Scott (Trustee), in the matter of Stolyar (Bankrupt) v Stolyar

Background 5 This proceeding has a long history. It was commenced by the Trustee in 2019. The respondents to the proceeding are Mrs Stolyar and Fanchel Pty Ltd, a company in Mrs Stolyar's control. 6 The proceeding was heard in 2021 and on 16 June 2022 I delivered my reasons and made orders requiring the parties to confer and provide draft orders to my Associate giving effect to those reasons: see Scott (Trustee), in the matter of Stolyar (Bankrupt) v Stolyar [2022] FCA 691 (Stolyar (No 1)) 7 In accordance with the orders made by the Court on 16 June 2022 the parties provided proposed competing orders and short submissions identifying their respective differences and on 6 September 2022 the Court made declarations and orders giving effect to my earlier published reasons (6 September 2022 Orders). Those orders included: (1) a declaration that immediately before the sale of the property known as 2C Dumaresq Road, Rose Bay being folio identifier A/33652 and C/33652F (Rose Bay Property) on 29 April 2020 Mrs Stolyar held 38.1% of the legal title of the Rose Bay Property on trust for the Trustee (Declaration 5); (2) a declaration that upon completion of the sale of the Rose Bay Property on 29 April 2020 Mrs Stolyar received 38.1% of its net sale proceeds (Rose Bay Proceeds) as resulting trustee for the Trustee (Declaration 6); and (3) an order that an accounting be taken of the net sale proceeds of the Rose Bay Property and that Mrs Stolyar pay the Trustee 38.1% of the net sale proceeds and pre-judgment interest upon that amount from 29 April 2020 calculated in accordance with the Court's Practice Note GPN-INT (Order 31); and (4) the accounting the subject of, among others, Order 31 be referred to a Registrar to take the accounts pursuant to r 30.55 of the Rules (Order 33). 8 It was not in dispute that the Rose Bay Property was sold during the course of the proceeding for $16.6 million and that the proceeds after sale costs and settlement adjustments were $16,436,835.80. 9 In accordance with Order 33 the accounting relating to the Rose Bay Property the subject of Order 31 was referred to a Registrar of the Court and on 27 May 2024 Judicial Registrar Segal issued a certificate pursuant to Orders 31(a) and 33 of the 6 September 2022 Orders and r 30.55(2) of the Rules certifying that in relation to the sale on 29 April 2020 of the Rose Bay Property: 1. the net sale proceeds were $16,436,835.80; 2. 38.1% of the said net sale proceeds is $6,262,434.44; and 3. the First Respondent is liable to pay the amount of $6,262,434.44 to the Applicant. The Registrar also issued reasons for reaching that conclusion. 10 In the First Stolyar IA Mrs Stolyar seeks a "review" in relation to the issue of that certificate. 11 The 6 September 2022 Orders also include orders that Mrs Stolyar pay the Trustee $1,011,302.07 and Mrs Stolyar and Fanchel jointly and severally pay the Trustee a further $4,533,480.39 (Orders 26 and 28). 12 On a date prior to 14 August 2024 the Australia and New Zealand Banking Group Limited (ANZ) received a garnishee order issued by the Court in this proceeding which attached "credit funds held in" Mrs Stolyar's accounts held with the ANZ "to satisfy the outstanding debt" which was recorded as $6,064,199.53. On 14 August 2024 ANZ informed Mrs Stolyar that: A debit in the amount of $61,246.39 has been processed to your accounts 433780217 today, and as directed by the Court, a EFT in the amount of $61,246.39 has been forwarded directly to the ANDREW SCOTT as Part settlement in respect of this order. ANZ has no alternative but to debit funds from your account(s) in accordance with this legal order. Should you wish to discuss this matter further, contact should be made with the Federal Court of New South Wales from which the order originated. 13 On 3 October 2024 Mrs Stolyar sent an email to the solicitors for the Trustee in the following terms: I was today informed that you have caused my bank ANZ to take out over $61,000 from my account, the funds that I need for living expenses and legal fees. Please have the funds refunded to my account immediately as you can not have any claim to those funds. Please advise at your earliest convenience when those funds will be credited back into my account. 14 By letter dated 10 October 2024 the Trustee's solicitors informed Mrs Stolyar that the funds would not be repaid and outlined why that was so including by providing an estimate of Mrs Stolyar's liabilities to the Trustee arising from the 6 September 2022 Orders. 15 By the Second Stolyar IA, Mrs Stolyar seeks repayment of the funds paid by the ANZ to the Trustee pursuant to the garnishee order.

The First Stolyar IA 16 As set out above by the First Stolyar IA Mrs Stolyar seeks a "review" of the decision by Registrar Segal to issue the Certificate. The Trustee's IA is responsive to the First Stolyar IA and only arises for determination if Mrs Stolyar is successful in her application and the Court accepts her interpretation of the meaning of "net proceeds of sale" as used in Order 31 of the 6 September 2022 Orders. 17 The 6 September 2022 Orders provided for an accounting to be taken of the net sale proceeds of the Rose Bay Property pursuant to r 30.55 of the Rules. That rule provides that a party may apply to the Court for an order that the Registrar take an account or hold an inquiry under Div 30.5 of the Rules: subr (1). If the Court makes an order under r 30.55(1) the Registrar will take the account or hold the inquiry and give a certificate to each party stating the amount due to any party and the person liable to pay the amount: subr (2). 18 Rule 30.56 of the Rules provides that a party who wants to object to a Registrar's certificate must, within 7 days after receiving the certificate, give the Registrar a notice objecting to the certificate and serve a copy of the notice on each other party. 19 Rule 30.57 of the Rules sets out the procedure where a notice is given pursuant to r 30.56. It provides that a party who has given notice under r 30.56 must, within 21 days after giving notice, apply to the Court for an order that the Court take the account or hold the inquiry. 20 While there was no evidence before me, the Trustee accepted that Mrs Stolyar had by an email sent on her behalf by her son, Ian Stolyar, in effect given the requisite notice under r 30.56 after the issue of the certificate. 21 The First Stolyar IA seeks a review of the issue of the certificate. While not the process followed by Mrs Stolyar, the Trustee accepts that the First Stolyar IA should be treated as an application under r 30.57 of the Rules for the Court to take the account. Similarly, the Trustee does not take issue with the time of the filing of the First Stolyar IA which, even assuming that notice was given under r 30.56 on the last possible day, 3 June 2024, was two days out of time. 22 Given the Trustee's position, Mrs Stolyar's health as disclosed to the Court and that she is unrepresented (albeit that she has the assistance of her son), I will grant the extension of time sought to file the First Stolyar IA. 23 Further and in any event, having regard to the terms of r 30.57 and the 6 September 2022 Orders, I consider that the First Stolyar IA should proceed as if it were an application for review and that r 30.57 of the Rules in effect requires that there be a taking of accounts afresh by way of a hearing de novo.

Consideration 24 The question to be resolved is whether "net sale proceeds" as used in Order 31 means the gross proceeds of sale: (1) net of sale costs and settlement adjustments (as contended by the Trustee); or (2) net of those costs and repayment of all amounts paid by Mrs Stolyar in relation to the purchase of the Rose Bay Property (as contended by Mrs Stolyar). Subject to resolution of that question, the accounting exercise is straightforward. 25 In support of her construction of the term "net sale proceeds" Mrs Stolyar submits that, in making the 6 September 2022 Orders, the Court "specifically intended that the Accounting of profits only include Net sale Proceeds of the Rose Bay Property". She submits that in real estate "net proceeds of sale" means the sale price of a property less: (1) mortgage debts including early redemption penalties; (2) other charges secured over the property; (3) real estate agent's commission; (4) conveyancing costs and disbursements; (5) "down payments" (or deposits); and (6) any principal repaid. 26 Mrs Stolyar relies on Order 2 of the Orders made by consent on 23 April 2020 before the final hearing which permitted the completion of the sale of the Rose Bay Property. That Order provided: The first respondent shall apply the proceeds of sale of [the Rose Bay Property] as follows: (a) to sales agent's commission and expenses of the sale; (b) to the conveyancer's costs and disbursements of the sale; (c) to the discharge of the mortgage on the title to Rose Bay to the Commonwealth Bank of Australia; (d) to the discharge of the mortgages registered on the title to the properties registered in the name of the first respondent at: (i) 701/152-162 Campbell Parade, Bondi Beach (Campbell Parade); (ii) 27/26 Ocean Street, North Bondi (27/26 Ocean Street); (iii) 11/2 Ocean Street, North Bondi (11/2 Ocean Street); (iv) 5/41 Francis Street, Bondi (5/41 Francis Street), (together the First Respondent's Remaining Properties). 27 Mrs Stolyar submits that the mortgages included in Order 2 set out above were $5 million secured against the Rose Bay Property, $3.6 million secured against a property situated at Campbell Parade, Bondi (Campbell Parade mortgage) and $1.48 million secured against properties situated at 11/2 Ocean Street, Bondi and 5/41 Francis Street, Bondi (Adelaide Bank mortgage). 28 Mrs Stolyar contends that in addition to deducting the amounts paid out on the mortgages referred to in the preceding paragraph, the following amounts should be deducted from the proceeds of sale for the Rose Bay Property: (1) early repayment fees of $41,323.09; (2) a "down payment" or "deposit" of $535,000 which was paid on 24 November 2014; and (3) monies borrowed from Ms Nguyen's family to complete the purchase of the Rose Bay Property in the sum of $760,002.97. Mrs Stolyar does not believe that it is controversial that she repaid those monies. 29 Accordingly, based on Mrs Stolyar's interpretation of the meaning of the term "net sale proceeds" in Order 31 the following amounts are to be deducted from $16,436,835.80 being the proceeds of sale of the Rose Bay Property after deduction of sale costs and settlement adjustments: Rose Bay mortgage $5,000,000 Campell Parade mortgage $3,600,000 Adelaide Bank mortgage $1,480,000 Deposit (down payment) $535,000 Early repayment fee $41,323.09 Private loan $760,002.97 Total $11,416,326.06

30 Applying these deductions Mrs Stolyar submits that the net sale proceeds for the Rose Bay Property are $5,020,509.74. 31 Mrs Stolyar also submits that, in any event, the Trustee is only entitled to 11.7%, rather than 38.1% as found by the Court, of the net sale proceeds of the Rose Bay Property. In support of that submission Mrs Stolyar refers to Scott (Trustee), in the matter of Stolyar (Bankrupt) v Stolyar (No 6) [2024] FCA 379 at [40], [44] and [37]. Mrs Stolyar submits that it follows from Stolyar (No 6) that $3,210,000 (referred to at [37]) belonged to her and refers to the facts she relies on in support of that contention. 32 Mrs Stolyar submits that the sum of $3,029,000 which was a part of the $3,600,000 drawn down from the Campbell Parade mortgage, was for her benefit and allowed her to complete the purchase of the Rose Bay Property, and only the balance, $507,100, which was applied to purchase of the Rose Bay Property belonged to the Bankrupts. Mrs Stolyar contends that therefore the percentage of the Rose Bay Property that was held on resulting trust by her for the bankrupts was 5.1% plus 6.6% for the May Deposits (as defined in Stolyar (No 1)). On that basis Mrs Stolyar submits that she holds 11.7% of the net sale proceeds on trust for the Bankrupts which amounts to $587,399.64 (11.7% x $5,020,509.74). 33 When considered in isolation, as the Trustee accepted, the meaning of the term "net sale proceeds" is somewhat ambiguous. It is clear based on the authorities that where orders are ambiguous a court may have regard to the judgment to which those orders are intended to give effect in resolving the ambiguity: see Athens v Randwick City Council (2005) 64 NSWLR 58 at [129]-[140]; Lim v Comcare [2019] FCAFC 104; (2019) 165 ALD 217 at [40]-[42]. Where that is so, the judgment to which the orders are intended to give effect is the primary point of reference for the court: see Athens at [140]. 34 There is also ample authority for the proposition that where a court construes orders that are ambiguous, it may have regard to surrounding circumstances in doing so: see Shout Rocks Cafes Pty Ltd v City of Port Philip [2018] VSC 120 at [14]; Nokia Corporation v Liu (2009) 179 FCR 422 at [30]-[31]. Relevantly, a court may have regard to the proceedings giving rise to the judgment and in particular the pleadings which defined the issues to be resolved: Athens at [140]; Hamersley Iron Pty Ltd v National Competition Council [2008] FCA 598; (2008) 247 ALR 385 at [85]-[86]. 35 Thus in construing the term "net sale proceeds' as used in Order 31, it is appropriate first to refer to the findings in Stolyar (No 1). Relevantly: (1) the Rose Bay Property was purchased for a total of $11,405,627.06: Stolyar (No 1) at [503]; (2) the Bankrupts contributed $3.6 million to the purchase of the Rose Bay Property. That amount came from the "Point Piper Repayment Amount": Stolyar (No 1) at [512]; (3) the May Deposits, being the amount of $760,002.97 described by Mrs Stolyar as a private loan (see [29] above) were funds advanced to the Bankrupts or to Ms Nguyen alone: see Stolyar (No 1) at [558]-[565]; and (4) as the Bankrupts contributed the sum of $3.6 million and the May Deposits to the purchase of the Rose Bay Property, it follows that Mrs Stolyar holds 38.1% of that property on trust for them. 36 The relevant transactions in relation to the Campbell Parade mortgage were explained by the Trustee in his affidavit affirmed on 29 January 2024. The Trustee explained that there were two accounts: one which he describes as the Campbell Parade Mortgage Account, which was the loan associated with the Campbell Parade mortgage, and one which he describes as the Campbell Parade Mortgage Offset Account, which was an offset account associated with the Campbell Parade Mortgage Account. He explained the transactions on these accounts insofar as they are relevant and were the subject of findings in Stolyar (No 1). Among other things the Trustee explains that: (1) on 20 May 2009 the Bankrupts repaid $2.2 million of the amount drawn down from the Campbell Parade Mortgage Account: Stolyar (No 1) at [480]; (2) on 29 October 2010 a payment of $1.1 million was made into the Campbell Parade Mortgage Account. That payment was made by the Bankrupts: Stolyar (No 1) at [498]; (3) on 5 November 2010 and 31 March 2011 there were redraws of $1.3 million and $1,732,000 respectively from the Campbell Parade Mortgage Account; (4) the amounts referred to in the preceding subparagraph were applied towards the purchase of a property by the Bankrupts at 5/6 Buckhurst Avenue, Point Piper (Point Piper Property): Stolyar (No 1) at [449]; (5) those amounts were in part payment of the moneys Mrs Stolyar owed to the Bankrupts by reason of their deposits into the Campbell Parade Mortgage Account referred to at subparas (1)-(2) above: Stolyar (No 1) at [499]; (6) on 19 December 2013 $3,932,500 (referred to as the Point Piper Repayment Amount) was paid into the Campbell Parade Offset Account from the sale proceeds of the Point Piper Property. The Point Piper Repayment Amount was received and held by Mrs Stolyar on trust for the Bankrupts: Stolyar (No 1) at [464], [500]; (7) there were then the following transactions in the Campbell Parade Mortgage Offset Account: (a) on 9 March 2015 $3 million was transferred out of that account to the Campbell Parade Mortgage Account; (b) on 24 March 2015 that amount and an additional $29,000 was transferred back into the Campbell Parade Mortgage Offset Account, making the balance in that account $3,707,128.42; (c) on 18 May 2015 $3.6 million was withdrawn from the Campbell Parade Mortgage Offset Account. It was not in dispute at the trial that the $3.6 million, traceable to the Point Piper Repayment Amount, was applied to the purchase of the Rose Bay Property; and (8) as the Point Piper Repayment Amount was held on trust for the Bankrupts, the payment of $3.6 million was held to be a contribution by the Bankrupts to the purchase of the Rose Bay Property which gave rise to a resulting trust in their favour: Stolyar (No 1) at [512]. 37 As for the May Deposits, as set out above, the May Deposits were applied towards the purchase of the Rose Bay Property. The Court found in Stolyar (No 1) that they were a loan to the Bankrupts or Ms Nguyen alone, not a loan to Mrs Stolyar. 38 Thus, the total amount found to be contributed to the purchase of the Rose Bay Property by the Bankrupts was $4,360,002.97 or 38.1% of the purchase price. A declaration was made that Mrs Stolyar held 38.1% of the Rose Bay Property on trust for the Trustee. 39 The balance of the purchase price for the Rose Bay Property was paid by Mrs Stolyar but in doing so she obtained funds through secured loans, referred to as the Rose Bay mortgage and the Adelaide Bank mortgage (see [29] above). 40 Upon publication of the Court's reasons the parties were ordered to confer and agree propose orders giving effect to the reasons or, if they could not agree, to provide their proposed draft orders together with submissions explaining their respective draft orders and the differences. The parties could not agree on all orders and thus they provided their competing drafts and submissions. In relation to the Rose Bay Property: (1) the Trustee proposed that Mrs Stolyar be ordered to pay $6,324,600 which was his proportionate share of the $16.6 million for which the Rose Bay property as sold plus interest from 29 April 2020; and (2) Mrs Stolyar and Fanchel submitted that: 9 The main point of disagreement between the parties is whether proposed order 6 ought to identify a dollar figure ($6,324,600 being 38.1% of the sale price of the Rose Bay Property) or a percentage figure (38.1% of the sale proceeds of the Rose Bay Property) for the portion of the sale proceeds of the Rose Bay Property declared to be held on resulting trust for the Applicant. The Applicant contends for the dollar figure whereas the respondents contend for a percentage figure which properly gives effect to the Reasons. 10 The Respondents submit that the dollar figure contended for by the Applicant fails to account for the adjustments made to the sale proceeds upon settlement. This is an accounting exercise that the parties will need to undertake. It follows that the appropriate form of order, consistent with the Reasons, is to express the portion of the Rose Bay Property held on resulting trust as a percentage of the net sale proceeds, after all adjustments. … 28 The Respondents seek proposed order 27A which requires the Second Respondent to account to the Applicant for the Rose Bay Proceeds. An accounting is necessary as the Rose Bay Proceeds are defined as the sum received by the First Respondent on trust for the Applicant, not the net sale proceeds following the necessary adjustments at settlement. 41 In light of the above and the context in which Order 31 was made, it is clear that the meaning of net sale proceeds is as contended for by the Trustee. That is the gross proceeds of sale net of sale costs and settlement adjustments. Mrs Stolyar's contended for construction amounts to a contention that the Trustee is entitled to 38.1% of the capital gain or profit on the sale of the Rose Bay Property. That is not the meaning of "net sale proceeds" as used in Order 31. 42 As set out above, it is common ground that the proceeds of sale of the Rose Bay Property after sale costs and settlement adjustments were $16,436,835.80. I have found that the amounts set out at [29] above, which Mrs Stolyar contends must be deducted from $16,436,835.80 before determining the share of the net sale proceeds to which the Trustee is entitled, are not to be included in the Court's accounting exercise in this case. Accordingly, Mrs Stolyar holds $6,262,434.44 of the net sale proceeds of the Rose Bay Property on trust for the Trustee (38.1% x $16,436,835.80). 43 Given that conclusion it is not necessary for me to consider the relief sought in prayers 1 and 3 of the Trustee's IA. An order should be made in accordance with prayer 2(a) of the Trustee's IA that upon the Court taking an account Mrs Stolyar is to pay the Trustee $6,262,434.44 and pre-judgment interest on that amount from 29 April 2020 calculated in accordance with Practice Note GPN-INT. The First Stolyar IA should be dismissed.

Second Stolyar IA 44 As set out above by the Second Stolyar IA Mrs Stolyar seeks return of the sum of $61,246.39 which was debited from her ANZ account pursuant to a garnishee order issued by the Court. 45 Mrs Stolyar submitted that the Court should make the order she sought for two reasons. First, she is effectively homeless and needs the funds to pay rent and secondly, because Mrs Stolyar has identified some inconsistencies between, as I understand it, the findings in Stolyar (no 1) and Stolyar (No 6) and requires funds to pay lawyers to assist her. Mrs Stolyar was saving money for that purpose. In addition, Mrs Stolyar believed that the judgment debt would be repaid from the sale of another property, referred to as the Longworth Avenue Property. She submitted that the reason why the Trustee sought an order for possession of that property was to enable the judgment to be satisfied. 46 In Fitz Jersey Pty Ltd v Atlas Construction Group Pty Ltd (2017) 94 NSWLR 606 the New South Wales Court of Appeal considered the enforcement of a determination by an adjudication under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act). One of the questions to be resolved concerned a garnishee order that had been issued and executed in favour of the claimant builder and whether the primary judge had erred in refusing equitable relief. 47 Relevantly, in that case when the adjudicator's determination was not paid within the time allowed under the SOP Act the builder registered it and obtained a garnishee order directed to the developer's bank. Prior to the registration of the adjudicator's determination as a judgment, the developer commenced a proceeding in the Supreme Court of New South Wales seeking to set aside the determination but did not seek interlocutory relief, nor an undertaking from the builder not to take steps to enforce the determination. On learning of the payment out if its bank account, the developer filed a notice of motion in the proceeding in which the garnishee order was obtained seeking that the garnishee order be set aside and that the builder repay the amount paid from its bank account. The primary judge dismissed that motion primarily because the requirement to repay the money involved a mandatory injunction and thus equitable relief. The relief was refused because the developer had not taken timely steps to protect its position and there was no evidence that the builder would not be able to repay the monies if called upon to do so. 48 Justice Basten (with whom Beazley ACJ agreed) considered the refusal by the primary judge to set aside the garnishee order at [84]-[86]. In doing so his Honour observed at [86]: It remains to note that the court was referred to no case which involved a grant of equitable relief to mandate repayment of a sum acquired pursuant to an executed garnishee order, assuming that there were grounds to set the order aside. The result is that no error of principle has been identified which would warrant interference with the judge's refusal to exercise a discretionary power on equitable grounds. 49 To like effect, counsel for the Trustee informed the Court that he could not identify any case which involved a grant of relief or required the repayment of monies to a judgment creditor where those monies were obtained pursuant to a garnishee order. 50 Mrs Stolyar does not provide any principled basis on which she seeks repayment of the monies paid from the ANZ Account. She refers to her personal circumstances, which are understandably difficult, but which do not provide a basis for the Court to require repayment of the monies paid to the Trustee pursuant to the garnishee order. There is no suggestion that the garnishee order was improperly obtained. 51 Indeed, the Trustee has a significant judgment in his favour recorded in the 6 September 2022 Orders. According to the evidence before me the Trustee calculated the amount owing by Mrs Stolyar pursuant to those Orders to be in the order of $17.4 million as at 10 October 2024. There is no suggestion that Mrs Stolyar will pay that amount and no evidence that she has the ability to do so. 52 In the circumstances the relief sought by Mrs Stolyar in the Second Stolyar IA must be refused and that application dismissed.

Conclusion 53 I will make orders in accordance with [22], [43] and [52] above including, given her lack of success, orders that Mrs Stolyar pay the Trustee's costs of the First Stolyar IA and the Second Stolyar IA. The Trustee's IA should otherwise be dismissed with no order as to costs. I certify that the preceding fifty-three (53) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Markovic.