Laro-Bashford v Mihos
[2015] VCC 1540
•10 November 2015
| IN THE COUNTY COURT OF VICTORIA | Revised (Not) Restricted Suitable for Publication |
AT MELBOURNE
COMMERCIAL DIVISON
GENERAL LIST
Case No. CI-14-00145
| ADAM LARO-BASHFORD & ANOR | Judgment Creditors |
| v. | |
| GEORGE MIHOS | Judgment Debtor |
---
JUDGE: | His Honour Judge Anderson | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 8 October 2015 | |
DATE OF JUDGMENT: | 10 November 2015 | |
CASE MAY BE CITED AS: | Laro-Bashford & Anor v. Mihos | |
MEDIUM NEUTRAL CITATION: | [2015] VCC 1540 | |
REASONS FOR JUDGMENT
---
Catchwords: Practice and proceedure – Judgment debt – Installment order – Rehearing – Interest accruing on judgment debt to be taken into account – Time over which debt would be repaid – Adequacy of information provided by the judgment debtor about his financial situation – Judgment Debt Recovery Act 1984 (Vic).
---
APPEARANCES: | Counsel | Solicitors |
| For the Judgment Creditor | Ms E. Stubbs | MST Lawyers |
| For the Judgment Debtor | In person |
HIS HONOUR:
1On 31 July 2015, a Deputy Registrar of the Court granted an application by the judgment debtor, George Mihos, to pay a judgment debt by instalments pursuant to the Judgment Debt Recovery Act 1984 (Vic).
2The order was that the judgment debtor pay the judgment debt of $100,453 by 60 monthly instalments of $1,700 commencing 1 September 2015. The judgment creditor filed a notice of objection on 13 August 2015 and the matter comes before the Court for determination by the way of rehearing.
3The judgment creditor submits that no instalment order should be made, for the following reasons:
a.an instalment order must take account of the statutory interest that would accrue on the judgment debt;
b.the application by Mr Mihos was supported by an affidavit by him setting out a statement of financial situation. It was submitted that the affidavit was untruthful or incomplete in material respects;
c.there was a real risk that Mr Mihos would not adhere to an instalment order, if it were made;
d.the period of time over which the judgment debt should be repaid must not be unreasonable;
e.there are other means for payment by the judgment debtor;
f.the interests of the judgment creditors required the judgment debt to be immediately repaid.
Truthfulness and completeness of the statement of financial position
4In support of his application for an instalment order, Mr Mihos swore an affidavit on 14 July 2015 containing a statement of financial situation. In summary, the statement disclosed the following matters:
a. earnings
$37,000 average pre-tax earnings for the last 12 months as a self-employed consultant ($712 per week);
b. assets
$926.33 balance in Westpac joint account with his wife. Household and personal items;
c. expenses
$2,227 per week, including $1,003 for rent. Apart from $74 per week for income tax, all expenses were joint responsibilities with his wife;
d. liabilities
balance owing on 3 credit cards, totalling $57,203.
5At the rehearing of the application, Mr Mihos was cross-examined by the judgment creditors’ counsel. The Court also took account of an affidavit of Mark Skermer sworn 7 October 2015 relating to Mr Mihos’s position as a trustee and beneficiary of certain trusts, and the assets of those trusts.
6The additional matters relating to Mr Mihos’s financial position disclosed by this additional evidence were as follows:
a.Mr Mihos and his wife are directors of the Mihos Family Superannuation Fund. Mr and Mrs Mihos and their two children are the beneficiaries of the fund;
b.Mr Mihos is the sole director and shareholder of Today Not Tomorrow Institute Finance Pty Ltd. That company is the trustee of the G & C Mihos Family Trust. This is a discretionary trust. The beneficiaries are the same family members as for the superannuation fund;
c.the superannuation fund and the family trust hold a substantial number of shares in Creative Waters Technology Ltd. This company’s shares are not traded on the Australian Stock Exchange. Shares are apparently privately traded and since 1 July 2011 only one “request for transfer” has been submitted to the company. It was suggested that there had been “recent sales” of shares in the company at 8-12 cents per share, although the dates and quantities of these sales is unclear. No dividends have ever been declared to shareholders.
d.in his affidavit, Mr Mihos disclosed that he and his wife shared the burden of household expenses including the rental for the home the family live in. During cross-examination, Mr Mihos said that his wife has an interest in two properties. She is a 50% owner with Mr Mihos’s sister in a beach house at Dromana, which he said was acquired over 20 years ago. She is also a 50% owner with Mr Mihos’s parents in the property his parents live in at Preston.
e.In his affidavit, Mr Mihos disclosed that he had three credit cards with balances as follows:
Westpac Mastercard $47,968 owing
Citibank Visa $6,254 owing
CBA Visa $2,891 owing
Mr Mihos did not, however, include the regular repayments he was making for those credit cards in his list of expenses.
7A complaint was made by Ms Stubbs, on behalf of the judgment creditor, that Mr Mihos had not attached financial records to his affidavit containing the statement of financial situation and had not brought any such documents to court for the hearing. Ms Stubbs gave as an example the financial statements of Results Today Not Tomorrow Academy Pty Ltd (“RTNTA”) which Mr Mihos listed as the company which conducts his consultancy business.
8It seems, however, that the judgment creditor had made no request to Mr Mihos prior to the hearing for the production of any documents. Mr Mihos said that he “didn’t know I had to being the documents” to the hearing. He said he had asked a person in the Court Registry, “what shall I bring”? He said he was told that he would simply be required to listen to the reasons advanced by the judgment creditor as to why the instalment order should not be made and then to respond.
9At the hearing, Mr Mihos was questioned about his credit cards. He said that the cards were very important to his continued ability to pay expenses and for his business as a financial coach to continue to operate. He said that the credit limits for the credit cards were as follows:
Westpac Mastercard $50,000
Citibank Visa $45,000
CBA Visa $20,000
10Mr Mihos said that, given access to a computer, he could obtain copies of his current statements for the cards. The Court adjourned and Mr Mihos was given the opportunity to use the computer equipment in court. As a result, the most current page relating to the Westpac credit card and the last two pages of the CBA card were obtained.
11The Westpac statement disclosed that:
a.the credit limit seemed to be about $49,500;
b.on that date, $47,952.54 was owed on the card;
c.the interest charges on purchases during the previous month had been $778.49;
d.a payment of $2,500, by transfer from a Westpac account, which Mr Mihos said was the joint account with his wife, had been made on 14 September 2015;
e.the transactions on the statement covered the period from 14 September to 7 October 2015.
12The CBA statement disclosed that:
a.the credit limit of the card was $22,500;
b.$1,117.20 was owed on the card;
c.the transactions on the statement covered the period from 4 June to 7 October 2015;
d.payments were made to the account as follows:
29 June 2015
$87.30
27 July 2015
$2,698.92
31 August 2015
$867.30
11 September 2015
$617.90
14 September 2015
$1,068.00
e.“fines” totalling $40 per fortnight were apparently deducted pursuant to a “payment plan”.
13At the conclusion of the hearing on 8 October 2015, I ordered that Mr Mihos, by 13 October 2015, serve copies of further bank statements covering the months of August and September 2015 in respect of the three credit cards and the Westpac joint account.
14Mr Mihos complied with this direction and produced the following documents:
a.two monthly statements for the Westpac credit card covering the period 5 August to 6 October 2015;
b.two statement for the Westpac joint account covering the period 27 July to 25 September 2015;
c.two monthly statements for the CBA credit card covering the period 6 August to 5 October 2015;
d.two monthly statements for the Citibank credit card covering the period 13 July to 13 September 2015.
15On 16 October 2015, the judgment creditor’s solicitors filed written submissions in relation to the information disclosed by the bank statements. On 19 October 2015, Mr Mihos filed a written response.
16The Westpac credit card statements show the following further information:
a.the credit limit was $50,000;
b.interest charges on purchases were debited as follows:
6 September 2015 $824.91
6 October 2015 $778.49
c.payments were made to the account from the Westpac joint account as follows:
10 August 2015
$2,350.00
21 August 2015
$2,500.00
7 September 2015
$2,480.17
14 September 2015
$2,500.00
17The Westpac joint account statements showed the following further information:
a.the transfer to the Westpac credit card of $2,500 on 14 September 2015 and to the CBA credit card totalling $5,252.12 on 27 July, 31 August, 11 September and 14 September 2015 did not come out of the joint Westpac account;
b.it is likely the following further payments to the Westpac credit card account were not transferred from the joint Westpac account, but from accounts described as “Business Cheque Account” and “Westpac Business Cash”:
10 August 2015
$2,350.00
21 August 2015
$2,500.00
7 September 2015
$2,480.17
c.since 21 August 2015, the account has had a credit balance ranging between $2,390.97 and $3,692.07.
18The CBA credit card account statements contained little further information.
19The Citibank credit card account statements show the following information:
a.the credit limit is $45,000;
b.at the end of the second statement on 13 September 2015, the amount owing on the card was $10,102.42;
c.substantial payments into the account totalling $29,759.85 are described on the statements as “Bpay payments”;
d.during August 2015, significant sums were paid for what were apparently travel expenses, described by Mr Mihos in his evidence on 8 October 2015 as having arisen as a result of a charitable donation by extended family members and assistance by the family which enabled Mr Mihos, his wife and daughters to make a recent trip to Europe. The payments set out in the bank statement were as follows:
13 August 2015
Etihadair $3,338.92 x 4
$13,355.68
14 August 2015
Expedia
$2,988.12
14 August 2015
Aegean Ai $212.90 x 4
$851.60
21 August 2015
Expedia
$1,484.10
21 August 2015
Relais Uffizi
$955.42
27 August 2015
Austrian Ai $726.10 x 4
$107.91
$22,647.23
e.on 8 September 2015, there was a payment of $3,570 to “Gucci Australia Melbourne Au”.
20A comparison of the balances shown on the bank statements produced by Mr Mihos with the details he supplied in his statement of financial situation sworn on 14 July 2015 shows that the statement of financial situation was likely to have been accurately stated in this regard.
21The judgment creditors’ solicitors referred to the following information disclosed by the bank statements:
a.there are deposits to the accounts which are unexplained. By his response, Mr Mihos said that:
i.deposits in the Wespac credit card account represented his wife’s fortnightly “pays” as follows:
30 July 2015 $923.74
13 August 2015 $914.23
27 August 2015 $998.31
10 September 2015 $1,105.40;
ii.other deposits in the various accounts represent “business revenue” and “are not income”. Mr Mihos said, “As a consultant my invoices for works completed vary. Suffice to say projections are that my income will double this financial year”.
b.On 25 September 2015, there was a deposit of $46.50 which represented a dividend paid in respect of Telstra shares. Mr Mihos in his response stated:
i.The shares are apparently held by Today Not Tomorrow Institute Finance Pty Ltd as trustee of the G & C Mihos Family Trust;
ii.300 shares were purchased in about 2000 for $7.40 each;
iii.On 16 October 2015, a sale of the shares would have realised $1,566.
c.Significant expenses were not referred to by Mr Mihos in his statement of financial situation, including:
i.interest on the Westpac credit card;
ii.motor vehicle expenses, including fuel costs totalling $1,741.43 paid by credit card during August and September 2015;
iii.payment of $470 during August and $1,050 during September with the Westpac credit card to Fort Knox for storage facilities;
iv.insurance premiums totalling $1,361.75 paid by credit card during August and September.
By his response, Mr Mihos seemed to suggest that these items were “business expenses” of his consultancy business.
d.payments of certain weekly household expenses disclosed in the statement of financial situation are not evidenced at all by the bank statements, including:
Rent $1,003
Water and sewerage rates $15
Electricity and gas $115
e.the statement of financial situation refers to weekly expenditure of $250 on food and $220 on clothing and shoes. The bank statements for August and September 2015 show significant sums being spent on these and other personal items during that period.
22Mr Mihos, on 16 October 2015, forwarded to the Court details of offers made to the judgment creditors in relation to payment of the judgment debt, as follows:
a.repeating an offer made by Mr Mihos whilst giving evidence on 8 October 2015, for the shares held by the superannuation fund and the family trust in Creative Water Technology Ltd to be transferred to the plaintiffs in full settlement of the judgment debt;
b.alternatively, offering to pay an immediate lump sum of $20,000 sourced “via CBA Visa card”, and the balance by monthly payments of $1,800.
23Mr Mihos again referred to these offers in his email with the response submissions on 19 October 2015.
24The judgment creditors’ solicitors submitted that the further bank statement supplied by Mr Mihos on 13 October 2015, “further support” their previous submissions that:
“a. The Affidavit material submitted by the Judgment Debtor was not fully encompassing of his financial position;
b.There is a real risk of non-adherance;
c. There are other means for payment by the Judgment Debtor; and
d.The Judgment Creditors will be prejudiced if an Instalment Order is made”.
25Mr Mihos made the following responses:
“a) Totally inaccurate and misleading
b) There is no risk to judgment creditors – in actual fact I’d like to reiterate that the risk is squarely mine and would impact my ability to earn a stable income for my family…
c) Have already provided an alternative and reasonable and immediate solution as full and final settlement in this claim and / or reduce my original timeline to pay by a further 18 months
d)There is no prejudice by instalment order made.”
Conclusions
26Interest on the judgment must be taken into account: Mr Mihos’s application for an instalment order dated 14 July 2015, and the order of the Deputy Registrar dated 31 July 2015, anticipated that the judgment debt might be repaid by 60 monthly instalments of $1,700. This appears to ignore payment of the interest on the judgment which would accrue pursuant to section 73(4) of the County Court Act 1958.
27The interest which would accrue must be taken into account when making an instalment order (Cahill v Howe [1986] VR 630 per Young CJ). The judgment creditors are also entitled to their costs of the proceeding to be taxed on a standard basis in default of agreement.
28It is not possible to calculate in advance the interest which would accrue under the Penalty Interest Rates Act 1983, as the applicable rate varies from time to time. Ms Stubbs prepared a set of calculations based on the application of the current interest rate of 9.5% and assuming that regular monthly payments of $1,700 were made. Mr Mihos’s application and the Registrar’s order anticipate that the total judgment debt will be repaid within 5 years. However, Ms Stubbs’ calculations show that after 3 years, instead of the debt being reduced by $61,200 (36 instalments of $1,700), the debt would only be reduced by $36,025, as initially over $800 of each monthly instalment of $1,700 would be required to meet the accrued interest. Even after 3 years, the interest component would exceed $500 each month.
29It is clear, therefore, that to repay the judgment debt with accrued interest by instalments of $1,700 each month would take closer to 7 years at the current penalty interest rate. The costs of the proceeding, which commenced by Writ issued 14 January 2014 and concluded by a judgment following trial on 26 June 2015, would not be insubstantial. However, the period of repayment would be reduced if, as proposed by Mr Mihos, an initial lump sum payment were made.
30I consider that the length of time the judgment creditors would need to wait before the judgment debt, including interest and costs, was paid is a factor which militates against the making of an instalment order.
31Truthfulness and comprehensiveness of the statement of financial position: Whilst in the judgment creditor’s most recent submissions, the description “not truthful” was removed, it is difficult to have confidence in the accuracy and the completeness of affidavit sworn 14 July 2015 purporting to contain a “true statement” of Mr Mihos’s financial situation.
32Mr Mihos’s affidavit was supplemented by his oral evidence under cross-examination at the rehearing and by the bank statements he produced both at that hearing and subsequently. I refused a request by Ms Stubbs at the hearing that Mr Mihos be required to produce documents relating to his consultancy business, as no earlier request had been made for the production of those documents.
33It is clear, even from the limited documents and further matters Mr Mihos was required to address in cross-examination and from the few bank statements he produced at the Court’s direction, that Mr Mihos has not provided credible or comprehensive evidence of his financial situation. The bank statements, covering only a two month period, have many deposits and payments which have not been adequately explained, particularly when compared with the position disclosed in Mr Mihos’s affidavit.
34Risk of non-adherence: Ms Stubbs submitted that on Mr Mihos’s disclosed income and the evidence of his share of the household and personal expenses, there is a shortfall which does not engender confidence that the instalment program would be adhered to. Ms Stubbs submitted the bank statements suggest that the household expenditure is substantially more that Mr Mihos had disclosed. Mr Mihos’s response was that “projections are that my income will double this financial year” and he could therefore meet the installments.
35I consider that the critical issue is whether the Court can have confidence in the evidence by Mr Mihos of his financial position rather than speculating as to whether Mr Mihos would comply with the instalment order proposed by Mr Mihos of $1,700 per month for 60 months. The present evidence is totally inadequate in view of the incomplete and misleading disclosures made by Mr Mihos of his financial position and the fact that, for the total amount owing to be paid, would take significantly longer than 5 years.
36The period of time for payment is excessive: If the Court were otherwise confident that the judgment debtor had limited means, payment over a period of five years, or even longer, may not be inappropriate. The present case can be distinguished from Cahill v Howe on the basis that, in Cahill, the judgment debtor’s means were clearly limited, and also, when accruing interest was taken into account, the instalments proposed (of $50 per week) would have been insufficient even to pay the interest, so that there was “an ever-increasing debt to the judgment creditors” (at page 633).
37Prejudice to the judgment creditors: Two decisions of the New South Wales Supreme Court provide very useful guidance as to how courts should approach instalment applications under the Victorian, and now, the uniform legislation. In Chint Australia Pty Ltd v Cosmoluce Pty Ltd [2008] NSWSC 1054, Einstein J analysed the background of the Victorian Act and at paragraph 15 made a number of observations about how the legislation should operate, particularly in regard to “substantial commercial litigation”.
38In Hellier Capital Pty Ltd v Albarran [2009] NSWSC 403, McDougall J, at paragraph 19, noted the comments by Einstein J in Chint where he had “referred to the proposition that a successful party is entitled to the fruits of its success and to enforce the Court’s orders” as being applicable in terms of “major commercial litigation”. McDougall J did not, however, consider “that the principle is so limited”.
39He considered that, “There is a real public interest in enabling parties who have litigated their disputes to enforce the victory that they have achieved. That public interest arises, at least in part, because the system of adjudication through courts depends firstly on acceptance of the outcome (if necessary, after exhausting all available avenues of appeal) and secondly, the ability to enforce the outcome. If the process of adjudication is to survive, so that people do not resort to self-help, the courts should be slow to interfere in the normal processes of enforcement”.
40In the present case, the lack of clarity about Mr Mihos’s financial position makes it difficult to give weight to the usual counterveiling factors which are dependent upon reliable evidence of the judgment debtor’s means and his necessary living expenses (including those of his dependents).
41Upon the evidence presented to the Court it would be difficult to make findings in relation to Mr Mihos as to:
a.his available sources of income;
b.the assets he has access to, including bank accounts and trust assets;
c.the extent of his debts, apart from those subject to payment plans;
d.the expenses for which he is responsible and the nature of those expenses;
e.the extent to which he contributes towards the living expenses of his wife and children.
Proposed orders
42Accordingly, upon the rehearing, the judgment debtor’s application for the payment of the judgment debt by instalments must be refused and the order of the Deputy Registrar made 31 July 2015 cancelled.
43No orders will be made until after the parties have had the opportunity to make further submissions at a hearing next Tuesday, 17 November 2015 at 9.30am.
44I note that, by section 6(9) of the Judgment Debt Recovery Act 1984 (Vic), no further application for an instalment order may be made for at least 3 months. If such an application was contemplated by Mr Mihos, he should ensure that any such application is supported by material which fully discloses his financial situation.
- - -
Certificate
I certify that these 12 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 10 November 2015.
Dated: 10 November 2015
Mi-Lin Chen Yi Mei
Associate to His Honour Judge Anderson
0
2
0