Xin and Qinlang and Ors (No 2)

[2020] FamCA 399

FAMILY COURT OF AUSTRALIA

XIN & QINLANG AND ORS (NO. 2) [2020] FamCA 399

FAMILY LAW – PROPERTY – division of property – injunction for sale of property to protect business – risk to property pool – requirement of franchise and lease agreements to refurbish property – outstanding request for extension of time for refurbishment deadline – whether adequate proof of risk in absence of additional steps to pursue an extension of time for refurbishment deadline – nature of serious argument to be tried – balance of convenience

Family Law Act 1975 (Cth) ss 79, 114

In the Marriage of P N and B M Aldred (No 2) (1985) 9 Fam LR 1091
Australian Coarse Grain Pool Pty Ltd v Barley Marketing Board of Queensland (1982) 46 ALR 398
American Cyanamid Co v The Ethicon Ltd [1975] AC 396
Stowe & Stowe (1980) 6 Fam LR 757

APPLICANT: Mr Xin

1st RESPONDENT: Ms Qinlang

2nd RESPONDENT: Mr B Xin

3rd RESPONDENT: Ms Wang

FILE NUMBER: CAC 1782 of 2018

DATE DELIVERED: 22 May 2020

PLACE DELIVERED: Canberra

PLACE HEARD: Canberra

JUDGMENT OF: Gill J

HEARING DATE: 19 May 2020

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr I Coleman, SC

SOLICITOR FOR THE APPLICANT: Hijazi Curran Cameron Lawyers

COUNSEL FOR THE 1ST RESPONDENT: Mr J Haddock

SOLICITOR FOR THE 1ST RESPONDENT: Dobinson Davey Clifford Simpson

SOLICITOR FOR THE 2ND & 3RD RESPONDENTS: Farrar Gesini & Dunn

Orders

1. That in respect of the refurbishment works required at the F Franchise, Suburb H (“The F Franchise”):

   (a)the parties do all acts and things necessary to sell the real property situate at D Street, Suburb E in the Australian Capital Territory being the whole of the land more particularly described in Certificate of Title Volume ..55 Folio … (“the Suburb E property”) and to apply the net proceeds of sale towards the refurbishment costs of the F Franchise and subject to the following:

   (i)That as soon as practicable, and in any event within fourteen days, the Husband vacate the Suburb E property, and leave the property in a clean and tidy condition;

   (ii)That for the purposes of the sale of the Suburb E property, the Wife be appointed as the sole trustee of the sale;

   (iii)That in her capacity as the sole trustee for the sale of the Suburb E property, the Wife do all acts and things and sign all such documents as may be required to sell the Suburb E property forthwith, by private treaty or by a public auction as she may be advised, subject to the provisions in Order 1(a)(iv) to Order 1(a)(xxi) below;

   (iv)The offering price or reserve price be determined in consultation with the agent;

   (v)The Wife may incur advertising expenses in respect of the proposed sale up to an amount of $5,000, with such expenses to be reimbursed to the Wife from the sale proceeds as set out below;

   (vi)The Wife may incur costs for cleaning, redecorating or improvement of the presentation of the property for the purposes of sale to such amount as may be advised/recommended by the agent acting on the sale but not exceeding an amount of $20,000;

   (vii)The Wife may retain an agent on the basis that the agent is given the sole agency for a limited period or may list the property for sale with a number of agents, in her discretion;

   (viii)The Wife may enter into an agency agreement with an agent provided that the commission agreed upon does not substantially exceed the recommended scale of the Real Institute of ACT;

   (ix)The Wife may retain a solicitor of her choice, or Mr G of J Firm, to act for the vendor on the sale;

   (x)The Wife is authorised to enter into a contract for sale in such terms as advised by the solicitors acting on the sale;

   (xi)Liberty to apply to the Court be reserved to the Wife with respect to the terms and conditions of the sale for further directions in the event that it proves necessary; and

   (xii)The Wife keep the Husband advised of the progress of the sale and provide copies of documents relevant to the sale within 48 hours of receipt of such by her.

   (b)That within seven (7) days of being requested by the Wife (or the conveyancing solicitor acting for the sale), the Husband duly execute all documents relating to the sale, including but not limited to the Transfer of Land and Discharge of Mortgage, and provide the signed original documents to the conveyancing solicitor.

   (c)That pending the completion of the sale, the Husband continue to service the mortgage encumbering the Suburb E property in accordance with Order 5A of the Orders of 10 May 2019.

   (d)That upon the completion of the sale, the proceeds of sale shall be distributed as follows:

   (i)First, in payment of agent’s commission, advertising costs and other expenses in relation to the sale, including but not limited to reimbursement to the Wife for any expenses incurred by her personally pursuant to these Orders in relation to the sale;

   (ii)Secondly, in payment of the amount required for normal conveyancing adjustments as to municipal and water rates on sale (if any);

   (iii)Thirdly, in payment of the conveyancing solicitor’s costs of acting on the sale;

   (iv)Fourthly, in payment of the amount required to discharge the home loan (being account (…43);

   (v)Fifthly, in payment of the costs associated with the refurbishment of the F Franchise;

   (vi)Sixthly, the remaining balance be paid to the trust account of the Wife’s solicitors, and the parties thereafter do all acts and things required to transfer the funds into an interest bearing account in their joint names and they are restrained from accessing the funds pending an Order of the Court or written agreement between the parties.

2. That in default of the Husband doing all acts and things and executing all such documents as are necessary to give effect to these Orders, a Registrar of the Family Court of Australia at Canberra be appointed pursuant to s 106A of the Family Law Act 1975 (Cth) to execute all such documents in the name of the party in default and to do all such acts and things necessary to give validity and operation to the said Orders.

3. The parties have liberty to apply in respect of the mechanisms for the sale of the Suburb E property.

4. This matter is transferred to the Registrar’s list pending further application or the listing of the trial date.

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 Xin & Qinlang 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 CANBERRA

FILE NUMBER: CAC 1782 of 2018

Mr Xin

Applicant

And

Ms Qinlang

Respondent

And

Mr B Xin and Ms Wang

2^nd & 3^rd Respondents

REASONS FOR JUDGMENT

1. The Husband and Wife are in contest as to the division of their property following the breakdown of their marriage.  Together they hold significant property within a pool comprised of multiple businesses and real estate.  The case further involves claims of loans by third parties and a claim by the Second and Third Respondents that the Husband and Wife hold a particular property in Suburb K on a resulting trust for the benefit of the second and third respondents.

2. The particular context of this application is that orders are sought by the Wife to preserve a business held by the parties, F Franchise.  The preservation of that item of property was previously dealt with by Judge Hughes in the Federal Circuit Court on 24 February 2020, prior to the matter being transferred to this Court.  Her Honour made orders that permitted the sale of a property in Suburb K to provide funding for the refurbishing of the premises for that business as required by the franchise agreement.

3. However, following transfer of the matter this to this Court the Second and Third Respondents joined the proceedings and sought the discharge of the order for the sale of the Suburb K property on the basis that the property is held on trust for them.  That order has now been discharged pending a resolution of the claim of resulting trust in the proceedings.

4. The discharge of that order defeated the mechanisms put into place by Judge Hughes for the protection of the F Franchise business.  Accordingly, the Wife seeks the sale of a different property which is not touched by the resulting trust claim, being a property held in Suburb E in the Australian Capital Territory.  That property is currently occupied by the Husband.  The matter now comes to be determined in a different landscape to that which confronted Judge Hughes.  Although there is the same underlying issue there are now different parties and an unavailability of the Suburb K property to present a solution.

5. What is not contentious between the parties is as follows:

   a)The parties together own a business, the F Franchise;

   b)It is a requirement of the franchise and lease agreements that the premises be refurbished;

   c)The current estimate for the work to refurbish the property is $170,000;

   d)The current deadline for the refurbishment to be completed is 20 May 2020; and

   e)Failure to comply with refurbishment requirement render the parties vulnerable to the complete loss of the business.

6. The issue at large is the preservation of the pool.  In aid of the preservation of the F Franchise business the Wife seeks the sale of the parties’ property at Suburb E which is currently occupied by the Husband.  The Husband resists the sale of that property and asserts that he wishes to retain it as part of the overall property disposition.

7. The Husband identified the source of power for the remedy sought by the Wife as s 114 of the Family Law Act 1975 (Cth). The Wife made no disagreement to this characterisation.

8. The Husband identified that, as it is the Wife who seeks the injunctive relief pursuant to s 114, she bears the onus of justifying the exercise of that power. The Husband's counsel identified a number of authorities dealing with giving of injunctive relief, in particular In the Marriage of P N and B M Aldred (No 2)[1] which surveyed the various formulations in relation to the giving of interlocutory injunctive relief.  In that case, the Court observed what had been said by Gibbs CJ in Australian Coarse Grain Pool Pty Ltd v Barley Marketing Board of Queensland[2]

   …the proper approach, in considering whether an interlocutory injunction should be granted, is first to inquire whether there is a serious question to be tried, and then to determine the matter on the balance of convenience.

   [1] (1985) 9 Fam LR 1091

   [2] 1982 46 ALR 398

9. It was identified that the appropriate test is that set out by the House of Lords in American Cyanamid Co v The Ethicon Ltd.[3]  Aldred (No 2) also quoted Spry: Equitable Remedies (2^nd edition) page 353:[4]

   Ultimately it can only be said that the court will take account of all relevant matters and will make such order as appears most just in view of the various interests of the parties and of third persons.  As a negative proposition, however, it may be safely stated that courts of equity in their auxiliary jurisdiction will not exercise their discretion by granting an injunction when the risk of injury which is complained of is merely insignificant or illusory. 

   [3] [1975] AC 396

   [4]In the Marriage of P N and B M Aldred (No 2) (1985) 9 Fam LR 1091, 1098

10. The court also cited Stowe & Stowe[5] which dealt with the pursuit of an injunction to preserve property,

    …it is clearly not sufficient to show that it may be proved later that the other party has a relevant interest in the property.  Some other factor must be established, for example, that unless an injunction is granted the other party may dispose of or deal with the property, or with company or trust property, in such a manner that there is a risk that any order made under Sec.79 will not be met. 

    [5] (1980) 6 FAMLR 757

11. In Aldred (No 2) the question was posed as to the risk of suffering injury in an absence of the restraint that was sought by way of injunction.  The risk was variously described as “proof of imminent danger" and proof that the damage should it eventuate, would be “very substantial".

12. The Husband boiled these matters down to three factors to be established by the Wife being:

    a)a serious argument to be tried;

    b)a risk of injury; and

    c)the balance of convenience.

13. The Husband asserted that the Wife had failed on all three of these aspects and accordingly had failed to justify the relief that she seeks.

14. In addressing whether there was a serious argument to be tried, the Husband put this matter as a failure on the part of the Wife to demonstrate an actual risk of loss.  While I accept that the issue of risk is necessary to the consideration of whether an injunction should be granted, the focus of requirement for a serious argument to be tried appears to be differently placed.  For example, an examination of Australian Coarse Grain Pool Pty Ltd v Barley Marketing Board of Queensland identifies the issue of a serious question be tried in that case as being the ultimate issue of whether “the barley was the subject of an interstate transaction and therefore protected from seizure by the defendant board."  In the current context a serious argument to be tried relates to the overall relief sought by the Wife in respect of a claim pursuant to s 79 in relation to the property pool which is comprised in part of the F Franchise.  In the sense adopted by Gibbs CJ in Australian Coarse Grain Pool Pty Ltd v Barley Marketing Board of Queensland this constitutes a serious argument to be tried.

15. The key focus of the Husband's submissions went to the nature of the risk put forward by the Wife as requiring injunctive protection.  The Husband accepted that a risk arises with non-refurbishment in accordance with the franchise agreement, being the risk of a complete loss of the business.  However, it may be understood that a risk is comprised of two components being, firstly, the nature of the harm that should arise if a particular occurrence takes place, and secondly, an assessment of the likelihood of that occurrence taking place.  It was primarily to the second of these two limbs that the Husband addressed his submissions.  In doing so he correctly identified that the onus is on the Wife to establish that there is a justifying risk.  He asserted that she has fallen short of establishing a likelihood of the occurrence taking place in particular due to her lack of enquiries as to the potential extension of the requirement to refurbish the premises.

What was the evidence in respect of the risk? 

1. The evidence as to the risk of the loss of the F Franchise business may be summarised as follows:

   a)That the F Franchise in Suburb H is overdue for refurbishment being a requirement under the franchise agreement.[6] 

   [6] [5] Wife's affidavit 28 January 2020

   b)The current deadline for refurbishment for the F Franchise is 20 May 2020.[7]

   c)The F Franchise was due to complete refurbishment in December 2019 but the Wife sought and obtained an extension from the Corporate Office.[8]

   d)On 3 February 2020 the Wife received a cost estimate for the refurbishment of F Franchise at $170,651 excluding GST.[9] 

   e)On 13 February 2020 the Wife consulted with her business bankers at Westpac and ANZ bank in relation to further loans for the business but was told none would be provided.

   f)On 21 February 2020 the Wife requested a further extension to complete the refurbishment at the F Franchise but has received no formal response.[10]

   g)In March 2020 the Wife received emails from the Project Manager seeking to progress the refurbishment.[11]

   h)In March the Wife “ran into” the Leasing Manager of the Suburb H Shopping Centre, Mr L and inquired whether it be possible have a further extension to complete refurbishment.  His response was “it is unlikely because you have already been given a 6 month extension since the lease expired." 

   i)After 8 May 2020 the Husband suggested requesting a further extension to complete the refurbishment works due to the impact of COVID-19 on the businesses.  The Wife did not agree to the proposal to further postpone the refurbishments saying “I do not wish to take any risks which may result in me losing the businesses, as they are the sole source of income for me and the children."[12] 

   j)On 12 May 2020 the Wife spoke to a person from the Corporate Office who said in response to the Husband's query about extension of the deadline for refurbishment that the Corporate Office will “assess appropriately if [Mr Xin’s] request to postpone refurbishment works for the F Franchise is acceptable.  As you would appreciate, we are required to seek confirmation from the landlord of the F Franchise if this is possible.  At this stage we are unable to confirm if your request is approved."[13]   

   k)The Wife reported that the National Operations Manager, Mr M, had told her “it is a requirement for refurbishments to be carried out when leases are renewed", “COVID-19 problem will not last forever” and that “situations are improving dramatically."

   [7] [18] Wife's affidavit of 15 May 2020

   [8] [7] Wife's affidavit 28 January 2020

   [9] [8] Wife's affidavit 19 February 2020

   [10] [18] Wife's affidavit 15 May 2020

   [11] [18] Wife's affidavit 15 May 2020

   [12] [21] and [22] Wife's affidavit 15 May 2020

   [13] [23] Wife's affidavit 15 May 2020

2. Accordingly, the Wife notes that she does not comprehend the difference that will be made by a further request in respect of extension of the refurbishment deadline given that there is a pending request already with the franchisor.

3. The Wife is criticised on the basis that the material that she presents is equivocal and that there is no document provided recently from the franchisor in relation to the extension.  Rhetorically the Husband asks why a landlord or franchisor would cause the failure of the business in what are currently difficult times.  He criticises the Wife for not pursuing the extension issue further.  He submits that there is no evidence to establish that, but for the giving of interlocutory relief, the business is a genuine risk, or alternatively poses the question as to whether or not the business is already lost in that it has not been trading due to COVID-19 restrictions.

4. The second matter raised by the Husband is the balance of convenience.  He notes that if the Wife is successful in her application then the Suburb E property will be sold which would defeat forever his hope to retain the Suburb E property at the final distribution of property between the parties. 

Conclusion

1. It is accepted that the failure to comply with the requirement to refurbish opens the door to the complete loss of the F Franchise business.  The loss of that business has significant implications for the pool of property the subject of the parties’ s 79 claims.  The loss of the business is the removal of an asset from the pool and the diminution of the pool.

2. There is uncertainty as to whether this risk will be realised if the parties do nothing to comply with the requirement to refurbish.  It is possible that the franchisor and the lessor would not want the demise of the business under difficult general economic circumstances.

3. However, what is not required is, as described by counsel for the Wife, an absolute proof of the loss of the business.

4. What is required is that there be sufficient risk of that outcome to justify the injunctive relief as a means of protecting the pool of property.

1. It is true that the Wife could have taken further steps to pursue an additional extension of the time to refurbish the F Franchise.  The failure to pursue a further extension could be a matter that undermines the remedy she pursues, undermining her assertion of an underlying risk to justify the remedy and in undermining the need for that remedy.

2. However, it is not the case that the Wife has failed to pursue an extension.  She has obtained two extensions in relation to the refurbishment, and has sought another, without response.  The failure to seek another extension whilst waiting for a response to the previous request for an extension is not a failure that undermines the Wife’s case in any significant manner.

3. Risk, however, is not the sole issue.  Dealing with the risk impacts other interests of the parties and, in particular, defeats the Husband’s claim upon the Suburb E property, and deprives him of his current residence.  It is necessary to consider the balance of convenience.

4. The remedy sought is the disposal of another item of property from the pool, the Suburb E property.  This does not equate to the loss of property from the pool in the same sense as the loss of the business would.  Rather, it involves the conversion of that property into another form of property within the pool, being a conversion from real property into a cash resource and into the business.

5. In short, the loss of the business impacts the pool of property by diminishing it.  The sale of the Suburb E property does not reduce the pool of property, but reshapes it.

6. This is a matter where the injunction is pursued in relation to a serious question to be tried, being the alteration of the parties’ property interests pursuant to s 79.  The risk to that pool is serious and imminent, even if not certain.  The balance of convenience weighs to the protection of the pool as a whole despite the adverse impact upon the Husband.  The Suburb E property should be sold to protect the parties’ interests in the F Franchise business.

7. In making orders to provide for the sale, it should be observed that the matter was argued on the basis of a substitution of the Suburb E property.  No issues of practicability were raised in relation to the terms, or in relation to the vacating of the property. The terms of the previous orders will be modified insofar as is necessary to substitute the Suburb E property, giving a short period to vacate the property and leaving the parties with liberty to apply in relation to the mechanisms.

I certify that the preceding twenty-nine (29) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Gill delivered on 22 May 2020.

Associate: 

Date:  22 May 2020