Woodley v Woodley - [2019] WASC 316

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   WOODLEY -v- WOODLEY [2019] WASC 316
CORAM:   TOTTLE J
HEARD:   22 AUGUST 2019
DELIVERED          :   22 AUGUST 2019
PUBLISHED           :   30 AUGUST 2019
FILE NO/S:   CIV 2347 of 2019
BETWEEN:   ROSS MAXWELL WOODLEY
First Applicant
ROSLYN PATRICIA WOODLEY
Second Applicant
AND
VALENTINA VLADIMIROVNA WOODLEY
First Respondent
THE REGISTRAR OF TITLES
Second Respondent

Catchwords:

Application for freezing order - Whether risk of dissipation of assets - Turns on own facts

Legislation:

Rules of the Supreme Court 1971 (WA) O 52A r 5

Result:

Application dismissed

Category: B

Representation:

Counsel:

First Applicant	:	Mr P G Donovan
Second Applicant	:	Mr P G Donovan
First Respondent	:	Mr M G Pendlebury
Second Respondent	:	No appearance

Solicitors:

First Applicant	:	MDS Legal
Second Applicant	:	MDS Legal
First Respondent	:	Summers Legal
Second Respondent	:	No appearance

Case(s) referred to in decision(s):

BGC Contracting Pty Ltd v WA Construction Hire Pty Ltd [2010] WASC 25
Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380
Commonwealth Bank of Australia v Oswal [2011] WASC 84
Construction Engineering (Aust) Pty Ltd v Tambel (Australasia) Pty Ltd [1984] 1 NSWLR 274
Duro Felguera Australia Pty Ltd v Trans Global Projects Pty Ltd (In Liq) [2018] WASCA 174
Perdaman Chemicals & Fertilisers Pty Ltd v Griffin Coal Mining Co Pty Ltd [2011] WASC 188
Third Chandris Shipping Corporation v Unimarine SA [1979] 1 QB 645

TOTTLE J:

Overview

The applicants are the brother and sister‑in‑law of the late Terry Ray Woodley (the deceased). They are also creditors of his estate. The first respondent is the widow of the deceased and the executrix of the deceased's will.
The applicants applied for a freezing order restraining the first respondent from dealing with four properties that form part of the estate without the applicants' written consent. After a hearing on 22 August 2019 I dismissed the application. I gave brief oral reasons for so doing and said that more detailed reasons would be published. These are those reasons.
The application was brought by an originating summons filed on 31 July 2019. The application was made under O 52A r 5 of the Rules of the Supreme Court 1971 (WA). On 1 August 2019 I made interim orders in favour of the applicants and gave directions for the filing and service of further evidence and submissions.
This application is an unfortunate sequel to the proceedings brought by the deceased in respect of the estates of his parents. The applicants are creditors by reason of costs orders made in their favour in that litigation. It is common ground that the costs to which the applicants are entitled exceed $900,000. The taxation processes have yet to be completed so the final amounts have not been determined. From the applicants' perspective the practical consequence of this is that they are not in a position to apply for a property (seizure and sale) order under s 59 of the Criminal Judgments Enforcement Act 2004 (WA).
The four properties the subject of the application are located in or around Waroona. For the purposes of these reasons they may be described as follows:
(a)the Buller Road farm;
(b)the McDowell Street block;
(c)the Patterson Road block; and
(d)the McDowell Street house.
The deceased died in January 2019 as a result of injuries suffered in a car accident.
The first respondent is a Russian national who came to live in Australia in 2011 having met the deceased in 2010. The applicants submit that there is a risk that the assets of the deceased's estate may be converted into cash and placed beyond their reach. In support of this submission the applicants say that the first respondent has no significant ties to Australia and that there is 'a risk that she might abscond to Russia'.

The evidence

The applicants relied on the affidavit of Helen Jennifer Burnside sworn 31 July 2019 and a supplementary affidavit sworn by Ms Burnside on 12 August 2019. Ms Burnside's first affidavit set out the various factual circumstances on which the applicants rely and which I refer to below.
The first respondent relied on an affidavit sworn by her on 8 August 2019 and on an affidavit sworn by Mr McLane William Edinger, her lawyer, on 22 August 2019. Mr Edinger's affidavit was filed in response to Ms Burnside's supplementary affidavit and included a table setting out the current assets and liabilities of the estate and a statement of income earned and expenses of the estate. These statements were prepared by Mr Edinger on the basis of information provided to him by the first respondent that he believed to be true.

Legal principles

There was no dispute between the parties about the applicable principles. The provisions of O 52A r 5 effectively provide that two conditions must be met before the court will exercise its discretion to grant a freezing order:
(a)the applicant has a judgment given by the court, or alternatively a 'good arguable case' on an accrued or prospective cause of action that is justiciable in the court; and
(b)there is a danger that the judgment or prospective judgment will be wholly or partly unsatisfied because either:
(i)the debtor, prospective debtor or another person might abscond; or
(ii)assets of such a person might be removed or otherwise disposed of, dealt with or diminished in value.
A 'good arguable case' means a reasonably arguable case on legal and factual matters.[1]
[1] Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380 [68]; BGC Contracting Pty Ltd v WA Construction Hire Pty Ltd [2010] WASC 25 [5]; Perdaman Chemicals & Fertilisers Pty Ltd v Griffin Coal Mining Co Pty Ltd [2011] WASC 188 [144].
Often the danger that the prospective judgment will be unsatisfied can be inferred by reference to the nature of the case. Where that cannot be inferred there must be evidence to establish the danger of asset dissipation. The relevant danger must be a 'real risk' that, by reason of dissipation, the judgment or prospective judgment will go unsatisfied.[2]
[2] Commonwealth Bank of Australia v Oswal [2011] WASC 84 [40]. See also Cardile v LED Builders Pty Ltd [26], [122].
It is not sufficient for the court to conclude that one or more of the events described in O 52A r 5(4)(a) or (b) might occur. The court must be satisfied that the identified danger (that the prospective judgment will be unsatisfied) arises because one or more of those events might occur. That is, the court must be satisfied that there is a causal connection between the event and the danger.[3]
[3] Duro Felguera Australia Pty Ltd v Trans Global Projects Pty Ltd (In Liq) [2018] WASCA 174 [41].
The reference to a 'danger' that a judgment or prospective judgment will be wholly or partly unsatisfied is to a risk of that outcome.[4]
[4] Duro Felguera Australia Pty Ltd v Trans Global Projects Pty Ltd (In Liq) [42].
The risk or danger must be real or substantial, as opposed to a remote, speculative or a theoretical possibility. The applicant must prove facts from which the court can infer the existence of a real or substantial risk or danger that the respondent will dispose of or otherwise deal with its assets in a way such that the applicant will not be able to satisfy any judgment obtained against the respondent. The facts from which the risk or danger is to be inferred must be proved on the balance of probabilities. However, it is not necessary to establish that it is more probable than not that judgment will be unsatisfied unless a freezing order is made.[5]
[5] Duro Felguera Australia Pty Ltd v Trans Global Projects Pty Ltd (In Liq [43].
The fact that assets within the jurisdiction are moveable, and that the respondent is incorporated outside the jurisdiction is not enough to warrant an inferential finding of danger of dissipation.[6]
[6] Third Chandris Shipping Corporation v Unimarine SA [1979] 1 QB 645, 671 (Lawton LJ).
No matter how strong the applicant's claim appears to be and how inconsequential the prejudice to the respondent by the ordering of security, a freezing order should not be made unless the risk of dissipation is established.[7]
[7] Construction Engineering (Aust) Pty Ltd v Tambel (Australasia) Pty Ltd [1984] 1 NSWLR 274, 281 (Clarke J).

The facts

Many of the facts were not controversial. The principal issue is what inferences may be drawn from the facts. In the following section of my reasons I will first set out some background facts. I will then identify the factual contentions relied upon by the applicants from which they submit the court should infer there is a risk that the first respondent will remove estate assets from the jurisdiction.
The deceased carried on business as an accountant. Before coming to live in Australia the first respondent lived in Siberia, Russia. She is a university graduate and practised law in Russia as an 'in-house' lawyer for a construction company. She had been a practising lawyer for about six years before she met the deceased.
After visiting each other in the respective countries the deceased and the first respondent decided to get married. They married in January 2011. Visa restrictions meant that the first respondent did not start to live permanently in Western Australia until August 2011. The first respondent and the deceased had two children. They are now aged four and six years. During their married life the first respondent and the deceased lived together in the McDowell Street house which is where the first respondent and her children continue to live.
The first respondent's only family in Russia is her mother with whom she does not have a close relationship. She has only spoken to her mother once in 2019 and that was in May when her mother telephoned her to inform her that her father had died. The first respondent has not returned to Russia since August 2011.
In addition to his accountancy practice the deceased carried on farming activities on the Buller Road farm, a 500 acre property.
The Patterson Road block and the McDowell Street block are vacant blocks of land. The National Australia Bank has mortgages over the Patterson Road block and the McDowell Street house as security for a debt of approximately $500,000. The Commonwealth Bank of Australia has a mortgage over the McDowell Street block but no money is owed under the mortgage.
The first respondent obtained a grant of probate in respect of the estate on 15 March 2019 and she is the sole beneficiary.
On 11 April 2019 the first respondent engaged real estate agents to sell the Patterson Road block and the McDowell Street block and the properties have been openly marketed by the real estate agents.
On 17 May 2019 the first respondent engaged a real estate agent to sell the Buller Road farm and that property has been openly marketed by the real estate agent.
In her affidavit the first respondent outlined the steps that she has taken to administer the estate. These include communicating with the Australian Taxation Office over the estate's tax liabilities, communicating with the National Australia Bank in relation to the payment of the debt due to it, dealing with claims for costs made by the successful parties in the various actions commenced by the deceased and dealing with claims from former clients of the deceased's accounting practice. On the evidence before the court there is nothing to suggest that the first respondent has acted otherwise than with complete propriety and diligence in the discharge of her duties as executrix - indeed it was not suggested otherwise by the applicants.
The first respondent has not put the McDowell Street house on the market as she would like to keep that property and live in it with her children. The house has been her children's home since they were born.
The first respondent's long term plan is to stay in Waroona and raise her children there. Her view is that Australia is a 'great place to raise children and … far better than Russia'. She has no intention of returning to live in Russia. Her children have never been to Russia and cannot speak the language. The first respondent deposed that moving back to Russia would be very difficult for her and I accept that would be so. The first respondent deposed that she has no intention of moving back to Russia and I accept that is so.
The respondents raise a number of matters which they say support the inference that there is a 'real risk' that the judgment debt will remain unsatisfied if a freezing order is not made. I have made findings about some of those matters but it is helpful to outline all of the facts for which the applicants contended to understand the way in which their case was developed even though doing so will involve some repetition. The facts for which the applicants contend are as follows:
(a)The first respondent is a Russian national and she has not surrendered her Russian passport. It was not in dispute that the first respondent is a Russian national and, although there was no direct evidence as to whether she still holds a Russian passport, I am prepared to draw an inference to that effect.
(b)The first respondent obtained professional qualifications as a lawyer in Russia and worked as a lawyer for a number of years. These facts are not disputed and as indicated earlier I make findings to that effect.
(c)The first respondent has no professional training or qualifications in Australia. This was not in dispute and I make a finding to that effect.
(d)The first respondent is presently unemployed and is in receipt of Centrelink benefits. Again this was not in dispute and I make a finding to that effect. I would infer, however, that the first respondent's capacity to undertake paid employment is limited by the need to care for her two young children and to attend to the affairs of the estate.
(e)The applicant submits that I should make a finding to the effect that the first respondent's employment prospects are better in Russia than they are in Australia. In support of that submission, the applicant points to the first respondent's qualifications as a lawyer in Russia and to the absence of any comparable, or, indeed, any qualifications in Australia. Whilst I accept that the first respondent has professional qualifications recognised in Russia and none in Australia that is not the sole determining factor. The first respondent's prospects of obtaining gainful employment in Russia would be limited by her responsibilities for the care of her two children. Moreover, there is no evidence of the employment market in Russia. The finding sought by the applicants does not have an adequate evidentiary foundation.
(f)The applicant submits that the strength of the first respondent's connection with Australia was significantly reduced by the death of the deceased. The applicants referred to the first respondent's evidence that she would not have left her job and life in Russia but for the deep love that she felt for the deceased. I accept that the first respondent's circumstances have changed and if the first respondent's only connection to Western Australia was her relationship and her marriage to the deceased the position might be different. In my assessment the first respondent has a stronger connection to Western Australia than allowed for by the applicants' submissions. The first respondent has lived in Western Australia for eight years. This is where she and the deceased shared their lives and brought up their young children. As recorded earlier I find the first respondent's intention is to remain in Waroona and bring up her children there in the McDowell Street house. The fact that this property has not been put on the market reinforces the existence of that intention. Further, I find that the first respondent no longer has a strong connection with Russia. In this respect I have already referred to the absence of a close relationship between the first respondent and her mother.
(g)The first respondent has given no evidence about her status as either an Australian citizen or resident. I accept that is so. There is no direct evidence of the first respondent's right to reside in Australia. I infer, however, from the fact that the first respondent is in receipt of Centrelink benefits, that she does have at least a present right to reside in Australia, and in the absence of evidence to the contrary, I infer that her right of residency will continue.
(h)The first respondent has no friendship or community ties in Western Australia. There is no evidence establishing that the first respondent has links to the community in Western Australia in the form of friendships or participation in community activities that go beyond a role as the former wife of the deceased and the mother of her children. I accept that the first respondent's ties to the community are limited to those she has as the deceased's widow and the mother of her children.
(i)The first respondent, through her solicitors, failed to keep the applicants and their solicitors informed of steps taken to sell the three properties currently on the market. It is unnecessary to review the evidence in detail. The applicants' complaint is that the first respondent's solicitors assured the applicants' solicitors that they would keep the applicants' solicitors informed or updated ‑ to a reasonable degree ‑ about the realisation of the assets of the estate but that they failed to inform the applicants' solicitors that the McDowell Street and Patterson Road blocks had already been put on the market and failed to inform the applicants' solicitors when the Buller Road farm was put on the market. Having reviewed the relevant communications I am not satisfied that there was any conduct on the part of the first respondent or her solicitors that could be characterised as surreptitious or a deliberate failure to keep the applicants informed. My assessment is that there was a misunderstanding between the solicitors as to what 'keeping the applicants' solicitors informed or updated' involved.
(j)There is a possibility that the estate may ultimately be an insolvent estate. I accept this is a possibility.

Analysis

The strength of the applicants' case

The applicants have a strong case - that was not disputed. No further comment is required.

Balance of convenience

Counsel for the applicants stressed that the discretion to grant a freezing order must be exercised by reference to the strength of the applicants' case, the balance of convenience and the risk of dissipation and that these factors are interconnected and must be assessed together. I accept that this is the approach to be adopted.
Perhaps unusually in the context of applications of this nature, in this case freezing orders could be fashioned that would cause little prejudice to the first respondent's administration of the estate.
A strong case and the absence of a reason to suppose that a freezing order will cause prejudice to a respondent are not sufficient, however, to justify the making of a freezing order. The court may only make a freezing order if satisfied of the existence of a real or substantial risk of dissipation and that is the issue to which I now turn.

Risk of dissipation

Determining whether a risk of dissipation may be inferred from the facts as I have found them is an evaluative judgment requiring a synthesis of all the facts.
Counsel for the applicants did not suggest that the first respondent's evidence of her intention to remain in Western Australia was false or that the first respondent was secretly harbouring the possibility of returning to Russia. He put the matter in this way: although the first respondent's primary aim is to care for her children and she is seeking to set up a life within Australia, she is faced with the potential problem that she may not be left with any assets from the estate and 'human nature is such' that in those circumstances the risk that the first respondent will act in a way that is detrimental to the applicants is increased.

I am not satisfied that a risk of dissipation may be inferred from the facts as I have found them. My reasons are as follows:
(a)Over the past eight years the first respondent has established a life in Western Australia. This is her children's home and it is her home.
(b)The first respondent's life has been disrupted by the death of the deceased. It is a very sad event but not one that has destroyed the prospect of a happy life for the first respondent and her children in Western Australia.
(c)In my judgment the applicants' submissions underestimate the difficulties that would be involved in the first respondent 'absconding' from Western Australia with two young children and establishing a new life in Russia.
(d)Reduced to its essence the premise upon which there is a risk of dissipation involves three matters: the first respondent is from Russia; assets in Russia are beyond the reach of the court's enforcement processes; and the darker side of human nature. I do not consider that a risk of dissipation can be inferred from those matters alone but if I am wrong, when those matters are considered in the wider context of the first respondent's situation and her intentions as I have found them to be, I am satisfied that a risk of dissipation cannot be inferred from the facts in this case.
(e)There is no evidence of any dishonesty or subterfuge on the first respondent's part and no evidence that she is not dealing with the Estate in an entirely proper manner.
The applicants are owed a substantial sum of money by the estate and although their concern (no doubt heightened by years of stressful litigation) to ensure that they are paid is readily understandable, they have not established that they are entitled to the drastic remedy of a freezing order.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
AS
Research Associate/Orderly to the Honourable Justice Tottle
30 AUGUST 2019