Zan and Zaro
[2019] FamCA 143
•15 March 2019
FAMILY COURT OF AUSTRALIA
| ZAN & ZARO | [2019] FamCA 143 |
| FAMILY LAW – INJUNCTIONS – where the husband seeks to set aside orders made ex parte in his absence – where the Court discharges the injunctions made against the husband, where the wife is to continue to have sole use and occupation of the former matrimonial home and sole and exclusive use of a motor vehicle. |
| Family Law Act 1975 (Cth) |
| Zaro & Zan [2019] FamCA 4 Seiling & Seiling (1979) FLC 90-627 Walter Rau Neusser Oel Und Fett AG v Cross Pacific Trading Ltd[2005] FCA 955 Auricchio & Auricchio and Ors (No. 2) [2014] FamCA 240 |
| APPLICANT: | Ms Zan |
| RESPONDENT: | Mr Zaro |
| FILE NUMBER: | BRC | 2137 | of | 2018 |
| DATE DELIVERED: | 15 March 2019 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Baumann J |
| HEARING DATE: | 11 February 2019 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr B Dodd |
| SOLICITOR FOR THE APPLICANT: | Michael Lynch Family Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Graeme Richardson SC and Mr P Hackett |
| SOLICITOR FOR THE RESPONDENT: | Hirst & Co |
Orders
That upon the Undertaking of the husband filed 11 February 2019:
That Orders 6, 7 and 10 made 8 March 2018 are discharged.
That the words “notwithstanding the provisions of Orders 6 and 7 above” are removed from Order 8 with the intent that Order 8 remain in full force and effect on an interim basis.
That Order 9 made 8 March 2018 remain in full force and effect on an interim basis.
That Orders 12 and 13 made 8 March 2018 having been put into effect, the wife shall have sole and exclusive use of Motor vehicle 1 and be responsible for costs of registration, insurance and maintenance pending further order.
That the costs of the interim hearing on 11 February 2019 are reserved.
That these proceedings be adjourned for Case Management Hearing at 9.30am on 10 April 2019 in the Family Court of Australia at Brisbane, when further orders and directions for discovery, valuations and case management will be considered, if not otherwise agreed.
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 Zan & Zaro 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 |
FILE NUMBER: BRC 2137 of 2018
| Ms Zan |
Applicant
And
| Mr Zaro |
Respondent
REASONS FOR JUDGMENT
Introduction
On 8 March 2018, the Court made ex parte orders in respect of parenting and financial issues arising from the wife’s, Ms Zan, Initiating Application filed 28 February 2018.
Subsequently, the husband Mr Zaro filed an Application in a Case on 30 April 2018 seeking that the wife be restrained from continuing proceedings in this Court. After hearing oral and written submissions, the Court delivered Reasons on 11 January 2019 (see Zaro & Zan [2019] FamCA 4) staying permanently the wife’s application for parenting orders but dismissing the husband’s application for a stay of the property proceedings commenced by the wife. On 4 February 2019 orders were made setting aside the parenting orders made on 8 March 2018.
As a result, the remaining interim orders still in operation are orders 6 to 13 as follows (the other orders being procedural in nature), namely:
“6. That the Respondent be restrained from drawing money, including money paid in advance, further encumbering or causing the drawing of money from the following bank accounts and/or loan facilities:
a. The Commonwealth Bank mortgage registered on the former matrimonial home at [B Street, Suburb C] being mortgage number …63;
b. The Commonwealth Bank account being the mortgage account registered on the property at [D Street, Suburb E] being mortgage number …73; and
c. The Commonwealth Bank account held in the Respondent’s sole name being [account number …31];
without the prior written consent of the Applicant or further Order of this Court, except to make payment of any existing loan or mortgage as and when they fall due.
7. That the Respondent be restrained from:
a. transferring or paying any funds exceeding $10,000 held by:
i. him or
ii. by any of the following corporate entities:
1. [F1 Pty Ltd] ACN …;
2. [F2 Pty Ltd] ACN …;
3. [F3 Pty Ltd] ACN …;
4. [F4 Pty Ltd] ACN …; and
5. any other entity incorporated in Australia in which the Respondent is a director and majority shareholder,
without the written consent of the Applicant, which shall not be unreasonably withheld; and
b. Transferring other property to the value of $10,000 owned:
i. by him; or
ii. any of the following corporate entities listed in Order 7(a)(ii) herein,
without the prior written consent of the Applicant, which shall not be unreasonably withheld.
c. Expending or disbursing funds from a loan or overdraft facility where:
i. the lending institution holds security in any form;
ii. over any assets owned by the Respondent or the corporate entities listed in Order 7(a)(ii) herein;
iii. whether or not the Respondent or those corporate entities is the beneficial owner of the assets or owns the assets as trustee of a trust,
without the prior written consent of the Applicant, which shall not be unreasonably withheld.
8. That notwithstanding the provisions of Orders 6 and 7 above, the Respondent pay:
a. all instalments pursuant to mortgages;
b. all rates and taxes and other outgoings;
on the real property owned by him, as they fall due.
9. That the Applicant wife have sole right to occupy the real property at [B Street, Suburb C] to the exclusion of the Respondent husband.
10. That notwithstanding the provisions of the Order 7 above, the Respondent is permitted to pay accounts for services rendered:
a. to the Respondent; or
b. any of the following corporate entities listed in Order 7(a)(ii) herein:
i. incurred in the ordinary course of carrying on;
ii. his personal affairs;
iii. in the ordinary course of carrying on business; or
where those debts or obligations to pay, arose from business obligations incurred prior to 9 February 2018.
11. That the Respondent shall provide evidence of all such payments and invoices to the Applicant’s solicitor forthwith upon paying the accounts referred to in Order 10 herein.
12. That the Respondent make available for the use of the Applicant, the motor vehicle two registered in the Respondent’s name or the name of a corporate entity in which he is the director and shareholder by providing the keys to the vehicle to the Applicant’s solicitors within fourteen (14) days of the date of service of the Orders on the Respondent, and at the same time providing the Applicant’s solicitors with instructions on how and when the Applicant can access/retrieve the vehicle.
13. That the Applicant is able, by this Order, to obtain from a locksmith, mechanic or other service provider, a key/key fob/remote that will enable the Applicant to operate [Motor vehicle 2]. This Order shall operate as sufficient authority for any locksmith, mechanic or other service provider to provide the Applicant with such key/key fob/remote without having to be concerned about the registered owner or seek the registered owner’s permission.
The husband, now submitting to the jurisdiction of this Court, filed on 29 January 2019 an amended Response seeking that orders 2 to 13 of the orders made 8 March 2018 be discharged and further that:
a)within seven days caveats filed by the wife over the D Street, Suburb E and B Street, Suburb C property be removed;
b)the husband have sole use and occupation of the B Street, Suburb C property; and
c)the wife make Motor vehicle 2 available for collection by the husband.
The wife opposes those interim orders sought.
On 11 February 2019, the Court heard oral and written submissions by Mr Richardson SC (with him Mr Hackett) for the husband and Mr Dodd for the wife. During the course of those submissions Senior Counsel for the husband offered an undertaking by the husband, which was subsequently filed and was in the following form:
“I hereby undertake to the Applicant Wife and the Court that pending the determination of the property settlement proceedings herein or being released from this undertaking by Order of this Court prior to that time, that I will not dispose of or further encumber my interest in each of the properties at [B Street, Suburb C] and [D Street, Suburb E], without providing 60 days’ notice to the Applicant wife, and for the avoidance of doubt I accept that ‘I will not…further encumber’ operates to prevent me from further drawing down upon the mortgages secured over the said properties.”
Issues for determination
With parenting orders no longer an issue for this Court, and noting that part of the final orders sought by the husband includes an application for damages for “the losses he has suffered from the orders made 8 March 2018 of this Court pursuant to the undertaking provided by the Applicant wife as to damages”, these Reasons deal with the continuance or discharge of a number of ex parte interim orders made by the Court on 8 March 2018. I deal with them sequentially.
No legitimate basis to apply ex parte
At paragraphs 27 to 29 of their submissions, Counsel for the husband contends there was no legitimate basis to apply ex parte and, if there was, then in any event the wife had at 8 March 2018 failed to disclose a number of material matters. The wife disputes this submission. I find that:
a)at the time the ex parte orders were made, which dealt with both parenting and financial issues, I was satisfied that it was in the interests of justice and a need to preserve the wife’s occupancy and claims to property and it required urgent intervention;
b)cognisant of the non-appearance by the husband, orders provided for:
i)the filing of an amended Initiating Application setting out final orders sought, within one business day;
ii)service being affected upon the husband by email; post (including to China); notice by SMS; and
iii)adjournment to 15 May 2018 but with liberty to re-list the matter to both the husband and the wife on “short notice” (order 20).
c)although I do not know when (or by which means) the husband was formally served, at least by 30 April 2018, the husband had retained representation and had filed his stay application. Pending the determination of the forum issue, the husband did not submit to the jurisdiction of the Court and did not contend that the ex parte orders should be discharged. No criticism of the husband’s approach is intended – however the effect of the delays, which were also contributed to by the delay in this Court delivering Reasons, has meant that the interim ex parte orders have now been in operation for over 12 months.
I accept that the husband was reluctant to return to Australia until the forum issue was decided as, with the child remaining in China, the wife’s applications could have sought to restrain the husband from again leaving Australia without the child being returned.
Nonetheless, I am satisfied that the wife had a legitimate basis for seeking urgent ex parte orders, at the time. At that time there was no evidence that the husband would return to Australia to provide evidence. In my view, the non-exhaustive principles enunciated by the Full Court in Seiling & Seiling (1979) FLC 90-627 were met and the discretion to make the orders properly enlivened.
Failure by wife to disclose all material matters
I was directed by Senior Counsel for the husband to the remarks of Allsop J (as he then was) in Walter Rau Neusser Oel Und Fett AG v Cross Pacific Trading Ltd[2005] FCA 955 at [38] where his Honour said:
“38. In an ex parte hearing, it is the obligation of the party seeking orders, through its representatives, to take the place of the absent party to the extent of bringing forward all the material facts which that party would have brought forward in defence of the application: Thomas A Edison Ltd v Bullock (1912) 15 CLR 678 at 681-82 per Isaacs J. That does not mean stating matters obliquely, including documents in voluminous exhibits, and merely not mis-stating the position. It means squarely putting the other side’s case, if there is one, by coherently expressing the known facts in a way such that the Court can understand, in the urgent context in which the application is brought forward, what might be said against the making of the orders. It is not for the Court to search out, organise and bring together what can be said on the respondents’ behalf. That is the responsibility of the applicant, through its representatives.”
The husband submits that the wife failed to disclose material matters that were relevant at the ex parte hearing by which the husband contends the Court was either misled or the wife did not fulfil the high duty required of an applicant applying on an ex parte basis – which alone requires the discharge of the orders.
At paragraph 34 of his submissions, the material facts said not to have been disclosed are set out and I deal with each assertion separately:
a)The wife failed to disclose a second property registered in her name in China. The sworn testimony in the wife’s Financial Statement filed 28 February 2018 (Item 36) and the disclosure in the updated Financial Statement filed 7 February 2019 reveals that:
i)the wife now says the property at City J has a value of $220,000 (not $150,000); and
ii)the wife discloses a 33.33% interest in a property at City J with a value of $406,666.
The wife admits at paragraphs 17.4 and 17.5 that she failed to disclose her interest in the family property and the reason. On an interim basis I am unable to accept or reject the excuse offered save to say, under Australian principles, the interest should have been disclosed.
b)The husband says paragraph 3 of his Affidavit filed 4 February 2019 explained further his assertion made at paragraphs 35 and 36 of his earlier Affidavit filed 29 January 2019, where he says he made payments:
i)to the wife of the equivalent of AUD$581,363 between 27 May 2014 and 27 February 2017;
ii)to the wife’s mother the equivalent of AUD$102,915 between 20 August 2015 and 28 November 2016; and
iii)to the wife’s father the equivalent of AUD$283,900 on 22 February 2017,
by acknowledging that “part of the money I paid to [Ms Zan] and her parents was transferred to them at my request to bank accounts under my control in Australia because there were limits as to the funds I could transfer myself from China.” The wife gives, at paragraph 17 of a reply Affidavit filed 7 February 2019, a comprehensive explanation for the use of funds received. Although the husband disputes the correctness of the wife’s evidence that about AUD$800,000 of the funds were transferred “back” he says it could have been about AUD$500,000. A number of these transactions will need to be properly traced – seemingly through bank accounts in China and Australia. These are trialable issues.
c)The husband’s concerns about how the funds were used, partly arises it appears from the failure of the wife in her initial Financial Statement to disclose all her bank accounts at Item 37 in China. In her updated Financial Statement she does so whilst claiming the accounts have nominal balances. It seems likely, the account numbers now having been disclosed (for three of the four accounts), that further disclosure of those bank statements will be required by the husband.
d)At paragraph 67 of her initial Affidavit filed 28 February 2018, the wife swore that:
“67. I have put $25,000 in my solicitor’s trust account, which I have taken out of my own savings account in China linked to my Chinese Visa Card. This is my only savings. My parents do not have a lot of money (my mother and father are retired in China), they are only able to lend me $1,000 to $2,000 if I am desperate. I do not have any access to other funds in any of [Mr Zaro’s] accounts. I seek an order that [Mr Zaro] pay me $1000 per week spouse maintenance.”
Exhibit 3, being a copy of the Trust Account Statement for the wife’s solicitors reveals that whilst $25,334.95 had been paid by the wife to her lawyers at the time of the swearing of that Affidavit, a further nearly $80,000 has been paid to the solicitors since then. Seeking to respond to the query raised by the husband as to the source of these funds, the wife in her reply Affidavit (at paragraph 12) says additional funds came from her mother, being funds remaining in her control from funds given to her by the husband (as referred to earlier in these Reasons). A further summary of how funds retained by the wife’s parents (from funds paid to them by the husband), is set out by the wife at paragraph 17.6.5 – totalling $153,180.
Again, the tracing of these funds and their use will be an important exercise to undertake, as clearly “add backs” or the taking into account of such funds needs to be considered.
e)Finally, the husband says the wife has failed to disclose in either of her Financial Statements “her valuable jewellery” which the husband asserts at paragraphs 28 and 29 included rings and watch purchased for AUD$57,000 during the relationship. The wife in reply said the items were stored in the husband’s house in City G, whereas the husband says the wife has them. Another trialable issue.
I am not satisfied, on an interim basis, and where the evidence cannot be properly tested by cross examination, that the areas of admitted non-disclosure by the wife had a material effect at the time the orders were made on 8 March 2018. What is clear however, as I revisit the injunctions and other orders made, this late disclosure is of some relevance to the re-exercise of the discretion now invited by the husband
Withdrawal of caveats
The claimed “caveatable interest” by the wife under State law in the properties at D Street, Suburb E and B Street, Suburb C is dubious. Whilst the wife asserts a claim under the Family Law Act 1975 (“the Act”) in all property and interests of the husband, the lodgement of a caveat must be sustained under the law of Queensland. The wife has not adduced evidence to support a “caveatable interest” and they should be removed. I will so order. As the Court has identified in Auricchio & Auricchio and Ors (No. 2) [2014] FamCA 240, the power to make such an order exists.
In any event, the undertaking offered by the husband, and accepted by the Court, provides suitable and adequate protection to the wife pending final determination of property proceedings.
Injunctions and freezing orders over husband’s use of personal and company funds
I choose to deal with the arguments in respect of the sole use and occupation of the former matrimonial home and Motor vehicle 2 separately.
I propose to discharge orders 6 and 7 made 8 March 2018 for the following reasons:
a)Even though a significant disagreement exists at this early stage, whether or not the wife has a claim likely to result in an alteration of property interests to her, some of the basis for an assertion made by Senior Counsel for the husband (see paragraph 26(b)) to support the relief sought by the husband that not only should the wife receive no adjustment but in fact should pay the husband $750,000, needs to be tested. I disagree that there “remains no serious question to try” as is submitted;
b)Mr Dodd, in his submissions at paragraphs 15 to 20 points to the inability to quantify the pool of assets, not assisted by the husband’s Financial Statement filed 7 February 2019 that does not even attempt to provide an estimate of his corporate interests in Australia and China (see Item 41), yet he claims (at Item 50), that he owes a personal loan of $5,852,156 to N Ltd, Such a precise estimate suggests reference to some documentary evidence, not yet disclosed to the Court;
c)There is broad agreement that the B Street, Suburb C property has a value of $3,200,000 and a secured mortgage of $963,302, with the D Street, Suburb E property having a value of $750,000 and a mortgage of $509,431; and
d)The husband, prior to the ex parte orders being made, discloses at Item 59, that he had sold “shares” on 27/28 February 2018 for E$3,000,000 and made loan repayments to Mr O of $12,824,485 between 11 February and 5 March 2018. The wife claims that no disclosure of these transactions has been made. During the course of these proceedings, full disclosure of the transactions will be required by the husband.
The principles to be applied for injunctive relief, pending determination of proceedings, are well settled and are set out in Senior Counsel’s submissions at paragraph 25.
I am satisfied on an interim basis that:
a)there is a serious question to be tired and that the claim by the husband that the wife’s current personal assets; monies received during the relationship and lack of direct financial contribution, completely outweighs the wife’s non-financial contributions as a mother and home keeper and her support of the husband’s business activities and use of her and her family to assist with currency movements, means that a claim is at least arguable;
b)It needs to be remembered that the mother continues to assert, now in a Chinese Court, that the best interests of the infant child of the relationship, requires her to be returned to the mother in Australia, where the mother and the child (as well as the father) have a visa to remain permanently. If the mother is successful with her action in China, that fact has a significance under s 75(2) of the Act;
c)However, the retention of the two real properties here in Australia provide an adequate base for any claim by the wife. The husband has extensive corporate interests in Australia, and his visa conditions require those interests to be developed and maintained. He was sponsored. He says he wishes to maintain his business interests in Australia.
I am not satisfied, on balance, that the injury which the wife might suffer by the lifting of the freezing orders outweighs the significant injury that could flow to the husband if the injunction remains. Of course, if during the course of this matter new information/evidence establishes the husband is effectively “closing up shop” in Australia and moving his corporate interests entirely back to China, further injunctive relief might need to be considered. On the evidence now before the Court, I am not satisfied that is a reasonable likelihood.
It is appropriate, notwithstanding the discharge of orders 6, 7 and 10, for a process to be in place to keep the wife informed of major business decisions affecting the Australian corporate interests at least. The current evidence is insufficient to enable the Court to style orders achieving this aim – by way of the husband meeting his obligations for continuing discovery. The Court is aware that the major activity of these companies in Australia appear to be property development rather than trading or manufacturing entities. I say more about orders for continued disclosure later in these Reasons.
Sole use and occupation of the former matrimonial home
The former matrimonial home at B Street, Suburb C has been occupied by the wife solely since the husband returned to China in or around 14 March 2018 (after a brief visit). The reasons for him living in China relate not only to his active business interests there, but because he seeks that the parties’ child X (now four years of age) live with him in China. He has other children in China as well.
The evidence to date, limited as it might be, suggests his application in the Chinese Court for parenting orders is based on his intention to live in China (whilst maintaining business interests in Australia). Not only does he say he is employed by P Ltd in City J, but the undertaking he offered to the Court states his residential address is in City J.
Whilst I accept that the fact the wife wishes to remain living in Australia and in the B Street, Suburb C home whilst the husband does not, is not determinative of the wife’s application for continuance of the sole use and occupation order, in my view it persuades me that at this time the wife should be permitted to remain in the home. The home, owned solely by the husband, was the former matrimonial home and whilst less valuable accommodation would surely be available, the fact remains that this is the property chosen by the parties during the relationship.
At paragraph 40 of Senior Counsel’s submissions the husband contends for an order that he have sole use and occupation of the home because:
a)the husband seeks to retain the home by way of final orders. The wife’s amended Initiating Application filed 8 March 2018 does not specify the assets sought to be retained, but by seeking a 30 per cent share of the pool, I infer she may seek to retain the home in her share;
b)the husband conducts his business in Australia from the home office. The wife, at paragraph 17.1 of her Affidavit filed 7 February 2019 acknowledged the husband had a home office from where he ran his business and that the office “contains a desktop computer, desk, 1 office chair. The business documents are kept in a second room in the house, adjacent to the office. That room has 1 table, 2 chairs, a filing cabinet with 2 draws and a printer”. The wife says that the husband can take these items “so that he can continue the business”;
c)the husband’s boat is described in the husband’s Financial Statement as Boat Q with an estimated value of $210,000. The wife claims no great interest in the boat, but the husband says she has refused to allow the husband or his agents to access the property to maintain the boat. I see no compelling reason why the husband should not be entitled to access the property to remove the boat to a different mooring for maintenance or use; and
d)the husband says the wife “has the financial resources to rent, if she genuinely wishes to remain in Australia, and to buy a motor vehicle”.
The wife’s updated Financial Statement discloses within the last month or so, she commenced employment in an office duties role, with R Pty Ltd on a gross wage of $475 per week. Although the evidence establishes she has accessed significant funds from her parents to pay legal expenses, I am not satisfied that the wife does have the income to pay rent and meet her living expenses.
No spouse maintenance claim is currently made or pressed by the wife, but her continued right to maintain her residence, in my view, is proper and causes minimal disruption to the husband if:
a)he can recover all his business records and business furniture; and
b)he can secure and move his boat.
I propose to maintain the intent of order 8 so as to require the husband to maintain mortgage instalments and rates and other outgoings on the real properties.
The final issue relates to the continuation of orders relating to the use of Motor vehicle 2. The motor vehicle is in the wife’s possession as a result of orders 12 and 13 made 8 March 2018. The wife deposes, at paragraph 3 of her recent Affidavit in reply, that she has maintained the use of the vehicle but was required to register the vehicle because, after being apprehended by Police on 11 July 2018, she was advised the registration had expired.
I can understand that the complex business activities of the husband could mean that maintaining registration of the motor vehicle was inadvertently overlooked by the husband’s company. However, the wife has caused, at her cost, for Motor vehicle 1 to be registered in her name to 10 July 2019. Registration does not, of course, amount to ownership however it was not appropriate for the wife to drive an unregistered motor vehicle.
In the circumstances that have transpired, I regard it as proper to make an interim order that the wife have sole use of the motor vehicle and that she maintain the vehicle, at her cost, and also the car’s registration and insurance.
Form of orders
Having earlier, by consent, discharged various interim parenting orders made on 8 March 2018, I pronounce today orders in the form set out at the commencement of these Reasons.
Before this matter returns to the Registrar’s pool for usual case management processes, I propose to list the matter for one further case management hearing before me, to allow the parties to discuss any further ancillary orders arising from the orders pronounced today (including how the husband can access the property to collect his business furniture and records and his boat), including specific discovery orders. I am aware that a Protection Order in favour of the wife has been made by the Magistrates Court, and any orders permitting the husband (or his agents) to access the property for the reasons above, must include reference to the order.
I certify that the preceding thirty-four (34) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Baumann delivered on 15 March 2019.
Associate:
Date: 15 March 2019
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