Prior v Lakic

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMON LAW DIVISION

PROPERTY LIST

S CI 2017 1163

STEPHEN PRIOR	Plaintiff
v
BOGDANKA LAKIC, ZDRAVKO LAKIC, BORIS LAKIC and NJEGOS LAKIC	First to Fourth Defendants
- and -
THE REGISTRAR OF TITLES	Fifth Defendant

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JUDGE:	Digby J
WHERE HELD:	Melbourne
DATE OF HEARING:	28 April 2017
DATE OF JUDGMENT:	11 May 2017
CASE MAY BE CITED AS:	Prior v Lakic
MEDIUM NEUTRAL CITATION:	[2017] VSC 255

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REAL PROPERTY – Costs order made against defendant in separate proceedings – Failure to pay legal costs – Undertaking to court not to dispose of, deal with, encumber or diminish value of interest in real property – Whether transfer of land executed with intent to delay, hinder or otherwise defraud creditors – Whether Registrar of Titles should be directed to cause the Land Titles register to be amended – Whether caveat validly lodged – Whether balance of convenience favoured removal of caveat – Caveat removed – Property Law Act 1958, s 172 – Transfer of Land Act 1958, s 103(1).

PRACTICE AND PROCEDURE – Restraint on dealing with real property – Whether there exists an arguable case against the defendants – Whether there is a danger that the prospective judgment will be wholly or partly unsatisfied as a result of the dissipation of assets –Balance of convenience – Real and unacceptable risk that judgment will not be wholly satisfied established – Supreme Court (General Civil Procedure) Rules 2015, Order 37A.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr C Juebner	Obst Legal
For the First, Second, Third and Fourth Defendants	No appearance
For the Fifth Defendant	Letter from the fifth defendant to the plaintiff dated 6 April 2017 advised he did not intend to appear and that he had been joined for jurisdictional reasons only.

HIS HONOUR:

Introduction

Stephen Prior (the plaintiff) commenced this proceeding by Originating Motion, together with a Summons on Originating Motion, filed 31 March 2017 seeking the following relief:

(a) that pursuant to s 172 of the Property Law Act 1958, the execution and registration of transfer of land dealing number AN14948H between Bogdanka Lakic (the first defendant) and Zdravko Lakic (the second defendant) dated 4 October 2016 in respect of the property located at 22 Lucerne Road, Ferntree Gully in the State of Victoria (Ferntree Gully Transfer), more particularly described in Certificate of Title Volume 09395 Folio 417 (Ferntree Gully Property) is void;

(b) that the second defendant take all necessary steps to re-convey his interest in the Ferntree Gully Property to the first defendant within seven days of the date of such an order being made and, if the second defendant fails to do so;

(i) that pursuant to s 22(1) of the Supreme Court Act 1986 the plaintiff’s solicitor be permitted to execute any document reasonably necessary to re-convey the second defendant’s interest in the Ferntree Gully Property to the first defendant;

(ii) further or in the alternative to (i), that pursuant to s 103(1) of the Property Law Act 1958 the fifth defendant (the Registrar of Titles), be directed to amend the Register to reflect the first defendant’s interest in the Ferntree Gully Property immediately before registration of the transfer of land;

(c) a declaration that Boris Lakic (the third defendant) and Njegos Lakic (the fourth defendant) do not possess a caveatable interest in the Ferntree Gully Property;

(d) an interim and an interlocutory injunction restraining the second defendant from in any way dealing with the Ferntree Gully Property without the plaintiff’s prior written consent;

(e) pursuant to s 103(1) of the Property Law Act 1958 that the Registrar of Titles be directed to reject executed transfer of land dealing number AN129513D between the first and second defendants dated 4 October 2016 in respect of the property located at 27 Maplewood Court, Cranbourne North 3977 (Cranbourne Transfer), more particularly described in Certificate of Title Volume 11225 Folio 478 (Cranbourne Property).

The plaintiff’s Summons first came on for hearing before Justice Ginnane of this Court on 7 April 2017. There was no appearance for the defendants, including the Registrar of Titles.[1] At that time, the plaintiff only pressed for orders in respect of an interim injunction against the second defendant together with orders for substituted service against the first, second, third and fourth defendants.
[1]Letter from the fifth defendant to the plaintiff dated 6 April 2017 advised he did not intend to appear and that he had been joined for jurisdictional reasons only.

On 7 April 2017 Ginnane J made orders for substituted service together with the following order (7 April Orders):

Until 4pm on 28 April 2017 or further order, the second defendant is restrained, whether by himself, his servants or agents or however otherwise, from selling or offering for sale, further encumbering (including by making any redraw against an existing facility secured against the property) or in any way dealing with the property located at 22 Lucerne Road, Ferntree Gully in the State of Victoria more particularly described in Certificate of Title Volume 09395 Folio 417, without the plaintiff’s prior written consent.

The interim injunction referred to above, which was made by Ginnane J against the second defendant on 7 April 2017, expires at 4pm today.

As required by the 7 April Orders, they were served on the first, second, third and fourth defendants on 8 April 2017.[2]
[2]Affidavit of Howard Obst, 19 April 2017, Exhibits “HSO-2”, “HSO-3” and “HSO-4”.

Paragraph [7] of the 7 April Orders required the first, second, third and fourth defendants to file and serve any affidavits upon which they intended to rely in opposition to the relief sought, by 21 April 2017.

No affidavits have been filed by any of the first, second, third or fourth defendants.

Relief Sought

The plaintiff seeks orders in the form of Annexure “A” to the outline of submissions filed by the plaintiff in substance as follows:

(a)the Ferntree Gully Transfer be set aside;
(b)the second defendant provide to the plaintiff’s solicitors a signed transfer of land by which the second defendant conveys the Ferntree Gully Property to the first and second defendants as joint proprietors and a duplicate Certificate of Title for the Ferntree Gully Property.
(c)if the second defendant fails to comply with the above order, the Registrar of Titles be directed to:
(i)cancel the folio of the Register for the Ferntree Gully Property;
(ii)create a new folio of the Register and Certificate of Title for the Ferntree Gully Property (New Folio);
(iii)record the first and second defendants as the joint registered proprietors of the New Folio;
(iv)produce a Certificate of Title for the New Folio and deliver it to the plaintiff’s solicitors, who shall be entitled to retain the Certificate of Title until further order.

(d)the Registrar of Titles be directed to:
(i)remove caveat AN088536C, unless the third and fourth defendants commence a proceeding in this Court seeking a declaration that they have a caveatable interest in the Ferntree Gully Property;
(ii)reject the Cranbourne Transfer;

(e)the first and second defendants be restrained from dealing with the Ferntree Gully Property without the plaintiff’s prior written consent or further order of this Court.

Material relied upon by the plaintiff

The plaintiff relies upon the following affidavits each sworn by the plaintiff’s solicitor, Mr Howard Obst:

(a) affidavit sworn 30 March 2017, together with exhibits;

(b) affidavit sworn 6 April 2017 together with exhibits; and

(c) affidavit sworn 19 April 2017 together with exhibits.

The issues

The first defendant is indebted to the plaintiff pursuant to a costs order made by Justice Macaulay of this Court on 17 June 2016[3] in proceeding number S CI 2015 00118 (Original Proceeding) and taxed in the sum of $178,692.65 on 1 February 2017.[4]
[3]Affidavit of Howard Obst, 30 March 2017, Exhibit “HSO-1”.
[4]Ibid [10], Exhibit “HSO-4”.

Subsequent to the costs order made on 17 June 2016, further costs in the sum of approximately $65,000 have been incurred by the plaintiff in taking steps in aid of enforcement of the costs order, including in relation to relief sought to prevent the dissipation of assets by means of a freezing order sought by the plaintiff and an injunction.[5]
[5]Ibid [35]-[38].

Costs orders in respect of this further legal work have not yet been made. However, the plaintiff’s solicitors’ estimate, and assert in their submissions, that the first defendant will be indebted to the plaintiff in the sum of at least $245,000 (including the taxed costs order) when cost orders are in due course made. [6]
[6]Plaintiff’s outline of submissions, 27 April 2017, [8].

The plaintiff also asserts in this application that the first defendant, together with the second defendant who is her husband, have actively taken steps to dissipate assets to avoid the consequences of the costs order made by Macaulay J, and to avoid the judgment of his Honour Judge Anderson in unrelated proceedings in the County Court.

Relief sought by the plaintiff

In these circumstances and supported by the plaintiff’s affidavit material and submissions referred to above, the plaintiff seeks the following relief:

(a) The transfer of the first defendant’s interest in the Ferntree Gully Property to the second defendant be set aside.

The plaintiff asserts that the transfer was made with the intent to defraud creditors and is voidable under s 172 of the Property Law Act 1958.

(b) The Registrar of Titles be directed to reject the transfer (at present unregistered) by which the first defendant attempted to transfer her interest (other than 5%) in the Cranbourne Property to the second defendant in breach of her abovementioned undertaking to this Court.

The plaintiff asserts that the attempted transfer was also made with the intent to defraud creditors and would also be voidable under s 172 of the Property Law Act 1958 had it been registered.

(c) The first and second defendants be restrained from dealing with the Ferntree Gully Property.

(d) The caveat in respect of the Ferntree Gully Property, lodged by the third and fourth defendants on 8 September 2016, be removed by the Registrar of Titles.

I am satisfied that the uncontradicted evidence referred to above and filed in support of the plaintiff’s application, prima facie, establishes that on 4 October 2016 the first defendant:

(a) attempted to transfer the majority (but for 5%) of her interest in the Cranbourne Property to the second defendant, in breach of an undertaking given by the first defendant to this Court;[7]

(b) transferred the whole of her interest in the Ferntree Gully Property to the second defendant, asserting that this occurred by reason of a breakdown of her marriage.[8]

[7]Affidavit of Howard Obst, 30 March 2017, [29], Exhibit “HSO-21”; Orders of Zammit J made 31 August 2016.

[8]Ibid, [29].

Chronology of events

The plaintiff submits the below chronology of relevant events:[9]
[9]The plaintiff noted that:
(i) references to page numbers and, where applicable, paragraph numbers are references to the affidavit of Howard Obst sworn 30 March 2017; and
(ii) events recited in the affidavit of Howard Obst sworn 30 March 2017 which are not critical to the application made for interim relief on 7 April 2017 are not referred to in the chronology.

Date	Event	Ref.
13 December 1999	Bogdanka and Zdravko became the joint registered proprietors of the Ferntree Gully Property.	5, [16(b)]
19 June 2015	Bogdanka and Zdravko became the joint registered proprietors of the Cranbourne Property.	4, [16(a)]
17 June 2016	In the proceeding which the First Defendant (Bogdanka) had brought against Mr Prior in this Court (Original Proceeding), Macaulay J ordered that there be judgement for Mr Prior and that Bogdanka pay Mr Prior’s costs of the Original Proceeding, to be taxed on the standard basis in default of agreement.	2, [4]
18 July 2016	His Honour Judge Anderson delivered judgement in a County Court proceeding brought by Bogdanka’s former solicitors (VCL) against Bogdanka for failure to pay legal fees.	16, [45]
18 August 2016	Garde J made an ex parte freezing order in the Original Proceeding upon Mr Prior’s application, prohibiting Bogdanka from removing from Victoria or in any way disposing of, or dealing with her assets in Victoria up to the unencumbered value of $195,000, which included the Cranbourne Property.	8, [21]
25 August 2016	The freezing order application came on for hearing before the Court. Bogdanka filed an affidavit in opposition to the freezing order.[10] Counsel for Bogdanka read part of the affidavit in open court, in which she deposed the following: · that she has a half interest in the Cranbourne Property (which was consistent with the title search showing her and her husband as joint registered proprietors), that the Cranbourne Property was unencumbered and had a value of $450,000; · that she had a half interest in the Ferntree Gully Property, which was worth not less than $530,000; · that she had no other significant liabilities or assets apart from costs orders. The freezing order application was adjourned to 31 August 2017.	9, [23]
31 August 2016	Rather than continue the freezing order, Bogdanka provided an undertaking to the Court that she would not, without giving 7 working days’ notice to Mr Prior and to the LPLC (Mr Prior’s insurer), in any way dispose of, deal with, encumber or diminish the value of her interest in the Cranbourne Property, such undertaking to be discharged and of no further force and effect upon Bogdanka paying Mr Prior’s costs in the Original Proceeding. At the time this undertaking was provided to the Court, Bogdanka’s counsel advised the Court (namely Zammit J) as follows: I have explained to my client that an undertaking is a solemn promise to the Court. That if she breaches that undertaking, it can be regarded as a contempt of court and the penalty for contempt of court can be a fine or a term of imprisonment. So she has had fully explained to her the consequences in accordance with this undertaking, she’s also had explained to her - it’s also been interpreted to her to make sure of it and there’s an interpreter now present in Court that’s now interpreting this… So I’m confident my client fully understands the need to comply with this undertaking. Based on Bogdanka’s affidavit filed 25 August 2017, the undertaking was thought to be sufficient to protect Mr Prior in respect of the costs order made by Macaulay J in the Original Proceeding.	9, [24],[25]
31 August 2016	Mr Prior filed a summons for taxation in respect of the costs in the Original Proceeding.	2, [7]
4 September 2016	The Third Defendant (Boris), who is the son of Bogdanka and Zdravko, lodged a caveat over the Ferntree Gully Property in which Boris and his brother, the Fourth Defendant, claimed an interest in the Ferntree Gully Property pursuant to an alleged agreement. Note: This is the caveat in respect of which orders are sought at paragraph 4 of the proposed orders at Annexure A.	11, [29]
6 September 2016	Mr Prior’s solicitors provided a copy of Bogdanks’s undertaking to the Registrar of Titles.	10, [26]
4 October 2016	Without prior notice and in contumelious disregard for the undertaking given on 31 August 2016, a transfer of land for the Cranbourne Property was lodged with Land Victoria, by which Bogdanka and Zdravko attempted to transfer their joint interest in the Cranbourne Property to Bogdanka (as to 5%) and Zdravko (as to 95%) as tenants in common. The purported commercial effect of lodging the transfer, in breach of the undertaking, was to seek to reduce Bogdanka’s interest in the Cranbourne Property by 45% (from 50% to 5%).[11] The Registrar of Titles did not immediately register the transfer of land, but advised Obst Legal of the receipt of the transfer as set out below. Note: This is the transfer in respect of which orders are sought at paragraph 5 of the proposed orders at Annexure A.	11, [29]
4 October 2016	On the same day on which Bogdanka breached her undertaking to this Court by lodging a transfer in respect of the Cranbourne Property, she also transferred the whole of her interest in the Ferntree Gully Property to her husband, Zdravko. Note: This is the transfer in respect of which orders are sought at paragraphs 1, 2 and 3 of the proposed orders at Annexure A.	11, [29]
7 October 2016	Mr Prior’s solicitors received a letter from the Registrar of Titles advising that a transfer had been lodged for registration in respect of the Cranbourne Property. That is how Mr Prior’s solicitors became aware of Bogdanka’s breach of the undertaking. The Registrar of Titles invited Mr Prior’s solicitors to seek an injunction preventing him from registering the transfer, so as to prevent the undertaking not to deal with the Cranbourne Property from being undermined.	11, [27], [28]
13 October 2016	On the application of Mr Prior, Riordan J granted an injunction in the Original Proceeding preventing the Registrar of Titles from registering the transfer in respect of the Cranbourne Property. Riordan J then adjourned the further hearing of the application to 17 November 2017.	12, [30]
11 November 2016	His Honour Judge Anderson made a freezing order in the County Court against Bogdanka and Zdravko’s assets (County Court Freezing Order) in the proceeding where VCL sued for its fees.	16, [46]
17 November 2016	At a hearing before Daly AsJ, Bogdanka complained about the continuation of the injunction against the Registrar of Titles in respect of the transfer of the Cranbourne Property. Daly AsJ ordered that any application to set aside the injunction be made no less than 14 days after the conclusion of the costs mediation. Daly AsJ informed Bogdanka that, on the face of it, the signing of the transfer by Bogdanka was a breach of her undertaking and that Bogdanka could be prosecuted for contempt. No further steps have been taken by Bogdanka to seek to set aside the injunction made by Riordan J.	12, [31], [32]
18 November 2016	The County Court Freezing Order was extended.	16, [46]
30 November 2016	A mediation was held in respect of the summons for taxation of costs filed by Mr Prior against Bogdanka.	2, [8]
14 December 2016	The County Court Freezing Order was extended.	16, [46]
1 February 2017	The summons for taxation of costs in respect of the Original Proceeding proceeded to hearing, despite an application for an adjournment by Bogdanka, alleging illness. Costs in the sum of $178,692.65 were allowed to Mr Prior.	3, [10]
14 February 2017	The County Court Freezing Order was extended. Additionally, his Honour Judge Anderson ordered: · Bogdanka to pay VCL $61,369.49; · VCL to pay to Bogdanka $29,318.39 (on her counterclaim); · the sum of $29,318.39 to be offset against the sum of $61,369.49, leaving a balance of $32,050.56 payable by Bogdanka to VCL. On payment of that $32,050.56, it is likely that the County Court Freezing Order will be discharged.	16, [46], [47]
29 March 2017	At the request of Mr Prior’s solicitors, estate agents (Biggin and Scott) advised that the Cranbourne Property has a market value between $385,000 and $405,000. Assuming that Bogdanka is entitled to half the equity (despite her attempt to transfer all but 5% of her interest to her husband), her half interest is worth approximately $192,500 and $202,500. This is insufficient to satisfy the amount which will be payable to Mr Prior (estimated above to be at least $245,000). For that reason, Mr Prior seeks that the transfer of the Ferntree Gully Property be set aside.	15, [42]

[10]Is the affidavit which is the subject of the application for release from the Harman undertaking. That application will be pursued in the Original Proceeding.

[11]Noting that a joint registered proprietor has an indivisible interest in the entire property, but commercially has the benefit of 50% of the value of such property.

Analysis – s 172 of the Property Law Act 1958

Section 172(1) of the Property Law Act 1958 provides as follows:

Save as provided in this section,[12] every alienation of property made, whether before or after the commencement of this Act, with the intent to defraud creditors, shall be avoidable, at the instance of any person thereby prejudiced.

[12]No other aspect of the section is relevant.

In Deputy Commissioner of Taxation v Haritos,[13] Sloss J summarised the principles applicable to s 172 of the Property Law Act 1958 as follows:
[13][2014] VSC 379.

Alienation of property
[219]Section 172, and its counterparts in other jurisdictions, is “derived from ‘the Elizabethan statute’ which was intended to prevent debtors alienating property when this would prevent their creditors from recovering the moneys owed to them.” The provision applies to all forms of property, both legal and equitable.
Intent to defraud creditors
[220]In Marcolongo v Yu Po Chen (2011) 242 CLR 546 (“Marcolongo“) the High Court considered the operation of s 37A of the Conveyancing Act 1919 (NSW). In a joint judgment, French CJ, Gummow, Crennan and Bell JJ observed that the concept of “defraud“ within the meaning of that section (and correlative state and federal provisions) should receive a liberal construction consistent with the case law deriving from the Elizabethan Statute. Accordingly, the phrase “intent to defraud creditors“ should be understood as encompassing an intention to “delay, hinder or [otherwise] defraud“ consistently with the application of the phrase used in the Elizabethan Statute.
[221]Further, in Marcolongo, their Honours in the majority also noted that whilst the concept of “defraud” does not extend to encompass equitable or constructive fraud, it does not require a finding of actual dishonesty in the sense of an actual intention or purpose of causing loss. Rather, they said, it was necessary to show “an intention to hinder, delay or defeat creditors and in that sense to show that accordingly the debtor had acted dishonestly.”
[222]…
[223]An intention to defeat creditors is usually sought to be inferred from the circumstances in which the property is alienated. Although intent must be found as a fact, it need not be the sole, nor predominant, intent. It may exist concurrently with a genuine and good faith intention to dispose of property. In ascertaining intent, the critical period to examine is the period leading up to the date of the transfer and the critical mind is that of the transferor. Where that transferor is a corporate entity, the critical mind is that of the person controlling the transferor’s actions in effecting the transfer.
[224]The manner in which intent is to be ascertained was considered in Deputy Commissioner of Taxation v Yeo (2007) 66 ATR 428, where Harper J noted that direct evidence of the necessary intent to defraud creditors is very seldom available. His Honour observed:
Given that intent is a state of mind, it cannot be seen or otherwise perceived. In practice, therefore, the available evidence is almost invariably circumstantial. One ascertains someone else’s intention by looking at what that person has done or said as circumstantial evidence from which an inference can be drawn concerning the intention in question.

[225]The observation made by Harper J reflects what was said by Clyne J in Re Trautwein; Richardson v Trautwein (1944) 14 ABC 61, which was quoted with approval by the Full Court (Wilcox, Gummow and von Doussa JJ) in PT Garuda Indonesia Ltd v Richard John Grellman (1992) 35 FCR 515, as follows:
With regard to the applicant’s claim under s 37A of the Conveyancing Act 1919 (NSW), it is, I think, clearly established that in determining whether or not an alienation has been made with intent to defraud creditors, a court must look at all the circumstances surrounding the alienation to ascertain if there were any such intent. It is not necessary to bring actual proof that the alienor had in his mind an intention to defraud creditors: for if it appears from the evidence that the effect might be expected to be and has in fact been to do so, the court will attribute the fraudulent intention to the alienor.

[226]In Cannane, Brennan CJ and McHugh J said that an intention to defraud creditors may be inferred where a disposition results in a “subtraction of assets’ available for payment of creditors. Where a disposition is voluntary, rather than for valuable consideration, and a necessary consequence of the alienation is to defeat or delay creditors, the inference of intent to defraud may be drawn more easily.

In Caple v Wilson, Robson J observed:[14]

The High Court held in Marcolongo v Chen that the expression “intent to defraud” in the section means intent to delay, hinder or otherwise defraud as was provided in the precursor to s 172 found in the Statue of Elizabeth. Also the High Court held that the relevant intention may be inferred if the natural consequence of the transaction is to delay hinder or otherwise defraud creditors. The intention need not be the sole purpose of the debtor. The intention may exist along with a genuine intention to dispose of property.

[14][2016] VSC 704, [194].

The plaintiff submits that from the circumstances of the transfers of the properties referred to below, and from the natural consequences of those transactions, there are sufficient bases upon which to infer and conclude that the transfers of land executed in respect of both the Ferntree Gully Property and the Cranbourne Property were executed with intent to delay, hinder or otherwise defraud the first defendant’s creditors.

In relation to the establishment of the claim made in the last preceding paragraph. the plaintiff specifically relies upon the following facts and circumstances:[15]
[15]Affidavit evidence referred to in paragraph [8] above and facts referred to.

(a) the first defendant’s knowledge at the relevant time:

(iii) that a costs order had been made against her by Macaulay J on 17 June 2016 in the Original Proceeding, the quantum of which was likely to be very substantial;

(iv)of her involvement in litigation in the County Court;

(b) the first defendant’s attempt on 4 October 2016 to transfer her interest (other than a residual 5%) in the Cranbourne Property to her husband in clear breach of her undertaking to this Court and notwithstanding assurances from her Counsel that she understood the significance of the undertaking;[16]
[16]Affidavit of Howard Obst, 30 March 2017, [24]–[25].

(c) that, on 4 October 2016 that very same day, the first defendant transferred the whole of the interest in the Ferntree Gully Property to her husband;[17]
[17]Ibid [29].

(d) the first defendant had sworn an affidavit on 25 August 2016[18] (shortly before these two transfers were executed by her) in response to a freezing order in the Original Proceeding in which the first defendant asserted that she had a half interest in each of these properties and in which she made no reference to the agreements (allegedly made on 5 June 2015) which she uses to justify the Cranbourne Property and the Ferntree Gully Property transfers;
[18]Ibid [23].

(e) that the transfers were said to be made pursuant to the same breakdown of marriage, but also asserted to be in respect of two separate agreements:

(i) in respect of the Cranbourne Property “pursuant to breakdown of marriage and agreement dated 5 June 2015” (prior to the first defendant’s freezing order affidavit of 25 August 2016);[19]
[19]Ibid [29]; Exhibit “HSO-21”.

(ii) in respect of the Ferntree Gully Property “pursuant to breakdown of marriage and declaration dated 4 September 2016”;[20]

(f) and despite having the opportunity to file affidavit material by 21 April 2017, the first, second, third and fourth defendants have not done so and have not attempted to refute the plaintiff’s claims, evidence and relief sought on this application, nor have they put forward evidence to establish and support the alleged agreements referred to in (i) and (ii) of the preceding sub-paragraph.

[20]Ibid [29]; Exhibit “HSO-24”.

The plaintiff submits that the conduct referred to in paragraphs [20] and [21] above is sufficient to enable the Court to infer that the first and second defendants attempted to delay, hinder or otherwise defraud the plaintiff.

Analysis – s 103(1) of the Transfer of Land Act 1958

Section 103(1) of the Transfer of Land Act 1958 provides as follows:

In any proceeding in a court relating to any land or any instrument or dealing in respect thereof if the court directs the Registrar to make any amendments to the Register or otherwise to do any act or make any recordings necessary to give effect to any judgment decree or order of the court the Registrar shall obey such direction.

The plaintiff submits that s 103(1) of the Transfer of Land Act 1958 is facilitative, in that it provides the mechanism by which the Court can cause the Land Titles Register to be amended to give effect to its orders.

In these applications the plaintiff seeks orders which will bring about a two stage process. The plaintiff, in the first instance, seeks to have the second defendant provide the plaintiff’s solicitors with the documents necessary to effect the transfer of the Ferntree Gully Property to the joint names of the first and second defendants, and make available the duplicate Certificate of Title. If this does not occur the plaintiff then seeks, as the second stage, to rely on s 103(1) of the Transfer of Land Act 1958 to obtain proposed order [8(c)], (order [3] below).

The plaintiff submits that once s 103(1) is engaged, it will be necessary to cancel the current Certificate of Title for the Ferntree Gully Property to reduce the risk of fraud arising from two inconsistent Certificates of Title remaining in circulation in relation to the same property.

In Official Trustee in Bankruptcy v Registrar of Titles,[21] Riordan J recently observed the following with respect of s 103:

Accordingly, Ferguson J adopted a less strict approach to such applications and I summarise her Honour’s conclusions as follows:
(a)The powers under s 103(1) of the Transfer of Land Act 1958 should be exercised with caution.
(b)If there are any practical steps that could be taken that would have a real prospect of resulting in the production of a Certificate of Title without the need for orders under s 103(1), those steps should be taken.
(c)It is not necessary to take steps to exhaust every other avenue, if such steps have no real prospect of success; and would only serve to delay the inevitable application under s 103(1) at a later time.

[21][2015] VSC 563, [11].

Riordan J made orders in the Official Trustee in Bankruptcy case as follows:[22]

Pursuant to s 103(1) of the Transfer of Land Act 1958, I will direct the defendant to:
(a)cancel the folio of the register for the Property;
(b)create a new folio of the register for the Property;
(c)remove the restraining order instrument AK684488N from the new folio;
(d)record the Commonwealth of Australia as the registered proprietor of the Property in the new folio; and
(e)produce a Certificate of Title for the new folio and deliver it to the Commonwealth of Australia as the person entitled to it.
[22]Ibid, [15].

Conclusions

Here, in my view, the two step orders sought by the plaintiff are appropriate and those orders, including the orders directed at obviating the risk of the existence of two Certificates of Title in relation to the same property, are also proportionate, practical and consistent with the approach taken in other cases, and as suggested by the Registrar of Titles in this proceeding.[23]
[23]Ibid, [11]; Marchesi (as Trustee of the Bankrupt Estate of Andrew Vasiliou, a Bankrupt) v Registrar of Titles (2010) 30 VR 397 (Ferguson J); Fifth Defendant’s letter dated 6 April 2017.

I am satisfied on the basis of the above, in particular the facts and circumstances which I am satisfied are sufficiently established and referred to in paragraphs [10], [11], [13], [16], [20] and [21] above, that there is an adequate and reasonable basis upon which to infer that the first defendant deliberately attempted to hinder, delay and defeat the plaintiff as a creditor and in particular defeat or retard his legitimate efforts to recover his just entitlement.

Further, I am comfortably satisfied on the same bases that the first defendant by her above specified actions, in particular the Cranbourne Property and the Ferntree Gully Property transfers, intended to hinder, delay and defeat her creditor, and in particular defeat the plaintiff’s rightful recovery of the moneys owed to him by the first defendant.

Accordingly, I am satisfied that the plaintiff is entitled to the far reaching orders which he seeks in respect of both the Ferntree Gully Property and the Cranbourne Property.

Analysis – injunction

The plaintiff also seeks an order that the first and second defendants be restrained from dealing with the Ferntree Gully Property. No such order is sought in respect of the Cranbourne Property, because it remains restrained by the order of Riordan J made in the Original Proceeding on 13 October 2016.[24]
[24]Affidavit of Howard Obst, 30 March 2017, [30]; Exhibit “HSO-25”.

The restraint which the plaintiff seeks with respect to the Ferntree Gully Property is sought principally in the nature of a freezing order, on the basis that:

(a) in relation to the first defendant, there is a danger that the judgment against her will be rendered wholly or partly unsatisfied because her assets would otherwise be disposed of, dealt with or diminished in value;[25] and

(b) in relation to the second defendant, there is a danger that the judgment will be wholly or partly unsatisfied because the second defendant holds or has exercised or is exercising, a power of disposition over assets of his wife the first defendant, the judgment debtor through the indivisible joint ownership of the Ferntree Gully Property.[26]

[25]Rule 37A.05(4)(b)(ii) of the Supreme Court (General Civil Procedure) Rules 2015.

[26]Rule 37A.05(5)(a) of the Supreme Court (General Civil Procedure) Rules 2015.

In Choice Planning Pty Ltd v Mider @ Franklin Street Pty Ltd,[27] Hargrave J elucidated principles which ordinarily inform the court’s exercise of discretion in relation to a freezing order, and in doing so his Honour referred to the decision of J Forrest J in Deputy Commissioner of Taxation v AES Services (Aust) Pty Ltd.[28] In Choice Planning, Hargrave J stated:
[27][2015] VSC 59, [9]-[10].
[28][2009] VSC 418, [20].

[9]While the court’s powers to make a freezing order or an ancillary order are not limited to the circumstances stated in r 37A.05, in the present case such powers can be determined by reference to the circumstances specified therein. Of course, an order will not follow as a matter of course if the elements for the existence of the court’s power are established. The court retains a discretion and must consider the balance of convenience.
[10]The legal principles to be applied in deciding whether or not to grant a freezing order were conveniently summarised by J Forrest J in Deputy Commissioner of Taxation v AES Services (Aust) Pty Ltd, in the following terms:
First, that a freezing order, by its very nature, is a drastic remedy and a court must exercise a high degree of caution before taking a step which will interfere with a party’s capacity to deal with his or her assets.
Second, the order is not designed to provide security for the applicant’s claim. It is solely directed to preserving assets from being dissipated, thereby frustrating the court process.
Third, the applicant bears the onus both in satisfying the court that the order should be continued and in satisfying the court as to the amount which is to be the subject of the order.
Fourth, that an order can only be made on the basis of admissible evidence which supports the contentions made by the party seeking the order. Speculation and guesswork is no substitute for either the facts or inferences properly drawn from proved facts.
Fifth, that before such an order can be made it is necessary that the applicant establish —
(a)an arguable case against the defendant; and
(b)that there is a danger that the prospective judgment will be wholly or partly unsatisfied as a result of the defendant’s actions in either removing the assets or disposing or dealing with them so as to diminish their value.

Sixth, the balance of convenience must favour the granting of the freezing order.
Seventh, that there is no set process determining the exact nature of an order. The order will be framed according to the circumstances of the case.
Eighth, the applicant must establish with some precision the value of prospective judgment. The order should not unnecessarily tie up a party’s assets and property.
Finally, there may be discretionary considerations which militate against the granting of a freezing order, such as delay in bringing the application on before the court or a lack of candour in the materials placed before the court.

Conclusion - injunction

Here in my view there is ample evidence upon which to conclude that there is a real and unacceptable risk that the costs order made by Macaulay J (taxed on the amount of $178,692.65), and also any further costs order likely to be made against the first and second defendants in this proceeding, will be wholly or partly unsatisfied as a result of the actions of the first and second defendants in disposing or dealing with their assets so as to put those assets out of reach or to diminish their value. Comfortingly, that evidence is not refuted by the first or second defendants, or the other defendants.

I consider that the real and unacceptable risk referred to above, is amply established by the following facts and circumstances and the evidence referred to in paragraph [30] above, in particular that:

(a) the first defendant has already sought to transfer her interest in the Cranbourne Property in breach of her undertaking to this Court;

(b) the second defendant was the transferee in respect of the interest of the first defendant in the Cranbourne Property and the Ferntree Gully Property, which appear not to have been motivated by any genuine commercial purpose but rather in an effort to delay and frustrate and ultimately defeat creditors, and in particular the plaintiff’s entitlements to recover against the first defendant;

(c) their children, the third and fourth defendants, have registered a caveat over the Ferntree Gully Property pursuant to an alleged “Agreement” which I infer in the above circumstances, including the caveators’ asserted basis of the proprietary interest on which the caveat is based, is also likely to have been registered in a further attempt to delay and frustrate and if possible ultimately defeat the plaintiff’s legitimate claims.

Further, the risk to which I refer has previously been recognised.[29]
[29]Freezing orders and injunctions have been granted against the first and second defendants by Riordan J, Ginnane J and Judge Anderson.

In relation to the quantum relevant to the plaintiff’s claims, the uncontradicted evidence establishes the following:

(a) an existing costs order made against the first defendant in the sum of $178,692.65;

(b) further costs having been incurred since the making of that costs order in the sum of at least $65,000;

(c) having regard of the conduct of the first, second, third and fourth defendants, I am also satisfied that it is very likely that further costs are likely to be incurred in seeking to enforce the costs order made by Macaulay J;

(d) a half interest in the Cranbourne Property is valued between $192,500 and $202,500;

(e) the value of the first defendant’s half interest in the Cranbourne Property is insufficient to meet the:

(v) costs order made by Macaulay J; and

(vi)the further costs incurred in seeking to enforce that costs order;

(f) apart from her interest in the Cranbourne Property and the Ferntree Gully Property, as a result of a re-conveyance, the first defendant appears to have no other assets against which a judgment may be enforced.

In the above circumstances, I am satisfied that the injunction sought by the plaintiff should be granted to avert the risk of a judgment, or prospective judgment, not being wholly satisfied.

Conclusion – removal of caveat

On 4 September 2016, the third defendant lodged a caveat over the Ferntree Gully Property, by which the third and fourth defendants assert an interest in that property pursuant to an “Agreement”.

Although Ginnane J made an order allowing evidence to be filed in support of the claim to the caveatable interest by the 7 April Orders, no evidence in support of the caveat, sought to be removed by the plaintiff, has been filed.

I am also satisfied, in these circumstances, that the caveators have failed to establish that there is any proper justification for the maintenance of the subject caveat, and accordingly Caveat AN088536C should be removed by an order pursuant to s 103(1) of the Transfer of Land Act 1958.[30]
[30]Piroshenko v Grojsman (2010) 27 VR 489 at [491], [493], [495].

For the above reasons I order that –

1.Pursuant to s 172 of the Property Law Act 1958, the execution and registration of transfer of land dealing number AN14948H between the first defendant and the second defendant dated 4 October 2017 in respect of the property located at 22 Lucerne Road, Ferntree Gully in the State of Victoria more particularly described in Certificate of Title Volume 09395 Folio 417 (Ferntree Gully Property) is void.
2.Within 14 days of the date of this order, the second defendant shall provide to the plaintiff’s solicitors:
(a)a duly signed transfer of land by which the second defendant conveys the Ferntree Gully Property to the first defendant and the second defendant as joint proprietors; and
(b)the duplicate certificate of title for the Ferntree Gully Property.

3.If the second defendant fails to comply with paragraph [2] of these orders, pursuant to s 103(1) of the Transfer of Land Act 1958, the fifth defendant is directed to do the following:
(a)to cancel folio of the Register Volume 9395 Folio 917 containing the land in Lot 912 on Plan of Subdivision 627654E;
(b)to create a new folio of the Register and Certificate of Title for the land in Lot 912 on Plan of Subdivision 627654E (New Folio);
(c)record the first defendant and the second defendant as the joint registered proprietors of the New Folio;
(d)produce a Certificate of Title for the New Folio and deliver it to the plaintiff’s solicitors, who shall be entitled to retain the Certificate of Title until further order.

4.The fifth defendant is directed to remove caveat AN088536C from the land in folio Register Volume 9395 Folio 417 pursuant to s 90(3) of the Transfer of Land Act 1958.
5.Pursuant to s 103(1) of the Transfer of Land Act 1958, the fifth defendant is directed to reject executed transfer of land dealing number AN129513D between the first defendant and the second defendant dated 4 October 2016 in respect of the property located at 27 Maplewood Court, Cranbourne North 3977, more particularly described in Certificate of Title Volume 11225 Folio 478.
6.Other than insofar as is necessary to comply with paragraph [2] of these orders, the first defendant and the second defendant, whether by themselves, their servants or agents or however otherwise, are restrained from selling or offering for sale, further encumbering (including by making any redraw against an existing facility secured against the property) or in any way dealing with the Ferntree Gully Property without the plaintiff's prior written consent or further order of this Court.
7.By 4.00pm on 2 May 2017, the plaintiff shall serve a copy of this order on the defendants.
8.The first, second, third and fourth Defendants pay the plaintiff’s costs of and incidental to this proceeding, including reserved costs, such costs to be taxed on the standard basis in default of agreement.
9.There be no order as to costs as between the plaintiff and the fifth defendant.

[2017] VSC 255

11 May 2017