Tsiang & Wu and Ors

[2019] FamCAFC 128

FAMILY COURT OF AUSTRALIA

TSIANG & WU AND ORS [2019] FamCAFC 128

FAMILY LAW – APPEAL – PROPERTY – Where the primary judge dismissed the husband’s interim application seeking certain injunctions – Where property settlement orders were made by consent – Where the husband seeks to set aside the consent orders – Injunction sought by the husband restraining the wife from dealing with property – Injunction sought by the husband restraining the second and third respondents from disposing or encumbering interests in an overseas company – Where the injunctions sought against the wife and the second and third respondents were dismissed on the lack of an evidentiary basis – Whether there is a identified risk that the wife will dispose of the assets in Australia – Whether there is a risk that the second and third respondents may deal with particular overseas assets in a way that would defeat the husband’s possible judgment or claim to it – Balance of convenience favours the making of the injunction against the wife – Where the primary judge failed to take into account all of the evidence of the husband – Where the primary judge erred in refusing to make the injunction in relation to the wife – Where the primary judge was correct in refusing to grant an injunction against the second and third respondents – Appeal allowed in relation to the dismissal of the injunction against the wife – Discretion re-exercised – Orders made in accordance with husband’s Application in a Case – No costs order between the husband and the wife – Husband to pay costs of the second and third respondents.

FAMILY LAW – APPEAL – LEAVE TO APPEAL – Interlocutory order – Sufficient doubt attends the decision – Substantial injustice if leave to appeal refused – Leave to appeal granted.

Family Law Act 1975 (Cth) s 79A

Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170; [1981] HCA 39
Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199; [2001] HCA 63
Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57; [2006] HCA 46
Blueseas Investments Pty Ltd v Mitchell and McGillivray (1999) FLC 92-856; [1999] FamCA 745
Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18
Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148; [1986] HCA 58
Medlow & Medlow (2016) FLC 93-692; [2016] FamCAFC 34
Mullen and De Bry (2006) FLC 93-293; [2006] FamCA 1380
Palmer v Parbery [2019] QCA 27
Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319
Shercliff v Engadine Acceptance Corporation Pty Ltd [1978] 1 NSWLR 729
Skyworks v 32 Drummoyne Road [2017] NSWSC 343

APPELLANT: Mr Tsiang

FIRST RESPONDENT: Ms Wu

SECOND RESPONDENT: Mr Wu

THIRD RESPONDENT: Mr Cao

FILE NUMBER: SYC 1529 of 2016

APPEAL NUMBER: EAA 6 of 2019

DATE DELIVERED: 31 July 2019

PLACE DELIVERED: Adelaide

PLACE HEARD: Sydney

JUDGMENT OF: Strickland, Ainslie-Wallace & Aldridge JJ

HEARING DATE: 5 July 2019

LOWER COURT JURISDICTION: Family Court of Australia

LOWER COURT JUDGMENT DATE: 11 December 2018

LOWER COURT MNC: [2018] FamCA 1057

REPRESENTATION

COUNSEL FOR THE APPELLANT: Mr Cummings SC

SOLICITOR FOR THE APPELLANT: Mills Oakley Lawyers

COUNSEL FOR THE FIRST RESPONDENT: Mr Kearney SC

SOLICITOR FOR THE FIRST 

RESPONDENT:

Somerville Legal

COUNSEL FOR THE SECOND AND THIRD

RESPONDENT:

Ms Gillies SC

SOLICITOR FOR THE SECOND AND THIRD RESPONDENT: Juris Cor Legal

Orders

1. The Appellant Husband have leave to appeal order 3 made by the primary judge on 11 December 2018 to the extent that that order dismisses paragraphs 2 and 3 of the Appellant Husband’s Application in a Case filed on 16 August 2018.

2. The appeal against order 3 made by the primary judge on 11 December 2018 to the extent that that order dismisses paragraphs 2 and 3 of the Appellant Husband’s Application in a Case filed on 16 August 2018 be allowed.

3. Upon the amended undertaking as to damages given by the Appellant Husband and filed on 26 November 2018 order 3 made by the primary judge on 11 December 2018 be set aside to the extent that that order dismisses paragraphs 2 and 3 of the Appellant Husband’s Application in a Case filed on 16 August 2018.

4. The application for leave to appeal and the appeal be otherwise dismissed.

and it is ordered

1. That pending determination of the substantive orders sought by the Appellant Husband as against the Respondents as to financial matters arising in relation to G Partnership (Chinese Registration no. …) (“the substantive proceedings”), the First Respondent Wife be restrained from dealing with or further encumbering the following properties:-

   a.H Street, Suburb J in the State of New South Wales … being all of the land comprised in Folio Identifier …;

   b.K Street, Suburb L in the State of New South Wales … being all of the land comprised in Folio Identifier …;

   c.M Street, Suburb N in the State of New South Wales … being all of the land comprised in Folio Identifier …; and

   d.O Street, Suburb P in the State of New South Wales … being all of the land comprised in Folio Identifier ….

2. That the Appellant Husband be permitted to lodge a Request at NSW Land Registry Services in respect of each of the properties identified in order (5) hereof pending a determination of the substantive proceedings on a final basis.

it is further ordered

1. There be no order as to costs as between the Appellant Husband and the First Respondent Wife.

2. The Appellant Husband pay the costs of the Second and Third Respondents of and incidental to the application for leave to appeal and the appeal fixed in the sum of $25,507.

Note: The form of the order is subject to the entry of the order in the Court’s records.

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

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY

Appeal Number: EAA 6 of 2019
File Number: SYC 1529 of 2016

Mr Tsiang

Appellant

and

Ms Wu

First Respondent

and

Mr Wu

Second Respondent

and

Mr Cao

Third Respondent

REASONS FOR JUDGMENT

1. By way of Notice of Appeal filed on 20 December 2018, Mr Tsiang (“the husband”) seeks leave to appeal and if leave is granted, appeals against the dismissal by a judge of the Family Court of Australia on 11 December 2018, of his application for injunctions, first restraining Ms Wu (“the wife”) from dealing with certain property in Australia, and secondly, restraining the second and third respondents, the wife’s father and uncle respectively, from disposing of or encumbering their interests in a business in City C, China.

2. Because the order appealed is interlocutory, the husband requires leave to appeal. For the reasons that follow, we are of the view that leave should be granted in relation to the order dismissing the application for an injunction against the wife, that the appeal should be allowed to that extent, and the primary judge’s discretion re-exercised.

Background

1. The parties married in April 2000 and separated in October 2015.  They were divorced in March 2017.  There is one child of their relationship who was born in 2005.

2. On 23 March 2016 the parties consented to orders being made which dealt with property settlement and parenting matters (“the consent orders”).

3. The controversy concerning the injunctions arises from the property settlement orders.

4. From 2002 the parties lived in City C where they established a company called the DD company.  The business was extremely successful and as it grew, seven affiliated companies and entities were formed to deal with particular aspects of the work of the DD company.

5. The parties also had property holdings in Australia and China and it was agreed between them that the value of their combined net assets, including superannuation, was in the order of $38,844,765.  Of that sum, the DD company and the entities associated with that company were said to have a total value of $8,800,000.

6. So it was that they entered into consent orders about the property.  The parties agreed that the husband would receive 46.2 per cent of the value of the net assets being $17,939,731 and the wife would receive 53.8 per cent representing $20,900,034.

7. The property settlement orders were extensive.  In effect, the orders provided for the wife to have the assets in Australia and the husband to take the business interests and real estate in China.

8. Of those consent orders, order 18 concerned the DD company and the affiliated entities and provided:

   18.      That in relation to [the BB] companies:

   18.1The Wife forthwith transfer to the Husband all of her interest in the [BB] companies and resign from any office that she holds in [the BB] companies;

   18.2That the Husband indemnify the Wife and keep her indemnified against all liability of the Wife arising as a consequence of the holding by her of any interest in the [BB] companies or the holding by her of any office in the [BB] companies excluding liability for personal income tax;

   and for the purpose of this Order:

   18.3The Wife agrees to surrender any and all interest she may have in the [BB] companies and upon entering these Orders the Husband shall be absolutely entitled to the whole interest in the [BB] companies;

   18.4The Husband shall forthwith indemnify the Wife and keep the Wife forever indemnified with respect to any or all liability of the Wife arising with respect to the [BB] companies;

   18.5It is noted that in the event of the Husband requiring the Wife's consent to sell any or all of the [BB] companies the Wife will execute all such documents as may be necessary to give effect to such transaction and for the Husband to retain the entirety of the net proceeds of sale of the [BB] companies.

   (As per the original)

9. Recital 35 to the orders dealt with the BB company and defined “[BB Co. Ltd]” to include the following entities:

   A 35.1           [R] Co. Ltd;

   A 35.2           [U] Co. Ltd;

   A 35.3            [S] Co. Ltd;

   A 35.4           [T] Co. Ltd;

   A 35.5 [G] partnership;

   A 35.6           [V] partnership;

   A 35.7[W] Ltd partnership.

   (As per the original)

10. After the orders were made, on 8 April 2016 the wife executed a document in China which was intended to give effect in China to the orders made in relation to the parties’ property.[1]  The entity referred to at A 35.5 (“the partnership”) was not transferred.  Both parties agree that the description of entity A 35.5 in the schedule to the orders was at the very least imprecise.

    [1] Wife’s affidavit, filed 14 November 2018 at paragraph 17 and Exhibit MW1 – Chinese Property Agreement dated 8 April 2016.

11. The husband argued that the entity referred to was a partnership in which the shares were held by the second respondent as to 95 per cent and the third respondent as to 5 per cent, and that they held those shares on trust for the husband and the wife.

12. The wife contends that the imprecision is a result of a translation error, and the entity it was intended to describe, is an entity that was wholly owned by another of the Chinese companies at the time of the consent orders, and as a result that entity had been transferred to the husband.  She further contended that the partnership entity the husband identified was not included in the property settlement the subject of the consent orders, arguing that it was never intended to be included.

13. The husband contended that the fact that legal ownership of the shares in the partnership is held by others did not prevent it being included in the consent orders because shares in other entities referred to in the orders were held by other people and they had been transferred to the husband.

14. The husband contends that the partnership was not only intended to be included in the consent orders, but it is the pivotal entity of the affiliated entities and it is the most valuable of them all.  He further contends that without the inclusion of the partnership as part of the DD company entities, it will damage its brand reputation.

15. The husband brought proceedings in the Family Court of Australia seeking to set aside the consent orders made on 23 March 2016 pursuant to s 79A of the Family Law Act 1975 (Cth). Shortly put, he asserts that in consenting to the orders in March 2016 and by representing that she and he were owners of the partnership, the wife has “duped him”. Those proceedings have not yet been heard.

16. In support of that application, the husband sought an order that the wife be restrained from dealing with or encumbering the properties in New South Wales held in her name and transferred to her in compliance with the consent orders.  The husband further sought that the second and third respondents be restrained from disposing of or encumbering their interests in the partnership and that they be restrained from disposing of any asset of the partnership other than in the ordinary course of business.

17. That application came before the primary judge who dismissed it finding that the husband had not identified an evidentiary basis for the injunction against the wife’s properties in New South Wales.  Her Honour’s order also dismisses so much of the husband’s application that sought injunctions against the second and third respondents.

The appeal

1. The grant of an injunction is discretionary and the basis on which such an order is made is well established.[2]  A purpose, as in this case, is to preserve the status quo pending resolution of the controversy.[3]   An applicant must demonstrate first that there is a serious issue to be tried.[4]  While that statement has been the subject of various iterations, in essence it requires the demonstration of an arguable case or as was said in Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 at [65], the applicant must “show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo”.

   [2] Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170; Cardile v LED Builders Pty Ltd (1999) 198 CLR 380.

   [3] Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at [9]–[12], [15] (per Gleeson CJ) and [245] (per Callinan J).

   [4] Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 at 153-154; Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at 328–329; Blueseas Investments Pty Ltd v Mitchell and McGillivray (1999) FLC 92-856 at [56].

2. Next the applicant must demonstrate that the balance of convenience favours making the order sought.[5]  As part of this, the applicant must show that there is a “danger” or risk of dissipation of or dealings with assets which will frustrate any judgment in favour of the applicant.

   [5]Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 at [19].

3. In Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319, Gleeson CJ said after discussing the discretionary nature of the remedy at 321–325:

   … as a general rule a plaintiff will need to establish, first, a prima facie cause of action against the defendant, and secondly, a danger that, by reason of the defendant’s absconding, or of assets being removed out of the jurisdiction or disposed of within the jurisdiction or otherwise dealt with in some fashion, the plaintiff, if he succeeds, will not be able to have his judgment satisfied.

   ...

   It is not difficult to imagine situations in which justice and equity would require the granting of an injunction to prevent dissipation of assets pending the hearing of an action even though the risk of such dissipation may be assessed as being somewhat less probable than not.

4. As McDougall J in Skyworks v 32 Drummoyne Road [2017] NSWSC 343 said:

   24.The Court is required to undertake a qualitative evaluation of all the evidence that is available, to see if there is a sufficiently serious risk of frustration to justify the making of a freezing order. Further, the two considerations [namely, (1) whether there is a good arguable case and (2) whether there is a real risk of judgment frustration] should be analysed together (as each may impact on the other), and with an appreciation of both the underlying purpose of the rule and the relative risks of granting or withholding relief – the customary discretionary calculus.

5. In this case the identified risk was that the wife might dispose of assets in Australia and in her name in order to defeat the husband’s claim and, equally it was asserted that there was a risk that the second and third respondents too might deal with the partnership assets in a way so as to defeat the husband’s possible judgment or claim to that entity.

6. It is unnecessary to demonstrate a positive intention but merely the possibility of the event occurring.[6]  The determination about the balance of convenience may thus be an inference drawn from the facts and circumstances established by the applicant’s evidence.[7]

   [6]Mullen and De Bry (2006) FLC 93-293 at [49].

   [7]Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at 321-322.

7. Nor is it the role of the judge determining the question of the injunction to, in effect conduct a trial of the disputed evidence to resolve those disputes (see Shercliff v Engadine Acceptance Corporation Pty Ltd [1978] 1 NSWLR 729).

8. As to the determination of the existence of the risk and its magnitude, in Palmer v Parbery [2019] QCA 27 McMurdo JA (with whom Fraser and Gotterson JJA agreed) said:

   119.The determination of whether there exists a sufficiently serious risk of the dissipation of assets involves the evaluation of future possibilities, rather than the ascertainment of historical facts. The risk of dissipation might justify an order although the probability of the risk eventuating is less than 50 per cent. But, as the risk of dissipation must be a real and not merely a theoretical one, it must have an evidentiary basis. Where a fact is alleged by the plaintiff in support of its case about the risk, but there is contrary evidence from the defendant, must the fact be proved to the court’s satisfaction as if the application for the freezing order was the trial of the case? In my view, a plaintiff need not do so. A freezing order is interlocutory in nature; it does not involve a final determination of the parties’ positions. Usually it is made in circumstances of urgency in which the court is unable to conduct an extensive and conclusive factual inquiry in a way which is fair to both parties. Where the factual basis for the plaintiff’s case about the risk of dissipation is disputed, the risk will commonly have to be evaluated with the recognition that the factual basis for it is in doubt. Nevertheless, the possibility of the plaintiff’s evidence being correct, considered with other facts and circumstances, might mean that there is a sufficiently serious risk of the frustration of the satisfaction of a judgment as to justify the making of a freezing order. …

   (Footnotes omitted)

The primary judge’s approach to the issue

1. Against this legal background, we turn to her Honour’s approach to the injunction sought in relation to the wife’s property.

2. Her Honour said:

   14.The wife and the second Respondent submitted that the husband failed to establish a ground or evidentiary basis for injunctive orders against the wife in relation to the four parcels of real estate in Sydney.  I accept the submission on behalf of the wife, to the effect that the husband failed to identify the risk to the husband and what steps are necessary to address that risk.

   15.I accept the submission on behalf of the wife, to the effect that the only evidence pertinent to risk which the husband adduced was an alleged statement made by the parties' ten year old daughter.  The husband deposed as follows:

   22.I am gravely concerned that [Ms Wu] will dispose of assets in order to continue to defeat my claim for property settlement.  On about 5 August 2018 [X] said to me in words to the effect of:

   "Mum is going to sell [Suburb J], it is too far away from [Suburb Z] and [Suburb Y]."

   16. The wife denied that she made any such statement.  She deposed as follows:

   50.In relation to paragraph 22 of [Mr Tsiang’s] Affidavit, I have not told [X] that I was going to sell the [Suburb J] property.  I have no present intention of selling any of the properties in my name.

1. Her Honour said:

   18.I accept that the husband may be able to establish a prima facie case for relief as sought in his Further Amended Initiating Application.  As noted the wife intends to seek summary dismissal of aspects of that Application and that issue, inter alia, will be explored at such a hearing.

2. Her Honour concluded that the husband had not adduced “any proper evidence of an intention by the wife to dispose of assets”, noted that the husband was relying on the comments of their child, and said that she was not prepared to make an injunction on that basis (at [22]).

3. As to the injunctions sought against the second and third respondents, her Honour said this:

   23.The husband adduced no evidence in support of his application for injunctive orders against the second and third Respondents.  As noted, service has not been effected upon the third Respondent.  In these circumstances, I am not prepared to make orders in accordance with paragraph 4 of the husband’s Application in a Case.

4. It was argued that the primary judge erred in her approach to the question of the injunction in that while she was apparently of the view that the husband might be able to establish that the wife had deceived him in relation to the ownership of the DD entities (and thus impliedly finding he had a prima facie case), she failed to consider the balance of convenience of making the order but, rather, deferred consideration of the issue to when the wife brings an application seeking summary dismissal of aspects of the husband’s s 79A application.

5. Her Honour’s finding that the husband “may” be able to establish a prima facie case that the consent orders were obtained by deception, was, in our opinion sufficient for her Honour to consider whether in those circumstances, the balance of convenience favoured the making of the injunction.  It was not incumbent on the husband to do more than to first establish a prima facie or arguable case on his evidence taken at its highest, and her Honour clearly found that.

6. We are, however of the view that her Honour did not find that the husband had established a prima facie or good arguable case as part of the foundation for the injunction, but rather noted that in passing and deferred the consideration of that question until a time that the parties were next before the Court when the wife would seek an order that some aspects of the husband’s application pursuant to s 79A be summarily dismissed.

7. Plainly, if, as her Honour found, the husband had a prima facie case as he asserted, there could be no basis for the wife to seek summary dismissal.

8. Her Honour concluded that the husband failed to identify the risk (against which the injunction was sought), but for the following reasons, we consider that her Honour failed to take into account all of the evidence on which the husband relied in that regard.

9. First, there was the evidence itself on which the husband’s application was based; that is, being deceived by the wife as to the effect of the consent orders was a persuasive argument in favour of making the injunction.

10. Next, although her Honour made reference to the proceedings commenced by the second respondent in China in which he sought to rescind transfers of some business entities to the husband, she did not take into account the husband’s evidence that from the outset  that although neither the husband nor the wife were the legal owners of the entity, they had both always acted in ways consistent with them being the beneficial owners; for example they received payments of dividends and made decisions about its operations.

11. As part of this consideration, the husband relied on his daughter’s comments about the wife selling a property, a matter to which her Honour gave no weight. 

12. While the daughter’s comments may or may not reflect the wife’s intention (her Honour favoured the wife’s denial in determining not to take those comments into account), it was a factor to be taken into account in considering whether or not to make the injunction.

13. Whether or not the wife was proposing to sell property owned by her, it was necessary for her Honour to be alive to the value of the controversial entity in the light of the parties’ assets as a whole.  It was agreed that the value of the DD company and associated entities was in the order of $8.8 million.  The husband contended that the bulk of that value reposed in the value of the partnership and if that entity was not part of the entities transferred to him, it would significantly diminish the effect of the orders and the overall division of the assets as between the parties.

14. While it was argued for the second and third respondents that there was no evidence to support the husband’s assertion as to the value, given the husband’s unchallenged evidence that he and the wife had made the day to day decisions about the partnership and had been in receipt of dividends from its operations, that provided a basis for the assertion by the husband to be taken into account.

15. No harm or detriment was contended for by the wife in the event the injunction was made.  It was merely resisted.  Indeed, properly considered there were no factors militating against the making of the injunction.

16. For all of those reasons we find that her Honour erred in refusing to make the injunction in relation to the wife.

17. Turning then to the second and third respondents, as we have said, her Honour declined to make orders in relation to them because no evidence had been adduced in support of the application for injunction, and in any event, the third respondent had not been served.

18. Although not referred to in her Honour’s reasons for declining to make that order, it is to be understood and indeed was agreed between the husband and wife that neither the second nor the third respondent were party to the orders, and neither knew anything of their making.  There had been a transfer of the shares held by the second respondent to an agent of the husband as a result of which the second respondent, in proceedings in China, sought and was granted a declaration that the transfer was illegally made.  Although that declaration was made, the shares had not at the time the matter was before her Honour, been retransferred to him. While it was argued that there could thus be no utility in making an injunction against the second respondent, we are of the view that that, of itself, would not be a sufficient basis for refusing to make the injunction sought in the light of the second respondent’s evidence that he was endeavouring to have those shares returned to him.

19. However, there was in fact no evidence before the primary judge either directly or inferentially that the second and third respondents had acted in a way that raised a relevant risk of disposition, and her Honour was nonetheless correct in refusing to grant the injunction sought against them.

20. As is apparent from our reasons, the husband has demonstrated that sufficient doubt attends her Honour’s decision to warrant the matter being considered on appeal, and a substantial injustice would result if leave is not granted (Medlow & Medlow (2016) FLC 93-692 at [57]). Thus, leave to appeal order 3 will be granted to the extent that that order dismisses paragraphs 2 and 3 of the husband’s Application in a Case filed on 16 August 2018.

21. It follows then that the appeal will be allowed to the extent that it relates to the dismissal of the injunction sought against the wife, and order 3 of her Honour’s order made 11 December 2018 will be set aside to the extent that it dismissed paragraphs 2 and 3 of the husband’s Application in a Case.

22. Accepting the husband’s amended undertaking as to damages which was before her Honour, we will re-exercise the discretion and make the orders sought in paragraphs 2 and 3 of the husband’s Application in a Case.

Costs

1. The husband sought an order for costs against the wife. We do not however propose to make a costs order as between the husband and the wife.  In our view though the husband should pay the costs of the second and third respondent fixed in the sum of $25,507.

I certify that the preceding fifty-two (52) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Strickland, Ainslie-Wallace & Aldridge JJ) delivered on 31 July 2019.

Associate: 

Date:  31 July 2019