Zeng and Jing & Anor
[2020] FamCA 507
•25 June 2020
FAMILY COURT OF AUSTRALIA
| ZENG & JING AND ANOR | [2020] FamCA 507 |
| FAMILY LAW – PROPERTY – Interim – Where the husband seeks a litigation funding order against the wife and/or her mother – where the husband says he does not have access to sufficient resources to fund his litigation and asserts that the wife unilaterally transferred assets of the marriage to her mother – where the wife opposes the husband’s application and seeks orders that a property owned by the parties in China be sold or mortgaged to fund both parties’ litigation costs – where the wife and her mother deny the husband’s interest in the properties transferred to the wife’s mother - where all parties make allegations of inadequate disclosure against each other – where it is found that the wife, whose legal costs are being funded by her mother, and her mother are in a position of greater financial strength than the husband – where it is found that the husband is not in a position to fund his own litigation costs and has at least an arguable case for substantive relief which deserves to be heard at a final hearing – where the circumstances of this case justify the making of litigation funding order under s117(2) of the Family Law Act 1975. |
| Family Law Act 1975 (Cth) Evidence Act 1996 (Cth) |
| Aiden Shipping Co Ltd and Interbulk Ltd [1986] AC 965 Atkins & Hunt [2018] FamCA 14 Barro & Barro (1983) FLC 91-300 Bing & Bing [2007] FamCA 418 Burns Philp & Co Ltd v Bhagat [1993] 1 VR 203 Breen v Breen (1990) 65 ALJR 195 Forlan & Forlan [2016] FamCA 469 Gabel & Yardley (2008) FLC 93-386 Harris & Harris (1993) FLC 92-378 Hogan & Hogan (1986) FLC 91-704 In the Marriage of Collins (1985) FLC 91-603 In the Marriage of McAlpin (1993) FLC 92-421 Iphostrou & Iphostrou [2011] FamCA 20 Knight v F P Special Assets Ltd (1992) 174 CLR 178 Kyriakos & Kyriakos (2013) FLC 93-528 Moroni & Moroni [2014] FamCA 664 Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578 Peters & Giannopoulos [2018] FamCA 237 Re Z (No 4) (Fam C of A, Full Court, 6 March 1997, unreported) S v S : The Child Representative; Victoria Legal Aid : The Chief Commissioner of Police (1997) FLC 92-762 Salmon & Salmon [2019] FamCA 448 Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466 Zschokke v Zschokke (1996) FLC 92-693 | ||
| APPLICANT: | Mr Zeng | |
| RESPONDENT: | Ms Jing |
| SECOND RESPONDENT: | Ms Lao |
| FILE NUMBER: | MLC | 5795 | of | 2018 |
| DATE DELIVERED: | 25 June 2020 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | McEvoy J |
| HEARING DATES: | 9 August, 4 September and 25 November 2019 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Stoikovska SC |
| SOLICITOR FOR THE APPLICANT: | Kennedy Partners |
| COUNSEL FOR THE RESPONDENT: | Mr Salamanca |
| SOLICITOR FOR THE RESPONDENT: | Carew Counsel |
| COUNSEL FOR THE SECOND RESPONDENT: | Mr Matta |
| SOLICITOR FOR THE SECOND RESPONDENT: | Sayer Jones |
Orders
Pursuant to s 117(2) of the Family Law Act 1975 (“the Act”) the second respondent pay or cause to be paid to the husband’s solicitors the sum of $350,000 to be applied towards the husband’s legal costs and disbursements incurred or to be incurred as follows:
(a) within 14 days, the sum of $100,000;
(b)within 14 days of the making of orders listing the matter for trial, the sum of $75,000;
(c)within 30 days of the date listed for the commencement of the trial, the sum of $175,000.
The husband’s solicitors keep detailed records of all payments made by the second respondent pursuant to order 1 hereof and of all legal costs and disbursements paid with the funds provided by the second respondent.
Liberty be reserved to all parties to argue the ultimate disposition of the moneys referred to in paragraph 1 hereof at the final trial of all applications.
The husband’s Amended Application in a Case filed 8 July 2019 be otherwise dismissed.
The wife’s Amended Response to an Application in a Case dated 6 August 2019 be dismissed.
The second respondent’s Response to Application in a Case dated 22 July 2019 be dismissed.
The matter be listed for a case management hearing at 3.30 pm on 20 July 2020.
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 Zeng & Jing and Anor 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 MELBOURNE |
FILE NUMBER: MLC5795/2018
| MR ZENG |
Applicant
And
| MS JING |
Respondent
And
| MS LAO |
Second Respondent
REASONS FOR JUDGMENT
Introduction
Before the Court is an Amended Application in a Case dated 8 July 2019, the remaining parts of which seek that the respondent wife and, or alternatively, the second respondent (the wife’s mother), pay to the applicant husband’s solicitors the sum of $350,000 to be applied towards the husband’s outstanding and anticipated legal costs and disbursements. In the alternative the husband seeks a dollar for dollar order against the wife, to be paid by her or the second respondent. The husband also seeks his costs of the application.
The husband initially sought other relief as well, but his application in respect of these other matters is no longer pressed, and it is unnecessary that they be dealt with further.
The wife and the second respondent resist the husband’s application for litigation funding, or that a dollar for dollar order be made. The wife seeks orders, instead, that a property jointly owned by the husband and the wife in China be sold or otherwise mortgaged for the purpose of raising the sum of $600,000 to be divided equally between them to fund the proceedings. The second respondent seeks orders dismissing the husband’s application, together with her costs of responding to it.
For the reasons which follow there will be orders pursuant to s 117(2) of the Family Law Act 1975 (“the Act”) that the second respondent pay or cause to be paid to the husband’s solicitors the sum of $350,000 to be applied towards the husband’s legal costs and disbursements on a staged basis between now and the trial of the proceedings. Liberty will be reserved to all parties to argue the ultimate disposition of these moneys at the final trial of all applications. All other extant applications for interim orders will be dismissed.
Background
The husband and the wife were both born in China. They commenced a relationship in 2006 and were married in China in 2010. They separated in about late May 2018. The husband is aged 36 years, and the wife is aged 37 years. The husband is an Australian permanent resident, and the wife is an Australian citizen. The husband describes himself as a manager, but it is apparent that his principal occupation has been in property development. The wife has completed tertiary studies in Australia as a professional, but she says that she is unable to work in gainful employment because of the effects of a brain injury arising from a car accident in 2009.
There are two children of the relationship – a girl aged 6 years who lives with the husband’s parents in China and who has non-high functioning autism, and a boy aged 4 years who lives with the wife in Australia.
At the time of the marriage the husband was self-employed in China where he says he owned and operated a retail business. After the husband came to Australia in 2009 he completed post-graduate studies and conducted business as a property developer. The wife says that she worked in the property development business managing its day to day operations, and that she was responsible for managing the day to day expenditure.
The financial aspects of this proceeding are integrally concerned with the property development business conducted by the parties. In very broad terms, the husband asserts that many of the assets associated with the business and the parties’ personal assets belonged to him and the wife through a series of entities and trusts controlled by the wife. The wife’s position, and that of the second respondent, is that most of these assets actually belonged to the second respondent, and that their acquisition was funded by the wife’s parents. The wife and the second respondent deny that the wife and her husband have any beneficial interest in most of the assets which the husband contends are properly to be regarded as assets of the marriage.
The husband’s complaint is that at around the time the parties separated the wife and the second respondent, without his knowledge or consent, made alterations to the wife’s control and ownership of most of the parties’ private corporate entities, the effect of which has been to transfer most of the assets of the marriage to the second respondent so as to endeavour to defeat the husband’s entitlement to an alteration of property interests under Part VIII of the Act. Accordingly he seeks final orders in the proceeding pursuant to s 106B of the Act setting aside various instruments pursuant to which assets of the marriage were transferred to the second respondent, and requiring that the wife and the second respondent do all things necessary to reinstate the wife’s role as a director or member of relevant corporate entities or as the beneficiary of certain trusts. He also seeks an alteration of property interests pursuant to s 79 of the Act.
History of the proceedings
The husband commenced the proceeding on 25 May 2018 in this Court by filing an Initiating Application. He filed an Amended Initiating Application on 4 June 2018, a Further Amended Initiating Application on 30 July 2018, and another Further Amended Initiating Application on 3 May 2019.
By her Amended Response to Initiating Application dated 23 May 2019, insofar as the property aspects of the proceeding are concerned, the wife seeks the dismissal of the husband’s application, as well as declaratory relief pursuant to s 78 of the Act to the effect that she has no legal or equitable interest in the various properties and businesses held in the corporate entities and trusts now controlled by the second respondent. In addition, the wife seeks that one property of the marriage which remains owned by the husband and the wife in China (“the City E property”) be sold and the proceeds be apportioned between the wife (as to 70 per cent) and the husband (as to 30 per cent). She also seeks that the parties otherwise retain all other assets in their respective possession, power and/or control.
By the second respondent’s Amended Response to Initiating Application dated 28 May 2019, the second respondent seeks declarations pursuant to s 78 of the Act confirming her interest in two properties on the basis of the existence of certain trusts, and that the husband repay some $284,650 to her received by way of part property settlement and in respect of funds said to have been taken by the husband from bank accounts in the name of the second respondent.
The proceeding first came before the Court (Cronin J) in the judicial duty list on 6 June 2018. As well as interim parenting orders, the husband sought orders pursuant to s 106 of the Act for, at least on an interim basis, the various transfers made by the wife to be reversed and for the wife to resume her position as a director of the relevant entities. Relief in these terms was resisted by the wife and the second respondent. At that time there was a dearth of evidence in relation to precisely what had occurred, and the nature of the parties’ respective interests in the relevant assets was (as it remains) contentious.
His Honour did not consider that the Court was in a position to make orders pursuant to s 106B of the Act, or orders for partial property settlement. Instead he accepted that injunctive orders should be made as an interim measure, and the wife and the second respondent were restrained from disposing of or encumbering the fixed assets and entities which they controlled and altering the existing corporate and/or trust structures which were then in place: [2018] FamCA 423.
On 31 July 2018 consent orders were made by Johns J which, amongst other things, varied these injunctions slightly, and provided for the husband to receive a sum of $144,000 by way of partial property settlement from the wife’s share of a property in G Street, Suburb B which was to be sold, this amount to be deducted from the husband’s ultimate entitlement (if any) or reimbursed to the second respondent if so ordered.
On 8 July 2019 the husband filed the Amended Application in a Case which is presently before the Court. On 6 August 2019 the wife filed an Amended Response, the second respondent having filed her response on 22 July 2019. The parties’ respective interim applications were listed for hearing on 9 August 2019. Although certain matters, principally relating to disclosure of documents, were able to be resolved that day, this listing proved insufficient and the applications were adjourned part heard until 4 September 2019.
After the hearing on 4 September 2019 the wife filed a document entitled “Addendum to Wife’s Summary of Argument for the Interim Hearings on 9 August 2019 and 4 September 2019”, to which the husband responded by way of a further set of submissions dated 26 September 2019. At the request of the parties the matter returned to Court on 25 November 2019, the wife having filed further contentions on 19 November 2019 for the purposes of that hearing. On 9 December 2019 a further set of submissions in response to the husband’s submissions filed 26 September 2019 was filed by the wife, and on 10 December 2019 the second respondent also filed further written submissions.
At the conclusion of the hearing on 25 November 2019 the matter was adjourned to a date to be fixed for judgment on the question of what if any orders should be made in relation to litigation funding, and with the agreement of the parties the December 2019 trial date was vacated.
Material relied on
The husband relies, relevantly, on:
a)his affidavits filed 7 June 2019, 8 July 2019, 6 August 2019 and 23 September 2019;
b)the affidavit of Susanne Khung filed 7 June 2019;
c)summary of argument dated 31 July 2019;
d)submissions of 26 September 2019 in response to the further submissions made on behalf of the wife at the hearings on 9 August 2019 and 4 September 2019 and in the addendum filed on 16 September 2019.
The wife relies, relevantly, on:
a)her affidavits filed 21 June 2019 and 5 August 2019;
b)the husband’s affidavit filed 25 May 2018;
c)summary of argument dated 6 August 2019;
d)affidavit of Susan Scott-Mackenzie sworn 21 June 2019;
e)affidavit of Ms PP affirmed 28 August 2019;
f)addendum to wife’s summary of argument dated 16 September 2019;
g)statement of contentions for the interim hearing on 19 November 2019, dated 19 November 2019;
h)submissions filed 9 December 2019 in response to the husband’s submissions filed 26 September 2019.
The second respondent relies on:
a)her affidavits filed 22 July 2019 and 25 October 2019;
b)written submissions filed 7 August 2019;
c)written submissions filed 10 December 2019.
The evidence
Affidavit of the husband affirmed 7 June 2019
The husband’s 7 June 2019 affidavit was filed in support of his application for litigation funding and the other relief then pressed by him. It deposes, relevantly, to separation in May 2018, the parties’ business interests, his position in relation to the legal and equitable interests of the marriage, what he describes as the unilateral transfer of assets of the marriage from the wife to the second respondent, and his application for litigation funding.
Insofar as the parties’ business interests are concerned, the husband identifies the following businesses, properties and entities which he asserts are or have been assets of the marriage:
a)The J Street, Suburb K retail business, purchased for $2.25 million in April 2011, owned via D Pty Ltd as trustee for Jing’s Family Trust, and operated through F2 Pty Ltd. The husband deposes that the wife was, originally, the sole appointor of Jing’s Family Trust and that they were both, originally, directors of F2 Pty Ltd. The husband contends that the acquisition and construction of J Street was financed by borrowing from a family friend in China and by bank finance secured over real properties registered in the name of the second respondent. He refers to further remunerative activities he undertook involving other retail businesses, the discharge of the J Street loan from the family friend in China with $1.8 million received from the second respondent and her husband, and the discharge of the bank loan in relation to J Street. The husband’s evidence is that the J Street retail business was sold in December 2015 for $300,000 and the freehold in April 2016 for $4.2 million.
b)The L Street, Suburb M retail business and associated freehold land which the husband deposes that he and the wife purchased in August 2013 for $2.5 million. He contends that the freehold was owned via the entity E Pty Ltd as trustee for the E Family Trust, and that the retail business at L Street was owned and operated via F Pty Ltd. The husband deposes that as with J Street he overhauled and rebranded the business, and in May 2016 it was sold for $700,000.
c)The N Street, O Town retail business and freehold which the husband contends was purchased in 2014 for $1.3 million and rebuilt. This business now operates as a depot via F Pty Ltd. The husband deposes that the freehold of the O Town property was sold in 2017 for $1.85 million.
d)The P Street, Suburb K retail business which he deposes that he and the wife purchased in November 2015 for $330,000 via F2 Pty Ltd, together with a 30 year lease for the use of the freehold. The husband contends that he made substantial improvements at the cost of about $1.3 million. He says that the business was sold in November 2017 for $330,000, and that the new owners took a 15 year sub-lease pursuant to which F2 Pty Ltd receives rent of $250,000 (plus GST) per annum. He says that he secured a separate operator who took a sub-lease pursuant to which F2 Pty Ltd receives rent of $24,000 per annum, and that he also secured another separate operator who took a sub-lease pursuant to which F2 Pty Ltd receives rent of about $18,000 per annum. The husband deposes that the rent for the use of the freehold under the head lease is $70,000 per annum.
e)The R Street, Suburb S property, purchased in 2017 for $2 million (plus GST and stamp duty) via the entity T Pty Ltd as trustee for the S Family Trust. The husband deposes that on 30 November 2017 the wife made the second respondent the sole director of T Pty Ltd without his knowledge and consent, however the wife continues to own all issued shares in T Pty Ltd and remains the sole appointor of the S Family Trust. The husband contends that he spent $150,000 improving the site and obtaining a permit for the construction of a community service business, and that he sourced a tenant and obtained bank finance for $3.9 million for construction costs. The husband says that the project was earmarked for completion at the end of 2018, and has an anticipated completion value of approximately $8 million. He contends that the project was ready to proceed at the time of separation, but he has had no involvement in it since separation and does not know what steps the wife has taken to complete it.
f)The U Street, Suburb V retail business and freehold, which the husband deposes he signed a contract to purchase for $5.8 million in 2017, via F Pty Ltd. The husband contends that at the time of separation he had begun the process of obtaining permits to subdivide the property, sourced tenants, and secured premium leases. He says that just before the parties’ separation he had received a $7.7 million offer for Suburb V.
g)The W Street, Suburb Z freehold which the husband deposes he signed contracts to purchase for $2.12 million in May 2018 to develop the property into a community service business, but which contract did not complete because of the breakdown of the marriage. The husband says that a portion of the deposit money ($106,000) was refunded to him and that he has paid living expenses and some of his legal costs in this proceeding from that amount.
h)The AA Street, BB Town property purchased in early 2018 for $1.3 million with other investors and in which, via D Pty Ltd, the husband and the wife have a substantial interest as unit holders in the BB Unit Trust. The trustee of the BB Unit Trust is BB Pty Ltd, a company of which the wife is the sole director.
i)The G Street, Suburb B property, which was purchased by the husband and the wife in late 2016 for $3.9 million plus stamp duty. The husband deposes that the wife owns a 20 per cent interest in the property, while the second respondent owns an 80 per cent interest. The husband contends that the second respondent was given an 80 per cent interest in return for the $1.8 million which she and her husband had provided for the discharge of the loan from the family friend in China on the J Street property. The husband contends that in October 2017 the wife and the second respondent signed a contract to sell the Suburb B property for $5.65 million to a company as trustee for the CC Family Trust, settlement of which was due to occur in November 2018.
The husband’s position is that the assets of the marriage include:
a)D Pty Ltd, as trustee for Jing’s Family Trust, which owns:
i)the former matrimonial home at DD Street, Suburb B;
ii)an 80 per cent interest in F2 Pty Ltd (which owns the leasehold of the P Street retail business as well as bank accounts);
iii)a 78 per cent interest in the BB Unit Trust, which owns the freehold of AA Street, BB Town (the wife being sole director of BB Pty Ltd, the trustee of the unit trust); and
iv)various cash accounts, including an offset account at the GG Bank, which is linked to the line of credit facility secured over the DD Street, Suburb B property. The husband says that at the time of separation there was about $500,000 available for redraw in that offset account;
b)E Pty Ltd, as trustee for the E Family Trust, which owns:
i)the freehold of L Street, Suburb M;
ii)cash accounts, including the account that receives the rental income of over $300,000 per annum from the L Street, Suburb M business; and
iii)a van which was originally the subject of the present application but possession of which the husband no longer presses;
c)F Pty Ltd, which owns:
i)the retail business at N Street, O Town;
ii)the freehold at U Street, Suburb V (or the contract to purchase it);
iii)cash accounts of indeterminate value;
iv)a motor vehicle 1; and
v)a motor vehicle 2;
d)T Pty Ltd as trustee for the S Family Trust which owns the freehold of the Suburb S property, the wife being the appointer of the S Family Trust;
e)a contract to purchase freehold at 1 EE Street, Suburb FF, 3 EE Street, Suburb FF and 5 EE Street Suburb FF ("EE Street, Suburb FF"), the wife having signed a contract to purchase EE Street, Suburb FF on 2 November 2017 for $4.1 million in circumstances where the parties had intended to undertake a commercial development on the site;
f)the wife's 20 per cent interest in G Street, Suburb B;
g)the City E property, now worth about $900,000, which the husband says his parents bought for him upon his engagement to the wife and in which his parents and the older child of the relationship now live;
h)various other assets which the wife has in China, the extent of which was, at the time of the husband’s 7 June 2019 affidavit, unclear to the husband;
i)bank accounts in the wife’s personal name and monies held on her behalf by the second respondent, including:
i)a bank account at the GG Bank in the joint names of the wife and the second respondent which at January 2018 held some $321,853;
ii)a bank account at the ANZ Bank into which the wife transferred $40,000 from an account in the name of F Pty Ltd on 7 June 2018, only to withdraw $40,015 from that account on 13 June 2018 and transfer it into another undisclosed account;
j)superannuation benefits possibly held by the wife, the amount of which is unknown to the husband.
The husband deposes that to the best of his knowledge the only liabilities of the parties are:
a)$1.3 million borrowed from the GG Bank and secured over L Street, Suburb M;
b)about $2.6 million borrowed from the GG Bank and secured over G Street, Suburb B;
c)a line of credit or overdraft facility secured over DD Street, Suburb B of $1 million, drawn down to about $500,000 at the time of separation.
It is the husband’s evidence that in early May 2018, as the marital relations between him and the wife worsened, the wife told him that she had an “agreement” with her parents and that all the assets that the two of them had acquired together (presumably that means in the period since 2009) were “an investment for [her] parents”. The husband contends that in response, on 25 May 2018, he filed his Initiating Application in this Court seeking final orders for alteration of property interests and urgent interim injunctive relief for the preservation of property.
The husband deposes that in the period from 28 May 2018 various unsuccessful attempts were made to serve his Initiating Application on the wife and the second respondent, and that on 28 May 2018 the wife and the second respondent made alterations to the control and ownership of some of the parties’ private corporate entities as follows:
a)the wife resigned as the sole director of D Pty Ltd, appointing the second respondent as the sole director and transferred all her shares in D Pty Ltd to the second respondent such that the second respondent now owns all issued shares in D Pty Ltd;
b)the wife resigned as the sole director of E Pty Ltd and appointed the second respondent as sole director, transferring all the issued shares in E Pty Ltd (which she owned) to the second respondent;
c)the wife resigned as the sole director of F Pty Ltd and appointed the second respondent as the sole director, transferring all the issued shares in F Pty Ltd (which she owned) to the second respondent. The husband deposes that he has been informed by the wife that she transferred her shares in F Pty Ltd, which holds substantial assets, to the second respondent for no consideration.
It is also the husband’s evidence that on 18 September 2018 he discovered that the wife had, unilaterally, retired as the appointor of Jing’s Family Trust.
The husband says that he will seek orders at final hearing setting aside these various transactions which he contends were made to defeat his application for property settlement commenced in this Court on 25 May 2018.
It is in these circumstances that the husband makes his application for litigation funding. As has been mentioned, he seeks the sum of $350,000 from the wife and/or the second respondent for the payment of his legal costs and disbursements, and so as to prosecute his claims. He deposes as to his presently billed and unbilled legal costs, and to his advice that the likely costs he will incur up to and including the final hearing in the proceeding is in the order of $350,000.
The husband deposes that during the marriage the wife assumed sole responsibility for managing their finances, and that she alone organised the corporate structures of their various businesses and property development projects without any reference to him. The husband says that he trusted her as a qualified accountant, and that all their property was held in discretionary family trusts or private companies that the wife and the second respondent controlled.
The husband says that as a result of the unilateral transactions that occurred on 28 May 2018, the only assets now owned by the wife or controlled by her are the following:
a)her 20 per cent interest in the G Street, Suburb B property;
b)T Pty Ltd as trustee for the S Family Trust, which owns the freehold of the Suburb S property;
c)accounts held in her personal name at the ANZ Bank and the GG Bank;
d)whatever assets she owns in China.
The husband notes that the wife alleges that she holds her interest in G Street and the S Family Trust on trust for the second respondent.
The husband also deposes as to his limited access to funds since separation, his present employment status and involvement with HH Pty Ltd, including as a “Buyer’s Guarantor” for that company (although he says this did not involve the pledging of assets as security for the underlying contract). He contends that he continues to support financially the older child of the relationship who lives with his parents in China, and that he does not have the capacity to pay his outstanding and anticipated legal costs and disbursements without a litigation funding order. The husband contends that both the wife and the second respondent have the capacity to pay their legal costs using the income derived from assets accumulated during the marriage and improved by him, and that he is insufficiently fluent in English to present legal argument in support of his position. The husband also submits that due to the complicated nature of the wife’s divestment of the assets of the marriage, which he says is ongoing, it will be necessary for him to engage a forensic accountant to trace the wife’s movement of money between various accounts.
In this latter respect the husband deposes to various examples of the movement of substantial sums from business accounts as follows:
a)a total of $237,000 withdrawn from F Pty Ltd’s ANZ Bank account on 7 May 2108;
b)a further sum of $40,000 withdrawn from F Pty Ltd’s account on 14 May 2018;
c)a further sum of $85,000 withdrawn from F Pty Ltd’s account on 25 May 2018;
d)a further sum of $45,000 withdrawn from F Pty Ltd’s account on 4 June 2018 and transferred to an account unknown to the husband;
e)a further sum of $40,000 withdrawn from F Pty Ltd’s account on 7 June 2018 and transferred to an account unknown to the husband;
f)further sums of $30,000 and $50,000 withdrawn from F Pty Ltd’s account on 13 and 15 June 2018 respectively, and transferred to an account unknown to the husband;
g)a further sum of $100,000 withdrawn from F Pty Ltd’s account on 3 July 2018.
It may be observed that the total of these withdrawals is some $627,000.
The husband also deposes to various aspects of the sale of G Street, Suburb B, in relation to which there was the order by consent on 31 July 2018 that he be paid $144,000 from the wife’s 20 per cent share of the net proceeds of sale upon completion. For present purposes it is unnecessary to traverse further the husband’s complaints in relation to the sale of this property, save to note that at least by the final hearing day of this interim matter in November 2019 he had not received his $144,000 from the sale of G Street. What has happened in the intervening period has not been made clear.
Affidavit of Susanne Khung affirmed 7 June 2019
Ms Khung is the husband’s solicitor. Her affidavit of 7 June 2019 deposes as to the husband’s then indebtedness to her firm in the sum of $86,472, the complexity of the proceeding, the need for full disclosure from the respondents which had not been forthcoming, and the need for the husband to engage a forensic accountant to trace the movement of money across various bank accounts. Her assessment is that the husband’s legal costs and disbursements, including the engagement of single expert valuers and counsel’s fees, to run the matter to trial will be in the order of $350,000. She says that her firm is not prepared to act for the husband on a deferred payment basis.
Affidavit of the wife sworn 21 June 2019
The wife responds to the husband’s 7 June 2019 affidavit in her affidavit of 21 June 2019. The wife deposes that her parents originally provided her and the husband with funds which enabled the creation of a trading business in China which assisted in the purchase of the City E property. She concedes that the husband’s parents also contributed to the purchase of the City E property. The wife deposes also that after a serious car accident she suffered in 2009, her parents provided significant financial support to the parties.
It is also the wife’s evidence that “in or about 2010” her family had “a family meeting” at which her parents, the husband, and herself discussed future investment opportunities in Australia. She says that at that meeting her father defined the separate roles of each of them, which included that he would fund all investments in Australia and be responsible for all business decision making, that her mother would control the family fund which would own all the assets, and that the husband and she would be responsible for the day to day operations of the business, with her managing the day to day expenditure. This, she asserts, was “agreed” by her parents, the husband, and her.
The wife paints a significantly different picture to the husband of the development of their various assets and businesses in Australia. She says that it was originally her father who decided to invest in retail businesses, and that her father asked the husband and her to source retail businesses in which to invest. She says that her mother set up Jing’s Family Trust in September 2010 as the fund’s investment vehicle, with the wife as the appointor because she spoke English and was always present in Australia. It is the wife’s evidence that since 2011 her parents have funded several business investments via Jing’s Family Trust and other family trusts, and that she and the husband were placed in charge of the management of each business investment in accordance with the 2010 “verbal agreement”.
The wife proffers an alternate explanation for the acquisition of the retail business and freehold in J Street, Suburb K and the corporate organisation of that business which she contends was sold in October 2015, with the freehold being sold in November 2016. Notably, however, the wife says that she and the husband developed the business.
The wife also advances a different version of events in relation to the acquisition of the L Street, Suburb M property, albeit that she accepts that her parents retain the freehold “via the [E Family] Trust” and that they receive rental of $330,000 per annum.
The wife also advances a different version of events in relation to the parties’ acquisition of the N Street, O Town retail business and freehold. She says that the business has been on the market for sale for over 12 months.
The wife says that the P Street, Suburb K retail business was purchased with her father’s approval on behalf of Jing’s Family Trust. She says that she and the husband managed the improvement of the property and she accepts that rental is received from three businesses. Notably she does not say how much rental is received.
Insofar as the R Street, Suburb S property is concerned, the wife deposes that this property was actually purchased by her parents. She outlines a significantly different account of the structure and organisation of that development, minimising the role played by the husband and noting that the planning permit sought for the opening of a community service business has not been obtained.
The wife also advances a different account of the circumstances surrounding the acquisition of the U Street, Suburb V property, and the present status of that development. She says that her parents intend to subdivide it, and that settlement has not proceeded to date.
Insofar as the EE Street, Suburb FF property is concerned, the wife says that she signed the contract to purchase the property for $4.1 million and funded the deposit with monies received from the deposit on the sale of the G Street, Suburb B property. However she says that she was unable to complete the purchase and forfeited the deposit of $410,000.
The wife has a different position also in relation to the W Street, Suburb Z property. Amongst other things she says that the deposit for the purchase of that property was paid by the husband from the D Pty Ltd redraw facility in May 2018 when the contract was signed and remains outstanding to that entity. However she agrees that the husband has retained half of the deposit monies in the amount of $106,000 for his personal use.
The wife also has a different account of the circumstances in which the AA Street, BB Town property was acquired.
The wife also contends that on 25 November 2015 another agreement, this time a written one, was drawn up by her father and discussed and agreed between her and the husband, and her parents. A version purporting to be an English translation of the agreement is set out in her affidavit. The wife says that her “understanding of the Agreement at the time was that her parents were to be the owners and investors in all investment projects in Australia and that all investments were funded with my parents’ monies”. She says that her mother was to manage the investment fund and that she and the husband were to be the managers [of the businesses], reporting to her father in relation to all business decisions.
Now is not the occasion for an analysis of the terms of this purported agreement, however it is noteworthy that it appears to be implicit in the agreement that:
a)the husband and the wife have “run” the Australian business of the parties to the agreement for 5 years;
b)the “business” (a term which appears not to be defined) “is now in reasonably good shape”;
c)the husband and the wife have some sort of liability to pay the second respondent and her husband “AUD$3 million after tax”;
d)once this has been done the husband and the wife on the one hand, and the second respondent and her husband on the other, “shall split the net income all Australian operations and rents with 50% to each party[,] income from the [O Town business to be] agreed separately”; and
e)if the development of the O Town business proceeds, the income from it shall not be distributed and only be invested in fixed assets, with the net proceeds being distributed with 50 per cent to each party.
The wife also alleges what she says was intended to be the consideration that she and the husband received for their “work” in the various businesses and developments which the alleged 2015 agreement accepts were in “good shape”: living “rent free” in the DD Street, Suburb B property and enjoying a “very generous lifestyle” provided by her parents, which included access to prestige motor vehicles and undefined amounts of “cash” for “general entertainment”.
Insofar as the G Street, Suburb B property is concerned, the wife proffers an explanation of how she came to be registered on title as a tenant in common with her mother, and she contends that it was agreed that when that property came to be sold, she would deposit her share of the proceeds into Jing’s Family Trust. She refers to another agreement in relation to these matters, and sets out a purported Chinese translation of that agreement dated 10 February 2017. The wife also provides an explanation of the circumstances in which she says the purchaser has been unable to complete the contract of sale leading to the forfeiting of the deposit which the wife used to pay the deposit on the EE Street, Suburb FF properties. The wife also proffers an explanation of the circumstances in which the purchaser of the G Street property demolished the property.
Insofar as the family trusts are concerned, the wife purports to explain the circumstances in which Jing’s Family Trust, the E Family Trust, the S Family Trust, the BB Trust and the JJ Family Trust were created, their organisation, and their beneficiaries and unit holders. She also advances an explanation of the organisation, both current and historic, of D Pty Ltd, E Pty Ltd, T Pty Ltd, F Pty Ltd, F2 Pty Ltd, BB Pty Ltd, and JJ Pty Ltd.
By way of explanation for the changes in the corporate structure of these entities to which the husband has pointed, the wife contends that the changes were made because the husband had become “argumentative with [the second respondent] and me” and because her parents became “unhappy” with the husband because he had failed to discuss the O Town and Suburb Z investments with them before signing the contracts. The wife deposes that it was by reason of these concerns that the second respondent told her that “she wished to take back control of all the business entities and trusts in accordance with the Agreement of 25 November 2015”. The wife says that the second respondent instructed her accountant to change the appointor of the Jing’s Family Trust from the wife’s name to her name on 24 April 2018. Similarly, she says that on 3 May 2018 the second respondent told her that she wished to change the directors and the shareholding in D Pty Ltd, E Pty Ltd and F Pty Ltd – the entities that hold and controlled the various businesses that she and the husband were operating.
The wife deposes that she became aware on 20 May 2018 that the husband had engaged family law solicitors and that after becoming aware that a person had attended their home with documents, her mother told her that she had instructed her accountants on 28 May 2018 to lodge documents changing the various corporate structures “because she needed to protect herself and my father no matter what happened between the husband and myself”. She says that she was only the appointor and the trustee of Jing’s Family Trust, and a director and shareholder in various corporate trustees and companies, on the advice of her parents’ accountant.
Although now is not the occasion to make any findings as to the parties’ interests in the underlying assets, I pause to observe that the wife does not, in her lengthy explanation of the parties’ business interests, deny the substance of the husband’s evidence of his substantial role in the development of a business and property portfolio apparently worth some millions of dollars. Her case, it seems, is that the husband knew all along that he worked for her father, and presumably that his compensation for his role in the development of this substantial portfolio, whatever that role was, was to live rent free in the DD Street, Suburb B property and enjoy a “very generous lifestyle,” together with whatever he stood to gain from the alleged 2015 agreement. It would seem that the wife does not accept that the husband created any significant equity for the marriage, still less for himself, in the portfolio which was developed over at least an 8 year period between about 2009 and 2018.
Insofar as the husband’s application for litigation funding is concerned, the wife points out that the husband has had available to him, one way or another, the sum of approximately $185,000 since the parties separated (now more than two years ago). She says that he has skills which he has deposed to in his affidavit in the acquisition and development of businesses and real estate which would enable him to obtain gainful employment. She points to the husband’s involvement in the affairs of HH Pty Ltd as suggesting that he must have funds or assets behind him, as well as his $10,000 gross salary per month. She points also to the companies of which he is a director, and his alleged exporting business. The wife says that all of this, together with an unexplained withdrawal of $18,500 from an ANZ Bank account and the husband’s likely receipt of $144,000 from her 20 per cent ownership of the G Street, Suburb B property when it settles, means that the husband has not demonstrated an adequate need for a litigation funding order of the kind he seeks.
Insofar as her own position is concerned, the wife deposes that the only real estate asset currently available to her and the husband is the jointly owned City E property. Everything else is in the various corporate entities which are now owned by the second respondent. She says that although the City E property is valued at $900,000, she believes its true value is in excess of $1.1 million. The wife says that the interest she has in the G Street, Suburb B property she holds on behalf of her mother, and that this is also true of the shares she owns in T Pty Ltd.
The wife deposes that she has incurred substantial costs in the proceedings so far, and that these will total approximately $300,000 by the time of final hearing. She says that to date her legal fees have been advanced by her mother. The wife maintains that she has agreed to pay her mother back in full at the conclusion of the proceedings, and that she believes she has sufficient equity in the City E property to enable her to do this. She deposes that she has no independent capacity to pay her legal costs and disbursements, that she cannot obtain gainful employment, and that she cannot obtain a bank loan.
It is the wife’s position that the City E property should be sold to provide the husband and her with sufficient monies to fund their legal costs and disbursements until the conclusion of these proceedings. She says that the City E property is unencumbered, and that if it is sold it will more than likely realise sufficient funds to enable $300,000 to be paid to both the husband and her to fund their costs and disbursements of the proceeding, with the balance to be held in trust for distribution on the final determination of the matter.
Affidavit of Susan Scott-Mackenzie sworn 21 June 2019
The wife also relies on an affidavit of Susan Scott-Mackenzie, her solicitor in this proceeding. Ms Scott-Mackenzie deposes to the substantial costs being incurred by the wife, and the fact that they are being paid by the second respondent, and that there is an oral agreement between the wife and the second respondent that these costs will be repaid. Ms Scott-Mackenzie estimates the wife’s costs of the proceeding in the amount of approximately $300,000.
Husband’s affidavit affirmed 8 July 2019
The husband responds to the wife’s 21 June 2019 affidavit with an affidavit of 8 July 2019. The husband opposes the sale of the City E property to fund the parties’ costs of the litigation on the basis that the older child of the relationship and his parents are presently living in the property. He says that the property was bought for him by his parents on his engagement to the wife, and that she did not make any direct financial contribution to it. He deposes that if the property is sold, his parents and the child will have nowhere to live, and that this will be extremely disruptive for the child whose autism requires special care. He says that the sale of this property may have a devastating and perhaps irreversible impact on the child.
The husband also takes issue with various other aspects of the wife’s affidavit which, insofar as they are presently relevant, include denials by him that:
a)the wife’s father “funded the initial capital injection into the [Chinese] business and referred his contacts and friends for the purposes of the business”;
b)the City E property was purchased by the wife and him, reiterating that it was purchased for him by his parents following his engagement to the wife and transferred into joint names in 2014 when the wife’s parents advanced the $1.8 million to the husband and the wife which they used to discharge the loan they had taken out from the family friend to acquire their first business – the J Street property;
c)the wife’s parents provided “significant financial support for us” after the wife’s car accident and that the second respondent gave the wife “cash amounts”;
d)the deposit on the signing of the contract to purchase the Suburb Z property “remains outstanding” to D Pty Ltd, together with a contention that during the marriage the income the parties received from their various businesses and their personal and business expenses were intermingled;
e)he has received the part property settlement of $144,000 envisaged by the consent order of 31 July 2018;
f)the “family meeting” referred to by the wife in 2010 took place;
g)the wife’s father ever asked him to “source [retail businesses] to invest in” and that the wife was the appointor and trustee of the Jing’s Family Trust because her parents did not speak English and were not in Australia, together with a contention that the wife’s father is no more than a healthcare worker who was never enthusiastic about investing in retail businesses and advised the husband against doing so;
h)since 2011 the wife’s parents have funded several business investments via the Jing Family Trust and other family trusts set up for investment purposes and that the husband and the wife’s work managing the business investments was in accordance with any “verbal agreement” entered into in 2010;
i)a Chinese investor “invested” $1.8 million into the acquisition of the J Street property and the establishment of the retail business, together with a contention that the family friend who provided funding did no more than loan $1.8 million to the husband and the wife and that they paid interest on the loan at a commercial rate;
j)the wife owned her shares in E Pty Ltd and F Pty Ltd “on behalf of [her] mother”, together with a contention that the freehold of the L Street retail business was owned by E Pty Ltd as trustee for the E Family Trust, not the wife’s parents;
k)there were ever any plans between the husband and the wife to sell the O Town retail business, together with a contention that the wife and the second respondent have placed the business on the market for sale without the husband’s consent;
l)the husband sought and obtained his father-in-law’s “approval” when the parties acquired the P Street, Suburb K property and that the husband ever sought the approval or consent of his parents-in-law before acquiring any of the properties or business which he acquired, together with a contention that he was never under any obligation to seek his father-in-law’s consent before acquiring property;
m)the freehold in R Street, Suburb S was purchased with “funding provided by [the wife’s parents]”, together with a contention that the husband and the wife paid the deposit for R Street from the business accounts (likely held in the name of D Pty Ltd) and settled by the contract by selling the freehold of the retail business at O Town;
n)the wife’s parents “approved” the construction of a community service business at R Street and that the husband had “limited involvement in the project”, together with a contention that the wife’s parents did not have any involvement in the acquisition and development plans for R Street;
o)the husband and the wife purchased the Suburb V property “upon the recommendation of [the wife’s] parents’ business broker” together with a contention that it was the husband who sourced, researched, and acquired the Suburb V property through a Mr KK (referred to as “Mr KK” in paragraph 31 of the wife’s affidavit);
p)the husband and the wife were ever relying on the wife’s parents to complete the sale of the Suburb Z property;
q)the other unit holders in the BB Unit Trust contributed to the purchase price of the BB Town property “in accordance with their holdings”;
r)the wife’s father told the husband that he “did not have authority to proceed” with the acquisition of the freehold and retail business at O Town, that his father-in-law told him that the purchase was “against the original agreement that [the wife’s] father have the final decision in all investments”, and that there was ever such an agreement in place;
s)there was ever any verbal agreement as alleged by the wife and that he ever read or signed the alleged written agreement in November 2015;
t)he was remunerated for his “work” by receiving rent free accommodation at DD Street, that the wife’s parents purchased DD Street, and that “the mortgage of approximately $1 million has always been paid by [the wife’s parents]”, together with a contention that the DD Street property is encumbered by a mortgage in favour of the GG Bank which secures a loan facility in the name of D Pty Ltd as trustee for Jing’s Family Trust, which overdraft has a limit of $1 million and was used to pay the parties’ personal expenses as well as those relating to their business and property developments;
u)the wife’s parents provided the husband with a “very generous lifestyle”, that the wife’s parents paid the outgoings associated with the motor vehicles, and that the vehicles were owned by corporate entities belonging to the wife’s mother, together with contentions that the husband purchased the van which he used for work, and that the vehicle running costs were paid from the business accounts;
v)the wife’s parents “allowed” the husband and the wife access to the overdraft facility secured over the DD Street property, together with a contention that at all times during the marriage the husband and the wife regarded and treated D Pty Ltd and the other corporate entities as their personal corporate entities;
w)the wife’s parents paid for “all [the parties’] living expenses”, and that the husband incurred “gaming costs” (albeit that he concedes that he sometimes played online games);
x)the wife’s mother “purchased” the G Street property, together with contentions that the husband and the wife gave the second respondent an 80 per cent interest in the property by way of recompense for the $1.8 million they had advanced to the parties in 2014, that the parties had to obtain a loan from the GG Bank to complete the purchase contract as the contract to sell the J Street freehold had not yet settled, that loan repayments on the property were met from business accounts, that the husband was not involved in the loan application as the parties’ finances were always handled exclusively by the wife, and that the bank loan was paid down after the sale of the J Street property was settled;
y)there was any agreement to pay the wife’s 20 per cent share of the proceeds of sale of the G Street property into the Jing’s Family Trust, together with a contention that the husband was not aware of the agreement allegedly signed by the wife and the second respondent on 10 February 2017;
z)he has a exporting business, together with a contention that he has not pursued any business through the LL Pty Ltd;
aa)the wife owns her interest in the G Street property or the S Trust on trust for her mother.
It is also relevant to record that in his 8 July 2019 affidavit the husband contends that:
a)insofar as the mortgage of the DD Street property is concerned, when he left the marriage the amount outstanding was $446,819, and if it has now been drawn down to $1 million, as the wife contends, this has been done unilaterally by her and/or the second respondent following separation, which will have dissipated or eroded the equity in the DD Street property, pointing in this regard to a withdrawal of $190,000 from the mortgage on 7 May 2018;
b)insofar as the contract to sell the G Street property is concerned, his consent to the extension of the settlement date of the contract of sale was never sought by the wife or the second respondent, notwithstanding his interest in the proceeds of sale;
c)on the subject of the wife’s allegation that part of the reason for the change in corporate structure of the various entities in mid 2018 was that his “behaviour at home changed”, this was a function of his knowledge that the marriage was deteriorating and his discovery that the wife had made her mother the director of T Pty Ltd, the trustee of the S Trust (which owns the R Street, Suburb S property) and his suspicion that the wife was transferring the parties’ assets to her parents;
d)he did not enter into contracts to purchase properties or businesses with the agreement or authorisation of the wife’s parents, and his entry into contracts for the O Town and Suburb Z properties were no different;
e)insofar as the wife says that the second respondent instructed her accountant to change the appointor of Jing’s Family Trust from the wife to the second respondent, the husband says that he has sought copies of these instructions and ancillary documents but they have not been produced and that documents subpoenaed from the accountant suggest little, if any, contact with the second respondent during the marriage;
f)in relation to his involvement in HH Pty Ltd, this company is owned by a friend of his and he holds no shares in the company and has not pledged any assets as security for the purchase by that company of seven retail businesses from MM Pty Ltd;
g)in relation to NN Pty Ltd and LL Pty Ltd, neither of these entities have conducted any business.
The husband also proffers explanations in his 8 July 2019 affidavit for certain borrowings from friends and his inability to secure a bank loan in the amount of about $450,000 which would be necessary for him to discharge his existing legal debt and meet future legal costs. Insofar as the wife contends that the only real estate currently available to herself and the husband is the City E property, the husband denies this, contending that the only reason most of the assets of the marriage are now in the control and ownership of the second respondent is because of the various transactions engineered by the wife at the time of, or after, separation. He denies that the sale of the City E property will provide the funds to meet the parties’ legal costs of the proceeding, contending that the parties will not be able to transfer more than $30,000 each out of China.
Affidavit of the second respondent affirmed 22 July 2019
The second respondent has sworn an affidavit in response to the husband’s affidavits of 7 June 2019 and 8 July 2019 and the wife’s affidavit of 21 June 2019. Insofar as it is relevant for present purposes, the second respondent provides a general endorsement of the matters deposed to by the wife in her affidavit, including the two “agreements”, and disputes the husband’s explanation of the development of the relevant businesses and properties. The second respondent asserts that she has transferred not less than $5,738,000 from China to Australia since January 2009, approximately $4,168,000 of this amount since what the wife has described as the 2015 family meeting. The second respondent’s central contention is that the husband and the wife have not contributed their own money towards the business investments or real estate acquisitions in Australia. She says that the purchases of business investments have been made using funds provided by her or funds borrowed from banks and secured against property owned by her. She disputes that the husband and the wife have entitlements to any of the relevant assets whatsoever.
The second respondent explains her position in relation to the G Street property, contending that she and the wife “have always understood that [the wife] does not have a beneficial interest in [G Street]” and disputing that the husband and the wife “gifted” her the majority interest in G Street as a way of repaying her for discharging the loan for the purchase of the J Street property. She also deposes to the use of the $410,000 deposit by the husband and the wife to purchase the Suburb FF property, which she says was done without consulting her or her husband, and to the subsequent forfeiting of the deposit.
Insofar as the husband’s claim for litigation funding is concerned, the second respondent confirms that she is meeting, and will continue to meet the wife’s legal fees of this proceeding, but she contends that she will require the wife to repay her. She says that the wife has agreed to repay her from the wife’s share of the City E property. The second respondent also contends that she is struggling to meet her own legal fees, and that she cannot borrow further funds at this stage due to the orders restraining her from dealing with the business assets.
The second respondent also disputes aspects of the husband’s evidence concerning the City E property, and his family’s own property holdings in China. She disputes the suggestion that funds from the sale of the City E property cannot easily be repatriated to Australia, and claims the husband has made about the financing of the care of the older child in China.
On the subject of the various business investments, purchases and sales which are the subject of this proceeding, and the current assets which she holds, the second respondent provides her own response to the claims which the husband has made about the development of the portfolio of investments. It is unnecessary for present purposes to set out the detail of the second respondent’s responses, although a number of matters should be noted.
The order will be framed in such a way as to provide as much protection as possible to the second respondent were she to be entirely successful in her claim. The funds will be required to be advanced in tranches, as the litigation progresses to trial, there will be a requirement that the funds be administered solely by the husband’s solicitors and applied only to meet the expenses referred to in the order; and detailed records will be required to be maintained to permit review by the Court, if necessary, at the time of its determination of the underlying proceeding and its final determination of the issue of costs. To the extent necessary liberty will be reserved to all three parties to argue the ultimate disposition of the moneys advanced by way of litigation funding at the final trial of all applications.
Orders in these terms will be made in the form set out at the commencement of these reasons for judgment. The matter will be listed for a case management hearing at the next available opportunity for the making of new trial orders.
As to the question of costs, the husband has sought his costs of the application and the second respondent has sought her costs of resisting it. In all the circumstances, which include that certain parts of the husband’s application were ultimately not pursued, the question of the costs of the husband’s application will be reserved for determination at the conclusion of the trial.
I certify that the preceding two hundred and fifteen (215) paragraphs are a true copy of the reasons for judgment of the Honourable Justice McEvoy delivered on 25 June 2020.
Associate:
Date: 25 June 2020
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