Stolyar v Scott

1. The application for leave to appeal be dismissed with costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

PERRAM J: 1 Ms Faina Stolyar applies for leave to appeal from orders made on 18 April 2024. I permitted Ms Stolyar to be represented by her son, Mr Ian Stolyar, on the application for leave to appeal. The respondent, Mr Scott, is the trustee of Mr Ian Stolyar's bankrupt estate and also of the bankrupt estate of his wife, Ms Beth Nguyen. Meaning no disrespect, I will refer to them as Ian and Beth. 2 Leaving aside the costs orders made, the orders the subject of the application are as follows: 1. The applicant is entitled to be exonerated by the first respondent in respect of the National Australia Bank Ltd mortgage which was registered on the title of the property located at 701/152-162 Campbell Parade, Bondi Beach, New South Wales until its discharge on 3 March 2023. 2. The applicant's solicitors distribute the balance of the proceeds of sale held pursuant to Order 24 of the orders made on 6 September 2022 and any interest which has accrued upon it to the applicant. 3 These orders determine the rights of the trustee in bankruptcy and Ms Stolyar to the proceeds of the sale of premises at 701/152-162 Campbell Parade, Bondi Beach in New South Wales ('the Campbell Parade property'). Prior to its sale, the Campbell Parade property was in the name of Ms Stolyar. In an earlier proceeding it was determined that Ms Stolyar held the Campbell Parade property on a resulting trust for Ian and Beth as to 58.17% and for herself as to 41.83%: Scott (Trustee), in the matter of Stolyar (Bankrupt) v Stolyar [2022] FCA 691 at [289], [598]. That interest vested in Mr Scott as Ian and Beth's trustee in bankruptcy on the making of sequestration orders in respect of their respective estates. An appeal from that decision was dismissed by the Full Court (Stolyar v Scott (Trustee) [2023] FCAFC 61; 410 ALR 346) and an application for special leave to appeal to the High Court was also subsequently dismissed: Stolyar v Scott [2023] HCASL 129. 4 On 6 September 2022 orders were made for the sale of the Campbell Parade property by trustees for sale so that its realised value could be allocated between Mr Scott and Ms Stolyar in their respective already determined shares. The property was subject to a mortgage in favour of the National Australia Bank ('the NAB') which secured a loan. On the settlement of the sale on 3 March 2023 the amount available after the deduction of all sale costs was $8,305,422.49. Ms Stolyar's 41.83% share was $3,474,158.23. The amount paid to the NAB to discharge its mortgage was $3,244,543.45. After that was deducted, this left net sale proceeds of $4,705,516.15 which was paid by the trustees for sale into a controlled moneys account in the name of Mr Scott's solicitor. It is not in dispute that from the net proceeds of sale an amount of $200,000 was to be paid to a Mr Kroger and that this was to be deducted from Ms Stolyar's share. 5 These figures may be illustrated this way: Sale proceeds after deduction of all selling costs $8,305,422.49 Ms Stolyar's 41.83% share $3,474,158.23 Repayment of NAB loan $3,244,543.45 Payment to Mr Kroger $200,000.00 6 One of the questions between the parties before the primary judge (and the only question on the present application) was how the repayment of the loan was to be accounted for as between Mr Scott and Ms Stolyar. Mr Scott says that the whole of the $3,244,543.45 paid to the NAB in discharge of its mortgage should be borne by Ms Stolyar out of her share of the proceeds and not out of his. His reason for this is that the loan balance due to the NAB, which was discharged on the sale of the Campbell Parade property, resulted from drawings made by Ms Stolyar - drawings which Ms Stolyar used to purchase a property in her name and for her sole benefit at Longworth Avenue, Point Piper ('the Longworth Avenue property'). Since the loan funds had been used entirely for her benefit it would be inequitable to require Mr Scott to bear any of that expense out of his share of the sale proceeds. More formally, he says that he was an involuntary co-surety with Ms Stolyar in respect of the Campbell Parade property and that, as she got the whole of the benefit of the loan, he was entitled to be exonerated by her for that payment out of her share of the proceeds and not his. The primary judge accepted this submission. 7 It will be seen that between the loan repayment and the payment to Mr Kroger, Ms Stolyar's share would be almost completely consumed. There would, however, remain a balance of approximately $29,000. The primary judge referred to other debts owed by Ms Stolyar to Mr Scott which were said to exhaust any such balance. Nothing was made of this by Ms Stolyar and I mention it only for completeness. 8 On the present application, Ms Stolyar did not dispute any of the legal principles surrounding the doctrine of exoneration. The only question raised was whether the primary judge was correct to conclude that the loan balance extinguished on the sale of the Campbell Parade property had been incurred for Ms Stolyar's sole benefit. 9 At the hearing, Ms Stolyar through her son Ian sought to develop an argument that the amounts drawn down for the purchase of the Longworth Avenue property were not drawn down for her benefit but rather for the benefit of his and Beth's bankrupt estates. The steps in this argument were somewhat elaborate and depended on a close consideration of a series of purchases and sales of residential premises across suburbs in Sydney's eastern suburbs, including the purchase and sale of a property at Rose Bay, which in earlier proceedings had been found to be held by Ms Stolyar to an extent on a resulting trust in favour of Ian and Beth. 10 Behind these transactions there was considerable activity on both the NAB loan account secured by the mortgage of the Campbell Parade property and also an offset account associated with that loan account. The end point of Ms Stolyar's submissions was to show that, when the loan account was most recently drawn down to fund the purchase of the Longworth Avenue property, this had been for the benefit of Ian and Beth's bankrupt estates and not Ms Stolyar. 11 This submission was not made to the primary judge. Before her Honour, Ms Stolyar made two relevant submissions. The first was that Ms Stolyar's funds, on the one hand, and those of Ian and Beth, on the other, had become so intermingled in the loan and offset accounts that the repayment of the NAB loan should be borne by both Ian and Beth's bankrupt estates and Ms Stolyar in proportion to their respective interests in the Campbell Parade property. That is not the argument pursued by Ms Stolyar on the present application. 12 The second submission, described before the primary judge by Ms Stolyar's Senior Counsel as her more 'ambitious' submission, was that the only reason that Ms Stolyar had been forced to borrow the funds to purchase the Longworth Avenue property was because she had made a number of payments which had been found to be for the benefit of the bankrupt estates of Ian and Beth. This is not the argument that Ms Stolyar now pursues either. 13 In fact, before the primary judge there was no debate at all that Ms Stolyar was the beneficial and legal owner of the Longworth Avenue property. Her Senior Counsel accepted this at T31.37-44: HER HONOUR: Perhaps I'm not following you, Mr Hall. The argument that's put today is that the $3.2 million payment was entirely for Mrs Stolyar's benefit and, therefore, she should bear - and that's what caused the redraw of the mortgage 40 account and, therefore, she should bear the burden of its repayment, because she is the beneficial and legal owner of Longworth Avenue. MR HALL: I accept the proposition about Longworth Avenue. That is not disputed … 14 The primary judge recorded this concession in Scott (Trustee), in the matter of Stolyar (Bankrupt) v Stolyar (No 6) [2024] FCA 379 at [40]: 'It was also not in dispute that Mrs Stolyar is the sole legal and beneficial owner of the Longworth Avenue Property'. 15 The situation then is that Ms Stolyar seeks leave to appeal from the orders of the primary judgment to contend that she was not beneficial owner of the Longworth Avenue property when no such argument was ever put to her Honour and, indeed, in circumstances where her Honour was told that she was. 16 Parties are bound by the way they run their case and will generally be held to it save in very exceptional circumstances which are not present in the current case: University of Wollongong v Metwally (No 2) (1985) 59 ALJR 481; 60 ALR 68 at 483 per Gibbs CJ, Mason, Wilson, Brennan, Deane and Dawson JJ. It would not be appropriate to grant Ms Stolyar leave to appeal to pursue her new arguments now. 17 This makes it unnecessary to deal with Mr Scott's principal point which was that the orders made by the primary judge on 18 April 2024 were final in nature and that the application for leave to appeal was incompetent. It is a question of some nicety whether the orders made by the primary judge were final or not and I would prefer to express no view. It will be sufficient merely to dismiss the application on its merits. In any event, the appeal time has now expired. Even if I were to treat Ms Stolyar's application for leave to appeal as an application for an extension of time within which to appeal, I would dismiss it for the same reasons. 18 The application for leave to appeal will be dismissed with costs. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Perram.