Shuren & Fang (No 9)
[2025] FedCFamC1F 104
•21 February 2025
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Shuren & Fang (No 9) [2025] FedCFamC1F 104
File number: MLC 3815 of 2023 Judgment of: STRUM J Date of judgment: 21 February 2025 Catchwords: FAMILY LAW – APPLICATION IN A PROCEEDING – INJUNCTIONS – Breach of injunction – Enforcement of injunction – Discretion to enforce – Where there were multiple withdrawals of funds by the respondent from his company in breach of injunction in repayment of loans to him and another of his companies – Where respondent asserts prejudice if required to repay funds – Where one withdrawal was in payment of an outstanding taxation debt – Consideration of “the ordinary course of business” – Respondent ordered to repay funds to the company except for the withdrawal applied to reduction of taxation debt. Legislation: Family Law Act 1975 (Cth) s 79A
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 8.14
Cases cited: Collins and Olsthoorn (2005) FLC 93–216; [2005] FamCA 138
Downs Distributing Co Pty Ltd v Associated Blue Star Stores Pty Ltd (in liq) (1948) 76 CLR 463; [1948] HCA 14
Ramsey and Ramsey (1983) FLC 91–301
Re Netherby Hall Pty Ltd (1974) CLC ¶40-110
Robertson v Grigg (1932) 47 CLR 257; [1932] HCA 29
Shuren v Fang (No 7) [2024] FedCFamC1F 716
Taylor v White (1964) 110 CLR 129; [1964] HCA 11
Division: Division 1 First Instance Number of paragraphs: 42 Date of hearing: 19 February 2025 Place: Melbourne Counsel for the Applicant: Dr Ingleby Solicitor for the Applicant: Australian Legal Advisory Centre Counsel for the First Respondent: Mr North SC, assisted by Mr Eley Solicitor for the First Respondent: Ascot Solicitors (Sunbury) Pty Ltd For the Second Respondent: The Second Respondent did not appear For the Third Respondent: The Third Respondent did not appear For the Fourth Respondent: The Fourth Respondent did not appear 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:
21 FEBRUARY 2025
THE COURT ORDERS THAT:
1.The husband forthwith repay to National Australia Bank account no. …10 in the name of HH Pty Ltd (“the HH Pty Ltd account”) the sum of $3,000,000 withdrawn by him from that account on 17 January 2025.
2.The husband forthwith repay or cause Z Pty Ltd to repay to the HH Pty Ltd account the sum of $100,000 transferred by him or caused by him to be transferred from that account to Z Pty Ltd on 30 January 2025.
3.The husband forthwith cause Z Pty Ltd to pay to the Australian Taxation Office, in full, the sum of $1,300,000 transferred by him or caused by him to be transferred from the HH Pty Ltd account to Z Pty Ltd on 17 January 2025.
4.The husband be and is hereby restrained from howsoever dealing with the funds referred to in orders 1 and 2 hereof, together with the balance of the sum of $5,600,000 deposited by the QQ Group into the HH Pty Ltd account on 16 January 2025, other than the funds referred to in order 3 hereof, save strictly in accordance with order 4(a) of the orders made on 14 June 2024, as amended by paragraph 5 of the orders made on 14 October 2024.
5.The Application in a Proceeding filed by the wife on 12 February 2025 and the Response to Application in a Proceeding filed by the husband on 18 February 2025 be otherwise dismissed, save as to costs.
6.The costs of the Applicant Wife and Respondent Husband of and incidental to the said Application in a Proceeding and the Response to the Application in Proceeding be reserved to after the determination of the s 79 threshold issue (listed for trial on 18 August 2025).
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:
Orders made by the Court on 14 June 2024 (“the June 2024 orders”) provided, inter alia, at [4]:
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 he be at liberty to encumber the property in an amount of not more than $5,600,000, being the subject of an offer of funding from [JJ Ltd], and provided that any amount borrowed pursuant to that encumbrance to be applied only to development costs of that property.
On 14 October 2024, upon application by the husband, who is the respondent in the substantive proceedings pursuant to s 79A of the Family Law Act 1975 (Cth) and to the present interlocutory application, the Court varied certain provisions of the June orders (“the October 2024 orders”).
Order 5 of the October 2024 orders provided that Order 4 of the June 2024 orders 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.
(Emphasis in original)
On 16 January 2025, the sum of $5,600,000 was credited from the QQ Group, a financier, (“the QQ Group funds”) to a bank account in the name of HH Pty Ltd (“HH Pty Ltd”), which is the trustee for the HH Unit Trust. It is agreed that the QQ Group funds are secured by the GG Street property referred to in Order 4 of the June orders (as amended) and that they were borrowed for the purposes provided by sub-paragraph (a) thereof, namely, the development and operational costs of HH Pty Ltd and the GG Street property. In my reasons for judgment delivered on 14 October 2024, Shuren v Fang (No 7) [2024] FedCFamC1F 716 (“the October 2024 reasons”), at [2], I referred to the GG Street property as being “a property which the husband wishes to develop in the course of his business as a property developer”.
On 17 January 2025, sums of $1,300,000 and $3,000,000 were transferred out of a National Australia Bank account in the name of HH Pty Ltd (“the HH Pty Ltd account”) and on 30 January 2025, a further sum of $100,000 was transferred out of that account (“the January 2025 withdrawals”).
By an Application in a Proceeding filed on 12 February 2025, the applicant wife seeks that each of those three sums be returned by the husband to the HH Pty Ltd account and that those funds remain therein until further order. The wife’s Application is supported by an affidavit by her solicitor dated and filed on 12 February 2025.
By a Response to an Application in a Proceeding filed on 18 February 2025, the husband seeks the dismissal of the wife’s Application. The husband’s Response is supported by an affidavit by him dated and filed on 18 February 2025. Notwithstanding r 8.14 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth), the husband sought leave, which was unopposed and was granted, also to rely upon an affidavit by him dated and filed on 3 December 2024, as well as paragraph 51(b) of an affidavit by him dated and filed on 26 September 2024. He also relied upon a written outline of submissions dated 18 February 2025 and filed on 19 February 2025.
In the October 2024 reasons at [20], I referred to the husband seeking an exception to the June orders to enable, inter alia, the GG Street property “to be used as security in the ordinary course of business, upon subsequent notice to the wife” (emphasis added).
At [21], I said:
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.
At [23], I said:
The husband also seeks to define ordinary business expenses as including his living expenses and his legal fees. They are nothing of the sort …
At [31], in relation to the husband’s residence at O Street, Melbourne (“the O Street property”), I said:
…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.
At [33], I referred to the husband’s evidence that the liabilities he had incurred, secured by the O Street property, were 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”.
At [34]–[35], I referred to the reasons for the change of financier from JJ Ltd, to which Order 4 of the June 2024 orders initially referred, to the QQ Group.
At [38], in relation to the husband’s living expenses, I said:
… 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.
At [39], I referred to the husband’s legal expenses.
At [43], I referred to the wife not being “satisfied” that the husband had any obligation pursuant to the then proposed loan agreement with the QQ Group to use the funds borrowed for the development of the GG Street property. Importantly, for present purposes, I said:
… the husband is on his oath, and the amendment to the injunction at paragraph 4 of the 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 cost of the company and the unit trust that owns the property.
In the circumstances, I made Order 5 of the October 2024 orders, varying Order 4 of the June 2024 orders. In so doing, I said at [44] of the October reasons that “[t]he 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 relation to the January 2025 withdrawals, the wife’s solicitor deposes that:
·they became apparent from a bank statement discovered by the husband in February 2025 for the HH Pty Ltd account;
·there was no written notice thereof; and
·they were made utilising the QQ Group funds, which is conceded by the husband.
It is common ground that, of the January 2025 withdrawals:
·the sum of $1,300,000, on 17 January 2025, was transferred to a Westpac Bank account in the name of Z Pty Ltd, a company controlled by the husband;
·the sum of $3,000,000, on 17 January 2025, was transferred to a National Australia Bank account in the name of the husband; and
·the sum of $100,000, on 30 January 2025, was also transferred to the Westpac Bank account in the name of Z Pty Ltd.
In each case, the transfer was described as being in “repayment of loan”.
In relation to the husband’s National Australia Bank account, as at 6 January 2025, it had a debit balance of $6,357,020.55, which was reduced to $3,357,020.55 on 17 January 2025, after the deposit thereto of $3,000,000.
At paragraph 35 of his affidavit filed 18 February 2025, the husband refers to loans (previously disclosed by him) owed by HH Pty Ltd to him, in the sum of $3,000,000, and to Z Pty Ltd, in the sum of $5,264,565, in each case subject to interest at the rate of 10 per cent.
At paragraph 36, the husband explains each of the January 2025 withdrawals:
(a)In relation to the transfer of $1,300,000 to Z Pty Ltd, he refers to the sum of $5,264,565 owed by HH Pty Ltd to it and deposes that, to avoid further interest accruing on that loan, he transferred that sum to reduce it. He further deposes that those funds were required by Z Pty Ltd as it has an outstanding taxation debt, which has previously been disclosed by him. As at 18 November 2024, the amount due was $1,780,000. As at 13 February 2025, it had increased, due to penalties and interest, to $1,937,496. The husband has sought, but apparently not yet received, the agreement of the Australian Taxation Office, to pay the sum of $1,300,000 by way of part-payment and the balance by way of a payment plan.
(b)In relation to the transfer of $3,000,000, he refers to the sum owed by HH Pty Ltd to him in that amount and deposes that it was “returned” to him. He deposes that this sum was drawn and on-lent by him from his “personal home loan”, somehow resulting in a higher interest rate and that, by virtue of the repayment, the daily interest has decreased from $1,115 to $589 per day. It is entirely unclear why a higher interest rate, per se, rather than a higher amount of interest payable, is said to have resulted.
(c)In relation to the transfer of $100,000, he deposes that it was to reduce further the loan owed by HH Pty Ltd to Z Pty Ltd, which was then transferred as a loan to another of his companies to pay for its business expenses and his personal living expenses.
The husband deposes (at paragraphs 40 and 42) that is impossible for construction at GG Street to commence by mid-2025 in accordance with the current permit; that application has been made for an extension; and that, if the extension is not granted, application will need to be made for a new permit, which “will take over 12 months to secure if the process proceeds smoothly”.
He deposes at paragraph 37:
If funds are required for the pre-construction works and development of the Property, I will organise the funds that were transferred from my NAB account to [HH Pty Ltd] when required. This is the most efficient way of undertaking the loan as it allows me to save significant interest on my home loan.
He asserts, at paragraph 38, that it will be extremely prejudicial to him if orders are made requiring the funds comprising the January 2025 withdrawals to be returned to HH Pty Ltd as:
(a)Z Pty Ltd is unable to repay the amounts paid to it as they are being used to reduce its taxation debt and to pay expenses of K Pty Ltd, as well as the husband’s legal fees and living expenses; and
(b)he will incur a higher interest rate (6.4 per cent) in respect of his home loan, which he asserts to be “unnecessary and unreasonable”.
There are only two exceptions to the injunction in Order 4 of the June 2024 orders, as amended by Order 5 of the October 2024 orders, namely, encumbrance of the GG Street property:
·to borrow funds to be applied only to development and operational costs of HH Pty Ltd; and/or
·to borrow funds for application in the ordinary course of the husband’s business (which, as I noted in my reasons for judgment in relation to the October 2024 orders, is as a property developer), the payment of his reasonable living expenses and/or the payment of his proper legal expenses.
Notwithstanding the conjunctive / disjunctive words “and/or” between sub-paragraphs (a) and (b) of Order 4 of the June orders (as amended), they do not permit funds borrowed for the specific purpose permitted by the former paragraph to be applied to purposes permitted by the latter paragraph, all the more so in circumstances where notice of borrowings is required for those within sub-paragraph (b) but not sub-paragraph (a).
It is clear, on the husband’s own evidence, that he has borrowed funds for the former purpose and not applied them thereto but, rather, at least in part, for the latter purpose. It is not for him to arrogate to himself the right to do so. He could, and should, have made application to the Court, in the absence of consent by the wife which, in the circumstances of this case, which I have previously described as being reminiscent of “a 21st century version of Charles Dickens’ Bleak House”, would nevertheless have been highly unlikely. He seeks to justify his breach of Order 4(a) (as amended) by arguing that it nevertheless falls within, and can be categorised as coming within, Order 4(b) (as amended).
In relation to the notice required by sub-paragraph (b) of Order 4 (as amended), the husband deposes at paragraph 24 of his affidavit of 18 February 2025:
I understand I had to provide [the wife] 7 days notice if I were to offer the security in the ordinary course of my business, payment of reasonable living expenses and/or the payment of my proper legal expenses. At the time and following the hearing [on 14 October 2024], [the wife] was fully aware of the reasons for the [QQ Group] loan which included the repayment of loans to different entities, tax debts, payment of legal fees and pre-construction works. There has been no change in the security offered (save for the lender being [QQ Group]) and the reasons were deposed consistently in my affidavits filed on 3 May 2024, 16 July 2024, 7 August 2024, 10 September 2024 and 3 December 2024.
He also points to paragraph 51(b) of his affidavit filed on 26 September 2024, in which he deposed that he intended to use a portion of the funds obtained through the loan from the QQ Group to repay a portion of the loan owed by HH Pty Ltd to Z Pty Ltd to reduce the latter company’s taxation debt. That was his evidence on 26 September 2024 but it is not what was ordered on 14 October 2024. Unlike the wife, there was no application for leave to appeal / appeal by him in respect of the October 2024 orders, which were made on application by him.
Subsequent to the October 2024 orders, in his affidavit filed 3 December 2024, the husband deposed at paragraphs 55–56:
55.As I do not draw a wage, I support myself and my family through loans from the companies I manage and upon a sale of a property. As a property developer, the only times that I would earn money is upon a sale of a unit or property that I have developed. I do not draw a wage and in order to support myself and my family during the course of a development, I would borrow from the various companies I manage and I would also loan the companies from my own funds as well.
56.Generally, money is moved from each entity to pay down the outstanding debts of another related company by way of a loan, if that entity’s debts are more pressing.
In the written outline of submissions filed on behalf of the husband, it is submitted that the application of funds by HH Pty Ltd in repayment of its loans, in particular, from Z Pty Ltd and the husband, “is clearly an operational cost” of HH Pty Ltd and thus permitted by sub-paragraph (a) of Order 4 (as amended). That is difficult to reconcile with his evidence that it is impossible for construction to commence at GG Street in accordance with the existing permit. In the circumstances, it is therefore difficult to understand what operational costs that company has or could have. Whilst he deposes to application having been made for an extension of time and, if unsuccessful, application being required to be made for a new permit, which will take over 12 months, I note that at paragraph 37 of his affidavit filed on 18 February 2025, he deposes to what he will do “if funds are required for the pre-construction works and development” of GG Street (emphasis added). In any event, I do not accept that repayments of loans between inter-related parties, whether by the husband or Z Pty Ltd to HH Pty Ltd, especially in circumstances where he solely controls (whether directly or indirectly) those two corporate entities, constitute “operational costs” of HH Pty Ltd. The husband’s mere deposition that because “money is moved from each entity to pay down the outstanding debts of another related company by way of a loan, if that entity’s debts are more pressing”, does not make such inter‑entity transfers operational costs. Senior Counsel for the husband did not make any submissions as to what constitute operational costs generally and, in particular, those of HH Pty Ltd.
In the circumstances, I find that the January 2025 transfers of the QQ Group funds were made in breach of the exception in sub-paragraph (a) to the injunction in Order 4 of the June 2024 orders (as amended) and cannot retrospectively, and unilaterally, be brought by him within the exception in sub-paragraph (b). Accordingly, in the circumstances, it is unnecessary to consider whether the January 2025 transfers could be within the ordinary course of the husband’s business as a property developer. In any event, I was not referred, on behalf of the husband, to any definition or explanation by courts of the phrase “in the ordinary course of business”. It has been held to be a question of fact in each case: Downs Distributing Co Pty Ltd v Associated Blue Star Stores Pty Ltd (in liq) (1948) 76 CLR 463; Robertson v Grigg (1932) 47 CLR 257; Re Netherby Hall Pty Ltd (1974) CLC ¶40-110. In Taylor v White (1964) 110 CLR 129 at 136, Dixon CJ said at [6], albeit in the context of preferences:
… I do not doubt that "in the ordinary course of business" refers to "business" as a general conception and is not restricted to the conduct of any particular business such as the business carried on in a shop or merchant's office or the like, but is referring to the transaction of business as a known and recognized activity pursued by anybody engaged in an attempt to win or earn or "make" money or a living in a systematic or regular way. But this seems to me to have been a family transaction in which a son-in-law, with the help of his wife, decided to borrow money from his mother-in-law for his company and then attempted to effect its repayment in the face of approaching disaster. The time-honoured phrase "in the ordinary course of business" is meant to refer to transactions regularly taking place in a sustained course of activity or some usual process naturally passing without examination. …
(Emphasis added.)
I consider his Honour’s reference to a “family transaction” analogous to a transaction between inter-related natural persons and/or legal entities, as has occurred in this case by the repayments by HH Pty Ltd to the husband and Z Pty Ltd of their loans to it.
I turn, therefore, to consider whether the January 2025 withdrawals should be returned by the husband, personally or through Z Pty Ltd, to the HH Pty Ltd account. The husband contends that, in order to make an order therefor, the usual principles in relation to injunctions are applicable and that I must have regard, inter alia, to the balance of convenience which, he submits, favours him. Whilst styled in a form akin to an injunction, an order in such circumstances is not a Mareva injunction; rather, it is an order for the enforcement of a Mareva injunction.
It is well settled that the court has a discretion whether to enforce or to refuse to enforce its own orders: see Collins and Olsthoorn (2005) FLC 93–216 (Full Court) at [14], citing with approval Ramsey and Ramsey (1983) FLC 91–301 (Full Court).
Insofar as the husband asserts prejudice, in terms of inter-entity interest payments, if the relevant January 2025 withdrawals (namely $1,300,000 and $100,000) are required to be returned by Z Pty Ltd to HH Pty Ltd, he controls those entities. Further, there is no evidence, nor could there credibly be in the present circumstances, of any demand by Z Pty Ltd for repayment by HH Pty Ltd.
Insofar as the husband asserts prejudice if the relevant January 2025 withdrawal (namely, $3,000,000) is required to be returned by him to HH Pty Ltd, other than an extra $526 per day in interest (being the difference between $1,115 and $589), which I accept is not de minimis when annualised, there is no evidence of any requirement by the National Australia Bank for a reduction by him of his home loan. Further, although he refers to an interest rate of 6.4 per cent charged by the Bank to him, his evidence is that his loan to HH Pty Ltd in turn incurs interest payable to him at the rate of 10 per cent.
Accordingly, the husband will be ordered to repay or cause to be repaid to HH Pty Ltd the January 2025 withdrawals in the sums of $3,000,000 and $100,000 and restrained from using those monies, together with the remaining balance of the QQ Group funds, which I calculate to be in the order of $1,200,000, save as strictly permitted by Order 4(a) of the June 2024 orders (as amended).
However, insofar as the sum of $1,300,000 of the January withdrawals was transferred to Z Pty Ltd to enable it to pay, in part, its debt to the Australian Taxation Office, in respect of which the husband is on oath, I do not propose to require the repayment thereof. Rather, I shall require him to apply or cause to be applied that amount, in full, in reduction of the taxation debt, and not otherwise. That debt has already been the subject of evidence by him in his affidavits filed on 26 September 2024 (at paragraph 51(b)) and 3 December 2024 (at paragraph 42) and is not the subject of any contradictory evidence by the wife.
I make orders accordingly.
I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the ex tempore Reasons for Judgment of the Honourable Justice Strum. Associate:
Dated: 24 February 2025
SCHEDULE OF PARTIES
MLC 3815 of 2023 Respondents
Fourth Respondent:
HH PTY LTD
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