Samootin v Official Trustee in Bankruptcy

Federal Court of Australia|2009-04-21|Before: Palmer J, Jacobson J

REASONS FOR JUDGMENT 1 The applicant, Ms Samootin, is bankrupt. She was made bankrupt by a sequestration order of the Federal Magistrates Court dated 24 May 2006. The judgment debt upon which the petition was founded arose in part from costs incurred by Ms Samootin in proceedings heard in the Equity Division of the Supreme Court of New South Wales, matter 1973/01, and in appeals and related proceedings. 2 The genesis of Ms Samootin's complaint arises from the sale of her former matrimonial home at 82 Waterview Street, Mona Vale. That property was owned jointly by Ms Samootin and her former husband, Mr Christopher Shea. The proceeds of sale of the property were used by Mr Shea, his friend, Mr Deans, and a company now called Loan Design Pty Ltd, to purchase properties at 24 and 26 Oxford Falls Road, Beacon Hill. Mr Deans' company, S.R. Deans Pty Ltd, was the sole shareholder of Loan Design. Title to the properties at Beacon Hill was taken in the name of Shea Delite Pty Ltd, now known as Loan Design, as sole registered proprietor. 3 The trial of the proceedings brought by Ms Samootin against Mr Shea, Mr Deans and Loan Design, took place before Palmer J. His Honour described the proceedings as a tragic case for all who have been involved in it. He said, at [1], that Ms Samootin has developed a fixation that she has been a victim of a fraudulent conspiracy between Mr Shea and Mr Deans, in which she has been cheated out of her home. His Honour referred, at [4], to the ocean of litigation that has enveloped the parties since 1998. He described it in stronger terms as a "nightmarish web of litigation", although Ms Samootin objects to that description. 4 However it is described, it is plain that the tally of cases continues to mount and that, by reason of her bankruptcy, Ms Samootin has embroiled the Official Trustee in Bankruptcy in the costly and time-consuming exercise of dealing with the processes of the courts. 5 In this application Ms Samootin seeks an order pursuant to s 19 and other sections of the Bankruptcy Act 1966 (Cth) that the Official Trustee: seize the Shea/Samootin marital property of the bankrupt wife and her non-bankrupt ex-husband, namely 24 Oxford Falls Road, Beacon Hil … and to sell the property by auction. 6 Ms Samootin seeks this order for the purpose of enabling the completion of proceedings for property settlement or property adjustments in the Family Court. The Family Court matter has been listed for hearing on 6 July 2009. It was largely for this reason that the present application was listed before me for urgent hearing on 20 April 2009. 7 Ms Samootin seeks a number of orders in her amended application filed on 16 March 2009. I need mention only two of them. The first is an allegation made against Ms Nash and the Official Trustee in respect of what is said to be their wilful and deliberate mismanagement and dereliction of duties. Ms Samootin seeks the removal of Ms Nash as the solicitor for the Official Trustee, so that some other solicitor should be appointed to act for the Official Trustee in relation to her bankruptcy. I should mention here that Ms Samootin made strong allegations against Ms Nash, but for reasons which I will refer to later, the allegations are unfounded. 8 The second order which I should mention is an order which Ms Samootin seeks that the Official Trustee seek leave in the Equity Division of the Supreme Court, in matter number 1973/01, for an order for sale of 24 Oxford Falls Road. In the course of the application, she also sought an order under section 66G of the Conveyancing Act 1919 (NSW), or an order that the Official Trustee seek such an order in the Supreme Court of New South Wales. 9 To understand the basis upon which the present orders are sought, it is necessary for me to trace the details of some part of the history of what I have called the ocean of litigation.

Samootin v Shea and Others (No 2) [2003] NSWSC 695 (Palmer J) 10 Palmer J, at [9] of his reasons for judgment, set out the essence of Ms Samootin's allegations. For present purposes, the first two dot points of that paragraph are relevant. They are, first, that the part of Ms Samootin's proportion of the proceeds of sale of 82 Waterview Street, Mona Vale, owned jointly by her and Mr Shea, were used by Mr Shea, Mr Deans and Loan Design in the purchase of the property at 24 Oxford Falls Road, Beacon Hill, in the name of Loan Design, without Ms Samootin's knowledge and consent. 11 Second, Ms Samootin alleged that part of her proportion of the proceeds of sale of the Mona Vale property was used in the purchase of 26 Oxford Falls Road, pursuant to an agreement or understanding between herself and Mr Shea that the two of them would be registered as proprietors of the property as joint tenants, but that without her knowledge and consent, Loan Design was registered as the sole proprietor. 12 Palmer J observed at [12] that at the commencement of the hearing, he sought to clarify the issues. It appeared to his Honour that Mr Shea, Mr Deans and Loan Design did not dispute and never had disputed that Ms Samootin's share of the net proceeds of sale of the Mona Vale property had been used in the purchase of numbers 24 and 26 Oxford Falls Road and that she had a proportionate beneficial interest in those properties. This was confirmed by Mr Shea and by counsel for Mr Deans and Loan Design. 13 His Honour observed at [13] that he spent a considerable amount of time explaining to Ms Samootin that there was no contest in the proceedings that she was entitled to a beneficial interest in the two properties, commensurate with the contribution which her share of the net proceeds of sale of the Mona Vale property had made to the equity in numbers 24 and 26 Oxford Falls Road. Notwithstanding this, his Honour said at [17], that he concluded that for reasons explained by him, he was obliged to hear the whole of the proceedings. 14 His Honour set out those facts which were not in dispute. Importantly, at [29], his Honour set out the precise details of the source and application of funds for the settlement of the purchase of the properties at numbers 24 and 26 Oxford Falls Road. I will refer to this again later. His Honour also set out at [38] a document signed by Mr Deans which acknowledged the contributions made by Ms Samootin and Mr Shea to the purchase of the properties at 24 and 26 Oxford Falls Road. 15 His Honour then set out in some detail Ms Samootin's account of the disputed facts, however, in his findings commencing at [65], his Honour came to the view that he could not accept Ms Samootin's account of the events. He set out his reasons in some detail. His Honour was of the view that there ought to be a declaration as to the respective interests of Ms Samootin, Mr Shea and Loan Design in the properties at 24 and 26 Oxford Falls Road and that there should be an enquiry before the Master in Equity and a taking of accounts between the parties to ascertain the respective interests of the parties. He said at [82] that when the enquiry and the accounts determined the interests of the parties in the properties, the terms of the declaration could be finalised.

Court of Appeal decision of 3 June 2004 16 Ms Samootin appealed to the Court of Appeal. The purported appeal was heard by Handley, Sheller and Ipp JJA. The reasons for judgment were delivered by Handley JA, with whom Sheller and Ipp JJA agreed. The Court was of the view that the appeal was incompetent, but their Honours granted leave to appeal against the orders made by Palmer J on 29 September 2003 which they considered to contain a number of difficulties and inconsistencies. The reasons given by Handley JA deal with the matters to be considered on the taking of accounts, including the necessary allowances to be made in the carrying out of that exercise.

Orders of Palmer J dated 28 June 2004 17 On 28 June 2004, Palmer J made orders which were apparently intended to give effect to the reasons for judgment of the Court of Appeal. His Honour's orders were entered on 4 August 2004. The orders included a declaration that Loan Design holds the properties at 24 and 26 Oxford Falls Road upon trust for Ms Samootin, Mr Shea and Loan Design with their respective interests being in proportion to the equity contributions made by them or on their behalf to the acquisition costs of the properties at 24 and 26 Oxford Falls Road. His Honour ordered that the matter be referred to the Master in Equity to enquire as to what the respective equity contributions and what the respective proportionate interests of the parties were. 18 His Honour also ordered that the matter be referred to the Master in Equity to enquire into and take accounts between Ms Samootin, Mr Shea and Loan Design, with respect to a number of matters, including the amount which Ms Samootin should reasonably pay for her own use and occupation of the property at 26 Oxford Falls Road.

Further applications to the Court of Appeal 19 Following upon the orders of 28 June 2004, Ms Samootin made a number of further applications to the Court of Appeal for a stay of the orders and for leave to appeal. I do not propose to set out in any detail the lengthy history of those applications. One of them was an application for a stay which was determined by Giles JA on 17 February 2005: see Samootin v Shea & Ors [2005] NSWCA 16. Giles JA observed at [63] that Ms Samootin's application was in large part misconceived and in whole without substance. His Honour said that he did not think Ms Samootin was entitled to any of the relief she sought. He observed that the waste of time and resources, and the unwarranted disruption and expense occasioned to the defendants was evident. 20 Another of the applications to the Court of Appeal was an application for leave to appeal which was determined by Giles and Bryson JJA on 16 May 2005. At [27] and [29], their Honours expressed the view that the matters put forward did not justify the grant of leave to appeal and they dismissed the application. 21 Before dealing with an application to the High Court, I should say that the lengthy history which has been put before me shows that all of the applications made by Ms Samootin to the Court of Appeal for a stay of the orders of Palmer J of 28 June 2004 or for leave to appeal have been dismissed.

High Court stay application 22 On 29 March 2005, Ms Samootin made an application in the High Court for a stay of the orders of Palmer J. She also apparently sought a stay of the orders of the Court of Appeal. The application was heard by McHugh J: see Samootin v Shea and Others [2005] HCATrans 181. McHugh J said at page 7 (line 150 to 155) that his view was that, having read the papers, Ms Samootin had no real prospects of success on an application for special leave to appeal because it was not the sort of case that the High Court would take on or could take on. 23 I do not seem to have been referred to a transcript of what happened on any special leave application, but it is sufficient to say that there is no suggestion that special leave to appeal was ever granted by the High Court.

Accounting before Hammerschlag J 24 The matter came before Hammerschlag J on 16 and 17 July 2007 for determination of the matters which had been referred by Palmer J to the Master in Equity. That is to say, Hammerschlag J determined the accounting between the parties and the respective proportionate interests in the properties at 24 and 26 Oxford Falls Road. His Honour made orders on 17 July 2007. Those orders were subsequently amended pursuant to the slip rule. 25 Although Ms Samootin describes the orders of Hammerschlag J as, "Consent Orders" it is plain that they are not consent orders. It is true that the orders of 17 July 2007 were signed by Mr Nash, Mr Shea and counsel for Mr Deans and Loan Design, but that does not mean they were consent orders. I have read the three judgments of Hammerschlag J, delivered on 16 and 17 July 2007. It is plain from reading those judgments that the orders of 17 July 2007 were made following upon legal argument before his Honour. They were signed by the parties or their legal representatives in the usual way, only to acknowledge the form of those orders, rather than the content of the orders, which was arrived at after full argument. 26 Hammerschlag J declared in order 5 that Loan Design held the properties at 24 and 26 Oxford Falls Road upon trust for Ms Samootin, Mr Shea and Loan Design in the following proportions: · Ms Samootin: 15.2%; · Mr Shea: 15.2%; · Loan Design: 69.6%. 27 His Honour also dealt in orders 6 and 7 with various allowances to be made by the parties in respect of occupation fees and other matters referred to in the orders of Palmer J. Three of those allowances as declared or ordered by Hammerschlag J are important. 28 First, Ms Samootin was ordered to pay to Loan Design an amount of nearly $126,000 for her use and occupation of 26 Oxford Falls Road, during the period commencing from 29 October 1998 to 17 July 2007 and thereafter at a rate of near $280 per week. Second, Ms Samootin was ordered to pay to Mr Shea an amount of approximately $27,000 for her exclusive use and occupation of 26 Oxford Falls Road during the same period. Third, Ms Samootin was ordered to allow to Loan Design an amount of approximately $48,000 as contributions to the mortgage payments made by Loan Design. 29 It will be seen, therefore, that the allowances ordered by Ms Samootin to be made exceeded $200,000. It is true that other allowances were referred to and ordered to be made by Mr Shea and Loan Design, but the substantial amount of the allowances ordered to be made by Ms Samootin is a significant matter in the accounting exercise. 30 This is of particular importance because in [8] of his orders, Hammerschlag J declared that the amounts to be allowed by Ms Samootin and the other parties were to be charged upon their respective interests in the properties; that is to say, the amount of approximately $200,000 ordered to be allowed by Ms Samootin was a charge against her 15.2% interest in the properties at 24 and 26 Oxford Falls Road.

Events following the orders of Hammerschlag J 31 There has been considerable relevant correspondence in the period following the orders made by Hammerschlag J. The correspondence and relevant events are set out in an exhibit to the affidavit of Mr Karolyi, who is the Senior Assistant Official Receiver for the Bankruptcy District of New South Wales. He has the day-to-day care and control of the management of the bankrupt estate of Ms Samootin. It is not necessary to set out all of the events, but I will refer to the principal matters in chronological order. 32 On 12 November 2007, Messrs Derham Houston Lawyers wrote to Ms Nash reporting on the auction of the properties at 24 and 26 Oxford Falls Road. Derham Houston reported that the property at 26 Oxford Falls Road was sold for $738,000, but there was only one bid of $600,000 for number 24, and it was passed in at the auction. 33 On 14 December 2007, Derham Houston wrote to Ms Nash referring to earlier correspondence and setting out a list of directions for payments to take place on the settlement of 26 Oxford Falls Road. The cheques which were requested included a cheque to Loan Design for approximately $168,000, and a cheque to Derham Houston for nearly $99,000. The total of those two cheques was approximately $267,276. However, on 17 December 2007, Ms Nash wrote to Derham Houston, stating that she did not agree to Loan Design being paid funds out of the proceeds of sale of the property at 26 Oxford Falls Road. 34 The same day, Derham Houston replied to Ms Nash, stating that they would proceed to pay all of the surplus from the sale into a controlled moneys account. That surplus is, as I have stated above, the amount of approximately $267,000. The lengthy correspondence in the exhibit demonstrates that this money has been paid into the controlled moneys account. 35 As I have said above, the property at 24 Oxford Falls Road was not sold at auction. On 20 June 2008, Palmer J made orders authorising Loan Design or Mr Deans to purchase part of the trust estate which Loan Design held on the trusts referred to above in respect of the property at 24 Oxford Falls Road. His Honour's orders established the machinery for the purchase and for establishing the purchase price. The entitlement of Loan Design or Mr Deans to purchase the properties was to be exercised within seven days of the receipt of a written valuation report. 36 On 19 September 2008, Ms Nash wrote to Derham Houston, pointing out that Mr Deans or Loan Design had to elect to purchase the property at 24 Oxford Falls Road and that no election had been made. Ms Nash said: Please do so by 5.00pm today. 37 Not withstanding Ms Nash's best efforts, neither Mr Deans nor Loan Design purchased the property pursuant to the leave granted by Palmer J. On 12 March 2009, Ms Nash wrote to Derham Houston stating that since the property at 24 Oxford Falls Road had not been purchased, she was seeking instructions to re-list the matter with a view to obtaining orders for its sale. However, for reasons which are stated in Mr Karolyi's affidavit evidence, no such application has been pursued.

MR KAROLYI'S EVIDENCE 38 Mr Karolyi's evidence was set out in an affidavit of 9 April 2009. He says at [12] that the Official Trustee does not expect to receive any funds on the sale and account for 24 and 26 Oxford Falls Road pursuant to the orders made by Hammerschlag J. This is explained further in [21] in which Mr Karolyi sets out the reasons why he has not taken any steps to approach the Supreme Court for orders for sale of the property. He observes that the Official Trustee has no prospect of any payment to the estate. 39 He points out that the Official Trustee has paid nearly a hundred thousand dollars in legal fees to the date of the affidavit in the numerous applications made by Ms Samootin to the courts. He estimates the amount required to discharge Ms Samootin's bankruptcy at in excess of $660,000. The principal components of this are the claim of the petitioning creditors in an amount of $467,000 and the amount of nearly $100,000 being the Official Trustee's legal costs incurred to date.

DISCUSSION 40 The essence of Ms Samootin's submissions was that the orders made by Hammerschlag J wrongly applied the principles stated by the High Court in Calverley v Green (1984) 155 CLR 242. Ms Samootin submitted that on a proper application of the principles, Mr Deans or Loan Design ought to have had only 50% of the beneficial interest in the properties at 24 and 26 Oxford Falls Road with the remaining 50% to be divided equally between Ms Samootin and her former husband. Ms Samootin accused Ms Nash of wrongfully consenting to the orders made by Hammerschlag J which declared the interest of Ms Samootin and Mr Shea in the proportions that I have mentioned above. 41 Ms Samootin also accused Ms Nash and the Official Trustee of deliberately increasing the amount contributed by Mr Deans in calculating the net amount due to Ms Samootin on the accounting so as to ensure that Ms Samootin received nothing from the taking of accounts between the parties. 42 In addition, Ms Samootin complained that there has been delay in finalising the administration of her estate, in particular, the property of 24 Oxford Falls Road which has not been sold. She submitted that Hammerschlag J should have made an order for sale and as I have said above, she sought orders under section 66G of the Conveyancing Act or an order compelling the official receiver to seek such orders from the Supreme Court. Ms Samootin accused Ms Nash and the Official Trustee of breach of their duties under section 19 of the Bankruptcy Act in failing to seek such orders. 43 The short answer to Ms Samootin's complaint is that by the time the sequestration order was made in May 2006, the decision of Palmer J had been handed down and all avenues for appeal had been exhausted. The orders made by Hammerschlag J merely gave effect to the orders of Palmer J of 28 June 2004 which reflected the reasons and orders of the Court of Appeal as explained by Handley JA. 44 Hammerschlag J carried out the accounting which had originally been referred to the Master in Equity. His Honour determined the proportionate interests of the parties in the properties at 24 and 26 Oxford Falls Road and set out the allowances to be made against those shares in respect of occupation fees, mortgage contributions and the other matters referred to in his Honour's orders. The determination of the proportionate interests of the parties properly reflected the principle stated in Calverley v Green and the factual findings made by Palmer J. 45 The findings made by Palmer J as to the application of the settlement moneys were set out in [29] of his reasons of 5 August 2003, to which I have referred above. What is of particular importance in those findings is that an amount of approximately $550,000 of the purchase price of the properties was provided by the St George Bank pursuant to a mortgage procured by Mr Deans. The balance of the purchase price of $735,000 plus legal expenses and stamp duty came from the proceeds of sale of the Mona Vale property. This explains why the interest of Ms Samootin and Mr Shea was diluted to 15.2 per cent each. I can see no error in this and even if there were an error, it would be immune from attack because it is reflected in the orders of the Supreme Court of New South Wales. 46 Ms Samootin submitted that those orders are not final orders, but even if they are interlocutory, there is no basis for the suggestion that they may be set aside. An interlocutory order is not a moving feast. It would be appropriate to review it where there are changed circumstances but this does not mean that an interlocutory order can be attacked at first instance upon an allegation that it was wrongly made: Adam P. Brown Male Fashions Proprietary Limited v Phillip Morris Incorporated (1981) 148 CLR 170 at 178. 47 The other answer to Ms Samootin's application is that which appears in Mr Karolyi's evidence. It is that, even if it were open to me to order the Official Trustee to seek an order for sale of the property at 24 Oxford Falls Road, there is no utility in doing so. This is principally because the Official Trustee would obtain nothing from the sale of the property because it appears that Ms Samootin's 15.2% equity is entirely wiped out by the contributions or allowances she is required to make for occupation, fees and mortgage repayments. As I have said, those contributions total approximately $200,000 and they are charged against her 15.2% interest in the property. 48 Furthermore, the Official Trustee has no funds to pursue such an application. He has already incurred nearly $100,000 in legal fees in the numerous applications made by Ms Samootin. That amount will have increased as a result of this hearing. There is nothing to suggest that Ms Samootin is capable of providing funds necessary to pursue an application under section 66G of the Conveyancing Act. 49 The total of the Official Trustee's legal expenses and the claim of the petitioning creditors, together with the other expenses referred to by Mr Karolyi, are well over $600,000. The only assets of the bankrupt estate are the sum of approximately $267,000 in the controlled moneys account and Ms Samootin's interest in the property at 24 Oxford Falls Road which now appears to have no net worth. As Mr Karolyi says in his affidavit, his analysis shows that there is no prospect of any payment to the estate, even if an order for sale of 26 Oxford Falls Road, were made and carried out. The valuations of the properties bear this out. 50 There are two further points to be dealt with. First, Ms Samootin wrongly contended that Ms Nash had permitted Mr Deans and Loan Design to appropriate the amount of approximately $267,000 from the proceeds of sale of 26 Oxford Falls Road. She referred to the letter from Mr Deans' solicitor of 14 December 2007, but simply refused to acknowledge that Ms Nash informed those solicitors that she did not agree to Loan Design being paid those moneys. This was stated in Ms Nash's letter of 17 December 2007, to which Ms Samootin turned a blind eye. So too did Ms Samootin ignore the letter of the same date from Derham Houston Lawyers which acknowledged that they would pay the funds into a controlled moneys account. 51 The second point is that it is true, as Ms Samootin contends, that Mr Deans is still in occupation of 24 Oxford Falls Road, which has not been sold. No doubt this is of concern to Ms Samootin as a personal matter because she has been removed from the home at 26 Oxford Falls Road which was purchased as a replacement or part replacement for her former matrimonial home at Mona Vale. This result is merely a consequence of Ms Samootin's failure in the litigation, the effects of which have been compounded by the legal expenses which she has incurred in the many futile applications made by her since 2003. 52 Finally, I should say that I have carefully considered all of the submissions made by Ms Samootin in her oral and written submissions. They are entirely without foundation. The order that I will make is that the application be dismissed.

COSTS 53 Following the delivery of my reasons I heard argument on the question of costs. Ms Nash seeks an order for costs against Ms Samootin personally, upon the basis that there may, in due course, be funds coming to her from her proceedings in the Family Court. The Official Trustee is, of course, entitled to an indemnity for his costs out of the trust estate. But Ms Nash does not seek any order to give effect to the usual orders made in cases such as Lazar v Seccombe [2005] FCA 1652, [32]. 54 Ms Samootin resists this order. She says that it was necessary for her to come to this court, in order to determine what may or may not happen in relation to the sale of 24 Oxford Falls Road. As I have said, she is concerned about the fact that the property has not been sold. She wanted to have the position clarified before the matter comes to the Family Court, on 6 July 2009. 55 I should add that it may be possible, although I express no view whatsoever as to this, that the Family Court may be able to make some order in respect of Ms Samootin's 15.2% interest in 24 Oxford Falls Road, which might bring to finality that aspect of this saga. Nevertheless, Ms Samootin has made an application to this court which I have found to be one which had no prospects of success. In the circumstances explained in my reasons for judgment it seems to be me to be appropriate that I should make a costs order personally against Ms Samootin. 56 Whether there will in due course be funds available to meet that order will turn on the outcome of the Family Court proceedings.

FUTURE APPLICATIONS BY MS SAMOOTIN 57 Ms Nash also requested me to make an order that Ms Samootin not be permitted to file any further application in relation to the subject matter of these proceedings without the leave of the court. Ms Samootin resisted the making of such an order. 58 The long history of these proceedings and the numerous futile applications made by Ms Samootin in this court and in the Supreme Court illustrates the waste of time and resources which have been devoted to this matter. An example of judicial observation about this is to be found in the remarks of Giles JA in the New South Wales Court of Appeal to which I referred above. I do not propose to make the order sought, although there is substantial force in what Ms Nash says. 59 What I wish to say is that I urge upon Ms Samootin the need for a practical end to the litigation, and I emphasise that the unnecessary incurring of additional costs for the parties and the waste of public resources must come to an end. Ms Samootin still has the Family Court proceedings to be determined in July, and at least those proceedings will involve one of the parties to whom she has subjected the court processes and who has been involved in the matter since its inception. 60 As I have said, it may be that whatever is left to be mopped up from this tragic saga can be dealt with in the Family Court. I would strongly hope that the time of this court and the time of the legal advisers for the Official Trustee and the Official Trustee himself ought not be further occupied by further unnecessary legal skirmishing. I certify that the preceding sixty (60) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.

Associate: Dated: 21 April 2009 The Applicant was self-represented.

Solicitor for the Respondent: Sally Nash & Co

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