Yang and Lin - [2015] FCCA 3040

FEDERAL CIRCUIT COURT OF AUSTRALIA

YANG & LIN

[2015] FCCA 3040

Catchwords:
FAMILY LAW – Competing interlocutory applications – assets in Australia and China – forum issue.

Legislation:

Family Law Act 1975, s.79

Federal Circuit Court Rules 2001, r.6.19

Federal Circuit Court Act 1999, ss.39(4), 39(2)(b)

Voth and Minildra Flour Mills Pty Ltd (1990) 171 CLR 538
Gilmore and Gilmore (1993) FLC 92-353
Pagliotti & Hartner [2009] FamCAFC 18
Henry v Henry (1986) 185 CLR 571
In the Marriage of Gilmore (1993) 110 FLR 311
Cashiel and Carr (2005) FLC 93-232

Applicant:

MR YANG

Respondent:

MS LIN

File Number:

MLC 7205 of 2014

Judgment of:

Judge Harland

Hearing date:

9 October 2015

Date of Last Submission:

23 October 2015

Delivered at:

Melbourne

Delivered on:

13 November 2015

REPRESENTATION

Counsel for the Applicant:

Ms Stoikovska

Solicitors for the Applicant:

Oakfair Lawyers

Counsel for the Respondent:

Ms Kildea

Solicitors for the Respondent:

Rose Chai Lawyers & Consultants

ORDERS

The application in a case filed by applicant wife on 31 July 2015 is dismissed.
The response to an application in a case filed by the respondent husband on 9 September 2015 is dismissed.
Pursuant to s.39(2)(b) of the Federal Circuit Court of Australia Act 1999 (Cth) proceedings are transferred to the Melbourne Registry of the Family Court of Australia.

IT IS NOTED that publication of this judgment under the pseudonym Yang & Lin is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLC 7205 of 2014

MR YANG

Applicant

And

MS LIN

Respondent

REASONS FOR JUDGMENT

The parties have competing interim applications before the Court. The parties are Chinese. The husband lives in China. The parties have significant assets in China.
It is significant to note that the husband invoked this court’s jurisdiction when he filed the initiating application. The husband says he had to bring urgent proceedings to injunct the wife from dealing with the proceeds of the parties’ (omitted) business.
The parties broadly agree about what assets and liabilities they have although valuations have not been carried out as yet so the size of the pool is not established. The wife annexes a balance sheet to her case outline. The majority of the parties’ assets are located in China. The Australian assets are easier to deal with as they consist of real property subject to a mortgage, motor vehicles and bank accounts. The assets in China consist of real estate and two companies operating an (omitted) business. There is no value attributed to the companies apart from the funds which have been frozen by the Chinese court.
The wife filed an application in a case seeking an order that she receive 50% of the funds being held in China pursuant to a Chinese court order. Those funds are the proceeds of sale from real property owned by the parties’ company (business omitted). Those funds were frozen by order of a Chinese court when the wife sought orders that the company be wound up on 15 September 2015. The court dismissed the wife’s application. The wife has lodged an appeal. She did not disclose this in her affidavit filed on the 30 September 2015 despite instructing her Chinese lawyers file the appeal on 23 September 2015. The wife should have disclosed this in her affidavit. It is not known when that appeal will be heard.
The husband filed a response to the application in a case. The primary order that he was seeking is that all outstanding applications with respect to the parties’ matrimonial assets in China be dismissed.
Neither party has particularised the property orders that they seek. It is an all too common practice in the Melbourne Registry to simply state that a party be excused from particularising his or her claim until both parties make full and frank discovery. This practice should be avoided, except for in very urgent cases. Whilst the husband sought urgent orders initially, his application was filed on 15 August 2014 and over a year later the court and the wife do not know what final orders he is seeking. The wife’s response while articulating some final orders also seeks the same indulgence. Her response was filed on 26 September 2014. Parties are entitled to know the case they are required to meet. It is also important for the court to know the nature of the case and the orders sought as well as the Registrar conducting a conciliation conference. In most cases, parties have a general idea of the assets and liabilities. It is common for parties to amend the orders they seek as the proceedings progress and therefore there is no reason why parties cannot particularise the orders sought in the initiating documents.
The wife filed several affidavits in support of her application in a case.
The wife seeks that the whole of the parties’ matrimonial interests in Australia and China be dealt with by the Federal Circuit Court of Australia.
The husband argued that Australia is an inappropriate forum to deal with the Chinese assets and seeks that the Federal Circuit Court only deal with the parties’ Australian interests.
It is of interest to note that whilst maintaining this argument both parties have initiated proceedings in competing jurisdictions. The husband’s case is that he had no choice but to initiate urgent proceedings in Australia to prevent the wife from dealing with the proceeds of sale of a (omitted) business the parties owned in (omitted). The wife argues that the proceedings she initiated in China, unrelated to the matrimonial dispute were simply seeking to protect her rights as shareholder in the company under Chinese company law.
It is important to note that neither party has initiated family law proceedings in China.
There is a dispute between the parties as to whether or not the (omitted) company is still operating the business of manufacturing and maintaining (omitted). The husband claims that it is but that the wife’s court proceedings have greatly affected its ability to operate and that the company has had to borrow funds from its daily operations because of the proceeds of sale being frozen.
The husband says that he wishes to avoid the cost of litigation in separate jurisdictions over the same matter. It is unclear how what he is seeking to do would avoid this given that his application is to deal with the Australian assets in the Federal Circuit Court and the Chinese assets in an unnamed Chinese court. I accept the wife’s submission that the husband’s application is unclear but it appears that what he is really arguing is that his primary position is that this Court should only consider the parties’ Australian assets. If the Court does not accept that position then this Court is the inappropriate forum to deal with the parties’ property.
One of the more bizarre aspects of this case is the husband’s insistence that the wife be psychiatrically assessed. The parties agreed to consent orders in April 2015 that both parties be psychiatrically assessed. The wife has complied with that order. The husband has not. The husband wants the wife to be assessed by a different psychiatrist. There is nothing amiss on the face of the report that she has provided, in circumstances where the husband has not complied with an order which is an unusual one to make in property cases. I expressed the view at the hearing that it was incumbent upon the husband to comply with that order. At the hearing, the husband was no longer seeking orders for psychiatric assessment. However, given that the wife has had to go through the process and given husband’s insistence, it is appropriate that he undergo assessment as it is noted for example, that the husband’s affidavit filed on 3 September 2015 devotes some 24 paragraphs to that issue.
The husband also seeks an order that the wife return company documents he says an employee Ms J took from the company. Ms J is not a party to the proceedings. There is no evidence that the wife was involved in the removal of documents.
There was a dispute between the parties as to the amount of financial support the wife has received both before and after separation.
The wife says she has no income and is unable to obtain employment because she does not speak English well. The work she has done in Australia previously has been in a business that the parties owned.
This is linked to the wife’s application to receive half of the (omitted) company’s funds which are currently frozen. There are already injunctions in place restraining the parties from dealing with their properties. There is no satisfactory evidence that would enable me to entertain the wife’s application about those funds.
There is also a dispute between the parties as to whether or not the (omitted) company can continue to lawfully operate the (omitted) factory. The wife says that the (omitted) company only manufactures the (omitted) and a different company maintains the (omitted). The affidavit filed on 30 September 2015 says that her application to Shanghai Pudong Court was dismissed on 15 September 2015. The judgment referred to the wife’s ability to resolve the issue of the shareholdings in the company through property division in a “divorce lawsuit”. The wife says she is only a nominal shareholder of the company and that she does not have the power to affect the decisions of the company. The judgment found that the company was operating normally and that its operation period will expire on 18 October 2019.
The parties are in dispute as to whether or not the Chinese Court will enforce Australian Court orders. The evidence on this issue is scant and contradictory. I am not aware of any international agreement or convention that provides for recognition of family law property orders between China and Australia. It is a common problem in family law cases with international dimensions.
There are ongoing issues with respect to the production of documents.
The wife filed an affidavit one day before the interim hearing from a Chinese lawyer. Again it is unfortunately common practice in the Melbourne Registry for practitioners to file material very close to the court date. Given the late service of this affidavit which contravenes r.6.19 of the Federal Circuit Court Rules 2001 (Cth) it was necessary to give leave to the respondent husband to file an affidavit replying to the issue raised in that affidavit which included the enforceability of Australian orders in China. This has meant it is necessary to reserve this decision.
The affidavits from the wife’s Chinese lawyer is brief and simply states that a Chinese Court “apply the law of evidence that judgement/orders made by Australian court in relation to property matters in the parties divorce suit.” It is unclear what the sentence actually means and whether or not the court would take into account an order made in Australia as part of the evidence, or would recognise those orders and enforce them.
The husband filed an affidavit from his Chinese lawyer. Unsurprisingly, he says that the Chinese courts will not enforce orders of an Australian court but will consider evidence of it.
Thus far in the proceedings whilst there have been several interim applications and affidavits filed, a clear picture of the nature and scope of the dispute is yet to emerge. The lawyer confirms that the wife is entitled to bring divorce proceedings in China, as is the husband. There is no specialist family law court in China.
What is missing from the affidavits by the Chinese lawyers is any explanation as to what principles apply in Chinese family law.
The principles applicable to inappropriate forum disputes are well known. It is clear from decisions such as Voth and Manildra Flour Mills Pty Ltd (1990) 171 CLR 538 and Gilmore and Gilmore (1993) FLC 92-353, that the test to be applied is whether or not the local court is a clearly inappropriate forum such as to continue proceedings would be vexatious or oppressive. In determining these issues, the Court considers the balance of convenience and the right of the party who invoked the jurisdiction to insist on the jurisdiction being exercised. In this case somewhat unusually it is the husband who invoked the jurisdiction initially and who is now saying that the jurisdiction should not be exercised. Perhaps the most important point in these types of cases is that there are competing applications in different courts about the same issues. Both courts have jurisdiction, the question to be determined is which court should exercise that jurisdiction. In this case there are no family law proceedings on foot in China and the court has no information as to how the Chinese court would deal with such an application including how it would deal with property in Australia. The Court also has no information as to how long it takes for a family law case to be completed in China.
The husband says parties conducted most of their marriage in China. They both speak the language and are familiar with the legal system there, and indeed both have lawyers in China. In this Court, both need the assistance of interpreters. Whilst this is true, it is all the more perplexing as to why proper evidence about these issues is not in place before the Court. It was made very clear when the matter was last heard, that that the Court was concerned about the prospect of there being two sets of family law proceedings on foot.
In this case the Court cannot find that these proceedings are ‘oppressive in the sense of seriously and unfairly burdensome…’ as the Full Court in Henry v Henry (1986) 185 CLR 571 referred to in circumstances where the husband invoked the jurisdiction and there being no other family law proceedings on foot.
The husband relied on the case of Pagliotti & Hartner [2009] FamCAFC 18. The circumstances of that case were very different to this one. In that case, there had been proceedings in Italy which dealt with spouse maintenance. Those proceedings did not address real estate the parties owned in Australia.
It was clear in that case that the Italian court could not determine the parties’ interest in the Australian real estate. Also, the Italian proceedings were finalised so there were no competing proceedings on foot. Italian law does not provide for transfer of property in specie except by consent.
The Full Court found that the Court did not deal with the real property. It was common ground that the parties could vary the maintenance orders in the Italian Court taking into account the outcome of the Australian property proceedings.
The husband relies on this case in support of his argument that the proceedings should effectively be split with the Australian Court determining the parties’ entitlements to the Australian properties and the Chinese courts could determine the division of the Chinese assets. This ignores the following factors:
a)the Italian court determined the parties’ judicial separation and maintenance entitlements. It did not address the parties’ property entitlements;
b)the Italian proceedings had completed;
c)arguably an application for maintenance is a different cause of action to a property proceeding.
It is difficult to see how this Court could properly determine the property entitlements of the parties without reference to and consideration of the parties’ overseas assets. This is because of the requirements under s.79 of the Act. The Full Court In the Marriage of Gilmore (1993) 110 FLR 311 confirms the correctness of this approach. In that case the competing forums were Australia and New Zealand. The Full Court observed that when s.79 of the Family Law Act1975 is invoked it includes all of the property of the parties. This is in contrast to the New Zealand legislation which provided that a New Zealand court may decline to deal with movable property located outside of New Zealand when neither party is present or domiciled in New Zealand. The Full Court also observed that difficulties with enforcement may also be a significant factor in determining the forum dispute.
In this case where the majority of the assets are in China. It simply would not be possible to be satisfied that the outcome is just and equitable without having proper evidence as to the nature and value of the assets in China. The assets in Australia are much easier to address. It may well be that the parties would be better to conduct their property proceedings in China in the circumstances, but it is somewhat premature given there is little information about Chinese family law, the length of time it would take to determine the proceedings there and the costs. These are all relevant factors in forum disputes.
Cashiel and Carr (2005) FLC 93-232 is an example of a case in which there were potentially two sets of proceedings with respect to property. In that case the parties had real estate in Australia and Hong Kong. The husband also had overseas superannuation interests. There were competing stay applications with respect to proceedings in both jurisdictions. Neither of those applications were successful. The connections with both countries were finely balanced.
The other difficult aspect of the matter is the wife’s application for the release of half of the funds frozen by the court in China. There are real practical difficulties about that application. There is no evidence before this court that the Chinese Court will take any notice of an order of this Court, particularly in circumstances where the wife sought those funds to be frozen in proceedings she initiated in China. The funds remain frozen pending her appeal. Much was said by the husband’s counsel from the bar table about the fact that these were company funds and that the company would need those funds to operate. Much of what he says is common sense but the husband’s material is sorely lacking in setting this out.
The principle of comity between courts is well-established. The wife has asked a Chinese court to freeze funds in China. She now asks this Court to make an order interfering with that. In my view it would be improper to embark on such a course even if it was thought that such an order would be enforceable.
In the circumstances, I will dismiss the application in a case and the orders sought in the response to the application in case.
In considering the latest material, I hold concerns about whether or not the matter will be able to be contained to 4 days given the fact that both parties require interpreters and given the international aspects of the matter. Given these factors, the matter would be better determined by the Family Court. I am mindful that the Family Court is a Superior Court of record and that in the protocol between the two courts it has been acknowledged that the Family Court is better placed to deal with cases that have international dimensions.
I suspect that there will be further interim applications between these parties. I note that the parties are due to undertake private mediation in November 2015 in an attempt to resolve the financial issues in dispute.
In my view neither party has properly considered the practicalities and implications of the orders they seek nor how the hearing will be most efficiently managed.
In light of these concerns, having considered the relevant factors set out in s.39(4) of the Federal Circuit Court Act 1999 (Cth) I am also going to exercise power pursuant to s.39(2)(b) to transfer the proceedings to the Family Court.

I certify that the preceding forty-three (43) paragraphs are a true copy of the reasons for judgment of Judge Harland

Date: 13 November 2015