Sam and Kim and Ors

[2009] FamCA 819

FAMILY COURT OF AUSTRALIA

SAM & KIM AND ORS [2009] FamCA 819

FAMILY LAW - PROPERTY SETTLEMENT – TERMS OF SETTLEMENT – INJUNCTIVE RELIEF OF THIRD PARTIES – APPLICATION OF LAW – Established that there was a relevant nexus between third party interests and matrimonial cause constituted by s 4 (ca)– Third party submissions for part of the matrimonial funds to be retained by injunctive order upheld

Family Law Act 1975 (Cth) s 4(f)

Spry & Kennon (2008) 83 ALJR 145

APPLICANT: Ms Sam

FIRST RESPONDENT:	Mr Kim
FOURTH & FIFTH RESPONDENTS:	Mr Sat and Ms Kop
SIXTH RESPONDENT:	Mr Chu trading as D Lawyers

FILE NUMBER: PAF 649 of 2005

DATE DELIVERED: 11 August 2009

PLACE DELIVERED: Parramatta

PLACE HEARD: Parramatta

JUDGMENT OF: Coleman J

HEARING DATE: 11 August 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Sansom

SOLICITOR FOR THE APPLICANT: Champion Legal

COUNSEL FOR THE FIRST RESPONDENT: Ms Ghabrial

SOLICITOR FOR THE FIRST 

RESPONDENT:

COUNSEL FOR THE FOURTH AND FIFTH RESPONDENTS: Adams & Co Lawyers

SOLICITOR FOR THE SIXTH RESPONDENT: D Lawyers

Orders

1. That orders be made in accordance with the document headed Terms of Settlement marked as Exhibit “X” and annexed hereto.

2. That 55 per cent of the monies payable to the husband pursuant to Order 1(b) of the orders made this day be retained by Champion Legal Pty Ltd in an interest accruing account pending further order of this Court or any other court of competent jurisdiction PROVIDED THAT unless within 28 days of this date the 4^th and/or 5^th respondents file and serve an application supported by affidavit evidence challenging the entitlement of the 6^th respondent to receive the balance of the monies payable to the husband pursuant to Order 1(b) of the orders made this day such injunctive order be discharged without further order of the Court.

3. That the costs of 4^th, 5^th & 6th respondents in the proceedings between them be reserved.

4. That the matter be stood over to 26 October 2009.

5. That by no later than 19 October 2009 the parties are to have filed all evidence upon which they rely and to have given discovery and inspection of all relevant documents.

IT IS NOTED that publication of this judgment under the pseudonym Sam & Kim and Ors is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT PARRAMATTA

FILE NUMBER: PAF649 of 2005

MS SAM

Applicant

And

MR KIM

First Respondent

And

MR SAT

Fourth Respondent

And

MS KOP

Fifth Respondent

And

MR CHU TRADING AS D LAWYERS

Sixth Respondent

REASONS FOR JUDGMENT

1. Listed for trial commencing this day were proceedings between the husband and wife with respect to the property of the husband or wife or the joint property of them. In the course of those proceedings coming to trial a number of third parties became involved for various reasons which, broadly speaking, could be described as seeking to protect existing legal rights or asserted legal rights, or to protect legal rights which have yet to be declared or confirmed but which are asserted.

2. The dispute between the husband and wife was resolved by terms of settlement which were presented to the Court this morning by Counsel appearing for the wife. Without objection from any of the other respondents, orders were made in accordance with those terms of settlement.

3. At that point and upon the making of those orders, the matrimonial cause constituted by proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them, being proceedings which either arose out of the marital relationship or were in relation to concurrent pending or completed divorce proceedings, was concluded.

4. For the Court to retain jurisdiction it is necessary to consider whether by virtue of Section 4(f) of the Family Law Act 1975 (Cth) (“the Act”) the Court has jurisdiction to entertain the competing applications to which reference will shortly be made.

5. Section 4(f) relevantly refers to any other proceedings in relation to completed proceedings of a kind referred to in paragraphs (a) to (eb) of s 4 of the Act. Section 4 of the Act includes s 4(ca) to which reference was made a few moments ago. Section 4(ca) clearly falls between paragraph (a) and (eb) of s 4 of the Act.

6. That is not, however, the end of the matter because, as s 4(f) makes clear and the decisions in the High Court in relation to the jurisdiction thereby potentially enlivened confirm, a necessary ingredient of a matrimonial cause pursuant to s 4(f) is a relationship with the, in this case, completed proceedings for settlement of property. The words in the section “in relation to” have been considered by the High Court on numerous occasions, not the least but perhaps the last to date being in the judgment of Keiffel J in Spry & Kennon (2008) 83 ALJR 145 in the High Court.

7. The Court concludes that there is a relevant nexus between the applications to which reference will shortly be made and the completed matrimonial cause constituted by the property settlement proceedings between the parties which clearly fell within the ambit of s 4(ca).

8. Why that is so is essentially as follows. In the course of the matrimonial cause between the parties to the marriage with respect to their property, the various parties now in dispute intervened or otherwise were drawn into the proceedings, to use a neutral term, in order to seek to advance or protect their legal rights or anticipated legal rights. 

9. Had the proceedings with respect to the property of the parties to the marriage been agitated to judgment, as would have been the case but for the terms of settlement which were filed in Court this morning, pursuant to the provisions of Part VIII of the Act as they now operate, the Court would have been obliged to consider the claims and entitlements of judgment creditors and/or others with, as the s 79 refers to it, an interest or asserted interest. In other words, had the proceedings gone forth on the fully contested basis which existed prior to the resolution of the dispute between the husband and wife, the entitlements of the various third parties would have been agitated, and determined.

10. The issue which requires consideration at present is limited to interlocutory injunctive relief, albeit part of that relief involves, arguably, making a mandatory injunction. It does not extend to finally determining the rights of third parties, and if it did the Court would be disinclined to exercise the jurisdiction, so tenuous being the relationship that the dispute between creditors, potential or actual, would bear to the matrimonial cause which provided the basis upon which s 4(f) could be attracted.

11. In short, the orders in the matrimonial cause within s 4(ca) provide that the husband receive what has been clarified to be a sum of approximately $407 000 after the payment out of moneys referred to in the orders to a third party, the fifth respondent. That $407 000 the husband has purported to vest in his, I think I am correct in saying, former solicitor and it is asserted by Mr Chu to be payable to him in its entirety in partial satisfaction of legal fees owed by the husband to Mr Chu, which Mr Chu asserts approximate $540 000.

12. Mr Chu relies, according to the comprehensive and, with respect, closely reasoned submissions of his Counsel, on a number of bases for his assertion that he has security over the moneys which passed to the husband pursuant to the consent orders made earlier today. It is unnecessary to refer for present purposes to any of the grounds upon which Mr Chu claims to be entitled. The merits of those various assertions are potentially a matter for determination at another time, and in somewhat differently constituted proceedings. Mr Chu, through his Counsel, asserts in the alternative that no injunctive order should be countenanced by this Court which would have the effect of denying Mr Chu receiving and retaining the moneys which passed to the husband pursuant to the consent orders.

13. The fourth and fifth respondents are both third parties. The fourth respondent, according to the submissions of learned Counsel representing the fourth respondent, is expecting to receive a verdict for civil damages with judgment accordingly against the husband in the sum of approximately $150 000 and consequent upon such verdict, receiving costs which Counsel asserts are likely to approximate $250 000. When that will happen, if it ever does, it could not realistically be suggested with any certainty, given the complicating factors to which Counsel for the fourth respondent and/or the sixth respondent, Mr Chu, have referred during the course of submissions today.

14. The fifth respondent whose judgment debt is to be satisfied by virtue of the payment referred to the consent orders, has a costs claim yet to be determined. Having obtained a verdict, there does not seem to be much doubt that a costs order will be made in favour of the fifth respondent against the husband in the now concluded District Court civil proceedings.

15. Where the parties disagree is as to the likely quantum of those costs. Counsel for the sixth respondent asserts $12 000. Counsel for the fourth respondent submits approximately $250 000.

16. A number of matters emerge from what is understandably a somewhat complicated factual and at times understandably less than subjectively agitated dispute. The long and the short of it is that if Mr Chu is entitled, whether as a secured creditor or otherwise, to $540 000, the best he can hope for is a substantial part of his indebtedness being satisfied. Conversely, if their best hopes are fulfilled, the fourth and fifth respondents together may become entitled to receive $650 000.

17. There are a number of possible outcomes of these competing claims when they are ultimately determined by the Court having the misfortune to be charged with that duty. It is self-evident that out of approximately $400 000 claims of $540 000 and perhaps as much as $650 000 cannot possibly all be satisfied in full. Although it might not be conceded by all of the parties, because objectively very little consensus has emerged during the course of debate today, it is sufficiently clear for present purposes to find that if Mr Chu succeeds in his assertion that he is a secured creditor of the husband, on whatever of the various bases he asserts, to use the colloquial, he will “get the lot”.

18. On the other hand, if there is a successful challenge to Mr Chu’s entitlement as a secured creditor as foreshadowed and with respect, as there would have to be if the fourth and fifth respondents are to have any chance of ever accessing any part of the husband’s $400 000, the position would become that Mr Chu would be an unsecured creditor, as the fourth and fifth respondents are and would also be.

19. Whether it be by way of bankruptcy, as would seem virtually inevitable, or otherwise, there seems little doubt that if Mr Chu, contrary to his contention and the documentation and evidence upon which he relies in support of it, is ultimately held not to be entitled as a secured creditor, the Court apprehends that $400 000 would be apportioned as to 55 per cent to the fourth and fifth respondents, as to 45 per cent to the sixth respondent Mr Chu.

20. Given that the best that the fourth and fifth respondents could hope for is accordingly to ultimately, if successful in challenging Mr Chu’s claims to be a secured creditor of the husband, be awarded 55 per cent of $400 000, the question arises as to why Mr Chu should be kept out of his entitlement to 45 per cent of that sum whilst that issue is agitated.

21. Put another way, nothing to which the Court has been referred by Counsel for the fourth and fifth respondents establishes the possibility, much less the probability, of the fourth and fifth respondents being able to establish, if wholly successful in proceedings proposed against Mr Chu, an entitlement to receive, on the figures before the Court; and it should be noted that the $650 000 figure asserted on behalf of the fourth and fifth respondents is, to use the colloquial, hotly contested, Counsel for the sixth respondent submitting that nothing remotely approximating the sum asserted is likely to be awarded with respect to costs in the District Court. So the case is assessed on the basis of accepting for present purposes the highest figure asserted on behalf of the fourth and fifth respondents.

22. Nothing to which the Court has been referred by Counsel for the fourth and fifth respondents establishes a basis for retaining more than the maximum entitlement which, on their own figures, the fourth and fifth respondents may be ultimately held to have. It should be noted that that conclusion is not said in any way critically of Counsel for the fourth and fifth respondents who, with respect, has put everything that could reasonably be put before the Court on behalf of those respondents. 

23. At the risk of over-simplifying the issue, it comes down in the Court’s view to a very simple issue, that being that on the one hand to decline to grant any injunctive relief would create the very real prospect that if successful, the fourth and fifth respondents would be left with no realistic prospect of recovering their indebtedness from the husband. On the other hand, to release to Mr Chu 45 per cent of the $400 000, the balance to abide challenges to his entitlement to receive such balance, would not only be fair to Mr Chu but could not be said to be unfair or in any way prejudicial to the fourth and fifth respondents. They would quite simply be in a position where Mr Chu received something which they could never hope to receive any part of in any event.

24. It might be noted that the husband has not featured at any time in the discussion thus far. Reading of the transcript would show that he did not feature at any time in the course of submissions in relation to these topics. The husband appears in person at present. He has been assisted by an interpreter. Before the consent orders were made, so far as it is realistically possible to do so, the Court ascertained from the husband that he understood what he was doing, the terms and effect of the settlement and that he wished to do so. There was no suggestion, and if it transpired that Mr Chu had in any way mislead the Court in relation to it, he would, of course, face very dire consequences in various ways. But there is no suggestion that the husband did not execute the documentation to which the Court has been referred today, nor any suggestion that he did not voluntarily execute what is described as a deed of release, annexure A to Mr Chu’s affidavit, although it might be thought to be, in substance, more in the nature of a deed of charge. However, it is categorised, there is no suggestion that the husband did not sign it and know what he was doing when he did.

25. Given that no matter what happens today the husband is unlikely to see any part of the $400 000 and to have, for good reason, not opposed that, to invite him to make submissions would have been to the extent that he might have made any meaningful submissions, would have been a waste of time.

26. The Court, it should be noted, that whereas if the application to injunct part of the $400 000 payable to the husband came before a Court exercising equitable jurisdiction, either per se or pursuant to powers vested in a Court which otherwise exercised common law jurisdiction, the claim for injunctive relief may well fail.

27. The circumstances here, however, are somewhat different and the difference is not without significance. As noted earlier, had the husband and wife not resolved the dispute with respect to settlement of property the interests now being agitated by the fourth and fifth respondents would have required consideration.

28. It is possible that in the course of so doing orders would ultimately have been made under Part VIII for providing for the satisfaction of some indebtedness of the fourth and/or fifth respondents, or, in the case of the fifth respondent perhaps more significantly, the preserving of a fund in order to provide some fund in the event of the fifth respondent’s claim succeeding.

29. It would be regrettable in those circumstances if, given that the fourth and fifth and sixth respondents have no power over the husband and wife to do so, the settlement of the proceedings for settlement of property between the husband and wife defeated the legitimate expectations of each of these parties to have their claims with respect to the balance of the funds receivable by the husband pursuant to such settlement, at least considered in the context of preserving those funds.

30. It is not without significance, as noted earlier, that the course the Court proposes does not, save potentially for a reasonably short time and in circumstances which may, if Mr Chu is successful, result in his being awarded costs of so doing, defeat Mr Chu’s claim to be entitled to the totalities of the husband’s entitlement under the consent orders. On the other hand as noted earlier, the course proposed on the fourth and fifth respondents’ own case, as that emerges from the written submissions of their Counsel and the oral submissions made by Counsel appearing for them today, preserves what, on their own case, is the most they could hope to possibly access in the future if all of their expectations as to orders in the District Court were fulfilled and a proposed application to set aside or otherwise defeat Mr Chu’s claims on the various bases asserted by him were wholly successful.

31. In those circumstances the order of the Court will be that part of the funds be retained by injunctive order. There is much force in the submission of Counsel for Mr Chu that the onus should be on those seeking to disturb his securities to do so, and to do so expeditiously. The issue has arisen swiftly today, there is no question of that, hence the Court’s concern that no-one’s rights be adversely or irreparably impacted.

32. To allow 28 days however for the fourth and fifth respondents to file an application supported by an affidavit in support of any challenge to Mr Chu’s prima facie entitlement to receive the balance of the husband’s moneys would in the circumstances be a reasonable compromise on between on the one hand the need of the fourth and fifth respondents to mount a case, on the other, Mr Chu’s legitimate entitlement to have any challenge to his asserted securities determined expeditiously.

I certify that the preceding thirty-two (32) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Coleman

Associate: 

Date:  31 August 2009