Bogdanov and Pryor (No 4)

[2013] FamCA 1084

FAMILY COURT OF AUSTRALIA

BOGDANOV & PRYOR (NO 4) [2013] FamCA 1084

FAMILY LAW – PROPERTY – Where the wife seeks an extension of time to a partial property settlement order – S 80(1) Family Law Act 1975 (Cth) – Fahmi & Fahmi (1995) 19 FamLR 517 – Watson & Watson [2013] FamCAFC 25 – Where the wife’s evidence had misled the court - Where the wife’s financial circumstances had changed – Dollar for dollar order – Where the wife claimed the existence of an equitable charge over an asset that was subject to the order – A charge of that nature cannot defeat a legal order of the court – orders suspended.

Family Law Act 1975 (Cth)

Fahmi & Fahmi (1995) 19 FamLR 517
Watson & Watson [2013] FamCAFC 25

APPLICANT: Ms Bogdanov

RESPONDENT: Mr Pryor

FILE NUMBER: BRC 9953 of 2012

DATE DELIVERED: 13 December 2013

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Bell J

HEARING DATE: 15 and 25 November 2013 and 2 and 7 December 2013

REPRESENTATION

COUNSEL FOR THE APPLICANT: North SC on 15 November 2013
Mr Jones on 25 November 2013
Mr Jones on 2 December 2013
Mr Jones on 7 December 2013

SOLICITOR FOR THE APPLICANT: Jones Mitchell Lawyers

COUNSEL FOR THE RESPONDENT: Hackett on 15 November 2013
Hackett on 25 November 2013
Hackett on 2 December 2013
Mr Hirst on 7 December 2013

SOLICITOR FOR THE RESPONDENT: Hirst & Co Family Lawyers

Orders

It is ordered that:

1. Pursuant to section 80(1) of the Family Law Act 1975 (Cth), Order (1) of the Orders of the Honourable Justice Tree made 11 October 2013 be varied so as to allow the applicant wife until 4.00pm 24 March 2014 to pay the respondent husband the sum of $135,000 provided that, in order to pay that sum to the husband, the applicant wife hereby does forthwith:

   (a)       cause the four trading accounts held by her with F Pty Ltd being accounts numbered …, …, … and … to be closed and/or sold and provide evidence of same to the husband’s solicitors as soon as possible thereafter;

   (b)       cause the proceeds of sale referred to in (1)(a) hereof to be paid to the husband’s solicitors’ trust account (being NAB account BSB … account number … in the name of G Trust);

   (c)       cause $10,000 of the monies held in the ANZ account number … to be paid to the husband’s solicitors’ trust account (being NAB account BSB … account number … in the name of G Trust);

   (d)       deliver up the husband the British sports car registration number “…” on the basis that he be appointed trustee for sale and the net sale proceeds be paid to the husband’s solicitors’ trust account (being NAB account BSB … account number … in the name of G Trust);

2. Should the net proceeds from the sale of the vehicle referred to in Order (1)(d) herein be in excess of what is required to meet Order 1 of the order of Justice Tree (following first the use of the funds generated from orders (1)(a), (b) and (c) to meet Order (1) of Justice Tree), then the residual amount from the sale of the vehicle be placed in Jones Mitchell Lawyers’ trust account to be used to meet Orders 2 – 5 of the Order of the Honourable Justice Tree made 11 October 2013.

3. If it is the case that there are residual proceeds from the sale of the vehicle placed in Jones Mitchell Lawyers’ trust account pursuant to Order (2) herein, and if it is the case that the said residual proceeds are depleted before 27 January 2013, then, pursuant to section 80(1) of the Family Law Act 1975 (Cth), Orders (2) – (5) of the Order of the Honourable Justice Tree made 11 October 2013 be suspended until 27 January 2014.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Bogdanov & Pryor has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC 9953 of 2012

Ms Bogdanov

Applicant

And

Mr Pryor

Respondent

REASONS FOR JUDGMENT

Introduction

1. This application in a case comes before me pursuant to Part VIII of the Family Law Act 1975 (Cth) (“the Act”) and concerns the property proceedings between the applicant, Ms Bogdanov (“the wife”), and the respondent, Mr Pryor (“the husband”).

2. On 11 October 2013, Justice Tree made partial property settlement orders requiring that the wife pay to the husband the sum of $135,000 by 25 October 2013 (Order 1 therein), and also providing a “dollar for dollar” regime to be implemented in favour of the husband (orders 2 to 5 therein). I incorporate the reasons for judgment of Justice Tree in respect of those orders into these my reasons for judgment.

3. Notably, for the purpose of these reasons, prior to the interim hearing before Justice Tree, on 21 February 2013, the wife gave an undertaking to the Court in the terms of paragraph 49 of her affidavit filed 19 February 2013, in which she deposed:

   I will provide 28 days written notice to the Respondent or his solicitors of any intention to mortgage encumber or otherwise deal with any interest in any entity or business in which I have an interest which is outside the ordinary day to day transactions of the business.

4. The wife initiated these proceedings by way of an application in a case filed 28 October 2013 for an extension of time in respect of the order of Justice Tree. An amended application was filed by the wife on 15 November 2013 when the matter was heard before me. Since then, this same matter has returned back before me on three occasions. On the first of those occasions, 25 November 2013, the matter returned as a result of further material which was filed by the wife’s solicitor, Mr Jones, which detailed that the court had been misled on part of the wife’s evidence. The matter then returned before me again on 2 December 2013, at my insistence, in circumstances where, upon further reading of the wife’s material in respect of the agreements, it became apparent that the parties’ submissions made on 15 November 2013 had not been wholly informed. As a result, I required the parties to return before me again on 6 December 2013 to provide further submissions in respect of some discreet, identified issues.

5. As a result of the above circumstances, it is imperative that this application be finalised and that no more expense is borne by the parties for what should have otherwise been a simple application for extension of time. 

The wife’s application for an extension of time

1. By way of her amended application filed on 15 November 2013, the wife seeks the following orders:

   1) That pursuant to s 80(1) or alternatively s 79A(1)(b) of the Act, order 1 of the orders of Justice Tree made 11 October 2013 be varied so as to allow the wife a period of 5 months to pay to the husband the sum of $135,000; and

   2) That pursuant to s 80(1) or alternatively s 79A(1)(b) of the Act, Orders 2 to 5 of the Orders of Justice Tree made 11 October 2013 be suspended for a period of 5 months to afford the wife the opportunity to comply with those orders.

2. In support of that application in a case, the wife filed a financial statement and the affidavit of her financial advisor, Mr J.

3. In his affidavit, Mr J deposed that the wife’s financial circumstances had changed since the hearing of the matter before Justice Tree on 30 April 2013 such that she was no longer able to comply with his Honour’s order of 11 October 2013.

4. Mr J attributed that change of circumstances to the husband’s actions in lodging caveats over three of the wife’s properties in January 2013. He deposed that, as a result of those caveats being lodged, in mid-March 2013, ANZ suspended the overdraft facilities of the Wife’s business, C Pty Ltd (“the business”) and the wife’s personal line of credit, and called in all loan facilities.

5. Mr J went on to depose that although those caveats were later withdrawn, the ANZ maintained their position and required the loan facilities to be discharged by 25 October 2013. That deadline was later extended to 22 November 2013. The consequence of those loan facilities not being discharged, as Mr J deposed, was that the ANZ would shut down the direct debit EFTPOS facilities of the business, an action which could cause the company to become insolvent. 

6. Mr J deposed that, in order to refinance the business, the wife required “security” of $400,000 – an amount which was not within the means of the business. As such, she had obtained personal loan from her mother, Ms I, in the amount of $480,000 (“the Loan Agreement”). By way of security for the loan from her mother, Mr J deposed that the wife simultaneously entered into a general security agreement (“the General Security Agreement”) which created a floating charge over the equipment of the business in favour of Ms I.

7. In addition to the affidavit of Mr J filed 28 October 2013, the wife also filed a financial statement. Notably for the purposes of these reasons, under Part I of that statement entitled, “Property owned by you” the wife listed her British motor vehicle (“the vehicle”), in respect of which she was the sole owner. Pursuant to the wife’s financial statement, the vehicle was unencumbered.

8. On 13 November 2013 the husband filed a response to the wife’s application filed on 28 October 2013.  By way of that response, the husband sought orders for the wife’s application to be dismissed with costs on an indemnity basis.

The hearing of the wife’s application on 15 November 2013  

1. At the hearing of 15 November 2013, the wife sought leave of the Court to file two affidavits (one of which was 4 pages in length [“the first affidavit”] and the other which was 6 pages in length [“the second affidavit”]) which she swore after having been granted a s 128 certificate in respect of the content of both of those affidavits.

2. At paragraph 4 of the first affidavit, the wife deposed that she had entered into the Loan Agreement and the General Security Agreement in “late October”, by way of the former, Ms I had advanced to her the sum of $480,000 and by way of the latter, a floating charge had been created over the equipment of the company.

3. At paragraph 5 of the first affidavit, the wife deposed that, having received those funds, she was “…able to discharge the leases with ANZ Bank which at that point in time totalled $490,280.51.”

4. The wife went on to depose at paragraph 7 that while the General Security Agreement created a floating charge over the equipment of the business, she and Ms I had also intended that “…as part of the Loan Agreement that [the wife] would sell [the vehicle] so as to pay back a large portion of the funds that [the wife] owed to [Ms I].” However, following the signing of both agreements, though drafted by solicitors, might I add, she realised that “…no reference had been made to sale of the [vehicle]”. 

5. In light of such realisation, the wife deposed that she and Ms I agreed to rescind both agreements and then enter into further agreements which would include the sale of the vehicle. However, she was unable to provide a copy of such signed agreements to place before the Court on 15 November 2013 and instead deposed “I do anticipate that [Ms I] will certainly require the documents to be signed in order to secure the advance of $480,000 that she has already made for the benefit of myself and [C] Pty Ltd.”

6. Following a short adjournment whereby the parties entered into discussions but were unable to resolve the matter on their own terms, the husband handed up a set of proposed orders. Those draft orders provided that the extension of time with regard to Order 1 of Justice Tree’s interim property orders be granted provided that the wife met the specific terms of the orders as discussed below.

7. As regards the length of that extension, Hackett submitted that the extension ought be provided until 24 March 2014, being the date five months from the date of the filing of the wife’s application in a case on 28 October 2013. North SC submitted that such extension ought be provided until 20 April 2014. On this point, I accept the submissions of Hackett and find that the date of the extension ought be made in terms of the date which is five months from the filing of the wife’s initial application in a case.

8. Both parties made submissions with respect to the proposed orders of the husband, and I deal with those in the following paragraphs.

Proposed order 1(a)

1. The wife did not dispute order 1(a) proposed by the husband. That order was that:

   (a) the applicant wife forthwith cause the four trading accounts held by her with [F Pty Ltd] being accounts numbered …, …, … and … to be closed and/or sold and provide evidence that she has done so to the husband’s solicitors so soon thereafter as she may reasonably do and cause the proceeds of sale to be paid to the husband’s solicitor’s trust account (being NAB account BSB … account number … in the name of [G Trust]).   

2. In light of the agreement between counsel as regards subparagraph (a), I make orders to that effect.

Proposed order 1(b)

1. Subparagraph (b) of the husband’s proposed orders provided:

   (b)the applicant wife forthwith cause $20,000 of the monies held in the ANZ account number … to be paid to the husband’s solicitors’ trust account (being NAB account BSB … account number … in the name of [G Trust]).    

2. Both parties accepted that, in light of there being $36,608.43 available in the wife’s personal ANZ account at the date of the hearing of 15 November 2013, it was appropriate that it be ordered that the wife cause some of those monies to be paid to the husband. However, the amount of such payment was disputed.

3. North SC submitted on behalf of the mother that the amount ought be $10,000. He submitted that $20,000 was too onerous an amount in light of the wife’s claimed change of circumstances coupled with her obligations to meet expenses such as significant educational expenses for the three children of the relationship and a land tax payment of $20,565 (evidenced by the Office of State Revenue Land Tax Assessment Notice tendered and marked Exhibit 1) which was due on 19 November 2013.

4. Hackett submitted that the amount of $20,000 was appropriate in circumstances where no evidence as to the wife’s school expenses had been placed before the Court for the purposes of the wife’s application and where the non-payment of the land tax would simply result in a statutory charge and, as such, there was no present need to pay it.

5. In light of the proposal of the wife, the outstanding land tax and my findings and orders below with respect to the distribution of the proceeds of sale of the British motor vehicle, I consider it appropriate that the wife pay an amount of $10,000 to the husband from her personal ANZ bank account. 

Proposed order 1(c)

1. The husband’s proposed order 1(c) was as follows:

   (c)the applicant wife by herself and her servants or agents forthwith cause the bank guarantee provided in favour of the applicant wife’s solicitor from the sum of $30,010.00 withdrawn from ANZ account number … to be cashed and paid to the husband’s solicitors trust account (being NAB account BSB … account number … in the name of G Trust).  

2. At the hearing of 15 November 2013, North SC advised the Court that the wife had obtained a bank guarantee, pursuant to which the sum of $30,000 would be paid into the trust account of Jones Mitchell Lawyers, the wife’s solicitors, on 22 November 2013. The purpose of that payment would be to give effect to Justice Tree’s dollar for dollar order made on 11 October 2013, as it was anticipated that the wife’s legal representatives’ fees for the hearing of the application would total $15,000. 

3. In support of that guarantee, North SC relied on a bank statement of the applicant’s personal bank account, tendered and marked “Exhibit 2” which reflected a withdrawal of the amount of $30,010 on 12 November 2013. Hackett also made submissions by reference to that statement and the alleged guarantee.

4. On 22 November 2013, the wife’s solicitor, Mr Jones, filed an affidavit in which he deposed that it had been brought to his attention that the Court had been misled at the hearing of 15 November 2013 in respect of the withdrawal of $30,010 from the wife’s personal bank account.  As Mr Jones deposed, the wife had encountered difficulties in obtaining a bank guarantee and had not done so; however, she had not informed her legal representatives of this. Consequently, Mr Jones proceeded with the application on the understanding that a guarantee had been obtained by the wife. As Mr Jones deposed, he later discovered that the wife had drawn a bank cheque in the amount of $30,000 (the additional $10 reflected in the amount on the bank statement was identified as the fee for the bank cheque) payable to herself personally and had intended for that amount to be received by Jones Mitchell Lawyers on 22 November 2013.   

5. Mr Jones also deposed that on 22 November 2013, Jones Mitchell Lawyers received into their trust account $30,000 from the wife. Of that amount, $15,000 had been paid into the trust account of G Trust. in accordance with the dollar for dollar order of Justice Tree; the balance of $15,000 remained frozen in the Jones Mitchell Lawyers trust account pending my decision in respect of the wife’s application which is the subject of these reasons.  

6. As a result of that affidavit, this matter returned before me on an urgent basis on 25 November 2013. At that hearing, both parties accepted that it was necessary for the record to be corrected in respect of the guarantee. In addition, Hackett submitted that the wife had withdrawn the moneys so as to reduce her personal bank balance in order to demonstrate difficulty in complying with the orders of Justice Tree. Had the cheque been drawn in favour of the husband, Hackett submitted, those funds could have been used in partial discharge of Order 1 of Justice Tree’s order. Instead, half of those funds were applied in payment of the wife’s solicitors fees.

7. As to whether the remainder of the funds which are presently frozen in the trust account of Jones Mitchell Lawyers should be transferred to the husband in accordance with Justice Tree’s Order 1 or be used to meet the wife’s legal fees for the appearance of North SC on 15 November 2013, I accept the submissions of North SC on this point. In accordance with the existing order, the wife incurred expenses as a result of her legal fees and consequently, in order to maintain a level playing field between the parties in respect of these proceedings, she is to pay to the husband’s solicitors an amount equal to that which she incurred.

8. As such, I find that the amount of $15,000 in the Jones Mitchell Lawyers trust account ought be applied for the payment of the wife’s legal fees.

Proposed order 1(d) and matters concerning the vehicle

1. I turn to sub paragraph (d) of the husband’s proposed orders which provided:

   (d) the applicant wife forthwith deliver up the husband the [British motor vehicle] registration number “…” on the basis that he be appointed trustee for sale and the net sale proceeds be paid to the husband’s solicitors’ trust account (being NAB account BSB … account number … in the name of [G Trust]).   

2. North SC said at the hearing of the application on 15 November 2013 that the wife’s mother had, at the very least, an equitable interest in the vehicle and in those circumstances, such an order could not be made. In support, North SC drew upon paragraph 7 of the first affidavit of 15 November 2013, in which, as outlined above, the wife deposed that she and Ms I had agreed that they would rescind the Loan Agreement and the General Security Agreement and would draw up two new agreements to include the sale of the vehicle; part performance of such agreement, he submitted, was evidenced by the mother’s advance of the $480,000 pursuant to the Loan Agreement.

3. Hackett submitted on behalf of the husband that there was no moral or equitable charge in favour of Ms I pursuant to the content of her affidavit of 15 November 2013 and, further, to grant such a charge would be in breach of the wife’s undertaking. Rather, Hackett submitted that the wife merely had a prospective intention to sell the vehicle and repay Ms I.

The hearings of 2 and 6 December 2013

1. Though it appeared that the above was the end of the evidence, I called the parties back before me on 2 December 2013 to raise a further issue which arose upon my reading of the material. 

2. That issue was that the Loan Agreement, by way of clause 4.3, had in fact, created a charge over the personal property of the vehicle, and as such, various issues arose as a result. Having raised this clause with the parties, I required them to return before me on 6 December 2013 to hear further submissions on this point and the consequences which flowed as a result.

3. At the hearing of 6 December 2013, Mr Jones, the solicitor for the husband, confirmed by way of his submissions that the Loan Agreement and the General Security Agreement had been rescinded and that the new agreement between the wife and the mother had been entered into, though that agreement had not been formally executed by the wife and Ms I.

4. In support of such submissions, Mr Jones sought the leave of the Court to file two further affidavits, one of Ms I confirming the advance of the monies and the terms upon which that loan was advanced, and the other, of the wife, annexing the new Loan Agreement and the new General Security Agreement, both of which remained unsigned. I granted the husband leave to file those documents.

5. Mr Jones accepted that, as those documents were not executed, the wife’s case on the status of the vehicle was, at its highest, that there was an equitable charge over the vehicle in favour of Ms I as a result of the oral agreement to enter into the loan, part-performance of which was evidenced by the transfer of the said moneys. 

6. Importantly, in the affidavit of Ms I, she deposed that the first Loan Agreement and the first General Security Agreement had both been entered into on 18 October 2013. There are two points that come from such deposition. First, those agreements were entered into seven days after the interim property order of Justice Tree and second, those agreements were entered into despite the wife’s undertaking of February 2013.

7. On that point alone, there was sufficient evidence to support a decision that I ought not hear this application at all on the basis of the wife’s actions. And, indeed, such submission made by the husband, relying on the authorities of Fahmi & Fahmi (1995) 19 FamLR 517 and Watson & Watson [2013] FamCAFC 25. However, in the circumstances, and as foreshadowed by my earlier reasons in respect of proposed orders (a), (b) and (c), to disallow the application would not be of any benefit to the parties, particularly the husband.

8. It is not for this Court to make a finding as to whether the vehicle is subject to an equitable charge. What this Court is able to do, however, is make a finding that the vehicle is not subject to any legal charge. On the evidence before me, as conceded by the legal representatives for the wife, that is so. I do not take the view that such a charge as the wife purports to be over the vehicle, in the circumstances as detailed above, could defeat a legal order of this Court.

9. In those circumstances, I support the proposed order (1)(d) of the husband and make orders to that effect.

10. Further, I shall be making an order that the residual proceeds of sale be placed in the Jones Mitchell Lawyers trust account to be used for the purposes of the husband’s legal expenses in respect of the dollar for dollar order.  

The extension of time for the dollar for dollar order

1. In light of the circumstances of the case, I shall exercise my discretion pursuant to s 80(1) of the Act to allow Orders 2 – 5 of Justice Tree’s Order of 11 October 2013 to be suspended.

2. As to the date that the suspension ought be granted until, I do not accept the proposed order of the husband that the payment be suspended for five months.

3. Insufficient information has been put forward before me in this application about the current profitability of the company, being the wife’s major source of income, aside from the Balance Sheet from 30 September 2013. What I am aware of at the moment is that the company has been able to re-finance and is no longer under the immediate threat of insolvency. I also take into my consideration the affidavit of Mr J filed 28 October 2013 wherein at paragraph 23 he deposed that he did “…suspect that it may take the business 3 – 6 months to be able to recover from the financial difficulties” (my emphasis).

4. I am of the view that it would be neither just nor fair to suspend an order for five months in those circumstances, especially where, as was noted by North SC on an earlier issue in this application, that the rationale behind the order was to ensure a level playing field between the parties.

5. As such, I shall make orders that the suspension be in place until 27 January 2014 being the date three months from the filing of the wife’s application. I shall impose a term, however, that the suspension will only be operative once the residual proceeds of sale of the vehicle, to be held in the Jones Mitchell Lawyers trust account, are depleted.

I certify that the preceding fifty-four (54) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Bell delivered on 13 December 2013.

Associate: 

Date:  13 December 2013