paid it to her brother in part repayment of a loan. She said that this payment occurred before the cheque for the deposit cleared.
On 1 September 2021, a further $20,000 was withdrawn and paid to her brother, which was the balance of the loan. On the same day the wife withdrew $50,000 and $650,030 (including a $30 bank fee) which she paid to her sister and father respectively for repayment of loans and, in the father’s case, a further $463,000 to support his business which was struggling as a result of COVID-19.
There is no suggestion that the deposit was anything other than the wife’s money or that the payments were in breach of either a court order or undertaking. Rather, the basis for the injunction that was sought was that any disposition of the funds would put them beyond the jurisdiction of the court and diminish the property pool available for distribution.
It is convenient to commence with Ground 1(b). I shall deal with the question of leave to appeal, which is required as the order is interlocutory, in due course.
Did the primary judge err in making an order for the payment of $850,000, when the funds available to the wife at the time were $117,000? (Ground 1(b))
It is clear enough, as is accepted by the wife, that there was some basis for making a freezing order against the funds still held by the wife.
As to the money transferred to the wife’s brother, sister and father, the primary judge found:
·The return of the funds was necessary to protect the property pool (at [7]);
·At the time of the payments, the wife was aware of the injunction sought in the husband’s Application in a Case (at [8]);
·There was no evidence that the wife was required to make the payments (at [9]); and
·There was no evidence that justified the amount of the payments (at [10]–[12]).
This led to the following conclusion:
13.I am not satisfied that the making of an order that she refund the sum of $850,000 disbursed by her without the consent of the husband or order of this court is an order that cannot be complied with, because she adduces no evidence to suggest that there was any pressing need for the moneys to be paid and no evidence from any relative to the effect that they have disbursed those funds and are therefore not in a position to repay those moneys to her. It will be a matter for her to take up with them the repayment of those moneys to her.
Unfortunately, such an approach is not consistent with principle.
In Jackson v Sterling Industries Ltd (1987) 162 CLR 612, Deane J, with the agreement of Mason CJ, Wilson, Brennan and Dawson JJ said at 625:
There are three related grounds upon which these combined orders are susceptible of attack. First, they required the appellant to pay into court not money identified as being within his possession but money which he was required to provide or obtain regardless of source. Secondly, they go beyond a mere order for the preservation of assets pending judgment or execution in that they specifically required that the money be paid into court as “security”. Thirdly, they failed to identify either what the money paid “to any Registrar” was to secure or what the entitlement of the appellant (or anyone else) was in relation to it after it has been so paid. Put in positive form, it appears to me that, when an order for the preservation of assets goes beyond simply restraining the defendant from disposing of specific assets until after judgment, it must be framed so as to come within the limits set by the purpose which it can properly be intended to serve. That purpose is not to create security for the plaintiff or to require a defendant to provide security as a condition of being allowed to defend the action against him. Nor is it to introduce, in effect, a new vulnerability to imprisonment for debt, or rather for alleged indebtedness, by requiring a defendant, under the duress of the threat of imprisonment for contempt of court, to find money, which he may or may not have (whether or not at some point of time it may have been available to him), to guarantee to a plaintiff that any judgment obtained will be satisfied. It is to prevent a defendant from disposing of his actual assets (including claims and expectancies) so as to frustrate the process of the court by depriving the plaintiff of the fruits of any judgment obtained in the action. It may be appropriate in a rare case that such an order requires the defendant actually to deliver assets to a named person…
(Emphasis added)
A freezing order “operates to preserve the status quo and not to change it in favour of the party who seeks the order” per Gageler, Keane, Gordon and Gleeson JJ in DeputyCommissioner of Taxation v Huang (2021) 395 ALR 616 at [29] (emphasis added).
The order made by the primary judge for the payment of $850,000 exposed the wife to the risk of punishment for contempt in the event it was not complied with, and indeed, the husband has brought such an application.
As Deane J explained, the purpose of a freezing order is to maintain the status quo and not to improve the security position of the applicant or to render the respondent liable for imprisonment for debt. The order should only have been considered if it was clear that it could be complied with, for example, where the transferred funds were in an account under the wife’s control.
It follows, in my opinion, that the wife did not need to adduce evidence to show that her relatives were unable to or would not return the funds. As an aside, the criticism that the wife had failed to adduce such evidence was somewhat unfair, because, any need to do so only arose on the day of the hearing when the application for the return of the funds was first made, but also accepting that no application for adjournment was sought.
It also has to be accepted that whilst there may have been a basis to prevent the funds from being transferred, absent an order from the Court preventing her from doing so, the wife was free to deal with her funds as she saw fit. The wife did not need an order from a court permitting her to do so.
The primary judge assumed that the wife could recall the funds paid, at will. Presumably this was because there was no satisfactory evidence establishing the existence of loans and there was some evidence (for example, the wife’s Financial Statement) which suggested that there were none. Accepting that to be so, it does not follow that the sister, brother and father could repay the funds which they may have spent or would do so as they may feel they were entitled to retain the funds.
A person is entitled to deal with their assets as they see fit unless there is a legal obligation preventing them from doing so.
The fact that an injunction could have been obtained preventing that person from transferring funds, but was not, does not automatically lead the proposition that, having permissibly done so, they must now reacquire the funds and possibly be held in contempt for not succeeding in doing so. As Deane J explained, that is not the purpose of a freezing order.
The husband submitted that Order 2(c) was not a freezing order and that the above principles do not apply. In my opinion, reading Order 2 as a whole, it clearly was.
This is sufficient to dispose of the appeal. It will be allowed and Order 2(c) set aside.
I shall therefore deal only briefly with the other grounds.
Did the evidence before the Court establish the necessity for the order? (Ground 1(a))
It is to be recalled that the purpose of a freezing order is to ensure that the exercise of the Court’s jurisdiction is not frustrated by the removal of assets. Such an order should do the minimum disturbance necessary (Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at [124]).
The wife submitted that the assets remaining in Australia were more than enough to meet any appropriate claim by the husband, particularly having regard to the very short marriage and the extensive assistance from the parties’ parents.
Counsel for the wife prepared a balance sheet which sought to demonstrate that the net assets available for division in Australia ranged between $7.5–8.5 million, however it was a contentious document and nothing like it was placed before the primary judge. For those reasons I accord it little weight.
More to the point, was the wife’s evidence that three of the properties were in the hands of a bank as mortgagee in possession. It was owed a total of $1,760,000. Valuations conducted in January 2020 gave a combined value to the properties of $2,750,000, leaving a significant surplus.
Whether such an amount is sufficient to meet the husband’s claim was never explored.
More importantly, a freezing order is only justified if, without it, the exercise of the Court’s jurisdiction would be frustrated. That required a consideration of the nature and extent of the husband’s claim and whether the remaining assets were sufficient to meet it. If so, there was no basis for the order for return of the funds.
There is some force in this argument as the primary judge did not undertake such a consideration but this is lost once it is accepted that this issue was not raised before her Honour.
In Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar the Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66, Gummow A-CJ, Kirby, Hayne and Heydon JJ said:
120.…when a court is invited to make a discretionary decision, to which many factors may be relevant, it is incumbent on parties who contend on appeal that attention was not given to particular matters to demonstrate that the primary judge’s attention was drawn to those matters, at least unless they are fundamental and obvious.
There would therefore be some difficulty with this ground succeeding. See also Metwally v University of Wollongong (1985) 60 ALR 68; Suttor v Gundowda Pty Ltd (1950) 81 CLR 418.
What was the effect of the absence of the usual undertaking as to damages? (Ground 1(c))
It may be accepted that, generally speaking, the giving of the usual undertaking as to damages is the usual course when obtaining an interlocutory injunction (National Australia Bank Ltd v Bond Brewing Holdings Ltd [1991] 1 VR 386 at 559–561). There may be more leeway in applications under the Family Law Act 1975 (Cth) (Blueseas Investments Pty Ltd v Mitchell and McGillivray (1999) FLC 92-856).
Here, both parties were legally represented. An undertaking as to damages was neither proffered nor sought.
In these circumstances the following words from Teo & Guan (2015) FLC 93-653 are apt:
155.The first draws attention to the failure of the wife to provide an undertaking as to damages. Counsel for the husband conceded that no undertaking had been sought by the husband, nor was the primary judge asked to take into account the fact that no undertaking had been proffered. We consider these concessions fatal to the complaint: Blueseas Investments Pty Ltd v Mitchell and McGillivray (1999) FLC 92-856 at [46]–[57].
This ground does not succeed.
What was the effect of the lack of a “carve out” for the wife’s reasonable living expenses and legal costs? (Ground 1(d))
It is clear that in framing freezing orders a court may take into account the respondents need for living expenses and legal costs so as to permit the continued payment of them.
The difficulty for the wife is that she did not seek any such orders from the primary judge. There is no evidence as to the need for such an order.
As the point was not raised and as evidence could have been called on the point if it had been raised, it is now too late to do so.
This ground fails.
The remaining grounds (Grounds 2 and 3)
Ground 2 is the mirror image of Ground 1 but as to the dismissal of the wife’s response. It needs no further consideration.
Ground 3 raises the indemnity costs order. Counsel for both parties accepted that if Order 2(c) was set aside there was no basis for the making of the costs order. It too will be set aside.
In her Response to the Application in a Case, the wife proposed that the remaining proceeds of the Supreme Court of Queensland action, $100,000, be paid to the trust account of her solicitors and not to be disbursed without an order of the Court or the written agreement of the parties. I understand the payment has occurred. To formalise matters it is appropriate that this order be made.
CONCLUSION AND COSTS
It can be seen from the above that the decision of the primary judge was erroneous and that a substantial injustice would result if leave to appeal was to be refused (to paraphrase Medlow & Medlow (2016) FLC 93-692 at [57], somewhat to give effect to the above finding). Leave to appeal will be granted.
The appeal has been successful. Counsel for the husband properly conceded that the costs order sought was just in the circumstances. The husband will be ordered to pay the wife’s costs fixed in the sum of $5,436.56.
I certify that the preceding fifty-four (54) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Aldridge. Associate:
Dated: 21 June 2022
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