Shuren & Fang (No 7)
[2024] FedCFamC1F 716
•14 October 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Shuren & Fang (No 7) [2024] FedCFamC1F 716
File number(s): MLC 3815 of 2023 Judgment of: STRUM J Date of judgment: 14 October 2024 Catchwords: FAMILY LAW – DISCHARGE OR VARIATION OF INTERLOCUTORY INJUNCTIONS – Where interlocutory injunctions previously made restrained the husband from further dealing with, disposing of, encumbering or diminishing the value of two real properties – Where further injunctions subsequently made relating to other assets – Finding that there has been a material change of circumstances such as to warrant variation of earlier injunctions Legislation: Family Law Act 1975 (Cth) s 114
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 44
Federal Circuit and Family Court of Australia Family Law Rules 2021 (Cth) r 5.1
Cases cited: Adam P Brown Male Fashions Pty Ltd v Philip Morris Incorporated & Anor (1981) 148 CLR 170
AED Oil Ltd v Puffin FPSO Ltd (No. 5) [2011] VSC 60
Chorn & Hopkins (2004) FLC 93-304; [2004] FamCA 663
Langford & Coleman [1993] FLC 92 346; [1992] FAMCA 68
Mullen & De Bry (2006) FLC 93-293; [2006] FamCA 1380
Oswal v Carson and Others (No. 3) [2011] VSC 193
Paras & Public Service Body Head of the Department of Infrastructure (No 2) [2006] FCA 622
Waugh & Waugh (2000) FLC 93-052; [2000] FamCA 1183
Division: Division 1 First Instance Number of paragraphs: 45 Date of hearing: 14 August 2024 Place: Melbourne Counsel for the Applicant: Mr Tatarka and Mr Ryan Solicitor for the Applicant: Australian Legal Advisory Centre Counsel for the First Respondent: Mr Dickson KC and Ms Renwick Solicitor for the First Respondent: Ascot Solicitors Counsel for the Second Respondent: No Appearance Counsel for the Third Respondent: No Appearance Counsel for the Fourth Respondent: No Appearance ORDERS
MLC 3815 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS SHUREN
Applicant
AND: MR FANG
First Respondent
B PTY LTD
Second Respondent
C PTY LTD (and another named in the Schedule)
Third Respondent
ORDER MADE BY:
STRUM J
DATE OF ORDER:
14 OCTOBER 2024
THE COURT ORDERS THAT:
1.The matter be listed for a Trial Management Hearing on 19 February 2025 at 10.00am.
2.The Wife’s application for leave to review the final s 79 orders made 1 October 2020 out of time be consolidated with her application to set aside those orders pursuant to s 79A and adjourned to the final hearing, and otherwise all extent interim applications, save for the Husband’s Application to Review filed 7 August 2024, be dismissed.
3.The said applications be listed for trial on 11 August 2025 at 10.00am with an estimated hearing time of 10 days.
4.Paragraph 1 of the orders made by the Honourable Justice Strum on 14 June 2024 be varied as follows:
The Husband, both personally and his capacity as director of any corporate entity, be restrained by injunction from further dealing with, disposing of, encumbering or diminishing the value of the real property situate and known as O Street, Melbourne in the State of Victoria (“the O Street property”), save and except for being offered as security by the Husband in the ordinary course of his business, the payment of his reasonable living expenses and/or the payment of his proper legal expenses, and the husband provide the Wife with written notice of same within 7 days of such security being offered.
5.Paragraph 4 of the orders made by the Honourable Justice Strum on 14 June 2024 be varied as follows:
The Husband be restrained by injunction, both personally and in his capacity as a director and/or secretary and/or shareholder of HH Pty Ltd, as trustee for HH Unit Trust, from disposing of, encumbering or diminishing the value of the GG Street property, save that the Husband:
a)be at liberty to encumber the property in an amount of not more than $6,000,000, and provided that any amount borrowed pursuant to that encumbrance be applied only to development and operational costs of HH Pty Ltd and that property; and/or
b)be permitted to offer the property as security in the ordinary course of his business, the payment of his reasonable living expenses and/or the payment of his proper legal expenses, and the Husband provide the Wife with written notice of same within 7 days of such security being offered.
AND THE COURT FURTHER ORDERS BY CONSENT THAT:
6.Paragraph 3 of the orders made on 19 April 2023 be varied to read:
That the Husband provide monthly transaction histories or bank statements (if they exist) relating to properties owned or controlled by him or entities in which he has an interest including, but without being limited to, his interest in:
a. LL Pty Ltd;
b. B Pty Ltd;
c. Z Pty Ltd;
d. K Pty Ltd;
e. MM Pty Ltd;
f. NN Pty Ltd;
g. OO Pty Ltd; and
h. HH Pty Ltd.
7.The documents produced by R Pty Ltd, Q Pty Ltd and PP Company pursuant to subpoena issued to each of those entities and filed on 25 September 2024 shall remain in the Registry and not be released for inspection until further order (by consent or upon application filed by either party).
8.The costs of and incidental to the Husband’s further amended application in a proceeding filed on 10 September 2024, the wife’s response thereto filed on 11 October 2024 and the subpoena objections returnable this day be reserved.
AND THE COURT NOTES THAT:
A.Counsel for the husband and wife advised the Court of their respective clients’ consent to order 6 above.
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).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of 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 a pseudonym has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
EX TEMPORE REASONS FOR JUDGMENT
Strum J:
INTRODUCTION
On 14 June 2024, injunctions were made by me, partly by consent and partly not by consent, upon an undertaking given by the wife as to damages. Each of the parties, but in particular the husband, was represented by Senior Counsel. There has been no application for leave to appeal or any consequent appeal from those orders. Counsel for each of the parties today have pointed to various passages of the transcript of the hearing on that occasion that they contend support their client’s case and negate that of the other. However, in Langford & Coleman [1993] FLC 92-346 at 79,670–79,671, Nygh J (with whom Barblett DCJ and Ellis J agreed) said, albeit in a different context, that “it is to [the] orders alone that the Court must look” in interpreting them. Further, there was no application made to the Court, after I made the injunctions, to amend them pursuant to the slip rule.
The injunctions dealt with two discrete properties: the injunction by consent dealt with the property at O Street, Melbourne (“the O Street property”); and the injunction not by consent dealt with the property at GG Street, Suburb F (“the GG Street property”). The latter property is registered in the name of HH Pty Ltd as trustee for the HH Unit Trust and is a property which the husband wishes to develop in the course of his business as a property developer.
In the case of the O Street property, the injunction restrained the husband from further dealing with, disposing of, encumbering or diminishing the value of that property. In respect of the GG Street property, he was largely similarly restrained, save that he was at liberty to encumber the property in an amount not more than $5.6 million, being the subject of an offer of funding from JJ Ltd (“JJ Ltd”) and providing that any amount borrowed pursuant to that encumbrance be applied only to the development costs of that property.
Both in relation to the order by consent and that not by consent, Senior Counsel then appearing for the husband did not seek an exception in respect of dealings in the ordinary course of business or for reasonable living expenses or proper legal expenses. It is for Counsel to conduct their clients’ cases on advice to and/or on instructions from their clients. That is all the more so where the parties were represented, presumably competently, by Senior Counsel, as both parties were on that occasion.
The injunctions were made in circumstances where the wife had lodged caveats over the two properties and the husband had applied to the Supreme Court of Victoria for the removal thereof. Those proceedings were transferred to this Court and were listed before me on 14 June 2024.
JUDGMENT OF 14 JUNE 2024
Neither party today, through their Counsel, has referred at any length or in any detail to my reasons for judgment delivered ex tempore that day, and subsequently published. These reasons for judgment should be read in conjunction with those I delivered that day.
At [1] of my reasons for judgment, I described the sorry history of the proceedings between the husband and the wife in this Court as reading “like a 21st century version of Charles Dickens' Bleak House”. Nothing for the better has changed since then.
At [4] – [5], I said as follows:
4.The issue before me today transpired to be a narrow one. The hearing was largely truncated, and these reasons are therefore brief. The husband seeks that certain caveats lodged by the wife over land owned by companies controlled by him be removed to enable him to develop that land. It is well settled that a claim under s 79 of Act does not, in and of itself, give rise to a caveatable interest in land, and I consider that is all the more so insofar as proceedings under s 79A of the Act are concerned.
5.The wife’s position is that she will remove the caveats on the proviso that she is afforded sufficient security. She has no right to security, per se, and again all the more so in s 79A proceedings. The dicta of the Full Court in Waugh & Waugh (2000) FLC 93-052, even as contextualised by a later Full Court in Mullen & De Bry (2006) FLC 93-293, makes that abundantly clear.
At [6] – [14] I referred to the decisions of the Full Court in Waugh & Waugh (2000) FLC 93-052 and Mullen & De Bry (2006) FLC 93-293, as well as to the Court's injunctive powers under s 114 of the Family Law Act 1975 (Cth) (“the Family Law Act”), and s 44 of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (“the FCFCOA Act”).
At [15], I said:
In the present case, the husband’s position is, in substance, that the wife should have some comfort, by way of security, but that it should be in the form of an undertaking. As the Full Court said in Mullen & De Bry, so too in this case, there would be little or no detriment to the husband if the injunction were granted, as opposed to an undertaking, as proffered by him. There was no good reason proffered by Senior Counsel for the husband as to why he would consent to an undertaking but not an order.
I continued at [16]:
The terms of the undertaking proposed by the husband and of the injunction sought by the wife are before the Court. The Court has no power to require an undertaking, as opposed to the power to grant an injunction. …
At [17], I relevantly – and, in my view, importantly for the purposes of today's application – said:
Ultimately, the differences between the parties are more disputes over form, rather than of substance, in my view. The husband does not disagree with the proposition that he should be the subject of certain restraints, whether by injunction or undertaking. Given that he can point to no reason why an undertaking should be preferred over an injunction, and that there is no power in the Court to require an undertaking or to stipulate the terms thereof, I consider that, as required by s 114(3), it is just and convenient to grant an injunction, as sought by the wife.
I referred at [18] to the way the proceedings unfolded that day, and the fact that Senior Counsel for each of the parties sought time to have some discussions in an endeavour to resolve, or at least narrow, the ambit of the dispute. I observed that “[u]ltimately, there was some agreement reached, but judicial determination was still required”. I consider that contextualises the circumstances in which both injunctions were made on 14 June 2024.
At [20], I said:
The wife seeks that the husband be restrained personally, and in his corporate capacity in relation to [HH Pty Ltd] as trustee for the [HH Unit Trust], from disposing of, encumbering or diminishing the value of the real property at [GG Street, Suburb F], in the State of Victoria, save for encumbering the property not in excess of $5.6 million as offered by a financier, which advances are to be applied to meet the development costs of that property. Again, the distinction between the substance of the terms of the restraint, whether by undertaking or injunction, is, in essence, a distinction without a difference or, at least, with very little difference. That difference, in my view, is more apparent than real.
Again, importantly for today's purposes, I noted at [21] that the husband proposed to undertake only that he be so restrained without first giving the wife 21 days written notice, which would have made it incumbent upon her to return to Court if she joined issue with the transaction proposed by him. I noted that there were already multiple other interlocutory applications pending, which I then referred to a Senior Judicial Registrar for determination. I consider that makes it clear that the injunctions in relation to the two properties were not part of the application to be referred to the Senior Judicial Registrar but, rather, had been dealt with that day.
I continued at [22] that the husband sought that –
… the caveats be removed to enable him to develop the [Suburb F] property. There was no submission made by his Senior Counsel as to why he might need to encumber the property in excess of the offer of the financier, nor why he might need to apply the funds secured by that encumbrance other than to development costs. …
That was so at the particular point in time when I made the injunctions. For reasons that I will turn to shortly, there is now further evidence before the Court in this regard.
Lastly, I noted at [23] that “…[t]he husband is a property developer, and there is no reason why he should not be able to continue doing what he does in the ordinary course of that business. …”.
CURRENT PROCEEDINGS
By his further amended Application in a Proceeding filed on 10 September 2024, the husband seeks the discharge of the injunctions at paragraphs 1 and 4 of the Orders made on 14 June 2024. Alternatively, as a so-called ‘fallback position’, he seeks variations in respect of each of the injunctions, and those proposed variations have been further refined in the annexure to his written submissions that were filed on 10 October 2024.
In the case of each property, the husband seeks an exception that the properties be able to be used as security in the ordinary course of business, upon subsequent notice to the wife.
Further, in relation to the GG Street property, he seeks that the named financier, JJ Ltd, be deleted and the amount of the finance be increased from $5.6 million to $6 million. On his oath, he deposes having secured alternative finance from QQ Group in circumstances where JJ Ltd withdrew their offer of finance due to the caveat over the GG Street property. He also seeks that borrowings be applied to operational costs of that company and that property.
I note parenthetically that, whilst the wife ultimately complied with my Order made on 14 June 2024 to remove the caveats, the Registrar of Titles has delayed in doing so for reasons that are not readily apparent.
The husband also seeks to define ordinary business expenses as including his living expenses and his legal fees. They are nothing of the sort, and I will return to that issue below.
For the reasons above, I do not accept that the injunctions I made on 14 June 2024 were other than as they state on their face, namely, one injunction by consent and one injunction by the Court. Further, they were clearly interlocutory injunctions. They were not short-term “holding” injunctions, nor were they, as Senior Counsel for the husband faintly suggested, permanent injunctions. Although infelicitously not expressly so stated, they were not and could not be anything other than interlocutory injunctions. Indeed, r 5.1 of the Federal Circuit and Family Court of Australia Family Law Rules 2021 (Cth) makes it clear that, on the making of final orders in a proceeding, any order made in a proceeding pending further order is automatically discharged and ceases to have continuing effect. I could not have made final orders on 14 June 2024, thus the orders I made – unless discharged beforehand – would cease to have effect, in any event, on the making of final orders.
Both parties' submissions – well drawn as they were – do not substantially address the principles governing the variation of an injunction, as opposed to those for the grant of an injunction, which has already occurred.
In Oswal v Carson and Others (No 3) [2011] VSC 193, Ferguson J, as her Honour then was, said at [10]:
An interlocutory injunction granted until trial or further order will be varied or discharged where there has been a material change of circumstances since the injunction was first granted. The application for variation or discharge is not a vehicle for a rehearing of the original application on the same material nor is it a substitute for an appeal from the original orders granting the injunction.
(Footnotes omitted)
In support of those propositions, her Honour referred to Adam P Brown Male Fashions Pty Ltd v Philip Morris Incorporated & Anor (1981) 148 CLR 170; AED Oil Ltd v Puffin FPSO Ltd (No. 5) [2011] VSC 60; and Paras & Public Service Body Head of the Department of Infrastructure (No 2) [2006] FCA 622.
Material Change of Circumstances
I turn therefore to consider whether there is a material change of circumstances such as to warrant the discharge or variation of the injunctions made on 14 June 2024.
The husband points to the change of financier and to the increase in the amount of proposed finance from $5.6 million to $6 million. The wife does not cavil with that.
In relation to a variation to provide for an exception for dealings in the ordinary course of business and to meet his reasonable living expenses and his proper legal expenses, the husband points to the fact that, since the subject injunctions were made, further injunctions were subsequently made by a Senior Judicial Registrar on 18 July 2024, which restrained his dealings with other assets. Although those further injunctions are the subject of a pending review application, I must take the case as I find it. At present, I am faced with those further injunctions and I accept that, by reason thereof, there has been a material change of circumstances.
In relation to the O Street property, at [19] of his affidavit filed 26 September 2024, the husband deposes that, with respect to the existing loan from the National Australia Bank secured over that property, he has used funds therefrom to assist with his property development and management business. This has been in order to meet his monetary obligations to investors, creditors, suppliers, staff, builders, tradesmen, lawyers, conveyancers, government agencies (including local councils), the Australian Taxation Office, the State Revenue Office and the like. He deposes that this has been in the ordinary course of conducting business, namely, that of the various property developments in which he is involved, and that he has made various loans to different entities. In particular, he deposes to having lent $4.36 million to three entities, one of which is HH Pty Ltd, being the registered proprietor of the GG Street property, and to being owed $4.1 million from those three entities.
The husband’s case today is that, because the wife subsequently obtained injunctions in relation to other properties owned by various entities under his control (being those made by the Senior Judicial Registrar), it is now even more difficult for him to obtain the requisite financing to discharge all of his debt obligations. He deposes that he cannot meet his obligations as a property developer in the ordinary and proper course of business, as the injunction, in its current form, prohibits him from seeking further finance, which prevents him from fully discharging his debt obligations to other parties. This, he maintains, in turn, may cause potential default and litigation to ensue. He provides, by way of a recent example, that one of the companies, Z Pty Ltd, is due to incur a tax debt of approximately $1.8 million, in addition to owing $545,000 already to the Australian Taxation Office under a payment plan, which requires a monthly repayment of $37,000. He deposes that, if he is unable to obtain finance from other related entities, he will be unable to pay those significant tax debts.
He also deposes at [24] that the liabilities that he has incurred, secured by the O Street property, are for the sole purpose of meeting expenses for himself, as well as for his property businesses so as “to increase all of the value of his assets”.
In relation to the GG Street property, he deposes at [32] to the pre-construction loan, which was the loan referred to at paragraph 4 of the injunctions I made on 14 June 2024, initially intended to be from JJ Ltd. He deposes that the next, and urgent, step in the development of that property is to obtain the pre-construction loan, which is intended to cover several categories of pre-construction costs, totalling an estimated $6.95 million. The wife takes issue with sales commission being paid out of that loan; however, at some point, it will need to be paid and, given the nature of his business, I consider it forms part of what would be in the ordinary course thereof.
The husband deposes that, prior to the injunctions being granted in June, he had obtained the pre-construction loan to which I have referred above; however, after becoming aware of the caveats and the injunctions, JJ Ltd withdrew its offer to lend. As such, the development was further delayed. He has since sought, and obtained, approval for alternative finance, in order to proceed with the development, from QQ Group in the sum of $6 million. The differential between that proposed loan and the previously proposed JJ Ltd loan is $400,000 in respect of prepaid interest. He deposes to his longstanding relationship with QQ Group due to years of working together on various projects.
I accept, at an interlocutory stage, that limiting the borrowings previously to $5.6 million or now to $6 million may cause difficulties moving forward with the development of the property. However, at this stage, he himself proposes, albeit as his less preferred option, that it be so limited.
I consider that many of the wife's concerns – and I do not put them higher than that – by reason of which she opposes the variations sought by the husband, can be obviated by the exception the husband seeks, which is that his dealings be in the ordinary course of business in respect of both properties.
In relation to living expenses, I now have evidence before me, commencing at [50] of the husband’s affidavit, which was not before me on 14 June 2024. He deposes that, as he does not draw a wage, he supports his family and himself through loans from the companies he manages and upon sales of property as a property developer. The only times that he earns money is upon the sale of a unit or a property that he has developed. In order to support his family and himself during the course of a development, he borrows funds from the various companies he manages.
Insofar as his legal expenses of these proceedings are concerned, they will, in the ordinary course, be added-back, in accordance with the dicta of the Full Court in Chorn & Hopkins [2004] Fam CA 663, which has been upheld in subsequent cases. The husband sets out at [52] what are said to be his legal expenses and his arrangements with his lawyers.
I have carefully read the wife's affidavit filed on 7 October 2024. Unsurprisingly, it is primarily directed to buttressing the injunctions that I made on 14 June 2024, rather than answering the case of changed circumstances, about which, I accept, she can probably say little. Further, much of her affidavit is comprised of comment, argument and speculation. At [11], in relation to the O Street property, she says that it is one of the few properties not otherwise "entangled" with any development or entity, and that she continues to press for its protection in the proceedings, pending the outcome of her substantive application before the Court. She asserts that the husband has continued to take steps to encumber, and thus devalue, the remaining assets available for division between the husband and herself. She remains "concerned" that the husband will not have sufficient assets from which to meet an order in her favour. However, that is, as I have indicated, primarily directed to buttressing her opposition to the discharge of the injunctions (which I do not propose to do), rather than responding to the fallback position proposed by the husband.
In relation to the GG Street property, insofar as the wife deposes, at [13(a)], that she does not oppose the genuine development of that property proceeding, the variation I propose to make will enable that development to go ahead.
Insofar as, at [13(b)], the wife deposes that she does not accept that the loan offer received by the husband from QQ Group is for the purpose of development, she adduces no basis for such speculation. Indeed, the order, as made on 14 June 2024, at paragraph 4 provides for a development loan, albeit from a different lender and in a slightly lesser amount, but for reasons that I have already referred to.
Insofar as, at [13(d)], the wife deposes that she is not “satisfied” that the husband has any obligation pursuant to the proposed QQ Group loan agreement to use the funds borrowed for the development the GG Street property, I was not taken to any provision of that agreement that would support such contention. In any event, the husband is on his oath, and the amendment to the injunction at paragraph 4 of the 14 June 2024 Orders proposed by him in sub-paragraph (a) thereof limits the application of the borrowed funds to the development of the GG Street property, as well as to the operational costs of the company and the unit trust that owns the property.
Given the husband's evidence in his affidavit filed on 26 September 2024, much of which the wife, albeit understandably, cannot respond to, I consider the variations he seeks to be proper, just and appropriate, to adopt the wording in s 114 of the Family Law Act or, alternatively, s 44 of the FCFCOA Act. The exceptions are ones to which the husband will be held to account, and in respect of which consequences may flow if they are breached.
In the circumstances, I shall order substantially in accordance with the Minute of Orders marked “A” and annexed to the husband’s submissions, save to add the exception in each of paragraphs 1 and 2(b) thereof: “the payment of his reasonable living expenses and/or the payment of his proper legal expenses”. Such exceptions are in place of the definition sought in paragraph 3 thereof, which I decline to make, as they are not in the ordinary course of business.
I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the ex tempore Reasons for Judgment of the Honourable Justice Strum. Associate:
Dated: 31 October 2024
SCHEDULE OF PARTIES
MLC 3815 of 2023 Respondents
Fourth Respondent:
HH PTY LTD
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