Coshott v Coshott

Case [2017] FCA 1239

FEDERAL COURT OF AUSTRALIA

Coshott v Coshott [2017] FCA 1239

File number: NSD 1412 of 2009
Judge: BROMWICH J
Date of judgment: 20 October 2017
Catchwords: PRACTICE AND PROCEDURE – enforcement of judgments – whether garnishee order can compel statutory trustees for sale to make payment from moneys payable to a beneficiary in satisfaction of a judgment debt – where trustees for sale have paid moneys sought by garnishee order into Court – whether obligation on trustees for sale to account to the beneficiary for her interest from the proceeds of sale of property is a “debt” for garnishment purposes
Legislation:

Federal Court of Australia Act 1976 (Cth), s 53

Judiciary Act 1903 (Cth), s 79

Civil Procedure Act 2005 (NSW), s 117

Conveyancing Act 1919 (NSW), ss 66D, 66G(1),(7), 66F(2), 66H

Federal Court Rules 2011 (Cth), rr 2.43, 41.10

Cases cited:

Application of Richard Albarran; Harb v Harb [2010] NSWSC 1251

Abbott v Pegler (1980) 1 BPR 97,025

Coshott v Coshott [2016] FCA 966

Coshott v Crouch [2017] FCAFC 135

Coshott v Learoyd [2001] FCA 88

Coshott v Prentice [2014] FCAFC 88; 221 FCR 450

Dixon v Roy (1991) 5 BPR 97,390

Hughes v Egger (No 2) [2005] NSWSC 323; 12 BPR 22,791

MacDiarmid v MacDiarmid [1957] 74 WN (NSW) 170

Date of hearing: 12 October 2017
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Category: Catchwords
Number of paragraphs: 33
Counsel for the Applicants on request for enforcement and interlocutory application: Mr J Johnson
Solicitor for the Applicants on request for enforcement and interlocutory application: O’Neill Partners Commercial Lawyers
Counsel for the Applicants on interlocutory applications: Ms M Castle
Solicitor for the Applicants on interlocutory applications: CKB Associates Lawyers
Counsel for the Respondent on the interlocutory applications: Mr O Jones
Solicitor for the Respondent on the interlocutory applications: Comino Prassas

ORDERS

NSD 1412 of 2009
BETWEEN:

MAXWELL WILLIAM PRENTICE

Applicant on request for enforcement and interlocutory application
AND:

LJILJANA COSHOTT

Respondent on request for enforcement and interlocutory application
AND BETWEEN:

STEPHEN BARRY & MARTIN BOARD

Applicants on interlocutory applications
AND:

LJILJANA COSHOTT

Respondent on interlocutory applications
Arising out of proceedings involving the parties listed in the Schedule

JUDGE:

BROMWICH J

DATE OF ORDER:

20 OCTOBER 2017

THE COURT ORDERS THAT:

1.Under r 2.43 of the Federal Court Rules 2011 (Cth), the following payments be made to the interlocutory applicants out of the moneys that were paid into Court pursuant to the orders made by Buchanan J on 9 March 2016:

(a)$14,153.42 to Mr Barry and Mr Board;

(b)$299,000 to Mr Prentice;

(c)$6,842.58 to Mr Barry; and

(d)interest in the account at the time the principal sums are paid out, in the following proportions:

(i)4.4% to Mr Barry and Mr Board;

(ii)93.5% to Mr Prentice; and

(iii)2.1% to Mr Barry.

2.A garnishee order be issued in accordance with the request for enforcement by Mr Prentice dated 27 March 2017 and filed…

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AGLC
Coshott v Coshott [2017] FCA 1239
Case
[2017] FCA 1239
Decision Date

CaseChat Overview and Summary

In the Federal Court of Australia, Coshott v Coshott was a case involving a dispute over the enforcement of a judgment debt through a garnishee order. The primary issue was whether a garnishee order could compel statutory trustees for sale to make a payment from the proceeds of the sale of a property to satisfy a judgment debt. The trustees had already paid the relevant moneys into court. The court had to determine if the trustees' obligation to account to the beneficiary for their interest from the proceeds of the sale of the property constituted a "debt" for garnishment purposes.

The court's reasoning hinged on the interpretation of the phrase "debts that are due or accruing from the garnishee to the judgment debtor at the time of service of the order" as found in section 117 of the Civil Procedure Act 2005 (NSW). The court referred to the case of Coshott v Learoyd, where similar issues were considered. The court found that the obligation of the trustees to account for the net proceeds of sale constituted a debt. This interpretation aligned with the broad definition of "debt" as any sum of money now payable or becoming payable due to a present obligation. The court concluded that where a trustee is under a present obligation to pay money to a beneficiary, the trustee becomes a debtor of the beneficiary in respect of those funds, thus constituting a debt.

The court ordered that specific payments be made to the interlocutory applicants from the moneys paid into court. Additionally, a garnishee order was to be issued to enforce the judgment. Mrs Coshott was directed to pay the costs of the interlocutory applicants, to be determined by a Registrar. The court also set deadlines for the submission of affidavits and submissions regarding the basis and quantum of costs.

Orders

Orders of the court

1. Under r 2.43 of the Federal Court Rules 2011 (Cth), the following payments be made to the interlocutory applicants out of the moneys that were paid into Court pursuant to the orders made by Buchanan J on 9 March 2016:

(a) $14,153.42 to Mr Barry and Mr Board;

(b) $299,000 to Mr Prentice;

(c) $6,842.58 to Mr Barry; and

(d) interest in the account at the time the principal sums are paid out, in the following proportions:

(i) 4.4% to Mr Barry and Mr Board;

(ii) 93.5% to Mr Prentice; and

(iii) 2.1% to Mr Barry.

2. A garnishee order be issued in accordance with the request for enforcement by Mr Prentice dated 27 March 2017 and filed on 28 March 2017.

3. Mrs Coshott pay the costs of the interlocutory applicants (Mr Barry, Mr Board and Mr Prentice) to be fixed by way of a lump sum.

4. The determination of the basis upon which costs are to be paid be made on the papers.

5. The quantum of the lump sum costs order be determined by a Registrar.

THE COURT DIRECTS THAT:

6. By or before 4.00 pm on 3 November 2017, the interlocutory applicants (Mr Barry, Mr Board and Mr Prentice) file and serve:

(a) any affidavit in support of costs being awarded on an indemnity basis;

(b) any submissions, not longer than three pages, on costs being awarded on an indemnity basis; and

(c) an affidavit constituting a Costs Summary in accordance with paragraphs 4.10 to 4.12 of the Court’s Costs Practice Note (GPN-COSTS).

7. By or before 4.00 pm on 17 November 2017 the interlocutory respondent (Mrs Coshott) file and serve:

(a) any affidavit opposing costs being awarded on an indemnity basis;

(b) any submissions, not longer than three pages, on costs not being awarded on an indemnity basis; and

(c) any Costs Response in accordance with paragraphs 4.13 and 4.14 of the Costs Practice Note (GPN-COSTS).

8. In the absence of any agreement having been reached on the quantum of the costs order to be made and notified by email to the associate to Justice Bromwich by or before 4.00 pm on 1 December 2017, the appropriate lump sum figure for the applicant’s costs be referred to a Registrar for determination.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Section 53 of the Federal Court Act provides:53 Enforcement of judgment(1)Subject to the Rules of Court, a person in whose favour a judgment of the Court is given is entitled to the same remedies for enforcement of the judgment in a State or Territory, by execution or otherwise, as are allowed in like cases by the laws of that State or Territory to persons in whose favour a judgment of the Supreme Court of that State or Territory is given.(2)This section does not affect the operation of any provision made by or under any other Act or by the Rules of Court for the execution and enforcement of judgments of the Court. Rule 41.10 of the Federal Court Rules provides:41.10 Execution generally(1)A party who wants to enforce a judgment or order of the Court may apply to the Court to make an order, to issue any writ, or to take any other step that can be taken in the Supreme Court of the State or Territory in which the judgment or order has been made as if the judgment or order was a judgment or order of that Supreme Court.(2)An order made under subrule (1) authorises the Sheriff, when executing the orders of the Court, to act in the same manner as a similar officer of the Supreme Court of the State or Territory in which the order is being executed is entitled to act.(3)A party who wants to enforce an order in more than one State or Territory may adopt the procedures and forms of process of the Supreme Court of the State or Territory in which the judgment or order has been made.Note: It is not necessary to adopt different modes of procedure and forms of process in each State or Territory. The relevant provision of the Civil Procedure Act 2005 (NSW), applied in the above way, is s 117, which provides:117 Operation of garnishee order in relation to debts(1)Subject to the uniform rules, a garnishee order operates to attach, to the extent of the amount outstanding under the judgment, all debts that are due or accruing from the garnishee to the judgment debtor at the time of service of the order.(2)For the purposes of this Division, any amount standing to the credit of the judgment debtor in a financial institution is taken to be a debt owed to the judgment debtor by that institution. Critically, the key terms of s 117 provide that a garnishee order may “attach … all debts that are due or accruing from the garnishee to the judgment debtor at the time of service of the order”. This phrase has been the subject of long-standing judicial interpretation both in Australia and in the United Kingdom, from where it apparently originated, as considered below. In Coshott v Learoyd [2001] FCA 88, Wilcox J considered the effectiveness of garnishee orders addressed to a bank which, as mortgagee in possession, had effected the sale of a property previously owed by Mrs Coshott and her husband, Mr Robert Coshott. The garnishee orders were in relation to costs orders made against Mrs Coshott and had been served after the sale of the property and prior to payment into court of the amounts to which the garnishee orders related. To that extent, the facts in Coshott v Learoyd were quite similar to the present situation, with the only material difference being the basis upon which a power of sale existed and was exercised. As in this case, an application was made for payment out of the moneys paid in to court. It was also argued on behalf of Mrs Coshott in Coshott v Learoyd that the garnishee orders should be set aside, a step that has not been taken in this case. It was further argued in Coshott v Learoyd that the moneys in court should be paid to Mrs Coshott, again a step that has not been taken in this case. Nonetheless, Mrs Coshott now seeks to stop the payments out that are presently sought and to stop a further garnishee order being issued.

Ratio Decidendi

Legal Principle Established

The relevant provision of the Civil Procedure Act 2005 (NSW), applied in the above way, is s 117, which provides:117 Operation of garnishee order in relation to debts(1)Subject to the uniform rules, a garnishee order operates to attach, to the extent of the amount outstanding under the judgment, all debts that are due or accruing from the garnishee to the judgment debtor at the time of service of the order.(2)For the purposes of this Division, any amount standing to the credit of the judgment debtor in a financial institution is taken to be a debt owed to the judgment debtor by that institution. Critically, the key terms of s 117 provide that a garnishee order may “attach … all debts that are due or accruing from the garnishee to the judgment debtor at the time of service of the order”. This phrase has been the subject of long-standing judicial interpretation both in Australia and in the United Kingdom, from where it apparently originated, as considered below. In Coshott v Learoyd [2001] FCA 88, Wilcox J considered the effectiveness of garnishee orders addressed to a bank which, as mortgagee in possession, had effected the sale of a property previously owed by Mrs Coshott and her husband, Mr Robert Coshott. The garnishee orders were in relation to costs orders made against Mrs Coshott and had been served after the sale of the property and prior to payment into court of the amounts to which the garnishee orders related. To that extent, the facts in Coshott v Learoyd were quite similar to the present situation, with the only material difference being the basis upon which a power of sale existed and was exercised. As in this case, an application was made for payment out of the moneys paid in to court. It was also argued on behalf of Mrs Coshott in Coshott v Learoyd that the garnishee orders should be set aside, a step that has not been taken in this case. It was further argued in Coshott v Learoyd that the moneys in court should be paid to Mrs Coshott, again a step that has not been taken in this case. Nonetheless, Mrs Coshott now seeks to stop the payments out that are presently sought and to stop a further garnishee order being issued. Wilcox J dismissed Mrs Coshott’s application in Coshott v Learoyd. His Honour’s reasons for doing so are instructive on the topic of whether the obligation of the bank to account for the net proceeds of sale was a “debt” for garnishment purposes. His Honour found that it was, observing:Whether the obligation was a debt41Finally, Mr Wasilenia [counsel for Mrs Coshott] contends that, although Citibank had an obligation to pay to Mrs Coshott one-half of the surplus on sale of the mortgaged property, this was not a “debt” within the meaning of rule 5(1) of Part 46 of the Supreme Court Rules [now s 117 Civil Procedure Act]. He says a mortgagee’s obligation to account to the mortgagor, for the proceeds of sale of a mortgaged property, is an equitable obligation for which the word “debt” is inappropriate.42I reject this contention. I do not doubt that a mortgagee’s obligation is an obligation enforceable in equity: see Meagher, Gummow and Lehane, Equity: Doctrines and Remedies (3rd ed, 1992) para [115]. However, that is not inconsistent with it also being a “debt” within the meaning of Order 46 rule 5(1). A debt and a trust obligation are not mutually exclusive concepts. Where a trustee comes under a present obligation to pay money to a beneficiary the trustee also becomes a debtor of the beneficiary in respect of those moneys.43The word “debt” is one of wide application. In Re European Life Assurance Society (1869) LR 9 Eq 122 at 127, James VC defined the word “debt”, in a garnishee context, as meaning “a sum of money which is now payable or will become payable in the future by reason of a present obligation”. Section 112(4) of the Conveyancing Act 1919 (NSW) imposes a payment obligation in respect of any net surplus after exercise of a mortgagee’s power of sale. The subsection reads:“(4)The money which is received by the mortgagee or chargee, arising from the sale, after discharge of prior incumbrances to which the sale is not made subject (if any), or after payment into court under this Act of a sum to meet any prior incumbrance, shall in the absence of an express contract to the contrary be held by the mortgagee or chargee in trust to be applied by the mortgagee or chargee, first in payment of all costs, charges, and expenses properly incurred by the mortgagee or chargee as incident to the sale or any attempted sale or otherwise; and, secondly, in discharge of the money, interest, and costs, and other money (if any) due under the mortgage or charge and the residue of the money so received shall be paid to the person entitled to the mortgaged or charged property or authorised to give receipts for the proceeds of the sale thereof.” [Emphasis added] If there is a residue, the mortgagee has an obligation to pay that residue to the mortgagor; there is a “debt”.