Xiu v Li
[2021] VCC 1665
•28 October 2021
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERICAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-20-01192
| YUEYUE XIU | Plaintiff |
| v | |
| PIN LI | First Defendant |
| and | |
| Second Defendant | |
| WOODBINE PROJECT PTY LTD |
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JUDGE: | HIS HONOUR JUDGE COSGRAVE | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 12 October 2021 | |
DATE OF RULING: | 28 October 2021 | |
CASE MAY BE CITED AS: | Xiu v Li and Anor | |
MEDIUM NEUTRAL CITATION: | [2021] VCC 1665 | |
RULING
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Subject:FREEZING ORDER
Catchwords: s79A of the Family Law Act
Legislation Cited: Bankruptcy Act 1966 (Cth); County Court Civil Procedure Rules 2018 (Vic); Family Law Act 1975 (Cth); Property Law Act1958 (Vic)
Cases Cited:Cantrell v Northand Anor [2020] FamCAFC 175
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | A L Berger | Hiways Australia |
| For the First Defendant | P Bornstein | Oceania & Li |
| For the Second Defendant | Grace Xiao | |
| For the Third Party | Lim & Lim Legal |
HIS HONOUR:
1This is an application by the plaintiff (“Xiu”) for freezing orders against the first defendant (“Li”), the second defendant (“Woodbine”) and Yiming Tai (“Tai”), the former wife of Li. Xiu seeks general freezing orders against Li and Woodbine. That application is being heard and determined by another Judge. Xiu seeks a freezing order against Tai in relation to the property at Unit 2, 11 Gnarwyn Road, Carnegie (“the Carnegie property”). Xiu also seeks orders compelling Tai to provide information.
2According to Xiu, the purpose of the application is to prevent the frustration of the Court’s processes by avoiding a situation where a judgment of the Court will be wholly or partly unsatisfied by reason of the conduct of one or more of the respondents.
3Xiu said that the court has power, pursuant to Rule 37A.05(5)(b) of the County Court Civil Procedure Rules 2018 (Vic) (“the Rules”), to permit the Carnegie property to be frozen on the basis that there are court processes available in relation to a prospective judgment against Li whereby Tai would have to disgorge the property. The process envisages bankrupting Li with the result that the transfer of the Carnegie property to Tai would be rendered void against the trustee in bankruptcy in circumstances where Li was, or was about to become, insolvent or the transfer was made at an undervalue. If the transfer of the Carnegie property from Li to Tai was ordered in the Family Court of Australia pursuant to a settlement between them, those orders can be varied under section 79A of the Family Law Act 1975 (Cth) (“the FLA”). It is also possible that the transaction might be caught by section 172 of the Property Law Act 1958 (Vic) (“the PLA”).
Background
4The proceeding has an extensive history.
5Some of the material points are as follows:
· Xiu has for some time been pursuing Li and Woodbine in relation to the transfer of a property at Chelsea in Victoria.
· Since about May 2021, the shareholders of Woodbine, other than Li, have been seeking (by applying to the Victorian Supreme Court) to assume control of Woodbine and act on its behalf in these proceedings.
· Li came to Australia as an international student around July 2005. Tai came to Australia as an international student in February 2006.
· Li and Tai were married in June 2010.
· Li and Tai obtained their permanent residency visas in August 2010.
· There are two children of the marriage, one born in October 2012 and another in May 2016.
· Xiu began an extramarital relationship with Li beginning around late 2016 or early 2017.
· Li bought expensive gifts for Xiu and her parents and spent a substantial sum of money in this way.
· Li and Tai separated on about 9 September 2018.
· On about 2 January 2019, Xiu paid about $970,009 into the Woodbine bank account.
· On about 17 January 2019, Xiu signed a loan agreement with Woodbine in which she agreed to lend Woodbine $970,009. Woodbine charged all its interest in the property situated at Lot 3, 53 Woodbine Grove, Chelsea in Victoria (“the Chelsea property”) in favour of Xiu.
· In February 2019, Tai engaged solicitors to act on her behalf in the Family Court of Australia. Li was separately represented by other solicitors. Tai sought a property settlement arising from the dissolution of her marriage.
· On 30 March 2021, Woodbine transferred the Chelsea property to Rabosa 2 Pty Ltd (“Rabosa 2”). Xiu applied for a freezing order against Rabosa 2 and joined it as a defendant to this proceeding. After Xiu failed to obtain a freezing order against Rabosa 2, she withdrew her claim against that entity.
6On 30 August 2019, the Family Court of Australia made consent orders between Li and Tai in the following terms:
(a) within 30 days of the orders, Li shall at his own cost transfer to Tai all his interest in the Carnegie property.
(b) within 30 days of the orders, Li shall at his own cost transfer to Tai all his interest in the property situated at 33 Jean Street, Cheltenham in the State of Victoria.
(c) within 30 day of the orders, Li shall at his own cost transfer to Tai all his shares and other interests in Goldlands Parkdale Pty Ltd, the registered proprietor of the land situated at 56 Lower Dandenong Road, Parkdale.
(d) subject to these orders, Li shall retain to the exclusion of Tai the following:
(i)his interest in Woodbine;
(ii)his interest in TM Pty Ltd;
(iii)his interest in the Audi Q7;
(iv)his interest in his furniture and personal effects;
(v)his interest in cash in the bank under his name;
(e) apart from the above, Tai will retain the following:
(i)her interest in 4/10 Howe Street, Murrumbeena in the State of Victoria;
(ii)her interest in the BMW X4;
(iii)her interest in her furniture and personal effects;
(iv)her interest in cash in the bank under her name;
(v)superannuation standing in her name.
7Tai says that before she agreed to the consent orders, she received advice from her solicitor to the effect that she could receive at least 65% of the matrimonial assets. This was because the couple were married for eight years; she was the main carer of the children since they were born; Tai continued to be the primary carer after the separation and the children continued to live with her; at the time the consent orders were made the children were six and three years old respectively; because of her responsibilities as a mother and carer for the children, Tai was unable to work full time, unlike Li who was still able to work full time in his property development business.
8Tai said that in order to avoid the stress of protracted litigation and the legal costs which that would entail, she agreed to a division of the matrimonial assets whereby she received about 59% of the asset pool and Li received about 41%. In August 2019, the net equity of Li’s share of the asset pool was valued at about $1,041,486.
The Carnegie property
9In about February 2013, Li, Mr Guan and Ms Chong purchased the Carnegie property. They obtained a planning permit to build five townhouses on the property. They obtained five separate titles for the property and were registered as tenants in common on each of the five titles. They sold two of the townhouses and decided that each of them would retain one townhouse. Pursuant to a partition agreement, in December 2014, the Carnegie property was transferred to Li.
10In about June 2015, Li, Tai and the children moved into the Carnegie property to live. Tai said that she and Li began sleeping in separate rooms at the property from early 2018. Li continued to live at the property until about August 2018. She said that, between about August 2018 and February 2019, Li was mostly in China. Li moved out of the Carnegie property in February 2019.
11On 13 August 2021, the Carnegie property was transferred to Tai pursuant to the orders made in the Family Court of Australia. In order to effect the transfer, Tai had to refinance a loan owing by Li to Westpac Bank. Because Tai could only work part time and her income was not large, it took her some considerable time to obtain the loan of $950,000 from National Australia Bank to pay out the Westpac loan.
Freezing order principles
12Under Order 37A of the Rules, where an applicant has a good arguable case on a prospective cause of action and there is a sufficient prospect the Court might give judgment in that party’s favour, the Court may make a freezing order where it is satisfied that, in all the circumstances, there is a danger that a prospective judgment will be wholly or partly unsatisfied because assets of the prospective judgment debtor may be disposed of, dealt with or otherwise diminished in value.
13The key points are that:
(a) an applicant must establish an arguable case against the respondent;
(b) there must be a danger that the prospective judgment will be wholly or partly unsatisfied as a result of the conduct of the respondent in removing, disposing of or dissipating assets, or otherwise acting to diminish their value;
(c) the balance of convenience must favour the granting of the freezing order;
(d) the precise terms of the order will be framed to fit the particular circumstances of each case;
(e) the applicant should establish with some precision the value of the prospective judgment. An order should not unnecessarily restrict the use which a party can make of its assets and property;
(f) a court should exercise a high degree of caution in granting a freezing order. Such orders can have significant impact upon a party in impairing and restricting its freedom and ability to conduct business;
(g) a Mareva order should only be made upon admissible evidence which supports the contentions made by the applicant. Speculation and guesswork are no substitute for admissible evidence and inferences properly drawn from such evidence.
Important factors
14There are some important factual matters relevant to the manner in which the Court should exercise its discretion in this case.
15First, in the affidavit sworn by Xiu’s solicitor on her behalf on 17 March 2021, Payne Wu says that Xiu’s claim for the return of the $930,000 is against Li and Woodbine. Xiu claims the loan against Li but acknowledges that Woodbine received the money into its account. She says that this was due to a mistake of fact.
16The defence denies there was any mistake by Xiu and says that the loan was always intended for Woodbine. The defence refers to the loan extension agreement dated 17 January 2019 under which:
·Xiu agreed to advance $930,009;
·Woodbine agreed to repay the loan within 36 months;
·although Woodbine charged its interest in the Chelsea property in favour of Xiu, she agreed not to lodge a caveat over the property; and
·if Woodbine failed to repay the loan, the Chelsea property became the absolute property of Xiu and Woodbine’s obligations under the loan agreements were discharged in full.
17Secondly, Xiu intimated by her affidavit affirmed on 3 September 2021 that she lives in Baolian City, Baoshan District, Shanghai. She nowhere says that she is an Australian citizen or visa holder or that she owns any real property or other substantial assets in Australia (other than the alleged loan).
18Thirdly, Xiu said that she was aware of the divorce between Li and Tai in around 2017. Xiu told Tai in a phone conversation in January 2019 that she had seen her divorce papers. Xiu said that the status of Li’s divorce was a matter of some importance to her because it affected moving forward in her relationship with Li. Xiu said that in mid-2019, she was staying at Li’s place in Melbourne. On 7 September 2019, Lui showed her a photo of a Federal Court of Australia document and he told Xiu that he was waiting for the court hearing on the family law matter with Tai. Xiu stated that, for some time before then, she had been asking Li about the divorce. She claimed that the last communication between her and Li was in December 2019 and that there had been no contact since then.
19Fourthly, although Xiu attempted in about February 2020 to intervene in the family law case between Li and Tai, she was not successful. The court advised in early March 2020 that it would not accept her application to intervene because there were no ongoing proceedings in the matter. As noted earlier, the final orders between Li and Tai were made in August 2019.
Xiu’s submissions
20Xiu relies upon section 79A of the FLA which provided for circumstances in which a Court can re-examine orders made in a proceeding. Situations can include where there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence (including a failure to disclose information) and the giving of false evidence. Xiu noted that there was an obligation on the parties to the marriage to disclose significant creditors or claims by third parties against them. Claimants or creditors who might be affected by a Court order made pursuant to section 79 of the FLA are meant to be notified so that they can seek to have their rights recognised.
21In Cantrell v Northand Anor[1] the Full Court of the Family Court of Australia noted that procedural unfairness (such as a third party creditor not being advised of a Court proceeding and therefore not seeking to participate) struck at the validity and acceptability of the trial with the result that there should be a re-trial. The Court rejected the notion that it should re-examine and potentially overturn the earlier orders only if, assuming the parties had made proper disclosure and given appropriate notice to third party creditors, substantially different orders would have been made.
[1] [2020] FamCAFC 175.
22Xiu also commented on the figures revealed in the material filed at Court by Li and Tai. Xiu argued that the statements of assets and liabilities were not correct and that the Tai was actually awarded about 66-67% of the matrimonial assets.
23Xiu was especially critical of the figures produced by Li. However, that is the subject of a separate application before another judge.
Tai’s submissions
24Tai made a number of submissions opposing Xiu’s application.
25She said that the claim against Li was weak. This was evident from the uncertainty about the party to whom Xiu made the alleged loan. Xiu cannot say for sure who the borrower is.
26Tai contended that she received the Carnegie property as a result of the Family Court orders made due to the dissolution of her marriage with Li. Such an order was part of the normal court processes and could not be attacked.
27Tai also contended that the Court could not be satisfied that Li was without means and could not meet a judgment in Xiu’s favour.
28Tai claimed the balance of convenience favoured her. She said that freeing orders were not made to provide security for an applicant who may or may not succeed at trial. In any case, Xiu had to prove that any judgment against Li would be rendered nugatory and then pursue Tai through the processes provided for in section 121 of the Bankruptcy Act 1966 (Cth) and/or section 172 of the Property Law Act1958 (Vic).
Analysis
29In my opinion the freezing order against Tai should be discharged or dismissed for the following reasons.
30First, the fundamental basis of Xiu’s claim to the alleged loan is unsound as the lender herself is uncertain whether the borrower is Li or Woodbine. The written loan extension agreement between Xiu and Woodbine strongly indicates that the loan was to Woodbine rather than Li. On that basis, Xiu has not merely a weak a prima facie claim against Li and Tai but no claim at all.
31Secondly, even if Xiu made the loan to Li, that occurred in early 2019, months after Li and Tai separated and about one year after they began leading separate lives under the one roof at the Carnegie property. In those circumstances, I regard it as unlikely that Tai would have known about the alleged loan and acted to deprive Xiu of her alleged entitlement.
32Thirdly, Xiu said that she was aware of the divorce papers around 2017. Assuming that it was in early 2018 after Tai engaged solicitors to act on her behalf in the Family Court, it seems that Xiu on her own evidence had some knowledge or awareness of the breakdown of the marriage and the likely process which would follow at the Family Court. In that case, Xiu should have taken some action before February 2020 to protect her alleged financial interests. She had ample time and opportunity. Xiu should not be able to unreasonably penalise Tai where Xiu was in a position to, but did not, attempt to protect herself.
33Fourthly, Mareva orders are not meant to provide security for applicants. Such orders create significant limitations upon the use which a person can make of their property. Here, Tai has not long obtained title to the Carnegie property and she resides in it with her two children. Given the substantial mortgage she procured in order to obtain the property from Li, I consider it unlikely that she will do anything in the near future to sell the property or diminish its value. To that extent, the balance of convenience favours Tai. Also, it appears that Li has or at least had some assets of worth and it is questionable to assert that he lacks the capacity to meet a judgement (assuming he is the borrower).
34Finally, in circumstances where Xiu apparently lives in Shanghai and has not established that she owns unencumbered property or other assets in Australia which could underpin her undertaking as to damages, I am not satisfied that Xiu’s undertaking is of real value and substance.
Conclusion
35For the reasons set out, I propose to make orders as follows:
(a) the application by Xiu for a freezing order be dismissed.
(b) Xiu pay Tai’s costs of the application, such costs to be taxed on a standard basis in default of agreement.
36If either Xiu or Tai has any objection to the proposed orders, they should file written submissions by 4:00pm on 1 November 2021. The submissions are not to exceed four A4 pages, a minimum 12 point typeface, and 40mm margins on either side of the page. Unless I regard it as necessary or a party persuades me otherwise, I intend to determine the final orders and costs without a further hearing.
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