Elford v Minty

Mr Marcus Minty's Motion for Payment out of Court

1. The mediation was unsuccessful and the reference out to Mr Ferrier is still underway. It is expected to conclude later in November 2017. In this context, Mr Marcus Minty as applicant filed the current Motion dated 28 April 2017 for relief under Uniform Civil Procedure Rules 2005, r 41.3 seeking payment from the $375,000 funds in Court of up to $100,000.
2. Mr Marcus Minty's motion was heard in the Court's Equity Division Applications List on 1 September 2017. The first plaintiff and the first defendant are the principal contestants on the motion, to which the second and third defendants are not active parties.
3. The principal contest on the motion was whether Mr Marcus Minty had established that, outside the monies held in Court, he did not have additional sources of funds that would enable him to pay his legal fees.
4. Mr A. d'Arville of counsel, instructed by John de Mestre & Co Pty Ltd appeared for the applicant/first defendant, Mr Marcus Minty, on the motion. Mr S. Wells of counsel, instructed by Hedges Bhatty appeared for the first plaintiff Mr Elford on the motion.

Mr Elford and Mr Marcus Minty in Contest - 2010 to 2017

1. Set out in this section is the plaintiff's allegations in the various proceedings together with a short description of the way in which the defendants contest those allegations.
2. The final hearing has not yet taken place. The allegations on each side remain just that - allegations. This judgment does no more than set out the parties' respective contentions. It does not make findings, which can only be made when the Court gives final judgment in the proceedings. For convenience in these reasons the defendants are sometimes referred to collectively as "the Minty parties".

Mr Marcus Minty and Mr Elford develop two South Coast properties - 2010 to 2014

1. Mr Elford's case may be shortly stated, as he alleges it. He says in the main proceedings that from about 2009 until mid-2014 he and Mr Marcus Minty jointly undertook a venture for the development of two properties on the South Coast of New South Wales, situated respectively at Malua Bay and Sussex Inlet, using Locums as the development vehicle.
2. Locums purchased the Malua Bay property in November 2009 for $890,000 plus GST using funds that Mr Elford advanced. The Minty parties did not advance any funds at that time for that acquisition.
3. The plan was for the land to be sub-divided into 10 separate lots. The Eurobodalla Shire Council had granted subdivision approval for the land and subdivision works were about 80 per cent complete. After the acquisition Mr Elford and Mr Marcus Minty through Locums undertook further road works, concreting works to construct pathways and drainage works, and turf was laid to complete the subdivision.
4. Locums applied for, and was granted consent to further subdivide some of the lots. Ultimately the Malua Bay property was divided into 23 separate lots plus a residual lot to be retained by the developers. The 23 separate lots in the Malua Bay subdivision were sold at various stages between April 2011 and May 2014. But Locums still holds the residual lot, which has been valued at $260,000 in June 2015 by one valuer, "Walsh and Monaghan", and by another valuer, "LJ Hooker", in September 2015 in the range $480,000 to $500,000.
5. In early 2010 Locums also acquired another property as a joint venture vehicle for Mr Elford and Mr Marcus Minty. The company acquired the Sussex Inlet property in March 2010 for $370,000 plus GST. Mr Elford says that he personally funded all the acquisition costs for this property except for stamp duty, the burden of which was split evenly between Mr Elford and Mr Marcus Minty, who each paid $19,782.50 towards that stamp duty.
6. Since the purchase of the Sussex Inlet property the joint venture carried out general subdivision works on that property, including: clearing the land; doing civil earthworks, including excavation and filling, to raise and level the land; conducting land surveys; undertaking geotechnical assessments; and installing drainage pipes. The Sussex Inlet property comprises an area of some of 16,000 square metres and is said presently to be worth approximately $320,000.
7. Mr Elford further alleges that over the period from 2011 to 2014 Locums' bank account shows evidence of substantial cash withdrawals by Mr Marcus Minty which remain unexplained. These withdrawals total some $294,641.14, which are more fully particularised in the Amended Statement of Claim. Moreover, Mr Elford alleges that he has contributed approximately $874,220 more than Mr Marcus Minty to the partnership. He seeks to achieve through the accounting on the reference already underway appropriate contributions by Mr Minty and adjustments to the accounts.
8. Mr Marcus Minty denies that he misapplied any joint venture funds. He says that he contributed more to the joint venture that Mr Elford admits. Mr Ferrier's reference is charged with resolving some of these differences between the parties as to the joint venture accounting.
9. Mr Elford's claim against Mr Michael Minty and Mrs Jennifer Minty principally relates to their alleged receipt of joint venture monies to pay down a mortgage over their residential real property and to save them bank interest charges on that mortgage.

The Current Status of the Proceedings

1. The course of these proceedings has been relatively slow. But as earlier indicated they came to a head on 17 October 2016, when Lindsay J ordered by consent, on the terms previous indicated, the disposition of the interlocutory application brought by the second and third defendants for the appointment of a provisional liquidator to Locums.
2. The order referring the proceedings to Mr Ferrier for inquiry and report into the dealings and transactions of the company, Locums, from 1 July 2009 to date included orders for the payment of Mr Ferrier's referee's fees. The first defendant, Mr Marcus Minty, does not have to pay any of these in the first instance. The parties are responsible for the referee's fees in the following proportions: the plaintiffs (as to 50%) and the second and third defendants (as to 50%).
3. The reference before Mr Ferrier is almost concluded. Mr Ferrier has received preliminary submissions from each side and is preparing a schedule of relevant transactions as part of his referee's report. The original plan was for the referee's final report to be provided to the Court by 1 November 2017. But that timetable has slipped due to an additional information request from the referee. It is now envisaged that the reference will be completed in late November.
4. Mr Marcus Minty's Cross-Claim in the proceedings contends that he and Mr Elford were a de facto couple and the proceedings are a "matrimonial cause" under the Family Law Act 1975 (Cth). He seeks an order for the settlement of property under the provisions of Family Law Act, s 90SM. At the conclusion of this motion the Court will raise with the parties whether or not this matter should be referred to the Family Court of Australia under the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth).
5. The second and third defendants have also cross-claimed against Locums and Mr Elford for the repayment of monies lent to the joint venture, less other monies that are found to be owed by them to the plaintiffs. All of these claims are presently unresolved.

The Legal Issues

1. Two main legal issues arose on the motion. First, Mr Elford contends that this application and the funds in Court do not concern a freezing order with respect to all Mr Marcus Minty's assets, so the usual exception from freezing orders to permit payment of some legal fees for defending the proceedings does not apply with respect to the $375,000 funds held in Court pursuant to the orders of 2 April 2015: A v C (No. 2) [1981] QB 961 and Clout (Trustee) v Anscor Pty Ltd [2001] FCA 174 ("Clout") at [19] - [20]. This issue was only developed in a peripheral way. There was certainly a basis to infer that this was indeed only a freezing order over part of Mr Minty's assets. As such, cases such as Clout at [20] suggest that the applicant bears the onus of showing that it did not have any other assets out of which its debts could be paid.
2. Mr Elford's second main issue is much the same as the first issue. He opposes the release of any of the funds paid into Court on the grounds that Mr Minty's evidence in support of the application does not discharge the required onus to prove that Mr Minty has no other assets or sources of funds from which legal fees may be paid: Goumas v MacIntosh [2002] NSWSC 713 at [22] - [23] ("Goumas") was cited. In Goumas Barrett J was considering certain Mareva relief and first had to undertake an exercise of characterisation of the orders he was being asked to make, as he explained (at [22] - [23]). "22 Turning now to the legal issues, there is a preliminary question as to the correct approach in this case - whether it should be treated as an application for new or further Mareva relief or an application to vary existing Mareva restraints. In the latter kind of case, it may well be that the party seeking release of assets from the orders so that those assets may be applied for particular purposes bear the burden of showing not only the legitimacy of those purposes but also that they have no other assets (that is, assets not caught by the orders) from which the legitimate expenditure may be met: A v C (No 2) [1981] 1 QB 961, Szentessy v Woo Ran (Australia) Pty Ltd (1985) 64 ACTR 105, Clout (Trustee) v Anscor Pty Ltd [2001] FCA 174. Where a Mareva order is being imposed in relation to the whole of a person's property, the approach must be to impose it in terms that create an exception for necessities, particularly reasonable living expenses and reasonable expenses of the litigation itself: see, for example, the views expressed by Powell J (as his Honour then was) in Clark Equipment Credit of Australia Ltd v Como Factors Pty Ltd (1988) 14 NSWLR 552. 23 As the High Court has emphasised, most recently in Cardile v LED Builders Pty Ltd (1999) 198 CLR 380, Mareva relief is not intended to operate as some form of de facto security for the claims of the party seeking the imposition of the restraint. The sole concern is with reasonable measures to ensure that the processes of the court are not frustrated by removal from the jurisdiction, dissipation or misapplication of assets which will be available to meet any eventual judgment. The aim is not to stop people spending their money. It is to stop them spending it in ways which are not legitimate, having regard to the interest of the claimant in ensuring that there is no untoward removal of assets from the ownership of the person against whom a judgment may in due course be entered."
3. This passage states the applicable law. Here, in my view, the current motion, which seeks to vary the orders resolving Mr Elford's motion on 2 April 2015, is in the nature of a variation to existing Mareva relief: the same kind of situation that Barrett J was dealing with in Goumas. Mr Marcus Minty is seeking the release of assets from those orders and bears the burden of showing not only the legitimacy of the proposed use of the funds but that he has "no other assets (that is assets not caught by the orders) from which the legitimate expenditure might be met". There was no contest here that the payment of Mr Minty's legal fees was a legitimate purpose. The matter in contest was whether he had established, as Goumas says he must, that he had no other assets to meet that expenditure.
4. Mr Marcus Minty was briefly cross-examined on the application about certain funds in his accounts and whether he could explain the sources of monies available to him. The Court's findings with respect to that cross-examination are set out below.

Mr Marcus Minty's Case on the Motion

1. Mr Marcus Minty says he needs the funds in Court to pay his legal fees. He previously retained Djundja Lawyers between March and May 2015 to act for him in the proceedings and then after that he retained Uther Webster and Evans Solicitors from May 2015 to April 2016. Since then he has engaged his current solicitors John De Mestre & Co Pty Ltd and counsel. He claimed in his affidavit filed with his motion that he had not yet paid $25,000 in legal fees to John De Mestre & Co Pty Ltd and counsel, Ms Juliet Curtin. But he conceded in cross-examination and in an affidavit of July 2017 that in fact that sum of $25,000 had been paid. His claimed financial position is a weekly wage of between $600 and $800 net after tax, which was variable according to the numbers of hours per week that he worked. But he says that his current weekly expenses are in the order of $600 inclusive of food and medical bills.
2. Shortly before filing the motion he had to undergo surgery which cost him $7,500, which due to his poor financial circumstances, he says he had to pay for on his credit card. He says he does not have any savings and he deposed to the fact "I currently do not have sufficient funds to pay for my existing legal bills". He says he is unable to afford his share of costs for the appointed referee's report. Although that particular problem has been cured because he did not have a direct liability for those costs. The Court accepts this evidence subject to the discussion below.
3. As at the time of the hearing Mr Marcus Minty's legal representatives had about $17,000 incurred in work in progress and they would be likely to incur about $1,500 in respect of the hearing of the motion. Mr Marcus Minty's solicitors estimated that it would cost a little over $40,000 for his lawyers to prepare the matter for hearing and to attend the hearing in the substantive proceedings, based on an estimate of a four day hearing. The estimate appears to the Court to be reasonably proportionate to the amount in issue and the matters in issue in these proceedings. It is certainly not an excessive claim. Mr Marcus Minty's legal representatives constructed a table showing, after the payment of past fees, his existing liability for work in progress and the estimate for preparing and attending the hearing, as follows: John De Mestre & Co WIP as at 31 August 2017 $13,501.96 Anais d'Arville WIP as at 31 August 2017 $3,547.50 Estimated costs of hearing of current motion on 1 September 2017 $1,500.00 Estimate of cost of preparing evidence $7,150.00 Estimate of preparing for and attending hearing $33,000.00 Total $58,699.46

1. Apart from the costs for the legal tasks set out in this table, Mr Marcus Minty claims a total of $100,000, because it is said, there is other work that is likely to be required in the litigation to be carried out for him. Therefore he seeks a withdrawal of $100,000 from the account on the motion. His alternative claim is for the withdrawal of $58,699.46, the amount shown in the table.

Mr Elford's Case on the Motion

1. Mr Elford opposes the orders sought on the motion on the basis Mr Minty has not discharged the onus to prove that he has no other assets or sources of funds to pay his legal fees. The submission is based on a number of contentions that present the major contest on the motion. First, Mr Elford contends Mr Marcus Minty made a mistake in his first affidavit about whether certain prior legal fees had been paid. Secondly, Mr Marcus Minty has been able to pay his living expenses, overseas travel expenses and his legal fees to date, a basis to infer, it is said, other sources of funds are available to him. Thirdly, Mr Elford contends that Mr Marcus Minty received funds from undisclosed sources between July 2016 and April 2017 and has not eliminated the possibility that those undisclosed sources may be a repository of sufficient funds to pay his legal fees.
2. (1) The $25,000 Past Error. Mr Marcus Minty's principal affidavit on the motion deposing to the fact that he had "not yet paid" amounts of $25,000 owing to John De Mestre & Co and Juliet Curtin, solicitor, was wrong. But the error had been corrected before his cross-examination on 1 September 2017, in Mr Marcus Minty's affidavit of 3 July 2017. The fact of the error and its correction considerably before the hearing, does not create any adverse credit issue for Mr Minty in my view. The mistake was not used to point specifically to other undisclosed funds to which he might have had access to allow that payment to be made. But the payment does show that Mr Marcus Minty has been attempting to meet his legal bills with his current solicitors and counsel in a reasonably orderly fashion.
3. The Court does not consider this issue as throwing any doubt upon Mr Marcus Minty's contention that he does not have sufficient funds to pay his legal bills.
4. (2) Overseas Trips and Living Expenses. Mr Marcus Minty has been able to pay his ongoing ordinary day-to-day living expenses out of his income. He deposed to that in his original affidavit and there is no reason to doubt that it is true. This fact does not raise particular suspicions about whether he has undisclosed sources of income.
5. Mr Marcus Minty readily conceded in cross examination that he travelled overseas on five separate occasions since July 2016. But he said that the visits were principally "to visit my sick parents" who were then living in Manila in the Philippines but who are now back in Australia. He did take some holiday time in Vietnam, but the holidays taken seem to be reasonably incidental to the main purpose of the trips, which was to visit his parents. It did not appear from the evidence that the cost of the holiday component of these trips was excessive. Moreover, whatever the cost of the travel it is likely to be reasonably small in contrast to the amount of the legal fees of $58,699.46 which it is claimed Mr Marcus Minty will be incurring.
6. The Court does not consider this issue as throwing any doubt upon Mr Marcus Minty's contention that he does not have sufficient funds to pay his legal bills.
7. (3) Receipt of Funds from Undisclosed Sources. Mr Marcus Minty has two bank accounts, an ANZ savings account and an ANZ credit card account ("the credit card account"). Mr Elford demonstrated through Mr Wells of counsel that although many payments were routinely made from Mr Marcus Minty's savings account during the period 11 July 2016 to 5 April 2017 to pay off his credit card account, in the period in question payments of some $22,630 were made to pay off the credit card account from other, as Mr Elford's submissions described them, "unknown sources".
8. Mr Marcus Minty was cross-examined about some of these payments and his answers about them were somewhat unsatisfactory. As to one payment of $5,000 in December 2016, which had gone into the credit card account but clearly had not come out of the savings account, he could not even advance an hypothesis as to where it had come from. He was similarly bereft of theories about where an amount of $2,700 paid into the credit card account in March 2017, had come from. Mr Marcus Minty's evidence about these payments was not particularly impressive. Nor was his apparently inability to recall whether or not he had put in tax returns in the last few years. But Mr Marcus Minty did say that he had received some $25,760.96 from the Philippines government as a result of his cancellation of his permanent residency in the Philippines. His evidence on this was not challenged and in my view it can be accepted.
9. In reply to Mr Elford's case in final submissions, Mr d'Arville suggested that the amount received from the Philippines is approximately the same amount as the total amounts transferred to the credit card from the savings account, although the amounts do not correspond precisely.
10. But this explanation is not entirely satisfactory either. The money from the Philippines may have been in part applied to pay down the past legal fees of $25,000 which was mistakenly said to be outstanding in Mr Marcus Minty's affidavit of April 2017.
11. But these other unsourced payments are not a basis to infer that Mr Marcus Minty has considerable other financial resources that could meet the bulk of his legal fees. Since April 2017 all of the payments reducing the credit card account balance have come from identified sources, although it is true that this is the period during which Mr Marcus Minty would have appreciated he was under scrutiny, because of the motion in question. But even during the July 2016/March 2017 period the payments are of relatively small amounts and are received in no particular pattern and do not generally reduce the credit card to a debit balance of under approximately $10,000. Since April 2017 the credit card debit balance has generally been above $14,000. Mr d'Arville says, with some force, that if Mr Marcus Minty had funds to pay his legal bills he would also have funds to reduce the credit card balance over that extended period, to reduce the high interest rates that such credit cards attract.
12. This evidence presents a mixed picture. Mr Marcus Minty's unsatisfactory explanations of the smaller amounts of money he did receive raise the concern that he may have limited amounts of extra money to pay some of his legal fees. But there is no real basis to infer that he has sufficiently deep funds hidden somewhere, from which he could pay all his legal fees.
13. For those reasons, in my view, the appropriate course is to make an order allowing him to withdraw some money from Court but not the amount which is sought. In my view, in exercise of the Court's overall discretion he should be permitted to withdraw a maximum of $50,000 from the funds into Court. But this sum has been specified as covering all his costs of preparation for a trial and the hearing and no further applications for the drawn down of funds should be entertained in the future on his behalf except in the most exceptional circumstances.
14. As the parties have had a mixed result, if they cannot agree on an appropriate costs orders, the matter can be listed for costs argument. Although subject to hearing argument, the costs result which may suggest itself in this case is that the costs of the motion be the successful party's costs in the cause.

Conclusions and Orders

1. For the reasons given the Court makes the following orders and directions: 1. The applicant/first defendant may withdraw the maximum sum of $50,000 from the funds of $375,900 paid into Court in this matter on or about 2 April 2015; 2. The funds in Order (1) shall be paid to the applicant/first defendant's solicitors John De Mestre & Co. 3. Costs are reserved. 4. If the parties cannot agree on the disposition of the costs of this motion they are at liberty to approach my Associate for the fixing of a date to argue questions of costs. 5. The parties are invited to put submissions as to whether these proceedings should be transferred to the Family Court of Australia and the parties have liberty to apply for that purpose, if they cannot agree upon a common course.

Amendments 30 November 2017 - cover sheet and [29] citation "Cross Vesting" changed to "Cross-vesting" DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 30 November 2017