CHOI & DANG & ORS (No.2)

[2020] FCCA 1196

FEDERAL CIRCUIT COURT OF AUSTRALIA

CHOI & DANG & ORS (No.2) [2020] FCCA 1196

Catchwords:
FAMILY LAW – Property – consideration of form of orders to be made to give effect to substantive judgment – parties submitting widely differing proposals – orders made to bring matter to as speedy a conclusion as practicable.

Legislation:

Bankruptcy Act 1966 (Cth), s.153B

Family Law Act 1975 (Cth), ss.4(1),78, 79, 90AE, 117B

Federal Circuit Court of Australia Act 1999 (Cth), s.76

Cases cited:

Duff & Duff (1977) FLC 90‑217

Lake & Brand (No.2) [2016] FamCA 945

Applicant: MS CHOI

First Respondent: MR DANG

Second Respondent: MR F DANG

Third Respondent: MR T DANG

Fourth Respondent: MR MASON

File Number: DGC 1847 of 2017

Judgment of: Judge Burchardt

Hearing date: Not applicable

Date of Last Submission: 28 April 2020

Delivered at: Dandenong

Delivered on: 21 May 2020

REPRESENTATION

Counsel for the Applicant: Not applicable

Solicitors for the Applicant: Sutherland Lawyers

Counsel for the First Respondent: Not applicable

Solicitors for the First Respondent: GR Lawyers

Counsel for the Second Respondent: Not applicable

Solicitors for the Second Respondent:	Accuro Legal
Counsel for the Third Respondent:	Not applicable

Solicitors for the Third Respondent:	John Snodgrass & Associates
Counsel for the Fourth Respondent:	Not applicable

Solicitors for the Fourth Respondent: Roser Lawyers

ORDERS

THE COURT DECLARES THAT:

1. The whole of the land known as Street R, Suburb S Victoria more particularly described in Certificate of Title Volume ... Folio ... (the “Street R, Suburb S Property”) is held by the Second Respondent on trust for the Second Respondent and the First Respondent in the following proportions:

   (a)50% to the Second Respondent;

   (b)50% to the First Respondent.

2. The whole of the land known as D Street, Suburb E Victoria 3168 more particularly described in Certificate of Title Volume ... Folio ... (the “D Street, Suburb E Property”) is held by the First Respondent on trust for the First Respondent and Third Respondent in the following proportions:

   (a)50% of the increase in the value of the property from the date of its purchase until the date of these orders to the First Respondent, which 50% is charged with the sums of $312,000 plus interest of $150,000 owed by the First Respondent to the Third Respondent.

   (b)The remainder to the Third Respondent.

3. The legal and equitable interests the First Respondent in the Street R, Suburb S Property and the D Street, Suburb E Property vested in the Fourth Respondent upon his appointment as Bankruptcy Trustee of the First Respondent, on 22 January 2019, in accordance with the provisions of the Bankruptcy Act 1966 (Cth).

4. Pursuant to section 90AE and/or 78 of the Family Law Act 1975 (Cth), the legal interests the First Respondent holds in the Street R, Suburb S Property and the D Street, Suburb E Property is held on trust for the Applicant and First Respondent in the following proportions:

   (a)80% to the Fourth Respondent;

   (b)20% to the Applicant.

THE COURT ORDERS THAT:

1. The parties, their solicitors and agents forthwith do all acts and things necessary to remove any caveat over the Street R, Suburb S Property and the D Street, Suburb E Property.

2. If any party does not comply with Order 5, the Registrar of the Federal Circuit Court of Australia is hereby appointed to sign a Withdrawal of Caveat on behalf of the said parties pursuant to section 106A of the Family Law Act 1975 (Cth) forthwith thereafter.

3. The Street R, Suburb S Property be placed on the market and sold as follows:

   (a)The Fourth Respondent shall apply to the President of the Real Estate Institute of Victoria to nominate a selling agent;

   (b)The Street R, Suburb S Property shall be sold by public auction with an advertising campaign as nominated by the selling agent.  The reserve price be set at as the amount valued by SS Group pursuant to letter of instruction dated 25 February 2020. 

   (c)If the Street R, Suburb S Property should fail to sell at auction it shall remain on the market for sale by private treaty. The sale price shall be nominated by the selling agent at a selling price which in the Agent’s opinion is a fair market price for the Street R, Suburb S Property.

   (d)The parties shall co-operate in every way in the sale of the Street R, Suburb S Property including:

   (i)     Making the keys available to the Selling Agent.

   (ii)Allowing inspection of the Street R, Suburb S Property at all times requested by the Selling Agent.

   (iii)Ensuring the Street R, Suburb S Property including the grounds are in a neat and clean condition at any time of inspection and at the time of auction by the Selling Agent.

   (iv)Signing all documents and doing all acts necessary to effect the inspection and sale of the property.

   (v)Providing vacant possession on settlement of the sale of the property.

   (e)A solicitor be selected within 7 days of the date of these orders to have conduct of the sale on behalf of the parties as Vendor, including the preparation of contracts and conveyancing relating to the sale.  In the absence of agreement, the Fourth Respondent shall nominate a firm of solicitors based in Melbourne.

   (f)The settlement period of the Street R, Suburb S Property shall be a period as nominated by the Selling Agent not exceeding 42 days (unless such longer or shorter time by agreement with the purchaser and the vendors).

   (g)In the event any party fails to comply with any of the orders 7(a) – (f) above then:

   (i)A writ for possession shall be issued in the Fourth Respondent’s favour;

   (ii)The First Respondent, Second Respondent and any occupiers of the Street R, Suburb S Property:

   (iii)   Vacate the property; and

   (iv)Remove any goods, garbage, chattels and/or belongings from the Property that have not vested in the Fourth Respondent;

   (v)The First Respondent, Second Respondent and any occupiers of the Street R, Suburb S Property must give the Fourth Respondent:

   (vi)   The keys to the Street R, Suburb S Property; and

   (vii)    Any alarm or access codes for the Street R, Suburb S Property.

   (h)On settlement of the sale of the Street R, Suburb S Property the proceeds of sale shall be paid in the following manner and priority:

   (i)All costs and expenses of sale including legal costs and disbursements, agents commissions, advertising expenses, valuer fees and auction expenses in respect of the sale;

   (ii)The amount required to discharge any mortgage held over the Street R, Suburb S Property;

   (iii)50% of the proceeds shall then be distributed to the Second Respondent.

   (iv)The remaining proceeds (50%) shall then be distributed to the Fourth Respondent in his capacity as Trustee of the Bankrupt Estate of Mr Dang, who shall hold 20% of funds distributed to him on trust for the Applicant and pay same to a bank account nominated in writing by her.

4. In the alternative to Order 7 above, in relation to the Street R, Suburb S Property, the Second Respondent must, within 7 days of the date of these Orders, duly notify the Solicitor for the Applicant, Mr John Sutherland of Sutherland Lawyers and Solicitor for the Fourth Respondent, Mr Raymond Roser of Roser Lawyers in writing if he intends to payout the Applicant’s and Fourth Respondent’s interest in the Street R, Suburb S Property.

5. Upon receipt of notification in accordance with Order 8 above, Order 7 herein will be stayed for a period of 35 days from the date of these Orders.

6. The Second Respondent, within 35 days from the date of these Orders, make sufficient funds available equal to 50% of the equity in the Street R, Suburb S Property calculated as follows:

   $2,750,000

   (being value of the Street R, Suburb S Property as valued by SS Group pursuant to letter of instruction dated 25 February 2020.)

   Less:

   $989,291.47

   (being the value of the mortgage as at 31 January 2020)

   divided by two

   (that is, value – mortgage / 2)

   equals

   $880,354.27

7. The Second Respondent pay the amount as calculated in Order 10 to the bank account nominated by the Fourth Respondent by 5.00PM on 35th day from the date of these Orders. If such payment is not made within 35 days from the date of these orders, the stay on Order 7 ceases to have effect.

8. The Fourth Respondent to hold 20% of any funds received in accordance with Order 11 on trust for the Applicant.

9. Within 7 days of receipt as Cleared Funds of the sum paid in accordance with Order 11, the Fourth Respondent shall:

   (a)Pay an amount equal to 20% of those funds to the account nominated by the Applicant; and

   (b)Relinquish his 50% interest in the Street R, Suburb S Property.

10. No party further encumber the Street R, Suburb S Property.

11. The D Street, Suburb E Property be placed on the market and sold as follows:

    (a)The Fourth Respondent shall apply to the President of the Real Estate Institute of Victoria to nominate a selling agent;

    (b)The D Street, Suburb E Property shall be sold by public auction with an advertising campaign as nominated by the selling agent.  The reserve price be set at as the amount valued by SS Group pursuant to letter of instruction dated 25 February 2020. 

    (c)If the D Street, Suburb E Property should fail to sell at auction it shall remain on the market for sale by private treaty. The sale price shall be as nominated by the selling agent at a selling price which in his/her opinion is a fair market price for the property.

    (d)The parties shall co-operate in every way with the selling agent including:

    (i)     Making the key available to the agent;

    (ii)Allowing inspection of the D Street, Suburb E Property at all times requested by the agent;

    (iii)Ensuring the D Street, Suburb E Property including the grounds are in a neat and clean condition at the time of inspection and auction;

    (iv)Signing all documents and doing all acts necessary to effect the inspection and sale of the property;

    (v)Providing vacant possession on settlement of the sale of the property.

    (e)A solicitor be selected within 7 days of the date of these orders to have conduct of the sale on behalf of the parties as Vendor, including the preparation of contracts and conveyancing relating to the sale.  In the absence of agreement, the Fourth Respondent shall nominate a firm of solicitors based in Melbourne.

    (f)The settlement period of the properties shall be as nominated by the selling agent not exceeding 42 days (unless such longer or shorter time by agreement between the purchaser and the vendors).

    (g)In the event any party fails to comply with any of the orders 15(a) – (f) above then:

    (i)A writ for possession shall be issued in the Fourth Respondent’s favour;

    (ii)The First Respondent, Third Respondent and any occupiers of the D Street, Suburb E Property:

    (iii)   Vacate the property; and

    (iv)Remove any goods, garbage, chattels and/or belongings from the Property that have not vested in the Fourth Respondent;

    (v)The First Respondent, Third Respondent and any occupiers of the Street R, Suburb S Property must give the Fourth Respondent:

    (vi)   The keys to the D Street, Suburb E Property; and

    (vii)    Any alarm or access codes for the D Street, Suburb E Property.

    (h)On settlement of the D Street, Suburb E Property the proceeds of sale shall be paid in the following manner and priority:

    (i)All costs and expenses of sale including legal costs and disbursements, agents commissions, advertising expenses, valuer fees and auction expenses in respect of the sale;

    (ii)The amount required to discharge any mortgage held over the D Street, Suburb E Property;

    (iii)50% of the proportion of the remaining proceeds that represent the difference between the purchase price of $315,000 and the sale price, shall then be distributed to the Fourth Respondent in his capacity as Trustee of the Bankrupt Estate of Mr Dang.

    (iv)The remaining proceeds shall then be distributed to the Third Respondent.

    (v)The Fourth Respondent then pay to the Third Respondent $312,000 plus $150,000 in respect of interest.

    (vi)Of the funds remaining, then 20% of these funds to be paid to an account nominated by the Applicant.

1. No party further encumber the D Street, Suburb E Property.

2. The First and Fourth Respondents do all acts and things and sign all documents necessary transfer to the Applicant at the Applicant’s expense the Motor Vehicle 1 within 14 days of these orders and the First Respondent shall not encumber the vehicle in any way.

3. In the event that any of the parties refuses or neglects to do any act or execute any document, deed or instrument to give effect to these orders, the Registrar of this court being satisfied of such failure, or neglect or default by way of affidavit evidence be appointed pursuant to section 106A of the Family Law Act 1975, to execute such document, deed or instrument in the name of such party and to do all acts and things necessary to give validity to the operation of these orders.

IT IS NOTED that publication of this judgment under the pseudonym Choi & Dang & Ors (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT DANDENONG

DGC 1847 of 2017

MS CHOI

Applicant

And

MR DANG

First Respondent

MR F DANG

Second Respondent

MR T DANG

Third Respondent

MR MASON

Fourth Respondent

REASONS FOR JUDGMENT

Introductory

1. These reasons for judgment are designed to indicate why the final orders that are published together with these reasons for judgment are made in the form that they are.  They do not deal in terms with each and every matter raised in the all too voluminous submissions filed by the parties, in support of the various forms of orders for which they have contended.  To the extent that any matter is not the subject of express comment, the propounder of that proposition can properly infer that I have considered it but rejected it.

The History of the Matter

1. On 7 February 2020 I published reasons for judgment following a five day trial in December 2019.  As indicated in the last paragraph of those reasons for judgment, I gave the parties an opportunity to consider the judgment and make further submissions as to what orders might be made.  On the same day, and by consent, I made machinery orders designed for the parties to attempt to achieve agreement as to proposed orders to give effect to the Court’s judgment, but I listed the matter on 30 March 2020 to take oral submissions.

2. I also ordered valuations of the D Street, Suburb E and Street R, Suburb S properties with which the judgment was so significantly concerned, together with updated mortgage statements.

3. Unfortunately, the COVID‑19 emergency emerged prior to the return date and accordingly, on 24 March 2020, I made further orders in chambers requiring the parties to file and serve the minutes of orders they sought, together with written submissions and a timetable for these to be received.

4. Thereafter, it is not unfair to say that my associate has been besieged with all too numerous communications from the various parties, whose ferocious financial instincts show no signs of waning.  I have had to give an interim ruling about the receipt of materials filed without leave.  I note that in the various matters the parties have put before the Court in their written submissions, the parties have traversed the desirability of an annulment of the bankruptcy of the first respondent husband and a very late filed application in a case by the same person, to which his trustee in bankruptcy takes objection.

The Relevant Parts of the First Judgment

1. I note that, at paragraph 227, I accepted that the husband had improperly obtained from his brother Mr F Dang the sum of $230,000 by a redraw on the mortgage of the D Street, Suburb E property and a further withdrawal of some $82,000 from the same source.  I found that the husband should account to his brother, with interest from the date of the drawdown.  The drawdown in relation to the Street R, Suburb S property was in 2008 when it was purchased, and the drawdown of the $82,000 was in about 2009.

2. I note the wife’s evidence was that the increase in the mortgage following these two borrowings went from $2,000 a month to $3,000 a month (paragraph 82).  The husband’s evidence is that he still receives rent from the D Street, Suburb E property of approximately $2,000 per month (paragraph 132).  The evidence of Mr F Dang was that the mortgage on the D Street, Suburb E property in 2002 was $252,000, but following the husband’s unlawful refinancing, it went up to $480,000 and then $570,000 respectively (paragraph 159).

3. I note that the only mortgage account in evidence in respect of the D Street, Suburb E property, being “D-3” to Mr F Dang’s affidavit affirmed 6 December 2019, appears to show monthly mortgage payments of approximately $1,500 in respect of the $250,000‑odd loan in 2002.

4. At paragraph 228 of the judgment, I noted that the property in D Street, Suburb E was owned jointly by the husband and his brother, pursuant to the terms of a 2002 agreement, and that the husband was entitled to half the capital appreciation of the property since its purchase.

5. I then, at paragraph 229, repeated that the husband must repay the monies he had taken, together with interest from the date of the withdrawals.

6. Finally, I declared that the property in Street R, Suburb S was, in equity, jointly owned by the husband and Mr F Dang.

7. At paragraph 234, I noted that the husband plainly had an interest in both the D Street, Suburb E and Street R, Suburb S properties and that they would have to be valued or sold.  Once the pool was thus ascertained, it would be practical to come to the dollars and sense between the parties.

The Applicable Law

1. Given that the parties have raised questions as to what should or should not be included in the property pool as a matter of law, it is appropriate to remind ourselves of some basal propositions.

2. First, the trustee in bankruptcy is right to point out that whatever interests the husband had in any property are vested in the trustee by reason of the husband’s bankruptcy, and are no longer his property.

3. The interests that I have declared in the judgment are plainly, in my view, “property”, within the meaning of the Family Law Act 1975 (Cth) (“the Act”), contrary to the various submissions advanced to the opposite effect.

4. Pursuant to section 79 of the Act, it is provided:

   (1)In property settlement proceedings, the court may make such order as it considers appropriate:

   (a)in the case of proceedings in respect to the property of the parties to the marriage or either of them – altering the interests of the parties to the marriage in the property; or

   (b)in the case of proceedings with respect to the vested bankruptcy property in relation to a bankrupt party to the marriage – altering the interests of the bankruptcy trustee in the vested bankruptcy property;

   including:

   …

   (d)an order requiring:

   (i)     either or both of the parties to the marriage; or

   (ii)    the relevant bankruptcy trustee (if any);

   to make, for the benefit of either or both of the parties to the marriage or a child of the marriage, such settlement or transfer of property as the court determines.

5. Pursuant to section 78 of the Act, the Court may:

   (1)In proceedings between the parties to a marriage with respect to existing title or rights in respect of property, the court may declare the title or rights, if any, that a party has in respect of the property.

   (2)Where a court makes a declaration under subsection (1), it may make consequential orders to give effect to the declaration, including orders as to sale or partition and interim or permanent orders as to possession.

1. Pursuant to section 90AE of the Act, the Court, relevantly:

   (2)In proceedings under section 79, the court may make any other order that:

   (a)directs a third party to do a thing in relation to the property of a party to the marriage; or

   (b)alters the rights, liabilities or property interests of a third party in relation to the marriage.

   (3)The court may only make an order under subsection (1) or (2) if:

   (a)the making of the order is reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage; and

   (b)if the order concerns a debt of a party to the marriage – it is not foreseeable at the time that the order is made that to make the order would result in the debt not being paid in full; and

   (c)the third party has been accorded procedural fairness in relation to the making of the order; and

   (d)the court is satisfied that, in all the circumstances, it is just and equitable to make the order; and

   (e)the court is satisfied that the order takes into account the matters mentioned in subsection (4).

   (4)The matters are as follows:

   (a)the taxation effect (if any) of the order on the parties to the marriage;

   (b)the taxation effect (if any) of the order on the third party;

   (c)the social security effect (if any) of the order on the parties to the marriage;

   (d)the third party’s administrative costs in relation to the order;

   (e)if the order concerns a debt of a party to the marriage – the capacity of a party to the marriage to repay the debt after the order is made;

   (f)the economic, legal or other capacity of the third party to comply with the order;

   (g)if, as a result of the third party being accorded procedural fairness in relation to the making of the order, the third party raises any other matters – those matters;

   …

2. “Property settlement proceedings” is defined in section 4(1) as:

   (a)in relation to the parties to a marriage – proceedings with respect to:

   (i)the property of the parties or either of them; or

   (ii)the vested bankruptcy property in relation to a bankrupt party to the marriage; or

   …

3. In section 4(1), “property” is defined as:

   (a)In relation to the parties to a marriage or either of them – means property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion; or

   …

4. As long ago as 1977, the Full Court of the Family Court in Duff & Duff (1977) FLC 90‑217 (“Duff”), said, at page 76‑132:

   It seems unnecessary to attempt to set out a catalogue of what “property” may include in the content of s 79. It is sufficient for the purposes of this case to say that “property” means property both real and personal and includes choses in action. The word “property” has been the subject of a very large volume of judicial interpretation. A compendious description of it is to be found in Halsbury, 3rd ed, Vol 3, par 541 with multiple references to cases. It is sufficient for our purposes to refer to that definition which states:

   “Property is that which belongs to a person exclusive of others and can be the subject of bargain and sale. It includes goodwill, trademarks, licences to use a patent, book depts, options to purchase, life policies and the rights under a contract.”

   Chitty J in Re Earnshaw-Wells [1894] 3 Ch 156 at 157 said:

   The expression ‘property’ is not a term of ancient art. The word is discussed in Williams On Real Property and incorporeal hereditaments are found under the title of real property. In that work there is a well-reasoned explanation of the word ‘property’ which says that it is used in three senses. ‘Property’ may denote the thing to which a person stands in a certain relation, and also the relation in which the person stands to the thing.”

   The word has also been comprehensively defined in statutes both State and Imperial relating to married women's property. We do not propose to instance those definitions here, but in Jones v Skinner (1835) 5 LJ Ch 90 Langdale MR said:

   “Property is the most comprehensive of all terms which can be used inasmuch as it is indicative and descriptive of every possible interest which the party can have.” This is a definition which commends itself to us as being descriptive of the nature of the concept of “property” to which it is intended that the Family Law Act 1975 should relate and over which the Family Court of Australia should have jurisdiction to intervene when disputes arise in relation to the property of spouses as between themselves or when the court is asked to exercise the powers conferred upon it under Pt VIII or its injunctive powers under s 114 so far as they are expressed to relate to a property of the party to a marriage.

1. The Full Court went on to expand further on the very general definition that “property” should be given under the Act.

2. In Spry v Kennon [2008] HCA 56; (238) CLR 366, French CJ referred to the decision in Duff and said at [54]:

   Section 79 confers a wide discretionary power to vary the legal interests in any property of the parties to a marriage or either of them and to make orders for a settlement of property in substitution for any interest in the property. It is subject to the limitation that it validly applies only with respect to a claim based on circumstances arising out of the marriage relationship. The word "property", appearing in the section, construed by reference to its ancestry in matrimonial causes statutes, has been given a wide meaning. In 1977 the Full Court of the Family Court said (and part of the extract referred to above from Duff was set out).

3. Hayne and Gummow JJ said at [89]:

   The phrase in par (ca) "with respect to the property of the parties to the marriage or either of them" should be read in a fashion which advances rather than constrains the subject, scope and purpose of the legislation. In particular, as statements by this Court illustrate, the term "property" is not a term of art with one specific and precise meaning. It is always necessary to pay close attention to any statutory context in which the term is used. In particular it is, of course, necessary to have regard to the subject matter, scope and purpose of the relevant statute.

1. Their Honours went on at [91] to quote, with apparent approval, a further passage from Duff, part of which I have extracted above.

2. The other judgments did not touch upon the judgment of Duff at all, but it seems clear, in my respectful view, that the broad constructional approach propounded by the Full Court in Duff remains good law.

3. It should be noted, in parenthesis, that this expressly destroys the submission of one of the respondents that the husband’s interest in the D Street, Suburb E property, being one arising under a contract, is not “property” within the meaning of the Act.

The Property Pool

1. The wife is in possession of a Motor Vehicle 1 which has been paid out and it is common cause that it is still registered in the husband’s name and an order must be made for that to be transferred to her.  There is no valuation of it before the Court and it has been in her possession for a considerable period of time post‑separation.  While it is a resource of the wife, it does not, in my view, alter the 80/20 division I have earlier referred to of the parties’ real life assets, which are the husband’s interest in the D Street, Suburb E and Street R, Suburb S properties.

2. I said in the first judgment, at paragraph 202, relevantly:

   The agreement was that the Husband would, in effect, get half the capital appreciation for the work that he did on the property and for managing it and ensuring that the mortgage was paid.

1. This paragraph was the springboard for the finding, at paragraph 228:

   I find that the property in D Street, Suburb E is owned jointly by the Husband and his brother pursuant to the terms of the 2002 agreement. The Husband is therefore entitled to half the capital appreciation of the property since its purchase.

1. In order to give effect to my judgment, the husband must now be paid half the capital appreciation of the D Street, Suburb E property from 2002 until now.  The property was bought for $315,000 and is now valued at $1,590,000.  Half that capital appreciation ($637,000) must be paid to the brother.  Mr F Dang does not want the property to be sold because it would accrue capital gains tax, but that was always in fact the deal.  Because the husband was always to get half the capital appreciation, it follows inexorably that it was agreed that the property would, after a period of time, be sold, or else he would get nothing at all.  Since capital gains tax was always going to be payable, the protestations made by the parties in this regard are, in my view, untenable.

2. Furthermore, the interest that the husband has in the property (and his legal interest is vested presently in his trustee) can only be effected by a payment to the trustee.

3. It has not been necessary for me to construe a trust in favour of Mr F Dang in respect of the D Street, Suburb E property.  Plainly, the husband held his legal interest on constructive trust for himself and his brother in terms of the 2002 agreement as I had defined it.  Were it necessary to do so, however, I would make appropriate declarations to that effect, but I am not persuaded that it is necessary.  What is necessary is that a payment be made to the trustee and 20 per cent of it given to the wife (subject to what follows as to payments back to the third respondent).

4. In respect of the Street R, Suburb S property, for the reasons set out at paragraph 225, balancing a number of competing considerations, I decided that a 50 per cent division of the proceeds of the Street R, Suburb S property was appropriate.  I found, at paragraph 221, that this sprang from a reliance by the husband on the part of an assumption created by Mr F Dang that the husband would have an interest in the property.

5. In my view, it seems reasonably clear that the Street R, Suburb S property was bought for $1,150,000 and now has a value of $2,750,000.  That leaves an equity of $1,600,000.  Half of that figure must be paid to the trustee.  Once again, Mr F Dang does not want the property to be sold because of capital gains tax issues.

6. As with the D Street, Suburb E property, this being something I omitted to mention earlier, nothing is known of the personal taxation circumstances of Mr F Dang and it may or may not be the case that they would be liable to pay tax at the maximum applicable GST rate.  They may have other capital losses to offset and, indeed, there was reference in the evidence more generally to failed ventures here and there.

7. Nonetheless, if Mr F Dang is not able to provide these funds to the trustee, the property will have to be sold. No other outcome will give the husband and through him, the wife, justice and equity as against Mr F Dang.

8. This then leaves the question of the repayments of the monies owing.  The husband unlawfully borrowed $312,000 and needs to pay interest.  Mr F Dang calculates the interest at in excess of half a million dollars.

9. This is not, in my view, an appropriate outcome.  Interest is, of its nature, generally a factor required to compensate a person who may have been deprived the use of funds.  The evidence makes it clear that what really happened as a result of the additional borrowing made by the husband, the mortgage went from some $252,000 about $565,000.  

10. As I have earlier indicated, the available evidence in respect of interest charged, like so many things in this difficult case, is very difficult to work out.  But I do know that in 2002, the interest payable was of the order of roughly $1,200 per month. That sum was more than doubled by the husband’s unlawful borrowings.  Obviously the interest on the mortgage increased to a total of about $2,500 per month.  

11. I note that the limited information to be gleaned from “D-3” to Mr F Dang’s affidavit affirmed 6 December 2019 shows from its inception that the mortgage was always being met. Given the keen attention the parties have to their finances, there is no reason to doubt that this always remained the case although I note that Mr F Dang has deposed to having made additional cash contributions in relatively minor amounts over time. Because rents must have increased significantly in the period of 2002 until now, any lineal calculation so to speak of what the increase in borrowing may have cost Mr F Dang would not provide an accurate outcome. In the end, this case is about trying to do justice and equity between the parties.

12. The Court’s power to award interest is contained either in section 117B of the Family Law Act 1975 (Cth) or in section 76 of the Federal Circuit Court of Australia Act 1999 (Cth) in non-family law proceedings. This raises an intriguing question because there is no doubt that the substantive proceedings between the parties are family law proceedings, but in truth the proceeding as between the first and third respondent is perhaps more properly characterised as a general law claim being determined within the Court’s accrued jurisdiction. The Court’s power under section 76 of the Federal Circuit Court of Australia Act 1999 (Cth) provides in subsection 76(3)(c) and (d) relevantly:

    (c)order that there be included in the sum for which judgment is given interest at such rate as the Federal Circuit Court of Australia or the Judge thinks fit on the whole or any part of the money for the whole or any part of the period between:

    (i)the date when the cause of action arose; and

    (ii)the date as of which judgment is entered; or

    (d)without proceeding to calculate interest in accordance with paragraph (c), order that there be included in the sum for which judgment is given a lump sum in lieu of any such interest.

13. Under section 117B(1) of the Family Law Act 1975 (Cth):

    Subject to any order made by the court under subsection (2), where, in proceedings under this Act, a court makes an order for the payment of money (other than an order for the payment by way of maintenance of a periodic sum), interest is payable, at the rate prescribed by the applicable Rules of Court, from:

    (a)  the date on which the order is made; or

    (b)  the date on which the order takes effect;

    whichever is later, on so much of the money as is from time to time unpaid.

14. However subsection (2), there is an exception:

    A court that makes an order for the payment of money as mentioned in subsection (1) may order that interest is not payable on the money payable under the first-mentioned order or may order:

    (a)  that interest is payable at a rate specified in the order, being a rate other than the rate prescribed by the applicable Rules of Court; or

    (b)  that interest is payable from a date specified in the order, being a date other than the date from which the interest would be payable under subsection (1).

15. In my view, these are as least as between the first and third respondent properly not described as family law proceedings although they have undoubtedly been ventilated in the course of what looked at are globally family law proceedings. This means that the Court has the power to make such order as the judge thinks fit. For example, power to order interest at such a rate that the judge thinks fit (section 76(3) (c)) or to order a lump sum without calculating interest (section 76(3)(d)). Further, I note that the Court is not obliged to order interest in any event even if the matter is dealt with in terms of section 117B of the Family Law Act 1975 (Cth) or may order interest at any rate thought appropriate.

16. In my opinion the husband having unlawfully further borrowed some $312,000 when the original mortgage was $252,000 (with monthly interest of $1,200), and doing the best one can in this area of imprecision,  the rent would have increased by approximately $1,500 a month or something slightly over that figure. There is nothing in the materials filed before the Court to suggest that that mortgage ever fell into arrears, and no doubt this would be explained by the likely increase in rents that must have occurred between 2002 and 2008-2009 when the unlawful borrowings took place. The net effect must have been that instead of the additional rent reducing the mortgage, the funds were applied in the additional interest on the mortgage at least in part.

17. In the end, and bearing in mind that the first respondent with the assistance of Ms Choi attended to the payments of the mortgage, the tenanting and the like, I think $1,500 per month for the approximately 11 years that the monies had been borrowed is a fair starting point, but I propose to fix the sum payable at $150,000 to reflect the - necessarily impossible to quantify in any precise way - contributions made by first respondent and the applicant. Unsurprisingly the parties have differing views of the mechanics as to the repayment of these amounts. In my view the submissions of the trustee dated 14 April 2020 at paragraph 30 are those that reflect justice and equity in this matter: “the Applicant wife had the benefit of the unauthorised drawdowns insofar as they were applied to the purchase or improvement of the Street R, Suburb S property, in which she has an interest. For those reasons she should also bear the burden of the repayment of funds drawn from the D Street, Suburb E property mortgage”.  In my view, that submission is entirely correct.

Other matters

1. A number of the respondents have submitted orders which contemplate the annulment of the first respondent’s bankruptcy. No party to the proceeding sought an annulment of the bankruptcy prior to the judgment being handed down. It was open to the parties to have contemplated a proper application subject to section 153B of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) but none of them sought to do so. All of the submissions made in support of the annulment of the bankruptcy are cast very much in terms of trying to promote the particular interests of the respondents and in my view to disadvantage the applicant. The submissions of the trustee in bankruptcy as to why the annulment should not be now permitted are entirely cogent and in my view thoroughly dispose of those parts of the applications presently before the Court seeking such annulment.

2. Further, the third respondent is in my view being fully compensated for the monies that were abstracted by the first respondent and then invested in the Street R, Suburb S property. Even if it were otherwise lawful, which I do not think it is, there is no occasion for ascribing any of the increase in value in the Street R, Suburb S property to the benefit of the third respondent.

3. Next, all too much has been said about costs. This is a proceeding to which section 117 of the Act would prima facie apply. Certainly this would be the case between the husband and the wife. In so far as it might arise under the Court’s accrued jurisdiction, no party has had such overwhelming success that I would be minded to make a costs order in favour of any particular party in any event. Indeed the parties’ positions inter se as to costs are mainly not seeking costs. The question of the trustee’s costs, which is the main area of controversy, are in my view properly dealt with in the relevant sections of the Bankruptcy Act as the trustee in bankruptcy submits.

4. The application to have a notation made as to the interests of Ms G is one that can be dealt with shortly. For the reasons propounded by the Trustee, it is wholly inappropriate to contemplate making such a notation.

5. Next, I do not accede to request of the applicant wife that the period for auction be extended to 120 days. I surmise that the solicitor and the selling agent will have their work cut out for them effecting the sale of these properties in the event that the purchase out of interests are not taken up. The parties simply need to get on with it and the sort of jostling for position that is otherwise is likely to take place is in my view entirely undesirable.

1. I note that the trustee has sought various orders relating to the bankruptcy of the first respondent. As I have already indicated, I am not persuaded that it is appropriate for the Court to embark upon what is likely rapidly (given the history of the matter generally) to become a protracted and disputed area of difficulty that will inevitably arise if orders are made seeking to compel the first respondent to take any proactive steps to cooperate with his trustee. There appears to be markedly absence so far.

2. If the sale of either of the properties engenders excess funds such that the trustee is in a position to contemplate, after taking such steps as may be necessary for the proper administration of the estate, to pay out and annul the bankruptcy then so be it. Those are matters for another day.

Conclusion

1. In the circumstances, I have drawn up orders which largely reflect the trustee’s proposals.  It will be seen that I have adapted the proposals for sale to avoid the inevitable disputation that would otherwise occur.

2. It will be noted that I have provided, as the Trustee’s draft minute suggested, an alternative mechanism to enable Mr F Dang to pay out the first respondent’s interest in the Street R, Suburb S property, thus avoiding the possible tax implications of which complaint is made. Despite turning my mind to it (indeed I had the Trustee toward a possible draft order to this effect), I have not done so in respect of the D Street, Suburb E property. This arises because the methodology involved in the Street R, Suburb S alternative is simply not practicable. As I have already indicated, the true net effect of the unlawful borrowings by the first respondent upon the ultimate net outcome of the D Street, Suburb E mortgage is impossible to gauge. Nonetheless, the orders that I am making in effect provide full recompense to the third respondent Mr F Dang, for the first respondent’s extraction of the funds. To enable Mr F Dang to purchase out his brother’s interest by taking the net increase in the value of the price of the D Street, Suburb E property and then notionally removing the mortgage would be in effect  to require the first respondent to pay twice over for the same thing. As I have indicated, there is simply no way of calibrating exactly, or indeed in any more meaningful way than I have already done so above, what loss was occasioned to Mr F Dang by the unlawful borrowings. There is just no methodology that would produce an outcome that is just and equitable for all concerned, bearing in mind that one of the parties in respect of whom the Court is seeking to do justice and equity is the applicant wife.  Furthermore, and entirely unlike the Street R, Suburb S property, the original agreement always contemplated the sale of the D Street, Suburb E property. In my opinion it is appropriate that finality in respect of the matter be achieved, and in respect of the D Street, Suburb E property, it is not appropriate in all the circumstances that any other outcome than the sale of the D Street, Suburb E property take place.

3. I will also order all relevant parties to remove any caveats.  There is clearly power to do so (see, for example, Lake & Brand (No. 2) [2016] FamCA 945). I note that it is asserted that one of the parties’ solicitors has filed a caveat and that will need to be removed also, if it exists.

4. I will also order that the solicitor to have charge of the sale of either of the properties be appointed by the trustee, so that there is no opportunity for any party to deal improperly with the proceeds of any sale.

I certify that the preceding fifty-eight (58) paragraphs are a true copy of the reasons for judgment of Judge Burchardt

Associate:

Date: 21 May 2020