Murrell as trustee v Clifford

FEDERAL CIRCUIT COURT OF AUSTRALIA

MURRELL AS TRUSTEE v CLIFFORD & ANOR

[2019] FCCA 128

Catchwords:
BANKRUPTCY – Application by trustee to have a transfer of property held void pursuant to section 120 and/or section 121 of the Bankruptcy Act 1966 – transfer occurring between service of Bankruptcy Notice and making of Sequestration Order – whether transfer part of family law settlement – whether respondent has an equitable interest in the property – property transfer clearly void pursuant to section 120 and section 121 – failure of trustee to address Family Law Act claim – parties to be further heard.

Legislation:

Bankruptcy Act 1966, ss.120, 121

Applicant:

JOHNATHAN MURRELL AS TRUSTEE OF THE BANKRUPT ESTATE OF MARK CLIFFORD (AKA MARK BRENDAN CLIFFORD) NO. VIC 2834 OF 2014/8

First Respondent:

MARK BRENDAN CLIFFORD

Second Respondent:

PAOLINA EVANS (AKA LEE EVANS)

File Number:

MLG 1590 of 2017

Judgment of:

Judge Burchardt

Hearing dates:

16 & 23 November 2018

Date of Last Submission:

13 December 2018

Delivered at:

Melbourne

Delivered on:

25 January 2019

REPRESENTATION

Counsel for the Applicant:

Mr Waldron

Solicitors for the Applicant:

Hutchinson Legal

The First Respondent:

In person

The Second Respondent:

In person

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLG 1590 of 2017

JOHNATHAN MURRELL AS TRUSTEE OF THE BANKRUPT ESTATE OF MARK CLIFFORD (AKA MARK BRENDAN CLIFFORD) NO. VIC 2834 OF 2014/8

Applicant

And

MARK BRENDAN CLIFFORD

First Respondent

PAOLINA EVANS (AKA LEE EVANS)

Second Respondent

REASONS FOR JUDGMENT

Introductory

This is a curious dispute in which in one sense the parties’ cases have never really directly engaged or interrelated with one another.

The applicant is the Trustee of Mark Clifford, the first respondent.

Ms Evans, the second respondent, to whom I shall refer as the respondent, is the allegedly former de-facto partner of the bankrupt.

It should be noted that Mr Clifford attended Court on the first day

of hearing, on 16 November 2018. It became apparent that he did not propose to play any active part in the proceeding, save to give supporting evidence on behalf of Ms Evans. This in due course he did. The case is – in truth – between Mr Murrell and Ms Evans.
The applicant seeks an order for possession against both respondents

in respect of a property at 11 Harries Court, Narre Warren North,

(“the property”). In order to achieve that, he seeks also ancillary declarations and orders. More particularly he seeks a declaration that

a transfer of the property from Mr Clifford to Ms Evans registered

on 27 August 2014 is void by virtue of the provisions of section 120 and/or section 121 of the Bankruptcy Act 1966 (“the Act”). Ancillary orders transferring the property to the Trustee and the like are also sought.
In her Notice of Opposition Ms Evans asserts that the original registration of the property in the name of Mr Clifford alone was not

a true reflection of ownership rights regarding the property, that she had an equitable interest in the property by reason of her contributions to it and that the transfer to her was not an attempt to defeat creditors but rather was an adjustment of property interest between the first respondents on their separation.
Because of the way the matter has proceeded, it is appropriate

to commence with the affidavit materials filed by the parties from time to time.

The Trustee’s first affidavit, filed 24 July 2017

Mr Murrell deposed that he is the Trustee of the Bankrupt Estate

of Mark Clifford. Mr Clifford became bankrupt as a result

of a Sequestration Order made on 30 September 2014, which noted that the date of the act of bankruptcy was 1 August 2014 (annexure JM-1).
Mr Murrell deposed that at the date of his affidavit the bankrupt had failed to file a Statement of Affairs.
Mr Murrell deposed that his investigations had revealed that from

19 June 2008 until 27 August 2014 the bankrupt was registered as the sole owner of the property (annexure JM-2).
Mr Murrell deposed that, by Transfer of Land dated 19 August 2014 – with consideration stated as “Natural love and affection” – registered on 27 August 2014, the bankrupt transferred the property to the second respondent (annexure JM-3).
Mr Murrell opined that the property was valued by Ms Evans’s mortgagee, Westpac, to have a value of $850,000 in or about July, August 2014 (annexure JM-4).
It should be noted, however, that under the heading “Transfer Details” in annexure JM-4 it was asserted:
“The following details pertinent to the Transfer document have been provided by your client(s). Please ensure that the transfer matches these details. If you believe the details held by Westpac are wrong in any way, please contact us immediately.”
Relevantly “Consideration” was described as “$850,000.00”.
Annexure JM-4 was written to one Mr Peter Gajanovic, whose role

is not specified, but it would appear he was acting in some capacity for

Ms Evans at that time.
Mr Murrell noted a Rates Valuation as at 1 January 2012 of $517,000 (annexure JM-5). He went on to opine that the value of the property was well in excess of $550,000 in or about August 2014, as Westpac approved a loan for $550,000 at that time (annexure JM-6). I note that the mortgage that was paid out to enable the transfer from Mr Clifford to Ms Evans to take place was no more than $471,000 as at 19 August 2014.
Mr Murrell opined that the property had a market value of between $850,000 to $900,000 as at 27 June 2016 (annexure JM-6A).
Mr Murrell went on to detail the history of Mr Clifford’s bankruptcy. The Petitioning Creditor, Chapel Corner Service Centre Pty Ltd, issued a Summons for Oral Examination in the Magistrates’ Court of Victoria in relation to a judgment debt owed by the bankrupt and his company DSD Tyres Pty Ltd, which was conducted on 12 May 2014, when

Mr Clifford appeared in person (annexure JM-7).
Mr Murrell opined that, given the Sequestration Order noted that the date of the act of bankruptcy was 1 August 2014, he understood that

a Bankruptcy Notice was served by Chapel Corner upon the Bankrupt on 11 July 2014 in relation to a debt of approximately $47,000, which was not complied with by 1 August 2014. The Creditor’s Petition leading to the Sequestration Order was filed on 20 August 2014 according to the Commonwealth Courts Portal website.
Mr Murrell deposed that by letter dated 2 April 2015 he asked

Ms Evans to provide information in relation to the transfer of the property shortly before the bankruptcy (annexure JM-8), but that

Ms Evans never replied.
Mr Murrell deposed that by letter dated 28 July 2016 from his solicitors, Hutchinson Legal, to Ms Evans the solicitors informed

Ms Evans that the transfer was likely to be void pursuant to sections 120 or 121 of the Act (annexure JM-9).
Messrs Belleli, King & Associates (“BKA”) responded by letter dated 11 August 2016 (annexure JM-10).
Given the way the matter has proceeded, it is appropriate, albeit slightly tedious, to set out the terms of the letter from BKA, so far as relevant, in full.
“We advise that we act on behalf of Paolina Evans (“Ms. Evans”) and have before us your letter to her of 28 July 2016.
We advise that Ms. Evans was the domestic partner of Mark Clifford (“Mr. Clifford) from 2002 until 2013.
Domestic cohabitation commenced in 2002 at Mr Clifford’s residence at Bond Court, Narre Warren. At the time of the commencement of cohabitation, Ms. Evans was the registered owner of the property at 17 Taylors Road, Cranbourne. In 2008, it became evident that the size of the residence at Bond Court, Narre Warren was not enough to house both Ms. Evans and

Mr Clifford, her two children and his two children. The couple decided to pull assets and purchase the property at 11 Harries Court, Narre Warren North. The property was purchased in the sole name of Mr. Clifford for $495,000.00.
We are instructed that from the sale proceeds of Mrs Evans’ property at 17 Taylors Road, Cranbourne, Ms Evans utilised $40,000 of such monies to install an indoor pool at Harries Court, Narre Warren. The balance of her sale proceeds paid off the mortgage over 17 Taylors Road, Cranbourne and a deposit was placed for the purchase of her Eildon property at 22 Ninth Street, Eildon.
Between 2002 and 2013, the contributions towards the domestic expenses and mortgage were equally contributed between

Ms Evans and Mr Clifford.
We are instructed that the couple undertook expensive renovations to the property requiring $200,000.00 In addition

to the $40,000 contributed by Ms Evans towards the installation of the indoor pool, Ms Evans contributed a further $45,000 towards the general renovations.
We are instructed that the relationship was volatile and in fact, Ms Evans obtained an Intervention Order on 6 February 2012. Mr Clifford moved out of the family home. His children remained with Ms. Evans.. Upon the expiry of the Intervention Order in February 2013, Ms Evans and Mr Clifford had agreed that he would move back in the property and it was agreed, that the couple would separate under the same roof.
In early 2014 Mr. Clifford with Ms Evans agreed that Ms. Evans would retain the property subject to Ms. Evans paying out

Mr. Clifford’s business overdraft.
We advise that in August 2014, the transfer of land was executed in favour of Ms. Evans. Prior to the execution of the transfer

of land, the parties had agreed that Ms Evans would discharge and pay out the overdraft facility owed by DSD Tyres Pty Ltd. This facility was secured by the Eildon property owned by

Ms. Evans.
On 28 April 2014, our client paid to the bankrupt the sum

of $40,358.88, copy of the National Australia Bank cheque account statement is enclosed for your reference.
At the time of separation, the City of Casey had valued the property at $571,000. We enclose a copy for your reference.

At the time that the Westpac Banking Corporation agreed

to advance funds to Ms Evans for the purposes of acquiring

Mr Clifford’s interest in the property, based on a loan ratio of 80% we have calculated that the Westpac Bank valued the property was $687,500.00.
Based on the equal contributions to the acquisition and improvement of the property at 11 Harries Court, Narre Warren North by both Mr Clifford and Ms Evans, we estimate that each of the parties had a 50% share in the equity of the property.
At the time separation, we estimate that each party had

an equity of $68,000 in the property. As our client is discharged the bankrupt’s overdraft facility for the $40,358.88 we estimate that Mr. Clifford had an equity of less than $20,000.00 in the property. Mr Clifford’s equity in the property was subsequently extinguished by relinquishing his parental control and financial obligations towards this children Jared Clifford and Brooke Clifford.
We are instructed that the Debtor’s Petition is as a result

of unpaid legal fees relating to a DHS petition with respect

to the accommodation for Jarred and Brooke Clifford,

the children of Mr. Clifford. DHS became involved following

a subsequent domestic violence incident between Mr. Clifford and Ms. Evans following separation and agreement as to the division of the relationship’s asset pool.
A further interim Intervention Order was granted in favour

of Ms. Evans against Mark Clifford on 25 August 2014 with

a final order being made on 9 October 2014.
We advise that the mother of the children had relinquished all responsibility and care for the children. An interim accommodation order was made in favour of Ms. Evans with respect of Jarred Clifford and Brooke Clifford on 7 July 2015. We enclose herewith copies of such orders.
We advise that Mr. Clifford’s children continue to reside with

Ms. Evans.
The mortgage facility that Ms. Evans took out from the Westpac Banking Corporation was for the sum of $550,000.00 which included
(a)   funds to payout the mortgage to the National Australia Bank in sum of $471,000.00;
(b)   $40,358.88;
(c)   $982.00 legal fees bank fees and registration fees
(d)   Balance $37,659.12 to complete renovations.
A copy of correspondence to our client from Westpac Banking Corporation is included showing the details of the loan facility.
Our client has substantially contributed to the improvement

of the property and continues to do so.
The transfer of land transferring Mr. Clifford’s interest in

11 Harries Court Narre Warren North to Ms. Evans was made pursuant to Ms. Evans’ entitlements under The Family Law Act 1975.
We requested that the enclosed supporting material to our client’s entitlement to be the sole registered proprietor and

to indefeasibility of her title is brought to your client’s attention.”
It should be noted at this point in passing, that it is clear that the footing on which Ms Evans was asserting her ownership of the property was pursuant to entitlements under the Family Law Act 1975.
Mr Murrell deposed that he issued a Notice pursuant to section 77A

of the Act to try and obtain further documents from BKA (annexure JM-11). BKA replied that they had no such documentation.

Mr Murrell deposed to seeking a meeting with the second respondent to try and resolve the matter, but it is clear that this did not occur. He deposed also to information received from the Australian Financial Security Authority (“AFSA”) about the bankrupt, which does not seem now to me to be relevant.
Mr Murrell went on to depose to being served with a section 89A Notice pursuant to the Transfer of Land Act 1958 (Vic), which had required him to commence the proceeding.
Ms Evans filed an affidavit on 2 October 2017. She deposed that she commenced a de-facto relationship with Mr Clifford in or about March 2003, when she moved into the property owned by Mr Clifford

at 3 Bon Court, Narre Warren North, with her two children, Joshua, then aged 10, and Ashlee, then aged 5. She deposed that

Mr Clifford had two children, Jarred, born 5 January 2001, and Brooklyn, born 4 May 2002, who were then living with the mother but spending time with the father each second weekend.
Ms Evans deposed that when she moved into the property she commenced to contribute to the weekly house-hold expenses and that at a later stage she began contributing to the mortgage repayments and expenses and did so until the property was sold, in 2007.
Ms Evans deposed to working two jobs until 2004.
At paragraph 7 she deposed:
“At the commencement of cohabitation I had the following assets and liabilities:
7.1    Approximately $60,000 from the sale of my previous property;
7.2    My Hyundai Sonata motor vehicle;
7.3    My boat valued at approximately $17,000.00;
7.4    I had no debts.”
She went on to depose that at the commencement of cohabitation

Mr Clifford’s assets and liabilities were the property at Bon Court, Narre Warren, (she was unsure of the equity) and business DSD Tyres Pty Ltd (“DSD Tyres”) with minimal value.
Ms Evans deposed that from 2004 onwards she started helping the business DSD Tyres and did not draw a wage, as they were trying

to establish the business.
Ms Evans went on to depose that in 2007 the Bon Court property was sold. At paragraphs 10-11 she deposes:
“10. … At the time of sale I estimate my equity in Mark’s share in the Bon Court property to be fifty per cent (50%). The funds from the sale were used to purchase the property at 11 Harries Court, Narre Warren in January 2008 (the Harries Court property). The property was registered solely in Mark’s name; however I contributed to the purchase price by way of my share of the funds from the sale of the Bon Court property. I recall that the settlement of the sale of Bon Street and the purchase of Harries Court took place simultaneously. I believe that the bank swapped security on the loan, which Mark had. I think the reason why my name was not put on the Harries Court property, was it was easier to swap Harries Court in as security rather than get a new mortgage.
11. Mark and I lived together in the Harries Court property from June 2008. Mark’s children also moved in full time with us at this time. Mark moved out of the Harries Court property on 22 August 2014. I continue to reside in the Harries Court property.
Ms Evans went on to depose to two periods of separation. The first was in mid-2008 for a period of six months and the second in February 2012 for approximately 12 months.
Noteworthily – in the second period of separation Ms Evans deposed

at paragraph 12.2:
“in February 2012 Mark and I again separated for approximately 12 months. I again left the Harries Court property, this time residing with my mother until about May 2012 when I moved into the property at 77 Anaconda Drive, Narre Warren. Mark and I had purchased this property together. Mark and I were getting along better living apart. Mark and I then resumed cohabitation around May or June 2013.”
Ms Evans’s affidavit, relevantly, continues.
“13. In January 2014 Mark and I separated for the final time. We continued to live in the Harries Court property separately and apart under the one roof until Mark moved out on 22 August 2014.
14. While living at the Harries Court property over a period

of nine years I made financial and other contributions to the property beyond providing funds for the purchase in June 2008.
15. Between 2008 and 2014, Mark and I made joint contributions to the mortgage repayments and general living expenses.
16. Between 2010 and 2012 I contributed to the improvement

of the property by funding outdoor renovations including the installation of a pool and alfresco entertaining area, at a cost

of $62,446.88.
17. Between 2013 and March 2014 I contributed to the improvement of the property by funding other renovations including new carpets, doors, ceiling fans and tiling, at a cost

of $8,152.22.
18. Since August 2014 I have further improved the property by funding further renovations including to the kitchen at a cost of $45,184.92.”
At paragraphs 19-22 Ms Evans continued:
“19. In January 2014, following our final separation, Mark and

I reached agreement as to the adjustment of property interests between us. In exchange for retaining the Harries Court property I:
19.1 Discharged the overdraft of Mark’s business,

DSD Tyres, in the sum of $40,358.88 on 28 April 2014;
19.2 Discharged the existing mortgage of $471,000 and refinanced the property including to fund further renovations to the Harries Court Property;
19.3 Forfeited my claim to Mark’s Nissan Patrol valued

at $15,000;
19.4 Paid out Mark’s share of our joint Visa Card debt

of $3,650.
20.    Since October 2014 I have had the fulltime care of Mark’s two children, Jarred and Brooklyn, as neither of their parents

is properly able to care for them.
21.    By reason of my contributions to:
21.1 the purchase price;
21.2 the mortgage repayments and general living expenses;
21.3 the improvements to the property; and
21.4 the agreement as to the final adjustment of property interests between us.
I believe my equity in the Harries Court property to be 50% at the time of the bankruptcy.
22.    Since the bankruptcy I have continued to improve

the property and have the ongoing care of Mark’s children, who reside full time in the property.”
Otherwise Ms Evans’ affidavit, essentially, responded to that of

Mr Murrell, although I note that she deposed that the description of consideration as “Natural love and affection” was, allegedly,

a suggestion of the conveyancer to avoid paying stamp duty,

the conveyancer being asserted to be aware of the settlement between Mr Clifford and Ms Evans.
Ms Evans also deposed that she and Mr Clifford had valued the property at an agreed value of $636,000 at the date of separation and annexed as PE 1 copies of recent sales that they used to calculate that value.
Ms Evans also deposed that the Official Trustee had obtained

a valuation on 9 October 2014 (annexure PE 2), which valued the property as at 9 October 2014 as between $621,600 - $701,600

a document in which these figures are described as a “guesstimate”.

I note that at paragraph 23.11 Ms Evans deposed:
“… The property was transferred to me as part of a settlement agreement. Mark being named as sole registered proprietor was not a true reflection of the ownership of the property.

The agreement was based on the true market value of the property and was not an attempt to defeat creditors.”
Both parties filed affidavits of documents which do not take the matter further.

Mr Murrell’s second affidavit

Mr Murrell filed a further affidavit on 13 November 2018. He deposed that Mr Clifford had filed a Statement of Affairs on 14 February 2018, some three years and 155 days late. He deposed that he had issued

a Notice to Creditors on 2 August 2017 in which, relevantly,

the creditors were revealed to be Chapel Corner Service Centre Pty Ltd – $47,034.59, NAB Credit Card – $19,760.00 and Australian Taxation Office (“ATO”) – $19,923,32. He went on to depose at paragraph 5:
“It is not anticipated that a recovery in this bankruptcy will

or could result in an annulment of this bankruptcy. Even if there were to be any surplus in the bankrupt estate following

an annulment, such surplus will be payable to the First Respondent’s second bankruptcy trustee.”
I would interpolate and say that I have been told nothing whatever

of the detail of the second bankruptcy.
The affidavit went on to depose to efforts by Mr Murrell’s solicitors

to obtain documentation from Ms Evans, all unsuccessful. The tenor

of the affidavit is perhaps best illustrated by the commencement

of paragraph 9, which reads as follows:
“As to the Evans affidavit, in those circumstances, I refer to it and say the following:
a. In response to paragraph 5, the Second Respondent has not provided me with any supporting documentation that would enable me to arrive at a conclusion as to her alleged contributions towards the weekly household expenses or the mortgage repayments and expenses of the Bon Court property.
b. In response to paragraph 6, the Second Respondent has not provided me with any supporting documentation that would enable me to agree with her alleged asset and liability position at the time of her cohabitation with the First Respondent.”
The affidavit goes on to make similar complaints of lack

of documentation to support Ms Evans’ claimed interest in the property.
Mr Murrell went on to annex as JM-20 copies of images of attempts

to sell a 2008 Camero Legend Series 3 Indmar 350 boat, which appear to have been endeavours by Mr Clifford to sell the boat up to at least 2016. He also annexed as JM-21 copies of various Shannon Motor Insurance policies for periods between February 2013 and February 2018.
It should be noted that Mr Murrell’s demands for documentation, while obviously very much redolent of the methodology that he would use as an accountant, fail in my view completely to appreciate what I would describe as the practical realities of de-facto property claims. It is in no way surprising that Ms Evans has no documentary proof

of how much she contributed to household expenses commencing

as far back as 2003. Even requests for documentation relating to the sale of the Bon Court property in 2007 to 2008 is well over 10 years old. The wholly-documentary-based approach that comes –

so obviously – as second nature to Mr Murrell fails comprehensively

to engage with the family-law case that – it was clear from the start – Ms Evans was asserting.
The only other affidavit I would mention in passing is that of Stephen John Morley Wilken, who is a Process Server who served Mr Clifford on 25 July 2017 with the documentation in the hearing at the Harries Court property.
It is now appropriate, to turn to the evidence and submissions given

at Court.

The case for the applicant

I do not propose to deal with the opening made by counsel for

Mr Murrell, helpful as it was. Counsel introduced the case in detail.

I note his submission that any claim that Ms Evans might make pursuant to s.116 of the Act (and I presume he was referring

to s.116(2)(r) by implication) was not made out. He emphasised that an order for sale was sought.
It should be noted, that what follows is taken from my notes.

Self-evidently it is not a transcript. It records aspects of the evidence that struck me as significant.
Mr Murrell was called and adopted his affidavits as true and correct. He tendered as exhibit A1 an extract of the account of DSD Tyres

for the period January 2014 until April 2014.
Under cross-examination by Ms Evans, who was self-represented,

Mr Murrell said there were a lot of bank accounts and moneys were being transferred. When he was asked what the estimated debts of the bankrupt were, he said there was a debt to the Petitioning Creditor of $47,000, a debt to NAB Visa of $19,000 and a debt to the Australian Taxation Office of $19,000. Not all tax returns have been lodged.

The Petitioning Creditor’s costs were taxed at $6,500.
When asked why there had been two years’ delay, Mr Murrell said he was seeking evidence of the transactions. He said he had written to

Ms Evans but she had not answered. There was no response to the s.77A applications. He had funded the entire proceeding himself. There have been some AFSA referrals for prosecution. There was no statement of accounts provided for three and a half years, and there was a failure to disclose properly. The bankrupt had tried to leave Australia. It was a most frustrating and difficult bankruptcy. The bankrupt was charged with fraud, but in one respect of one matter the Director of Public Prosecutions did not pursue the matter. His costs are over

a hundred thousand dollars.

The submissions and evidence of Ms Evans

Ms Evans made a relatively lengthy opening, which she subsequently adopted her affidavits as true and correct in the witness box. She was together with Mr Clifford for 11 years. They had the same assets at the start. He had a home, and she was paying off her home. They lived there for three years. He had to pay $250,000 to his ex-wife and had two young children. Her home sold straightaway, in six weeks. Her children were nine and five when the relationship started.

Mr Clifford’s children came to live with them and are now 16 and 17 years old. They bought Harries Court, which was very rundown. She sold her home in 2001. She was then renting. Mr Clifford went to gaol, and she then moved into his home. They were in a relationship before that. They bought Harries Court for $400,000. The contract note was dated 30 May 2008, and it was she who made the offer. They were there for 11 years. There were Intervention Orders and Department of Health and Human Services (“Department”) involvement which led to the breakdown of the relationship. His children had stayed with her. There was settlement at the time. The assets were the home in Eildon, worth $160,000, Harries Court, DHD Tyres, which went into receivership but was bought back through a deed of company arrangement worth $40,000. She believed she helped Mr Clifford and considered all of this as settlement. The value allotted to the Harries Court property was based on Rates Notices and other valuations. There was a guesstimate of $621,000 - $701,000. She bought the house off Mark. He got the business. They got a vehicle each, and she retained Eildon. The children were aged 13, 14, 16 and 20. They were all under the one roof. It is a fair settlement. The Trustee told her to get out. There were two caveats on the house. She would not have put money into the house if they had acted straightaway.
Ms Evans was cross-examined about the amount of time she was separated from Mr Clifford. She left for some two years in dribs and drabs but went back because of the children.
The Eildon property was the guarantee for the $40,000 overdraft for DSD Tyres. She discharged the overdraft and borrowed $40,000 to do so. This came from Eildon off-set account.
When the matter resumed (the case was heard over two days a week apart owing to listing pressures). Ms Evans referred to the guesstimate at (Court Book (“CB”) 96), the Rates Assessments for 2014 to 2015 (CB 98-99) and the Eildon off-set payment of $40,000 (CB 58), the Intervention Orders (CB 50-55) and the transfer (CB 26). She tendered further as exhibit R1 a retrospective and current appraisal of the property. This valued the property as at 2014 at $700,000-$750,000 and as at 21 August 2018 at $850,000 - $930,000. It should be noted that these were market appraisals rather than sworn valuations.
Ms Evans also tendered the contract note in relation to the purchase of the property in 2008 as exhibit R2. I note that the deposit described in that document was $24,750 out of a purchase price of $495,000.
Under further cross-examination Ms Evans was questioned about her employment as a medical receptionist. She confirmed that her present job is fulltime and involves 38 hours per week work. Ms Evans denied failing to produce any documents that had been requested. She said anything that was asked for was provided.
Ms Evans was taken to CB 41, Mr Murrell’s letter to her dated 2 April 2015. She first said that she recognised it but then said she was not sure. She said the only letter she remembered was the one that told her to leave the house. She said she had given a chronology to her solicitors. She roundly denied receiving the letter from Hutchinson Legal of 28 July 2016 and said she was not aware of it. She said she had been to her solicitors with a letter and then there were caveats on her house, she had had no notice of the caveats. She repeated that she did not give the letter of 28 July 2016 to her solicitors.
I interpolate and say that this evidence is manifestly obviously untrue. The letter from BKA commences “We advise that we act on behalf
of Paolina Evans (“Ms. Evans) and have before us your letter to her of 28 July 2016.”
Ms Evans assumed that the letter from BKA (see CB 47-49) was written on instructions.
Cohabitation commenced in 2002. Mr Clifford did not own 17 Taylors Road. This was bought after she moved in. She had owned Parramatta Close in Berwick. Parramatta Close was sold while Mr Clifford was in gaol. She moved into his Bon Court property in about 2002, because he was in goal. She had visited him in goal, and he told her to move in. 17 Taylors Road was two to three years after the relationship. She had funds from Parramatta, because she cleared approximately $60,000 from that sale. She bought Taylors Road for $196,000 with a mortgage of $147,000 from Home Side.
I note that Ms Evans’ memory of facts and figures was at times quite precise.
In 2008 Mark had had a terrible divorce which involved huge debt. He borrowed $250,000 to pay his ex-wife. They decided to sell and downgrade. His children came to live with them and stayed. They got Harries Court, which reduced his debt. $27,000 of Mr Clifford’s funds were used to pay the deposit on the Harries Court property. That was the deposit in the contract. The sale of Bon Court and the purchase of Harries Court was the same day. The loan was transferred directly, and this was why it was bought in his name. She paid a $500 deposit when she put in the offer. $24,750 came from his funds from the sale of the other property. He had a banking-manager, because he had business. He got more money than that from the sale of Bon Court, but it went to his debts.
I would interpolate again and say that Ms Evans’ description of how all this came to pass was vague and inconsistent.
Harries Court was bought in 2008. Taylors Road was sold, and $40,000 was applied to the pool in Harries Court. The rest went to the purchase of the property in Eildon for $145,000. The total sale price

of Taylors Road was $190,000-$200,000.
Ms Evans blamed her lawyers for any non-disclosures. She said she had given Rosalba Martino, the solicitor of BKA, receipts for the pool. She said the pool was receipted in Mark’s name because it goes to the owner’s name. This evidence was given in a spectacularly unconvincing way, and I do not accept it.
Ms Evans said that they had both joint and separate accounts and they juggled their moneys. In early 2014 it was agreed that she would pay his overdraft and the home loan.
When taken to her assertion at paragraph 10 of her affidavit filed

2 October 2017, that she estimated her equity in Bon Court to be 50 per cent at the time the property was sold, Ms Evans said that her solicitors put this in. She was entitled to 50 per cent, she put a lot into Bon Court, she worked her jobs and worked his business with no pay and looked after his children.
They moved to Harries Court in June 2008. When challenged as to how many separations had occurred, Ms Evans said that altogether she left the property three times, once per year. She moved to Anaconda Drive, which they had bought together, and there were other absences of six weeks, altogether it was one a half years and her affidavit was incorrect. There was separation under one roof in January 2014.
There was no deposit for the purchase of Anaconda Drive. Harries Court was the guarantee. She gave the documents to her solicitors.

If I understood the evidence correctly, the Anaconda Drive property was not owned for any length of time and was sold with no profit.
Ms Evans was cross-examined at some length about the various insurance records at CB 212 and following. She agreed that in 2014 they had cars to a value of $109,600. The Hilux referred to was bought by her son on hire purchase but insured in Ms Evans’ name, as this was cheaper. The Calais was Mark’s car. The Ford Mustang was hers.

It has always had a value for insurance well in excess of $30,000.

The Jeep Cherokee referred to is her daughter’s car. The husband happened only to be visiting when he was served with the proceedings. He moved out in 2014 but visits the property to see his children.
Ms Evans had a boat when she first met Mr Clifford. It is registered in her name. It was upgraded to another boat in due course. The ski boat is the third boat that they have had, and she has had this boat for five

to six years. It is a Camero with an inboard motor. Ms Evans confirmed that the boat at CB 209 is her boat.
Ms Evans confirmed that the DSD Tyres overdraft was secured against the Eildon property. She had to clear the overdraft so that it was clear. She confirmed that the bank records at CB198-202 are her account. She was taken to a transaction on CB 200 as at 28 April 2014 which shows a transfer of $40,358.88. Ms Evans said this was part of her payment of DSD Tyres, it came from borrowing money from Eildon.

It was put to her that she had received $20,000 from DSD Tyres on

22 April 2014 and further sums of $15,000 on 2 April 2014. Ms Evans said she did not recall these and repeated that she refinanced the Eildon property. She said the Eildon loan went up by $40,000.
Ms Evans was cross-examined about the employment of Mr Clifford, and he works in Dandenong for the Tyre Factory. It was put to her,

that she had worked for Austyre in 2015, and Ms Evans first said that she worked there for a short time just as a casual on and off. When it was put to her that the bank records showed that she had been paid $40,370 between January and October 2014 by Austyre, she accepted that this was the case. Exhibit A2 are Ms Evans’s Westpac accounts showing these figures.
Ms Evans confirmed that TTF in bank records was the Tyre Factory. Austyres and TTF are the same.
Ms Evans confirmed that Mr Clifford works at Austyre but denied that she was receiving payments into her account as a result of

Mr Clifford’s work for that company.
In re-examination Ms Evans said that she had been confused about the period.

The evidence of Mr Clifford

Mr Clifford adopted his affidavit as exhibit R3. It is, however, simply an affidavit that supports the assertions made in the affidavit

of Ms Evans.
In evidence-in-chief Mr Clifford said that he put in $27,000 to the Harries Court property. He said that Ms Evans had about $50,000 from the property she had sold. It was a relationship of some 10 to 11 years starting in about 2002 or 2003. They spent about one and a half years apart. The police had removed him from the property at times. He had an alcohol problem and was violent and abusive. When he was asked when the agreement as to financial separation took place, he said this was in late December or early January 2013-2014. When asked how the property was valued at the time, he said they looked at values at the time and looked at the rate valuations. He thought about the $600,000 mark. He said that Ms Evans had cleared his business overdraft and there was a small joint credit card debt. He kept his car and continued in his business. There was also a small business loan. Ms Evans borrowed $550,000 to pay him out. He just got a car and business. She retained primary care of the children. He does not live at the property but visits his children. He was charged by Australian Financial Securities, but the charge was withdrawn. He was not intentionally bankrupt. He believed the settlement was fair. They had agreed on it and were mutually happy with it.
Under cross-examination Mr Clifford said he worked at the Tyre Factory at Dandenong, he had been there for a couple of years, earning $850 a week for 38 hours a week. He takes home $700. His Statement of Affairs took a long time. He had submitted a Statement of Affairs before 14 February 2018. An earlier one he had submitted was not accepted. He filled out the Statement of Affairs himself, and it was true and correct. He lives in Noble Park with his mother and is not renting. He is the director of DSD Tyres, which started in about 2002. It repairs wheels and tyres. The business was paying its way at the time he became bankrupt. There had been voluntary administration previously, which was followed by a deed of company arrangement. In 2014 his creditors were his credit card and the tax department. He has deposed of DSD Tyres. He sold the plant and equipment to the Australian Tyre Group. This was in 2014, but he could not say if this was before or after bankruptcy. He was paid about $30,000 for the plant and equipment. Some was by cheque, in fact, mainly by cheque.
Mr Clifford was cross-examined about the insured cars to which reference has already been made. He had a Holden VE Commodore on which he owed $18,000 to Esanda pursuant to a lease. He handed this back but could not say when. He did not have a Nissan Patrol. The boat CB209 was not his boat but that of Ms Evans. The Hilux was not his car. They always had insurance together. The Nissan Patrol was his and was disposed of in 2015. That was the only car he kept.
There was some cross-examination about properties Mr Clifford had owned but it turned out this was entirely historical. Bon Court was bought in the early 2000s. It was sold for about $738,000. Harries Court was bought for $495,000. Ms Evans had a property

at Cranbourne. She also bought the Eildon property. There was another property in Narre Warren which was bought jointly.
When challenged as to the estimate of $68,000 equity referred to in his affidavit, he said this was based on a total of about $600,000 value for the home with a mortgage of $471,000 and the remainder divided equally. He said they had undertaken market research.
Mr Clifford confirmed that the DSD Tyre overdraft was secured against the Eildon property. $43,000 was paid out. He had a business loan

of about $30,000 and then there was the overdraft. He transferred

to Austyre and had done a lot of jobs. He is now full-time at the Tyre Factory and has been for a couple of years. Ms Evans works in the medical industry but helped the shop when it was busy. He has regular contact with Ms Evans through the children.
When cross-examined about amounts of money disclosed by bank records he was unable to assist. When it was put to him that Ms Evans had earned over $40,000 in 2015 from Austyre, he said that was her affair. He could not explain the reference to TTF in exhibit A3.

He could not explain payments by Austyre in exhibit A4. He denied that it was pay for him. He assumed it was Ms Evans’ money.

Mr Clifford said he had no claim on the Eildon property. The debt

to Chapel Corner he was paying and had reduced it from $40,000

to $30,000. The valuation on the property was within the range.

He had failed to pay the judgment debt in excess of $40,000 and an oral examination took place. He was served with a Bankruptcy Notice in July 2014 which expired on 1 August 2014. Separation was earlier that year. She had to get a loan. The transfer was not to defeat creditors and was not fraudulent.
Nothing of any moment emerged through re-examination.

The parties’ written submissions – the submissions of the applicant

The closing submissions of Mr Murrell run to some 24 pages and are comprehensive and detailed. Unsurprisingly, these concentrated upon sections 120 and 121 of the Act. I note that at paragraph 29, when dealing with the s.120 matter, Mr Murrell submitted that:
“The only ground of opposition relevant to the relief sought under section 120 of the Act is the contention that Ms Evans has equity in the Property prior to the Transfer.”
The written submissions went on to complain of failure on the part of Ms Evans to provide information to support her claim and asserts at paragraphs 31 and 32:
“31. … Despite those communications Ms Evans did not and has not provided the Trustee with documentation that would support her claim to equity in the Property or enable a proper view to be formed about it.
32. This position was not improved upon by the evidence given by Ms Evans during the hearing.”
The submissions assert that the money paid by Ms Evans from the Eildon property was in fact effectively advanced to her by DSD Tyres and reference was made to the bank accounts in this regard. Put shortly, the submissions are a comprehensive critique of the alleged implausibility of the position asserted by Ms Evans.
I have had regard to all of the matters set out, which are in large part cogent, but it is not necessary to take the matter further save to note that of course the submissions also press in the alternative s.121 of the Act. I note that the submissions do not touch in terms at all the question of any possible interest that Ms Evans might assert pursuant

to the Family Law Act 1975. The burden of the submissions is that in any event Ms Evans’ evidence does not establish any equitable interest in the property. At paragraph 101, the submissions conclude:
“If the Court finds that on the available evidence Ms Evans has established an equitable interest in the Property to some extent, then the Trustee is entitled to the relief sought in paragraphs 3, 5, and 6-16 of the Application.”
I note that at paragraph 5 of the application, it is sought:
“Alternatively to 3 above, a declaration that the Second Respondent holds her interest in the Property on trust for herself and the Applicant as tenants in common in such proportions as the Court determines.”

The written submissions of Ms Evans

Ms Evans is of course self-represented and her submissions are not entirely easy to paraphrase. She denies all wrongdoing. She complains of a delay on the Trustee’s part which has caused her detriment. She annexes a letter from Gabriela Hercman, Clinical Psychologist, dated 29 November 2018 which relevantly asserts:
“Mrs Evans was referred by her General Practitioner in May this year due to her presenting with severe symptoms of anxiety reactive to a long term violent relationship with her ex-partner.”
It should be noted that separation took place some four years before the referral.
The written submissions assert at paragraph 4 that:
“By virtue of an agreement made by the First and Second Respondents, the beneficial interest in the property

(or a substantial proportion thereof) transferred to the Second Respondent prior to the making of the Sequestration Order on 30 September 2014.”
At paragraph 10, the submissions assert:
“The Second Respondent, as a long-standing partner of the First Respondent in the relationship, is entitled to 50% and possibly up to 65% of the net value of the equity in the property at the date of separation. The property was not, however, the only asset as there was also the business, there being negligible equity in the Eildon property. Accordingly, the Second Respondent should be entitled to the whole of the property as this would represent a just and equitable settlement between the First and Second Respondents.”

The credit of the parties

Mr Murrell was a witness whose credit was never really in issue. He impressed me as being pedantic and while it is in no wise a proper criticism, it was entirely obvious that he had no understanding of any claim that Ms Evans might have under the Family Law Act 1975. He was transparently an honest witness.
I have already commented on certain occasions about Ms Evans’ evidence. Her failure to admit receiving both the original letter sent to her by Mr Murrell in 2015, and more particularly her hopeless denial that she had received correspondence from his solicitors in 2016 are merely illustrative of her difficulties as a historian. It is clear that she has adopted what one might describe as an ostrich policy. For several years she put her head in the sand and hoped that the difficulties would all go away.
I note that she was prepared to insure her son’s car in her own name to save money on insurance and her answers were at times either evasive, unconvincing or uncooperative. Her answers about her boat were particularly unhelpful, and her answers about the apparent quagmire related to moneys received from Austyre or TTF were deeply unconvincing.
Mr Clifford was a confident and assertive witness but far too glib. His answers about the boat likewise were extremely evasive and his answers about the alleged agreement in early 2014 to settle his affairs with Ms Evans were wholly unconvincing.

Findings about the relevant facts

There is no doubt that Mr Clifford and Ms Evans entered into

a de facto relationship in around about 2002 to 2003 when she moved into his Bon Court property because he was in gaol. I have no doubt that Ms Evans, who was in a relationship with Mr Clifford it would appear before he was gaoled, and certainly, one would assume,

from whatever date (not revealed) that he emerged, contributed to the general expenses of the household. There seems there is no logical reason to doubt it. I accept her evidence that she worked two jobs for part of the time until 2004 and then worked without pay for

Mr Clifford’s business. These were significant contributions. They also had care of Mr Clifford’s two children on alternate weekends and no doubt other times as well, and these would have represented significant contributions.
It would appear that Ms Evans sold a property in Berwick and that this gave her cash which as I find she must have invested into the property at Taylors Road which was ultimately sold. It is not clear how much equity was in the Taylors Road property at the time it was sold but she said that she deposited $40,000 of the sale proceeds to build the pool at the Harries Court property when it was bought.
The residue of her proceeds from the Taylors Road property were plainly invested into the Eildon property that she continues to own. There is no indication in any of the materials as to what equity there is in that property, although there must be some.
As I have earlier indicated, it appears that the parties jointly bought

a property at Anaconda Drive but this appears to be sold without profit and is not on the scene.
There were plainly periods of separation during the relationship, but the endeavours to give this some kind of percentage adjustment suggested by the Trustee’s submissions fails to acknowledge the reality. The relationship between Mr Clifford and Ms Evans lasted from 2002/2003 to 2014. It would seem that from about the time of the purchase of the property in 2008 Mr Clifford’s children remained in this property with Ms Evans and Mr Clifford and she had the primary housekeeping role in addition to her employment in respect of all four children.
This brings us then to the circumstances under which the transfer took place. It is clear that from 2012 to 2013 an Intervention Order was in place. A further interim Intervention Order was granted on 25 August 2014 and was made final on 9 October 2014.
Mr Clifford’s children continued to live with Ms Evans. Jarred is already 18 and Brooklyn will be 17 in May of this year. Ms Evans’ two children are clearly adult.
I accept the force of the submissions of the Trustee that the banking records tendered at the proceeding simply do not support the proposition that Mr Clifford and Ms Evans had separated their financial affairs by early 2014. Indeed as late as 2016 Mr Clifford was still seeking to deal with the boat owned, as is agreed by all concerned, by Ms Evans.
This does not mean that the relationship was not under strain.

It plainly had been and it involved an ongoing volatility. The final Intervention Orders plainly represented the end of the relationship.
I do not accept that Mr Clifford and Ms Evans came to some sort of inchoate agreement in late 2013 or early 2014 that they would enter into a binding financial settlement in the terms that they have subsequently described. I have seen them and heard them give their evidence and I do not accept it. Furthermore, the objective realities do not support the proposition.
Both Ms Evans and Mr Clifford would have the Court believe that they entered into an amicable and equitable settlement. The terms of this settlement involved Ms Evans discharging DSD Tyres’s overdraft of some $43,000, giving up any claim on Mr Clifford’s car and the payment of a small credit card debt. The difficulty with these assertions are obvious. Additionally, on any view of the matter, Ms Evans owned the Eildon property. Whatever equity there was in it, she was able to borrow a further $40,000 against its security. The fact that she discharged a guarantee on her own part is, in my view, neither here nor there. I do not accept that Mr Clifford and Ms Evans obtained valuations, as they now assert, and agreed a valuation of approximately $600,000.
The contemporaneity of the transfer and the bankruptcy is simply too great to be ignored. Mr Clifford knew by mid-2014 that he was going to be bankrupted. He has said his business was paying its way but the objective facts simply do not support it. He had been summoned for oral examination. He had been served with a Bankruptcy Notice.
The parties were underway with their mortgage application by July 2014 and the only inference that makes sense is that the consideration of $850,000 referred to at CB 30 in Westpac’s letter to somebody who is acting on behalf of Ms Evans can only have come from her. Furthermore, assuming an 80 per cent lending ratio as BKA, who acted for Ms Evans did (a presumption I myself would be prepared to make given general banking practice) would capitalise the property at in excess of $680,000. Given that the mortgage was only $471,000,

this meant that there was equity well in excess of $200,000 even on those figures.
I note that such a figure is within the range of the guesstimate at CB 96. The retrospective valuation was between $700,000 and $750,000.
Obviously that last figure was not available to the parties at the time, but the loan approval for $550,000 strongly suggests that the value

of the property, to the extent that it may have been known at all, was greatly in excess of what the parties asserted.
In the end, I do not think it matters what was in the parties’ minds as to what the true value of the property was. I have no doubt that they decided that Ms Evans would relieve herself of her guarantor position in respect of DSD Tyres’ overdraft, get Mr Clifford off her credit card and otherwise keep all the assets from the relationship except his car. That in substance is what occurred. This was not on any view of the matter a settlement entered into pursuant to Ms Evans’ rights under the Family Law Act 1975. It was a transparent attempt to alienate an asset to keep it from creditors.

Consideration about the bankruptcy claims

The evidence in this case could scarcely be clearer. The transfer of the property was plainly at an undervalue. It took place in the period beginning five years before the commencement of the bankruptcy and the consideration given was plainly less than the market value of the property.
I should note in passing that one area of Ms Evans’ evidence that I do accept is that the purchase of the property in Mr Clifford’s name alone simply reflected the transfer of the mortgage from Bon Court to the Harries Street property. That evidence at least was given with conviction and I accept it.
In these circumstances the transfer is plainly void pursuant to s.120

of the Act.
Further, as I have made plain already, the transferor’s main purpose

in making the transfer was to prevent the property from becoming divisible amongst his creditors and the property would otherwise undoubtedly have become part of his estate (section 121).

Is this the end of the matter

It should be noted that both in correspondence crafted by her solicitors and at times even in her oral evidence, Ms Evans appeared to suggest that she had only acquired something akin to a 50 per cent interest in the property (this being the same that she had said she had obtained in the Bon Court property prior to its sale).
The fact is that assessed on conventional family law principles there is no doubt that Ms Evans would have generated a significant degree of interest in the Harries Street property by 2014. Had she brought an application pursuant to the Family Law Act 1975, as she would have been entitled to do, she would unquestionably have received some proportion of the property of the parties. Had she made such application, the Trustee would have stood in Mr Clifford’s place and the matter would ordinarily be divided on what I would describe as standard family law property principles. These require an identification of the legal and equitable interests of the parties, a decision that a property adjustment is appropriate, an assessment of the pool, an assessment of the contribution of the parties, an assessment of the parties’ future needs and a just and equitable outcome.
The Court does not presently have sufficient information to assess

the position either as at the date of the bankruptcy or now. On the facts as disclosed thus far however, I would be confident in asserting that

Ms Evans would indeed have achieved a significant property adjustment out of the total pool available.

Conclusion

As I said at the start, this case has been bedevilled by the fact that neither party has properly engaged with the case propounded by the other. There is no doubt as I find that the Trustee’s case under s.120 and/or s.121 of the Act must succeed. Equally however the Trustee has not addressed in any sufficient fashion the undoubted fact that

Ms Evans does indeed have an interest in the property. Given the failure of the Trustee to turn his mind to the claim that Ms Evans undoubtedly has, I propose to hear further submissions from the parties as to how the matter should proceed from this point.

I certify that the preceding one hundred and twenty-three (123) paragraphs are a true copy of the reasons for judgment of Judge Burchardt

Associate:

Date: 25 January 2019

[2019] FCCA 128

25 January 2019

Key Legal Topics

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Equity & Trusts

Civil Procedure

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Fiduciary Duty

Breach

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