Provident Capital Ltd v Anderson & Anor

Supreme Court of NSW|2012-05-17|Before: Adamson J

Introduction 1The plaintiff (Provident), the mortgagee under a goods mortgage granted by Ian Anderson, the first defendant, applies by notice of motion for an interlocutory injunction restraining Sonya Coghlan, the second defendant, from disposing of certain assets, excluding cattle, which he transferred to her pursuant to consent orders filed in the Family Court on 26 August 2010. Provident also applies for an order requiring Ms Coghlan to pay into Court the proceeds of sale of any of the assets that have already been sold. 2Ms Coghlan opposed the relief sought on the following bases: first, that Provident could not establish a prima facie case; secondly, that it had not shown that damages would not be an adequate remedy; thirdly, that Provident had been guilty of delay in making the application and fourthly, that Provident had not made frank disclosure to the Court when it applied for short service before me on 16 May 2012.

Evidence 3Provident relied on an affidavit of Tasha Stewart sworn 16 May 2012, which, together with its annexures, provides the foundation for the narrative set out below. Ms Stewart, who is an employed solicitor whose principal has carriage of this matter, was cross-examined by Ms Coghlan's counsel. Provident also tendered an applicable accounting standard. 4Ms Coghlan relied on an affidavit by her solicitor, Anthony Fox, sworn 17 May 2012 which, subject to one paragraph referred to below, annexes correspondence between the solicitors. In the second paragraph Mr Fox deposes to the fact that Ms Coghlan told him that certain items in dispute were not on Barry Station but came from a property at Curlewis. In light of the potential importance of this matter I allowed this paragraph only on the basis that it recorded what Ms Coghlan told Mr Fox and was not admissible to prove the truth of what she had told him. Ms Coghlan also tendered a letter dated 16 June 2012 which Provident's solicitors had written to her solicitors, about which Ms Stewart was also cross-examined.

The Facts 5By Deed of Loan dated 21 December 2006, Provident lent Mr Anderson the sum of $5.7m. On the same day, in order to secure the monies advanced, Mr Anderson granted a goods mortgage to Provident (the Goods Mortgage) and a real property mortgage over the property known as "Barry Station". 6The Goods Mortgage comprises Particulars and provisions. The relevant Particulars are as follows: The Mortgagor's Name and residential address: Ian Maxwell Anderson "Barry Station", Via Nundle NSW 2340 The Mortgagor carries on business or intends to carry on business under the name: Ian Maxwell Anderson The Mortgagor's business or occupation is: Farmers The Mortgagor's present or intended place of business is: "Barry Station", Via Nundle NSW 2340 General description of goods to which this Goods Mortgage relates: All chattels personal, fixtures and other things capable of complete transfer by delivery (whether immediately or at any future true) owned and used, or intended to be used or acquired after the date of this Goods Mortgage to be used by the Mortgagor in connection with the business Specific goods to which this Goods Mortgage relates: Farming equipment One (1) only White tractor; serial number 4520344; One (1) international B250 tractor; serial number unknown: One (1) only international scarifier, serial number 17640; One (1) only Napier seeder; serial number unknown; One (1) only Yeoman chisel plough; serial number unknown motor vehicles One (1) only Commer body truck; serial number 199Y99863007 One (1) only Chevrolet body truck; serial number 537-253; One (1) only Toyota Hilux utility; serial number N15014082 One (1) only Toyota Hilux utility; serial number RN25230351; One (1) only Land Rover utility; serial number 10922737; One (1) only Land Rover wagon; serial number 3/90305809A; One (1) only Dodge flatbed truck; serial number D5N3264-JEL090648

7The relevant definitions of the Goods Mortgage are as follows. "'particulars' means the table of information set out in this document under the heading 'Particulars'; ... 'property' means all property (excluding real property) and all assets and rights used or intended to be used in connection with the business now or in the future and wherever situated; this includes: · the specific goods described in the particulars; ... 'secured money' means all money which the Mortgagor owes the Mortgagee now or in the future for any reason and whether alone or with another person; ... 'the business' means the business referred to in the particulars" 8The relevant clauses of the Goods Mortgage are set out below. "2 Charge on the Property The Mortgagor as beneficial owner charges the property as security to the Mortgagee for the payment of the secured money and the performance by the Mortgagor all of its obligations under the Goods Mortgage and the related agreements. 3 Fixed and Floating Nature of Charge The Mortgagor's charge is 3.0.1 a fixed charge on: 3.0.1.1 all of the property that is or is required to be accounted for as non-current assets by accounting standards and generally applicable accounting practices; and 3.0.1.2 each of the types of property specifically included in the definition of the property in clause 1.1; 3.0.2 a floating charge on all of the property not subject to the fixed charge under paragraph 3.0.1." 9The relevant accounting standard is AASB 101, "Presentation of Financial Statements", which applies to annual reporting periods beginning on or after 1 January 2006. It relevantly provides: "An asset shall be classified as current when it satisfies any of the following criteria: (a) it is expected to be realised in, or is intended for sale or consumption in, the entity's normal operating cycle; (b) it is held primarily for the purpose of being traded; (c) it is expected to be realised within twelve months after the reporting date; or (d) it is cash or a cash equivalent (as defined in AASB 107 Cash Flow Statements) unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting date. All other asserts shall be classified as non-current." 10The effect of the Goods Mortgage was to charge all of Mr Anderson's personal property that was intended to be, or which was in fact, used for his farming business, wherever it was conducted. There were 12 items specifically listed in the particulars of the Goods Mortgage, being 5 pieces of farming equipment and 7 motor vehicles. However the Goods Mortgage is not limited to these. 11Mr Anderson submitted a tax return for the year ended 30 June 2010 in which he nominated as his business activity "beef cattle and sheep farming" and identified "Barry Station" at Nundle as his only place of business. Although another business was disclosed, metal waste and scrap recycling, this does not appear to have produced any income and can therefore be disregarded. I infer accordingly that Mr Anderson was wholly engaged in the business of farming. 12The tax return included a document entitled "Full Schedule of Assets- Detailed", which comprises a list of farm equipment, vehicles and other assets. 13On 25 June 2010, by short form of statement of claim for possession against a mortgagor, Provident commenced these proceedings against Mr Anderson seeking a judgment for possession of Barry Station (the Possession Proceedings). 14On 26 August 2010, Mr Anderson and Ms Coghlan filed consent orders in proceedings brought by Mr Anderson against Ms Coghlan in the Family Court (the Family Court Consent Orders) which relevantly provided: "BY CONSENT IT IS ORDERED Property

That the Respondent be declared to have no further interest in the Applicant's real property known as Barry Station...
That within 28 days of the date of these order the Applicant transfer the following, subject to any loan thereon, to the Respondent: a) The 1994 Nissan Patrol 90E registration number SVS 755. b) The 1994 Nissan Patrol 94A registration number AT 37 YJ c) The 1999 Epps Box Trailer registration number S60085. d) The 1996 Mercedes Benz Prime Mover registration number YAP 400. e) the 2009 Iveco ML 1605A Rigid Truck registration number BD 85 SH. f) The 2000 Tipping Trailer registration number V57655. g) The 1978 Haulmark Tandem-axel trailer registration number R37543. h) The 1986 Alison 00 Trailer registration number U55380 i) Grizzly Offset j) White Tractor k) Case Tractor l) Deutz Tractor m) Hesston Square Bailer' n) Deutz Hay Rake o) Unregistered Nissan Utility p) Kubota RVT Tractor q) New Holland Tractor r) Case IH LB433 Square Bailer s) Kuhn Hay Rake t) Case IH tractor and front end loader u) Case IH DC 132 Mower Conditioner v) Portable Stockyards w) Overhead fuel tank x) 44 drums of molasses y) Coles Crane z) Rail line and steel aa) Case dozer and parts bb) International truck tank cc) 12 side deliver mulcher dd) 4 Grain Bins ee) 3 Self Stock Feeders ff) 1500 mixed store Cattle with EID Tag numbers from 01780 to 03280 with PIC Number NAO223730 gg) 1966 International 6 x 6 Truck hh) 1981 Bedford 4 x 4 Truck ... NOTATION ... B. That the parties agree that as far as it is practicable to do so that the orders are made having regard to the provisions of section 81 of the Act with a view to determining for all time the financial relationship between the parties and avoiding further proceedings between them." 15I shall refer to all of the items in clause 2, apart from the stock in (ff), as the Family Court Chattels. 16Provident has identified various goods which it submits appear both in the schedule to the tax return and clause 2 of the Family Court Consent Orders. It has identified: (f), (j), (cc), (i), (q), (p), (r), (s), (t), (o), (gg), (hh) and (e). 17By application filed on 11 May 2011 in the Possession Proceedings, Provident applied for an order to join Ms Coghlan as second defendant and also sought orders restraining her from disposing of cattle which have been removed from Barry Station. Ms Coghlan was joined as second defendant to those proceedings. 18By orders dated 9 June 2011 and entered the following day, Provident, Mr Anderson and Ms Coghlan resolved a substantial part of the Possession Proceedings (the Common Law Consent Orders). The Common Law Consent Orders provided for Provident to have judgment for possession of Barry Station. They also provided for the disposition of cattle between Provident and Ms Coghlan. For present purposes the significant orders in the Common Law Consent Orders are orders 12 and 13. 19Orders 12 and 13 of the Common Law Consent Orders relevantly provide: "12. The Court notes the agreement of the parties that: (a) subject to the terms of these orders and notations, and subject to subparagraph (b) below, the Plaintiff and the Second Defendant mutually release each other from any claim arising out of the subject matter of these proceedings whether known or unknown; and (b) these orders and agreed notations are without prejudice to the entitlement of the Plaintiff to: i. trace into the hands of the Second Defendant or any entity in which she has an interest, the proceeds of any sale by or on behalf of the First Defendant of:

Reasons 26The task to be undertaken in an application such as this is to determine whether Provident has established that it has a prima facie case and then determine where the balance of convenience lies. Because the relief sought is discretionary I must also take into account any disentitling matters which may make the grant of relief inappropriate.

Prima facie case 27In Australian Broadcasting Corporation v O'Neil [2006] HCA 46; 227 CLR 57 at [65], Gummow and Hayne JJ said, after referring to Beecham Group Ltd v Bristol Laboratories Pty Ltd [1968] HCA 1; 118 CLR 618 at 622-623: "By using the phrase 'prima facie case', their Honours did not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed; it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial." 28In determining the facts relevant to such an application, it is well established that I am neither required nor entitled to determine facts on any final basis. In 1st Fleet Pty Ltd v Australian Cooperative Foods Ltd [2006] NSWSC 881 White J said, at [5]: "However, the Court's task is not to conduct a preliminary trial of the action. It does not seek to resolve conflicts of evidence. The parties have not had the benefit of cross-examination or been able to deploy all other relevant evidence that may be available at a final hearing. The evidence adduced by the defendant is to be taken into account in determining whether on all the evidence the plaintiff has demonstrated that there is a serious question to be tried. That formulation of the question mandates that any conflict between the evidence of the plaintiff's witnesses and the defendant's witnesses is not to be resolved, but rather it is to be assumed that any such conflict would be resolved in the plaintiff's favour (Shercliff v Engadine Acceptance Corporation Pty Ltd [1978] 1 NSWLR 729 at 724)." 29I do not consider that the release in paragraph 12 of the Common Law Consent Orders prevents any of Provident's claims, which can either be described as tracing claims or applications to set aside the transfers. 30The clauses of the Goods Mortgage set out above have the effect of charging all of the assets used by Mr Anderson in his farming business, wherever they are situated. I do not accept that Provident has, by its pleading, confined its claim to identified assets. To the extent to which particular assets are identified in the particulars to the pleading, they are identified in a way that does not limit the claim. 31The Family Court Chattels would appear to comprise plant and equipment used by Mr Anderson in his farming business at Barry Station. 32Ms Coghlan submitted that the evidence was not of a kind which permitted the conclusion that the items offered for sale by Ms Coghlan and the items in the Family Court Consent Orders were used in connection with the farming business conducted by Mr Anderson on Barry Station. Accordingly, Ms Coghlan submitted that such assets were not the subject of the Goods Mortgage and that the proceeds of sale thereof could not fall within clause 12(b) of the Common Law Consent Orders and there was, accordingly, no basis to make the orders sought by Provident. 33In the absence of evidence to the contrary, I infer that Mr Anderson's farm machinery was on Barry Station on 2 June 2010 since that was where his farming business was being conducted. The hearsay evidence in Mr Fox's affidavit is not sufficient to displace, at this stage of the hearing, the inferences that arise from Mr Anderson's tax return for the year ended 30 June 2010. 34Mr Shearer, who appeared for Ms Coghlan, also cross-examined Ms Stewart by reference to a letter which Provident's solicitors had written to Registrar Bradford on 16 June 2011, following the making of the Common Law Consent Orders on 9 June 2011. In particular he cross-examined her about the following paragraph: "Absent any dispute as to the steps taken to comply with the Consent Orders of 9 June 2011, the Plaintiff considers that the next stages therefore appropriately involve discovery from the First Defendant as to these assets and their disposition and an opportunity to prepare evidence in relation to the current inventory of Barry Station." 35Ms Stewart admitted that no "current inventory" had been prepared. Mr Shearer submitted that this omission had the result that Provident would be unable to prove its case and that it also showed that Provident was dilatory in the preparation of its case for hearing. I am not sure of the relevance of an inventory conducted in June 2011. A relevant date for the purposes of the Common Law Consent Orders is 2 June 2010. An inventory of items present on Barry Station a year later would be of limited relevance to that question. Furthermore, by the time the letter was written, Provident was in possession of Barry Station. Accordingly, whatever was on Barry Station in June 2011 is presumably still there, or has been disposed of by Provident in the meantime. I do not consider this matter to stand in the way of Provident's persuading me that it has a prima facie case. 36I accept, for the purposes of this interlocutory application, that Provident Capital has established, from the terms of the Goods Mortgage and Mr Anderson's tax return, a prima facie case that the Family Court Chattels were charged by the Goods Mortgage and that, accordingly, Provident had a proprietary interest in them, namely a fixed charge. 37There is sufficient evidence to ground a prima facie case, for the purposes of this application only, that the items recently offered for sale were probably Family Court Chattels. 38Ms Coghlan's interest in the Family Court Chattels derives from the Family Court Consent Orders. The transfer to her was expressed to be "subject to any loan thereon". The Goods Mortgage which charged the Family Court Chattels secured the loan to Mr Anderson. In my view, although the language is less than precise, the words qualifying the transfer of the goods to Ms Coghlan have the effect of according priority to Provident's interest in the chattels. Provident's interest prevails, in any event, over that of Ms Coghlan since its interest was prior in time and Ms Coghlan was not a bona fide purchaser for value without notice. Accordingly, prima facie, Provident's interest in the Family Court Chattels prevails over that of Ms Coghlan. 39Provident has also relied upon s 79A (1)(a) of the Family Law Act, which relevantly provides: "79A Setting aside of orders altering property interests (1) Where, on application by a person affected by an order made by a court under section 79 in property settlement proceedings, the court is satisfied that: (a) there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence (including failure to disclose relevant information), the giving of false evidence or any other circumstance; or ... the court may, in its discretion, vary the order or set the order aside and, if it considers appropriate, make another order under section 79 in substitution for the order so set aside." 40Provident submitted that it was arguable that the Family Court Consent Orders should be set aside on the basis they constitute a miscarriage of justice because the plaintiff was not informed of the proceedings. 41It also submitted that the transfers are voidable as they were made with an intent to defraud creditors under s 37A of the Conveyancing Act 1919 and relied on Marcolongo v Chen [2011] HCA 3; 242 CLR 546 in support of the proposition that s 37A also covers situations where there is an intent to delay or hinder creditors. 42I consider Provident to have established a prima facie case on both or either of these two additional bases, although I do not consider either to be necessary having regard to the qualification expressed in the order itself and the absence of any basis for a suggestion that Ms Coghlan was a bona fide purchaser for value without notice.

Balance of convenience 43Provident has adduced sufficient evidence for me to be satisfied on the limited basis referred to above that at least some of the items in the Family Court Consent Orders were recently advertised for sale. In the absence of undertakings from Ms Coghlan, there is a risk that the subject matter of the proceedings will be dissipated unless a restraining order is made. 44Provident's rights are proprietary. If the items to be sold to bona fide purchasers without notice, Provident's rights in that property will be defeated by the rights of such purchasers. As for the goods already sold, Provident's rights attach to the proceeds of sale: Deputy Commissioner of Taxation v Horsborough [1983] 2 VR 591. Ms Coghlan will be protected by the undertaking as to damages for any prejudice caused to her and will be entitled to the proceeds of sale after the proceedings are determined, if the proceedings are determined in her favour. 45Ms Coghlan submitted that Provident has not established that damages will not be an adequate remedy and that interlocutory relief ought be refused on that basis. Mr Shearer, who appeared on her behalf, submitted that the relief sought was in the nature of a Mareva injunction and that Provident had not adduced evidence which could satisfy me that such relief was warranted. 46Provident contended in response that because Provident's rights are proprietory, it would suffer detriment if it were relegated from its present status as a secured creditor to an unsecured one and it ought not be left to a remedy in damages, whatever Ms Coghlan's net worth. 47Further, Provident submitted that I ought infer from the terms of the Family Court Consent Orders and in particular Notation B that the only substantial property owned by Mr Anderson and Ms Coghlan as at the date of those orders was that provided for in the orders, namely Barry Station and the chattels listed in clause 2. Mr Anderson retained Barry Station, although Provident is now in possession of it. The evidence that Ms Coghlan lacks the wherewithal to pay damages is scant. However the inference is available that she is not a woman of substantial means. 48The question whether damages are an adequate remedy is more pertinent when there is an issue whether the Court ought grant specific performance of a contract or whether it should grant an injunction to prevent a defendant from infringing the plaintiff's rights in some way. The adequacy of damages as a remedy is a less germane consideration when it is alleged that the rights of an alleged secured creditor will be compromised or destroyed by dissipation of the assets. I accept Provident's submission that its relegation from secured creditor to unsecured one is sufficient prejudice to warrant the orders being made. 49I do not accept the analogy sought to be made with the instant application and an application for a Mareva injunction. The purpose of a Mareva injunction is to protect the Court's own processes from abuse by a defendant who may dissipate its assets so as to render any judgment obtained in the proceedings worthless. Provident's application is for relief to protect the subject matter of the litigation, namely certain assets and the proceeds of sale of such assets.

Delay 50Ms Coghlan also submitted that Provident was disentitled to interlocutory relief because of its delay in making the application. 51Ms Stewart explained the delay to the Court in what I consider to be a frank and forthcoming way. I accept her explanation that the delay was due to an oversight. 52Mr Shearer was unable to identify any other possible reason for the delay. Nor did he suggest that there could be any tactical reason for it. Mr Shearer contended that Ms Coghlan was prejudiced by the delay and it was difficult for him to obtain instructions from his client because she lived on a rural property. However, the force of these contentions is reduced by the circumstance that Provident offered to adjourn the matter to a later date and I sought Mr Shearer's response to that proposal since I would not have proceeded with the hearing of Provident's application if Mr Shearer considered himself to be at a disadvantage because of the late notice of the application. Mr Shearer did not accept either Provident's, or my, offer of an adjournment. 53Ms Coghlan also appears to rely on the fact that Provident has not prepared an inventory of items, notwithstanding what was said in the letter to the Registrar in June 2011 referred to above, in support of a submission that Provident has been dilatory in preparing its case for hearing. In light of what I have said above as to Provident's possession of Barry Station since June 2011, it would seem that there is no particular urgency in preparing an inventory, even if one were necessary. These proceedings have not had a smooth course and are far from being allocated a hearing date. In these circumstances I do not consider that Provident's failure to perform an inventory ought disentitle it from obtaining interlocutory relief which would otherwise be appropriate.

Alleged lack of frank disclosure to the Court 54Mr Shearer submitted that Provident had not been entirely frank with the Court when it applied for short service on 16 May 2012 and that, accordingly, it was disentitled to relief. I do not consider that there was any breach of the duty of frankness to the Court by Mr Docker, who appeared on behalf of Provident. All that was being sought was short service and sufficient disclosure of Ms Coghlan's situation was, in my view, made. Furthermore, in light of the opportunity offered to adjourn the matter, and Mr Shearer's preparedness to have the application dealt with, I fail to see why any further disclosure could be material. 55I am satisfied that the balance of convenience favours the granting of relief.

Costs 56Provident sought an order that the costs of the application be the plaintiff's costs in the cause. Ms Coghlan sought an order that the costs of the application be costs in the cause. I consider that the costs order should be as sought by Provident. Ms Coghlan had the opportunity to give undertakings which would have removed the need for this hearing to be conducted. If she had required more time to consider whether to give undertakings, she would have been given sufficient time. In those circumstances, I am not dispose to accept her submissions that the costs of the motion should be the costs in the cause.

Orders 57For the foregoing reasons, and subject to the usual undertakings as to damages, I made the following orders on 17 May 2012: (1)Until the final determination of these proceedings or until further order, the second defendant ("Ms Coghlan") is restrained from selling, transferring, encumbering or otherwise dealing with each of the items listed in paragraph 2, except (ff), of the consent orders dated 26 August 2010 made in proceedings number NCC 2218 of 2010 in the Family Court of Australia (the Family Court orders) between the first defendant in these proceedings ("Mr Anderson") and Ms Coghlan. (2)Ms Coghlan is to pay into court or into an account jointly controlled by her solicitor and the plaintiff's solicitor the proceeds after selling costs of the sale of each of items in paragraph 2, except (ff), of the Family Court Orders which has already been sold at the date of the orders and such funds may not be paid out of court or from the joint account except pursuant to an order of the court or by agreement between the plaintiff and Ms Coghlan. (3)Costs of the notice of motion to be the plaintiff's costs in the cause. 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: 21 May 2012

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