Pirani & Pirani (No 7) [2025] FedCFamC1F 180 (19 March 2025)

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)

1. The first respondent is restrained from challenging the existence of the mortgage asserted by the second respondent upon the Suburb G property.
2. The claim as to the mortgage will proceed on an undefended basis in respect of the first respondent.
3. The first respondent is otherwise entitled to challenge the loans said to be secured by that mortgage.

Note: The form of the order is subject to the entry in the Court's records.

Note: This copy of the Court's Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).

Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.

IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).

1. On day two of the final trial, agreement was reached by the applicant, first respondent, second respondent and ninth respondent to the general effect that the ninth respondent holds a legitimate mortgage in respect of the Suburb G property, which has been the subject of sale, and is entitled to a payment of $2.8 million in priority to all others, save Westpac as a principal mortgagee of that property. That is a matter that somewhat simplifies the trial.
2. Similarly, the applicant and ninth respondent accept that the second respondent holds a mortgage on the Suburb G property and is entitled to payment. That is a position which is now disputed by the first respondent.
3. The raising of that dispute raises corresponding issues as to the conduct of the proceedings. Some procedural history is necessary to understand how the matter has got to this point.
4. As at 15 August 2023, it was noted by the Court that neither the applicant nor the first respondent had filed in compliance with the procedural orders. On 15 September 2023 further orders were made for the applicant and first respondent to file relevant documents in the proceedings. That had not happened by 25 January 2024 at which time a further extension was granted. By 22 July 2024 it was necessary for further procedural orders to be made for the filing of relevant material in the proceedings directed to the applicant and first respondent. Again, there was no compliance. On 30 September 2024 the proceedings were set down for final hearing and corresponding trial directions were given.
5. In partial response to those trial directions the first respondent filed, on 21 October 2024, a response to the wife's Initiating Application. In that response he raised an assertion that he had not executed director's guarantees or the mortgage currently relied upon by the second respondent. On 19 November 2024 further trial directions were given for the filing of material for the preparation of the matter for trial, including specific directions for the filing of points of claim and defences regarding security interests in the Suburb G property. Such were required to be filed by 17 December 2024. Undoubtedly that specific requirement was made due to the challenges made to the mortgages purportedly held by the second and ninth respondents. Those directions were not complied with by the wife or first respondent and on 12 December 2024 the timeframe was extended, again without response. On 31 January 2025 the timeframe was extended in respect of the applicant who did not respond within the relevant time frame. On 28 February 2025 there was a further extension of the orders, with a particular order directed to all parties asserting an interest in the Suburb G property to file relevant points of claim or a defence. That again, in addition to the prior orders of 19 November 2024, mandated that if such an issue of the challenge to the mortgage was to be pursued by the first respondent, he was required to file relevant pleadings. Rather than prosecuting such a claim, or filing any affidavit material that might support his suggestion of challenge to the mortgage or guarantees, on 6 March 2025 the first respondent filed an amended response. Within that amended response he pursued orders identifying the mortgage held by the second respondent in respect of the Suburb G property and seeking that the court compel that the second respondent be paid in accordance with the mortgage held by the second respondent over the Suburb G property. That is, he required that from the sale proceeds of the Suburb G property, payment be made to the second respondent in accordance with its claim connected with the mortgage. Such orders were repeated in the interlocutory orders then also pursued by the second respondent.
6. Today, the first respondent seeks to challenge the mortgage held by the second respondent which is, for present purposes, accepted by the wife and the ninth respondent. It may be noted that it is the wife who had taken the active role in the challenge of that mortgage and the interest attached to the mortgage, has today abandoned that pursuit and acknowledged the second respondent's legitimate claim under the mortgage.
7. It may be accepted, and was accepted by the second respondent, that at some unidentified time the first respondent raised in correspondence with the second respondent the legitimacy of the mortgage being a claim. This appears to have been repeated in the Response to an Initiating Application filed on 21 October 2024. However, the first respondent was required to plead to the issue, either by means of points of claim or defence.
8. The first respondent did not do so. Rather, the first respondent took the opposite position, in the most recently filed response which, may be observed, is consistent with the initial response filed by the first respondent, consistent with the balance sheet previously filed by the first respondent. It may also be noted that the first respondent has filed no trial evidence to establish the fraud that he now seeks to assert.
9. In those circumstances he should not be permitted to challenge the fact of the mortgage, to do so would be an abuse of the court's processes. It would derail the proceedings on an assertion that is not deigned to either identify by pleadings or to support by adducing evidence. It is a claim which is specifically contradicted in the evidence led by the second respondent in the absence of pleadings by the first respondent.
10. Consequently, no case may now be mounted by the first respondent against the second respondent and that aspect of the proceedings may be treated as undefended.
11. It may be noted that the first respondent challenges the quantum asserted to be secured by that mortgage, being the quantum of relevant loans drawn. The first respondent will be permitted to challenge that evidence as to quantum by relevant cross-examination of the relevant witnesses called by the second respondent.

I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Ex-Tempore Reasons for Judgment of the Honourable Justice Gill.