CPPIB Credit Investments Inc v Ren

By a notice of motion filed on 29 May 2017, Ms Xia Kong seeks to have a freezing order made by the court on 28 April 2017 dissolved at least so far as it affects her.

Ms Kong is the former wife of the defendant, Mr Ren. The freezing order was granted in respect of a property they own as joint tenants in Warrawee. It was sought in support of a claim that the plaintiff, CPPIB Credit Investments Inc (CPPIB), brings against Mr Ren to recover an amount in excess of $50 million for which Mr Ren is said to be liable under a guarantee. The freezing order was made against Ms Kong even though she is not a party to the proceeding under Uniform Civil Procedure Rules 2005 (NSW) r 25.14(5) on the basis that she is in a position to control or influence the disposition of the property. The freezing order was originally granted until 12 May 2017 and on that date it was extended until 9 June 2017 to give Ms Kong an opportunity to make the current application.

The evidence is that Mr Ren and Ms Kong are actively seeking to sell the property. The freezing order does not prevent the sale of the property. However, it requires the net proceeds of sale to be paid into court or into such bank account, to be held on such terms, as are agreed in writing between Mr Ren, Ms Kong and CPPIB.

Ms Kong resists a continuation of the freezing order on the ground that the Warrawee property is the subject of a binding financial agreement made under s 90C of the Family Law Act 1975 (Cth) in her favour, with the result that Mr Ren no longer has an interest, other than a nominal interest, in the property.

Subject to one qualification to which I will come, it is common ground that the freezing order should continue against Ms Kong if the Warrawee property is not the subject of a binding financial agreement, but it should not continue against her if it is.

The onus is on Ms Kong to establish that, notwithstanding that she and her former husband own the property as joint tenants, it is the subject of a binding financial agreement made under s 90C, with the result that the property effectively belongs to her. Originally, Ms Kong submitted that the question whether the property was the subject of a binding financial agreement should be determined by the Family Court. However, during the course of argument, Mr Glissan QC, who appeared for Ms Kong, properly conceded that this court has jurisdiction to determine that question. No relief under the Family Law Act is sought in respect of the relevant agreement. What is in issue is whether the agreement is an agreement to which that Act applies. Consequently, there is no reason to transfer the matter to the Family Court.

Section 90C of the Family Law Act relevantly provides:

Section 90G relevantly provides:

Section 90KA relevantly provides:

Section 104 deals with the recognition of overseas decrees. It relevantly provides that a divorce effected in accordance with the law of an overseas jurisdiction shall be recognised as valid in Australia in certain circumstances depending on the residency or nationality of one or both of the parties to the application for the divorce. One circumstance in which an overseas decree will be recognised is where “the respondent was ordinarily resident in the overseas jurisdiction at the relevant date”. “Respondent” is defined to include “a party to the marriage, not being a party at whose instance the divorce … was effected”. “Relevant date” is defined to mean “the date of the institution of the proceedings that resulted in the divorce …”.

It is common ground that the effect of s 90C is to prevent the Family Court from making orders in relation to the distribution of property of the parties to the marriage in property settlement proceedings that is inconsistent with the terms of a financial agreement made in accordance with that section.

Mr Ren and Ms Kong were married on or about 12 December 2006 in Dalian, China.

On 3 February 2011, Mr Ren bought the Warrawee property for $11,500,000. On 24 June 2014, he transferred the property to himself and Ms Kong as joint tenants upon the payment of $1.00.

According to evidence given by Mr Brendan Manning, Ms Kong’s solicitor, on information and belief, Mr Ren has remained overseas from around 25 November 2014. According to Mr Manning, Ms Kong asked for a divorce on or around February 2016 and initiated divorce proceedings in China in or around April 2016. Those proceedings were finalised on or around 18 September 2016.

On 4 November 2016, Ms Kong and Mr Ren entered what is described as a “Binding Financial Agreement”. The agreement is expressed (in Recital 4) to be “a Binding Financial Agreement as defined in sub-section 4(1) of the Family Law Act and for the purposes of and pursuant to Section 90C of the Act”. The agreement relevantly contains the following terms:

Also on 4 November 2016, Mr Manning signed a statement in the form required by s 90G(1)(c) of the Family Law Act stating that he had given advice to Ms Kong on the effect of the agreement under s 90C and the advantages and disadvantages of making the agreement. A similar statement was given by Ms Pauline Wong on 2 November 2016 in relation to advice she had given to Mr Ren.

Also on 4 November 2016, Ms Kong signed a receipt acknowledging that she had received the statement signed by Mr Manning and Ms Wong. Mr Ren signed a similar receipt which was dated 1 November 2016.

CPPIB advances two reasons for why the agreement dated 4 November 2016 is not a binding financial agreement made under s 90C of the Family Law Act. First, the agreement was entered into after Mr Ren and Ms Kong divorced. Second, Mr Ren’s receipt cannot be accepted as evidence that he was provided with a copy of the statement given to Ms Kong in accordance with s 90G(1)(c), since the receipt he signed was dated 1 November 2016 but the statement was dated 4 November 2016.

I accept both those submissions.

In my opinion, s 90C is concerned with agreements entered into between spouses when they were married. The section applies if “the parties to a marriage make a written agreement”. Subsection (2A) states that the section applies “before or after the marriage has broken down”. It is plain from these provisions that the section operates while the marriage is on foot. That conclusion is reinforced by s 90D which deals with agreements “after a divorce order is made in relation to a marriage (whether it has taken effect or not)”. Section 90D describes the parties to agreements of that type as “the parties to the former marriage”. It is plain, then, that s 90C is concerned with agreements made while the parties are still married and s 90D applies after they have divorced. The agreement was made on 4 November 2016, after Ms Kong and Mr Ren had divorced. It cannot therefore be a financial agreement under s 90C.

Ms Kong submits that the court cannot be satisfied that her divorce from Mr Ren in China will be recognised in Australia. I do not agree. The evidence is that Mr Ren has not lived in Australia since November 2014 and that Ms Kong initiated divorce proceedings in China in or about April 2016. The evidence that Mr Ren has not lived in Australia since November 2014 and that Ms Kong chose to bring divorce proceedings in China rather than Australia supports the inference that Mr Ren was ordinarily resident in China at the time Ms Kong commenced divorce proceedings there. Absent any other evidence, that is sufficient to conclude that the divorce satisfies the requirements of s 104 and consequently will be recognised in Australia.

I also accept CPPIB’s submission that there is no evidence that the requirements of s 90G(1)(ca) of the Family Law Act have been satisfied. The only evidence that Mr Ren was given a copy of the statement provided to Ms Kong under s 90G(1)(c) is the receipt that he signed on 1 November 2016. However, that cannot be evidence that he was given a copy of the statement because that statement could not have been in existence at the time he gave the receipt, since the statement is dated 4 November 2016. There is no other evidence that Mr Ren was given a copy of the statement provided to Ms Kong under s 90G(1)(c).

Under s 90G(1A) a financial agreement may be binding even if, relevantly, s 90G(1)(ca) has not been complied with if “a court is satisfied that it would be unjust and inequitable if the agreement were not binding on the spouse parties to the agreement”. However, there is no material before the court from which it is possible to conclude that it would be unjust and inequitable if the agreement were not binding.

Ms Kong also submits that, even if the agreement dated 4 November 2016 is not a binding financial agreement, the freezing order should not be continued because there are a number of freezing orders made in respect of the property and it may not be possible to comply with all of them, particularly if the property is sold, since different orders require the proceeds of sale to be dealt with in different ways.

There is no evidence that it is currently impossible for Ms Kong to comply with each of the freezing orders made in respect of the property. Whether that position will continue if, and when, the property is sold will depend very much on whether Ms Kong can reach agreement with CPPIB and the other applicants for freezing orders on what is to happen to the proceeds of sale. If a satisfactory agreement cannot be reached, then there is no reason why Ms Kong cannot apply for a variation of the freezing order at that time.

The orders of the court are: