Deputy Commissioner of Taxation v Uysal
[2004] VSC 278
•13 August 2004
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
PRACTICE COURT
No. 6617 of 2003
| DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA | Plaintiff |
| v | |
| NECMI UYSAL (also known as NACMA BARKER) | Defendant |
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JUDGE: | Byrne J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 4 and 5 August 2004 | |
DATE OF JUDGMENT: | 13 August 2004 | |
CASE MAY BE CITED AS: | Deputy Commissioner of Taxation v Uysal | |
MEDIUM NEUTRAL CITATION: | [2004] VSC 278 | |
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Contempt of court – whether deliberate act – whether mitigating circumstances – committal to prison.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms A Richards QC with Ms Heather Riley | Australian Government Solicitor |
| For the Defendant | Mr PJ Booth with Mr Louie Hawas | LN Christie & Co |
HIS HONOUR:
Before the Court is an application brought on behalf of the plaintiff, the Deputy Commissioner of Taxation of the Commonwealth of Australia, by summons filed on 7 July 2004. The plaintiff seeks an order that the defendant, Necmi Uysal, be punished for contempt of court. The contempt alleged is that Mr Uysal between 2 April 2004 and 6 May 2004 mortgaged certain real estate in breach of a Mareva order made by Habersberger J on 15 October 2003.
The background circumstances are not controversial. On 9 July 2003, the plaintiff sued Mr Uysal seeking about $200,000 for unpaid tax. At the time of the commencement of the proceeding the plaintiff sought ex parte from Gillard J and obtained a Mareva order in broad terms. An order in similar terms was made on an interlocutory basis by his Honour on 21 July 2003.
On 1 August 2003, the plaintiff amended its statement of claim to include further assessments and on 15 October 2003 it obtained from Habersberger J, by consent, summary judgment in the sum of $1,220,736.10. On that date, too, Habersberger J made a Mareva order in these terms:
"Until further order, the Defendant, whether by himself, his servants or agents or howsoever otherwise, be restrained from selling, transferring, charging, mortgaging, disposing, leasing, diminishing or dealing in any way (other than to pay the Plaintiff or with the prior written consent of the Plaintiff's solicitors) with any of his assets wherever situated (whether in the State of Victoria or elsewhere) including his interest in the land and property at 2 Rustic Court Thomastown, more particularly described in Certificate of Title Volume 09534 Folio 587 save insofar as the unencumbered value of such assets exceed $1,220,736.10."
By a further order at this time his Honour permitted Mr Uysal to sell certain land at Falcon Street, Thomastown which he held as tenant in common with another person. The land at Rustic Court, which is subject to the Mareva order, was and is the matrimonial home of Mr Uysal where he lives with his wife Nazmiye Uysal and their two dependent children. The land stands in the joint names of Mr Uysal and his wife and was, in February 2004, mortgaged to the National Australia Bank to secure their debt to the Bank of the order of $86,000 under a National Home Owners Package in their name.
On 16 February 2004, Mr and Mrs Uysal applied to Bluestone Mortgages on behalf of Permanent Custodians Ltd ("PCL") for a loan of $264,000 being 80% of $330,000, which they offered as the value of Rustic Court. The lender, however, valued the property at only $290,000 and accordingly, on or about 30 March 2004, it offered to lend them $232,000, being 80% of that valuation. In the letter of offer the purpose of the loan was expressed to be "purchase of business". The offer was accepted by Mr and Mrs Uysal on 2 April 2004.
The loan was settled on 6 May 2004 and the proceeds applied as follows:
NAB 89,981.18 Solicitors for Mortgagee 1,200.94 Mortgagee Charges 657.00 AMBD Pty Ltd 1,466.00 Mr and Mrs Uysal 138,694.88 232,000.00
The amount paid to the NAB was to pay out its secured debt. That to AMBD was to satisfy a business debt for which judgment had been obtained against Mr Uysal. The sum paid to the borrowers was deposited in a Commonwealth Bank account in the name of Mrs Uysal. Of this sum she transferred on 7 May 2004 $125,000 to an account with the same bank in the name of Menzil as Trustee of the Menzil Unit Trust. At the same time she withdrew $12,000 in cash to pay "day to day living expenses".
The amount to be paid to AMBD was not in fact paid to it.
On 12 May 2004 the plaintiff became aware of this loan transaction and on 14 May it sought and obtained from Williams J an order freezing the funds in the Menzil account.
A company search of Menzil discloses that it is a company registered on 17 February 2004 whose initial directors were and are Mrs Uysal and Ozkirbas. A third initial director Ali Ozturk, relinquished that office on 27 February 2004. Mrs Uysal is the secretary of the company and holds one of its three issued shares. The other two shares which appear to have been held by Mr Ozkirbas and Mr Ozturk respectively are now in the name of Mr Ozkirbas. The units in the Menzil Trust are also said to be held as to one unit by Mrs Uysal and as to two units by Mr Ozkirbas.
The loan documents were executed by Mr Uysal and his wife and he signed the mortgage of Rustic Court in favour of the lender.
To this point the case for contempt of court was not challenged. What was put in answer by Mr Uysal was this. The amount of about $90,000 previously owing to the NAB was his debt; not his wife's debt. The money had been drawn down by him "for his own purposes" pursuant to an arrangement between his wife and himself.
In February 2004, Mrs Uysal had decided to enter into business with a family friend, Ugur Ozkirbas, to open a supermarket in High Street, Thomastown. For this purpose, she was required to contribute $125,000 capital. The vehicle for this project was the Menzil Unit Trust and its Trustee, Menzil Pty Ltd. In order to raise this capital she decided to mortgage her joint interest in Rustic Court which Mr Uysal considered to be worth $275,000. The purpose of the loan from PCL was to pay out the NAB and to raise this capital. Accordingly, it was said, the sum of $230,142.06, being the net pay out figure from the PCL loan after deduction of expenses, should be treated as an asset, of which 50%, $115,071.03, was the property of each of the
spouses. This asset should be treated as having been applied as follows:
Mr Uysal Mrs Uysal NAB 89,981.18 AMBD Pty Ltd 1,466.00 Menzil 125,000.00 Cash 12,000.00 91,447.18 137,000.00
This distribution more or less represented their respective entitlements to the fund. So, it was said, Mr Uysal's conduct did not amount to a disposition by him of property available for payment of his tax debt. Before the transaction, the value of this property was $137,500 being one half of the value of Rustic Court, less $90,000 payable to the NAB, leaving $47,500. After the transaction, the same land, less the PCL mortgage was worth $43,500, all of which was his entitlement. This was because his wife had had $137,000 against her half share of the total value of the land, namely, $137,500.
Counsel on behalf of the plaintiff castigated this as a mere reconstruction put together after the transaction had been exposed.
A powerful attack was directed to the credit of Mr and Mrs Uysal. It was put, and admitted by them, that their application to PCL for the loan contained a number of serious and significant falsehoods. Their evidence of the arrangement whereby the draw downs against the NAB facility were for his purposes alone, was unconvincing. No evidence was produced as to the application of these draw downs other than the statement that they were used in part to repay debts owed to friends. I am unpersuaded by their evidence that the PCL loan was only for the supermarket business. All that was required for that purpose was $125,000 plus sufficient to pay out the NAB mortgage, a total of some $215,000. The amount they first sought was $264,000. Their explanations for this were unconvincing and I reject them. I am satisfied to the criminal standard that, by granting the mortgage over Rustic Court, Mr Uysal, was guilty of a deliberate breach of the Mareva order. Moreover, I would have reached this conclusion, at least as to part of the loan, even if I were to have accepted Mr Uysal's reconstruction.
In short, I am not prepared to act on the uncorroborated evidence of Mr and Mrs Uysal. I am satisfied beyond reasonable doubt that Mr Uysal, well knowing of the existence and import of the Mareva order of 15 October 2003, deliberately mortgaged Rustic Court. His action in so doing was not some casual, accidental or unintentional act. I find him guilty of contempt of court.
Counsel on behalf of the plaintiff urged me to impose a sentence of imprisonment for his contempt. On his behalf, a lesser punishment was pressed on the basis of his lack of contumacy and, further, because his disposition of the property had been reversed.
As to this last matter, the evidence showed that on 11 June 2004, PCL sued Mr and Mrs Uysal and Menzil for recovery of the money lent. On 5 July 2004 this claim was settled. Under the terms of this settlement Mr and Mrs Uysal agreed to pay to PCL the sum of $257,000 representing the claim of PCL and indemnity costs. This sum was payable as to $112,000 by 5 July; as to $125,000 from the funds paid to Menzil; and as to the remaining $20,000 by two instalments to be paid in the future. The payment of $112,000 was provided, as to $90,000 by a loan to Mr and Mrs Uysal from his sister and brother in law secured by an unregistered mortgage over Rustic Court. The balance of $22,000 was made up as to $12,000 by the repayment by Mrs Uysal of the money she received in cash from the PCL loan, as to $1,466 by the return of the cheque payable to AMBD, and as to $8,534 from an undisclosed source.
The consequence of this is that the PCL mortgage has been discharged and replaced by the unregistered family mortgage for a sum approximating that originally owed to the NAB in February. So, it is said that the plaintiff is no worse off as a result of the conduct of Mr Uysal and perhaps a little better off. On the other hand, the defendants are significantly worse off for they have had to repay to PCL $25,000 more than they borrowed. This is a loss for them if they comply with the terms of settlement. I insert this qualification because the plaintiff has on 24 June 2004 issued a bankruptcy notice against Mr Uysal.
Mr Uysal said in mitigation that he did not appreciate that his actions amounted to a breach of the Mareva order and he unreservedly apologised to the court for any breach.
I have found him guilty of a deliberate breach of a court order. I am not persuaded that, if the plaintiff had not moved swiftly and if it had not imposed a variety of statutory garnishee notices, he would have voluntarily reversed the transaction.
In my view this is a case where the court should demonstrate that its orders are to be obeyed. Accordingly, a real rather than nominal punishment is appropriate. I will therefore commit the defendant to prison for 7 days. I will further order that he pay the costs of the plaintiff of this application on an indemnity basis.
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