Small and Small

[2016] FamCA 987

FAMILY COURT OF AUSTRALIA

SMALL & SMALL [2016] FamCA 987

FAMILY LAW – INJUNCTIONS – Interim – wife seeks “assurance” that trusts will not be altered – husband not forthcoming – when then seeks undertaking – solicitor for husband says husband will not alter structure – sufficient basis to find interim injunction is proper – adjourned for four weeks.

Family Law Act 1975 (Cth)

Blueseas Investments Pty Ltd & Mitchell & McGillivray (1999) FLC 92-856
Mullen & De Bry [2006] FamCA 1380

Waugh & Waugh (2000) FLC 93-052

APPLICANT: Ms Small

RESPONDENT: Mr Small

FILE NUMBER: MLC 9067 of 2016

DATE DELIVERED: 14 November 2016

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 14 November 2016

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr T. Puckey

SOLICITOR FOR THE APPLICANT: Taussig Cherrie Fildes

COUNSEL FOR THE RESPONDENT: Ms R. Wheeler

SOLICITOR FOR THE RESPONDENT: R B Legal Pty Ltd

Orders

1. That paragraphs 2(a), (b) and (c) and 3 of the application filed 10 November 2016 by the wife is adjourned to 9.00am on 2 December 2016.

2. That until the conclusion of the hearing on the return date and unless with the written consent of the wife, the husband, by himself, his servants and agents, whether personally or as a director or shareholder of a company or as a trustee of a trust or in any other capacity, be and is hereby restrained from:

   (a)otherwise than in the ordinary course of business, and upon prior email to the wife, disbursing any monies received by himself or his companies from Yusen Logistics Co Ltd (or any associated entity)

   (b)altering or amending the legal or equitable structure of the Small LLP Group entities or any other entities under his direct or indirect control, including by:

   (i)altering the corporate structure of any company;

   (ii)varying the terms of any trust deed; and

   (iii)using any power of appointment or like power pursuant to a trust deed to remove existing trustees or beneficiaries, or to appoint additional trustees or beneficiaries.

3. That the costs of both parties of this day are reserved to the return date.

IT IS CERTIFIED:

1. That pursuant to Order 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel to attend.

2. That the reasons this day be transcribed and be made available to the parties.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Small & Small has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 9067 of 2016

Ms Small

Applicant

And

Mr Small

Respondent

REASONS FOR JUDGMENT

1. By application filed on 10 November 2016 Ms Small (“the wife”) applies a number of orders.  The only one that is of significance for the purposes of these reasons is 2(a) which relates to an injunction.  It is common ground between the parties that discovery can wait until the next return date.  The application for two injunctions sought need to be considered because of the way in which they have been drafted.

2. Both proposed orders commence with the words:

   Until further order and unless with the written consent of the wife, the husband by himself, his servants and agents whether personally or as a director or shareholder of a company or as a trustee of a trust or in any other capacity be and is hereby restrained from -

   and then the contentious part which is (a) reads:

   Otherwise than in the ordinary course of business dispersing any moneys received by himself or his companies from use in Logistics Co Limited (or any associated entity).

3. That application was redrawn by counsel for the wife to include some words which I, too, have amended so that it now reads, after the words “ordinary course of business”:

   “And upon prior email to the wife.”

4. The second order which is 2(b), relates to an injunction which, if made, would restrain the husband from altering or amending the legal or equitable structure of a variety of entities.  Whilst the husband’s position is that that should not be made, it is not disputed that it can at least be made until the next return date. 

5. The reason for another return date is that the application was only filed last week and the husband is currently overseas conducting the business.  At best, the husband has before the Court today an affidavit by his solicitor which to some extent assists in setting out a chronology of events.  The focus of my reasons is on injunction 2(a). 

6. The wife’s evidence does not need to be traversed in detail because of the discrete nature of the application.  Suffice to say that the husband issued a divorce application which was filed in late September this year but it has not as yet been served on the wife.  I note that the solicitor who filed that application is not the solicitor on the record for the husband in these proceedings.

7. The important piece of evidence that affects the determination here is a letter written by the solicitors for the wife on 14 October.  On any view of that letter the wife was not taking a draconian approach.  Indeed, what she was seeking was an assurance that there would be no changes to her entitlements.  The solicitor for the husband responded to that letter three days later on 17 October.  The response, without being impolite, was vague and it did not give the assurances that the wife was then seeking.  Two days later, the wife wrote to the solicitors for the husband but this time going one step further and seeking a formal undertaking about not altering assets.

8. That letter immediately provoked a response from the solicitor for the husband indicating that the wife’s position (or more importantly the solicitor’s position)  was totally unreasonable and unnecessary.  Again, bearing in mind what the wife was originally seeking was simply an assurance, I do not accept that what she was doing was totally unreasonable or unnecessary.  Attached to the solicitor’s affidavit was his letter of 25 October.  That letter brought to the attention of the solicitors for the wife, the absence of the husband overseas on business.

9. The significance of the affidavit, however, is in paragraph 7 where the solicitor deposed as follows:

   That I had a telephone conversation with the respondent this morning who said that he would not sign any documents or take any action to amend the trust deed.  The respondent wants the opportunity to full respond to the claims made by the applicant.

10. The first issue relates to the fact that the wife is apparently connected to, or a beneficiary of, one or more of the parties’ respective trusts, and she has found documents which indicated that there was going to be some alteration to the trusts that may (or may not) have had the effect of excluding her from benefiting under the trust.  People in those situations might see that as concerning, particularly when the wife later found out that there was a divorce application.  The divorce may very well have removed her position as a spouse and that may have affected the trust.  The reference in paragraph 7 of the solicitor’s affidavit was directed to that issue.  The question is whether or not that statement by the solicitor provides the necessary protection for the wife.  There is no undertaking by the solicitor in his capacity as a solicitor, or indeed from the husband himself.

11. The second issue raised by the wife concerned a significant sum of money coming from an Asian company.  That really is the subject of injunction 2(a).  What the wife sought was that the husband not dispose of those funds except in the ordinary course of business, and hence the additional amendment to include her being aware of any proposed changes. 

12. To the extent that any findings of fact can be made in these difficult cases where the evidence is not only controversial but also sparse, I consider the wife was entitled to feel uncomfortable about just exactly what the position of the husband was.  That is not a criticism of the husband because the reality is the letters were all written by lawyers, and the difficulty I have is that one would presume that the lawyer knew the significance of giving a precise answer.  I was not given.

13. In financial cases, injunctions between parties often arise where one party has control of the majority of the assets the subject of the dispute.  (See, for example, Blueseas Investments Pty Ltd & Mitchell & McGillivray (1999) FLC 92-856). In the present case, the assets seem to be significant, although it is unclear just what the parties own. It is also apparent that both parties have assets in their own rights of some substance. It is unclear whether or not the husband has the absolute control, but he may have had if he had made alterations to the various trusts.

14. The power to grant an injunction until trial is purposive.  It must be seen to serve the interests of the Court by protecting against an abuse of process.  If there is evidence that a party’s interest is at risk, or there is risk of removing assets from the reach of the Court, it can sometimes mean that orders are then unenforceable.  In this case, it is not clear just what would occur if the husband had both kept all of the Asian money as well as alter the trusts.  I do not have any evidence from the husband at this stage. 

15. The purpose therefore of the injunctions that I propose to make today is to protect the efficacy of any orders that may ultimately lie against the husband in respect of assets generally.  I stress again that the evidence is untested and I am not making any findings other than the one that I have just earlier mentioned. 

16. This Court seeks to protect a party’s right through the interlocutory injunction.  Over muted opposition from counsel for the wife, my preferred position was to adjourn the wife’s application to enable the husband’s evidence to be filed, particularly in circumstances where there may be some doubt about the meaning of such expressions as the “ordinary course of business”.  The comprehensive responses of the husband can flesh out what everybody understands to be the situation.  It also gives the husband an opportunity to raise questions about impacts upon potential third parties. 

17. In both Waugh & Waugh (2000) FLC 93-052 and Mullen & De Bry [2006] FamCA 1380, this Court has cautioned against applying broad-brush principles relating to Mareva-type injunctions over assets in family law disputes. Those decisions give guidance as to the exercise of the power in s 114 of the Family Law Act 1975 (Cth) (“the Act”). That section empowers the Court to grant a discretionary injunctive remedy. The fundamental principle in s 114 that the order should only be made if it is proper. Discretionary though the remedy may be, it is not unfettered and must be exercised according to law.

18. The Court must look to various provisions in Part VIII of the Act for that guidance in property settlement cases. To some extent, part of the order sought, 2(b) of a Mareva nature, but as it is only sought until the return date when much more evidence can be provided to the Court. A Mareva order is a severe remedy and it ought not to be made lightly because of the impact it has on rights. The two aspects of what the wife seeks in this case, however, are limited in time.

19. In respect of order 2(a), whilst I am conscious about the nature of a Mareva injunction, in reality what it causes here to the husband, if anything, is inconvenience.  It is not of the intrusive nature that a Mareva injunction would normally be.  Having regard to the inconvenience as distinct from the intrusion, it seems to me proper in the circumstances to make what is a holding order, because of the absence of the assurance that I have already mentioned. 

20. The husband through his counsel observes that the wife has not offered an undertaking as to damages.  Unlike other jurisdictions, it would be unusual for an undertaking as to damages to be sought inter partes (at least as between parties to a marriage) unless there was a strong indication that there would not be sufficient equity in property to be secured to make an adjustment between them to achieve a just and equitable outcome. 

21. In this case, the wife has not sought with any precision what final order she is seeking.  Counsel for the husband pointed to her financial statement wherein she noted that some of the commercial assets under her control were described as having a value which was “not known”.  Neither of those matters is of any great import in this particular case. 

22. The wife is not seeking what I have described as an intrusive order, but rather one causing inconvenience.  It would only be in the next stage of any proceedings of an injunctive nature that intrusion might be considered necessary to require an undertaking for damages.  The requirement for an undertaking as to damages assists the Court in lessening that incursion into proprietary rights. 

23. The Court must consider to the best of its ability, the likely outcome if the injunction is ordered, and, in the alternative, the result if it is not.  That is a balance of convenience argument.  In my view, here, the balance of convenience favours not insisting upon an undertaking as to damages. 

24. The second reason why I would not require the wife to provide an undertaking as to damages is because of the expected life of the interim injunction.  As I have already indicated, 2(b) is not disputed on that interim basis, and 2(a) is the notice provision rather than a Mareva injunction in the intrusive sense.  I am satisfied, therefore, in the circumstances that an undertaking as to damages is not necessary. 

25. As I have also indicated, the wife has sought discovery orders, but they can wait until the next occasion.  In the circumstances, I propose to adjourn the proceedings to 2 December, which is the Friday, at 9 am to deal with any issues as to – if it is necessary, to make the orders beyond 2 December until trial.

I certify that the preceding twenty-five (25) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 14 November 2016.

Associate: 

Date:  21 November 2016