It is not uncommon in family law proceedings that one party will attempt to dispose of assets in order to prevent their ex partner from receiving a share of the asset. An injunction may be used as a mechanism to stop the disposal of assets before it happens.
Is your ex selling assets after separation, without your consent to do so? Do you want to protect your property settlement rights?
In these circumstances, you can apply to the Court for an injunction, to restrain the other party from selling assets. If the transaction has already taken place you can also apply to reverse the transaction.
What is an injunction?
A person can apply for an injunction under section 114 of the Family Law Act 1975 to protect the property of a party to the marriage, for example, by restraining a person from selling or otherwise disposing of assets of the relationship or from doing any act that may reduce the size of the asset pool available for distribution between the parties.
The most common injunction made is an order of the Court that prevents a person from doing something, for example, restraining a person from:
- Selling land;
- Selling a company or assets of a company;
- further encumbering a mortgage secured over a property;
- Entering into a contract, for example, to obtain a loan.
Injunctions can also be made regarding the use and occupancy of the matrimonial home. See our article on sole occupancy for more information: Who stays in the home after separation?
An interlocutory injunction is an injunction sought on an urgent basis in family court proceedings to preserve the status quo pending a full hearing of all the evidence at a Trial.
Examples of behaviour that may warrant the consideration of an interlocutory injunction being made by the Court are where:
- A business owner, the husband, has entered into a contract for sale of his business and intends to use the sale proceeds for purposes that the Wife does not agree with. The Wife files an application for an interlocutory injunction restraining the sale of the business or otherwise that the sale proceeds be distributed in a manner which preserves the property pool;
- A business owner, the Wife, has a 50% interest in her business. After separation, she signs a contract to sell her share in the business to her sister, for $10. The Husband files an application for an interlocutory injunction restraining the Wife from selling her share in the business.
- The Husband has a property in his sole name. After separation, he enters into a contract to sell the property to a third party. The wife files an application for an interlocutory injunction restraining the husband from selling the property;
- The Wife after separation withdraws $100,000 from the joint account and gives it to her Mother to purchase a house in her name. The Husband files an application for an interlocutory injunction seeking that the third party be required to transfer the funds back to the joint account and an interlocutory injunction restraining either party from withdrawing funds from the joint account;
- the Husband redraws $50,000 from the mortgage secured over the matrimonial home and gambles those funds. The Wife files an application for an interlocutory injunction restraining the husband from redrawing further on the mortgage or doing any act that further encumbers the matrimonial home.
What if the asset has already been sold or transferred?
If a transaction has already taken place whereby an asset of the relationship has been disposed of, the Court has powers under s106B of the Family Law Act to set aside any transaction of a party to a marriage, or by a third party on behalf of a party to a marriage, which is made in order to defeat an existing or anticipated order in family law proceedings.
A common example is where a person disposes of a property or an interest in a company to a family member. In those circumstances an order can be sought reversing the transaction so as to ensure that it is taken into account in the property settlement proceedings.
What do I need to prove to obtain an injunction?
The Full Court in Dunworth & Faletti held that the criteria for whether an injunction can be granted is:
- whether there is a prima facie case / a serious issue to be tried; and
- whether the balance of convenience favours the grant of the injunction.
1. Does the Plaintiff have a serious question to be tried?
An injunction is not granted simply because the other party has behaved in an objectionable way in relation to matrimonial assets. Rather, injunctions are granted to enforce an existing legal or equitable right claimed by the applicant.
Accordingly, if you are seeking an injunction, you must who the court based on the current state of the evidence that there is a sufficient likelihood of success at trial to justify the preservation of the status quo pending trial.
How strong the probability needs to be depends on the nature of the rights that you assert and the consequences if the injunction is granted.
You do not have to show that it is more probable than not that you will succeed at trial.
In Dunworth & Faletti, the Court held that there was a serious question to be tried, those serious questions being:
- the existence & duration of a de facto relationship;
- whether the sale of the property will cause the proceeds of sale to be lost (as the respondent’s father said he would only withdraw the caveats if he is paid back his alleged loans in full);
- whether the respondent’s father and Ms C are valid creditors or whether the loan agreements are shams.
2. Does the The ‘balance of convenience’ favour the grant of the injunction?
The Court looks at the effect of the injunction on the parties i.e. whether the inconvenience or damage the Applicant would likely suffer if the injunction is not granted outweighs the damage the respondent would suffer if the injunction is granted.
The Court is unlikely to grant the injunction if doing so would have a disproportionately negative effect on the respondent over and above the negative effect on the applicant if the injunction is not granted.
If there is a serious question to be tried (i.e. the Applicant has a strong prima facie case), the balance of convenience is likely to favour the Applicant.
The applicant needs to show some form of irreparable harm if the injunction is not granted, for which damages
Also, as part of the ‘balance of convenience’ the plaintiff will generally have to show irreparable harm if the injunction is not granted and in such case damages will not be an appropriate remedy:
In all the examples referred to above, the balance of convenience favoured the grant of an injunction and damages were not an appropriate remedy as if the business or other asset had been sold, this would have left nothing meaningful for the Applicant to claim by way of property settlement;
In Dunworth & Faletti, the court held that the balance of convenience favoured granting the injunction restraining the sale as if the injunction was not granted it would result in the Applicant suffering loss which could not be remedied by damages if the property was sold – as if the Father and Ms C were repaid from the proceeds of sale, this would have left nothing meaningful for the Applicant to claim by way of property settlement.
Other relevant factors the Court considers in determining whether to grant the injunction
There are a few other things that the court will consider in determining whether to exercise power to grant an injunction.
Firstly, the Court will consider whether the person seeking the injunction is able to give an undertaking to the Court to be responsible for any damages that may arise as a consequence of that injunction being enforced. The purpose of the undertaking is to ensure the respondent suffers no damages if the Courts grant the injunction but later decides that the applicant is not entitled to enforce the rights claimed.
Secondly, the Court will consider whether that injunction is necessary to ensure that the applicant receives their property settlement entitlements. For example, if a property worth $50,000 is disposed of /or about to be disposed of, and the balance of the property pool is $5,000,000, of which the Applicant is entitled to 50%, then setting aside the transaction disposing of that property, or otherwise restraining the sale of that property, is not necessary to ensure that the Applicant receives what she/he is entitled to in a property settlement.
Thirdly, even if the elements of an injunction are satisfied, the Court still has a discretion as to whether to grant the injunction. The Court may not grant an injunction where there has been delay by the Applicant in seeking the injunction, such that it would be unjust to the respondent if it were granted, if there has been some acquiescence in the conduct of the respondent by the applicant, or if another order would enable justice to be done between the parties.
If you would like more information on similar topics, check out the following information and articles:
- Application for injunction to stop sale of of property where jurisdiction is not yet established;
- Why you should formalise your property settlement
- When can future inheritances be taken into account
- How do I apply for property and financial orders
Do you want to apply for an injunction?
Applying for an injunction is a complex application and it is risky. If you would like to know more information about injunctions and whether or not you would be entitled to an injunction in the circumstances of your case, contact us to book in a reduced rate initial consultation with one of our experienced Brisbane family lawyers to have a confidential discussion about your individual circumstances.