Schaber & Joseph
[2022] FedCFamC1F 739
Federal Circuit and Family Court of Australia
(DIVISION 1)
Schaber & Joseph [2022] FedCFamC1F 739
File number(s): BRC 8664 of 2021 Judgment of: HOGAN J Date of judgment: 28 September 2022 Catchwords: FAMILY LAW – INTERIM PROPERTY –Where the applicant seeks an order for litigation funding by way of interim costs order or partial property settlement – Where the applicant seeks various injunctions – Where the respondent seeks a review of a Registrar’s decision. Legislation: Family Law Act 1975 (Cth)
Federal Circuit and Family Court of Australia Act2021 (Cth)
Federal Circuit and Family Court of Australia (Family Law) Rules 2021
Cases cited: Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57; [2006] HCA 46
Blueseas Investments Pty Ltd v Mitchell (1999) FLC 92-856; [1999] FamCA 745
Breen v Breen (1990) 65 ALJR 195
Harris v Caladine (1991) 172 CLR 84; [1991] HCA 9
Kalenjuk and Kalenjuk (1977) FLC 90-218
Martiniello and Martinello (1981) FLC 91-050; [1981] FamCA 21
Mullen and De Bry (2006) FLC 93-293 at 80,995–80,999 [35]–[56]
Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578
Penfold v Penfold (1980) 144 CLR 311; [1980] HCA 4
Re JJT; Ex parte Victoria Legal Aid (1998) 195 CLR 184; [1998] HCA 44
R v Dovey; Ex parte Ross (1979) 141 CLR 526; [1979] HCA 14
Seiling and Seiling (1979) FLC 90-627; [1979] FamCA 23
Stowe and Stowe (1981) FLC 91-027; [1980] FamCA 92
Strahan & Strahan (Interim property orders) (2011) FLC 93-466; [2009] FamCAFC 166
Tsiang & Wu and Ors (2019) FLC 93-911; [2019] FamCAFC 128
Waugh and Waugh (2000) FLC 93-052; [2000] FamCA 1183
Zschokke and Zschokke (1996) FLC 92-693; [1996] FamCA 79
Division: First Instance Number of paragraphs: 43 Date of hearing: 15 October 2021 Place: Brisbane Counsel for the Applicant: Ms Minnery of Counsel Solicitor for the Applicant: Hartley Family Law Pty Ltd Counsel for the Respondent: Mr Looney of King’s Counsel Solicitor for the Respondent: Lander & Rogers (Brisbane) ORDERS
BRC 8864 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS SCHABER
Applicant
AND: MR JOSEPH
Respondent
order made by:
HOGAN J
DATE OF ORDER:
28 September 2022
IT IS ORDERED UNTIL FURTHER ORDER THAT:
1.Pursuant to s 117(2) of the Family Law Act 1975 (Cth), the respondent pay the applicant the sum of $112,200, with such sum to be used to pay the applicant’s legal costs and to be paid by the respondent to the trust account of Hartley Family Law as follows:
(a)$30,000 to be paid by 4.00 pm on 28 October 2022; and
(b)$60,000 to be paid by 4.00 pm on 25 November 2022; and
(c)$22,200 to be paid by 4.00 pm on 23 December 2022.
2.Pursuant to s 114 of the Family Law Act 1975 (Cth), the respondent, in his personal capacity or in his capacity as director of any of the companies that form part of the B Group or trustee of any trusts that form part of the B Group, is restrained and an injunction issue restraining him from:
(a)resigning or altering the appointer or trustee of any of the trusts that form part of the B Group; and
(b)dismissing any of the directors or appointing any further directors of the companies that form part of the B Group; and
(c)issuing any further shares, registering any shares already issued but not yet registered, altering the rights attaching to any shares issued in relation to any of the companies that form part of the B Group; and
(d)selling, mortgaging, transferring, assigning or dissipating any of the assets of the parties or assets owned by the entities in the B Group that are over the value of $10,000, except for assets owned by C Pty Ltd and D Pty Ltd where this is in the ordinary course of business for those companies; or
(e)making any loan, guaranteeing any loan or contractual liability of any other person, corporation or entity;
without the written consent of the applicant which will not be unreasonably withheld.
3.For the purpose of order 2, the ‘B Group’ comprises of the following entities:
(a)B1 Pty Ltd as trustee for the B2 Trust; and
(b)B3 Pty Ltd; and
(c)E Pty Ltd; and
(d)D Pty Ltd; and
(e)F Pty Ltd; and
(f)B4 Pty Ltd; and
(g)Joseph Family Trust; and
(h)C Pty Ltd; and
(i)G Pty Ltd; and
(j)H Pty Ltd; and
(k)J Pty Ltd; and
(l)Joseph & K Partnership; and
(m)B5 Pty Ltd as trustee for the Joseph Family Superannuation Fund; and
(n)Body Corporate for B6 Company CTS …; and
(o)any other entity in which the respondent or applicant have an interest.
4.The Application for Review filed 24 September 2021 is dismissed.
5.In the event that any party seeks an order that another party pay the costs of and incidental to the applications disposed of by the making of this order:
(a)any such party shall, within twenty-eight (28) days of today, file and serve:
(i)any affidavit necessary to support such application; and
(ii)written submissions in support of such application for costs; and
(b)the party against whom an order for costs is sought shall, within a further fourteen (14) days thereafter, file and serve:
(i)any affidavit necessary for the determination of any such application for costs; and
(ii)any written submissions in answer to the submissions filed and served by the party seeking an order for costs; and
(c)the party seeking an order for costs shall, within seven (7) days of being served with the submissions relied on by the party against whom an order for costs is sought, file and serve any further written submissions, strictly in reply, to the submissions served by the party against whom an order for costs is sought,
and any such application for costs shall be considered in Chambers.
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 Schaber & Joseph has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
HOGAN J
The applicant relevantly sought, by her Amended Initiating Application filed 1 September 2021, that the respondent be ordered to pay her $112,200, either by way of interim costs order pursuant to s 117(2) of the Family Law Act 1975 (Cth) (“the Act”) or, alternatively, by way of partial property settlement order pursuant to s 80(1)(h) of the Act and that the respondent be restrained by injunction, in the manner particularised in her application, from dealing with various entities which together constitute what the parties have described as “the B Group”.[1]
[1]See the Amended Initiating Application filed 1 September 2021 for those entities which are said to constitute the B Group.
The respondent opposed the applicant’s application for litigation funding and injunctive relief; he proposed that the parties’ self-managed superannuation fund acquire vacant land owned by an entity within the B Group and that the proceeds of this sale be applied, first, to pay the applicant the sum of $125,000 by way of partial property settlement and, then, to meet the costs of various valuations already ordered and a mediation in which the parties intend to participate. He also initially proposed that orders be made to facilitate the sale of a partially completed Motor Vehicle 1[2] (at a price agreed between the parties) and that the nett sale proceeds of the same be paid to B4 Pty Ltd (“B4 Pty Ltd”[3]) to enable the reduction of debt, although the position ultimately advanced on his behalf was, in essence, that the proposed sale await the completion of the valuation of the vehicle.
[2] Said to be owned by G Pty Ltd, an entity within the B Group.
[3] To use the term used by the applicant to refer to B4 Pty Ltd.
The applicant opposes any orders being made for the sale of the vacant land and the Motor Vehicle 1.
The respondent also sought that the Court hear his review[4] of those aspects of the orders made by a Registrar on 1 September 2021 (“the September 2021 order”) that provided for him to pay the costs of the various single expert reports that have been ordered and the costs of the mediator’s fees and any room hire in the first instance, with the applicant’s half share of the same to be deducted from her final property settlement. He sought, instead, that orders be made for the parties to pay the costs of the single expert reports[5] and the costs of the mediator, Mr L (including his fees and any room hire) equally, with each party to pay their share of the same as and when they fall due.
[4] Application for Review filed 24 September 2021.
[5] To be prepared by M Partners, N Pty Ltd, O Pty Ltd and P Pty Ltd.
The applicant proposed that the respondent’s application for review be dismissed; she opposed the making of any order which would require her to pay her agreed fifty percent of the costs of the single expert reports and the mediator other than as already provided for by the September 2021 order.
Background
The parties commenced their cohabitation in early 1992, married in 1992 and separated in either September 2018 (on the respondent’s contention) or in mid-March 2019 (on the applicant’s contention). It suffices for the purposes of the current application to regard them as having had a relationship of approximately 27 years’ duration.
The parties are both currently 57 years of age; they have three now-adult children and are professionals. At present, the applicant contends that the value of the property of the parties for the purposes of the property settlement proceedings between them is about $3,100,000 exclusive of the value of the yet-to-be valued corporate entities which constitute the B Group. At present the respondent contends that the value of the property of the parties is about $5,800,000, of which nearly $4,500,000 is held within the parties’ self-managed superannuation fund.
The respondent is in control of the business (B4 Pty Ltd) in which both of the parties previously worked. B4 Pty Ltd operates from premises on real property owned within the B Group. Vacant land next to these premises is also owned within the B Group. The respondent is also in control of various entities and trusts within the B Group.
The applicant is currently self-employed, working for a number of persons who were previously clients of B4 Pty Ltd.
The relief sought by the applicant on a final basis is that the Court make a number of declarations in relation to her asserted interest in specified property and that orders are otherwise made to cause her to receive property valued at 60 percent of the total nett value of the property of the parties. By Response filed 13 October 2021, the respondent seeks that orders are made to cause him to receive property valued at 60 per cent of the total nett value of the property of the parties; he seeks to detail the specific orders sought following the completion of the expert valuations.
It is in this context that the orders sought by the applicant on an interim basis are to be considered.
Litigation funding
The submissions made by counsel for the applicant in seeking that the Court order the respondent to pay the amount sought to enable the applicant to pay her legal costs included that:
(a)whilst the applicant was not obligated to identify precisely the source from which the respondent could meet the order sought (because he was dilatory in providing disclosure which would have assisted her to do so), the Court should infer from his actions after separation in:
(i)causing about $180,885 to be paid to one of the parties’ adult children; and
(ii)paying approximately $50,000 to meet his dental expenses; and
(iii)paying $390,000 toward the B Group’s acquisition of C Pty Ltd (“the C Pty Ltd business”) approximately a year before that sum was required to be paid; and
(iv)offering vendor finance for the purchase of interests in the C Pty Ltd business,
that the respondent is able to obtain whatever funds he needs when he needs them for purposes which he has identified as having priority; and
(b)if he was able to cause $390,000 to be paid out approximately a year before the sum was required to be paid, the respondent has the capacity to pay the applicant’s legal fees or to cause the same to be paid; and
(c)there are at least five sources of funds available to the respondent from which he could meet an order requiring him to pay the applicant the sum sought and that these include:
(i)the line of credit in his home loan facility which, as at the hearing, was such that there was $144,723 available which could be immediately accessed – it was submitted that, whilst the respondent asserted that this $650,000 facility has limits, he accepted that the funds referred to were available and that he had previously used the line of credit to meet his home loan repayments (that is, he moves funds between the two facilities); and
(ii)B4 Pty Ltd[6], in respect of which the Balance Sheet shows that, as at 30 June 2021, there was cash of $330,185 and that:
[6] Exhibit 1, p.8 and p.10.
(A)whilst the respondent asserted that Mr Q has a third party interest, it was uncertain whether he had actually bought in as yet because, as the respondent was offering him vendor finance, it was arguable that he did not then have a third party interest; and
(B)whilst the respondent asserted that Mr K had a 20 per cent interest, the position was also uncertain and, according to the Balance Sheet[7], his interest could not be quantified at higher than an entitlement to $92,000 (on the assumption that this amount was owing to him as opposed to owed by him, which was also unclear) – given that the Balance Sheet also showed that, as at 30 June 2021, the total for the B Group accounts was $2,779,721.15, there were plenty of funds from which any debt to Mr K could be paid and the respondent’s entitlement was such as to persuade the Court that there was “plenty of cash” from which the amount sought by the applicant could be paid; and
[7] Exhibit 1, p.4.
(C)whilst the respondent’s evidence included that $185,000 was payable by way of tax (and, inferentially, there was no capacity to meet this liability), this liability was already taken up and included in the Balance Sheet; and
(D)the increase in the retained earnings shown in the Balance Sheet from 30 June 2020 to 30 June 2021, whereby they went from $758,698 to $1.376 million (that is: an increase of around $617,000)[8], appeared to suggest that all of the profits from 2020 sat in the business and “undoubtedly” were part of the significant amount of cash (of nearly $2.8 million) sitting at bank; and
(E)whilst the Balance Sheet[9] shows that the K Trust is owed $240,000, this (and the $352,530 the parties are owed) is only a small portion of the $2.8 million held in cash.
(iii)given that it is an agreed fact that the B2 Trust owes $430,816 to either the applicant or the respondent, it was submitted that the Trust could require B4 Pty Ltd to repay it some of about $827,000 owed to it (which B4 Pty Ltd could do given that the cash at bank is about $2.8 million) and use the repaid funds to pay at least some of what is owed to either the applicant or the respondent – if paid to the respondent, he could use the funds to meet any order which requires him to pay the applicant the sum sought; insofar as the respondent asserted that the Trust was required to extinguish various debts using the $827,000 owed to it, it was submitted that it was, in a sense, disingenuous for the respondent to raise the issue of the same without also speaking about matters such as the trading performance and cash reserves of B4 Pty Ltd; and
(iv)the motorised vehicles (be they various assets of that nature) provide a potential source from which any order for the payment of funds to the applicant could be met; and
(v)the Balance Sheet of the C Pty Ltd business showed that, two days before the hearing, the total cheque savings were $478,980[10] – whilst it may well be that not all of these savings could be withdrawn, as various liabilities need to be met using the same, the amount sought by the applicant is such that, even if paid, the entity would retain not insignificant funds which it could use toward the discharge of liabilities.
(d)there has never been a time when the respondent’s line of credit or his home loan facility have been drawn to their maximum, and he has clearly been prepared in the past to use the facilities to meet his own expenditure, including his legal fees.
[8] See also the Profit & Loss Statement at 30 June 2020: Exhibit 1, p.7.
[9] Exhibit 1, p.8.
[10] Exhibit 1, p.2.
Whilst the respondent initially asserted that the applicant may have been able to meet her own legal fees using the proceeds of a claim made by her to her insurer in relation to damage suffered to the house in which she resides, this assertion was abandoned at the hearing.
The submissions made by counsel for the respondent included that:
(a)there was no dispute that the applicant needed funds for litigation funding – the respondent suggested that she be provided with $125,000 rather than the sum sought; and
(b)the submissions made on behalf of the applicant were based on an interpretation of documents that are not the final versions of accounts; and
(c)there are two groups of companies that conduct businesses (in which the applicant has no involvement and with which, insofar as the other business is concerned, she has not had any involvement for some time, albeit that she was previously a manager of the same) and it is clear that there are significant and complicated inter-entity transactions (within each group and between the two business groups): whilst there is some commonality of ownership between the two groups, there is not complete commonality of ownership and each group of companies has third party interests – there is no agreement by the third parties about the orders sought by the applicant insofar as they impinge upon the entities in which they have an interest; and
(d)the applicant has not stated, even in general terms, that there is spare surplus cash that is not required for the operation of the businesses – the submissions made by counsel for the applicant were really nothing more than assertions that, on particular days, there were particular sums of money that existed as cash or were available as further borrowings; and
(e)given that significant sums of money are required by the parties in relation to valuations and the mediation (funds which have to come from within one of the entities in which the parties have either a majority interest or that they control), there are constraints on cash flow – there are not enough surplus funds available to withdraw money out of the business and provide it to meet the costs of the litigation funding, the expert evidence and the mediation; and
(f)the only funding available from which the respondent could make payments is the net available credit in the home loan and the line of credit and the position of the same alluded to by counsel for the applicant was nothing more than a snapshot (that is, what the balance was on a particular day) which told the Court nothing about what the balances were on the intervening days – the significant rise and fall in amounts was consistent with the two facilities being used by the respondent as an overdraft facility for the operation of the business and, as he identifies, it is the source of cash and it is limited: whilst he does not say it is insufficient to pay the litigation funding if drawn on, he identifies other liabilities which provide context; and
(g)in essence, given the evidence relied on by the respondent in relation to the draws on the line of credit and home loan at various times, the amount of unpaid taxation which was due in early 2022, the necessity to maintain a buffer of funds to meet temporary shortfalls in business cash flow which occur from time to time and the cessation of the previously received Jobseeker payments which positively boosted the business’ cash flow position, the applicant had not shown how the respondent would meet business cash flow shortages if money was taken from the business overdrafts to meet her litigation funding and to pay her share of costs of experts; and
(h)the respondent’s evidence included that he had spoken to Mr K (his business partner) who did not agree that the respondent could access money from the B Group to meet payment of the applicant’s legal fees unless an appropriate amount was also paid to him to reduce the debt owed by the business to him and the business did not currently hold funds in the bank sufficient to pay these amounts; and
(i)the respondent was not seeking that any additional cash come out of the business and be provided to him – he was not taking a wage and had funded his litigation and his own large recent personal expenses out of drawings (limited to $100,000 per annum) that were available to him from the business based on its cash flow; and
(j)bringing forward the vendor financing transaction in relation to the change of ownership of the C Pty Ltd business did not change the amount of cash available to the Group; and
(k)the focus in determining whether the order sought by the applicant should be made should be upon the level of capital required by the business – it did not follow, just because (adopting the applicant’s analysis) the facilities drawn on by the respondent had never previously fallen below having $115,000 available, that it would not create any difficulties for the business if the Court ordered the respondent to pay the applicant the $112,200 sought, especially if he is also required to pay a further approximately $150,000 for the preparation for the various expert reports and the parties’ participation in a mediation; and
(l)the Court should reject the applicant’s invitation to, in effect, infer from the evidence that there is sufficient surplus cash, beyond an amount of about $275,000, that is not required in the business and which can be extracted from it (and not repaid in the near future) and used for purposes outside the business without such action having an adverse impact on the business; and
(m)insofar as it had been submitted by counsel for the applicant that, as at 30 June 2021, there was about $2.7 million in the B Group Accounts, a fair reading of the Balance Sheet would show that these are loan account balances and what was really needed was to identify the actual cash balance and how accessible the same was.
In Zschokke and Zschokke[11] the plurality of the Full Court of this Court held, at 83,215:
Accordingly, while the present state of the law remains somewhat unclear, it can be asserted with some confidence in light of Brennan J’s comments in Breen that there is at least power under s 117(2) (the costs power) for the Court to make an order which seeks to ensure that one party should be able to prosecute pending matrimonial proceedings and that the other party should provide the first mentioned party with the funds required to do so.
[11] (1996) FLC 92-693.
In Re JJT; Ex parte Victoria Legal Aid,[12] Gaudron J[13] said, at 85-181:
The power conferred by s 117(2) of the Family Law Act 1975 (Cth) (“the Act”) is a power to “make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.” That power is not simply a power to make an order for costs. Were it so, it would only authorise orders to indemnify for “costs actually incurred in the conduct of litigation”. However, a power to make an “order as to costs” is a broader power. And when regard is had to the consideration that s 117(2) expressly authorises interlocutory orders, that sub-section must, in my view, be construed as authorising orders requiring a party to proceedings under the Act to provide another party with funds to conduct those proceedings.
[12] (1998) 195 CLR 184.
[13]With whom Gummow and Kirby JJ agreed insofar as that s 117(2) of the Act permits the Court to make orders as to future costs of a spouse in proceedings under the Act.
In Strahan & Strahan (Interim property orders),[14] the plurality said at [79]:
The need for a party to proceedings under the Act to seek an order for the provision of funds to enable the payment of his or her legal costs of participating in the proceedings has been recognised for many years. It is a reflection of an important matter that distinguishes litigation under the Act from civil litigation between parties who are not parties to a marriage, namely that “very often the wealth of the parties is controlled by one rather than both of them”: Blueseas Investments Pty Ltd v Mitchell [1999] FamCA 745; (1999) FLC 92-856 at 86,128 per Full Court (Nicholson CJ, Lindenmayer and O’Ryan JJ).
[14] (2011) FLC 93-466.
Such comment seems to me to be pertinent to this case.
The plurality in Strahan also said, at [81]:
In Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578 (“Paris King Investments”) Brereton J observed at [29], “[t]he juridical bases for an order for preliminary provision for litigation costs in matrimonial proceedings are diverse”. As Brereton J said, an order may be made as a maintenance order under ss 72 and 74 of the Act or a property settlement under s 79 and s 80(1)(h) or a costs order under s 117. The spouse maintenance and costs jurisdiction to make such an order was recognised by the High Court in Breen v Breen (1990) 65 ALJR 195 (“Breen”) per Brennan, Dawson and Gardron JJ, when dismissing an application for special leave to appeal against such an order. In Paris King Investments Brereton J at [30] described such an order as an “order for interim provision for litigation expenses” and this may be a more appropriate description than an “interim costs” order so as to more accurately reflect the various sources of jurisdiction.
Given the applicant’s reliance on the costs power as the basis for the Court to make “an order for interim provision for litigation expenses”, the starting point in relation to costs in proceedings under the Act is that each party to the same shall bear his or her own costs.[15] However, such starting point is ameliorated by the existence of s 117(2) of the Act which provides that, if it is of the opinion that there are circumstances that justify it in doing so, the Court may, subject relevantly to subsection (2A) and the applicable Rules of court, make such order as to costs (whether by way of interlocutory order or otherwise) as the Court considers just.
[15] Family Law Act 1975 (Cth) s 117(1).
Whilst an applicant must persuade of the existence of “justifying circumstances” as a prerequisite to the making of an order under s 117(2) of the Act, such circumstances can exist without there being a clear or exceptional case.[16]
[16] Penfold & Penfold (1980) 144 CLR 311 per Stephen, Mason, Aickin and Wilson JJ.
Neither party is in receipt of assistance by way of legal aid.
I generally accept the thrust of the submissions made by counsel for the applicant to the effect that, in making the proposal that he did (namely, that the vacant land be sold to the self-managed superannuation fund so as to realise cash which could then be used, in part, to pay the applicant $125,000 by way of partial property settlement and which of course would enable her to meet her legal costs), the respondent accepted that the applicant was unable to meet her legal cost from her own property, income and resources.
I consider that, on the evidence before me, the respondent’s ability to access funds is superior to that of the applicant. As submitted by counsel for the applicant, he has previously been able to obtain funds to pay his dental expenses in an amount of about $50,000, he has been able to ensure that his own legal expenses have been met and he has made decisions about the priority to be accorded to various payments made by entities within the B Group that do not appear to necessarily favour the applicant. To the extent that it is appropriate to do so at this stage of the proceedings, it appears that the applicant has an arguable case insofar as it was suggested on her behalf that the respondent has, on occasion, failed to discharge the ongoing obligation of disclosure, imposed on all parties to litigation in the Court, in as timely a manner as would have been possible.
I accept, on the evidence before me, that the applicant cannot meet her own legal expenses from her own financial resources and that, absent the provision of funds to enable her to meet the same, she will likely be at a serious disadvantage in the conduct of the proceedings.
I accept the general thrust of the submissions made by counsel for the applicant as outlined above and, even taking the submissions made by senior counsel for the respondent into account, I am satisfied that the circumstances here justify the making of an order that the respondent pay the amount sought by the applicant by way of an interim order as to costs and that an order requiring him to do so is just. I am confident that, with the time allowed for the payment of the sum sought, the respondent will be able to make whatever arrangements are necessary to permit the payment of the funds to the applicant. I am also confident that he will be able to do so in a manner that does not cause long-lasting deleterious impacts on the operation of the businesses within the B Group. Given the value each party has attributed to the property the subject of these proceedings, I am also confident that the amount which the respondent will be required to pay to the applicant to assist her to meet her costs of the proceedings will be able to be taken into account appropriately at the final hearing of the proceedings.
Injunctive relief
The applicant sought a number of injunctions be made to restrain the respondent, in his personal capacity and in his capacity as director of any of the companies that form part of the B Group and in his capacity as trustee of any trusts that form part of the B Group in the manner particularised in the orders sought. The injunctive relief sought also provided for certain exemptions which related to the actions of the C Pty Ltd business and D Pty Ltd in the ordinary course of business for those companies and that the applicant would not unreasonably withhold the written consent that she proposed be a term of the orders she sought.
The Court has power to ‘make such order or grant such injunction’ in relation to the property of a party to a marriage as the Court ‘considers proper’[17]; in fashioning any injunctive orders made, the Court should ensure that the same are to the minimum extent required.
[17] Family Law Act 1975 (Cth) s 114(1).
In determining whether it is, in a particular case, proper to make injunctive orders sought by a party, the Court should consider:
(a)whether or not there is a serious issue to be tried – that is, whether or not an applicant for the injunction has established a prima facie case for the substantive relief sought (that is, the merits of the claim), albeit that such claimant is not required to establish that it is more probable than not that their substantive claim will succeed as it is sufficient that an applicant show a sufficient likelihood of success to justify, in the circumstances, the preservation of the status quo pending the trial; and, if so
(b)where the balance of convenience lies – that is, which of the parties will suffer the most injury or inconvenience if the injunction is or is not granted[18]; and
(c)whether there is an objective risk of the disposal by a party of assets if the injunction sought is not granted, noting that in this jurisdiction the Court is particularly concerned with preserving the subject matter of the proceedings so as to avoid an applicant’s claim being defeated and that an applicant is not required to establish that a respondent has a positive intention to dispose of the same[19] – regard should be had to the degree of danger of any prejudice to an applicant’s claim that will exist if an injunction is not granted[20]; and
(d)whether an applicant has established that the injunctions sought go no further than is necessary to prevent the abuse or frustration of the Court’s process and whether, and to what extent, any proposed injunction will affect the position and rights of third parties.[21]
[18] Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 at 68 [19], 81–84 [65]–[72].
[19]Tsiang & Wu and Ors (2019) FLC 93-911 at 79,138 [25]; Waugh & Waugh (2000) FLC 93-052 at 87,810 [45]-[46]. See also Mullen and De Bry (2006) FLC 93-293 at 80,995–80,999 [35]–[56].
[20]Seiling and Seiling (1979) FLC 90-627; Stowe and Stowe (1981) FLC 91-027; Martiniello and Martinello (1981) FLC 91-050.
[21] Kalenjuk and Kalenjuk (1977) FLC 90-218; R v Dovey; Ex parte Ross (1979) 141 CLR 526.
I am satisfied, for the purposes of this application, that there is a serious issue to be tried in that the applicant has established a prima facie case for a property settlement order.
The submissions made by counsel for the applicant to persuade that the Court would be persuaded that the balance of convenience favours the making of the injunctive orders sought, that there is an objective risk that the respondent may dispose of property to the applicant’s prejudice if such orders are not made and that the relief sought goes no further than is necessary to prevent the frustration of the Court’s processes included that:
(a)the respondent had removed the applicant as a director of the trustee company of B2 Trust in mid-2020 without her knowledge or consent and she only learned of this in early 2021 as a consequence of ASIC searches undertaken by her solicitor; and
(b)in circumstances where the other owners of the C Pty Ltd business would not provide guarantees, the respondent had provided a guarantee for 100 per cent of its borrowings even though, on his evidence, he has only a 30 per cent beneficial interest in it; and
(c)the applicant disputed the respondent’s contention she knew about him offering vendor finance to buyers for the C Pty Ltd business and granting beneficial interests such that his interest in the same was said to be only 30 per cent and she disputed that he had spoken to her about these events; and
(d)the respondent had paid $390,000 in mid-2020 in relation to the acquisition of the C Pty Ltd business a year before he was required to make such payment, which had a negative impost on the availability of funds to meet the applicant’s claims; and
(e)the respondent declined the request made of him on 28 July 2020 that he provide an undertaking in terms similar to the injunctions that the applicant sought; and
(f)the respondent had demonstrated the capacity during the post-separation period to buy and sell whatever he wanted to and to pay whatever liabilities he thought appropriate to the exclusion of the applicant (who could not even obtain his agreement to make a contribution to the payment of her legal fees); and
(g)in essence, because the respondent proposed to repay his brother the amount of $396,995 and his father the amount of $253,354 (which amounts are said to include an interest component) from the proceeds obtained from the sale of assets (that is, including the vacant land proposal discussed elsewhere in these Reasons) in circumstances where his brother loaned him $125,000 and his father loaned him $110,000 to assist in the building of the commercial premises from which the B4 Pty Ltd business operates and the asserted indebtedness to each of them is in issue between the parties, the Court should not allow him an unfettered opportunity to diminish the value of the property of the parties available for consideration in the proceedings – especially where it is alleged that he has a long-standing history of failing to make proper and/or timely disclosure to the applicant; and
(h)the respondent sold the shares held within the self-managed superannuation fund after he was served with the proceedings and despite having previously been asked to provide an undertaking in terms similar to the injunctive relief sought, which action caused capital gains tax to be incurred – which action also removed the possibility of in specie allocations between the parties at the final hearing; and
(i)by paying either $180,000 (on the applicant’s case) or $190,000 (on the respondent’s case) to one of the parties’ adult daughters (which was then subsequently the subject of subsequent transactions between that daughter and another of the parties’ daughters and B4 Pty Ltd), the respondent removed funds which could otherwise have been called on by the parties at any time for their own purposes and use and placed them beyond the applicant’s reach; and
(j)the respondent had seemingly disposed of an interest in the C Pty Ltd business to Mr K and had failed to provide meaningful disclosure about this transaction in a timely manner or at all.
Counsel for the applicant also submitted that the proposal that the respondent provide an undertaking that he will not act in the manner which the injunction seeks to prevent without first giving the applicant 10 days’ notice is not sufficient to protect the applicant’s interests as this would require the applicant to seek to return the matter to court on every occasion the respondent proposed to take an action with which she did not agree. It was also submitted that the respondent’s proposal, which essentially provided that he was not required to provide notice of proposed transactions where the same were under $50,000 and were done in the ordinary course of business, did not provide the applicant with appropriate protection against possible dissipation of property because this would not prevent the respondent from dealing with funds in increments of $50,000.
The submissions made by counsel for the respondent included that:
(a)the respondent was prepared to give an undertaking to not do substantially what was being sought by the injunctions (albeit that the value of the assets the subject of the restraint was to be $50,000 as opposed to the $10,000 proposed by the applicant) without giving the applicant 10 days’ notice of his intention to act; and that
(b)by doing so, he proposed that the applicant be given notice of anything of significance that was to be done so that she would have the opportunity to raise any concerns about the same and, if appropriate, return the matter to court; and
(c)Mr K (the respondent’s business partner) opposed the making of the injunctions; and
(d)there had been no complaint about the transactions within the self-managed super fund prior to 8 October 2021; and
(e)the payment of $390,000 made in early 2021 was a payment required to be made to reduce a liability (and had been the subject of both discussion and disclosure) and the implied conclusion contended for by the applicant that, in essence, there was so much cash washing around that it did not matter that this payment was brought forward in the manner which occurred is not a safe conclusion to reach at an interim hearing – further, the fact that the respondent paid this amount early was not a basis for restraining him via the broad injunctive relief that was proposed, particularly in circumstances where he has to discharge duties as a director in companies and entities in which there are third-party interests; and
(f)the payment made to the parties’ daughter was the repayment of a loan owing to her as shown in the books of the Group entities (albeit that the applicant’s evidence included that the parties’ children had not before been paid the funds shown in the Group accounts as being owed to them) and was made because she has some medical and/or mental health issues/difficulties – in addition, the financial position of the entities did not change because the subsequent transactions that were undertaken between the recipient of the funds and her sister and B4 Pty Ltd meant that, in essence, the amount previously owing to one daughter is now owed to “the other” daughter.
Whilst others may disagree, I am persuaded on an interim basis that the applicant has established that the balance of convenience favours making the injunctive relief she sought and that, given the respondent’s actions (which were the subject of detailed submissions by counsel who appeared for her), absent the injunctive relief sought, there is a risk of not insignificant prejudice to her claim – even if only insofar as the manner by which her ultimate entitlement to property may be satisfied.
Despite the opposition to the making of the injunctive relief sought and the respondent’s offer to provide an undertaking in the terms outlined, I consider that the matters to which counsel for the applicant referred during the course of her submissions should be accorded greater weight. Whilst I have also taken into account that Mr K opposes such orders, I am not persuaded that the injunctions as sought impinge inappropriately on the rights of third parties such as Mr K. I am persuaded, by virtue of the evidence relied on by the applicant and the submissions made on her behalf, that it is proper in the circumstances of this case to grant the injunctions sought by the applicant in the terms that the same have been sought.
Proposed sale of vacant land
The submissions made by counsel for the respondent included, in essence, that the respondent’s proposal would enable funds held within the self-managed superannuation fund to be available to the parties; the proposal that a lease be entered into on a commercial basis would mean that CGT rollover relief would apply; whilst the transaction would involve incurring stamp duty of slightly over $8,000, this amount paled into insignificance when compared to the parties’ legal costs generally and was, in a sense, immaterial when regard was had to the need to free up cash to be available to conduct the litigation rather than put the business under further financial pressure by seeking to obtain the money for the litigation from it.
Despite these submissions, I am not persuaded on an interim basis that it is appropriate and/or proper to make the orders sought by the respondent in relation to the vacant land in the absence of agreement between the parties about this issue; I consider that to do so would, in essence, impose a fundamental restructuring of the manner in which these parties have previously determined to hold their property on the applicant at an interim stage of the proceedings and may have an irreversible impact on the manner by which each of the parties is to receive that property which it is ultimately found to be just and equitable that they receive. Whilst the course advanced by the respondent may well be shown at trial to be appropriate, I am simply unpersuaded that such a significant change should be made at an interim stage.
Proposed sale of the incomplete motor vehicle 1
I note that the submissions made by senior counsel for the respondent about the issue of the proposed sale of the partially completed Motor Vehicle 1 included that his client would amend his application to seek that the application be adjourned to a date after the reports relevant to the valuation of the same had been prepared. I also note that he submitted (in essence in anticipation of any subsequent hearing of the same) that, if the applicant elected to receive the Motor Vehicle 1 as part of the property she sought by way of final orders, she should be prepared to identify the steps that should be taken to preserve the asset pending the making of final orders.
Whilst it is, perhaps, unnecessary to do so given the position adopted by the respondent about the issue of the sale of the Motor Vehicle 1, I think it appropriate to record that, in opposing orders for the sale of the partially completed Motor Vehicle 1 at this time, counsel for the applicant made submissions which included that:
(a)Motor Vehicle 1 ought not to be sold unless both parties do not want to retain it as part of the property each receives on a final basis; and
(b)the applicant may wish to retain Motor Vehicle 1 on a final basis but she wants to be able to assess its commercial viability and should be accorded that option, especially where the respondent’s position included that he should be permitted to sell it for between $250,000 and $350,000 as is (which he said he had been offered) in circumstances where she advanced that $1.2 million to $1.3 million had been spent on it to date; and
(c)any decision to sell Motor Vehicle 1 ought to be adjourned until trial (and not until after the valuation is prepared) because issues about how it can be funded and the source of funds in terms of its completion are trial issues.
Application for Review
By Application for Review filed 24 September 2021 the respondent reviewed those of the September 2021 orders which required that he be responsible, at first instance, for paying the costs of the single expert reports and the mediation and the applicant contribute her 50 per cent of the same at the conclusion of the proceedings.
The task on review is not to determine whether error attended the making of the order the subject of review; instead, a review of a Registrar’s decision is a hearing de novo during which the Court is required to examine the matter afresh.[22] In determining a review, the Court may make any order it thinks fit in relation to the matter in respect of which the power was exercised.[23]
[22]See: Federal Circuit and Family Court of Australia (Family Law) Rules 2021 r 14.07; Harris v Caladine (1991) 172 CLR 84 at 95.
[23] Federal Circuit and Family Court of Australia Act2021 (Cth) s 100(2).
I accept that the submissions made by those who appeared on behalf of each of the parties about the issues already the subject of discussion in these Reasons are relevant to the decision about the manner by which the costs of the various valuations which have already been ordered and the mediation in which the parties intend to participate should be met. I note that it is agreed that the parties will contribute equally to these costs; what is not agreed is whether the parties will be required to pay their respective shares of the same as and when they fall due or whether the respondent will be required to meet the entirely of these costs initially, with the applicant to pay her equal contribution to the same from whatever property it is determined to be just and equitable that she receive.
Having regard to the parties’ respective financial positions and their respective capacities to access the funds necessary to pay for the valuations and the proposed mediation as and when the same are payable, I consider that, even taking into account that the respondent will be required to pay $112,200 to the applicant in the manner provided for in the orders to be made, the most appropriate and proper course is that the respondent pay all of the costs of the valuations initially and that the applicant pay her equal share of the same from the property she receives on a final basis.
I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Hogan. Associate:
Dated: 28 September 2022
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