Sheehan and Sheehan
[2008] FMCAfam 655
•6 June 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| SHEEHAN & SHEEHAN | [2008] FMCAfam 655 |
| FAMILY LAW – Property – injunction – Mareva order – principles. |
| Family Law Act 1975, ss.79, 114 |
| Cardile v LED Builders Pty Limited (1999) 198 CLR 380 P. Biscoe, Mareva and Anton Pillar Orders, Freezing and Search Orders, (Sydney: LexisNexis - Butterworths, 2005) |
| Applicant: | MS SHEEHAN |
| Respondent: | MR SHEEHAN |
| File Number: | CAC 364 of 2008 |
| Judgment of: | Neville FM |
| Hearing date: | 28 May 2008 |
| Date of Last Submission: | 28 May 2008 |
| Delivered at: | Canberra |
| Delivered on: | 6 June 2008 |
REPRESENTATION
| Counsel for the Applicant: | Ms Tonkin |
| Solicitors for the Applicant: | Elrington Boardman Allport Lawyers |
| Counsel for the Respondent: | Mr Thomas |
| Solicitors for the Respondent: | S & T Lawyers |
ORDERS
The respondent husband, Mr Sheehan, cause $114,500, being half of the amount specified in the application, to be invested in an interest bearing account in Australia in the names of his solicitors as trustee for Mr Sheehan, pending the final resolution of the proceedings in the Federal Magistrate's Court number CAC364 of 2007, or until further order.
The costs of this application filed on 19 February 2008 be reserved.
IT IS NOTED that publication of this judgment under the pseudonym Sheehan & Sheehan is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT CANBERRA |
CAC 364 of 2008
| MS SHEEHAN |
Applicant
And
| MR SHEEHAN |
Respondent
REASONS FOR JUDGMENT
Introduction
In what follows in these reasons and orders, nothing is or should be taken as expressing or inferring any settled view in relation to any of the substantive issues to be determined at the hearing of the matter next February.
There is one issue for immediate determination in these proceedings. That is whether an order should be made by which the Respondent former husband, Mr Sheehan, should be restrained from reducing a specific bank account below a specified amount of $229,000, save for ordinary bank fees and charges.
The Applicant, Ms Sheehan, claims that her former husband failed to disclose both the account and the full extent of the funds in it. She also claims that the funds form part of the asset pool in relation to which she is seeking orders under s.79 of the Family Law Act1975.
The hearing of that application is fixed for February 2009.
The respondent opposes any order in effect freezing the bank account in question, which is known as the Maxi-1 Direct Westpac account.
The applicant, Ms Sheehan, claims that her former husband failed to disclose both the account and the full extent of the funds in it. She also claims that the funds form, or may form, part of the asset pool in relation to which she is seeking orders under s.79 of the Family Law Act1975. As I have already intimated, the hearing of that application is fixed for February 2009.
The respondent opposes any order in effect freezing the bank account in question, which is known as the Maxi- 1 Direct Westpac account.
Background
On 6 February 2008 Ms Sheehan's solicitors wrote to the lawyers who act for her former husband informing them of the recent discovery of the Maxi-1 Westpac account. They requested two things: (i) an undertaking that Mr Sheehan not withdraw moneys from that account; (ii) a detailed accounting of moneys already withdrawn from it.
By letter dated 11 February Mr Sheehan’s solicitors responded, advising that the account in question is one to which “our client's wife has contributed.” The solicitors continued, saying that “the funds in the account are joint savings and are used for their joint expenses.”
The attorneys confirmed that their client would not give the undertaking sought.
The Current Application
The application for this urgent relief was filed on 19 February 2008.
It sought a range of other orders separate from the restraint already referred to. Because of various written undertakings having been given by Mr Sheehan, those additional orders are, and no longer need to be, pressed.
It is not the first application of this kind in these proceedings. There was an earlier application filed in mid-2007. I need not consider its details for the purposes of the current application, nor do I need to say anything about various other protections the applicant has pursued in relation to placing caveats over titles to certain real estate which is also embraced in the property proceedings before the Court.
It was submitted on behalf of Mr Sheehan that because of the caveats and undertakings already given, the applicant's interests in relation to any future orders under s.79 of the Act are adequately protected.
Ms S is Mr Sheehan's de facto wife and has been since 1998. She has provided an affidavit in these proceedings, dated 12 March 2008, in which she deposes to receipt of various funds. While the total of each of those funds is specified, the portion deposited in the "joint Westpac bank account" which she has with Mr Sheehan is not detailed.
For example, in para.3 of her affidavit Ms S states:
When we started to live together I had just left [X]. I had worked for [X] as a […] technician. When I left [X] I received a pay out of about $130,000. I placed some of these funds into a joint Westpac bank account I had with [Mr Sheehan].
To similar effect are references to a later redundancy in 2003, and a deposit of $30,000, and a further sum, later still, of $12,000.
Ms S deposes to depositing "some" of each of these sums into the "joint Westpac Bank account."
The final financial matter to note from Ms S's affidavit is that she confirms that $140,000 was withdrawn from the "joint funds" in "our Westpac bonus saver account" on or about 14 February this year.
The reason for the withdrawal and the current location of the withdrawn funds are not specified. So far as I can see, no documents have been provided to support any of the contentions made in her affidavit.The final, non-financial, matter to note is that Ms S objects to providing any personal information to Ms Sheehan's solicitors. Presumably, at some time prior to the hearing, this position may be addressed or otherwise challenged by Ms Sheehan.
Mr Sheehan filed an affidavit by way of response to the application on 12 March. He outlines the history of the substantive proceedings, including various case assessment conferences in the Family Court - for example, in April and June 2007 - as well as various requests for further information sought by his former wife and the responses thereto from his lawyers.
It would appear that not all of Ms Sheehan's lawyer's requests for information were fulfilled, including information regarding Ms S's tax returns and assessments and, as stated in a recent letter to the Respondent’s lawyers, “copies of all joint statements with Ms S since separation, including but not limited to the Westpac Bonus Saver Account.”
In Mr Sheehan's affidavit just mentioned, he deposes to the withdrawal of certain funds and the purchase of certain items including a boat.
In para.55 of that affidavit Mr Sheehan deposes to Ms S's contribution to the Westpac Bonus Saver account, which had a maximum credit balance of $260,000, as being "approximately $140,000."
In the same paragraph [para.55.2] Mr Sheehan states: “On or about
14 February 2008 [Ms S] withdrew her money from that account.”
Again, especially in the context of Ms S's affidavit, it is not completely clear as to either the precise amount Ms S placed in this account, the exact amount she withdrew from it, or the current location of those funds now. I stand readily to be corrected or at least enlightened, but I confess to remaining somewhat unclear as to the connection or the distinction between the "Westpac Saver Account" and the recently disclosed "Maxi 1 Direct" account. Presumably this, too, will be clarified before, or at least early on in the trial.
Legal Principles
In M v DB, the Full Court of the Family Court said:
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 would necessarily produce the same result because of varying weight individually and comparatively.[1]
[1] (2007) 36 FLR 454 at p.464.
Indeed, here there are a number of factors to determine the `just or convenient result,’ some of which may well change at the final hearing, come next February.
One of those factors relates to the nature, scope, sufficiency and accuracy of discovery. While making no settled finding, I cannot help but have the impression that Mr Sheehan, either by design or by practice, has chosen to disclose only ever so much documentation and information as might prevent any coercive order being made against him that would require him to make complete and prompt discovery of all relevant documents. To state the obvious, this does his cause no great good.
Thus far, the disclosure of information and the production of documents may properly be characterised as being rather circumspect, and not exactly carried out with dispatch or alacrity. In saying this I do not suggest that he is in any way embarking on any orchestrated scheme designed to defeat or otherwise make more difficult the recovery of funds pursuant to the Court's final determination of the property proceedings. Indeed, in his material before the Court he acknowledges that there should be an appropriate order in
Ms Sheehan's favour.
It para.50 of his affidavit of 12 March 2008 he states unequivocally:
In relation to para.21 of the wife's affidavit, I accept that the wife has a claim under s.79 of the Family Law Act 1975.
His candour in this regard is refreshing.
I do not propose rehearsing in great detail the respective principles in relation to the granting of injunctions. Those principles and precepts have been amply set out by the High Court in the following cases.
(i)Jackson v Sterling Industries Limited.[2] I refer particularly to the joint judgment of Wilson and Dawson JJ [at pp. 616 – 620], and the judgment of Deane J [at pp.622 – 627], with whom Mason CJ [at p.616] and Brennan J [at pp.620 - 621 agreed.
[2] (1987) 162 CLR 612.
Brennan J said:[3]
A judicial power to make an interlocutory order in the nature of the Mareva injunction may be exercised according to the exigencies of the case, and the schemes which a debtor may devise for divesting himself of assets being legion, novelty of form is no objection to the validity of such an order.
[3] (1987) 162 CLR at p.621.
Also relevant are the comments of the High Court in CSR Limited v Cigna Insurance Australia Limited.[4] In the joint judgment of Dawson, Toohey, Gaudron, McHugh, Gummow and Kirby JJ said:[5]
The counterpart of a Court's power to prevent its process being abused is its power to protect the integrity of those processes once it is set in motion.
[4] (1997) 189 CLR 349.
[5] (1997) 189 CLR at p.391. Emphasis in the original text.
The High Court in CSR Limited v Cigna Insurance Australia Limited was here relying on the previous High Court judgment in Jackson v Sterling Industries to which I have already referred.
The third relevant case is Patrick Stevedore's Operations Number 2 Pty Limited v Maritime Union of Australia.[6] The joint judgment of Brennan CJ and McHugh, Gummow, Kirby and Hayne JJ deals with interlocutory relief [at p.32 ff.]. Their Honours rely expressly on the respective judgments of Brennan J and Deane J in Jackson v Sterling Industries. There is specific discussion of Mareva injunctions Patrick Stevedores [at p.44 ff.].
[6] (1998) 195 CLR 1.
The next relevant case is the High Court decision in Cardile v LED Builders Pty Limited.[7] Like others before it, this case relied upon and cited the established principles from Jackson Australia Industries, as well as their confirmation and elaboration in CSR Limited v Cigna Insurance Australia Limited. In Cardile, the joint judgment of Gaudron, McHugh, Gummow and Callingnan JJ referred to and relied again on the judgment of Deane J in Jackson v Sterling Industries, as well as the joint judgment of Mason CJ and Brennan and Deane JJ in National Australia Bank Limited v Bond Brewing Holdings Limited.[8]
[7] (1999) 198 CLR 380.
[8] (1990) 169 CLR 271 at p. 277.
The High Court in Cardile said [at p.394]:
In National Australia Bank v Bond Brewing, Mason CJ, Brennan and Deane JJ described as mistaken any proposition that Mareva relief could only be obtained against the defendant to an action if there were a positive intention to frustrate any judgment.
Also in Cardile, their Honours stressed [at pp.403–404] that:
It requires a high degree of caution on the part of the Court invited to make an order of that kind.
The reference to "an order of that kind" refers specifically to a Mareva injunction.
In a subsequent paragraph of the Cardile judgment the High Court said [at pp.403-404] (relying on authority from the New South Wales Court of Appeal in Frigo v Culachi an unreported 1998 decision of that Court):
[A Mareva order's] purpose is to preserve the status quo, not to change it in favour of the plaintiff.
Kirby J's detailed concurring judgment in Cardile begins at p. 411.
I confess that I found his Honour's treatment of discussion of asset preservation orders especially lucid and helpful. I note the following from his Honour's judgment.
His Honour said [at p.423, para.110];
Where a Court is endowed with a particular jurisdiction -
And I interpose here to say that that applies specifically to this Court, with its statutory powers:
…it enjoys the powers necessary to enable it to act effectively within that jurisdiction. Its powers are not ordinarily construed as restricted to defined and closed categories. This is because of the infinite variety of circumstances which may come before a Court and require appropriate orders. [Internal references omitted.]
In para.114 of the judgment [at p. 425] his Honour said:
The particular reasons given in disposing of one claim for an asset preservation order should not be converted into universal principles with invariable application. The case law in this topic is a field of single instances cultivated in a garden of interlocutory orders, nurtured in a wilderness of broad discretions. Unlike many English gardens, this one has a measure of orders stamped upon it, brought by analogy from the equitable rules developed for general injunctive relief. But excessive order and rigid rules would endanger the relief in question and be alien to its essential character.
Then at para.122 and following [pp. 427 ff.], his Honour said this:
In framing asset preservation orders, certain features must be observed. They take effect in personam. They are thus distinguished from remedies such as tracing which affect proprietary rights. They are interlocutory orders subservient to the main proceedings, but potentially vital to their utility. The grant of such relief is discretionary. They must often be provided (or withheld) in urgent circumstances where a propensity to shift assets, apparently to defeat a judgment, has already been manifested. The plaintiff must establish a real risk of assets being disposed of. No such relief should be contemplated without the provision of an undertaking as to damages. This is protective both of the defendant and of non-parties made subject to such orders. It acts as a sanction against ill considered applications or unjustified orders. It is the duty of the lawyers of the parties to remind the judge of this prerequisite. Various qualifications to the operation of such preservation orders are now well settled. [Internal citations omitted.]
His Honour, in a note, refers specifically to various exceptions to asset preservation orders as including legal fees, living expenses, and the payment of debts.[9]
[9] 198 CLR p.428, footnote 218, referring to Frigo v Culachi.
He then concludes part of this discussion by saying [at para.123]:
… these considerations require that a very large measure of latitude be allowed to judges as to when they consider it "appropriate" to provide such relief, with the aim of protecting the position of an actual or potential judgment creditor and the process of the Court itself. Few judges, asked for such orders, have the luxury of the extended reflection availed of by appellate courts. In expressing the applicable principles, we should not overlook the practical exigencies in which orders of this kind are typically made.
In the very next paragraph [para.124], his Honour said [under a heading: "Minimum disturbance"]:
The restraint against the disposal of assets pursuant to an asset preservation order is usually expressed so that it does not tie up assets and property beyond the extent that the party seeking the orders may be thought likely to recover. This rule is a reflection of considerations involved in the "minimum equity" principle, namely that relief should be confined to the "limits set by the purpose which it can be properly be intended to serve." [Internal citations omitted.]
His Honour’s last comment was from Jackson v Sterling Industries.
In passing and for the sake of completeness I should also refer to the High Court decision in Pelechowski v Registrar,Court of Appeal (NSW),[10] and the favourable consideration of a non-superior Court's jurisdiction to grant interlocutory relief, including the accurate description of a `Mareva order’ rather than a Mareva injunction. That case concerned whether the District Court of New South Wales had jurisdiction to grant Mareva relief.
[10] (1999) 198 CLR 435.
Relying on the decision in Cardile, the High Court held that the District Court had the relevant and necessary power because its exercise was ancillary to the exercise of the Court's jurisdiction.[11]
[11] In passing, I note that there was a very fulsome description of the appropriate description and nomenclature in relation to Mareva orders which are set out in Kirby J's judgment in Cardile at pp. 411-413.
Finally, all of these authorities and a great many more are discussed at length in the very helpful monograph by Peter Biscoe of the New South Wales Bar entitled Mareva and Anton Pillar Orders, Freezing and Search Orders.[12] I will come back to that discussion shortly.
[12] (Sydney: LexisNexis - Butterworths, 2005).
Before dealing with relevant Family Court authority, by way of summary, I note and stress the following from the High Court authorities to which I have referred, in addition to the extended comments that I have already noted from the judgment of Kirby J in Cardile.
In Jackson v Sterling Industries [at p. 621] Brennan J said:
A judicial power to make an interlocutory order in the nature of a Mareva Injunction may be exercised according to the exigencies of the case, and the schemes which a debtor may devise for divesting himself of assets being legion, novelty of form is no objection to the validity of such an order.
Secondly, in CSR v CIGNA Insurance [at p.391], the joint judgment of Dawson, Toohey, Gaudron, McHugh, Gummow and Kirby JJ, the Court said:
The counterpart of the Court's power to prevent its processes being abused is its power to protect the integrity of those processes once set in motion.
In my view, it is clear that by virtue of an application having been lodged and orders sought pursuant to s.79 of the Family Law Act, `the processes of the Court have already been set in motion.’
Thirdly, in Cardile the High Court said [at p.394], referring to National Australia Bank v Bond Brewing:
Mason CJ, Brennan and Deane JJ, described as mistaken any proposition that Mareva relief could only be obtained against a defendant to an action if there were a positive intention to frustrate any judgment.
I have already remarked that I do not have any evidence before me, nor do I infer in any way, that the respondent husband in these proceedings is attempting to abuse the proceedings before the Court by any deliberate scheme or other contrivance to frustrate any future orders of the Court. Nor was any submission to this effect formally put on behalf of Ms Sheehan. His less than fulsome and timely disclosure of documents and other information may simply and precisely be just that: namely, `less than fulsome and less than timely,’ with no other ulterior motive or intention. I certainly hope that this characterisation is accurate.
I will come back to these matters shortly in the light of the High Court's description in Cigna regarding a Court's responsibility to protect the integrity of its processes once set in motion. I will do so after considering the central Full Court decisions in Waugh's case and Mullen v De Bry. It is to those cases that I turn now.
In Waugh's case, formally in The Marriage of BA and RS Waugh,[13] the Full Court of the Family Court (Lindenmeyer, Coleman and Brown JJ), stated the following. Firstly, [at para.30]:[14]
While we do not disagree with that submission, we think that it has limited significance in the context of its case. 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.
[13] (2001) 27 FLR 63.
[14] Their Honours are referring to an earlier submission regarding the operation of Mareva Injunction and the principles relating to it.
The Full Court continued [at para.31]:
For example, we think it is important to bear in mind that there may be a distinction to be drawn between proceedings at law for 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 on spouse seeks an interlocutory injunction to restrain the other from dissipating assets….
At the end of that paragraph their Honours said:
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.
Their Honours went on to treat at some length the High Court judgment in Jackson v Sterling Industries.[15] I need not repeat what their Honours say there, other than to note that they stress [at para.41], quoting again from Jackson v Sterling Industries, that:
A Mareva injunction exists not to create additional rights but to enable the Court to protect its process from abuse in relation to the enforcement of its orders. It is neither a species of anticipatory execution, nor does it give a form of security for any judgment which may ultimately be awarded.
[15] (2001) 27 FLR 63 at pp.72ff.
At [para.42] they quote from Brennan J's judgment in Jackson v Sterling Industries, who describes the Mareva injunction as:
… a remedy which is incidental to the exercise by a Court of its jurisdiction, to enter judgment for a debt or damages, and which is designed to prevent the defendant from divesting himself of his assets, whereby enforcement of such judgment might be frustrated.
The Full Court notes [at para.45] that the nature of the relief is ultimately discretionary.
At the end of their judgment, the Full Court observed that the orders made by the trial Judge worked [at p.80; para.61]:
A substantial injustice to the husband in the sense that they unduly and unnecessarily fetter[ed] his capacity to conduct his business activities.
The final case to consider is Full Court's judgment in
M v DB.[16] The Full Court (Kaye, Warnick and Boland JJ), observed [at para.41]:
… 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.
[16] (2007) 36 Fam LR 454.
Then in subparagraph (c) of para.43, they concluded:
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.
All of these passages are, of course, consistent with the observations in the High Court cases of Jackson, CIGNA and Cardile.
Finally, in M v DB [at para.46] their Honours stated:
Finally, we think it helpful to recognise that the essential power being exercised in this Court 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.
Their Honours observed [at para.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.
And finally, [at para.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 inquire whether there is any evidence of the intention, plan or scheme to dispose of assets. But in an inquiry into the risk of disposal, the question of intention or scheme is but one of a number of factors relevant to the objective task of disposition to defeat an order. [Emphasis in original.]
Given what I have already said at some length, I do not need to do anything further other than to note the very brief summary of principles by O'Ryan J in Liatos v Liatos.[17]
[17] (2007) FCA 945 at para.280 to 285.
To conclude, I have already referred to the incomplete, somewhat tardy nature of the protracted processes of discovery thus far. In such circumstances I am a little surprised that I was not asked to make any orders for `specific discovery.’ This dimension is canvassed in detail by Mr Biscoe with detailed reference to significant judicial authority. He says:[18]
The commonest form of ancillary relief and the most important way in which a freezing order is made effective is by an order that the respondent disclose the nature, value and location of its assets.
[18] Biscoe, Mareva and Anton Pillar Orders: Freezing and Search Orders, op. cit., p.64 para.3.2.
I need say nothing further, since no such order has been sought in these proceedings.
Conclusion
Without making any formal finding at this stage, in my view, there is clear evidence, if not more, that a joint account has been used to purchase items of some worth. There are, at least, significant questions surrounding the detail of a certain bank account or bank accounts.
I have already noted that there are caveats in place in relation to certain real estate. There is nothing to protect the funds in the recently disclosed account.
In the absence of any undertaking from the respondent, and which in any event has been formally refused, on the usual undertaking as to damages, which is set out in para.29 of the applicant's affidavit of
18 February 2009, I propose granting the order sought but in a somewhat different and more limited form. The order will be as set out in the “Orders” section of this judgment.
I certify that the preceding seventy (70) paragraphs are a true copy of the reasons for judgment of Neville FM
Associate: Renee Davidson
Date: 30 June 2008
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