THE WESTERN AUSTRALIAN BAR ASSOCIATION CPD WEEKEND The Vines Resort October 2009 RESTRAINING RENEGADE RESPONDENTS FROM REPATRIATING RICHES by John Hedges Barrister Francis Burt Chambers
The aim The aim of this paper is to provide a checklist for family law practitioners who are asked to take steps to preserve the assets of the parties pending the implementation of orders for alteration of property interests pursuant to section 79 of the Family Law Act. The problem Imagine you receive instructions to commence section 79 proceedings after the breakdown of a ten year marriage. The husband has worked as a petroleum engineer in various overseas postings and the parties have a property in Perth subject to a small mortgage and an unencumbered property in New South Wales. There is one child of the marriage aged 10 and your client has worked as a teacher s aide for the past few years. What steps do you take to preserve the assets pending the finalisation of the proceedings? The facts of the case of PDM v JEM [2006] FamCA 1182 are relevantly: On 12 March 2001, the wife filed an application for settlement of property. On 23 March 2001, the following order was made by consent: Until further order the husband be restrained and an injunction be granted restraining him from disposing of or encumbering his estate and interest in [a property in another state], being the whole of the land comprised in Certificate of Title Volume XXX Folio XXX. The trial of the wife s application for settlement of property and spousal maintenance took place in September 2003. Justice Thackray published reasons for judgment on 20 October 2003 and final orders were made on 28 November 2003. The orders made on that day were as follows: WABA CPD 2009 (3).docx 1
1 The husband pay to the wife within sixty (60) days of the date of these orders the sum of $393,934. 2 In default of payment under order 1 above, interest shall accrue on such sum as remains outstanding at the rate as prescribed pursuant to the Family Law Rules. 3 Upon payment to the wife of the sum of $393,934 together with all interest accrued thereon, all interest of the wife in the property situated [in another State] do vest in the husband absolutely. Orders were made providing for a sale of the property [in another State] in the event of default of payment. On 17 December 2003, a further order was made that the husband contribute to the wife s costs in relation to the proceedings for adjustment of property interest and spousal maintenance in the sum of $20,000, payment to be made at the same time and on the same conditions as applied to the property settlement orders. The property in [another State] was registered in the husband s name only. Until 2004 there was no caveat registered on that property to protect the wife s interest. In October 2003 the husband applied to various financial institutions for a loan to be secured over the property [in another State]. Annexure A to the affidavit of SM, the husband s adult daughter from a previous marriage, sworn 15 June 2004, is an email sent by the husband to DL or R, a mortgage provider, setting out the terms of his employment and stating why R should be satisfied that in making a loan to him, he had the funds to repay it and there was sufficient equity in the property as security for the loan. On 28 October 2003, the husband sent an email to his daughter, S, and son, A, in which he discussed the advantages of keeping the house [on the property in another state] and the disadvantages of doing so. In that letter the husband stated it was likely, if the wife subpoenaed his loan application for finance, she would discover he had lied about his current WABA CPD 2009 (3).docx 2
salary, or had lied about his previous salary at trial. He believed she would try and enforce the maintenance order and may be awarded back maintenance. In the email the husband asked his children to make enquiries with a solicitor in relation to his obligation to pay maintenance, even if he is not paying tax and not working for an Australian company. He also wanted to know how serious it would be for him if the wife subpoenaed his loan application form and discovered he had lied at trial. On 26 November 2003, while he was in [another country] working, the husband sent an email to S. He asked her to find out what the consequences would be if he sold the house. He wanted to know whether it was a criminal act; would it stop him coming in and out of Australia and would a summons need to be issued and served upon him if he did it. Although not stated by him, it was clear he wanted to know the ramifications of selling the house without paying the wife the sums owing to her. On the same day, the husband sent a further email to S as follows: "S, can we sign the house over to you or P and, if so, what can the ex do to get it back? All my love, your Dad."... On 1 December 2003, S, on the husband's instructions and pursuant to the Power of Attorney, signed an exclusive agency agreement for the sale of the property [in another state] for between $850,000 and $950,000. On 11 December 2003, she signed a contract for sale of the property, on behalf of the husband, to IW, a family friend, for the sum of $700,000. On 14 or 15 December 2003, the husband asked S to go to his solicitors [sic] office and sign a mortgage on the property [in another state]. This was done on 16 December 2003. On the same day, the sum of $497,669.50 was deposited into the husband's Commonwealth Bank account, being the funds borrowed by the husband, using the property [in another state] as security. On WABA CPD 2009 (3).docx 3
17 December 2003, the husband gave S instructions to draw a bank cheque in the name of his maternal grandmother in the sum of $12,000, draw a bank cheque in the sum of $60,000 and deposit it into I and LW's ANZ bank account and transfer $400,000 into the account of the husband s girlfriend in [another country]. On 29 December 2003, a further $117,418 was deposited into the husband's Commonwealth bank account. S withdrew another $120,000 from the account and transferred it to the girlfriend s account. The wife subsequently lodged a caveat on the property [in another state] and the sale to Mr W was unable to be effected. On 24 December 2003, the wife's solicitors filed a Notice of Appeal on her behalf seeking an increase of the sums ordered to be paid to her by way of property settlement, and an increase of the costs awarded on 17 December 2003. On 1 February 2004, the husband emailed Ms M and stated as follows: "Don't worry about the mortgage. I have decided to let everything go. If she does not accept the settlement offer?? Could you keep an eye on my credit cards for me. I am sorry to have had to drag you into this mess, it is not that I am running away from this, it is purely economics which is driving my decision. I will always love and miss you heaps?? What a dysfunctional life I lead?? My mother and father would be ashamed of me, that is for sure?? Perhaps the fact that they have not worked on a pipeline is my excuse?? Not much of a one, that is for sure..." Have you reconsidered your initial response to the problem? WABA CPD 2009 (3).docx 4
The solution Injunctions Section 34(1) of the Family Law Act provides: The Court has power, in relation to matters in which it has jurisdiction, to make orders of such kinds, and to issue, or direct the issue of, writs of such kinds, as the Court considers appropriate. Section 114(3) of the Family Law Act provides: A court exercising jurisdiction under this Act in proceedings other than proceedings to which subsection (1) applies may grant an injunction, by interlocutory order or otherwise (including an injunction in aid of the enforcement of a decree), in any case in which it appears to the court to be just or convenient to do so and either unconditionally or upon such terms and conditions as the court considers appropriate. The leading case relating to injunctions for the preservation of property in section 79 proceedings is Waugh v Waugh (2000) FLC 93,052. In Waugh, the full Court of the Family Court of Australia cited Jackson v Sterling (1987) 162 CLR 612, and in particular the judgment of Deane J at page 623, where his Honour said: As a general proposition, it should now be accepted in this country that a Mareva injunction can be granted... if the circumstances are such that there is a danger of [the defendant s] absconding, or a danger of the assets being removed out of the jurisdiction or disposed of within the jurisdiction, or otherwise dealt with so that there is a danger that the plaintiff, if he gets judgment, will not be able to get it satisfied ; per Lord Denning MR, Rahman (Prince Abdul) v Abu-Taha [[1980] 1 WLR 1268, at p 1273; [1980] 3 All ER 409, at p 412] quoted with approval by Street CJ in Ballabil Holdings [(1985) 1 NSWLR 155, at p 150]. To some extent, the general power of the English High Court of Justice to grant a Mareva injunction was initially seen as based on the provisions WABA CPD 2009 (3).docx 5
of s 45(1) of the Supreme Court of Judicature (Consolidation) Act 1925 (UK): see also the Supreme Court Act 1981 (UK), s 37(3). That general power should, however, now be accepted as an established part of the armoury of a court of law and equity to prevent the abuse or frustration of its process in relation to matters coming within its jurisdiction. That being so, the power to grant such relief in relation to a matter in which the Federal Court has jurisdiction is comprehended by the express grant to that Court by s 23 of the Federal Court of Australia Act of power, in relation to such matters, to make orders of such kinds, including interlocutory orders, and to issue, or direct the issue of, writs of such kinds, as the Court thinks appropriate. The Court also cited Kirby J in Cardile v LED Builders Pty ltd (1999) 162 ALR 294 at 330, paragraph 121, where his Honour said: To secure an asset preservation order in a case such as the present, it will be necessary for the party seeking it to show, in addition to the conditions ordinary to the grant of relief injunctive in nature that there is a danger that the non-party will dispose of relevant assets or property in its possession or under its control; And further (at 330, paragraph 122) his Honour said: The grant of such relief is discretionary. They must often be provided or withheld in urgent circumstances where a propensity to shift assets, apparently to defeat a judgment, has already been manifested. The plaintiff must establish a real risk of assets being disposed of [Third Chandris Shipping Corp v Unimarine SA [1973] 3 WLR 122 at 137-8; [1979] 2 All ER 972 at 984-5]. No such relief should be contemplated without the provision of an undertaking as to damages [National Australia Bank Ltd v Bond Brewing Holdings Ltd (1990) 169 CLR 271 at 277; 92 ALR 49]. To ensure success in an application for an injunction to preserve matrimonial assets pending the implementation of final orders, the Court must be satisfied WABA CPD 2009 (3).docx 6
that the injunction is necessary to prevent abuse or frustration of the Court s process, having regard to the nature of the applicant s claim. That, in turn, requires evidence that the respondent intends to dispose of the assets the subject of the injunction. In practice, the Court often does not apply the test in a rigorous manner. Although the evidence often falls short of establishing the necessary intention, the Court errs on the side of caution. In circumstances where the evidence may be insufficient, it is prudent to warn the client that a strict application of the test would see the refusal of the injunction. Is an injunction sufficient to preserve the relevant asset? Most litigants will not act in defiance of court orders and their main concern will be to ensure that they do not fall foul of the law. The challenge for lawyers is to discern the parties (for some reason almost exclusively husbands) who are likely to contravene court orders. If you suspect that a party falls into this category, then the next question to ask is whether contravention of the injunction will leave your client unsecured or otherwise unable to receive the property sought by her. If your client could be frustrated by contravention, then you must consider the options for preserving your position. Real Property Registrars Packets In Western Australia there is a process whereby if notice of the existence of court orders is given to the Registrar of Titles, a Registrar s Packet is established. This involves the removal of the certificate of title from the normal storage area to ensure that documents lodged in respect of that certificate of title are carefully considered by one of Landgate s legal officers prior to registration. WABA CPD 2009 (3).docx 7
Annexure 1 is the relevant portion of the Land Titles Registration Manual. Delivery up of Title Where real property is unencumbered, the Court will fairly readily make an order requiring the certificate of title to be delivered to the Registry to be held pending further order. Caveats Section 137 of the Transfer of Land Act 1993 provides relevantly: (1) Any beneficiary or other person claiming any estate or interest in land under the operation of this Act or in any lease mortgage or charge under any unregistered instrument document or writing or under any equitable mortgage or charge by deposit without writing or by devolution in law or otherwise may lodge a caveat with the Registrar in an approved form forbidding the registration of any person as transferee or proprietor of and of any instrument affecting such estate or interest either absolutely or until after notice of the intended registration or dealing be given to the caveator or unless such instrument be expressed to be subject to the claim of the caveator as may be required in such caveat. Every such caveat shall state the name and address of the person by whom or on whose behalf the same is lodged and (except in case of a caveat lodged by order of the Supreme Court or by the Registrar pursuant to the direction of the Commissioner as hereinafter provided) shall be signed by the caveator or by his agent. The person lodging such caveat shall if required by the Registrar support the same by statutory declaration stating the nature of the estate or interest claimed and the title thereto and may withdraw any such caveat. If such declaration when required by the Registrar be not lodged with him within 7 days from the date of such requisition the caveat shall be absolutely null and void. A caveat under this section cannot be lodged unless it contains an address, WABA CPD 2009 (3).docx 8
or a number for a facsimile machine, in Australia for the service of notices in relation to the caveat. The leading authority in relation to whether entitlement pursuant to section 79 of the Family Law Act amounts to a caveatable interest is Ioppolo v Ioppolo, Unreported, Supreme Court Library 2469 p1, where Burt CJ said: In my opinion, this is not an interest in the land within the meaning of s 137 of the Transfer of Land Act and accordingly I would hold, for that short single reason, that she had no caveatable interest in the land, or that such an interest was not revealed by her in support of the caveat which she sought to lodge. Ioppolo was followed in Lightfoot v Lightfoot Unreported Supreme Court Library 8731 where Owen J said: There is clear authority for the proposition that the mere possibility of a court exercising jurisdiction to make an order for the settlement of matrimonial property is not an estate or interest in land necessary to support a caveat: Re Weeks Caveat (1971) QWN 4; Vandyke v Vandyke (1976) 12 ALR 621 per Hutley JA at 639; Bethian Pty Ltd v Green (1977) 3 Fam LR 11,579; Ioppolo v Ioppolo. In Hayes v O Sullivan (2001) WASC 55, Roberts-Smith J, having conducted a detailed analysis of the relevant case law, concluded at paragraphs 60 and 61:... the present proceedings to extend the caveat to protect a claimed interest by way of constructive trust, in respect of spousal property the subject of proceedings in the Family Court on an application under s 79 of the Family Law Act, are necessarily incidental to and relate to the property settlement proceedings and so constitute a matrimonial cause in respect of which the Family court has exclusive jurisdiction. That being so, the application to extend the caveat must be dismissed. WABA CPD 2009 (3).docx 9
Pursuant to section 205V of the Family Court Act 1997, a de facto partner who is, or was, eligible to apply for an order under Division 2, may not apply to the Supreme Court in its equitable jurisdiction for relief in respect of that property. Whilst this section raises arguable questions turning upon the distinction between statutory and equitable jurisdictions, I suggest that the intention is to confer upon the Family Court of Western Australia exclusive jurisdiction for the determination of property disputes between de facto couples and Ioppolo is authority that a claim falling under section 205ZG of the Family Court Act is not an equitable interest for the purposes of section 137 of the Transfer of Land Act. The starting point in advising a client about the propriety of a section 137 caveat is that, if challenged, the caveat may not be extended. In her article Caveatable Interests The Common Lore Distinguished, Murdoch University Electronic Journal of Law (1993) Vol 1 No 1, Sandra Boyle has argued that Ioppolo can be interpreted as limited to cases where the equitable interest claimed is pursuant to property settlement proceedings, rather than as beneficiary of a constructive trust. Whilst this view allows a practitioner to lodge a caveat confident that there may be an arguable case, the fact remains that it is anything but free from doubt and the client should be warned accordingly. As a matter of practice, I support the view that the caveat is a cheap and effective method of preventing unauthorised dealings with property. I consider that a caveat should be lodged when there are proper grounds for concern, rather than as a matter of course. Interim Orders of the Family Court permitting the lodging of a caveat Section 80(d) of the Family Law Act provides that the Court may order that any necessary deed or instrument be executed and that such documents of title be produced or such other things be done as necessary to enable an order to be carried out effectively or to provide security for due performance of an order. WABA CPD 2009 (3).docx 10
The basis for injunctive relief is the preservation of property necessary to satisfy final orders. In most cases, the Court will have little difficulty in assessing the minimum that a party will receive in the proceedings and there appears to be no reason why the Court should not grant a change over relevant assets to secure the assets sought by the applicant. The granting of a charge relating to real property removes any doubt that the grantee has a caveatable interest for the purposes of the Family Law Act. The granting of a charge relating to corporate assets allows registration with ASIC. Bank accounts and shares Notice to Financial Institutions In circumstances where parties are restrained from further encumbering assets, the most likely area for contravention is the drawdown on existing facilities with banks. I suggest that it is prudent to serve a copy of any injunction which relates to a financial facility upon the relevant bank or credit provider. In the rare case where you are concerned that, unless restrained, a financial institution will knowingly act to cause a breach of an injunction, it is appropriate to seek an injunction against the third party pursuant to section 90AF of the Family Law Act. Section 90AF provides relevantly: (2) In proceedings under section 114, the court may make any other order, or grant any other injunction that: (a) directs a third party to do a thing in relation to the property of a party to the marriage; or WABA CPD 2009 (3).docx 11
(b) alters the rights, liabilities or property interests of a third party in relation to the marriage. (3) The court may only make an order or grant an injunction under subsection (2) if: (a) the making of the order, or the granting of the injunction, is reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage; and (b) if the order or injunction concerns a debt of a party to the marriage it is not foreseeable at the time that the order is made, or the injunction granted, that to make the order or grant the injunction would result in the debt not being paid in full; and (c) the third party has been accorded procedural fairness in relation to the making of the order or injunction; and (d) for an injunction or order under subsection 114(1) the court is satisfied that, in all the circumstances, it is proper to make the order or grant the injunction; and (e) for an injunction under subsection 114(3) the court is satisfied that, in all the circumstances, it is just or convenient to grant the injunction; and (f) the court is satisfied that the order or injunction takes into account the matters mentioned in subsection (4). Notice to Share Registries Consideration should also be given to notifying the relevant share registry and sharebroker of orders affecting shareholdings in publicly listed companies. Provision of CHESS and HIN numbers will assist the effectiveness of your notice. WABA CPD 2009 (3).docx 12
ANNEXURE 1 Service of Court Orders upon the Registrar 1.1020 General Where a Court Order affects land, the Registrar of Titles should be joined as a party to the action. Court Orders must be served on the Registrar at DOLA s Midland office in accordance with the Rules of the Supreme Court. Note: The sealed copy of any Court Orders must be sighted by a responsible officer in the Registration Branch of DOLA at the time of service. 1.1030 Registrar s Packets Court Orders that are faxed to DOLA do not constitute proper service upon the Registrar, unless the order itself specifically authorises service by facsimile to the Legal Section at DOLA and quotes the relevant fax number. A Registrar s packet is an administrative mechanism that enables the Registrar of Titles to remove a certificate of title from the normal storage area to ensure that documents lodged in respect of that certificate of title are carefully considered by one of DOLA s legal officers prior to registration. The most common reasons for creating a Registrar s Packet are: that the Registrar of Titles has been served with copies of court proceedings, court orders or injunctions relating to land in a particular certificate of title; or the Registrar is put on notice that there may be defective or potentially defective documents that have been registered, lodged and not yet registered or that may be lodged in the future. By way of example, the need for a Registrar s Packet arises in the situation where an injunction has been served upon the Registrar of Titles. The Transfer of Land Act contains no provision for an injunction to be recorded on the register. It is therefore necessary to give notice of the injunction by removing the certificate of title from the normal storage area. If this is not done, dealings may be lodged and subsequently registered in breach of the injunction. The creation of a Registrar s Packet does not, of itself, prevent lodgment of documents nor changes to the Register. WABA CPD 2009 (3).docx 13
It is possible to obtain information about a Registrar s Packet that has been created by ordering a Status Report from DOLA s Search Transmission Centre. Note: For more information on Status Reports, see paragraph 1.1040. 1.1040 Status Reports (on Registrar s Packets) Freedom of information legislation limits access to information connected with any court action or other matters that are the subject of a Registrar s Packet. A Status Report is the mechanism by which all clients of DOLA can obtain identical information pertaining to a particular Registrar s Packet. This will assist clients to make informed decisions pertaining to the conduct of settlements in land. A Status Report will be signed and dated by an Assistant Registrar of Titles and will contain the following information: a list of all certificates of title, crown leases, dealings and surveys held in the Registrar s Packet; the reason for the creation and/or continuation of the Registrar s Packet; where court orders are involved, the Court Action number, the parties to the action, the solicitors acting for the parties and a general description of the orders sought will be provided; and DOLA s requirements for disbanding the Registrar s Packet. A Status Report can be ordered from DOLA s Search Transmission Centre upon payment of the prescribed fee. WABA CPD 2009 (3).docx 14