Ryan v Ryan

Judgment 1HER HONOUR: This is an application brought by Notice of Motion filed on 1 May 2012 by the defendant (Helen Ryan) for the release of funds currently held in Court. In July last year, Mrs Ryan was convicted of the murder of her husband. The funds in Court (approximately $1.032million) represent the proceeds of sale of a farm at Duri that was formerly owned by Mr and Mrs Ryan as joint tenants in equal shares (ownership of which in the ordinary course passed on his death, by right of survivorship, to Mrs Ryan). The application now made by Mrs Ryan is for the release of around $310,000 for anticipated legal expenses in criminal appeal proceedings and for past (and anticipated future) legal costs in these proceedings. 2In the current proceedings (to which I refer as the forfeiture proceedings), the executor of the late Mr Ryan's estate (his eldest child from his first marriage) claims that the property (and now the proceeds of sale) is held by Mrs Ryan on a resulting trust for the estate or, alternatively, that Mrs Ryan holds a one half interest in the property on constructive trust for the estate. The executor opposes Mrs Ryan's application on the basis that the estate has a seriously arguable case for relief that, if funds are now released to her, would be defeated. 3The estate's principal claim, as pleaded in [7]-[9] of the Statement of Claim, is that the whole of the property (or such other portion as the Court considers just) is held on a presumed resulting trust for the estate (on the basis that Mrs Ryan did not contribute funds to the purchase price for the Duri property. The alternative constructive trust claim (as to the deceased's one half-interest in the property at the time of his death) (pleaded in [10]-[13] of the Statement of Claim) is based on the common law rule known as the forfeiture rule (in effect that, having been involved in and/or alternatively procuring the death of the deceased, Mrs Ryan should not be entitled to profit from his death). 4There are also on foot in this Court separate proceedings brought by Mr and Mrs Ryan's daughter (to whom I will refer as C) in which C seeks additional provision from her father's estate. Counsel for the executor, Mr Heath, notes that the payment out of funds to Mrs Ryan will directly affect C's position in the family provision proceedings (presumably by diminishing the moneys that might otherwise have been available to the estate if it is successful in the forfeiture proceedings). 5I was informed by Mr Hill (Counsel who appeared on behalf of C on the present application solely to make submissions in her interest, she not being a party to the forfeiture proceedings) that the family provision proceedings had been commenced on the basis that the deceased's portion in the estate that had passed by survivorship to Mrs Ryan could be treated as notional estate. However, it now seems to be accepted that it will be necessary to determine the forfeiture proceedings before the family provision proceedings are heard, since only then will the quantum of the estate be finally known. 6Mrs Ryan has filed an Amended Defence in the forfeiture proceedings and denies that the property is held on trust for the estate. Her Counsel (Mr Barham) did, however, concede that if her conviction for murder were to stand then the executor's claim that she holds a one half interest in the property on constructive trust would be well made (though Mr Barham maintains that the executor's claim to the whole of the property cannot be so described). Emphasis is placed by Mr Barham on the fact that Mrs Ryan and the deceased were joint partners both in the ownership of the Duri property and in the operation of the farm on the property; and it is said that any presumption that there was a resulting trust arising from the circumstances in which the property was initially acquired is answered by a presumption of advancement in favour of Mrs Ryan. 7While it is accepted by Mrs Ryan that, if her conviction stands, the funds released for legal expenses will come from her half interest in the estate, the executor's concern is that if the estate's claim is successful (and the property is held on trust for the estate) then the estate will not be in a position to recover the amounts so paid out to Mrs Ryan in the interim. Background 8The relevant factual background can be briefly stated. 9Mr and Mrs Ryan commenced a relationship in about July 1994. C was born in 1995. 10In May 2001, the Duri property was purchased in their joint names. The executor has deposed, in his affidavit affirmed 30 April 2012, to the circumstances in which the purchase of the Duri property was effected (evidence broadly confirmed by Ms Jacqueline Yates, the chartered accountant who has, since 2002, been responsible for the preparation and submission of personal tax returns for the couple and financial statements for the partnership conducted by them from January 2002). 11The purchase price for the Duri property was $570,000. With expenses and stamp duty, the total cost was $597,129.25. 12In summary, the evidence filed for the executor is to the effect that the Duri property was purchased in part (as to $280,000) with finance provided through Perpetual Trustee Company Ltd (and secured by a mortgage entered into jointly by the couple as mortgagors) and that the balance of the purchase price came from a sum derived from the sale by Mr Ryan of a part of another property (the Marel property) in May 2001. The primary security for the loan was the property itself but there was collateral security in the form of the Marel property (which had been the subject of an intergenerational transfer from Mr Ryan's mother to Mr Ryan in about 2000). 13Ms Yates has deposed (at [20]) that, from her review of the taxation and financial records of the couple and of their partnership, a sum of $370,195.25 was received from the sale of the first parcel of the Marcel land was used to purchase the Duri property. After certain adjustments, she has calculated Mr Ryan's contribution derived from the funds obtained from the sale of the Marel property to the purchase of the Duri property was $317,129.25; his overall contribution thus being that amount plus his share of the joint borrowings. 14(The remaining parcel of land from the Marel property was sold in about August 2002. Ms Yates has deposed that the balance of the sale price of that parcel ($119,541.35) was applied in capital reduction of the funds borrowed for the purchase of the Duri property. For the reasons set out later, that does not of itself operate to increase Mr Ryan's beneficial interest in the property.) 15The couple married in late November 2001. Therefore, at the time of the purchase of the property they were unmarried though had been in a de facto relationship for some time (a fact of relevance when considering the presumption of advancement on which Mrs Ryan now relies to rebut any presumption of a resulting trust). 16The executor has deposed that the Perpetual mortgage was discharged on 3 December 2004, at which time a smaller (interest only) loan ($200,000) was taken out with the Elders Rural Bank Limited. That loan was ultimately discharged when the property was sold after Mr Ryan's death. 17Mr Ryan died on 23 October 2009. As noted earlier, Mrs Ryan was convicted of his murder on 4 July 2011. (Another person, Kenneth Brooks, was also separately convicted of his murder.) Mrs Ryan has been sentenced to a term of imprisonment of 36 years with a non-parole period fixed at 27 years. 18In mid 2011, the bank called for payment of the loan secured by the property. There was a mediation under the Farm Debt Mediation Act in November 2011 between the bank and the estate, following which agreement was reached as to the sale of the property. (Mrs Ryan did not participate in the mediation process but did agree to the sale process agreed as part of the outcome of the mediation.) The property was marketed for sale at an auction scheduled for 21 December 2011. 19The day before the scheduled auction, an application was made to Rein J, sitting as duty judge, for orders in relation to the auction. From his Honour's reasons it appears that Mrs Ryan had at that stage sought to resile from the previous agreement as to the steps for the auction to take place (there being a dispute at that stage as to a proposed change to the reserve to be set for the auction). A dispute had also arisen as to how the net proceeds of sale were to be held after the auction. His Honour noted that the auction had been set in the context of what was a looming mortgagee sale and concern by the estate as to the costs increasing by reason of the continued existence of the mortgage. 20For the reasons given in his Honour's ex tempore judgment on 20 December 2011, orders were made to permit the sale to proceed. His Honour further ordered that any surplus funds (if the property sold at auction) were to be paid into Court. In this regard, his Honour considered that the Short Minutes of Order then proposed by the executor were appropriate (and within the spirit of the earlier agreement) and made orders accordingly. The relevance of this is that it appears that the orders by which moneys were paid into Court cannot be said to have been made by consent, though in effect it seems that they were intended to implement the spirit of an earlier agreed regime for the sale of the Duri property. 21It is not disputed, as I understand it, that the primary asset of the deceased was his interest in the farm and that (he having held the property with his wife under a joint tenancy) in the normal course his interest in the property would pass to Mrs Ryan by the right of survivorship. Mrs Ryan's solicitor has deposed on the present application that his instructions are that Mrs Ryan has no assets other than her share of the proceeds of sale of the Duri property, a Toyota Landcruiser and a horse float (those vehicles being in the possession of the executor). 22The estate commenced the forfeiture proceedings in August last year. Mr Heath has confirmed that the estate has now served virtually all its evidence in chief (there being foreshadowed a further affidavit from Ms Yates to make a final calculation of respective financial interests in the partnership that operated the property). Apart from the three affidavits sworn by her solicitor (Mr Raed Rahal) on the present application, Mrs Ryan has not served any affidavit evidence in the forfeiture proceedings. Mr Rahal has deposed that as part of Mrs Ryan's evidence in reply she requires an expert witness to prepare a report and that he has been unable to engage such an expert without access to funds. (He has also deposed that unless funding is made available for these proceedings and for the criminal appeal proceedings his firm is unable to act in these matters; and that he is unable to, and will not, instruct Counsel to appear in the absence of funding.) 23The funds to which Mrs Ryan now seeks access are as follows: $150,000 plus GST for the preparation and hearing of her appeal against her criminal conviction and application for leave to appeal against her sentence; $61,153.20 for payment of an agreed sum for outstanding fees owed to her former solicitors for work in relation to the present proceedings; and $100,000 for the purpose of future legal fees in relation to these proceedings. (I observe, in light of Mr Hill's submission as to the release of funds for the family provision proceeding, that Mrs Ryan's present application does not appear to seek any moneys in relation to the family provision proceedings, to which Mrs Ryan is not a party.) 24The basis on which Mr Rahal has estimated the costs of the ongoing conduct of these proceedings or the criminal appeal proceedings is not apparent from his affidavit (save that he has indicated the daily rate of the Senior Counsel his office has sought to instruct in relation to the criminal appeal proceedings). An extension of time has been granted to 22 June 2012 for the filing of a Notice of Appeal. Legal Principles 25Although the orders sought by Mrs Ryan were expressed in her Notice of Motion to be pursuant to Part 55 Rule 55.11 of the Uniform Civil Procedure Rules 2005 (NSW), it is conceded by Mr Barham that the procedure contained in Rules 55.8-11 applies to moneys paid into Court pursuant to Part 4 of the Trustee Act 1925 (NSW) and is thus predicated on the existence of a trust. It was accepted when the matter came before me that the power sought to be invoked on this application by Mrs Ryan is the power under s 23 of the Supreme Court Act 1970 (NSW). 26The significance of that distinction is that the requirements for matters to be proved in order for a payment out of Court under Rule 55.11 (considered in cases such as Ruth Chong v Super Equity Invests Pty Ltd & Anor [2012] NSWSC 27 and Commonwealth Bank v Estate of late Slieman [2010] NSWSC 661) are not strictly applicable on the current application. (In Slieman, Slattery J noted that an applicant under Rule 55.11 must establish three matters to justify an order for the payment of money out of court: first, identification of the person who is primarily entitled to any funds paid into court and the basis of that entitlement (and that notification has been given to that person); second, that the applicant is not merely an unsecured creditor against the person primarily entitled to the fund but is a person who has an beneficial interest in the very fund that has been paid into court; and, third, identification of any other potential claimants to the fund in court and proof that they were notified of the claim.) 27Here, however, as it is accepted that the Part 55 procedure does not apply, it is a question as to whether in all the circumstances it is appropriate to order the payment of funds out of those presently held in Court to Mrs Ryan, in advance of a final determination as to who is entitled to those funds, in order to assist Mrs Ryan to fund part or all of her anticipated forthcoming legal costs (or her already incurred legal costs of these proceedings). 28In that regard, Mr Heath submitted that in a practical sense (having regard to the orders made by Rein J pursuant to which payment was made into Court in the first place) the current state of affairs is analogous to that where an injunction is sought (or an application has been made for release of funds in the face of an injunction that has been granted) in aid of a proprietary right, as opposed to the situation where such an application is made in the face of a freezing order or 'Mareva' injunction. 29The distinction between such scenarios was drawn in Badman v Drake [2008] NSWSC 968 at [8] by Brereton J, his Honour referring to the judgment of Robert Goff J (as his Lordship then was) in A v C (No 1) [1981] 1 QB 956 and to PCW (Underwriting Agencies) Ltd v Dixon [1983] 2 All ER 158. For present purposes, the relevance of the distinction is that it has been said that where funds have been (or are to be) retained by injunction granted in aid of a claimed proprietary right (in order to preserve those funds), the principles that ordinarily lead to a more ready pay-out of funds for legal expenses in a Mareva situation (where the purpose of the order is to prevent the dissipation of assets out of which a judgment debt might ultimately be met) do not apply. 30As Brereton J noted in Badman, the basis of the distinction between the two types of case is that in the first the concern is that, absent a preservation order, the very subject matter of the proceedings might be dissipated before the hearing and equity would then have been invoked in vain (or, as was said in PCW, quoting Templeman LJ in an earlier case, "it is the concern of any court of equity to see that the stable door is locked before the horse has gone"). Precisely that kind of issue seems to me to arise in the present case. 31Mr Barham submits that no such analogy is appropriate in circumstances where the orders for payment into Court were not made in response to either such claim. Nevertheless, it seems to me that there is force in the observation that the present circumstance is one in which the very fund the subject of the claimed trust (be that resulting or constructive) is the fund to which access is sought by Mrs Ryan and payment out of moneys from that fund will necessarily affect the estate's ability to recover those moneys if it is successful in its principal claim. 32Hence, I accept that the reasoning in the Badman line of cases informs the exercise of the discretion in the present case in that the application by Mrs Ryan should not be approached on the basis that there is an expectation that the Court will release funds for legal expenses (even in light of Mrs Ryan's impecuniosity and the seriousness of her current situation). Therefore, I consider that little can be drawn from the suggestion in the Practice Note SC Gen 14 on freezing orders to the effect that a carve-out for legal expenses will normally be permitted, to which Mr Barham has referred, and as recognised in Amalia Investments Ltd v Virgtel Global Networks NV [2009] FCA 39 per Collier J at [15]. 33It was accepted by Mr Barham that relevant considerations to be taken into account on the present application are those enumerated by Mr Heath, namely: (i)whether the estate has a seriously arguable claim; (ii)the strength of the estate's claim; (iii)the effect on the funds presently held in Court if an order releasing funds is made; and (iv)whether, as a matter of discretion, the application ought to be refused. 34The first two of those matters require a consideration of the estate's claim. The latter two go to balancing the prejudice that will be suffered by the estate if funds (to which it is later found that Mrs Ryan was not entitled) are released as against the prejudice that will be suffered by Mrs Ryan if access to funds (to which she is later found to have had an entitlement) is not permitted.

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