Case: Sharman License Holdings Ltd v Universal Music Australia Pty Ltd [2005] FCA 802
Outcome: cited
Wilcox J delivered judgment on the complex issues of liability arising in the primary proceedings on 5 September 2005 ( Universal Music Australia Pty Ltd v Sharman License Holdings Ltd (2005) 220 ALR 1). In the meantime, Ms Hemming had filed two disclosure affidavits pursuant to Wilcox J's orders of 22 March 2005 whilst Sharman License and Sharman Networks had unsuccessfully sought several stays on various grounds of that same order insofar as it applied to them (see Universal Music Australia Pty Ltd v Sharman License Holdings Ltd [2005] FCA 406 per Hely J, delivered 8 April 2005; Universal Music Australia Pty Ltd v Sharman License Holdings Ltd [2005] FCA 441 per Wilcox J, delivered 15 April 2005 and Sharman License Holdings Ltd v Universal Music Australia Pty Ltd [2005] FCA 505 per Moore J, delivered 28 April 2005). Disclosure affidavits were eventually sworn on behalf of Sharman License and Sharman Networks by Mr Gee on 19 April 2005, which were later superseded by further affidavits sworn also by Mr Gee on 16 June 2005. Sharman License and Sharman Networks had also unsuccessfully sought an enlargement of time in which to file an application for leave to appeal from Wilcox J's orders of 22 March 2005 (see Sharman License Holdings Ltd v Universal Music Australia Pty Ltd [2005] FCA 802 per Lindgren J, delivered on 17 June 2005). 24 All that was referrable of course to the implications of the payment of $1,116,405.63 by Ms Hemming to TIL, following the sale of her Sydney residence on 4 February 2005; that payment appears to have been made out of the proceeds of a sale of that residence, which was effected for the gross price of $2,100,000 to a person identified by the evidence as an accountant of certain of the Sharman companies. There was no sufficiently detailed or otherwise cogent evidence as to who exercised the substantial or underlying control of decision making of TIL, or as to the basis of or reasons for such alleged indebtedness having crystallised in the first place. The state of the evidence as to the control of TIL was itself the subject of disputation before Moore J and senior counsel for the Sharman applicants sought to attribute error to his Honour's judgment for the further reason that he had failed to make a finding as to Ms Hemming's control, or otherwise, of that entity. The Sharman applicants postulated that the 'remark' made by Lindgren J at [13] of his Honour's reasons for judgment in Sharman License Holdings Ltd v Universal Music Australia Pty Ltd [2005] FCA 802 that '[Wilcox J] accepted [in the course of granting the Mareva relief on 22 March 2005] that the Sharman Companies were controlled by Ms Hemming by reason of a "client services agreement" between her and TIL dated 8 April 2002' was an 'unsure foundation for any finding of control of the Sharman trust or the Sharman companies [by Ms Hemming]', and was thus inappropriately or impermissibly relied upon by Moore J in formulating his reasons for judgment. That submission lacked merit, particularly in the light of [31] of Lindgren J's reasons for judgment in which his Honour paraphrased the two-fold acceptance, given in cross-examination by the solicitor acting for Sharman License and Sharman Networks in their application before Lindgren J, that TIL as trustee of the Sharman trust was the ultimate beneficial owner of all the shares issued in Sharman License and Sharman Networks, and moreover that Wilcox J had himself appeared to accept that in consequence of the client services agreement, Ms Hemming 'controlled the Sharman trust'. 25 The Music companies had submitted to Moore J that given the evidentiary shortcomings on a subject readily susceptible to documentary demonstration, inclusive of banking records I might add, there was in truth and reality no antecedent loan, that the transfer of those funds by Ms Hemming to TIL in Vanuatu constituted a sham transaction, and consequently that those monies remained her own property beneficially, and should have been identified and disclosed as such in her affidavit provided in the Mareva context. Once more, so it was asserted by the Sharman applicants, his Honour declined to make any concluded finding on the subject. The point is however that his Honour had been able to infer from the surrounding circumstances I have already outlined that there was some force in the Music companies' submission. But in any event his Honour was of the view that he could permit cross-examination of Ms Hemming on and in relation to those matters because at least doubt existed in relation to that area of enquiry. 32 It is readily apparent that the primary judge placed significant weight, and I think rightly so, upon the following findings made by Lindgren J in the context of the preceding interlocutory proceedings of Sharman License Holdings Ltd v Universal Music Australia Pty Ltd [2005] FCA 802 , being proceedings which I have referred to earlier. At [15] of his reasons for judgment, Lindgren J observed as follows: 'As noted earlier, the Sharman Companies were ultimately beneficially owned by TIL as trustee of the Sharman Trust, and, notwithstanding the reference to "discretion" and the right of termination, the client services agreement provided evidence before his Honour that TIL, including TIL as trustee of the Sharman Trust, was likely to act at the direction of Ms Hemming. Since TIL, as trustee of the Sharman Trust was the ultimate beneficial owner of all the issued shares in the Sharman Companies, there was evidence before his Honour to show that they were also likely to act at her direction.' Earlier, at [4], his Honour had observed: 'On 4 February 2005, Ms Hemming and Richard Kilmer-Barber settled a sale of their home at Castle Cove in Sydney to John Simon Myers for $2,100,000. Title was transferred on 16 February 2005. Ms Hemming and Dr Kilmer-Barber continued to occupy the property. Ms Hemming's interest in the home was apparently her only substantial asset within the jurisdiction. There was evidence before his Honour that Mr Myers occupied some role such as accountant or bookkeeper of the Sharman Companies. Ms Hemming was the Chief Executive Officer of the Sharman Companies. Out of the proceeds of sale, $1,116,405.63 was transferred to a bank account in Vanuatu... which is where the Sharman Companies are incorporated.' 33 After reviewing in some detail the Australian authorities relating to misuse or abuse of process and of Mareva orders, and also the evidence placed before him in the present segment of the proceedings, in particular that concerned with Ms Hemming's apparent control of Sharman Networks, and Wilcox J's conclusions thereon, Moore J expressed his satisfaction that Ms Hemming should be required to swear a disclosure affidavit in relation to Sharman Network's assets, largely for the reasons I have already canvassed and which I will reproduce below, the same having been the focus of much of the respective parties submissions made in the present interlocutory proceedings (at [36] and [37]): 'This leads to a consideration of whether [Ms Hemming] should be cross examined on her affidavits concerning disclosure of her assets. In my opinion, such an order should be made. The evidence points clearly to the structure reflected in the Sharman trust and the arrangements in Vanuatu more generally, having been established by [Ms Hemming]. Counsel for the applicants described that structure as opaque. This is in an apt description. However, it is, in my opinion, unnecessary for me to resolve some specific issues concerning that structure which were the subject of argument. One was whether the fourth respondent has a beneficial interest in the Sharman trust or at least has an interest which should have been identified in her disclosure affidavit. Not only is the evidence on this issue likely to be incomplete ([Ms Hemming] has proffered no evidence and almost certainly the applicants do not have all relevant records - they do not even have the trust deed) but it is also by no means clear to me how the law of Vanuatu would operate on the arrangements revealed, to this point, by the evidence. It would be unsatisfactory, dealing with the type of issues presently under consideration, to proceed on the basis that the law in that country can be presumed to be the same as the law of Australia: see The Parchim [1918] AC 157 at 161. The findings of Wilcox J... point towards a conclusion that she does have such an interest. If this issue is explored in cross examination then the Court will be left with a greater measure of certainty about whether she does. The transfer of the property by [Ms Hemming] to another... has several unusual features. It occurred at a time when final submissions were being made in the primary proceedings. Registration of the transfer occurred five days after the applicant's final submissions were served on the respondents. One can infer that the strengths and weaknesses of the respective cases would have been apparent to the parties and those advising them. The transferee was to a person associated with [Ms Hemming]. He was an accountant who had work [sic] for the Sharman companies. A significant part of the proceeds of the sale were paid to [TIL]... This was in settlement of what was said to be a loan. While some of the documents in evidence can be viewed as supporting the existence of a loan, they nonetheless suggest a loan was made after the property was purchased. That, itself, is unusual, though one must accept there may be an explanation for this including, as counsel for [Ms Hemming] pointed out, that the funds lent replaced bridging finance. But the evidence suggests that a loan was not secured by a mortgage. In all, real doubts arise about, and uncertainty surrounds, the reason why this transaction took place when it did and whether the moneys transferred to TIL were, in truth, in satisfaction of a loan or continues to constitute an asset of, and requires disclosure by, [Ms Hemming]. Greater clarity about this matter may arise from the cross examination of [Ms Hemming].'