Wilson v Richards (No 3)
[2021] VCC 1732
•18 November 2021
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-16-05583
| PETER JOHN WILSON and | First Plaintiff/First Judgment Creditor |
| DAVID ROBERT WILSON | Second Plaintiff/Second Judgment Creditor |
| V | |
| KENNETH NORMAN RICHARDS & ORS (according to the Schedule attached) | Defendants/Judgment Debtors |
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JUDGE: | HER HONOUR JUDGE A RYAN | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 1 September 2020, submissions filed 6 November 2020 | |
DATE OF RULING: | 18 November 2021 | |
CASE MAY BE CITED AS: | Wilson and Anor v Richards & Ors (No 3) | |
MEDIUM NEUTRAL CITATION: | [2021] VCC 1732 | |
REASONS FOR RULING
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Subject:PRACTICE AND PROCEDURE – review of decision by a judicial registrar
Catchwords: Review of judicial registrar’s decision to vary an instalment order and increase instalments payable by the defendants/judgment debtors
Legislation Cited: County Court Civil Procedure Rules 2018; Judgment Debt Recovery Act 1984
Cases Cited:Bendigo and Adelaide Bank Limited v Grahame [2020] VSC 86; Southern Motors Pty Ltd v Australian Guarantee Corporation Ltd [1980] VR 187; Fernandez v State of New South Wales [2019] NSWSC 1736
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr W H C Forrester | DSA Law |
| For the Defendants | Mr C Möller | Gadens Lawyers |
SCHEDULE OF PARTIES
| Peter John Wilson | First plaintiff/first judgment creditor |
| and | |
| David Robert Wilson | Second plaintiff/second judgment creditor |
| and | |
| Kenneth Norman Richards | First defendant/first judgment debtor |
| and | |
| James Albert Burgess Shergold | Second defendant/second judgment creditor |
| and | |
| KJAAW Nominees Pty Ltd (ACN 147 546 790) | Third defendant/third judgment creditor |
| and | |
| Jumbo Nominees Pty Ltd (ACN 163 435 578) | Fourth defendant/fourth judgment creditor |
HER HONOUR:
1By a notice to review dated 19 August 2020, the defendants/judgment debtors seek a review of orders made on 12 August 2020 by Judicial Registrar Burchell (as her Honour then was). Her Honour made various orders, including an order varying the amount of the instalments payable by the defendants to the plaintiffs/judgment creditors. The defendants were ordered to pay $31,700 jointly per month to each of the plaintiffs. The variation ordered doubled the amount payable by the defendants under an existing instalment order dated 15 November 2018. The previous amount payable was $15,850 per month. The defendants seek a determination upon the review that the previous instalment order made on 15 November 2018 be confirmed.
2The defendants’ application for review is made pursuant to rule 84.03 of the County Court Civil Procedure Rules 2018. A review under rule 84.03 is conducted by way of a hearing de novo. On the review, the parties may rely upon any affidavits used and any evidence given orally before the judicial registrar. By leave of the Court, the parties may rely upon affidavits or oral evidence not given before the judicial registrar. It is not incumbent for the Court to find any error on the part of the judicial registrar to arrive at a different conclusion, but it is appropriate nevertheless for the Court to give such weight to the judicial registrar’s decision as appears proper in the circumstances.[1]
[1]See the discussion in Bendigo and Adelaide Bank Limited v Grahame [2020] VSC 86 at [15]−[18]
3These principles were referred to in Southern Motors Pty Ltd v Australian Guarantee Corporation Ltd, where the Full Court of the Supreme Court of Victoria said:[2]
“The appeal is to be a re-hearing de novo. Re-hearings are of more kinds than one, but the expression ‘re-hearing de novo’ shows that what is contemplated is (except to the extent to which r16(6) goes on to provide otherwise) a complete re-hearing, that is to say, the application is to be heard de novo in the sense that the party who was applicant before the Master is the party to begin, the appeal is determined on the evidence placed before the judge, no regard being had to the evidence placed before the Master, and the judge determines the appeal without being in any way fettered by the decision of the Master, but giving such weight to the decision of the Master as appears proper.”
[2]Southern Motors Pty Ltd v Australian Guarantee Corporation Ltd [1980] VR 187 at 190 (Starke, Murphy and Brooking JJ)
4The de novo hearing requires the party seeking the orders to establish all the relevant matters. The defendants contend the burden is on the judgment creditors to establish the matters necessary to persuade the Court that it should vary the instalment order. The nature of the review is such that the date for the determination of relevant facts is the date when the matter comes before the judge, not the date on which the application was dealt with by the registrar.[3]
[3]Ibid at 191
5A stay was granted on the enforcement of the varied instalment order pending determination of the defendants’ application for review. The application proceeded by way of a lengthy oral hearing on 1 September 2020. Arising out of objections to the receipt into evidence of an affidavit from the plaintiffs’ solicitor, Mr Nestel dated 27 August 2020, I delivered a ruling dated 14 October 2020.[4] Consequent upon my ruling, the defendants were given leave to file and serve further affidavits. The parties were also given leave to file and serve any further written submissions, which they did on 6 November 2020.
[4]Wilson and Anor v Richards & Ors [2020] VCC 1615 (For ease of reference, that ruling should be referred to as Ruling No.2)
Background
6On 23 February 2018, judgment was entered against the first defendant (“Richards”) and the second defendant (“Shergold”) in this Court, whereby they were ordered jointly and severally to pay:
(a) to Peter Wilson the sum of $733,000 plus interest of $13,455.07 and costs; and
(b) to David Wilson the sum of $733,000 plus interest of $13,455.07 and costs.
7On 8 November 2018, I gave reasons for ruling[5] which resulted in instalment orders being made on 15 November 2018 (“the instalment order”). Richards and Shergold were ordered to pay monthly instalments of $15,850 to each judgment creditor (a total of $31,700 per month). The judgment is due to be paid in full on 23 February 2023, assuming continued compliance by the defendants with the instalment order.
[5] Wilson & Anor v Richards & Ors [2018] VCC 1755 (this ruling should be referred to as Ruling No.1)
8On 7 May 2020, each of the plaintiffs filed applications together with a summons seeking to vary the instalment order. The applications record that $455,559.54 was then owing under the judgment. This sum comprised $334,355.07 (being the amount then due under the judgment), no amount for costs, and $121,204.47 in interest.
9The matter came before the judicial registrar for determination on the papers. On 10 August 2020, the registrar made orders and set out her extensive reasons for decision under the heading “Other Matters”. The registrar decided to vary the instalment order and increase the joint liability of the defendants. They were ordered to make payments of $31,700 to each plaintiff, payable on the 20th day of each month. A formal order to that effect was made on 12 August 2020.
10There has been an avalanche of further affidavits and written submissions filed since the matter was before the judicial registrar.
11The additional material relied upon in the review application consists of:
· three further affidavits of Shergold dated 17 and 25 August and 29 October 2020;
· two affidavits of Holly Shergold (Shergold’s wife) dated 25 August and 29 October 2020;
· four affidavits of Richards dated 18 and 25 August, 28 and 29 October 2020;
· two affidavits of Jennifer Richards (Richards’ wife) dated 25 August and 28 October 2020; and
· the further affidavit of Mr Nestel made 27 August 2020.[6]
[6] This affidavit was the subject of Ruling No.2.
12In addition, the parties filed:
· the defendants’ submissions dated 28 August 2020;
· the plaintiffs’ submissions in response dated 31 August 2020;
· the defendants’ further submissions dated 6 November 2020; and
· the plaintiffs’ further submissions dated 6 November 2020.
Judgment Debt Recovery Act 1984
13The plaintiffs rely on s8 of the Judgment Debt Recovery Act 1984 (“the Act”).
14Section 8(1) provides that:
“A judgment creditor or judgment debtor may apply to the court for the variation or cancellation of an instalment order.”
15Section 8(2) provides that:
“An application under subsection (1) may be made by a judgment creditor on either or both of the following grounds only:
(a) That there has been a substantial increase in the property or means of the judgment debtor; or
(b) That any information given in support of the application for the instalment order ... was inaccurate.”
The plaintiffs do not seek to rely upon s8(2)(b) in this application. Consequently, the critical issue for determination is whether there has been substantial increase in the property or means of the defendants.
16Section 8(5) of the Act provides that in relation to an application under ss(1):
“The court may—
(a) if it is satisfied as to the truth of the grounds of an application under subsection (1), vary or cancel the instalment order; or
(b) confirm the instalment order and dismiss the application.”
17Section 13(1) provides that:
“Subject to subsection (2), an instalment order shall not be made, confirmed, varied or cancelled ... unless the court ... —
(a)has orally examined the judgment debtor; or
(b)is otherwise satisfied that in the circumstances an instalment order should be made, confirmed, varied or cancelled.”
18The parties agreed there was a dearth of authority relating to s8 of the Act or its New South Wales equivalent. The same lack of authority applied to similar provisions in other states and territories.
19The plaintiffs dealt with the meaning of the words “property” and “means” within s8(2)(a) of the Act in written submissions filed before the judicial registrar. The defendants accept that “property” is a term which should be given a broad meaning. As to “means”, it is clear from the use of the word “or” in s8(2)(a) that “means” is something different to “property”.
20The plaintiffs referred to Fernandez v State of New South Wales,[7] where the Supreme Court of New South Wales considered the meaning of “means” in the context of the Health Services Act 1995 (NSW). The Court referred to definitions in the Macquarie Dictionary and the Oxford English Dictionary noting that means meant “disposable resources especially pecuniary resources” and “resources available for ….. achieving some objective… [specifically] financial resources esp in relation to requirements or expenditure.” The judgment debtors agreed that the relevant meaning of “means” is the dictionary definitions referred to in Fernandez at [189].
[7][2019] NSWSC 1736 at [189]
21The plaintiffs argue there has been a substantial increase in the property or means of the defendants since the orders were made in November 2018. The change in the defendants’ circumstances provides a proper basis for increasing the amount of the instalment orders payable.
22The plaintiffs contend Richards had an interest in the family home in Hawthorn of approximately $1 million. This property was sold by Richards’ wife. She paid him $100,000 from the proceeds of sale.
23As for Shergold, the judgment creditors point to his disposition of a significant asset, being shares for which he was paid the sum of $1,437,300, and an alleged entitlement to a loan repayment of $287,700.
The Plaintiffs’ objections to affidavits filed on behalf of the Defendants
24The plaintiffs objected to various paragraphs of affidavits filed on behalf of the defendants since the ruling was given in October 2020. The basis of the objections is set out in the plaintiffs’ submissions dated 6 November 2020. One of the repeated objections made related to hearsay, although it can be noted hearsay is admissible in interlocutory applications.[8] I have considered the objections made and am not prepared to rule the paragraphs identified are inadmissible. But I have taken the matters raised by the plaintiffs into account when considering what weight should be applied to this evidence.
[8] Evidence Act 2008 s75; County Court Civil Procedure Rules r43.03(2)
Variation of the instalment order against Richards
25In October 2019, Richards’ wife sold her family home in Hawthorn (“the Hawthorn property”) and paid $100,000 from the proceeds to him. The home was owned by Mrs Richards in her own name. Mrs Richards has deposed that after the borrowings were paid out, she received the net sum of $683,601.44 at settlement. She deposes that she requires those funds for herself and her children. She is not prepared to loan or gift any money to her husband to enable him to repay any increase in the instalment order.
26In the earlier hearing in 2018, Richards gave evidence that he contributed to the costs of renovations to the Hawthorn property. His oral evidence was that he had contributed “hundreds of thousands” towards renovations. Given the sum of $100,000 was transferred to him, the plaintiffs contend Richards is at least $100,000 better off than he was in October 2018.
27The payment to Richards is recorded in bank statements. Richards explains his wife transferred the money to pay family liabilities such as rent and school fees. On the same day the money was transferred to his account, at least $50,000 of it was applied towards other payments, leaving a balance of $50,105.11. He has since paid living expenses, child support payments, school fees, and instalments to the plaintiffs, which has now dissipated the balance of the funds available to him.
28Given these facts, the defendants argue that Richards was, at most, $50,000 better off following the sale of the property after the immediate disposal of at least $50,000. It was said that this hardly constitutes the significant increase that is required under s8(2)(a). Accordingly, there has been no significant increase in Richards’ property or means as assessed now.
29Richards deposed that he was working between January and April in 2020, but his relevant consultancy contract was not renewed due to the COVID‑19 crisis. He is currently working on an ad hoc basis as a consultant but not earning a regular income. He did not qualify for JobSeeker or JobKeeper, and expected his income in 2020 to be between $150,000 to $180,000, which is significantly less than previous years.
30On 25 August 2020, Richards had $3,011.81 in his bank account, while his consulting company had $6,748. On the same date, he owed a credit card debt to the National Australia Bank of $34,152.69 and a further $33,574.09 to American Express. Both Richards and his wife have confirmed that she is not prepared to lend or gift her husband any funds to increase the instalments ordered in November 2018.
Variation of the instalment order against Shergold
31The plaintiffs contend that the circumstances relating to Shergold have also changed and that he has received payment of $1,437,300 from shares sold in Mansh Group Pty Ltd. In addition, it is argued that he has an ability to recover certain loans.
32At the time of the hearing in November 2018, Shergold had shares valued at $630,216, which were his shares in an entity called “Fultons”. During the hearing, he gave evidence that those shares were valued in the order of $500,000, and noted that they were a minority shareholding in a private company and would not be easy to dispose of.
33The shares were subsequently sold and payment was payable in two instalments. The first payment of $718,650 was due on 13 February 2020, and the second payment in the same amount was payable on 13 August 2020. The contract, however, provided that if the purchasers did not obtain finance, they could stagger the second instalment – paying $356,150, and the balance in monthly instalments.
34Arising from this transaction, the plaintiffs argue that Shergold has made a significant financial gain from the sale. Consequently, there has been a substantial increase in his property or means.
35The defendants point out, however, that Shergold has applied the proceeds of the sale of the shares, including to meet other liabilities owed by him and his wife, and to entities associated with him. The consequence is that the proceeds of sale have been applied and are therefore unavailable.
Mansh and other entities associated with Shergold
36Mansh Group Pty Ltd operates a garden supply business under the name of “Fultons”. Before the sale of the Mansh shares, Shergold derived income from the Fultons business. Since that sale, his only source of income is from two other companies, Back Again Recycling Pty Ltd (“Back Again Recycling”), and Melbourne Business Sales Pty Ltd (“Melbourne Business Sales”). In paragraphs 17 and 20 of Shergold’s affidavit sworn 3 August 2020, he deposed as follows:
“I no longer derive income from Mansh or the Fultons business. The only source of income that I have, including the income necessary to support my family and to meet my obligations under the instalment order, is the businesses operated by Back Again Recycling and Melbourne Business Sales …
[T]he businesses conducted by Back Again Recycling and Melbourne Business Sales are the only source of income to replace the income previously derived from the Fultons business.”
37In respect to the other companies, the judgment debtors note:
(a) Back Again Recycling trades under the name “Green Bear”. Its business involves processing and recycling construction and demolition waste. The business is relatively new and is in a capital-intensive, start-up phase. The COVID-19 pandemic has had a dual impact on the business. Firstly, it has substantially reduced the need for processing and recycling of construction and demolition waste. Secondly, the work typical in a start-up phase such as marketing the business and approaching new clients has been limited by the COVID-19 restrictions. The business is running at a loss. Shergold does not expect that to change until the current economic environment improves;
(b) Melbourne Business Sales conducts business as a broker of business sales. It is remunerated on a commission basis, that is from facilitating the sales of businesses between third parties. In the current economic climate, Shergold deposes that such sales are simply not occurring with the effect that the income of Melbourne Business Sales has been reduced virtually to nil. He expects that once there is more clarity about the economic environment, such sales will commence again.
38As these businesses are his only source of income, the defendants argue that it is necessary for Shergold to support them. He explains that he needs an ongoing source of income, including to continue satisfying his obligations under the instalment order. Consequently, part of the proceeds of the sale of shares was paid to Back Again Recycling or Melbourne Business Sales or used to pay their liabilities.
39Putting to one side whether most of these entities are correctly categorised as assets of Higgins Finance Group Pty Ltd (“Higgins”) (the trustee of the Shergold Family Trust, which owned the Mansh shares) or Shergold personally, the evidence shows that these entities are unable to repay the loans made. Shergold explained that Back Again Recycling is trading at a loss, and the income of Melbourne Business Sales has been reduced to nil. He exhibited bank statements which show that Back Again Recycling has $2,739.11 available to it, while Melbourne Business Sales has available a sum of $350.86. Consequently, it is submitted that the financial position of these entities means that the loans made to them, however they are categorised and to whomever they are owed, do not amount to a “significant increase” in Shergold’s property or means.
40In 2019, Melbourne Business Sales took out two loans brokered by Interim Finance Corporation Limited for $525,000 and $210,000. The loans were for six months and attracted interest at a rate of at least 13.95 per cent. They were guaranteed by Shergold and his wife, and secured against Mrs Shergold’s house. As of 30 June 2020, the current outstanding balance on the loans was $752,862. They were not repaid when due, including because of the effect of the COVID-19 pandemic on the business of Melbourne Business Sales. The lender has since commenced proceedings in the County Court against Melbourne Business Sales and Shergold and his wife, not only for payment of the debt but also for possession of the Shergold family home.
41The defendants provided detailed evidence as to the application of the proceeds from the sale of the Mansh shares which is set out below.
The first tranche
42The first tranche of the sale proceeds paid on 13 February 2020 were dispersed as follows:
(a) $362,500 was paid to the trust account of Gadens Lawyers to be held for Higgins as trustee for the Shergold Family Trust;
(b) $180,000 to Back Again Recycling as part of a loan of working capital; and
(c) $320,000 was paid to Shergold’s ANZ bank account because Higgins, being a trustee, had never traded, and did not have a bank account of its own.
43Taking those amounts in turn:
(a) of the $362,500 as of 30 June 2020, $51,166.48 remained in Gadens’ trust account. The remainder was either paid in satisfaction of Gadens invoices ($11,333.52) or transferred to Shergold’s ANZ account ($300,000);
(b) the reason for the loan to Back Again Recycling was its inability to repay the money discussed above;
(c) of the $320,000 initially transferred to Shergold’s ANZ account, and the $300,000 transferred to that account from Gadens’ trust account, the balance of $42,295.27 remained as of 30 June 2020. The total amount of $620,000 was applied as follows:
(i)$50,000 was transferred to Mrs Shergold in repayment of a loan she made to Green Bear for working capital;
(ii)$30,000 was distributed to Mrs Shergold;
(iii)$85,100 was paid to the plaintiffs under the instalment order;
(iv)$60,740 was paid towards mortgage repayments, rates, and school fees of the Shergold’s children;
(v)$114,850 was paid to the ATO for obligations owed by Melbourne Business Sales;
(vi)$57,881 was paid in interest on the Interim Finance loans;
(vii)$122,887 was paid towards expenses towards Melbourne Business Sales (and treated as loans to that entity);
(viii)$15,000 was paid in legal fees to Gadens;
(ix)$6,350 was paid in fees to DGI Legal;
(x)approximately $33,000 has been paid in miscellaneous living expenses for Shergold and his family.
44Following the disposition of the funds received from the first tranche, that left a balance of $93,461.75. This represented $51,166.48 in Gadens’ trust account. The remainder of $42,295.27 is in Shergold’s ANZ account. It was noted, however, that Shergold still has the following obligations which need to be met, namely:
(a) capital gains tax payable by Higgins on the first tranche, which Shergold estimates will be no less than $200,000;
(b) living expenses for Shergold’s family;
(c) Shergold’s obligation under the instalment order; and
(d) ongoing working capital requirements of Melbourne Business Sales.
45The tax liability will consume all of what remains of the first tranche. This will leave a shortfall on that liability, namely $200,000 - $93,461.75 = $106,538.25.
Second tranche
46The second tranche payment for the Mansh shares was due on 13 August 2020.
47However, Shergold has explained that only part of the second tranche was paid. Higgins received only $356,150. The purchaser’s solicitor deposed that the buyers had not obtained finance and were significantly stretched for funds. The Mansh Group was unable to repay the balance of the loan it owed to Shergold. The part payment of the second tranche has been used to repay part of the debt owned by Melbourne Business Sales, which was guaranteed by Mr and Mrs Shergold. This debt is the subject of the other proceeding in this Court to obtain possession of the family home.
48Shergold had sworn an affidavit in 2018 in which he deposed that his pre-tax income was $970,000 per annum. However, he has explained that his income has dropped significantly since then. Apart from a reduction in income tax for which he will be liable given his income has dropped, his expenses will remain the same. He deposed that he would be unable to meet any increase in the amount of the instalment that he is required to pay under the instalment order. As in the previous hearing, there was no evidence provided that the wives of the two defendants would be willing to borrow moneys against the security of their homes. That position remains unchanged. Mrs Shergold has confirmed that while she was prepared to provide her house as security for loan to Melbourne Business Sales, she is not willing to lend her husband any money, or provide her house as security for any loan for the purpose of enabling Shergold to increase the amount that he is required to pay to the plaintiffs each month.
49Given these facts, the defendants argue there has been no substantial increase in the property means of either Richards or Shergold. The position is still the same that neither Mrs Richards nor Mrs Shergold will agree to lend money to their husbands or borrow against their homes to pay the plaintiffs. Whilst it is true that the Mansh shares were sold for more than the value estimated when the instalment order was made, the reason for that is that the business subsequently expanded. There were changes in its management and increased efficiencies in its operation. It should also be noted that the shares related to the Fultons’ business from which Shergold derived his principal income. Once those shares were sold, his income from that business fell away. Additionally, Shergold has applied the proceeds from the sale towards establishing other income-generated businesses and meeting liabilities. It should also be noted that the impact of the COVID-19 pandemic has detrimentally affected the ability of both Richards and Shergold to earn income. Consequently, the defendants submit the Court cannot be satisfied there were grounds to vary the instalment order but should be satisfied there are grounds for confirming the prior order.
50The plaintiffs submit there has been a clear increase in the defendants’ assets and means. Shergold’s apparent desire to repay other loans out of the $1,725,000 he received from the sale of his shares and return of his unexplained loan is irrelevant. They submit that the Court should not look at how Shergold says he is going to repay other debts and that it is irrelevant that Shergold wants to pay every other debt in preference to the plaintiffs. The critical question is whether Shergold has had an increase in his property and means and it is submitted he clearly has had such an increase. The fact that the defendants were able to borrow against properties to obtain funds for anything but the repayment of the plaintiffs’ debt should also influence the Court’s discretion to dismiss the review application.
Consideration
51As noted above, the plaintiffs’ application to vary the instalment under s8(1) relied upon the ground set out in s8(1)(a), namely, that there has been a substantial increase in the property or means of the judgment debtor. Although some criticism was made about the adequacy of the materials filed by the defendants in the earlier application, the plaintiffs did not seek to rely upon s8(2)(b), being the alternative ground that any information in the instalment order application was inaccurate.
52The application by summons dated 7 May 2020 by the plaintiffs sought to increase or cancel the instalment order made on 15 November 2018. However, the written submissions of the plaintiff made clear that they sought a variation only by way of an increase and did not seek cancelation of the existing order.
53There has been a change in circumstances since the judicial registrar gave her decision. The second tranche has been paid but not in full as was contemplated on 12 August 2020. Richards has now sworn four affidavits, whereas there was no evidence from him at the time Her Honour gave her decision. The defendants’ wives have now also sworn two affidavits each and there has been new factual material in the supplementary affidavits filed since August 2020. As this is a hearing de novo, it is not necessary for me to determine the correctness or otherwise of the judicial registrar’s decision.
54The plaintiffs were seeking an increased payment of $80,000 a month but provided no basis for that calculation. In my view, there must be an assessment of the debtors’ overall capacity to meet any increased payments, assuming there has been a substantial increase in property or means as required under s8(2)(a) of the Act.
55The ability to pay an increased amount cannot be dealt with in isolation by simply looking at payments received. The other side of the equation must involve an assessment of the debtors’ personal circumstances and their ability to make continuing payments under an extended instalment plan. For example, there might be a substantial increase in a debtor’s means which could be rendered nugatory if there was a corresponding increase in his or her expenses. The plaintiffs’ contention that a variation must inexorably follow if there is shown to be a substantial increase in property or means is too simplistic and cannot be accepted. In my view, the factors that a court takes into account when considering making an instalment order, which I set out in Ruling No.1 at [23], are also applicable when a court is asked to increase such an order. This involves, amongst other things, considering the financial position of the judgment debtor and his or her capacity to pay a proposed instalment order. The enquiry needed is directed towards an examination of the property and means of the judgment debtor, as opposed to speculating how a debtor might be able to get financial assistance from another party. An instalment order should not be made if it is obvious that it would be futile because the judgment debtor could not meet his or her obligations under it.
56Richards received $100,000 from his wife following the sale of the Hawthorn property. Approximately half of that sum was immediately disbursed to meet various liabilities. The remaining half has since been spent on the expenses identified by Richards, including his liability to meet the instalment order in place. There is no reason to disbelieve his evidence that these funds have been spent in the way outlined. The plaintiffs did not seek to cross examine Richards or indeed any of the other deponents, including Shergold. The plaintiffs for their part say there was no need to do so as they can make out their case on the materials filed. The affidavits from Richards show that he has limited sources of income and several debts. He deposes he would be unable to meet the increased instalment order.
57Richards’ wife received a sum more than $600,000 from the sale of her home. She is not willing to advance any part of this sum to Richards to assist him in payment of the debt due to the plaintiffs. Unless she was willing to do so, there is no way of compelling her to do so in this application. As was pointed out in the first ruling, the family homes were assets held by the defendants’ wives and not by the defendants. There are no assets which have been identified as belonging to Richards since the hearing in 2018, save for the $100,000 he received which has been spent.
58As a side issue, it was noted that Richards is now a director of a trustee company which owns a property at Portsea. This property is held on trust for the Richards children, all of whom are minors. This was the case in 2018 when the initial order was made. It transpires that Mrs Richards did use the name of the trustee company to obtain some funds to fund her business because she did not have a company vehicle at the time to do so. The circumstances of how this occurred are dealt with in her second affidavit. I do not accept the contention put that this somehow means Richards is now able to borrow funds against the security of this property to pay the plaintiffs. As the defendants point out if he borrowed funds to pay off his personal debts secured against trust property, he would be in breach of his obligation as a director of a trustee company. Mrs Richards deposes that she would not allow such a course. Further, she and Richards depose that he would not have any ability to service any additional debt raised against the Portsea property. The position in respect of the Portsea property is unchanged since the hearing in 2018 – it is not a property that Richards owns.
59I am not satisfied that there has been a substantial increase in the property or means of Richards. Nor am I persuaded on the evidence that it has been demonstrated that Richards can meet instalments which are double the previous sum ordered. His means, being in effect his disposable income, are arguably more precarious that they were on the last occasion. The increase in property, being the cash payment of $100,000, has been disbursed. I am not persuaded he has any legitimate ability to borrow funds secured against the Portsea property which is held in trust.
60I accept that Shergold did receive a substantial increase in property following the sale of the Mansh shares. The first tranche has been disbursed. The second tranche was not paid in full and the funds that were received have also been disbursed.
61From the funds received, loans have been made to business entities associated with Shergold. He says this was necessary to keep these businesses operating so that he can generate an income to meet his liabilities, including the instalment order currently in place. His dividend income from Fultons stopped once the Mansh shares were sold. Shergold deposes that his expenses are the same as before. His income is considerably less than he was earning in 2018. He says that he would be unable to meet the varied instalment order made by the judicial registrar.
62Mrs Shergold deposes that she is not willing to advance funds to her husband to pay the plaintiffs. Much mileage was made of the fact that Mrs Shergold had agreed to use her home as security for advances made to her husband’s business, Melbourne Business Sales. There was a dispute in the more recent affidavit material whether two caveats lodged over Mrs Shergold’s property, being the family home, were connected with loans to other business entities associated with Shergold. It was denied that there were any further advances made in connection with these caveats. In any event, the position remains as before: the Malvern property owned by Mrs Shergold is not an asset owned by Shergold. He cannot compel nor can the Court compel Mrs Shergold to advance moneys to her husband to pay off the debts owed to the plaintiffs using the family home as security.
63That then leaves the question of what assets are in the hands of Shergold? There are loans owing to him from his associated business entities. He deposes that those entities are not in a financial position to be able to repay those loans. The purpose of the loans was to shore up the position of these new enterprises upon which he is now dependent upon for his source of income. There is of course some advantage to the plaintiffs in Shergold remaining solvent, as it means he can continue to pay the instalments as ordered. If he is unable to do so and is ultimately declared bankrupt, then his secured creditors will rank ahead of the judgment creditors who are unsecured, increasing the possibility that the plaintiffs may receive nothing. Whilst I can well understand the desire of the plaintiffs to have their debt paid off more promptly, if the defendants cannot meet the increased amount, then any victory may prove pyrrhic.
64I am not persuaded that there has been an increase in Shergold’s means, being his disposable income. In fact, there has been a considerable reduction since November 2018. There was a substantial increase in Shergold’s property, which has been disbursed in the manner outlined above. However, at the time of the application for review, that property was no longer available to him as an asset which he could use to pay the plaintiffs. It has not been suggested that those funds were applied dishonestly or as a way to defraud creditors.
65Having regard to all the evidence, I am not persuaded that Shergold is able to pay double the instalment amount as ordered.
66In the circumstances, I am not satisfied that the instalment order should be increased above the existing order. I will allow the review application and confirm the instalment order made on 15 November 2018. The order made by the judicial registrar increasing the instalments payable will be set aside.
67Unless the parties bring to my attention any reason why costs should not follow the event, I will order that the plaintiffs pay the defendants’ costs of the application to review the orders of the judicial registrar made on 12 August 2020, and that such costs be taxed on the standard basis. The costs orders made by the judicial registrar should also be set aside and in lieu the plaintiffs be ordered to pay the defendants’ costs of the plaintiffs’ unsuccessful application to vary the instalment order. The parties are directed to confer and file a minute of proposed orders to reflect these reasons. If the parties are unable to agree, any submissions on the form of the orders must be filed and served by 4.00pm on 24 November 2021, limited to five pages. Final orders will then be made on the papers.
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Certificate
I certify that these 19 pages are a true copy of the Reasons for Ruling of Her Honour Judge A Ryan delivered on 18 November 2021.
Dated: 18 November 2021
Associate to Her Honour Judge A Ryan
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