Allbeck & Fielders (No 2)

Case [2024] FedCFamC1F 770

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Allbeck & Fielders (No 2) [2024] FedCFamC1F 770

File number: PAC 4152 of 2018
Judgment of: MCNAB J
Date of judgment: 14 November 2024
Catchwords:

FAMILY LAW – PROPERTY – Accrued jurisdiction – Where the applicant and first respondent were in a short marriage – Where the applicant sought orders pursuant to s 79 of the Family Law Act 1975 (Cth) – Where whilst proceedings were on foot in the then Federal Circuit Court of Australia the applicant brought proceedings in the District Court seeking damages for personal injuries allegedly inflicted by the first respondent in the course of the marriage – Where the applicant was awarded damages against the first respondent in the District Court for personal injuries – Where the first respondent was unsuccessful in his appeals and owes the applicant the damages and costs – Where the applicant alleges that throughout the District Court proceedings the first respondent divested funds to the second respondent – Where the applicant seeks for the transfers of funds from the first to the second respondent be set aside pursuant to s 37A of the Conveyancing Act 1919 (NSW) – Where the first and second respondent were in a de facto relationship – Where the first and second respondent contend that the transfers were the subject of a separation agreement and loans – Orders that the transactions are set aside and payment to the applicant of the moneys owed to her by the first respondent – No orders made for property adjustment.

BANKRUPTCY – COSTS – Where during these proceedings the first respondent entered into bankruptcy by presenting a debtor’s petition in circumstances where the applicant was seeking to serve a creditor’s petition – Where on the first day the proceeding was listed for final hearing the bankruptcy was annulled by consent and orders were made for the trustee’s costs to be reserved – Determination of the trustee’s costs – Orders for the first respondent to pay the costs of the trustee – Where the parties contest the quantum of the trustee’s costs – Where failing agreement of the parties as to the quantum, orders made for determination by a report from a Registrar.

Legislation:

Bankruptcy Act 1966 (Cth) ss 32, 35, 58, 109, 120, 121, 153B, 154

Family Law Act 1975 (Cth) ss 75, 79, 90SF, 90SM, 106B, 117

Conveyancing Act 1919 (NSW) ss 37A, 66G

Legal Profession Uniform Law 2014 (NSW) s 181

Cases cited:

Akbar & Gandega (2023) 67 Fam LR 59

Allbeck & Fielders [2024] FedCFamC1F 769

Axess Debt Management Pty Ltd v Haykal(No 2) [2017] FCA 1186

Biltoft & Biltoft (1995) FLC 92-614

Beck v Spalla [2005] FCAFC 82

Chan v Acres [2013] NSWSC 1597

C Pty Ltd and Ors & PGW as Liquidator of S Pty Ltd (In liq) [2011] FamCAFC 231

Daymond and Anor and Daymond and Ors (Costs) [2014] FamCA 302

Emerald & Emerald (2018) FLC 93-870

Hampton & Farley and Ors (No 2)

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AGLC
Allbeck & Fielders (No 2) [2024] FedCFamC1F 770
Case
[2024] FedCFamC1F 770
Decision Date

CaseChat Overview and Summary

The case of Allbeck & Fielders (No 2) involved the applicant, Ms. Allbeck, and the first respondent, Mr. Fielders, who were in a short marriage that ended in separation and subsequent divorce. The applicant filed proceedings in the Federal Circuit Court of Australia seeking property settlement pursuant to s 79 of the Family Law Act 1975 (Cth). While these proceedings were ongoing, the applicant brought separate proceedings in the District Court against the first respondent for personal injuries allegedly inflicted during the marriage. The District Court found in favour of the applicant, awarding damages and costs. The first respondent unsuccessfully appealed the District Court's decision and now owes the applicant the awarded amounts. The applicant further alleged that during the District Court proceedings, the first respondent transferred funds to the second respondent, Ms. Kazem. The applicant sought orders to set aside these transfers under s 37A of the Conveyancing Act 1919 (NSW) and to adjust property interests under the Family Law Act.

The court had to determine whether the transfers of funds from the first respondent to the second respondent were made with the intent to defraud creditors and should therefore be voided under s 37A of the Conveyancing Act. Additionally, the court needed to assess the validity of the loan agreements between the first and second respondents and decide on the just and equitable division of property between the parties.

The court found that the transfers of funds from the first to the second respondent were made with the intent to defraud creditors, as the first respondent was aware of the potential financial impact of the District Court proceedings. The court voided the transfers and declared the related loan agreements to be sham transactions. The court ordered the second respondent to pay the first respondent the amount owed to the applicant, less the sham loans, which were to be used by the first respondent to pay off his judgment debts to the applicant. The court dismissed the applicant's and the second respondent's requests for property adjustments and ordered the first respondent to pay the applicant the outstanding amounts from the District Court and Supreme Court proceedings. The court also ordered the sale of specific properties to satisfy the judgment debts and set aside a second mortgage held by the second respondent. Finally, the court ordered the first respondent to pay the costs of the bankruptcy trustee, with the quantum of costs to be determined if the parties could not agree.

This decision underscores the importance of transparency and fairness in financial dealings, especially in the context of family law and bankruptcy proceedings.

Orders

Orders of the court

PAC 4152 of 2018

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)

BETWEEN:

MS ALLBECK

Applicant

AND:

MR FIELDERS

First Respondent

MS KAZEM

Second Respondent

MR VORONIN (AS BANKRUPTCY TRUSTEE FOR MR FIELDERS)

Third Respondent

ORDER MADE BY:

MCNAB J

DATE OF ORDER:

14 NOVEMBER 2024

NOTATION:

In these orders the sum of the judgment debts referred to in Order 8 herein are collectively

referred to as “the judgment debts”.

THE COURT DECLARES THAT:

1. The transfers of money totalling $1,305,923.45 by the first respondent to the second respondent being:

(a) May 2021 – $366,624.40;

(b) May 2021 – $81,191;

(c) July 2021 – $620,000;

(d) September 2021 – $159,911.80; and

(e) September 2021 – $78,196.25

are void within the meaning of s 37A of the Conveyancing Act 1919 (NSW).

2. The four purported loan agreements between the first respondent as borrower and the second respondent as lender comprising the following purported loan transactions totalling $440,563.8 are each a sham transaction and are set aside:

(a) August 2021 – $300,000 (only $218,593.95 was transferred);

(b) July 2022 – $40,000;

(c) August 2022– $94,969.85; and

(d) October 2022– $87,000.

3. The second respondent holds the sum of $865,359.65, being the divested sum of $1,305,923.45 less the amount of the sham loans which were paid as the first respondent’s legal fees in the sum of $440,563.80 in the District Court Proceedings and Appeal proceedings, upon trust for the first respondent.

4. The registered second mortgage dated 2021(“the registered second mortgage”) between the first respondent as mortgagor and the second respondent as mortgagee affecting F Street, Suburb G is a sham.

5. By reasons of Declaration 2 herein that the transfers from the second respondent to the first respondent were sham transactions THE COURT DECLARES that the first respondent at all times retained and used the sum of $440,563.80 to his own benefit and not to the benefit of the second respondent.

THE COURT ORDERS THAT:

6. The applicant’s orders for an adjustment of the property interests as between her and the first respondent (as sought in her Second Amended Application for Final Orders filed on 12 December 2023) pursuant to s 79 of the Family Law Act 1975 (Cth) be dismissed.

7. The second respondent’s orders for an adjustment of the property interests as between her and the first respondent (as sought in her Further Amended Response to Initiating Application filed on 16 January 2024) pursuant to s 90SM of the Family Law Act 1975 (Cth) be dismissed.

8. Within 90 days of the date of these orders the first respondent pay to the applicant:

(a) the judgment obtained by the applicant as plaintiff against the first respondent as defendant in the District Court in 2021 in proceeding … in the sum of approximately $490,000.00 together with interest accrued thereon and continuing to accrue pursuant to s 101 of the Civil Procedure Act 2005 (NSW);

(b) the judgment for costs obtained by the applicant as plaintiff against the first respondent as defendant in the District Court in 2021 in proceeding … be forthwith paid to her as applicant creditor by the first respondent in the sum of approximately $849,000.00 together with interest accrued and continuing to accrue thereon from and after 2024 pursuant to s 101 of the Civil Procedure Act 2005 (NSW).

(c) the judgment for costs obtained by the applicant as respondent against first respondent as appellant in the Supreme Court, Court of Appeal in 2022 as amended in 2023 in proceeding … in the sum of approximately $137,000.00 together with interest accrued and continuing to accrue thereon from and after 2024 pursuant to s 101 of the Civil Procedure Act 2005 (NSW).

9. Within 60 days of the date of these orders the second respondent pay to the first respondent the sum of $865,359.65 with such sum to be held on trust by the solicitors for the first respondent and that the funds be directed:

(a) first, to pay the balance of the judgment debts owing to the applicant; and then

(b) to creditors of the first respondent; and

(c) the balance then remaining be paid to the first respondent.

10. Pending compliance with Order 9 herein, the second respondent be restrained by injunction from dealing with and/or in any way encumbering or disposing of any of her rights and entitlements in the properties located at:

(a) K Street Suburb L NSW; and

(b) M Street Suburb O NSW.

without the written consent of the parties or in the case there is no consent, the leave of this Court.

11. In the event that the second respondent fails to comply with Order 9 herein, the second respondent within 14 days of written notice of non-compliance do all acts and things and sign all documents necessary to cause K Street, Suburb L NSW (“the Suburb L property”) to be listed for sale and upon settlement of the sale of the Suburb L property the second respondent do all acts and things and sign all documents necessary to cause the proceeds of sale to be distributed in the following manner and priority:

(a) payment to discharge the ANZ Bank mortgage;

(b) payment of the real estate agent’s commission, advertising and other expenses payable upon the sale;

(c) payment of the conveyancer’s legal costs and outlays relating to the sale;

(d) payment of the usual adjustments of sale including but not limited to municipal and water rate adjustment;

(e) payment to the first respondent into a controlled monies account held by his solicitors of the amounts calculated in accordance with Order 8 as remains unpaid to the first respondent;

(f) the balance to the second respondent.

12. The registered second mortgage in favour of the second respondent be set aside and the second respondent forthwith execute and deliver to the applicant’s solicitor an executed and registerable discharge of mortgage.

13. Pending compliance with these orders, the applicant be and is restrained from enforcing or seeking to enforce orders made in her favour against the first respondent in the District and Supreme Court.

14. To give effect to these orders, the first respondent must, as soon as practicable, do all acts and things to cause the property situated at and known as F Street, Suburb G NSW, Folio ID … (“the F Street property”), to be placed on the market for sale and sold for its fair market value, which must be, unless otherwise agreed between the applicant and first respondent, no less than an amount being five percent less than $1,750,000.

15. On completion of the sale referred to in Order 14 herein, and after deducting reasonable selling costs including agent’s commission and conveyancer’s fees, and the amount due and payable to the ANZ bank, following the payment to ANZ bank, the then remaining balance must be paid to the applicant in satisfaction all amounts due to her in satisfaction of the judgment debts.

16. To enable the completion of the sale of the F Street property, and on or before the completion date, the applicant must release her charge over the F Street property granted pursuant to orders made in the District Court.

17. In the event that within (90) days from the date of these orders, the first respondent tenders to the applicant the amount of $301,317 in reduction of the judgment debt then the applicant must do all acts and things necessary to withdraw and grant discharge of the charge over the property known as H Street, Suburb J, NSW, Folio ID … (“the Suburb J property”) in her favour pursuant to orders made in the District Court.

18. In the event that after (90) days from the date of these orders, the first respondent has failed to comply with Order 7 herein, he must do all acts and things necessary to realise his interest in the Suburb J property and, and on completion of any sale of the Suburb J property, pay or cause to be paid to the applicant the net proceeds to be received by him with the payment to be made in reduction of the judgement debts.

19. Subject to the satisfaction of the charge in favour of the applicant over the property of the respondent over the property known as H Street, Suburb J, NSW, Folio ID … (“the Suburb J property”) in her favour pursuant to orders made in the District Court, the first respondent pay the third respondent’s costs, charges and expenses of the administration of the bankruptcy of the first respondent to be agreed within 14 days and if in default of agreement the quantum of the costs and expenses payable to the third respondent pursuant to this order be determined by a report of a Registrar under r 19.01 of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).

20. In the event any party refuses or neglects to execute any deed, document or instrument necessary to give effect to all or any of these orders, then the Registrar of the Court shall be appointed pursuant to s 106A of the Family Law Act 1975 (Cth) to execute such deed, document or instrument in the name of the said party and do all acts and things necessary to give validity and operation to the deed, document or instrument upon the Registrar being provided with verification of such refusal or failure by way of affidavit.

21. Within (21) days of the date of these orders, any application for costs made by a party be supported by a schedule detailing how the amount claimed has been calculated, and a written submission of no more than ten (10) pages setting out the reasons why the order for costs sought should be made including against whom the order should be made with the determination of costs to be determined in chambers on the papers subject to the right of any non-party having the right to be heard if orders are sought against a non-party including any legal representative and liberty to apply is reserved in that regard.

22. Other than as provided in these orders the first respondent is entitled to his Superannuation, personal property and any other property in his name.

23. Other than as provided in these orders the second respondent is entitled to her superannuation, personal property, car and any other property in her.

Note: The form of the order is subject to the entry in the Court’s records.

Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).

Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.

Background

Background to the litigation

The third respondent relies upon:(1)Third Respondent’s Tender Bundle filed 1 February 2024; and(2)Third respondent’s Court Book filed 30 January 2024.BACKGROUNDNarrative of the relationship between the applicant and first respondent The applicant and first respondent commenced a relationship in 2010 and commenced cohabitation in 2012 at a rental property located at P Street, Suburb Q. They were married in 2015. They separated in about March 2016 (noting that there is a slight dispute as to the date of separation) with divorce being finalised in 2018. Following separation, the applicant moved in with her mother, who was renting a property owned by the first respondent. The first respondent deposes to the applicant having minimal involvement in his affairs, including financial, where he says that during their relationship he had engaged agents to assist in managing his affairs. The first respondent says that he and the applicant maintained separate finances throughout the relationship, aside from an account which was established for expenses related to their wedding. The first respondent says that he solely funded this account. It is further alleged by the second respondent that communication continued between the applicant and first respondent after separation, to the extent that they were briefly intimate. The applicant gives evidence that she was subjected to severe family violence throughout the relationship including various forms of abuse perpetrated by the first respondent. On 4 September 2018, the applicant filed an Application for Final Orders in the Federal Circuit Court of Australia (as it then was) seeking an alteration of property interests pursuant to s 79 of the Family Law Act 1975 (Cth) (“FLA”) between herself and the first respondent. On 5 March 2019, there was a telephone conversation between the solicitors for the applicant and the first respondent, thereafter, the first respondent’s solicitors sent a letter to the applicant’s solicitors on 5 March 2019 detailing the terms of that conversation, including:[1][1] Exhibit A36.1.You indicated that your client is considering going to the District Court on allegations of “rape and assault” with a civil claim for an abusive relationship.2.You said you were advised by counsel to file in the District Court initially, but your client opted to file in the Family Court instead, seeking property settlement only. However, you now anticipate receiving instructions to file in the District Court shortly.…4.You said your client was advised by counsel that her potential “Kennon” argument would “do better” in the District Court. (We understand this to mean that your client would receive superior financial entitlements).5.You made a without prejudice statement that Kennon is worth more in the District Court.…7.You said you have sent our letter of offer to counsel and are awaiting instructions.8.You requested, in this phone call […], that our client stop sending “shit” and “rude” letters and make a proper offer.…Your client may take such proceedings as she is advised.(Emphasis Added)

Evidence

Evidence Before The Court

In order to determine what orders should be made, I adopt the following process:(1)Determine the applicant’s claims brought under s 37A of the CA;(2)If a finding is made that funds have been fraudulently divested from the first respondent to the second respondent, then return the assets found to have been fraudulently divested into the balance sheet of the assets of the first respondent;(3)Determine the net assets of the first respondent taking into account the secured and unsecured debts of the first respondent;(4)There be a determination of the just and equitable division of assets as between the applicant and the first respondent and the first respondent and the second respondent;(5)If that determination requires the second respondent to make a payment to the first respondent, then the terms of that payment and in what amount; and (6)Consideration of the costs and expenses of the third respondent. EVIDENCEThe witnesses The applicant gave evidence relying on her trial affidavit and was cross examined. She gave clear evidence in the witness box regarding the matters that she was cross examined on and there was no submission made that she was not truthful or was evasive. She was plainly upset by having to be involved in further proceedings and giving evidence was difficult for her. She presented as an honest person. The first respondent relied on his trial affidavit and was cross examined at length. He had a poor recollection of many of the details of the transactions and events that he was asked about. I got the impression that he genuinely struggles with fully appreciating the details of the transactions or the reasoning for them. His response to many questions about his reasons for several of the impugned transactions was entirely coloured by his belief that the claims brought against him in the District Court proceedings were without substance. He apparently cannot understand how the District Court came to the decision that it did and how he has come to have a liability to the applicant. I do have concerns about the truthfulness of the first respondent regarding his knowledge of the District Court proceedings and the fact that a successful claim may have had a significant effect on his and the second respondent’s financial position. The second respondent relied on her trial affidavit and presented as an articulate and intelligent witness. Her responses in cross examination regarding the detail and reasons for the transfers of funds to her, and subsequently from her to her infant son, are heavily affected by her strongly held belief that the applicant had poor prospects both in the Family Court proceedings and the claim for personal injuries damages in the District Court. I do not accept that she was not aware of the consequences of an adverse finding in the District Court once the hearing of those proceedings commenced and certainly after the decision was reserved.THE IMPUGNED TRANSACTIONS AND RELEVANT LAW Section 37A of the CA provides:1.Save as provided in this section, every alienation of property, made whether before or after the commencement of the Conveyancing (Amendment) Act 1930, with intent to defraud creditors, shall be voidable at the instance of any person thereby prejudiced.2.This section does not affect the law of bankruptcy for the time being in force.3.This section does not extend to any estate or interest in property alienated to a purchaser in good faith not having, at the time of the alienation, notice of the intent to defraud creditors.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

In Young v Smith [2015] NSWSC 400, in considering an application to set aside a transfer of property pursuant to s 37A of the CA, Sackar J observed at [37]:37.It is not necessary, for the purposes of s 37A, that there be actual proof that the alienator had in his mind an intention to defraud creditors; the court can attribute to the alienator the requisite fraudulent intent if, from all the surrounding circumstances, it appears that the effect might be expected to be, or has in fact been, to defeat creditors. CONSIDERATION OF THE S 37A CLAIM The relevant transactions are set out in Exhibit A15 and are as follows: The transactions were calculated as: In relation to the first impugned transaction involving the proceeds of sale of the U Street property in 2020, the applicant points to the following circumstances as establishing an intent to defraud:(1)The applicant commenced proceedings against the first respondent in this Court seeking a division of property between them pursuant to s 79 of the FLA on 4 September 2018; and(2)In 2019, the first respondent was "constructively notified" that a potential claim might be made against him by the applicant for damages for sexual assault and that he “may incur an adverse judgement in damages and costs”. The constructive notice was said to have arisen as a result of a phone call being made by the applicant’s solicitor to the first respondent’s solicitor where that solicitor was told that proceedings would be issued in the District Court for personal injuries suffered by the applicant during the course of the marriage if a suitable offer of settlement was not forthcoming. The first respondent gave evidence to the effect that he did not expect that the claim pursuant to s 79 of the FLA was of any substance nor did he believe (and continues to believe) that any claim for personal injury was of any substance. The second respondent gave evidence relevant to the U Street transaction that: (1)Prior to the commencement of the relationship, she had obtained tertiary qualifications;(2)In 2018, the first and second respondent decided to move into the U Street property;(3)She applied her salary to all household bills associated with that property, including utilities and groceries with the first respondent paying the rates; and (4)The property was in a state of disrepair and that she funded the renovations herself and did considerable work from 2018 until 2019 (of which a non-exhaustive list is set out at [158] of the second respondent's trial affidavit).[10][10]Second respondent’s trial affidavit filed 15 January 2024 “SR’s Affidavit” at [156]-[158]. The second respondent gave evidence that she believed the property increased in value as a result of the renovations and there was an appraisal indicating a $230,000-$300,000 increase in 2019 with further work being performed subsequently. She gives evidence that in early 2019 the decision was made to sell the U Street property and to buy a home in Region Z with the first respondent. Further to that decision, in 2019, she attended an auction for a parcel of land but was not successful in purchasing that property.