Nguyen v Corbett

Relief under s 37A

1. The submissions for the parties thus proceeded on the common assumption that the Court should order that the offending transfers be reversed, with the Baulkham Hills property being transferred back from Mrs Corbett to Mr Corbett to face enforcement action by the Nguyens. There is no doubt that the Court has power to make such an order, and at [104] in my decision I indicated that I would do so if I found in favour of the plaintiff. On reflection, however, I do not think that that is appropriate in the circumstances of this case. To explain why, it is necessary to go back to first principles.
2. The Statute of Elizabeth, 13 Eliz 1, c 5, provided that a disposition caught by the Statute was to "be void", but "only as against" the creditors of the disponor prejudiced by the disposition. The disposition was therefore not void for all purposes; it was void only to the extent necessary to permit the creditors of the disponor to proceed against the property as if the disposition had not taken place.
3. In Ideal Bedding Co Ltd v Holland [1907] 2 Ch 157, Kekewich J considered (at 173-174) the appropriate form of order in a case where the offending disposition was the settlement of property on trust for the benefit of the disponor's family. It was suggested that the proper order was a declaration that the settlement was void as against the disponor's creditors, and an order that the indenture of settlement be delivered up and cancelled. His Lordship rejected the making of a delivery-up order. He pointed out that, after all, there could conceivably be sufficient funds in the settlement to pay out the creditors, in which event the beneficiaries under the settlement should be entitled to retain the benefit of the surplus. He said: It seems to me that unless the Court is satisfied, or can make it appear on the face of the order that it is satisfied, that nothing can in any possible event come to the beneficiaries, it ought to provide for setting aside the settlement only so far as is required for the payment of the creditors.
4. His Lordship adopted as the appropriate order a form of order from Seton's Judgments and Orders. That form provided for a declaration that the indenture of settlement was void as against the plaintiffs and the other creditors of the disponor, and an order that the trustees "join and concur in all acts and things necessary for making the property in the said indenture available for satisfying the claims of the plaintiffs and all other the said creditors, as shall be directed by the Judge at Chambers in case the parties differ": Cecil C M Dale, W Tindal King and W O Goldschmidt, Seton's Judgments and Orders (Stevens and Sons Limited, 6th ed, 1901) vol 3, 2346.
5. An order in these terms foreshadowed the making of further directions by the court to carry the order into effect. The authorities referred to in Seton's Judgments and Orders show the type of directions which could be made. In Re Maddever (1884) 27 ChD 523, the order at first instance directed an account of what was due from the disponor to the plaintiffs and the other creditors, if any, of the disponor; the order also provided for the plaintiff creditors to have liberty to apply in chambers for the sale of the property in question (see at 529). In Cornish v Clark (1872) 14 Eq 184, where the property the subject of the disposition was three steam threshing machines one of which had been sold, the further directions included an order that the proceeds of the sale of the machines be paid into court as well as liberty to apply in chambers for a sale of the unsold machines (see at 190).
6. This shows that under the Statute of Elizabeth orders could be made for the sale of the property in question, and for the payment of the proceeds of sale into court, to facilitate payment of the disponor's creditors. There seems no reason why, in an appropriate case, an order could not have been made for the appointment of a receiver to take possession of the property, conduct the sale, and pay out the creditors.
7. In Caird Seven Pty Ltd v Attia and Shopmart Pharmacy Franchising Pty Ltd (2016) 92 NSWLR 457, an order had been made for specific performance of a contract. The defendants had failed to cooperate with the orders with a result that the transfer had not been effected. Emmett AJA made orders for the appointment of a receiver. He said (at [17]): The court has a wide jurisdiction to superintend the performance or working out of an order for specific performance. There is no doubt that where a plaintiff obtains an order for specific performance, the court may substitute other forms of relief where the decree of specific performance is not complied with. There is no reason in principle why the court should not have jurisdiction to make such orders as are appropriate to secure the proper performance of orders that it has already made.
8. His Honour also referred to equitable execution, and to some of the authorities which were referred to in the debate before me as to whether it was available in this case. But as I read his judgment, he did not need to rely on equitable execution. He said that it had "nothing to do with the enforcement of final orders made by a court exercising equitable jurisdiction" (at [16]).
9. It was suggested, based on the wording of s 67, that the Court might lack power to make an order appointing a receiver after it had already made a final order for specific performance. But his Honour said (at [14]): I do not consider that the language of s 67 should be construed narrowly in the manner contended for by the Defendants. There is nothing in the language of s 67 to indicate that the power conferred by that provision can only be exercised prior to the making of final orders and that a receiver could not be appointed in order to give effect to final orders made by the court. A provision conferring jurisdiction on or granting powers to a court should not be construed by implying or imposing limitations that are not found in the express words of the provision. There is nothing in the language of s 67 that would limit the exercise of the power to appoint a receiver to a time prior to the making of final orders.
10. At [15] his Honour made it clear that he considered that an order made in aid of the order for specific performance would be an "interlocutory" order for the purposes of s 67. See also Edwards & Co v Picard [1909] 2 KB 903 at 907 per Fletcher Moulton LJ (a dissenting judgment, but not on this point). I would add that the Supreme Court Act 1970 (NSW), s 67, is a facultative provision. It does not restrict the powers which courts of equity had, prior to the passage of the judicature legislation, to make orders in aid of equitable relief already decreed, whether or not such consequential orders are properly classified as interlocutory.
11. The present case does not involve a disposition by way of settlement. But, as in Ideal Bedding, there is a possibility (in fact, a likelihood) that the value of the Baulkham Hills property transferred to Mrs Corbett will exceed the debts owed to Mr Corbett's creditors. In principle, once those debts have been satisfied, any remaining equity in the property should belong to Mrs Corbett. Mr Corbett voluntarily transferred the property to her and there is no reason why the intervention of the plaintiff should result in a benefit flowing back to him.
12. This analysis shows that if the present case had been decided under the Statute of Elizabeth, the Court would have made a direct order against Mrs Corbett requiring her to make the Baulkham Hills property available for payment of the debts owing to the Nguyens (and the other creditors, if any, of Mr Corbett). To that end supplementary orders could have been made for the sale of the property including, if considered necessary, the appointment of a receiver for that purpose. As with the supplementary specific performance orders made by Emmett AJA in Caird, such orders would not have been a form of "equitable execution" and any restrictions which might apply to the appointment of a receiver in aid of common law rights of execution would not have been relevant. Nor would the debate about whether s 67 has expanded the powers of the Court to appoint a receiver: cf Masri v Consolidated Contractors International (UK) Limited [2009] QB 450 at [141]-[184].
13. But the Conveyancing Act, s 37A, is worded differently from the Statute of Elizabeth. It relevantly provides: 37A Voluntary alienation to defraud creditors voidable Save as provided in this section, every alienation of property, made… with intent to defraud creditors, shall be voidable at the instance of any person thereby prejudiced.
14. Section 37A does not expressly provide that an offending alienation is void only against the alienor's creditors. At first blush, the language of s 37A suggests that where a transaction is caught by the section, the Court would make an order declaring the transaction void, and, where property has been transferred under the transaction, ordering the property be re-transferred back: cf Houvardas v Zaravinos [2013] NSWSC 387 at [133].
15. Such an order may, no doubt, be appropriate in the usual case where the property is insufficient to satisfy the creditors' claims. But I do not think that s 37A requires the Court to reverse the whole of the transaction even where there will be, or may be, a surplus. In Silvera v Savic (1999) 46 NSWLR 124, Hodgson CJ in Eq said, (at [72]): What s 37A says is that the "alienation" is "voidable". In my opinion, when an application is made under s 37A to the Supreme Court, that Court can achieve the effect of avoiding the alienation by such measures as seem appropriate in the particular case.
16. In that case, the first defendant, Mr Savic, had transferred a property (at Budgewoi) and a half-interest in a second property (at Macquarie Fields) to the second defendant, Ms Arsenic, in an attempt to defeat or delay a claim against Mr Savic by the plaintiff. The plaintiff subsequently obtained judgment in the District Court. His Honour said (at [73]): … I would be prepared to order that Ms Arsenic transfer to Mr Savic the whole of her interest in the [Budgewoi] property and one-half of her interest in the Macquarie Fields property. However, the object of this exercise is to provide property against which enforcement of the District Court judgment can be obtained. The re-transfer of the properties to Mr Savic, followed by writs of execution and possible sale by the sheriff, may not be the most effective way to achieve that end. It may be more appropriate to make declarations and orders that bring about an early sale of the [Budgewoi] property, and the application of those proceeds towards that judgment, and possibly the costs in this case. If those proceeds are not sufficient, then consideration could be given as to what steps should be taken in relation to the Macquarie Fields property.
17. When considering the appropriate form of relief in Green v Schneller (2002) 11 BPR 20,935 Barrett J said (at [101]): The conclusions I have reached mean that the transfer of Mrs Schneller's interest in the Northwood property to Mr Schneller is, in terms of s 37A, "voidable". The court must therefore make orders which overcome the effect of the transfer in so far as that effect is such as to cause the property to be beyond the reach of Mrs Schneller's creditors.
18. In both Silvera v Savic and Green v Schneller, the proceedings were adjourned to allow for further consideration of the appropriate form of orders, and there is no published record of the orders actually made. But their Honours' remarks support the view that the Court has power to tailor its orders to the circumstances of the particular case, and is not required to nullify the transaction in question beyond what is necessary to protect the disponor's creditors.
19. The legislative history of s 37A supports this view. That history was traced in the judgment of the High Court in Marcolongo v Chen (2011) 242 CLR 546 at [13]-[17]. The idea was to rewrite the Statute of Elizabeth in more modern language without changing its meaning. The law which grew up around the Statute of Elizabeth therefore continues to be relevant in the application of s 37A.
20. For example, the Statute of Elizabeth applied to conduct by the disponor intended to "delay, hinder or defraud" creditors. Section 37A refers only to conduct intended to "defraud" creditors. But in Marcolongo v Chen, the High Court said (at [18]) that the term "defraud" in s 37A should be understood as meaning "defeat, delay or otherwise defraud" creditors. In the same way, I think that where s 37A speaks of a transaction being "voidable", it should be understood as conferring power on the Court to take whatever steps are necessary to render the disposition "void" in the sense used in the Statute of Elizabeth, that is, as against the creditors concerned.
21. For these reasons, I propose to make a declaration that each of the transfers is void for the purposes of s 37A and an order against Mrs Corbett that she make the Baulkham Hills property available to satisfy Mr Corbett's obligations to the plaintiff and his other creditors. The plaintiff will be directed to formulate appropriate consequential orders, which should include orders for the identification and quantification of the creditors' entitlements. They may also provide for the sale of the Baulkham Hills property.
22. For this purpose, the consequential orders may include provision for the appointment of a receiver. But appointing a receiver to sell the property may be expensive. Any orders should provide Mrs Corbett with alternative means of raising the necessary funds, either by raising security on the property, or by conducting the sale of the property herself, if that is her choice.
23. Orders pursuant to Family Law Act s 79A
24. In my first decision at [106] I referred to Green v Schneller at [23]-[31], where Barrett J held that where a transaction had been made pursuant to consent orders under Family Law Act 1975 (Cth) ('FLA'), s 79, relief could be granted under s 37A even if the consent orders had not been set aside. His Honour rejected the suggestion that otherwise there would be an inconsistency between the s 37A relief and the consent orders. My analysis concerning the appropriate form of order under s 37A reinforces that conclusion. An order that Mrs Corbett make the Baulkham Hills property available to satisfy Mr Corbett's creditors is in no way inconsistent with the consent orders previously made by the Family Court between Mr and Mrs Corbett. But as a set-aside order was sought and the making of such an order was fully contested, I will make the order as requested.
25. Counsel for Mr Corbett argued that the consequence of making a set-aside order would be to revive proceedings in the Family Court. According to counsel's submissions, the proceedings in the Family Court had invoked that Court's jurisdiction under the FLA, s 79. In counsel's submission, once the consent orders were set aside, that jurisdiction and the proceedings would revive so that Mrs Corbett could make her foreshadowed application in those proceedings. Counsel for Mrs Corbett supported these submissions.
26. Section 79A expressly provides that in the event of a set-aside order being made, a fresh application may be made for a property settlement. Counsel for Mr Corbett acknowledged that this Court therefore had jurisdiction to entertain any further application Mrs Corbett might make for a property settlement from Mr Corbett. But he contended that the Court should not do so. In his submission, such an application was properly one for the Family Court, which typically deals with property settlement matters. Counsel also submitted that there was little or no utility in this Court exercising its s 79A jurisdiction because, having regard to the findings I have made, it would be inappropriate for me to hear the proceedings and a new Judge would need to deal with them. Again, these submissions were supported by counsel for Mrs Corbett.
27. In response, counsel for Mr Nguyen pointed out that the consent orders in question were made pursuant to a specialised form of application under the Family Law Rules 2004 (Cth) (see r 10.15(1)(b)). Under r 10.17, on the hearing of such an application, the Court is required to make an order in accordance with the consent orders sought, or to require a party to file additional information, or to dismiss the application. In counsel's submission, there was no other alternative. He submitted that the application was spent, and the setting aside of the orders did not revive them.
28. It does appear that an application of the type which resulted in the consent orders is designed to be dealt with by consent, and no provision is made for such an application to be dealt with adversarially. Nevertheless, the Family Court's powers under Family Law Rules may be wide enough to allow the Court to dispense with its usual procedure in this regard. In my opinion, however, there is a fundamental obstacle to such a course in this case.
29. In my first decision at [113] I found that the consent orders did not represent a genuine compromise between Mrs Corbett and Mr Corbett. I found instead that the consent orders were entered into as a device to procure the transfer of the remaining share of the property from Mr Corbett to Mrs Corbett. Generally speaking, a claim attracts, and thereafter retains, federal jurisdiction irrespective of its merits. But there is an exception if the purported claim is "colourable" or "not bona fide": see R v Cook; Ex parte Twigg (1980) 147 CLR 15 at 26; Burgundy Royale Investments Pty Ltd v Westpac Banking Corp (1987) 18 FCR 212 at 219.
30. It follows, in my view, that the effect of setting aside the consent orders is not to revive the proceedings between Mr Corbett and Mrs Corbett. There was no genuine dispute in those proceedings, so there is nothing to revive. I accept that a genuine claim might now be made by Mrs Corbett, but in my view that would require fresh proceedings to be instituted under s 79A.
31. It is not certain that further proceedings will necessarily be instituted by Mrs Corbett. Contrary to the assumption underlying counsel's submissions, no order will be made for the retransfer of the Baulkham Hills property to Mr Corbett. For the purposes of the consent orders in 2014, Mr and Mrs Corbett estimated the value of the property at $700,000. To the extent that the current value of the property exceeds the amount required to satisfy the costs orders in favour of the Nguyens (and any other creditors who might emerge), the surplus will remain with Mrs Corbett. It is not self-evident that a proper property settlement would give Mrs Corbett more than this. Furthermore, the evidence before the Court in these proceedings suggests that Mr Corbett retains control of the Vietnamese business and this presumably means that further assets would be available to satisfy any further claim by Mrs Corbett. It is therefore not clear that Mrs Corbett will necessarily make a claim which would impinge upon the enforcement of the Nguyens' costs orders against the property.
32. In my opinion, the suggestion of apprehended bias is premature. Depending on the issues raised, there is potential for the hearing of a further claim by Mrs Corbett to cover some of the factual matters on which I made findings in my first decision, including the credit of Mrs Corbett and Mr Corbett. But that is far from certain at this stage.
33. Nonetheless, if any further property claim is made by Mrs Corbett, then I think it must be pursued in this Court, irrespective of whether it proceeds before me or before another Judge. The Court's orders in these proceedings under s 37A requiring the property to be made available to meet Mr Corbett's cost liabilities (and the ancillary freezing orders) will remain in force until those liabilities have been satisfied. Orders for sale and for the appointment of a receiver may be made. There may be further applications made for variation, or further supplementation, of those orders. If a claim is to be made which could impinge upon this process, then all relevant proceedings should take place in the same court.
34. In saying this, I do not rule out the possibility that any such property settlement claim by Mrs Corbett might still go to hearing in the Family Court. The claim may not impinge on the Nguyens' entitlements. Or the claim might not have been heard by the time these proceedings are resolved and the Nguyens are paid. The need for the claim to be dealt with alongside these proceedings might therefore disappear, and at that point it might be appropriate to transfer the property settlement claim to the Family Court.
35. At this stage, a further property claim is only a possibility. I do not think the Court should grant a stay now. As I have mentioned, such a claim may, or may not, be extensive enough to come into conflict with the Nguyens' entitlement to satisfaction from the Baulkham Hills property. If a stay were sought, it would be necessary for the Court to be satisfied that there was a genuine and plausible claim to that extent. Even if so satisfied, the Court could be expected to require appropriate undertakings to protect the position of the Nguyens. These are all matters for debate which cannot be resolved until a further claim, and an application for a stay, are made.
36. The order I will make is that, should Mrs Corbett decide to pursue a further property settlement claim under s 79A, she must file a cross-claim in these proceedings for the relief she seeks. Directions will also be made which provide an opportunity for Mrs Corbett to make an application for a stay of enforcement of the s 37A orders pending the determination of that claim.

Costs

1. The plaintiff has succeeded in the proceedings, and it is common ground that costs orders should be made in his favour against both Mr Corbett and Mrs Corbett. Counsel for Mr Nguyen sought an order under the Civil Procedure Act 2005 (NSW), s 101 for the costs to carry interest at 6%. Neither counsel for Mr Corbett nor counsel for Mrs Corbett made any submission in opposition to such an order for interest.

Stay pending appeal

1. Counsel for Mrs Corbett foreshadowed an appeal against my decision. Initially counsel sought a stay of all further proceedings pending the hearing of the foreshadowed appeal. But the grounds of the foreshadowed appeal have not been identified and there may be debate about the terms which should be imposed upon such a stay, or whether one is justified at all. Recognising this, counsel sought a 28 day stay to enable the notice of appeal to be filed and an application to be made to the Court of Appeal to extend the stay up to the hearing.
2. It seems to me, in the light of the orders which will now be made, that there is no need for a stay at this point. It is only once orders are made for the sale of the property or the appointment of a receiver that the question of Mrs Corbett vacating the property will arise. Under the orders the Court will be making, the plaintiff will have 28 days to bring in a proposed set of directions in this regard. Any application for a stay on account of the foreshadowed s 79A claim will also be made then. I propose to grant Mrs Corbett leave to make an application for a stay pending appeal at the same time, so that all relevant applications can be dealt with in one hearing. This will not, of course, prevent Mrs Corbett from making an application to the Court of Appeal instead, if she chooses to do so and the Court of Appeal is prepared to entertain such an application.

Court orders

1. The orders of the Court are:
2. Declare that the transfer from the second defendant of a half share in the property at [XX] Baulkham Hills, in the state of New South Wales, with Torrens Title folio identifier [XX] ("the Baulkham Hills property") to the first defendant as joint tenant, registered with effect from 12 August 2013, is void under the Conveyancing Act 1919 (NSW), s 37A.
3. Declare that the transfer from the second defendant of the second defendant's remaining interest in the Baulkham Hills property to the first defendant, registered with effect from 2 July 2015, is void under the Conveyancing Act 1919 (NSW), s 37A.
4. Order that the first defendant perform all acts and concur in all things necessary to make the Baulkham Hills property available for satisfying the debts owed by the second defendant to the plaintiff and to any other creditors of the second defendant.
5. Direct that within 28 days the plaintiff bring in proposed directions and orders providing for: (a) the identification of any other creditors the subject of Order 3; (b) the quantification of the amounts required to satisfy the debts owed by the first defendant to the plaintiff and to any other such creditors; (c) the sale of the Baulkham Hills property, including the appointment of a receiver for that purpose, the form of such orders and directions (to the extent not agreed) to be argued before me on a date to be fixed by arrangement with my Associate.
6. Order that the consent orders made by the Family Court of Australia in proceedings number No. (P) PAC 2155/2013 on 8 May 2014 be set aside.
7. Direct that the first defendant pursue any claim for an adjustment of property pursuant to the Family Law Act, s 79A, by way of cross-claim in these proceedings, such cross-claim to be instituted within 28 days of today's date.
8. Direct that any application for a stay of operation of any of these orders pending the determination of any such cross-claim be filed and served within 28 days of today's date and made returnable before me on a date to be fixed by arrangement with my Associate.
9. Order that the first defendant and the second defendant pay the plaintiff's costs of the proceedings.
10. The defendants to pay to the plaintiff interest on costs and disbursements, at the rates set out in UCPR r 36.7, on the Allowed Percentage of each amount for or on account of costs and disbursements actually paid to its legal advisers by or on behalf of the plaintiff, from the date of payment of each such amount until such time as the defendant has paid the costs due to the plaintiff the subject of Order 8 or further order, the Allowed Percentage being calculated as follows: X equals the total amount of costs and disbursements paid or liable to be paid to the plaintiff's legal advisers in connection with the proceedings; Y equals the total amount of costs and disbursements allowed on assessment to the plaintiff in connection with these proceedings; and The Allowed Percentage equals (Y/X x 100)%.
11. Grant leave to the first defendant to apply for a stay of operation of any of these orders pending the determination of any appeal, such application to be filed within 28 days of today's date and made returnable before me on a date to be fixed by arrangement with my Associate.

Amendments 19 April 2018 - Amended orders to correct references to first and second defendants. 14 May 2018 - amend typographical error 15 June 2018 - amend orders to refer to interest rate 14 December 2018 - Para [8] - Amended "Statute of Elizabeth, 43 Eliz 1, c 4" to read "Statute of Elizabeth, 13 Eliz 1, c 5". 14 December 2018 - Amended cover page. 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: 14 December 2018