Norco Co-operative Limited v Kelly

[2010] NSWSC 1011

CITATION:	Norco Co-operative Limited v Kelly [2010] NSWSC 1011
HEARING DATE(S):	3 September 2010
JUDGMENT DATE :	3 September 2010
JURISDICTION:	Equity Division
JUDGMENT OF:	Lindgren AJ
EX TEMPORE JUDGMENT DATE:	3 September 2010
DECISION:	1. Declaration made as to amount secured by charging order. 2. Charges of contempt of court dismissed.
CATCHWORDS:	PRACTICE AND PROCEDURE - contempt of court - contemnor signed by way of consent, and returned to plaintiff's solicitors, short minutes of orders restraining her from disposing of property and requiring her to file and serve asset disclosure affidavit - she disposed of property and failed to file and serve affidavit - no evidence that making of order or its contents known to contemnor - copy of order not served on contemnor and contemnor not in court when order made - charges of contempt of court not proved.
CATEGORY:	Procedural and other rulings
CASES CITED:	Norco Co-operative Limited v Kelly [2010] NSWSC 719
PARTIES:	Norco Co-operative Limited (Plaintiff) Hazel Magdalene Kelly (also known as Hazel Magdalene Groat) (First Defendant) Fabre Kelly (Second Defendant)
FILE NUMBER(S):	SC 287863 of 2009
COUNSEL:	Mr D A Lloyd (Plaintiff) In person (via video link) (First Defendant) No appearance (Second Defendant)
SOLICITORS:	Lee & Lyons (Plaintiff) In person (via video link) (First Defendant) No appearance (Second Defendant)

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IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

LINDGREN AJ

FRIDAY 3 SEPTEMBER 2010

2009/287863 NORCO CO-OPERATIVE LIMITED v HAZEL MAGDALENE KELLY (AKA HAZEL MAGDALENE GROAT)

JUDGMENT

1 HIS HONOUR: There are before the Court two aspects of the present proceeding. One is a charge against the first defendant of contempt of court. The other is the quantification of the amount secured by a declaration of a charge. I will deal with the latter first.

Charging Order

2 I published reasons for judgment on 30 June 2010 arising out of a hearing which had occurred on 28 June 2010; see Norco Co-operative Limited v Kelly [2010] NSWSC 719 (the Earlier Reasons). I will not repeat the account of the facts as set out in those Earlier Reasons and will take them as read.

3 Moreover, I will use the same abbreviations as I used in the Earlier Reasons. Therefore, without any disrespect, will continue to refer to the first defendant as "Hazel" and to the second as "Fabre".

4 The aspect of the proceeding of present relevance concerns four properties, although the third and the fourth are treated as one. The four were described at [7] of the Earlier Reasons. They are as follows:

(1) Lot 511, Crown Plan M5512, Title Reference 16308234 (Lot 511) subject to mortgage 704857815 to National Australia Bank Limited (NAB) which was registered on the date on which Hazel became the registered proprietor of Lot 511, namely, 27 June 2001. Lot 511 has a street address of 17 Watt Street, Murgon, Queensland.

By a Transfer signed by her on 15 February 2010 and registered on 3 March 2010, Hazel transferred Lot 511 to Cameron Roy Donohue for $124,000. So far as is known, he was a bona fide purchaser for value without notice.

Lot 511 is not one of the properties which I declared was charged in favour of Norco and it can therefore be ignored for present purposes.
(2) Lot 171, Registered Plan 862765, Title Reference 18644058 (lot 171) which is subject to a registered mortgage number 702943409 to Suncorp-Metway Limited (Suncorp-Metway) which was registered on 8 October 1998, being the date on which Hazel and Fabre became registered as proprietors of Lot 171 as joint tenants.

By a Transfer executed by Hazel and Fabre on 25 November 2009 and registered on 8 March 2010, Hazel and Fabre transferred lot 171 to Fabre alone. The “consideration” was described in the Transfer as “pursuant to an oral agreement”.
Lot 171 is at South Burnett and Hazel described it in evidence as a block of land at Blackbutt.
Lot 171 is the subject of the charging order I made in favour of Norco on 30 June 2010.

(3) & (4) Lots 9 and 10, registered plan 891053, Title Reference 50068238 (Lot 9) and Title Reference 500682839 (Lot 10). Hazel and Fabre became registered as proprietors as joint tenants of Lots 9 and 10 on 24 October 2001 and on 6 September 2005 Lots 9 and 10 became subject to a registered mortgage number 708953729 to NAB.


By the Transfer executed by them on 25 November 2009 to which I referred at (2) above, Hazel and Fabre also transferred Lots 9 and 10 to Fabre alone.

There is now a cottage erected on Lots 9 and 10 known as number 90 Levers Road, Tablelands. Apparently it is just out of Murgon.

Lots 9 and 10 are the subject of the charging order I made in favour of Norco on 30 June 2010.

5 On 30 June 2010 I made the following declaration and the following order reserving liberty to apply:

3. A declaration that each of the three properties mentioned below is charged in favour of the plaintiff as security for that part of the sum of $316,657.98 referred to in the Amended Statement of Claim filed in proceedings 09/287863 in the Equity Division of the Supreme Court of New South Wales that was paid in reduction of the amount secured by registered mortgage over the property:

a. Lot 171 Registered Plan 862765 Title Reference 18644058.
c. Lot 9 Registered Plan 891053, Title Reference 50068238.
c. Lot 10 Registered Plan 891053, Title Reference 50068239.


…

5. [An order] that the plaintiff have liberty to apply in relation to the determination of the three amounts (or any of them) referred to in para 3 above.

6 Norco subpoenaed records of Suncorp-Metway with a view to showing how much of the sum of $316,657.98 was paid in reduction of the amount secured by the registered mortgage over Lot 171, and records of NAB with a view to showing the same thing in relation to Lots 9 and 10.

7 Having studied the documents produced by Suncorp-Metway, Norco no longer seeks to establish an amount secured by the charge over lot 171. Accordingly I will determine that the amount secured by that charge is nil.

8 In relation to Lots 9 and 10, the position is different. The period of the misappropriations by Hazel was the period 2 December 2005 to 2 September 2008. Exhibit P3 are pages from an NAB interest only home loan account in the name of Miss H M Kelly, PO Box 191 Murgon QLD 4605, covering the period 29 August 2005 to 10 August 2010.

9 The documents show that since the commencement of the misappropriation period on 2 December 2005, payments totalling $9,732.60 were paid off the principal and amounts totalling $43,468.48 were paid as interest.

10 The amount of the interest only loan was $125,000. There is in evidence a memo from Hazel to "Belinda" at NAB dated 21 February 2005, referring to the total building cost as being $250,000 and the finished house as being valued at approximately $320,000 plus the land which had been purchased for $48,000 - a total of $368,000.

11 Counsel for Norco submits that the Court should infer that Hazel used the funds misappropriated from Norco for the interest and principal payments. He submits that this inference should be drawn because:

(a) in relation to the payments off principal, the payments were made after Hazel had ceased to work and at a time when Fabre was not in receipt of a regular income that might have been the source of the payments; and

(b) in relation to the payments of interest, the payments were made at times when the Court should find that Fabre was not in receipt of a regular income and Hazel's income of $35,000 per year before tax was insufficient to fund those payments, especially having regard to her evidence of having had living expenses of $500 - $600 per week and the fact that she had a mortgage over Lot 171 and Lot 511 for most of the relevant period.

12 I do draw those inferences.

13 I was a little concerned in relation to the interest payments totalling $43,468.48 because they did not actually reduce the principal outstanding. Rather, but they were the consideration for the obtaining of the principal of $125,000 which went into effecting the improvements on Lots 9 and 10. In other words, they would still be charged on Lots 9 and 10 having gone to obtain the money that funded the improvements rather than reduced the amount of principal secured.

14 It is arguable that the declaration made on 30 June 2010 does not adequately cover the facts that have now emerged, but I do not think that a further charging order is called for. I will declare that the amount secured by the charge declared on 30 June 2010 over Lots 9 and 10 is $53,201.08.

Contempt of Court

15 The present proceeding was commenced on 10 March 2009. On 19 March 2009 freezing orders were made. The important paragraphs of those orders for present purposes were paragraphs 1, 4 and 5 which were, relevantly, as follows:

1. Upon the Plaintiff by its counsel giving the undertakings set out in Schedule A to these short minutes of order, otherwise than to pay any amount to the Plaintiff as may be ordered by the Court, the Defendant must not remove from Australia or in any way dispose of, deal with or diminish the value of any of the Defendant’s assets in Australia (‘Australian assets’) up to the unencumbered value of AUD$375,000 (‘the Relevant Amount’).

…

4. For the purposes of this order, the Defendant’s assets include:

a. all the Defendant’s assets, whether or not they are in the Defendant’s name and whether they are solely or co-owned;
b. any asset which the Defendant has the power, directly or indirectly, to dispose of or deal with as if it were the Defendant’s own (the Defendant is to be regarded as having such power if a third party holds or controls the asset in accordance with the Defendant’s direct or indirect instructions); and
c. the following assets in particular:
i The Defendant’s interest in the following property;
1. Lot 551, Crown Plan M5512 bearing title reference 16308234.
2. Lot 171, Registered Plan 862765 bearing title reference 18644058.
3. Lot 9, Registered Plan 891053 bearing title reference 50068238.
4. Lot 10, Registered Plan 891053 bearing title reference 50068239.

5. Subject to paragraph 6, the Defendant must:

a. On or before 26 March 2009, to the best of the Defendant’s ability inform the Plaintiff in writing of all the Defendant’s assets world wide including details of bank account numbers, giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject), the extent of the Defendant’s interest in the assets, details of what has become of any assets the Defendant has disposed of since December 2005;
b. On or before 26 March 2009 swear and serve on the Plaintiff an affidavit setting out the above information.

Paragraph 6 is not presently relevant.

16 In summary, para 1 was the freezing order, para 4 defined the terms used in the freezing order and para 5 was an order for the swearing and service of an asset disclosure affidavit.

17 As I observed in the Earlier Reasons, there was no termination date fixed expressly for the freezing order.

18 On 28 June 2010 and subsequent occasions I made a fresh freezing order and extended its operation. That order and its extensions are not presently relevant.

19 Also on 28 June 2010 I made the following order for the filing and service of an asset disclosure affidavit as follows:

4. By no later than 2pm on 2 July 2010, the first Defendant is to file and serve an affidavit setting out the First Defendant’s assets world wide including details of bank account numbers, giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject) the extent of the First Defendant’s interest in the assets, details of what has become of any assets the First Defendant has disposed of since December 2005.

The asset disclosure affidavit has never been filed or served.

20 On the hearing Hazel has appeared unrepresented by video from a gaol in Brisbane where she was incarcerated on 10 June 2010 for offences in connection with the misappropriation from Norco.

21 The charges of contempt can be summarised as follows:

(1) Knowing breach of order 1 made on 19 March 2009 by reason of the transfers of Lot 511, Lot 171 and Lots 9 and 10;

(2) Knowing breach of order 5 made on 19 March 2009 by the failure to file and serve an asset disclosure affidavit by 26 March 2009 or at all;

(3) Knowing breach of order 4 made on 28 June 2010 by failing to file and serve an asset disclosure affidavit by 2 July 2010 or at all.

22 In relation to the orders made on 19 March 2009, there was a conflict between the evidence of Sean O'Connor, the solicitor for Norco, and the evidence of Hazel. In the light of the view I take of the case, the conflict is not decisive but I should refer to it for reasons that will become clear.

23 It is common ground that on 10 March 2009 Lee & Lyons Lawyers forwarded Ms Kelly at 90 Levers Road Tablelands, Queensland 4605 a form of short minutes of orders comprising five pages which Lee & Lyons proposed. In addition, there was enclosed the form of undertaking as to damages to be given to the Court by Norco. Lee & Lyons recommended that Hazel contact their office to discuss the matter as soon as possible.

24 On 17 March 2009 Mr O'Connor of Lee & Lyons wrote again to Hazel, referring to the short minutes of orders sent the preceding week and indicating that he would like to discuss them with Hazel the following day. The letter also explained the effect of the freezing order. The letter included the sentence:

You should read them [the short minutes] carefully though and ask either your own lawyer about them or I will explain them to you, but you must bear in mind that I will be at all times acting in the interests of Norco.

25 The form of short minutes of orders on which the Court acted on 19 March 2009 had an odd appearance. The fifth and final page was signed by Hazel with the date 18-3-2009 subscribed apparently in her handwriting below her signature, but the first four pages bore no signature or initialling and the appearance of the typeface on them was different from that on the fifth page.

26 In the course of the hearing before me on 23 August 2010 Hazel asserted that she had returned to Lee & Lyons the entire five page document with initiallings and other markings by her on all pages. She said that given time she would be able to look up a copy of that document and supply it to Lee & Lyons or to the Court. She asserted, in effect, that someone at Lee & Lyons had replaced the first four pages bearing her markings with different first four pristine pages.

27 The hearing was stood over to 31 August 2010 part heard.

28 At the resumed hearing on 31 August 2010, an affidavit by Mr O'Connor of that date was filed and read and the conflict became clear.

29 According to Mr O'Connor's affidavit and its attachments, on 18 March 2009, Hazel faxed to him only the fifth page, bearing her signature and her handwritten date 18-3-2009. Mr O'Connor then attached that page 5 to copies of the first four pages that were in his possession, assuming that Hazel was intending him to do just that. This explains the difference in the appearance of the typeface on page 5 from that on the first four pages.

30 Also attached to Mr O’Connor’s affidavit was a five page document bearing initials and ticks and crosses on the first four pages together, of course, with page 5 signed and dated by Hazel, which Mr O’Connor said he had received by fax from Hazel that very day, 31 August 2010. According to his affidavit, he had never seen this document previously. Hazel, however, insisted that the document now provided was a copy of the five page document she faxed to Mr O’Connor back on 18 March 2009. She said she had intended the crosses made by her on the document to indicate provisions in the short minutes to which she did not agree and ticks made by her to indicate those to which she did agree.

31 For the following reasons I reject Hazel's evidence and accept the evidence of Mr O'Connor:

1. Hazel's covering memo to Mr O’Connor dated 18 March 2009 said, "Please find the signed page [in the singular] of the short minutes of order".

2. Hazel's memo is headed "Facsimile-2 pages".

3. The page 5 that was enclosed with Hazel's memo of 18 March 2009 to which Mr O'Connor said he attached the first four pristine pages is not the same as page 5 of the five page document that Hazel has now provided.

32 In relation to the third matter just mentioned, it is to be noted that a close comparison of Hazel’s signature and handwritten date 18-3-2009 on the two documents reveals numerous differences. Hazel conceded this, as she was bound to do, and offered no satisfactory explanation. It is plain that whatever may be the explanation of the derivation of the five page document that Hazel now insists she sent to Mr O'Connor back on 18 March 2009, page 5 of that document is definitely not the page 5 that was in fact sent to Mr O'Connor back then to which Mr O’Connor attached his pristine pages 1-4.

33 It may have been unwise for Mr O'Connor to make the assumption that he did make, namely, that Hazel was agreeing to his attaching the first four pages, but one can understand why he did so: he had sent her a five page document, only the last page of which called for a signature and dating and Hazel returned to him that page signed and dated by her. It is understandable that he assumed that Hazel did not return pages 1-4 because she agreed to them in the form in which he had sent them to her and it had seemed to her useless, inconvenient and unnecessary for her to fax the identical pages untouched back to him. In effect, she was inviting him to attach pages 1 to 4 identical to those he had sent to her.

34 As I indicated earlier, however, my acceptance of Mr O'Connor's evidence and rejection of that of Hazel does not resolve the present problem. The reason is that a copy of the orders made on 19 March 2009 was never served on Hazel.

35 In a proceeding for contempt it is, of course, of the greatest importance to dot all the i's and cross all the t's. Ordinarily a sealed copy of the order must be served on the contemnor. At least it is necessary to prove that the contemnor was aware of the making of the order and of its terms. There have been cases where the contemnor has been present in court when the order is made and hears the order made. In such circumstances, he or she will be held to have had sufficient awareness of the making and terms of the order.

36 In the present case Hazel was not in Court when the orders were made on 19 March 2009 and she was never served with a copy, sealed or unsealed, of the orders. Hazel’s having signed and returned page 5 does not overcome the problem. Like Mr O’Connor, I am assuming that she was intending the Court to make orders in terms of all five pages. Courts do not, however, always make orders in the terms of consent short minutes of orders.

37 In these circumstances I decline to find her guilty of a contempt of court in respect of the first two charges.

38 This brings me to the order number 4 made on 28 June 2010. That order was set out at [19] above. Order 3 made on 28 June 2010 was that service of the notice of motion might be effected by sending a copy of the notice of motion to the defendants at [email protected] or by delivering a copy to the defendants at 90 Levers Road Tablelands Queensland.

39 At that time, however, unbeknown to the Court and apparently to the legal representatives of Norco, Hazel was in prison, having been incarcerated on 10 June 2010. She gave evidence that she did not receive a copy of the order dated 28 June 2010 for the filing and service of an asset disclosure affidavit until 23 August 2010 (elsewhere she said about a month after the order was made).

40 Hazel said that she did not take steps to comply with the order once she received notice of it because she was advised by “Legal Aid” that the time for compliance had passed and that it was therefore too late to obey the order. Advice to do nothing, if it was given, would have been bad advice in the sense that even though the time for compliance had passed, a person served with an order of the present kind would be expected to contact Norco's solicitors or the Court and make enquiries.

41 Be this as it may, the order made on 28 June 2010 did call for Hazel to file and serve an asset disclosure affidavit very soon after 28 June 2010. Whether she received the copy of the order as late as 23 August 2010 may be questioned but I am not persuaded to the degree required that she received a copy of the order or notice of its contents before the time fixed for compliance had long since passed.

42 For this reason the charge of contempt in relation to the order made on 28 June 2010 is not made out.

43 In some respects Hazel has proved to be very lucky. She has given evidence which I have rejected - evidence that impugned the honesty of a solicitor of this Court. The attack on his integrity should never have been made. However, contempt of court is itself a serious charge and she is entitled to the benefit of the rules that safeguard the position of a person the subject of such a charge.

44 Counsel for Norco asks for an order for costs. Although a general order of that kind is not warranted, Hazel should be ordered to pay the costs associated with Mr O’Connor’s affidavit sworn 31 August 2010 and of that part of the hearing that was associated with the subject matter of that affidavit (the conflict between Hazel and Mr O’Connor concerning the faxing of one page or all five pages on 18 March 2009). Some of the hearing on 23 August 2010 and most of the hearing on 31 August 2010, for example, were occupied with that issue.

CONCLUSION

45 The following declarations and orders should be made:

1. A declaration that the amount secured by the plaintiff’s charge declared on 30 June 2010 over Lot 171 Registered Plan 862765 Title Reference 18644058 is nil.

2. A declaration that the amount secured by the plaintiff’s charge declared on 30 June 2010 over Lots 9 and 10 Registered Plan 891053 Title Reference 50068238 is $53,201.08.

3. The defendants are to pay the plaintiff’s costs in relation to proving the amount secured by the charge declared on 30 June 2010.

4. The charges of contempt of court the subject of statement of charge attached to the amended notice of motion filed on 26 July 2010 are dismissed.

5. The first defendant is to pay the costs of the affidavit of Sean O’Connor sworn 31 August 2010 and the costs of that part of the hearing associated with the subject matter of that affidavit.

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