Cull & Lenz (No. 2)

[2020] FamCA 980

FAMILY COURT OF AUSTRALIA

Cull & Lenz (No. 2) [2020] FamCA 980

File number(s):

SYC 6598 of 2017

Judgment of:

REES J

Date of judgment:

24 November 2020

Catchwords:

FAMILY LAW – TRANSACTIONS TO DEFEAT CLAIMS – Where the wife entered into a contract of sale of a property – Where Orders of this court prevented her from selling the property – Where the husband had sought the property be transferred to him as part of final property settlement – Where the purchaser was a bona fide purchaser for value – Orders made for caveats to be withdrawn – Application to set aside the contract for sale dismissed – Orders for the proceeds of sale to be placed in a controlled monies account - Orders for the wife to pay the costs of the husband and the purchaser on an indemnity basis.

Legislation:

Family Law Act 1975 (Cth) s 106B, 117(2A)

Cases cited:

Balnaves v Balnaves (1988) FLC 91-952

Barnes v Addy (1874) LR 9 Ch App 244

Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89

Great Investments Ltd and Ors v Warner (2016) 335 ALR 542

Heath & Heath (No 2) (1984) FLC 91-517

Heath & Heath; Westpac Banking Corporation (1983) FLC 91-362

Lenova & Lenova (Costs) [2011] FamCAFC 141

Twigg and Keady (1996) FLC 92-712

Number of paragraphs:

98

Date of hearing:

11 November 2020

Place:

Sydney

Counsel for the Applicant:

Mr Lethbridge SC

Solicitor for the Applicant:

Nolan Lawyers

First Respondent:

In Person

Second Respondent:

In Person

Third Respondent:

Did not appear

Counsel for the Fourth Respondent:

Mr Martin

Solicitor for the Fourth Respondent:

Auyeung Hencent & Day Lawyers

ORDERS

SYC 6598 of 2017

BETWEEN:

MR LENZ

Applicant

AND:

MS CULL

First Respondent

MR B CULL

Second Respondent

MS C CULL

Third Respondent (and another named in the Schedule)

ORDER MADE BY:	REES J
DATE OF ORDER:	24 NOVEMBER 2020

THE COURT ORDERS:

1.That the application of the husband, pursuant to section 106B of the Family Law Act 1975 Cth to set aside the contract for sale between the wife and Mr DD, in relation to the property at EE Street, Suburb FF (“Suburb FF”), is dismissed.

2.That the husband serve ZZ Lawyers and HH Pty Ltd with the Application in a Case filed on 9 September 2020 and all affidavit material filed in relation to this application, including that of the wife and the respondents and a copy of these Orders and reasons for judgment forthwith.

3.That ZZ Lawyers and HH Pty Ltd be joined as respondents in these proceedings.

4.That upon the settlement of the sale of Suburb FF, the husband, ZZ Lawyers, HH Pty Ltd and Mr B Cull do all acts required to withdraw their respective caveats lodged on the title of Suburb FF.

5.That ZZ Lawyers and HH Pty Ltd have liberty to apply by arrangement with the Associate to the Honourable Justice Rees in relation to Orders 3 and 4.

6.That upon the settlement of the sale of Suburb FF, the proceeds of sale be applied in the following order and priority:

(a)To discharge the mortgage;

(b)To pay the agent’s commission and costs;

(c)To pay the sum of $10,000 to JJ Pty Ltd simultaneously with the withdrawal of the caveat lodged by that entity;

(d)To pay the balance of the amount into a controlled monies account held by Nolan Lawyers on trust for the husband and the wife, pending further order.

7.That the wife pay the costs of the fourth respondent in the sum of $30,000, such costs to be paid from any sum received by the wife by way of property settlement in the substantive proceedings.

8.That the wife pay the costs of the husband in relation to this application on an indemnity basis, as agreed or assessed, such costs to be paid from any sum received by the wife by way of property settlement in the substantive proceedings.

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 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to 17.02 Family Law Rules 2004 (Cth).

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

REASONS FOR JUDGMENT

Rees J

1. Proceedings relating to parenting and property between Ms Cull (“the wife”) and Mr Lenz (“the husband”) were filed in 2017 and directions have been made for the preparation of the matter for final hearing.

2. The parties to those proceedings are the wife, the husband and the wife’s parents.

3. One of the properties which is the subject of the property proceedings is the property at EE Street, Suburb FF (“Suburb FF”) which is registered in the sole name of the wife.

4. On 12 February 2018, orders were made which, inter alia, restrained the wife from dealing with Suburb FF.

5. On 4 June 2020, the wife, without notice to the husband, entered into a contract to sell Suburb FF to Mr DD (“the purchaser”) for $3,700,000. The sale has not been completed. The deposit of $370,000 is held by the selling agent.

6. By an Application in a Case filed 9 September 2020 the husband seeks to set aside the contract pursuant to the provisions of section 106B of the Family Law Act 1975 (Cth) (“the Act”).

7. That application is opposed by the purchaser who wishes to complete the purchase, and by the wife.

8. There are six caveats on the title of Suburb FF. The position of the caveators will be dealt with separately.

9. It is necessary to set out the undisputed facts.

10. On 12 February 2018, the following orders were made:

    That each of the parties are restrained from selling dealing with, transferring, assigning or further encumbering or increasing the secured debt or their interest in:

    (a)       Apartment KK Suburb LL City MM, Japan;

    (b)       Apartment PP, NN Street, United Kingdom

    (c)       EE Street, Suburb FF NSW Australia.

    (As per the original)

11. The husband and the wife were each represented by counsel when those orders were made.

12. Neither party lodged a Form 11R Request to the Registrar General to note the making of that order on the title to Suburb FF.

13. In August 2018, the wife made an application to sell Suburb FF. In an affidavit sworn by the husband on 23 October 2018, opposing that application, the husband deposed that he wished to retain the Suburb FF property as part of his property settlement. The application was dismissed by consent.

14. In about December 2019, the wife listed Suburb FF for sale without notice to the husband and in breach of the orders made on 12 February 2018.

15. On 17 March 2020, the husband received notice from the mortgagee that the wife was asking for a payout figure on the mortgage. The husband wrote to the mortgagee informing it that he did not consent to the sale. On 18 March 2020, the husband’s solicitor wrote to the wife’s solicitor seeking an undertaking that the sale would not proceed. The wife’s solicitors requested a draft undertaking for their consideration, which was provided. No response was received.

16. On 19 March 2020, the mortgagee wrote to the wife’s solicitors confirming that the husband’s signature was required to discharge the mortgage and enclosing a copy of the orders made on 12 February 2018.

17. The husband called the listing agent and ascertained the reserve price of the property at auction. There is no evidence that the husband told the agent of the orders restraining the wife from selling the property.

18. On 27 March 2020 the husband lodged a caveat on the title of Suburb FF. The caveat provided:

    ESTATE OR INTEREST CLAIMED

    Estate In Fee Simple

    By virtue of:  Court Order

    Dated:  12/02/2018

    Details Supporting The Claim: EQUITABLE INTEREST PURSUANT TO INTERIM FAMILY COURT ORDERS (P)SYC6598/2017

19. The purchaser was introduced to the property by a real estate agent in May 2020.  There is no dispute that the purchaser was a stranger to the wife and to the property.

20. A contract was issued to the solicitors for the purchaser, WW Lawyers. A copy of the title search was annexed to the contract. The title search notes, inter alia:

    ·11  …       CAVEAT BY MR LENZ

21. Mr Lenz is the husband. That would not have been obvious from the title search. The title search did not disclose the basis of the caveat.

22. The purchaser deposed:

    9.Some time shortly thereafter, I was informed by my solicitor …that there were 6 caveats on the property which she thought was unusual and that one of the caveats appears to relate to a Family Court case by the vendor’s former lawyers. [She] also told me that she was making more enquiries with the vendor about it.

    10.      I then had a conversation with [the selling agent] in which I asked him:

    I:“My solicitor told me that there were 6 caveats on title and they are making enquiries.”

    [Agent]:“Yes. I am informed that the vendor is going through a divorce case in the Family Court and she will have them removed on settlement.”

    11.Around this time, I was informed by my solicitor that the vendor had confirmed in writing that all caveats will be removed on settlement.

23. On 29 May 2020, the purchaser’s solicitor wrote to the wife’s solicitor stating:

    1.We refer to the Title search and note that there are 6 caveats registered on the title of the property. Please confirm whether all if this [sic] caveats will be withdrawn on or prior to settlement; …

24. The wife’s solicitor replied on 1 June 2020:

    1.Kindly refer to Special Condition 20 of the Contract of Sale.

25. Special Condition 20 provides:

    If any encumbrance (excluding a caveat lodged by or on behalf of the Purchaser) is noted on the Certificate of Title of this property, on completion the Purchaser must accept a duly executed discharge or withdrawal of the encumbrance in registrable form which will remove the encumbrance. The Purchaser is not entitled to delay completion nor make any claims whatsoever not require the Vendor to register any discharges or withdrawals of any encumbrances prior to completion.

26. On 2 June 2020 the purchaser’s solicitor wrote to the wife’s solicitor stating:

    1.The intention of the purchaser’s query in item 1 of our letter dated 29 May 2020 is to ask if the caveators will remove the caveats on or prior to settlement. We understand that the vendor is going through (or about to commence) family law proceedings and as such, need assurance that the 6 caveats will be withdrawn in or prior to settlement.

27. On 3 June 2020, the wife’s solicitor wrote to the purchaser’s solicitor stating:

    Our client shall cause the caveats to be withdrawn simultaneously on Completion.

28. Contracts were exchanged on 4 June 2020. The deposit of $370,000 is held by the selling agent. The purchaser has paid stamp duty of $198,722.

29. On 5 June 2020 the husband filed an Amended Response in which, for the first time, he sought an order that the Suburb FF property be transferred to him.

30. The husband learned of the sale of Suburb FF on 14 August 2020.

31. The purchaser has issued a Notice to Complete and is ready to settle the purchase.

    THE LAW

32. Section 106B of the Act provides, relevantly:

    106B Transactions to defeat claims

    (1)    In proceedings under this Act, the court may set aside or restrain the making of an instrument or disposition by or on behalf of, or by direction or in the interest of, a party, which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.

    (2)    The court may order that any money or real or personal property dealt with by any instrument or disposition referred to in subsection (1), (1A) or (1B) may be taken in execution or charged with the payment of such sums for costs or maintenance as the court directs, or that the proceeds of a sale must be paid into court to abide its order.

    (3)    The court must have regard to the interests of, and shall make any order proper for the protection of, a bona fide purchaser or other person interested.

    (4)    A party or a person acting in collusion with a party may be ordered to pay the costs of any other party or of a bona fide purchaser or other person interested of and incidental to any such instrument or disposition and the setting aside or restraining of the instrument or disposition.

    (4A)In addition to the powers the court has under this section, the court may also do any or all of the things listed in subsection 80(1) or 90SS(1).

    (5)    In this section:

    disposition includes:

    (a)    a sale or gift; and

    (b)the issue, grant, creation, transfer or cancellation of, or a variation of the rights attaching to, an interest in a company or a trust.

    …

33. Thus it is clear that the Court has power to set aside the contract for sale of Suburb FF between the wife and the purchaser on certain conditions being met. It is also clear that the remedy is discretionary and that the interests of the purchaser must be properly protected, whether the purchaser is a “bona fide purchaser” or “other person interested”.

34. There are a number of questions to be answered:

    ·Does the disposition defeat an anticipate order in the proceedings?

    ·Is the purchaser a bona fide purchaser?

    ·If the purchaser is not a bona fide purchaser then how should the Court regard his interest as an “interested person”?

    Does the disposition defeat an anticipate order in the proceedings?

35. At the time of the exchange of contracts, the husband had not specifically sought an order that the Suburb FF property be transferred to him.

36. However, I accept that his wish to retain Suburb FF had been made clear to the wife in October 2018 when he responded to her application to sell the property.

37. In those circumstances I accept that the disposition defeats an anticipated order.

    Is the purchaser a bone fide purchaser?

38. There is no dispute that the purchaser is a stranger to the wife and that he was introduced to the property by a real estate agent. He has paid the deposit and stamp duty and is ready to complete.

39. On behalf of the husband, it is submitted that the purchaser had sufficient notice of the husband’s claim to the property that he is deprived of the status of bona fide purchaser.

40. The husband relies on a decision of Nygh J, confirmed on appeal in Heath & Heath; Westpac Banking Corporation (1983) FLC 91-362 where his Honour, dealing with s 85 of the Act (the predecessor to s 106B) stated:

    The term “bona fide purchaser’ therefore implies two separate conditions: (a) the acquisition of an interest for valuable consideration and (b) without notice of what might at this stage be described neutrally as “the disabling condition”.

    …

    The next question is what the degree of notice is which would deprive the Bank of the character of “bona fide purchaser”…Fortunately, the legislature in enacting s85(1) of the Family Law Act has made it clear that under that section the objective test is to be applied. Hence the test of bona fides is whether the Bank at the time of the making of the instrument was aware or should have been aware by making due enquiry that the disposition would defeat the claim of [the wife].

41. In Twigg and Keady (1996) FLC 92-712, the Full Court of the Family Court held:

    The following useful summary of the meaning of “notice” in this context is to be found in Jacobs’ Law of Trusts in Australia, para 2723:

    Notice in this connection imputes knowledge and may be actually imputed or constructive. Actual notice is that possessed by a person having personal knowledge of the equitable claim. A person is said to have constructive notice when the circumstances are such that the court will impute to him knowledge of the equitable interest even though he has no personal knowledge of it. Thus he may have failed either purposely or negligently to make some inquiry which he should reasonably have made, or he may have had notice of one fact which would lead to notice of other facts. Imputed notice is notice which a person's agent has acquired or would have acquired if he had made proper inquiries.

42. The High Court, in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 dealt with the question of knowledge, albeit in consideration of the second limb of Barnes v Addy (1874) LR 9 Ch App 244, however the principles are analogous. Their Honours said:

    174.Against this background, it has been customary to analyse the requirement of knowledge in the second limb of Barnes v Addy by reference to the five categories agreed between counsel in Baden v Société Générale pour Favoriser le Dévelopment du Commerce et de l'Industrie en France SA:

    "(i) actual knowledge; (ii) wilfully shutting one's eyes to the obvious; (iii) wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make; (iv) knowledge of circumstances which would indicate the facts to an honest and reasonable man; (v) knowledge of circumstances which would put an honest and reasonable man on inquiry."

    In Bank of Credit and Commerce International (Overseas) Ltd v Akindele ("BCCI"), Nourse LJ observed that the first three categories have generally been taken to involve "actual knowledge", as understood both at common law and in equity, and the last two as instances of "constructive knowledge" as developed in equity, particularly in disputes respecting old system conveyancing. After noting that in Royal Brunei the Privy Council had discounted the utility of the Baden categorisation, Nourse LJ in BCCI went on to express his own view that the categorisation was often helpful in identifying the different states of knowledge for the purposes of a knowing assistance case.

    175.Although Baden post-dated the decision in Consul, the five categories found in Baden assist in an analysis of that for which Consul provides authoritative guidance on the question of knowledge for the second limb of Barnes v Addy.

    176.Thus, support in Consul can be found for categories (i), (ii) and (iii). Further, Consul also indicates that category (iv) suffices. However, in Consul, Stephen J held that knowledge of circumstances which would put an honest and reasonable man on inquiry, later identified as the fifth category in Baden, would not suffice. Gibbs J left open the possibility that constructive notice of this description would suffice. Barwick CJ agreed with Stephen J.

    177.The result is that Consul supports the proposition that circumstances falling within any of the first four categories of Baden are sufficient to answer the requirement of knowledge in the second limb of Barnes v Addy, but does not travel fully into the field of constructive notice by accepting the fifth category. In this way, there is accommodated, through acceptance of the fourth category, the proposition that the morally obtuse cannot escape by failure to recognise an impropriety that would have been apparent to an ordinary person applying the standards of such persons.

    178.These conclusions in Consul as to what is involved in "knowledge" for the second limb represent the law in Australia. They should be followed by Australian courts, unless and until departed from by decision of this Court.

    (footnotes omitted)

43. In Great Investments Ltd and Ors v Warner 2016) 335 ALR 542, the Full Court of the Federal Court summarised the authorities as follows:

    110.In Credit Agricole Corporation and Investment Bank v Papadimitriou [2015] 1 WLR 4265; [2015] 2 All ER 974; [2015] UKPC 13 at [33], Lord Sumption observed that judges had been vexed for many years with the question of the appropriate degree of notice that a bona fide purchaser for value without notice must negate.

    111.In Baden v Sociéte Générale pour Favoriser le Développement du Commerce et de l’Industrie en France SA [1993] 1 WLR 509 at 575–6; [1992] 4 All ER 161 at 235 and 242–3, Peter Gibson J differentiated five different categories of knowledge. Those five categories of knowledge provide a helpful form of analysis of the notice that might be required. In Australia, as the High Court of Australia observed in Farah at [174], it has been customary to refer to those different degrees of knowledge which are: (i) actual knowledge; (ii) wilfully shutting one’s eyes to the obvious; (iii) wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make; (iv) knowledge of circumstances which would indicate the facts to an honest and reasonable man; (v) knowledge of circumstances which would put an honest and reasonable man on inquiry.

1. The purchaser here did make enquiries and received three separate assurances that the caveats would be withdrawn on settlement – an oral assurance from the selling agent; written assurance from the wife’s solicitors on 1 June 2020 and a second written assurance from the wife’s solicitors on 3 June 2020.

2. The purchaser was entitled to accept the assurances made by the wife’s solicitor. He could not be expected to assume that the wife’s solicitor might be misleading or deceiving him.

3. I do not accept the submission made by senior counsel for the husband that it was incumbent on the purchaser to contact the husband’s solicitors and enquire of them whether the sale was likely to affect the husband’s claim in the family law proceedings.

4. The enquiries which the purchaser made, and his acceptance of the assurances given by the selling agent and, more importantly, the wife’s solicitor, were, in the circumstances, objectively reasonable and sufficient.

5. The information which was available to the purchaser, that there were Family Law proceedings on foot or about to be commenced between the wife as vendor and the husband, would not have alerted an honest and reasonable purchaser to the likelihood that the wife intended to act both contrary to orders made by the Family Court of Australia and with the intent of removing the asset from the pool available for distribution. Neither was the fact that the purchaser knew merely that there were such proceedings on foot sufficient to constitute a circumstance which would put an honest and reasonable man on inquiry.

6. Having regard to the findings I have made, it is not necessary to consider the position of the purchaser as a “person interested” but, for abundant caution I will do so, although no submissions were directed to this aspect of the law by either counsel.

7. The purchaser is clearly a “person interested”. He is a party to an exchanged contract for the sale of the property. The terms of s 106B (3) do not suggest that any different level of protection should be applied to the purchaser if he is an “interested person” as opposed to a “bona fide purchaser”.

8. In any event, the language of s 106B(1) indicates that the remedy is discretionary and therefore the Court must consider the competing interests of the purchaser and the husband in the light of what is just an equitable.

9. I am comforted in that conclusion by the statements of the Full Court in Heath & Heath (No 2) (1984) FLC 91-517 where the Full Court, dealing with s 85, stated that “…the Court has a discretion under that subsection in regard to the type of protection it considers appropriate to afford a bona fide purchaser or other person interested…”.

10. Further, in Balnaves v Balnaves (1988) FLC 91-952 the Full Court, also dealing with s 85, stated, in relation to the phrase “a bona fide purchaser or other person interested”:

    In our view…that phrase is to be read disjunctively. The subsection refers to two categories, the well known category of bona fide purchaser (for value) which is traditionally accorded a high level of protection in proceedings under section 85 or analogous provisions, and a second category of “persons interested”. A person may still be “interested” whether they acted bona fide or not, although of course the presence or absence of bona fides (or negligence or other conduct of a like kind) no doubt will have an impact upon the extent to which, if at all, a Court will extend to that person the protection which sub-section (3) allows.

11. The purchaser has paid a deposit and a considerable sum in stamp duty. He deposed that he had been searching for a suitable property since February 2020 and had not been able to find another property. Since exchanging contracts, he had stopped looking for another property and had thus possibly missed other opportunities to purchase. The property suited the purchaser’s requirements because of its location, views, proximity to schools and potential for renovation. All of these matters are valuable to the purchaser and must be placed in the balance when determining what is a just and equitable result.

12. I do not consider that it is just and equitable to deprive the purchaser of the fruits of his contract in circumstances where there was a mechanism in place which, if used by the husband, would have given the purchaser clear and unequivocal notice of the orders restraining the wife from dealing with the Suburb FF property. Not only did the husband choose not to lodge a request with the Registrar General, so that notice of the restraining order was placed on the title of Suburb FF, he failed to tell the selling agent, whom he contacted to ascertain the reserve price, of the existence of the injunction.

13. The same considerations apply to the protection to be given to the purchaser as a bona fide purchaser.

14. In either event, it is not just and equitable to set aside the contract between the purchaser and the wife and the husband’s application will be dismissed.

    THE CAVEATORS

15. In addition to the caveats lodged by the husband and the purchaser, there are a further four caveats on the title of Suburb FF.

16. Those caveats were lodged by:

    ·Mr B Cull (the wife’s father) on 28 January 2020.

    ·ZZ Lawyers (the wife’s former solicitors) on 21 February 2020.

    ·HH Pty Ltd (the wife’s former solicitors) on 3 July 2020.

    ·JJ Pty Ltd (from whom the wife sought a loan) on 7 July 2020.

17. Mr B Cull was served with the present Application in a Case and has been joined as a respondent in the substantive proceedings. He swore an affidavit in the proceedings, as did his wife. They both claim to have advanced money to the wife by way of loans totalling $830,000 in the case of Mr B Cull and $140,000 in the case of Ms C Cull. Mr B Cull appeared at the hearing and made submissions. He told the Court that his wife was unwell and that he spoke for both of them.

18. The husband, in the substantive proceedings, seeks that the loans purported to have been made to the wife by her parents be disregarded and not taken into account for the purpose of ascertaining the net pool of available assets.

19. That claim will be determined in the substantive hearing.

20. Orders will be made directing Mr B Cull to remove the caveat so that the settlement can proceed.

21. ZZ Lawyers previously provided legal services to the wife. They claim to be owed a sum of money which may be $100,000 or some other amount. There is no evidence that they have been served with this application.

22. HH Pty Ltd have also previously provided legal services to the wife. They have not been served.

23. Senior counsel for the husband submitted that the Court would be satisfied that the proceedings have been brought to their notice because the wife, in an email to her solicitors on 23 March  2020, signed herself as:

    Ms Cull

    Vice President XX Finance; Director, HH Lawyers, In association With YY Lawyers

24. I am not satisfied that HH Pty Ltd is the same entity as HH Lawyers or that HH Pty Ltd have notice of this application. I propose to order that the caveat be withdrawn but to give that entity liberty to apply in relation to the withdrawal of their caveat within seven days if they are dissatisfied with that outcome.

25. It is intended that the interests of HH Pty Ltd and ZZ Lawyers in the proceeds of the sale will be determined in the substantive proceedings.

26. In relation to JJ Pty Ltd, the husband agrees to payment of $10,000 to the caveator. It is the husband’s understanding that this is the amount which the caveator has agreed to accept.

    HOW SHOULD THE PROCEEDS OF SALE OF SUBURB FF BE DEALT WITH?

27. The husband proposes that the whole of the proceeds, after payment of the mortgage and the amount due to JJ Pty Ltd, should be placed in a controlled monies account pending determination of the substantive proceedings.

28. The wife opposes that application and seeks to pay out the alleged debt to her parents and to retain, if not all of the balance, then a substantial amount.

29. Although the wife asserts that she is in need of funds, there is no application before the Court for the payment of a lump sum or a periodic amount and the husband deposed that she has, contrary to the orders made on 12 February 2018 and without notice to him, sold the United Kingdom property and retained the whole of the net proceeds of about $148,820. He also deposed that the wife had sold a property in China in January 2018, without notice to him, and that she had retained the whole of the net proceeds of sale of about $198,635 and given those funds to her parents.   

30. Further the husband deposed that the wife, after separation, has borrowed, without his knowledge, $360,260 from QQ Limited and lost those funds in an investment. Those borrowings are in addition to the funds she allegedly borrowed from her parents of some $970,000.

31. In all, the husband asserts that the wife has had about $1,677,715 since separation and that she is not likely to receive any further sum from Suburb FF.

32. Mr B Cull’s position is that he wants the repayment of the monies lent by himself and his wife.

33. However, if the husband’s application is ultimately successful, then there will be no funds available to the wife with which to repay any of her debts.

34. I propose to order that the proceeds of the sale of Suburb FF, after discharge of the mortgage and the payment of $10,000 to JJ Pty Ltd, be held in a controlled monies account by the husband’s solicitors.

35. ZZ Lawyers and HH Pty Ltd will be ordered to remove their respective caveats and joined as parties to the proceedings with liberty to apply within seven days if they wish to be heard in relation to those Orders.

    COSTS

36. Both the husband and the purchaser seek an order for costs against the wife.

37. The purchaser seeks indemnity costs estimated to be $30,000. The husband also seeks indemnity costs.

38. The applications are governed by the provisions of s 117(2A) of the Act which provides:

    (2A)  In considering what order (if any) should be made under subsection (2), the court shall have regard to:

    (a)the financial circumstances of each of the parties to the proceedings;

    (b)whether any party to the proceedings is in receipt of assistance by way of legal aid

    (c)the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;

    (d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;

    (e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;

    (f)whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and

    (g)such other matters as the court considers relevant.

39. I will deal with the provisions seriatim:

40. There is no evidence of the wife’s financial circumstances. I note that she claims to be impecunious. However, I do not consider this to be a relevant factor. In Lenova & Lenova (Costs) [2011] FamCAFC 141, the Full Court said:

    That consideration must, of course, be balanced against a litigant having a limited capacity to meet a costs order, as well as any other relevant considerations.  But, a limited financial capacity to meet an order can not be determinative; if it were, a party would always be able to plead impecuniosity as a means of avoiding a costs order in circumstances where pursuit of the litigation has continued in the face of a reasonable offer to cease that litigation and the incurring of its attendant costs.

41. No party is in receipt of Legal Aid.

42. These proceedings were necessitated entirely by the wife’s conduct in entering into a contract for sale of the Suburb FF property when she knew that she had been ordered by the Court not to deal with the property.

43. The proceedings were necessitated by the wife’s failure to comply with an order of the Court.

44. In opposing the husband’s application, the wife has been entirely unsuccessful.

45. It is appropriate that the wife pay the costs of the purchaser and of the husband.

46. In relation to indemnity costs, the circumstances in which indemnity costs are ordered are well known and those circumstances must be exceptional. I consider that the fact that the wife, in contravention of an order restraining her from dealing with the Suburb FF property, entered into a contract to sell the property, justifies an order for indemnity costs to be paid by her both to the purchaser and to the husband.

47. The estimate of the purchaser’s costs of $30,000 is unexceptional and reasonable in the circumstances.

    THE CONDUCT OF THE WIFE’S SOLICITORS

48. At the time of the exchange of contracts for the sale of Suburb FF, the wife was represented by Mr RR of TT Lawyers in relation to the conveyance.

49. Her previous solicitor in relation to the conveyance was Ms UU of VV Lawyers.

50. Neither Mr RR nor Ms UU acted for the wife in the family law proceedings.

51. On 28 May 2020, Ms UU wrote to Mr RR forwarding the contract and correspondence from the mortgagee, including the email which indicated that the husband was required to sign the documents to discharge the mortgage and a copy of the orders made on 12 February 2018.

52. On 29 May 2020, Mr RR wrote to Ms UU stating:

    Thank you for your email and the documents.

    We note that the attached Order, provided in your released documents, made by Justice Le Poer Trench on 12 February 2018 ordered that the parties “are restrained from selling, dealing with, transferring, assigning or further encumbering or increasing the secured debt or their interest in… EE Street, Suburb FF NSW”. Accordingly, from our understandings, the client must not advertise, sell or deal with the property unless obtained further orders from the Court.

    Before we are seeking our client instructions, kindly advise if you have any file notes or give any advice to client in this regard.

    (Emphasis in the original)

53. Ms UU replied shortly thereafter:

    I have forwarded this to the client and she was aware of this even before I had sent it and continues to disputes this. She also has her own Family Law lawyer in this family law matter and I believe the family law matter has not settled yet and it’s still in court (but you’re best to check with her).

    (As per the original)

54. Mr RR proceeded to exchange contracts with the purchaser on 4 June 2020, in the knowledge that the Court had made an order restraining the wife from dealing with the subject property and without informing the purchaser’s solicitor about the existence of that order.

55. Insofar as the assurances Mr RR provided to the purchaser that the caveats would be withdrawn prior to settlement, he could have had no confidence of such an outcome.

I certify that the preceding ninety-eight (98) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Rees .

Associate:

Dated:       24 November 2020

SCHEDULE OF PARTIES

SYC 6598 of 2017
Respondents
Fourth Respondent:	MR DD