Simon and Simon and Ors - [2013] FCCA 432

FEDERAL CIRCUIT COURT OF AUSTRALIA

SIMON & SIMON & ORS

[2013] FCCA 432

Catchwords:
FAMILY LAW – Property adjustment – where husband was bankrupt – assessment of contributions – where loan and gift by husband’s father – where evidence of intention of donor of gift – contributions equal.

FAMILY LAW – Application to set aside instrument or disposition – where loan agreement and mortgage executed between first respondent and second respondent to defeat wife’s claim – where transaction a sham – loan agreement and mortgage set aside.

BANKRUPTCY – Application for declaration that transfer of property void as against the trustee in bankruptcy of the husband – where loan agreement and mortgage a transfer of property – loan agreement and mortgage executed within 5 years of husband’s bankruptcy – where second respondent gave no consideration for the transfer of property – declarations made.

Legislation:
Bankruptcy Act 1966, ss.108, 120BA, 120(1), 120(3), 120(7)(b)
Family Law Act 1975, ss.75(2), 75(2)(ha), 79, 79(1)(b), 79(2), 79(4)(a) – (g), 79(12), 79(13), 106B, 106B(1A), 106B(3)

Cases cited:
Balnaves v Balnaves (1988) 12 Fam LR 488
C v C (2005) Fam LR 414
Commonwealth Bank of Australia v Staatz and Staatz (1988) FLC ¶91-942
Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95
Evans (as Executor for the Estate of the late Evans) v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs (2012) 289 ALR 237
Halabi v Artillaga (1994) FLC 92-470
Heath and Heath (No 2) (1984) FLC 91-517
In the Marriage of Clauson (1995) FLC 92-595
In the Marriage of Ferraro (1993) FLC 92-335
In the Marriage of Hickey (2003) 30 Fam LR 355
In the Marriage of Holley (1982) FLC 91-257
In the Marriage of Ivanfy (1978) 4 Fam LR 542
In the Marriage of Lee Steere and Lee Steere (1985) FLC 91-626
In the Marriage of Toohey (1991) 14 Fam LR 843
Kessey v Kessey (1994) 18 Fam LR 149
Lemnos & Lemnos [2007] FamCA 1058
Loxton v Moir (1914) 18 CLR 360
Robb & Robb (1995) FLC 92-555
Russell v Russell (1999) FLC 92-877
Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 82 ALR 530
Stanford v Stanford [2012] HCA 52
Teen Ranch Pty Limited v Brown (1995) 87 IR 308
Trustee of the property of Lemnos (a bankrupt) v Lemnos (2009) 41 Fam LR 120

Applicant:

MS SIMON

First Respondent:

MR C SIMON

Second Respondent:

MR S SIMON

Third Respondent:

MR PETIT

Fourth Respondent:

MR HALEY

Fifth Respondent:

MR CASSAS

File Number:

BRC 3933 of 2012

Judgment of:

Judge Jarrett

Hearing date:

13 November 2012

Date of Last Submission:

13 November 2012

Delivered at:

Brisbane

Delivered on:

5 June 2013

REPRESENTATION

Counsel for the Applicant:

Mr Galloway

Solicitors for the Applicant:

Finemore Walters & Story

No appearance for the First Respondent

No appearance for the Second Respondent:

Counsel for the Third and Fourth Respondents:

Mr Ward

Solicitors for the Third and Fourth Respondents:

Masons Lawyers

Counsel for the Fifth Respondent:

Ms Clegg

Solicitors for…

Grounds of appeal

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

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

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

Consideration

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

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

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Details

AGLC: SIMON & SIMON & ORS [2013] FCCA 432
Case: [2013] FCCA 432
Decision Date: 5 June 2013

CaseChat Overview and Summary

This case involved an application by a wife (the applicant) against her husband (the first respondent) and another party (the second respondent) concerning property adjustment and the setting aside of certain transactions. The dispute centred on a loan agreement and mortgage executed between the husband and the second respondent, which the wife alleged were intended to defeat her claim in family law proceedings. The matter also involved the trustee in bankruptcy of the husband (the fifth respondent), who sought to have the same transactions declared void against him under the *Bankruptcy Act 1966*.

The court was required to determine several legal issues. Firstly, in the context of family law property adjustment, the court had to assess the contributions of the parties, including a loan and a gift from the husband's father, and consider the intention of the donor of the gift. Secondly, the court had to decide whether the loan agreement and mortgage constituted a disposition of property intended to defeat the wife's claim, and if so, whether these instruments should be set aside under the *Family Law Act 1975*. Thirdly, the court had to consider whether the loan agreement and mortgage were void as against the trustee in bankruptcy, particularly given they were executed within five years of the husband's bankruptcy and whether the second respondent provided valuable consideration.

In its reasoning, the court found that the contributions of the parties were equal. Crucially, the court determined that the loan agreement and mortgage were a sham transaction designed to defeat the wife's claim and were therefore void against the trustee in bankruptcy under section 120(1) of the *Bankruptcy Act 1966*. Consequently, the court ordered that the loan agreement and mortgage be set aside under section 106B of the *Family Law Act 1975*. The court further ordered the sale of a property, with the proceeds to be applied with 65% to the applicant and 35% to the fifth respondent. The court also made orders appointing the Registry Manager to execute documents if any party failed to comply with the orders.

Orders

Orders of the court

The Court declares that:

pursuant to s.120(1) of the Bankruptcy Act 1966 the loan agreement dated 5 November, 2007 between the first respondent and the second respondent is void against the fifth respondent;

pursuant to s.120(1) of the Bankruptcy Act 1966 registered mortgage numbered [1] between the first respondent and the second respondent is void against the fifth respondent;

The Court orders that:

pursuant to s.106B of the Family Law Act 1975 the loan agreement dated 5 November, 2007 between the first respondent and the second respondent be set aside;

pursuant to s.106B of the Family Law Act 1975 registered mortgage numbered [1] between the first respondent and the second respondent be set aside;

the property situated at Property B (the [B] property) be listed for sale by private treaty with a Real Estate Agent to be agreed between the applicant and the fifth respondent and failing agreement being reached as to that matter within 21 days after the publication of these orders, chosen by the applicant from a panel of three given to her for her consideration by the fifth respondent. In the event that the applicant does not chose an agent within 7 days of being provided with the panel by the fifth respondent, the fifth respondent shall choose the agent. For the purposes of the listing the following shall apply:

(a) The list price of the property shall be such amount as agreed between the parties and failing agreement as advised by the agent;

(b) The applicant shall have the sole right to occupy the property up to the date of settlement whereupon she is required to vacate the property and during such right of occupation:

(i) The applicant shall cooperate in every way with the agent in relation to the marketing of the property for sale including providing reasonable access to the real estate agent for the purpose of property inspections;

(ii) The applicant shall maintain the property in an acceptable state for sale having regard to the age of the property;

(iii) That if so advised by the agent conducting the sale, a ‘For Sale’ sign shall be erected on the property and remain on the property until the property is sold.

(c) The applicant shall be solely responsible from the date of these orders up to and including the date of settlement for all payments relating to the property including but not limited to insurance, rates, outgoings, electricity and reasonable maintenance of the property as they fall due;

(d) In the event the property is not sold by private treaty within sixty (60) days from the date of listing then the parties shall do acts and sign all documents as are necessary to sell the property by auction on the following terms:

(i) The property shall be listed with the an auctioneer recommended by the agent appointed pursuant to order (5) hereof (“the auctioneer”) for sale by auction with the auction to occur no later than one (1) month from the operation of order 5(d);

(ii) The applicant and the fifth respondent shall execute all documents requested by the auctioneer for sale of the property by auction;

(iii) The reserve price of the property shall be such amount as is agreed between the applicant and the fifth respondent and failing agreement being reached by the applicant and the fifth respondent 21 days prior to the auction, then the reserve price shall be nominated by the auctioneer;

(iv) The applicant and the fifth respondent shall each pay to the auctioneer one half of any sums requested for advertising or auction expenses and if one of either the applicant or the fifth respondent pays all of the expenses, that party shall be reimbursed from the proceeds of sale in respect of one (1) half of such payments before any division between the applicant and the fifth respondent;

(v) The sale price of the property shall be any amount in excess of the reserve price but in the event of the reserve price not being reached the sale price of the property shall be such amount as is agreed between the applicant and the fifth respondent or failing agreement any offer received after the auction to buy the property at a price that is at least 90% of the reserve price shall be accepted by the applicant and the fifth respondent;

(vi) In the event that the property is not sold at the auction or within fourteen (14) days after the date of the auction by further negotiation, then the parties shall cause a further auction of the property to be held within one (1) month of the first auction and for that purpose, the provisions of order 5(d) shall apply;

(vii) Should the property not be sold at the second auction, then the applicant and the fifth respondent must do all acts and sign all documents as are necessary to arrange further auctions at two (2) month intervals until such time as the property is sold and for that purpose, the provisions of order 5(d) shall apply.

Upon completion of the sale of the property the proceeds of sale are to be applied in the following manner and priority:

(a) Payment of all liabilities associated with the sale of the property including statutory charges, legal costs, agent’s commission, auction costs (if applicable) and advertising fees;

(b) 65% of the balance to the applicant; and

In the event any party to these orders refuses or neglects to comply with any or all of the provisions of these orders, the Registry Manager of the Brisbane Registry of the Family Court of Australia is hereby appointed, pursuant to s.106A of the Family Law Act 1975 to execute all deeds and documents in the name of the applicant and/or respondent and to do all acts and things necessary to give validity and operation to these orders.

Any application for costs, together with any supporting affidavit and written submissions be filed within fourteen (14) days of today’s date.

The respondent to any such application shall file and serve a response, supporting affidavits (if any) and written submissions fourteen (14) days thereafter.

10.

Any costs application be considered in Chambers. If any party wishes there to be a further oral hearing in relation to costs they should indicate so in their submissions.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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