Guan v Li

The draft notice of appeal

1. The draft notice of appeal contains six grounds: 1 The primary judge erred in failing to take into account the following matters in determining whether he could, and should, grant an asset preservation order: a. whether the respondent had established an arguable case to set aside the Settlement Deed; b. the strength of any such case; c. whether the jurisdiction to make an asset preservation order was properly invoked where there was no evidence that the Trustee was engaged in conduct that might be characterised as an abuse of process; and d. whether the respondent would suffer significant prejudice if the asset preservation order was not made. 2 The primary judge erred in making findings of fact which attributed a value to Mr Tang's estate that was far greater than the true position [J[79]). 3 The primary judge did not act on the only evidence as to the quantum of claims that might be made by the unsecured creditors of Mr Tang's estate [J[76]). 4 The primary judge erred in placing no weight on the undertaking proffered by Ms Guan, in circumstances where, if that was accepted by the court, Mr Li would not be substantially prejudiced [J[73]). 5 The primary judge ought to have held that: a. the respondent had not established an arguable case to set aside the Settlement Deed or, if he had, that such a case was weak; b. the conduct of the Trustee in entering into the Deed could not be characterised as an abuse of process; c. by reason of the quantum of claims of other unsecured creditors against the estate of Mr Tang, the respondent would likely recover no more than 5.5 cents in the dollar; d. as such, the disadvantage to the appellant in granting the relief sought by the respondent far exceeded any prejudice the respondent might suffer if relief was refused. 6 The primary judge ought to have ordered the respondent to remove dealing AR531462, being the writ for levy of property registered against title reference 61/DP605386.
2. Ground 6 was overtaken by events during the hearing. Counsel for Mr Li gave an undertaking to the Court, without admissions, to remove the "stale" writ recorded on the title to the Oatlands property within seven days. It is common ground that the writ was stale, as the "protected period" of six months had expired: Real Property Act 1900 (NSW), s 105A(6).

Submissions

1. In her summary of argument, Ms Guan challenged the freezing order on three bases, contending that the primary judge erred as follows.
2. First, in failing to take into account material matters, namely, whether: 1. Mr Li had established an arguable case to set aside the settlement deed; 2. the jurisdiction to make an asset preservation order was properly invoked where there was no evidence that the trustee was engaged in conduct that might be characterised as an abuse of process; and 3. Mr Li would suffer significant prejudice if the settlement deed was not set aside.
3. Second, in attributing a value to Mr Tang's estate that was far greater than the true position.
4. Third, in placing no weight on the undertaking proffered by Ms Guan, in circumstances where, if that was accepted by the Court, Mr Li would not be substantially prejudiced.
5. It is convenient to address proposed grounds 1-5 by reference to these identified issues.

Disposition of application for leave

1. The decision whether to make a freezing order in aid of the existing and prospective Federal proceedings involved a matter of practice and procedure and the exercise of judicial discretion. Decisions of this kind are difficult to challenge for sound reasons. As explained in PPK Willoughby Pty Ltd v Baird [2019] NSWCA 48 at [5], discretionary decisions "engage the strictures against over-ready appellate interference and the corelative need for 'added restraint' associated with House v The King (1936) 55 CLR 499 [at 504-505]; [1936] HCA 40 with the consequence that a 'heavy burden' lies on an applicant seeking leave to appeal from a discretionary judgment on a question of practice or procedure" (citations omitted).
2. None of the proposed grounds of appeal raises an issue of principle or question of public importance. The focus of argument on the application for leave was whether Ms Guan had demonstrated a reasonably clear injustice or ground going beyond something that is merely arguable: Secretary, Department of Family and Community Services v Smith (2017) 95 NSWLR 597; [2017] NSWCA 206 at [28]: Mourbarak (by his tutor Coorey) v Holt (2019) 100 NSWLR 218; [2019] NSWCA 102 at [12].

First issue: whether the primary judge failed to take into account material matters

1. Ms Guan submits that the primary judge failed to take into account whether Mr Li had established a good arguable case for final relief to set aside the settlement deed, relying upon s 90K(3) of the Family Law Act (grounds 1(a) and (b) and 5(a)).
2. The expression "good arguable case" is used "in the sense of a case which is more than barely capable of serious argument, and yet not necessarily one which the judge believes to have a better than 50 per cent chance of success": Ninemia Maritime Corpn v Trave Schiffahrtsgesellschaft mbH und Co KG ("The Niedersachsen) [1983] 1 WLR 1412; [1984] 1 All ER 398 at 404. As Mustill J explained at 404, what is required is a preliminary appraisal of the plaintiff's case, rather than an attempt to have a premature trial of the action.
3. In my view, there is no clear error on the part of the primary judge.
4. The starting point is to observe that an appellate court should be conscious of not "picking over an ex tempore judgment", and should give due allowance for the pressures under which judges deal with the urgent applications before them: Pollard v RRR Corporation Pty Ltd [2009] NSWCA 110 at [56]. Here, the primary judge was required to give a decision under significant time pressure, given the imminent hearing of the application for extension caveat in the South Australian proceedings the following day.
5. The primary judge was undoubtedly aware of the requirement for a good arguable case, which was common ground between the parties. This requirement was acknowledged in Mr Li's written submissions in chief (par 33(g) and (h), par 34(c)), and his Honour recorded at J[47], Ms Guan's oral submission to similar effect as follows: Further, the second defendant submits that there is no evidence of a prima facie case that the deed of settlement and release could be set aside. In the end, the second defendant's position is that the plaintiff is not seeking any orders in the FCFCOA which would allow that Court to set aside the deed of settlement and release, and further that the FCFCOA does not have the power to do so.
6. Ms Guan's submission that there was an absence of evidence that the trustee was not entitled to enter into the settlement deed misunderstands Mr Li's case for final relief under s 90K(3) of the Family Law Act. Mr Li relied below on the correspondence between the legal representatives of Ms Guan and the trustee for the inference that the financial agreement played a significant role in their communications as to why the trustee should agree to transfer Mr Tang's share in the Oatlands property to Ms Guan. At the level required of an arguable case, it was open to the primary judge to be satisfied that setting aside the settlement deed would be a just and equitable adjustment of the rights of the parties under s 90K(3) of the Family Law Act.
7. Nor should the finding at J[62], concerning the scope of the power conferred by s 90K(3) of the Family Law Act to make an order setting aside the settlement deed, be read narrowly or in isolation from his Honour's express reference at J[47] to the requirement of an arguable case for final relief, the finding at J[63] rejecting the no utility argument (which was premised, among other matters, on the absence of proceedings by Mr Li to review the trustee's decision to enter the settlement deed), and the finding at J[79] that the orders sought by Mr Li were necessary to prevent a possible abuse of process. It is implicit in his Honour's reasons that he was satisfied that Mr Li had an arguable case for the final relief in the prospective Federal proceedings.
8. Ms Guan submits that the primary judge failed to consider whether there was evidence that the trustee in bankruptcy had engaged in an abuse of process, and a finding to this effect was necessary to engage the jurisdiction to grant a freezing order (grounds 1(c) and 5(b)). The argument now put by Ms Guan was not advanced by Ms Guan before the primary judge. In any event, it was not part of Mr Li's case below that the trustee had engaged in an abuse of process.
9. Ms Guan also submits that the primary judge failed to take into account whether Mr Li would suffer significant prejudice if the settlement deed was not set aside (grounds 1(d) and 5(c) and (d)). This argument was directed to the question of the balance of convenience or balance of prejudice.
10. The primary judge considered the extent of the likely prejudice to Mr Li if a freezing order was not made. His Honour found that the effect of the freezing order would be to preserve the value of the Oatlands property so as to prevent Ms Guan depleting the value of that property to the detriment of Mr Li: at J[51]-[52]. Having recorded at J[74] Ms Guan's submission that even if Mr Li is successful in his application in the Federal proceedings, he will end up with something less than $150,000, his Honour accepted Mr Li's submission that the amount that might be recovered was not an important factor in the exercise of the discretion in circumstances where there had been no investigation into the proofs of debt lodged with Mr Tang's trustee in bankruptcy: at J[76].
11. On a fair reading of the reasons, his Honour was saying no more than that since the trustee was still investigating the amounts claimed by unsecured creditors, the estimate by counsel for Ms Guan of $150,000 as the amount that might be recovered was not as an important factor in the exercise of the discretion. That conclusion was open to his Honour.
12. It is not necessary to refer to the calculations which underlie Ms Guan's submission in support of ground 5(c) that his Honour ought to have held, when considering the balance of convenience, that Mr Li would recover no more than 5.5 cents in the dollar of his judgment debt. The argument now made was not advanced before the primary judge, and as counsel for Ms Guan properly accepted, would only arise if this Court granted leave and allowed the appeal and was re-exercising the discretion afresh.
13. Grounds 1 and 5 are not sufficiently arguable to justify any grant of leave to appeal.

Second issue: value of Mr Tang's estate

1. Ground 2 contends that the primary judge erred in attributing a value to Mr Tang's estate that was far greater than the true position. This mischaracterises his Honour's reasons at J[79], which are set out at [18] above. Plainly, his Honour was referring to the value of the Oatlands property, not Mr Tang's estate. Moreover, in referring to the value of the Oatlands property as $2.2 million, his Honour was not referring to the net equity. Nor did his Honour fail to take into account the debts secured by the mortgage over the Oatlands property. He referred to those matters at J[13], [68]-[69] and [74] of his reasons. Leave to appeal on ground 2 should be refused.
2. Ground 3 is related to ground 2. It contends that the primary judge did "not act" on the only evidence as to the quantum of claims that might be the unsecured creditors of Mr Tang's estate, being the $8 million of unsecured creditors identified in the trustee's report. There are two answers to this ground.
3. First, as indicated, it was well open to his Honour to proceed on the basis that there was some uncertainty as to the value of the claims of unsecured creditors because their proofs of debt against Mr Tang's estate were subject to investigation by the trustee.
4. Second, as Mr Li correctly submitted in this Court, the significance of the $8 million figure in the trustee's report was subsumed by the calculation of how much Mr Li could expect would be realised on the sale of the Oatlands property. As to this, at J[76] the primary judge proceeded on the basis of "something less than $150,000", being the figure given by counsel for Ms Guan in submissions. Ms Guan cannot advance a different argument on appeal. Leave to appeal on ground 3 should be refused.

Third issue: Ms Guan's undertaking and the balance of convenience

1. Ground 4 contends that the primary judge erred in placing no weight on Ms Guan's undertaking not to sell, dispose of, or encumber the Oatlands property other than by way of the first mortgage securing the principal amount of no more than $1,560,000.
2. The primary judge dealt with the undertaking at J[71]-[73] of his reasons. After referring to the terms of the undertaking, and recording that it was relied upon by Ms Guan for the submission that the risk of dissipating the assets by selling the Oatlands property was not significant, the primary judge found that the undertaking did not deal with the South Australian proceedings, and that on his understanding of Ms Guan's submissions, "she wanted to have the whole of the property so she could offer it up as some sort of security in those proceedings": at J[72]. That finding is not contested.
3. The undertaking did not deal with the South Australian proceedings in terms. Nor did counsel for Ms Guan address how the undertaking was intended to interact with the South Australian proceedings in which Ms Guan sought to offer the whole of the Oatlands property as security for an undertaking as to damages given by her company, PCI Green.
4. The primary judge further found that "in the circumstances of this case, I am not satisfied that the undertaking has the effect of reducing the risk of the second defendant diminishing the assets": at J[73]. That finding was well open to his Honour. The undertaking did not preserve that status quo. The undertaking would not have prevented the perfection of Ms Guan's asserted equitable interest in the Oatlands property or a drawdown from the equity in the Oatlands property of an amount up to $1,560,000, both of which would be detrimental to Mr Li.
5. The weight to be given to the undertaking was a matter for the assessment of the primary judge. It is not to the point that this Court might have exercised the discretion differently if the discretion had been conferred on it in the first place - such as to accept the undertaking - any such conclusion would be immaterial: Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274 at [45].
6. Ground 4 is not sufficiently arguable to justify any grant of leave to appeal.

Fresh evidence on appeal

1. Given the above conclusions, is not necessary to address Ms Guan's application to rely upon several affidavits as fresh evidence on appeal, if leave is granted and there is a re-hearing.

Conclusion and Orders

1. None of the criteria for a grant of leave to appeal is satisfied. Accordingly, leave to appeal should be refused. The applicant should pay the respondent's costs of the application. The order I propose is that the summons seeking leave to appeal be dismissed with costs.
2. GRIFFITHS AJA: I agree with Gleeson JA.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 December 2022