Maria Bechara v Theodoros Haratsaris - [2013] NSWSC 577

Supreme Court

New South Wales

Medium Neutral Citation: Maria Bechara v Theodoros Haratsaris [2013] NSWSC 577
Hearing dates: 7 and 8 April
Decision date: 26 April 2013
Jurisdiction: Equity Division
Before: Rein J
Decision:
Orders the first and second defendants to pay the plaintiff's debt with freezing orders in place to continue until the plaintiff's debt is paid, or arrangements satisfactory to the plaintiff are made in lieu.
Declare pursuant to s 37A of the Conveyancing Act 1919 (NSW) that the transfer of the first defendant's interest in the property comprised in Folio Identifier 1/308418 to the second defendant is void.Declare that the second defendant holds her registered title and interest in the property comprised in Folio Identifier 1/308418 as trustee for the first defendant. Order that the second defendant transfer, to the first defendant, the second defendant's currently registered title and interest in the property comprised in Folio Identifier 1/308418.Declare pursuant to s 86 of the Law of Property Act 1936 (SA) that the transfer of the first defendant's joint tenancy interest in the property comprised in Parent Title CT 5728-413 - allotment 503 DP 76543 to the second defendant is void.Declare that the second defendant holds her registered title and interest in the property comprised in Parent Title CT 5728-413 - allotment 503 DP 76543 as a joint tenancy between herself in her own capacity, and herself as trustee for the first defendant.Order pursuant that the second defendant transfer, to the first defendant as a joint tenant with the second defendant, the second defendant's currently registered title and trusteeship interest in the property comprised in Parent Title CT 5728-413 - allotment 503 DP 76543.Stay entry and execution only of each of orders 4 and 7 for a period of 90 days from the date of this judgment and orders.Order that the first and second defendants, or either of them by themselves their servants or agents, be restrained from taking any steps to sell, transfer, mortgage or further encumber the properties, or either property, made the subject of orders 2, 3, 5, 6 other than-(a) with the prior consent in writing of the plaintiff; or(b) for the purpose of complying with orders 4 and 7; or(c) until further order of the Court.

Catchwords: CONVEYANCING ACT - whether assets transferred with the intention to defraud creditor - whether the second defendant can rely on the defence of a purchaser in good faith without notice of the first defendant's intention to defraud creditors
Legislation Cited: Conveyancing Act 1919 (NSW)
Law of Property Act 1936 (SA)
Cases Cited: B v U [2012] NSWSC 1416
Briginshaw v Briginshaw (1938) 60 CLR 336
Huynh v Helleh Holdings Pty Ltd [2001] NSWSC 1162
Kang v Kwan [2002] NSWSC 1187; (2002) 11 BPR 20,623
Macquarie Bank Ltd v National Mutual Association of Australia Ltd & Ors (1996) 40 NSWLR 543
Marcolongo v Chen (2011) 242 CLR 546, (2011) 274 ALR 634; (2011) 85 ALJR 380; [2011] HCA 3
PT Garuda Indonesia…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2013] NSWSC 577
Decision Date: 26 April 2013

CaseChat Overview and Summary

Maria Bechara initiated proceedings against Theodoros Haratsaris in the Supreme Court, seeking to have certain property transfers set aside on the grounds that they were intended to defraud creditors. The dispute arose from a substantial judgment debt awarded to Ms Bechara against Mr Haratsaris, which he failed to satisfy. The crux of the case involved two property transfers: one from Mr Haratsaris to his wife, and another from his mother to him, both occurring shortly after the judgment was entered. Ms Bechara argued that these transfers were designed to prevent her from recovering the debt owed to her.

The primary legal issues before the court were whether the property transfers were made with the intention to defraud creditors and whether Mrs Haratsaris, as the recipient of one of the properties, could rely on the defence of being a purchaser in good faith without notice of Mr Haratsaris' intention to defraud. The court had to examine the timing, consideration, and circumstances surrounding the transfers to determine if they were legitimate transactions or devices to avoid creditor claims. Additionally, the court considered the applicability of s 37A of the Conveyancing Act 1919 (NSW), which allows for the setting aside of transactions that are entered into with the intent to defeat creditors.

In delivering judgment, the court found that the transfers were indeed made with the intent to defraud Ms Bechara. The court highlighted that Mr Haratsaris left himself with no significant assets by transferring his properties, and that these actions were taken immediately following the judgment against him. The court concluded that Mrs Haratsaris could not claim to be a bona fide purchaser for value without notice, as she was aware of the circumstances surrounding the transfers. Consequently, the court ruled that the property transfers should be set aside, and the Belmore Property should be subject to the satisfaction of the judgment debt owed to Ms Bechara. The court ordered that the property be sold and the proceeds applied to discharge the judgment debt.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

On 21 October 2010 judgment was entered in the District Court against Mr Haratsaris in the amount of $118, 870.33 plus an amount for interest of $55, 882.08 amounting to a total of $174, 752.41 ("the judgment debt"): see Exhibit A, p 629. Although Mr Haratsaris had filed a defence he did not take an active role in defending those proceedings thereafter and the matter was heard ex parte by Murrell DCJ, with her Honour noting that she was satisfied Mr Haratsaris had notice of the hearing. Within weeks of Mr Haratsaris having filed his defence in the District Court proceedings a property acquired by Mr Haratsaris in 2008 was transferred by him to Mrs Haratsaris as trustee of the Haratsaris Family Trust ("the Trust"). The stated consideration payable by Mrs Haratsaris was $550K: see Exhibit A2, p 537. The property in question, which I shall describe as "the Belmore Property", was one which had been transferred to Mr Haratsaris by his mother in early 2008 for a consideration of $1. Mr Haratsaris shortly after the transfer subsequently obtained a loan for $205,668.58 from First Mortgage Home Loans Pty Ltd ("First Mortgage") which was secured by the Belmore Property. On 22 July 2009 Mr Haratsaris arranged to discharge the mortgage to First Mortgage by repayment of the loan monies. On or about 27 August 2009 Mr Haratsaris transferred his interest to Mrs Haratsaris for the purported consideration of $550K and the transfer was registered on that date. Mrs Haratsaris applied for and obtained a loan in the amount of $300K from ANZ and that amount, or $250K of it, was used to repay the first Mortgage debt by Mr Haratsaris. By letter dated 13 July 2009 Ms June Hoskin, a registered conveyancer, on behalf of Mrs Haratsaris, advised the bank that Mrs Haratsaris would not be contributing any further funds to the purchase other than the loan proceeds "as she already has an interest in the property as spouse of the vendor": see Exhibit A2, p 538. Ms Bechara claims that the Belmore Property transfer, like the Adelaide Property conveyance, was designed to defeat her position as a creditor and should also be set aside by virtue of s 37A of the Conveyancing Act 1919 (NSW). It is clear that as at August 2005 Mr Haratsaris' only significant asset was his interest in the Adelaide Property and his entitlement to the balance of the settlement proceeds from his personal injury claim. By transferring his interest in the Adelaide Property to his wife and by directing that all of his personal injury settlement monies be paid to his wife, he left himself with no assets. Mr Haratsaris was then, and is now, in receipt of a disability pension although he has, according to his evidence, been conducting business as a developer: see T87.3-5 and T147.20, see also T114 and Mrs Haratsaris' evidence at T40.1, T44.32, T46.10 and T50.7 and see his affidavit verifying his defence in the District Court proceedings at Exhibit A2, p 520 and his affidavit in these proceedings, Exhibit A1, p 129, [81]-[84] and Mrs Haratsaris' affidavit, Exhibit A1, p 115, [36]-[38].

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.

Medium Neutral Citation:	Maria Bechara v Theodoros Haratsaris [2013] NSWSC 577
Hearing dates:	7 and 8 April
Decision date:	26 April 2013
Jurisdiction:	Equity Division
Before:	Rein J
Decision:	Orders the first and second defendants to pay the plaintiff's debt with freezing orders in place to continue until the plaintiff's debt is paid, or arrangements satisfactory to the plaintiff are made in lieu. Declare pursuant to s 37A of the Conveyancing Act 1919 (NSW) that the transfer of the first defendant's interest in the property comprised in Folio Identifier 1/308418 to the second defendant is void.Declare that the second defendant holds her registered title and interest in the property comprised in Folio Identifier 1/308418 as trustee for the first defendant. Order that the second defendant transfer, to the first defendant, the second defendant's currently registered title and interest in the property comprised in Folio Identifier 1/308418.Declare pursuant to s 86 of the Law of Property Act 1936 (SA) that the transfer of the first defendant's joint tenancy interest in the property comprised in Parent Title CT 5728-413 - allotment 503 DP 76543 to the second defendant is void.Declare that the second defendant holds her registered title and interest in the property comprised in Parent Title CT 5728-413 - allotment 503 DP 76543 as a joint tenancy between herself in her own capacity, and herself as trustee for the first defendant.Order pursuant that the second defendant transfer, to the first defendant as a joint tenant with the second defendant, the second defendant's currently registered title and trusteeship interest in the property comprised in Parent Title CT 5728-413 - allotment 503 DP 76543.Stay entry and execution only of each of orders 4 and 7 for a period of 90 days from the date of this judgment and orders.Order that the first and second defendants, or either of them by themselves their servants or agents, be restrained from taking any steps to sell, transfer, mortgage or further encumber the properties, or either property, made the subject of orders 2, 3, 5, 6 other than-(a) with the prior consent in writing of the plaintiff; or(b) for the purpose of complying with orders 4 and 7; or(c) until further order of the Court.
Catchwords:	CONVEYANCING ACT - whether assets transferred with the intention to defraud creditor - whether the second defendant can rely on the defence of a purchaser in good faith without notice of the first defendant's intention to defraud creditors
Legislation Cited:	Conveyancing Act 1919 (NSW) Law of Property Act 1936 (SA)
Cases Cited:	B v U [2012] NSWSC 1416 Briginshaw v Briginshaw (1938) 60 CLR 336 Huynh v Helleh Holdings Pty Ltd [2001] NSWSC 1162 Kang v Kwan [2002] NSWSC 1187; (2002) 11 BPR 20,623 Macquarie Bank Ltd v National Mutual Association of Australia Ltd & Ors (1996) 40 NSWLR 543 Marcolongo v Chen (2011) 242 CLR 546, (2011) 274 ALR 634; (2011) 85 ALJR 380; [2011] HCA 3 PT Garuda Indonesia…