Protecting Assets by an Injunction in Family Law Proceedings: Meeks v Meeks & Anor (2019) FCCA 638

Background

In property proceedings, it can sometimes be the case that one party will seek to dispose of assets, or otherwise arrange their financial affairs, to prevent the other party from receiving a share of an asset, or all of the assets, of the relationship.

Meeks v Meeks (2019) involved an application for an injunction restraining a wife from dealing with assets in a discretionary trust.

Key facts

The Meeks were married in 1994 but divorced in mid-2018. They had two children, now both adults. In December 2018, the husband commenced proceedings to implement a settlement of the matrimonial property. The principal asset in the "pool" was the unencumbered matrimonial home valued at $640,000. In addition, the husband had superannuation worth $120,000 and the wife $50,000. There was a joint term deposit of $100,000.

The primary point of contention concerned assets contained in a trust. The wife is a director, with her brother, of a company which is the corporate trustee of a trust owning parcels of land worth in excess of $1m. Clearly, if included, this would increase the property subject to proceedings significantly.

The husband, distrustful of his wife, joined the company as a second respondent to the proceedings and sought orders that his wife transfer her interest in the matrimonial home to him along with $84,000 but, failing this, she sell the assets in the trust and the proceeds used, firstly, to settle his claim.

The wife conceded that her interest in the company and any “unpaid distributions to which she is and may be in the future be entitled, are to be accounted as potential financial resources for her.” However, she refuted that the “trust property should be included in” ... the ... “pool of matrimonial assets available to be divided between them as a consequence of the current proceedings.”

Mrs Meeks argued she had no involvement in operating the long-running trust and, fundamentally, she and the trust contended that “there is no evidence to support a conclusion that the wife is intent on taking steps, vis-a-vis the trust, which are calculated to defeat the husband’s claim for a property settlement.”

Key issues

The law allows a person to apply to the court restrain certain behaviour or to reverse a transaction that has taken place.

 

Section 114 Family Law Act 1975 (“the Act”) deals with the matter of injunctions in relation to property matters. The powers of the court are considerable, but the most common order is an injunction relating to the property of a party to the marriage. This is ordinarily used to prevent a person from selling or otherwise disposing of an asset of the relationship. The court can also make an injunction relating to the use or occupancy of the former matrimonial home and can make an order that prevents a person from carrying out any activity that may reduce the size of the asset pool or reduce the value of an asset.

Under section 106B of the Act, the Court may set aside any transaction by a party to a marriage, or by a third party on behalf of that party to the marriage, which is made or proposed to defeat an existing or anticipated order in proceedings.

An example is where a person disposes of property or an interest in a company. In these circumstances, an order can be sought providing for the transaction to be set aside and the property, or interest in a company, to revert to the person that disposed of it to ensure that it is taken into account.

An important consideration for the Court is whether the injunction is necessary to ensure that the applicant receives what they are entitled to in relation to the asset pool.

In the case of Meeks, the trial judge stated, "I bear in mind that injunctions are not to be granted lightly, there must be a firm basis ... to justify their making". Injunctions exist to prevent "any unfair distribution or concealment of assets, before judgment. However, prior to the making of such an order, the Court must be satisfied that there is a real risk of such an outcome based on real evidence not merely apprehensive speculation."

Moreover, "the husband has not demonstrated any evidentiary basis that the wife, in tandem with her brother, will do anything in respect of the trust, which is untoward vis-a-vis his interests. It is the wife's case that she does not have any direct control of the trust. In any event, it seems improbable that, after a significant period during which the assets of the trust have remained stable, they will be liquidated and the proceeds in some way concealed.”

Accordingly, the application for an injunction was dismissed.

What does it mean?

It is sometimes the case that, during or following an acrimonious breakdown in a relationship, one party will try to hide or dispose of their assets in an attempt to minimise the resources available for sharing in a property settlement. A person can apply to the Courts to prevent or recover the disposal of assets. However, the Courts will require sufficient evidence that a disposal has happened or is likely to happen. A suspicion is not enough.

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