Wei and Xia & Ors

[2017] FamCA 666

FAMILY COURT OF AUSTRALIA

WEI & XIA AND ORS [2017] FamCA 666

FAMILY LAW – INTERLOCUTORY – Injunctions – Preservation of property – Where the applicant seeks injunctions in relation to four corporations – Where the husband acquired interest in one corporation after separation – Concluded injunctive relief will only apply to three of the corporations – Where the third and fourth respondents assert their proprietary entitlement to extract capital from the commercial entities – Where the extraction of capital will prejudice the wife’s rights and entitlements in the proceedings – Concluded the wife has established her entitlement to injunctive relief

FAMILY LAW – INTERLOCUTORY – Spousal maintenance – Where both parties depose to expenditure well above their means – Where the husband has no apparent capacity to pay spousal maintenance – Where the parties have sufficient equity in real property that can be used to meet their respective needs – Concluded there is no option but for the parties to use their own capital to support themselves

Family Law Act 1975 (Cth), s117

Family Law Rules 2004 (Cth), rr 1.04, 1.07, 1.08, 5.07, 9.08

APPLICANT: Ms Wei

1^st RESPONDENT: Mr Xia

3^RD RESPONDENT: Mr B Xia

4^TH RESPONDENT: Mr Siang

FILE NUMBER: SYC 196 of 2017

DATE DELIVERED: 29 June 2017

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Austin J

HEARING DATE: 29 June 2017

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Kearney SC

SOLICITOR FOR THE APPLICANT: Swaab Attorneys

COUNSEL FOR THE 1^ST RESPONDENT: Mr Kirk QC

SOLICITOR FOR THE 1^ST RESPONDENT: McQui Lawyers

COUNSEL FOR THE 3^RD RESPONDENT: Mr Lloyd SC

SOLICITOR FOR THE 3RD RESPONDENT:	Fox & Staniland Solicitors
COUNSEL FOR THE 4TH RESPONDENT:	Mr Lloyd SC

SOLICITOR FOR THE 4^TH RESPONDENT: Fox & Staniland Solicitors

Orders

1. All former orders made on 25 January 2017 and 22 February 2017 are discharged.

1. Without the wife’s written consent, the first respondent husband, third respondent, and fourth respondent are restrained from causing or permitting:

(a)C Pty Ltd to sell, transfer or encumber the real property situated at and known as D Street, Suburb E NSW;

(b)G Pty Ltd to disburse any more than one-half of any monies it receives from any of the following corporations:

(i)     H Pty Ltd;

(ii)    J Pty Ltd;

(iii)     K Pty Ltd.

(c)The distribution of any capital or income to any beneficiary of the Xia Family Trust.

1. The first respondent husband, third respondent, and fourth respondent shall cause G Pty Ltd to account to the wife each month in writing for:

(a)Monies received from H Pty Ltd, J Pty Ltd, and K Pty Ltd; and

(b)Monies expended from those receipts.

1. The first respondent husband, third respondent, and fourth respondent are restrained from causing or permitting, in respect of C Pty Ltd, G Pty Ltd, and L Pty Ltd:

(a)The alienation or encumbrance of their shareholdings;

(b)The issue of any new shares;

(c)The removal, replacement or appointment of directors; or

(d)The increase of any existing director’s loan account.

1. The wife shall have exclusive occupation of the property situated at and known as 2 D Street, Suburb E, NSW.

1. The husband shall have exclusive occupation of the property situated at and known as M Street, Suburb N, NSW.

1. The wife is restrained from causing or permitting the removal of any items of furniture from the property at M Street, Suburb N, NSW.

1. The parties are restrained from causing or permitting:

(a)The redraw of any available funds under the mortgaged loans secured over the following properties:

(i)     2 D Street, Suburb E, NSW.

(ii)    M Street, Suburb N, NSW.

(iii)     O Street, Suburb P, NSW.

(iv)   Q Street, Suburb R, NSW.

(b)The increase of the loan amounts secured by mortgage over those properties.

1. Pursuant to s 117 of the Family Law Act 1975 (Cth), within seven days of any payment by or on behalf of the husband of any accounts rendered by his solicitors or barristers in respect of these proceedings or rendered by accountant, valuer or other expert engaged by the husband in respect of these proceedings the husband shall pay or cause to be paid the same amount of money to the solicitors for the wife on behalf of the wife.

1. Save as to costs:

(a)The Amended Application in a Case filed by the wife on 4 April 2017 is dismissed.

(b)The application for interim relief contained within the Response filed by the husband on 28 February 2017 is dismissed.

(c)The application for interim relief contained within the Response filed by the third respondent on 2 March 2017 is dismissed.

(d)Any and all other outstanding applications for interim relief are dismissed.

1. No order as to costs.

NOTATION

A.The parties do not require the publication of reasons for Order 11 hereof.

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 Wei & Xia 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).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 196 of 2017

Ms Wei

Applicant

And

Mr Xia

First Respondent

And

Mr B Xia

Third Respondent

And

Mr Siang

Fourth Respondent

EX TEMPORE

REASONS FOR JUDGMENT

1. In January 2017, the applicant wife commenced these proceedings seeking property settlement relief against the respondent husband under Part VIII of the Family Law Act 1975 (Cth) (“the Act”), though she joined other parties to the proceedings.

2. H Pty Ltd was joined as the second respondent, but it was consensually removed as a party following its agreement to be bound by some temporary injunctions, made with the parties’ consent on 25 January 2017. 

3. The third respondent is the husband’s father, who has an interest in various commercial entities in which the wife is interested. The third respondent remains an active participant in the proceedings. 

4. The fourth respondent is the husband’s mother, who takes no active part in the proceedings. She has filed no documents, but she is represented commonly with the third respondent.

5. When the wife commenced the proceedings, she sought a suite of interim orders in respect of numerous corporations and parcels of real property in which the parties are variously interested.

6. The husband sought and was granted an adjournment of the hearing of the wife’s interim application on 25 January 2017, but numerous interim orders were made that day with the parties’ consent. The orders were intended to apply until the interim dispute could be heard and determined.

7. Thereafter, the wife amended her application for interim relief, some minor adjustments were consensually made to the existing interim orders on 22 February 2017, and the interim hearing was fixed for 29 March 2017.

8. Later, the wife again amended her application for interim relief, some more interim consent orders were made on 29 March 2017, and the interim hearing was adjourned to a date to be fixed. It was later fixed for hearing today. 

9. In the meantime, the wife amended her application for interim relief again, so the outstanding applications presently comprise:

   (a)The Further Amended Application in a Case filed by the wife on 4 April 2017;

   (b)The interim orders sought by the husband in his Response filed on 28 February 2017; and

   (c)The interim orders sought by the third respondent in his Response filed on 2 March 2017.

10. By reference to those applications, the issues in dispute relate to:

    (a)Whether the husband, third respondent and fourth respondent should be restrained from operating or dealing with numerous corporations (in which they and the wife variously have proprietary interests) in an ordinary commercial way; 

    (b)Whether the husband and wife should be restrained from making withdrawals from a controlled money account, set up for the purpose of holding money disbursed by several nominated corporations; 

    (c)The wife’s demand for disclosure of certain documents from the husband; 

    (d)The exclusive occupation of two parcels of real property; 

    (e)Whether mandatory injunctions should be made compelling the payment of mortgages secured over four real properties by the wife, husband, third respondent, or any corporation they control; 

    (f)Whether the husband and wife should be restrained from further encumbering those four real properties; 

    (g)The wife’s claim against the husband for litigation funding; 

    (h)The wife’s claim against the husband for spousal maintenance; 

    (i)The wife’s claim against the husband for child support departure orders;

    (j)The need for an injunction in respect of items of personal property;  and

    (k)Costs of the interim dispute.

Evidence

1. The wife relied upon:

   (a)Her financial statement filed on 23 March 2017;

   (b)Her affidavit filed on 13 January 2017;

   (c)Her affidavit filed on 23 March 2017; and

   (d)Exhibits W1 (excluding pages 23-41 inclusive, which were the subject of sustained objection), W2 and W3. 

2. The wife also sought leave to rely upon her affidavit sworn and served this morning, but leave was refused in the face of objections by both the husband and third respondent due to its lateness. Its admission would have affronted the Family Law Rules 2004 (Cth) (“the Rules”) (rr 1.07, 1.08(1)(c), 5.07, 9.08(3)) and no satisfactory explanation was proffered for its lateness.

3. The husband relied upon:

   (a)His financial statement filed on 28 February 2017;

   (b)His affidavit filed on 28 February; and

   (c)His affidavit filed on 5 May 2017 (excluding Annexures QX01 and QX02, which were the subject of sustained objection). 

4. The third respondent relied upon:

   (a)His affidavit filed on 20 February 2017; and

   (b)His affidavit filed on 1 March 2017.

Injunctions relating to corporate activity

1. The wife sought injunctions binding the parties’ conduct of the ordinary corporate activities of four corporations. 

2. C Pty Ltd (“CPL”) is the first of those companies. The spouses were formerly the directors of CPL and both held shares in it. However, in 2014, the husband transferred his shares to the third and fourth respondents for no consideration. In the substantive proceedings, the wife seeks an order under s 106B of the Act to set aside that transaction. In any event, the wife retains her 19 per cent shareholding in CPL, though the husband unilaterally removed her as a director in March 2016, so he is currently the sole director. CPL is the sole legal proprietor of a valuable piece of real estate, said to be worth $4 million and unencumbered.

3. G Pty Ltd (“GPL”) is the trustee of the Xia Family Trust (“the Trust”) and has been so since April 2016, when it replaced L Pty Ltd (“LPL”) as the trustee. The Trust was set up as an investment vehicle in June 2015.

4. The husband is the sole director of GPL. The shares he formerly held in the corporation were transferred to the third and fourth respondents in August 2016 and the wife also seeks to ultimately set aside that transaction under s 106B of the Act.

5. When LPL was registered and appointed as trustee of the Trust in June 2015, the spouses were equal shareholders and joint directors. The spouses were and remain beneficiaries of the Trust.

6. LPL took a 25 per cent stake in a large real estate development venture, which stake it held on trust for the Trust. GPL now assumes that responsibility as trustee and therefore the husband now has effective control of the Trust and its proprietary interest. Its principal asset is the 25 per cent stake in the real estate venture, which the parties expect will realise for the Trust not less than $8 million and probably not more than $14 million within the relatively near future. Indeed, a distribution of about $2.75 million is shortly due to be paid to the Trust.

7. V Pty Ltd (“VPL”) is a corporation about which the wife knows nothing, beyond that which has been disclosed by the husband. He deposed the corporation was established as the trustee of another trust in March 2016, at which time he was sole director and sole shareholder. He resigned the directorship and transferred his shares to the third respondent only eight months later, in November 2016, which transfer the wife also wants to set aside under s 106B of the Act. VPL is the corporate trustee of another trust which has a 20 per cent stake in another real estate development venture.

8. The wife wants VPL included within the ambit of the proposed injunction, but her application is refused. The husband only acquired his interest in VPL within a couple of months of their separation in July 2016. She did not depose to any contributions she made directly or indirectly to any property over which VPL exercises control. The husband has disclosure obligations in relation to the corporations and the wife will be at liberty to investigate VPL thoroughly, but there is no justification for its current inclusion within the restrictive injunction she proposes. 

9. Consequently, attention falls upon CPL, GPL and LPL.

10. The wife’s claim for property settlement relief hinges upon the availability of several assets, being: 

    (a)The valuable property owned by CPL; 

    (b)The 25 per cent stake in the valuable real estate venture owned by GPL beneficially for the Trust, of which the spouses are beneficiaries;  and

    (c)Four parcels of real estate, of which the spouses are the joint legal proprietors. 

11. In respect of all those assets, the third and fourth respondents argue they have either legal or equitable interests which impinge upon the spouses’ proprietary interests. 

12. The third and fourth respondents espouse an intention to enforce their proprietary entitlements to extract their capital and use it for investment in other ventures in both Australia and China. To the extent they exercise control over the corporations, the implementation of their intent will clearly prejudice the wife’s rights and entitlements in these proceedings.

13. The wife has established her entitlement to injunctive relief to protect her interests, though not to the draconian extent for which she submitted. The injunctions will be limited.

14. The husband, third respondent and fourth respondent will be restrained from allowing CPL to sell, transfer or encumber its real estate. They will also be restrained from allowing GPL to use any more than one-half of the money it receives in dividends from the real estate venture. It needs to be able to spend some money to cover ordinary operation costs, like the payment of Business Activity Statement accounts, CGT, accountancy fees, legal fees and other fees associated with its legal status. It should not be shut down completely, even though the wife has given an undertaking as to damages.

15. There is no need to cause the establishment and regulation of a controlled money account, as the wife proposed. Instead, the husband, third respondent and fourth respondent will need to report to the wife, monthly and in writing, accounting for the money received from business venture with the T Town corporations and how any of that money is expended. 

16. Otherwise, the husband, third respondent and fourth respondent are restrained from changing the shareholdings in or the directorships of CPL, GPL, and LPL.

Disclosure

1. The wife proposed an order in these terms:

   Pending further order, the husband shall provide to the wife forthwith upon the same becoming available to him copies of all documents and details of all information in relation to the affairs of the entities, the trust and the T Town entities, including but not limited to all financial statements, management accounts and details of payments to be received, proposed to be made and made by the same.

2. I make no order in those terms. 

3. I have already explained how the husband, third respondent and fourth respondent will be obliged to report to the wife monthly in respect of money received by GPL from the T Town corporations.

4. The husband is also bound by disclosure obligations imposed by Parts 12.2, 13.1, and 13.2 of the Rules. There is no utility in simply ordering the husband to comply with the Rules, since the obligation of disclosure exists without the need for an order.

Exclusive occupation

1. The spouses are the joint legal owners of four real properties, namely:

   (a)D Street, Suburb E, NSW;

   (b)M Street, Suburb N, NSW; 

   (c)O Street, Suburb P, NSW;  and

   (d)Q Street, Suburb R, NSW. 

2. The wife wants exclusive occupation of the Suburb E property and the husband consents. The order is made. 

3. The husband wants exclusive occupation of the M Street property, which the wife opposes. She wants the luxury of using that property on the weekends and the Suburb E property during the week.

4. I reject the wife’s proposal. The husband currently lives with the third and fourth respondents, but that may not always be the case. He cannot move to either of the other two properties owned by the spouses because they are leased. The husband is a legal proprietor of the M Street property and can go there at his whim. He does not wish to be confronted by the wife, because their relationship is fractious and police have already been summoned to quell their disputes. Since the wife will have exclusive occupation of the Suburb E property, the husband may have exclusive occupation of the M Street property.

5. The husband sought an injunction restraining the wife’s removal of furniture from the M Street property and, since she advanced no argument in opposition, such an order will be made. 

Payment of mortgages

1. Although the spouses are the joint legal proprietors of the four parcels of real estate just mentioned, neither of them is either willing or able to meet the loan repayments secured by mortgage over the properties. 

2. Similarly, although the third and fourth respondents allege their beneficial interest in one or more of those properties, neither of them is willing to meet the mortgage repayments. 

3. To cure that impasse, the wife proposed that an order be made compelling the husband or the third respondent to meet the repayments. 

4. Conversely, the husband sought an order compelling the wife to make the repayments. 

5. Both applications are dismissed. 

6. The wife’s proposed order is misconceived because the evidence does not permit a finding the husband has the independent financial capacity to meet the repayments. He allegedly relies upon the largesse of the third respondent for his income and such financial accommodation has allegedly either ceased or decreased to an amount commensurate with his regular expenses. The third respondent certainly has the capacity to pay the mortgages but, on the wife’s case, he has no legal or beneficial interest in any of the properties, so it begs the question: why should he pay the loans secured over them? She had no logical answer for that question.

7. The husband’s proposed order was equally misconceived. He suggested the wife pay the mortgages from the sum of $600,000 she withdrew from their joint account. However, she made that withdrawal over three years ago and she deposed to her expenditure of all the money. There was no proper basis upon which to disbelieve her and reject that evidence. Otherwise, the husband concedes the wife has no financial capacity to pay the mortgages.  

8. The upshot is that none of the parties will be compelled by order to pay the mortgages. If none of them voluntarily choose to service the mortgages then the mortgagees will ultimately foreclose and exercise their power of sale. Following the mortgagee sales and the discharge of the loans and costs, the net proceeds of sale will be distributed in equal shares to the spouses as the joint legal proprietors of the properties. It would then be up to the third and fourth respondents to decide how best to assert their alleged beneficial interests in those properties.

1. In the meantime, an order will be made restraining the parties from increasing the encumbrances over the properties, either by re-drawing any available funds or by expanding the loans.

Litigation Funding

1. The wife sought an order compelling the husband to pay her $250,000 to help fund her costs in this litigation, in the guise of either costs or interim property settlement orders.

2. The application is refused because she could not demonstrate the source from which the husband could pay such money. She could only identify money that would be received by GPL in trust for the Trust from the real estate venture, but those funds will be held in the Trust for the benefit of all the beneficiaries, not just her. The trustee has a fiduciary duty to consider all of the beneficiaries’ interests. No proper basis is demonstrated for a coercive order that forces the husband, in his capacity as director of GPL, to force its use of the money it holds for the Trust (for the benefit of numerous beneficiaries) to pay the wife’s legal fees in this litigation. 

3. The wife’s alternate proposal was for a “dollar-for-dollar” costs order. Such an order is made over the husband’s objection. He could not say why such an order should not be made. He simply said the parties should sell the jointly-owned Suburb E property to free up their capital to pay their legal fees. That would be convenient for him, but not for the wife. He has exclusive occupation of the Suburb N property, as he wanted, and therefore stable accommodation, but the order for the wife’s exclusive occupation of the Suburb E property would be useless if that property must be sold so her legal fees can be paid. 

4. Somehow, despite the asserted absence of any income, the husband manages to assemble and fund an impressive legal team. He would be in a position of superiority, enjoying a gross power in balance in the litigation, if the wife is not similarly represented in these proceedings. Pursuant to s 117 of the Act, fairness dictates that the husband share the money from which he benefits by applying one-half of all money intended for payment of his lawyers to the payment of the wife’s lawyers.

Spousal Maintenance

1. To date, the spouses have enjoyed a privileged lifestyle. Presently, it is impossible to find to what extent that is due to the generosity of the third and fourth respondents. There is a serious factual dispute about the manner in which the spouses have accumulated their assets and acquired their income, which dispute cannot be resolved at this interlocutory stage. Suffice to say, both parties deposed to their expenditure way beyond their current means. Both deposed to having very little or no income, but their discretionary expenditure has not shown commensurate restraint. 

2. The wife has some need for financial support, though it is difficult to quantify. 

3. The husband has no apparent capacity to pay any spousal maintenance, as he receives no income from the third respondent over and above that necessary to meet his own expenses. 

4. There is no realistic option but for the parties to resort to use of their own capital to support themselves. They can sell the property at Rosehill and also their second Suburb N property. The debts secured over their four properties amount to about $4.4 million, but they believe the properties are collectively worth about $10 million, so there is sufficient equity to extract to meet their respective needs in the absence of sufficient income from other sources. Consequently, the application for spousal maintenance is dismissed. 

Child Support Departure

1. There is a child support assessment in existence. The husband pays child support in accordance with the assessment. It apparently applies until 22 June 2018 and requires his payment of $342 per month. I remain unsure as to whether he presently pays the child’s school fees over and above that monthly payment.

2. In any event, the wife wants an order that the husband pay child support of $3,000 per week, in addition to payment of the child’s school fees and the child’s private health insurance premiums.

3. The absence of proof of the husband’s capacity for such payment is an impediment to the wife’s success, but there is a procedural impediment which is just as important. The wife has a right to seek administrative departure by order of the Child Support Registrar, but she has not availed herself of that entitlement. I accept the husband’s submission that it is wasteful to burden the Court with consideration of the departure application when the wife has failed to avail herself of a simple administrative procedure.

4. Lest it has escaped the parties’ attention, this interim dispute has already taken four days of Court time to determine: 25 January 2017, 22 February 2017, 29 March 2017, and today. The parties have seemingly lost all sense of proportion. The Court is implored to ensure that each case is resolved in a just and timely manner at a cost to both the parties and the Court that is reasonable in the circumstances of the case (rr 1.04, 1.07(a)). It is the obligation of each party and their lawyers to assist in the promotion of the main purpose of the Rules and, in particular, by assisting the just, timely and cost-effective disposal of cases (r 1.08(g)). The Court is also obliged to apply the Rules in a way that gives an appropriate share of the Court’s resources to each case, taking into account the needs of all other cases (r 1.07(e)). The application of those rules leads me to the conclusion it is not appropriate for the Court to further consider the application for child support departure and it is dismissed.

Conclusion

1. For those reasons, I make the following orders. 

2. The parties do not require the publication of reasons for Order 11 hereof.

I certify that the preceding sixty-two (62) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Austin delivered on 29 June 2017.

Associate:

Date:  30 August 2017