Bowden v Weldon

Judgment - EX TEMPORE 1By a Statement of Claim filed on 8 March 2013 the plaintiff seeks relief under, and by reference to, s 37A of the Conveyancing Act 1919 (NSW) in respect of a transfer of land (namely, an estate in fee simple in the land being lot 11 in Strata Plan 73233, located in Lilyfield Road, Lilyfield, New South Wales) by the first defendant to the second defendant in August 2011. The land comprises a home unit in a block of units. 2On the hearing of the proceedings each of the first defendant and the second defendant has appeared in person. The second defendant was assisted at the hearing by a daughter. 3Neither defendant has filed a formal appearance or a defence to the Statement of Claim. Nevertheless, they have each had an opportunity today to be heard in opposition to the case advanced by the plaintiff on the Statement of Claim. 4The second defendant sought an adjournment of the proceedings but, in light of evidence demonstrating that she has had the benefit of legal advice relating to matters the subject of the proceedings as far as back as September 2013, I declined her application. 5The transfer impugned pursuant to s 37A was effected by a Memorandum of Transfer dated 11 August 2011 registered (as dealing AG 436723) on the title to the land on 16 August 2011. 6The Transfer contains a formal acknowledgement by the first defendant (as transferor) of the receipt of $245,000 as consideration for the transfer. 7The Transfer was executed by a solicitor then acting for the first defendant (Mr Craig Milne) pursuant to a power of attorney (registered as being 4616 910) granted to him by the first defendant on 20 July 2011. 8The Transfer was purportedly executed by way of completion of a contract for the sale of land made by the first defendant as vendor and the second defendant as purchaser, also dated 11 August 2011, and also signed by Mr Milne as the first defendant's attorney pursuant to that power of attorney. 9The contract records that the sale was effected "without the intervention of an agent" (which may be taken as evidence of the absence of involvement of a real estate agent in the transaction) and without the payment of a deposit. The price for the land, as recorded in the contract, was $245,000. The contract records that the sale was subject to existing tenancies rather than a sale with vacant possession of the land. 10In fact, on the evidence before the Court, no monies changed hands for the sale of the land. There is no record, in the first defendant's banking records, of any receipt of monies that could, objectively, be characterised as sale proceeds. 11In his appearance before the Court at the hearing the first defendant maintains that the sale price was paid to him, but that he has dissipated the monies he is said to have received on the sale. 12The second defendant says that monies were paid but she is not presently in a position to provide evidence of the payment. 13Each of the first and second defendants has had ample opportunity to place evidence before the Court deposing, with such corroborative evidence as may be available, to the payment of the contract price. They have not taken up that opportunity. 14It is in these circumstances that I find, on the evidence, that no monies changed hands for the sale of the land effected by the subject Transfer. 15Although each of the parties to the Transfer had a solicitor (including, in the case of the second defendant, a licensed conveyancer) acting on the transaction, the tasks performed by each solicitor were, in substance, confined to the performance of formal steps designed to culminate in the registration of the Transfer with an appearance of regularity. 16Despite the transfer of the land, there was an agreement between the first defendant and the second defendant (or an associate of the second defendant, her son-in-law) that the parties would share future rent derived from letting the property out to tenants. 17In his attendance before the Court today the first defendant seeks to explain that agreement by saying that it was confined to rent payable by the tenant occupying the home unit at the time of the Transfer. Be that as it may, in circumstances in which solicitors were acting on the conveyancing, the arrangement is unusual to say the least, and it is consistent with the plaintiff's case to the effect that the transfer was not a bona fide transaction, but rather an arrangement made for the continuing benefit of the first defendant. 18The plaintiff's Statement of Claim does not, in terms, allege that the contract, pursuant to which the Transfer was registered, was a "sham" in the technical sense, explained by Equuscorp Pty Limited v HGT Investments Pty Limited (2005) 218 CLR 472 at [486], of a transaction that the parties intended not to have the apparent, or any, legal consequences suggested by its form. Nevertheless, the contract has the flavour of a "sham", falling shortly of that characterisation only by the apparent intention of the parties that the legal estate of the land be transferred to the second defendant. 19The fact of that intention, limited though it may have been, may be sufficient to explain why the doctrine of sham has not been invoked by the plaintiff. 20The object of the transaction appears, objectively, to have been to transfer the land out of the name of the first defendant in order to defeat or delay any entitlement to compensation that the plaintiff might have had, or might soon obtain (as she did obtain) in court proceedings, against the first defendant arising out of his assault upon her on 21 April 2010. 21On that date the plaintiff and the first defendant were neighbours. The plaintiff then owned a home unit located above that of the first defendant in the same block of units. He attacked her with a knife, seriously wounding her. 22On 16 December 2010 the first defendant pleaded guilty in the Central Local Court to a contravention of s 33(1)(a) of the Crimes Act 1900 NSW: "Wounding with intent to cause grievous bodily harm". On 4 March 2011 he was convicted of that offence and sentenced in the District Court (by Wells DCJ) to a term of imprisonment, for nine years, with a non parole period of six years. He has been in prison since that time. His attendance at court today was effected pursuant to the arrangements available under s77 of the Crimes (Administration of Sentences) Act 1999 NSW. 23The first defendant was in prison at the time the power of attorney, the contract and the Memorandum of Transfer, each earlier identified, were executed. 24The second defendant is the mother-in-law of a Mr Ken Tan, another inmate at Long Bay Goal, and an associate of the first defendant. The second defendant's retention of a solicitor to act for her in relation to the contract and the Transfer appears to have been prompted, if not arranged, by Mr Tan and his introduction of solicitor and client. The second defendant was unaware of the contract price when requested by the conveyancer who, nominally, acted for her on the transaction. 25On or about 10 January 2011 the plaintiff commenced civil proceedings (No. 2011/7891) against the first defendant in the District Court. She claimed damages for his assault upon her. 26For convenience, I here identify the parties to those proceedings by the designation they have in the current proceedings. 27On or about 31 May 2011 the first defendant signed a written undertaking, in favour of the plaintiff, not to list his home unit for sale or to initiate any sale or to further encumber the property, and to inform the solicitor for the plaintiff immediately of any intention to do so. 28On 12 July 2011 the District Court (Truss DCJ), by consent made a formal notation, and order, in the civil proceedings to give effect to the first defendant's undertaking. 29The first defendant did not honour the undertaking. He first met with Mr Milne at Long Bay Gaol, and gave Mr Milne instructions that culminated in the registration of the contentious Transfer, on 19 July 2011, a week after the District Court formally recorded the undertaking. 30Mr Milne also met Mr Tan at the gaol on 19 July 2011. Whether he met the two inmates at one and the same time, at the same meeting, is not disclosed in the evidence. 31The first defendant's power of attorney in favour of Mr Milne was executed by the first defendant, at Long Bay Gaol, in a follow up meeting between the two men the following day, 20 July 2011. 32At that time the first defendant gave Mr Milne written instructions to effect a transfer of title to his home unit to the second defendant for $245,000, noting that no consideration was to be payable at settlement of the transaction, and formally waived Mr Milne's advice that he should obtain independent legal advice. 33At about the same time the second defendant made arrangements in the same direction by consulting the solicitors who acted for her (via a licensed conveyancer) in relation to the transaction. 34On 2 December 2011 the District Court (by Truss DCJ) ordered that the plaintiff be granted default judgment against the first defendant in the civil proceedings. After an assessment hearing, on or about 10 February 2012 the Court (by McLoughlin DCJ) ordered that the first defendant pay to the plaintiff the sum of $295,000 plus interest and costs for the damages she claimed consequentially upon the assault. 35The first defendant has not satisfied the judgment debt obtained by the plaintiff against him, a fact he confirmed personally upon his attendance before the Court today. 36On 18 October 2012 he was examined as a judgment debtor but, having answered some preliminary questions, he declined to answer questions concerning his financial circumstances and, as he confirmed today, he ultimately refused to participate any further in the examination. 37Section 37A of the Conveyancing Act is in the following terms, the provisions of which I have in substance read to the parties today: "37A Voluntary alienation to defraud creditors voidable (1) Save as provided in this section, every alienation of property, made whether before or after the commencement of the Conveyancing (Amendment) Act 1930 , with intent to defraud creditors, shall be voidable at the instance of any person thereby prejudiced. (2) This section does not affect the law of bankruptcy for the time being in force. (3) This section does not extend to any estate or interest in property alienated to a purchaser in good faith not having, at the time of the alienation, notice of the intent to defraud creditors." 38My attention has been drawn by the plaintiff to authorities that include the recent decision of the High Court in Marcolongo v Chen (2011) 242 CLR 546. There the Court held that the expression "intent to defraud" in s 37A is to be taken as including an intent to delay or hinder. 39The course of the transaction that culminated in registration of the Transfer, the nature of the documentation signed to give it effect and the absence of payment of consideration in support of the transfer, all point to an intent on the part of the first defendant to delay or hinder or otherwise to defraud the plaintiff arising from her claim for compensation against him. 40The purpose and effect of the Transfer was to place an impediment in the plaintiff's way in pursuit of a civil remedy for the assault she suffered at the hands of the first defendant. The plaintiff was within the meaning of s 37A a creditor with standing sufficient to invoke the section. 41I am satisfied that, subject to a consideration of s 37A(3), the Transfer constituted an alienation of property made with intent to defraud creditors. 42 Section 37A(3) has no scope for operation on the facts of these proceedings. I am comfortably satisfied that the second defendant is not "a purchaser in good faith" without notice of the intent to defraud creditors. The absence of payment of the contract price, coupled with her ignorance of the contract price, and evidence of the involvement of her son-in-law (as an associate of the first defendant) in arranging for the transfer to be effected, all point against the second defendant falling within the protection afforded to a bona fide purchaser by s 37A(3). 43For these reasons I propose to grant the relief sought by the plaintiff in the Statement of Claim or, more particularly, in draft orders handed up at today's hearing. 44There is, as is presently recorded on the title to the subject land (pursuant to s 12 of the Real Property Act 1900 NSW), a freezing order made by the District Court. The notification of that order appears on the title to the land as dealing AI 41094. The Court's order contemplates that it is to continue until further order of the District Court or this Court. 45I propose to make a series of orders under, or by reference to, s 37A of the Conveyancing Act, and to reserve to the parties liberty to apply in order to give further effect to the Court's decision. In doing that, I record that it is my intention that the current freezing order is to continue for the time being, subject only to an indication that its subsistence is not to operate as an impediment to the parties in giving effect to this decision. 46I make the following declarations and orders: (1)Declare that the transfer by the first defendant to the second defendant in or about August 2011 (pursuant to a Memorandum of Transfer dated 11 August 2011 registered as dealing AG 436723) of the property being Lot 11 in Strata Plan 73233, known as xxxxx Lilyfield Road, Lilyfield in the State of New South Wales ("the subject property"), was made with the intent to defraud creditors. (2)Declare that the transfer of the subject property by the first defendant to the second defendant in or about August 2011 (by reference to the Memorandum of Transfer that became dealing AG 436723) is void pursuant to s 37A of the Conveyancing Act 1919. (3)Order that that transfer be set aside. (4)Order that the first and second defendants, no later than 12 March 2014: (a)sign a Memorandum of Transfer to retransfer the subject property to the first defendant; (b)file a copy of that Memorandum of Transfer with the Registrar General (the third defendant in these proceedings); and (c)provide a copy of the Memorandum of Transfer, so signed, to the plaintiff. (5)Order that, in the event that the first and second defendants jointly or severally fail to comply with order 4, the Registrar in Equity be authorised to sign the Memorandum of Transfer on behalf of the first and second defendants, or either of them, and to provide the signed Memorandum of Transfer to the plaintiff. (6)Order that the second defendant produce the Certificate of Title in respect of the subject property to the Court on or before 12 March 2014, and that she notify the plaintiff in writing of her having done so. (7)Order that the freezing order the subject of dealing NAI 41094 is to continue in operation pending further order of the Court, but is not to prevent the parties from compliance with the orders of the Court today made. (8)Order that the third defendant by himself, his servants and agents be restrained from registering any dealings affecting the title to the subject property without a further order of the Court. (9)Order, subject to further order, that the first and second defendants by themselves, their servants and agents be restrained from disposing of, dealing with, or charging the subject property without the prior leave of the Court. (10)Reserve to the parties liberty to apply generally. (11)Order that the plaintiff's costs of the proceedings be paid by the first and second defendants on the ordinary basis. 47Liberty to apply is reserved so that the plaintiff may be allowed an opportunity to liaise with the third defendant (the Registrar General) in working out steps for registration of the title to the subject land being returned to the name of the first defendant (for the benefit of his creditors, including, but not limited to, the plaintiff) without jeopardising the protection afforded to her by freezing orders, and supplementary injunctive relief, granted in her favour.