Zha & Wun (No 6)
[2024] FedCFamC1F 519
•5 August 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Zha & Wun (No 6) [2024] FedCFamC1F 519
File number(s): SYC4269 of 2020 Judgment of: SCHONELL J Date of judgment: 5 August 2024 Catchwords: FAMILY LAW – PRACTICE AND PROCEDURE – Injunction – Application by the wife to restrain the husband from leaving the jurisdiction until judgment is delivered – Where the wife contends that a $25 million surety should be paid into the Court – Where injunctions already in place for the quantum of the proposed surety – Timeframe of judgment for property proceedings uncertain – Application dismissed. Legislation: Family Law Act (Cth)
Federal Circuit and Family Court of Australia Act (Cth)
Cases cited: Fowles & Fowles (No. 2) [2019] FamCA 1027
Weir & Weir (1993) FLC 92-338
Xuen v Chao (Injunction in aide of enforcement) [2014] FamCA 798
Division: Division 1 First Instance Number of paragraphs: 45 Date of hearing: 30 July 2024 Place: Sydney Counsel for the Applicant: Mr Sirties SC and Mr Richardson Solicitor for the Applicant: Pickering Pendleton Counsel for the First Respondent: Mr Kelly KC Solicitor for the First Respondent: York Law Counsel for the Second, Third and Fourth Respondents: Ms Painter SC with Mr Turnbull (did not participate) Solicitor for the Second, Third and Fourth Respondents: David H Cohen Co. (did not participate) ORDERS
SYC4269 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS ZHA
Applicant
AND: MR WUN
First Respondent
MR A WUN
Second Respondent
MS YANG (and another named in the Schedule)
Third Respondent
ORDER MADE BY:
SCHONELL J
DATE OF ORDER:
5 AUGUST 2024
THE COURT ORDERS THAT:
1.The Application in a Proceeding filed 23 July 2024 is dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Zha & Wun has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
SCHONELL J:
The husband and wife are parties to litigation which first commenced before this Court in June 2020, and which culminated in a final hearing which concluded with submissions on 23 July 2024. On the last day of submissions, the wife’s counsel sought to move on an unfiled application to restrain the husband from leaving the jurisdiction until the delivery of judgment. No prior notice had been given of the application.
The Court indicated that it did not intend to deal with the application without notice to the husband and would give the husband an opportunity to respond to the wife’s application and affidavit. The husband proposed that he would remain in Australia until the return date of the application and the matter was then listed for hearing on 30 July 2024.
DOCUMENTS RELIED UPON
The wife relied upon:
(1)Amended Application in a Proceeding filed 23 July 2024;
(2)Affidavit of wife filed 23 July 2024;
(3)Case Outline document; and
(4)Tendered documents being Exhibit 1.
The husband relied upon:
(1)Response to an Application in a Proceeding filed 29 July 2024;
(2)Affidavit of husband filed 29 July 2024; and
(3)Case Outline document.
BACKGROUND
The husband and wife are involved in litigation before this Court in which judgment has been reserved. In addition to the husband and wife, the husband’s brother, the brother’s wife and a company are the second, third and fourth respondents.
The husband was born in China and is an Australian resident but not a citizen. The wife was also born in China is an Australian citizen but retains a Chinese passport.
The parties were married IN 2012 and separated in June 2018. The parties are at issue as to when the relationship commenced; the wife contending about July 2009, the husband contending August 2012. The relationship is either approximately nine years or approximately seven years. There are no children of the relationship.
The parties are at issue as to the identity of assets for division between them.
The wife contends that a company registered in the Country WW is the property of the husband; asserting that it is either the husband’s alter ego or alternatively the shares in the company are held by the husband’s brother on trust for the husband. The wife makes similar contentions in relation to a number of assets held by the husband’s brother in Australia and in other locations outside of Australia.
The wife contends that the pool of assets including the assets held by the husband’s brother is in excess of $674 million (Exhibit 1). The wife seeks orders for the payment to her of a sum of money in excess of $105 million together with the transfer to her of various funds in bank accounts and various parcels of real estate. The totality of her claim is said to be in excess of $130 million.
The husband submits that no adjustive order should be made in favour of the wife.
The husband denies the wife’s contention as to alter ego and or trust. He asserts in his financial statement that he has total net assets of approximately $36 million. Of that amount approximately $4.3 million is held in Australia (Paragraph 26 Wife’s written submission).
The Court is yet to make a determination as to the contentions advanced by each of the parties in relation to the identity and quantum of the pool of assets.
The wife seeks orders set out in her Amended Application in a Proceeding as follows:
1.That this Application in a Proceeding be filed in Court, heard instanter and on an ex parte basis.
2.That any times be abridged to enable the urgent hearing of this Application in a Proceeding.
3.That the rules of service be dispensed with for the purposes of this Application in a Proceeding.
RESTRAINTS
4.That pending further order, the First Respondent Husband be restrained by injunction from removing or causing or permitting the removal of himself from the Commonwealth of Australia.
5.That, to give effect to Order 4 herein, the Australian Federal Police are to place the name of the First Respondent Husband (i.e., [Mr Wun]) on the Family Law Watch List in force at all points of arrival and departure by air or sea in the Commonwealth of Australia and maintain the First Respondent's name on the Family Law Watchlist, pending further Order.
6.That by no later than 4 :00pm, 23 July 2024, the First Respondent Husband deliver up to the Sydney Registry of the Federal Circuit and Family Court of Australia (Division 1) all of his passports, to be held pending further Order.
7.That, to give effect to Order 5 herein, the Applicant Wife serve a sealed copy these Orders as soon as possible on the Australian Federal Police.
8.That this Application in a Proceeding and supporting Affidavit be sealed by the Court and the Applicant Wife otherwise serve a copy of those documents together with these sealed Orders on the First Respondent Husband as soon as possible.
9. That, in the alternative to Orders 4, 5. 6 and 7 herein:
9.1that, pending the Husband's payment in accordance with Order 9.4 and provision of a receipt in accordance with Order 9.5 herein. the First Respondent Husband be restrained by injunction from removing or causing or permitting the removal of himself from the Commonwealth of Australia;
9.2that, to give effect to Order 9.1 herein. the Australian Federal Police are to place the name of the First Respondent Husband (i.e., [Mr Wun]) on the Family Law Watch List in force at all points of arrival and departure by air or sea In the Commonwealth of Australia and maintain the First Respondent's name on the Family Law Watchlist;
9.3that, to give effect to Order 9.2 herein,- the Applicant Wife serve a sealed copy of these Orders as soon as possible on the Australian Federal Police;
9.4the First Respondent enter into a bond without surety. on the condition that the sum of AUD$25,000,000 by paid by the First Respondent Husband by no later than 4:00pm, 24 July 2024 to the Court, to be held pending further Order;
9.5that, once the First Respondent Husband has made payment in accordance with Order 9.4 herein, the First Respondent must provide a receipt of payment to the Applicant Wife as soon as possible:
9.6that, once the Applicant Wife has received the payment receipt from the First Respondent Husband in accordance with Order 9.5 herein:
9.6.1the restraint by injunction granted in accordance with Order 9.1 herein be lifted:
9.6.2that the Australian Federal Police remove the name of the First Respondent Husband from the Family Law Watch List in force at all points of arrival and departure by air or sea in the Commonwealth of Australia: and
9.6.3within 24 hours of the First Respondent Husband providing the receipt in accordance with Order 9.5 herein, to give effect to Order 9.6.2 herein. the Applicant Wife serve a copy of these Orders on the Australian Federal Police, seeking they remove the First Respondent Husband from the Family Law Watch List in accordance with Order 9.6.2.
Senior counsel for the wife advised that the wife’s primary position was that encapsulated in Order 9, namely that the husband be restrained from leaving Australia until such time as he pays $25 million into Court.
SUBMISSIONS ON BEHALF OF THE WIFE
The wife’s counsel in their written submissions summarises the relief sought by the wife in the following terms:
7.The wife’s application that the husband pay the sum of AUD$25,000,000 by way of bond is not a freezing order. Instead, it is sought to secure the wife’s final claim in these proceedings because the purpose of the bond with surety is to provide the husband with adequate incentive to comply (or disincentive to disobey) with any judgment delivered by this Court requiring the Husband to make a property adjustment in favour of the wife.
8.This is so because the jurisdiction of this Court can, relevantly, only be exercised by orders made in personam against the husband in relation to his overseas assets which are not the subject of reciprocal judgment protocols, as is the case with the PRC.
…
21.The wife’s final orders require the exercise of personal jurisdiction over the husband in order for her to be able to enforce any final orders made by the Court in these proceedings, including personal sanctions (wife’s Affidavit, 7), in relation to property in [China, Country AS, Country S, Country AY and/or Country WW]. If such jurisdiction is not available because the husband has left the jurisdiction, the wife is left to recover whatever she can from the Australian assets, which are paltry compared to the assets beyond her reach distributed in the aforesaid countries.
22.The husband’s absence from the jurisdiction which frustrate the jurisdiction of the Court. The wife will have expended millions in legal fees – increased significantly because of the husband and brother’s non-disclosure, and recover very little.
The wife submitted that the Court should have a legitimate concern that it’s jurisdiction will be frustrated because the husband will leave and not return. In support of such a submission the wife submits that the husband has limited ties to Australia in that he only has his brother and his brother’s family here, he has only a small proportion of his enormous wealth in this jurisdiction and despite having travelled to Australia on a number of occasions he has never sought citizenship.
The wife submits that the husband’s business interests are primarily located overseas, that he has engaged in a systematic failure to make a full and frank disclosure of his financial interests, has failed to comply with orders of this Court and a Chinese Court and has not declared to the Australian Tax Office the extent of his overseas assets. She also submits that there are issues with the husband’s credit and that he has not been honest with the Court. In that respect I note all of the matters referred to in her written submissions.
She submits that the husband poses “a high-flight risk” [46]. The wife, it must be accepted, somewhat backed away from that contention in her senior counsels’ oral submissions. The wife submits that the Court should view with a high degree of suspicion the husband’s assertions in his affidavit that he needs to return to China to conduct his business and that there is no prejudice to the husband by the granting of the orders the wife seeks.
The wife contends that in the event that the Court did not grant the relief she seeks, her final relief is jeopardised.
SUBMISSIONS ON BEHALF OF THE HUSBAND
Kings Counsel for the husband was highly critical of what he described as the ambush of the husband by the bringing of the application without notice, inferring that it was brought for a collateral purpose to put pressure on the husband, that it sought draconian orders preventing his freedom of movement and that it would be a misuse of the Court’s powers if the orders were made.
The husband’s Kings Counsel described the wife as a serial litigant and a description of him as flight risk was ironic where he sought only to return to his home.
The husband’s Kings Counsel submitted on his behalf that whilst his primary business interests are in China, he has frequently visited Australia and has engaged in the proceedings including being present in Australia for the last three months. At no time during the course of that three-month period was there any suggestion that he would depart the jurisdiction. Kings Counsel on behalf of the husband submitted that if it were the case that the husband was such an obvious flight risk, why is it that such application as sought by the wife had not been brought on an earlier occasion.
Kings Counsel submits that the wife has failed to identify a proper reason to detain the husband in Australia and that the wife has not articulated a proper reason as to why she seeks a surety of $25 million suggesting that it is a purely ambit claim. The husband’s counsel submits that the husband does not have $25 million to be able to pay to the wife and that either way the wife’s application is not compromised as there are injunctions currently in place that restrain the husband and his brother from dealing with assets held by the husband and the other respondents in Country AD and Country AS in excess of the surety. The submission proceeds upon the basis that in the event the wife is successful in her application that the assets of the respondents are really the assets of the husband or alternatively his alter ego, then the wife’s position as to at least $25 million is secured by the injunctions.
He submits that the wife has not discharged the heavy onus she carries to justify the orders she seeks which were described as “punitive, excessive and fundamentally unjust” [23].
The husband through his Kings counsel gave an undertaking that the husband would return to Australia for the purposes of delivery of judgment.
SUBMISSIONS OF THE WIFE IN REPLY
The wife’s counsel submitted that the husband’s undertaking to return was in effect worthless and that the time when the application was brought was the appropriate time and that it is improper to characterise it as an ambush.
APPLICABLE LAW
It is unquestionable that the Court has power pursuant to s 114(3) of the Family Law Act (Cth) and s 44 of the Federal Circuit and Family Court of Australia Act (Cth) to restrain a party by way of injunction from leaving the jurisdiction.
The onus rests throughout upon the applicant for such an order and that she must establish that she will, as opposed to may, be denied a remedy if the respondent is not restrained.
The issue is whether the court should, in the exercise of its discretion, make such an order recognizing that the restriction of a person’s freedom of movement is a very serious curtailment and if it to be imposed such an order “ought be for the bare minimum needed to achieve the relevant purpose” (see: Xuen v Chao (Injunction in aide of enforcement) [2014] FamCA 798 at [20]).
In Fowles & Fowles (No. 2) [2019] FamCA 1027, Bennett J respectfully encapsulated the relevant principles in the following terms:
13.…
•The relief is discretionary.
•By virtue of Australia’s execution in 1972 and ratification in 1980 of the International Covenant on Civil and Political Rights, a person’s freedom of movement is “certainly a relevant consideration when making an order pursuant to s 114 retraining a person from leaving Australia” (Minister for Immigration and Ethic Affairs v Teoh (1995) 183 CLR 27 at [286-288]). However, the rights protected by Article 12 must be taken into account by reference to the plain terms of relevant municipal law and balanced against a competing principle relating to the likelihood that a party applying for the order will be denied a remedy if the respondent’s freedom to leave the jurisdiction is not restrained (Rahman and Rahman [2013] FamCAFC 162 at [55] and [57]).
•Restraining a litigant’s freedom of movement is not a power that should be exercised punitively.
•Restraining a litigant’s freedom of movement should not take on the character of a free standing enforcement procedure and should be in the nature of a short term restraint (Brown & Brown (2007) FLC 93-316 at [192] - [195]).
•The onus of proving that the party applying for the order would be denied a remedy if the respondent’s freedom to leave the jurisdiction is not limited or suspended is a “heavy onus” (Rahman and Rahman [2013] FamCAFC 162, at [65]). The onus on the applicant for the order, is to establish that he or she ‘will not’, not ‘may not’, be denied a remedy which the proceedings are otherwise likely to provide (Xuen & Chao (injunction in aid of enforcement) per Tree J quoting from Antis & Antis (2000) FLR 93-013 at [38]).
•It is not appropriate to hold someone hostage or conduct a trial by ordeal.
•The power is to be exercised having regard to what is just and convenient. It is a balancing exercise. If the reason to travel is strong then the legitimate risks associated with the litigant leaving the jurisdiction will need to be stronger, before the court interferes with the liberty of a litigant.
•The restriction on a person’s ability to travel out of the jurisdiction should be of limited duration. It does not need to be limited in time but such a restriction should not be imposed for longer than is necessary which, in this case, means longer than is necessary to protect the integrity of the court’s processes.
14.In Talacko v Talacko [2010] FCA 193, Dodds-Streeton J summarised the issues as follows:-
45.As the authorities recognise, curial restraint and caution must be exercised in relation to curtailing or interfering with a person’s travel and freedom of movement, even in a bankruptcy context.
46. In Weiss v Offıcial Trustee in Bankruptcy (1983) 1 FCR 40 at 43, Bowen CJ stated:
I am conscious of the fact that the evidence revealed in his public examination suggests that he has committed various offences against the Bankruptcy Act 1966 (Cth) which have characteristics involving nondisclosure and concealment. However, these are matters to be litigated at the proper time. It is a basic principle that a resident of Australia is entitled to expect that he may travel freely notwithstanding the fact that he is a bankrupt provided it will not lead to his staying overseas in order to defeat or delay his creditors and provided it will not interfere with the due administration of his bankrupt estate (see Tyndall’s case at 15). It is to secure the proper administration of bankrupt estates that bankrupts are required by the Bankruptcy Act 1966 (Cth) to give their passports to the trustee (par 77(a)) and to obtain the permission of the trustee before travelling overseas (par 272(c)). This interference with the travel of bankrupts is not for the purpose of punishing or expressing disapproval of them for offences or alleged offences against the Bankruptcy Act 1966 (Cth).
47. Finkelstein J, in Australian Securities and Investments Commission v Wiggins (1998) 90 FCR 314 at 320 made observations to similar effect in relation to an application to order a director to remain in Australia to assist in ASIC investigations. His Honour stated:
In my view the power to restrain a person from leaving the jurisdiction or requiring a person to deliver up his passport, which would have the same effect, is a power that should be exercised with great caution. I regard any restriction on a person’s individual freedom of movement from one country to another as being a sufficiently serious interference with that person’s personal rights and liberties that the power to impose the restriction should be exercised only in the most clear case. Thus, in circumstances such as the present where the orders are sought for the purposes of assisting a current investigation that is being conducted by the ASIC, unless it is shown that the investigation cannot properly or effectively be conducted in the absence of the person, the orders should not be made.
48.Finkelstein J concluded that the appropriate course was to seek undertakings from the respondent’s solicitor as to the control of the respondent’s passport, which was currently in the solicitor’s possession.
49. Section 50 of the Act is aimed at facilitating the preservation and protection of the debtor’s property, so that in the event of sequestration, it will be available for equitable distribution to creditors. The considerations relevant to making an order thereunder differ from those relevant to the enforcement of a judgment and the present application differs from those recently made before the Supreme Court of Victoria.
DISCUSSION
Many of the wife’s submissions proceeded in a similar fashion to those made in the final hearing, namely, that the husband has failed to make a full and frank disclosure, that he has breached orders in the past and that the Court should in view of such conduct conclude that the husband will not return and will not comply with an order such that the wife’s judgment would be unsatisfied.
While judgment is reserved, I have not reached any final determination of the issues in the proceedings, of which there are many, not the least being whether it is even just and equitable to make any order providing for a payment by the husband to the wife.
That said, the husband conceded that he breached undertakings given to a Chinese Court, had failed to comply with an order made by Watts J on 20 November 2020 to meet the costs of the single expert and had failed to comply with an order made by Watts J on 19 March 2021 to pay to the wife the sum of $500,000 on account of her legal costs and disbursements in the proceedings.
I am also satisfied again as a consequence of concessions made by the husband, that he has failed to make a full and frank disclosure. In that respect the husband failed to disclose he had an interest in an entity registered in Country AY called AZ Limited. I am also satisfied that the husband has failed to properly complete his Australian Income Tax Returns in that he has failed to identify that he owns assets outside Australia having a value of more than $50,000.
That said, as the authorities referred to earlier identify, it is a serious step to curtail a person’s freedom of movement. The wife bears the onus of establishing that she will be denied a remedy if the husband’s freedom to travel and leave the jurisdiction is limited or suspended.
The wife’s claim for in excess of $130 million is an extraordinary claim in the context of the length of the parties’ relationship and where there are no children. That said, I recognise a significant part of the wife’s case involves assertions of non-disclosure and that the pool of assets, if established, is in excess of $674 million. I also acknowledge what the Full Court in Weir & Weir (1993) FLC 92-338, observed at 79,593 namely:
It seems to us that once it has been established that there has been a deliberate non-disclosure, which follows from his Honour's findings in this case, then the Court should not be unduly cautious about making findings in favour of the innocent party. To do otherwise might be thought to provide a charter for fraud in proceedings of this nature.
While the wife’s claim for final relief is pitched at in excess of $130 million, she seeks on the application a surety of only $25 million. The authorities make clear that the wife must demonstrate that her remedy will be defeated if the injunction is not granted. I am not satisfied that is so.
Firstly, the remedy she seeks is an order pursuant to s 79 of the Act. No such order has yet been made. Secondly, it cannot be that an injunction can be justified simply upon the basis that a party in a Court which exercises a wide discretion asks for a property settlement of a certain magnitude. Thirdly, the primary relief she seeks on the application does not seek to permanently injunct the husband from leaving the jurisdiction but rather only until that he pays $25 million into Court whereupon he can leave. The husband asserts he does not have $25 million he can deposit. The wife does not point to the husband having $25 million he can deposit. Her application invites the Court to conclude contrary to his evidence that he does in circumstances where it is has not reached its final determination.
There is merit to the submissions of the husband that the wife’s position is otherwise protected by the present injunctions. In the event that the wife is successful in her claim in relation to the assertion that the assets of the husband include property held on trust for the husband by the respondents or alternatively that the fourth respondent is his alter ego, then at least $25 million of assets would be available to meet the wife’s claim. It would be a nonsense to contend otherwise.
In the event that the wife is unsuccessful in her contentions that the assets of the husband include property held on trust for the husband by the respondents or alternatively that the fourth respondent is his alter ego then a fortiori the wife may not be able to justify a surety of $25 million.
I also accept that there is merit to the submissions on behalf of the husband that he could have left the jurisdiction at any time prior to the final hearing or for that matter not taken part in the litigation or the final hearing. In that respect I note that he undertook to remain pending the hearing of the application and gave a further undertaking that he would remain in Australia pending determination of the application in circumstances where he could not know what the result would be. I am not satisfied that the husband is a “flight risk” where China is his home.
I am also satisfied that it would be punitive to restrain the husband from returning to his home. He lives in China, conducts a business there (on the wife’s case an extremely large and successful business of which he is a key man) and is engaged in litigation there instituted by the wife. Further on either limb of the wife’s application the injunction is of indefinite length in circumstances where the husband says he does not have $25 million and final orders have not yet been made.
The granting of an injunction involves the balancing of convenience, competing prejudices and should be no more than is necessary to do justice. Weighing the matters referred to above in the balance I am not satisfied that the wife has discharged the heavy onus she carries. I am not satisfied that if the husband leaves the jurisdiction her remedy will be defeated. I am satisfied that any prejudice to the wife is outweighed by the prejudice to the husband when I take account of the existing injunctions.
DISPOSITION
For the above reasons the wife’s application will be dismissed.
I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Schonell. Associate:
Dated: 6 August 2024
SCHEDULE OF PARTIES
SYC4269 of 2020 Respondents
Fourth Respondent:
AB PTY LTD
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