Silvera v Savic and Anor. [1999] NSWSC 83 (19 February 1999)

Last Updated: 22 February 1999

NEW SOUTH WALES SUPREME COURT

CITATION: SILVERA V. SAVIC & ANOR. [1999] NSWSC 83

CURRENT JURISDICTION: Equity Division

FILE NUMBER(S): No.4290 of 1996

HEARING DATE{S): 14th and 15th December 1998

JUDGDMENT DATE: 19/02/1999

PARTIES:

Iris Silvera Plaintiff

Victor Savic 1st Defendant

Cveta Arsenic 2nd Defendant

JUDGMENT OF: Hodgson CJinEq

LOWER COURT JURISDICTION: Not Applicable

LOWER COURT FILE NUMBER(S): Not Applicable

LOWER COURT JUDICIAL OFFICER: Not Applicable

COUNSEL:

Mr. C. Harris for plaintiff

Mr. M. Aldridge for 2nd defendant

No appearance for 1st defendant

SOLICITORS:

Simpson & Harrison, Kogarah for plaintiff

Horowitz & Bilinsky for 2nd defendant

CATCHWORDS:

FRAUDULENT CONVEYANCES - JUDGMENTS AND ORDERS - REAL PROPERTY (TORRENS SYSTEM). Shortly after District Court proceedings are served on male defendant, he seeks and obtains a consent order under the De Facto Relationships Act in the Local Court for the transfer to the female defendant of two properties which comprise substantially all his assets, and the required transfers of those properties are registered under the Real Property Act. Plaintiff obtains judgment in the District Court, and seeks orders under s.37A of the Conveyancing Act avoiding the transfer. HELD that the male defendant in seeking and obtaining the Local Court order and effecting the transfers intended to defraud creditors; that the female defendant shared that intention, so would not have the protection of the indefeasibility provisions of the Real Property Act; (semble) that in any event s.37A prevailed over those provisions; that although an order avoiding the transfers would be inconsistent with the Local Court order, the Court could mould its order to avoid the transaction so that it was not inconsistent, for example by ordering a re-transfer of the properties; (semble) that s.37A empowered the Court to set aside the Local Court order obtained as part of an alienation to defraud creditors; and that the Court could order the defendants to apply to the Local Court to set aside the order. Re Baxter (1986) 10 FamLR 758 and Morris v. Maroudas (1986) 70 ALR 98 distinghished.

ACTS CITED:

Conveyancing Act 1919 s.37A

De Facto Relationships Act 1984 ss.10, 12, 18

Local Courts (Civil Claims) Act 1970 ss.12, 69, 84

DECISION:

See par.80 of judgment

JUDGMENT:

26

IN THE SUPREME COURT

OF NEW SOUTH WALES

EQUITY DIVISION

CORAM: HODGSON,CJ IN EQ.

Friday 19th February 1999

NO. 4290 OF 1996

SILVERA V. SAVIC & ANOR.

JUDGMENT

1 HIS HONOUR: : Pursuant to consent orders purportedly made on 7th November 1995 under the De Facto Relationships Act 1984 by the Fairfield Local Court, by transfers registered on 5th March 1996, the first defendant Victor Savic transferred to the second defendant Cveta Arsenic two properties, namely 60 Doyle Avenue, Budgewoi and 5 Argyle Place, Macquarie Fields.

2 On 29th November 1996, the plaintiff Iris Silvera obtained judgment in the District Court of New South Wales against Mr. Savic for $83,316.00 plus costs. In these proceedings commenced in December 1996, Ms. Silvera seeks orders to the effect that the transfers to Ms. Arsenic are void and/or that Ms. Arsenic holds the properties in question on trust for Mr. Savic, and further orders to ensure that these properties should be available to satisfy the District Court judgment.

OUTLINE OF FACTS

3 I will begin with an outline of facts which are not substantially in dispute. In reciting these facts, I will not discuss whether and for what purposes particular facts may or may not be admissible against particular defendants on particular issues. I will look at that matter where necessary later in the judgment.

4 Ms. Arsenic was born in 1950. In 1979, she became the owner of the property Unit 15, 412 The Horsley Drive, Fairfield, which she purchased for $25,700.00.

5 Ms. Arsenic met Mr. Savic in about 1982, and a sexual relationship commenced between them. At least until 1987 or 1988, Mr. Savic spent at least weekends and holidays with Ms. Arsenic at her Horsley Drive unit, although it appears that he was working in the country, apparently in the Budgewoi area.

6 By transfer dated 23rd December 1982, Mr. Savic became the owner of 60 Doyle Avenue, Budgewoi, which he purchased for a price of $22,500.00.00. He built a house on this property in about 1984.

7 By transfer dated 1st March 1985, Ms. Arsenic became the owner of the adjoining property, 58 Doyle Avenue, Budgewoi, which she purchased for a price of $21,000.00.

8 There are three children of the relationship: Stojan born 23rd October 1985, Simeun born 19th March 1988, and Nikola born 6th January 1992.

9 According to Ms. Arsenic, from about 1988 Mr. Savic no longer lived with her even on weekends and holidays, no longer kept personal belongings at her residence, but called at her residence to see the children and used her house as his mailing address. On occasions she took the children to see Mr. Savic at the Budgewoi property; and it was on one such occasion that they had sexual relations giving rise to the birth of their third son.

10 It appears that from about 1988 or 1989, Mr. Savic was on workers compensation, as a result of a work injury. Also he had a car accident in 1993, giving rise to a claim on his part which was settled in about 1994.

11 On 14th September 1994, Mr. Savic signed a home loan application to the Commonwealth Bank for $25,000.00 for the purpose of purchasing the property No.5 Argyle Place, Macquarie Fields for a price of $70,000.00. The application stated that the total cost of the purchase was $72,123.00, including stamp duty, legal fees, etc. The application gave his marital status as "sep.", and his current address as "15/412 The Horsley Dr., Fairfield".

12 The application listed his assets as follows:

60 Doyle Ave, Budgewoi $180,000.00

Contents $ 7,000.00

Deposit Paid $ 100.00

CBA Accounts $ 27,258.00

St. George Account $ 16,562.00

St. George Fairfield $ 203.00

13 The application stated that his monthly income was $700.00 invalid pension and $659.00 rental Doyle Avenue. It gave the sources of finance for the purchase as follows:

Loan $25,000.00

Cash/Savings $44,023.00

Deposit $ 100.00

"Ex Wife's Assistance" $ 3,000.00

14 On 25th November 1994, a party was held at Ms. Arsenic's Horsley Drive unit. The plaintiff claims that she was sexually assaulted at that party in the presence of Mr. Savic, and it is that claim that gave rise to the District Court judgment.

15 On 26th November 1994, Mr. Savic made and signed a statement to the Police in relation to the alleged assault. This statement gave his address as 15/412 The Horsley Drive, Fairfield. It gave his age as 48, and this seems uncontroversial. Paragraphs 3 and 4 of the statement were as follows:

3. I have resided at the above address for the past 12 years. I reside at the premises with my wife, Cvjeta, and my three sons Nicolas aged 2 years, Simon aged 7 years and Stojan aged 10 years.

4. On Thursday the 24th November, 1994 I was celebrating the saint name day of my son Stojan. I had a number of friends over to visit and celebrate. One of those friends was the lady who used to live in the flat above ours her name is Iris. Another friend was a fellow countryman of mine Dusan LUKIC, I know him from the old country, we even went to primary school together.

16 There is in evidence a document purporting to evidence three borrowings of $5,000.00 by Mrs. Arsenic from one Drago Posudio. The first of such borrowings is stated as having taken place on 8th December 1994. The other two are stated as having taken place respectively on 10th May 1995 and 4th March 1996.

17 On 1st March 1995, a process server served Mr. Savic at the unit 15/412 The Horsley Drive, Fairfield with a copy of a Statement of Claim filed in the District Court, by which Ms. Silvera sued one Dusan Lukic and also Mr. Savic for damages in respect of the alleged sexual assault.

18 On 2nd June 1995, Mr. Savic called on the Commonwealth Bank, and advised that he desired "his wife to be substituted for his name on the security property", that is the Macquarie Fields property. He was advised that a new application would be required.

19 A new application was thereafter signed by both Ms. Arsenic and Mr. Savic, and dated 6th June 1995, showing both as applicants for a loan. This application gave the marital status of both as "single", and the address of both as 15/412 The Horsley Dr., Fairfield. It gave the assets of the applicants as:

58 Doyle Avenue, Budgewoi (vacant land) $ 65,000.00

Contents (furniture, etc.) $ 20,000.00

Accounts $ 131.00

The Horsley Drive, Fairfield $120,000.00

60 Doyle Avenue, Budgewoi $130,000.00

Cash on hand $ 5,000.00

20 The application gave the monthly income of the applicants as follows:

Invalid pension $ 700.00

Supporting mother's pension $1,200.00

Rental on Doyle $ 659.00

21 This application resulted in an approval for a loan of $15,180.00 to re-finance the existing loan to Mr. Savic, which apparently had been reduced to that amount from the original principal of $25,000.00. The security was to be a registered first mortgage over the same property. Among the general comments noted on the application form, but apparently not verified by the applicants' signatures, were the words "Mr. Savic desires to have his defacto wife placed on security property as sole owner".

22 It appears that on 24th August 1995, the solicitors Watson Stafford sent a letter to Ms. Arsenic in the following terms:

Re: Savic & Arsenic - Application for Adjustment of Interest with Respect

to Property________________________________________________________

We advise that we act on behalf of Mr. Victor Savic in relation to the abovementioned matter.

We are (sic) the understanding that you and our client commences (sic) living together in a defacto relationship from 1982 for approximately five (5) years. As a result of this relationship you and our client have three (3) children who currently reside with you at 15/142(sic) The Horsley Drive, Fairfield

Our instructions are that you and our client have in fact separated although you continue to have some relationship. Our client however offers no maintenance or any financial assistance for you or the children.

As a result of a work accident in 1987 our client has been on a disability pension and unable to earn a living. Further he has been unable to maintain any of the properties which are the current subject of these proceedings.

We understand that you have been primarily responsible for their upkeep and maintenance and also for making the mortgage repayments on the property at 5 Argyle Place, Macquarie Fields of approximately $260.00 per month.

Our client acknowledges his inability to provide financial assistance for the care of provision of you (sic) children; as will (sic) as to maintain the properties in question. In light of this our client has instructed us to transfer the properties know as:-

(i) 60 Doyle Avenue, Budgewoi

(ii) 5 Argyle Place, Macquarie Fields

into you (sic) name.

We seek you (sic)consent at this time to our proposed transfer. We note that we are definitely not acting on you (sic) behalf and have drafted all documentation on the specific instructions of your husband.

In this respect we are not in a position to provide you with any legal advise (sic) in this regard and suggest that you should consult with the Chamber Magistrate at Fairfield Local Court.

Enclosed herewith is a copy of our application and our Affidavit in Support as well as a draft Affidavit in Support of our application for your execution signature in the event that you will provide us with your consent. We note that such an Affidavit will need to be signed in front of either Chamber Magistrate or a Justice of the Peace.

Further we enclose herewith:-

(a) Transfer for the property at Budgewoi

(b) Transfer for the property at Macquarie Fields.

We request that you sign both transfers were (sic) indicated.

We thank you in co-operation (sic) and look forward to receipt of you (sic) duly executed Affidavit in Support as soon as possible.

Should you have any enquiries do not hesitate to contact the writer at your convenience.

23 In late October 1995, Ms. Arsenic received from Watson Stafford a further letter dated 24th October 1995, in the following terms:

Re: Savic and Arsenic - Application for Adjustment of Interest with

Respect to Property____________________________________________

We advise that we act on behalf of Mr. Victor Savic in relation to the abovementioned matter.

We note that you have previously sought legal advice and executed documents in this matter in order that our client be able to transfer the property known as 60 Doyle Avenue, Budgewoi and 5 Argyle Place, Macquarie Fields into your name.

Upon receipt of your documents on or about 1 September 1995, we attended to the filing of the same at Fairfield Local Court.

Subsequent to this we followed up on the matter 2 weeks later and were advised that the orders had not been made as at 15 September 1995.

Recently, we were advised by the Court pursuant to our further enquiries that they now have no record of our documents and that should we wish to proceed, we would need to re-submit our application and all documents in support thereof in their original form.

In light of this sudden turn of events, we request that you attend to the re-swearing of your Affidavit in support of our application provided we have your continued consent to the same. We enclose herewith the necessary document and note that such an Affidavit will again need to be signed in front of either a Chamber Magistrate or a Justice of the Peace (who are usually available at only Bank Institutions and/or the Court counter staff).

We apologise for the unregrettable (sic) inconvenience and thank you in anticipation and your co-operation.

We look forward to receipt of your duly executed Affidavit in support as soon as possible.

24 On 31st October 1995, Ms. Arsenic swore an affidavit, prepared by Watson Stafford, before a Chamber Magistrate at Fairfield Local Court. The affidavit was in the following terms:-

1. I am the Respondent in these proceedings.

2. In 1982 the Applicant and I entered into a defacto relationship which spanned approximately 5 years. At that time we ceased to cohabited (sic) although the Applicant and I continued to have a relationship for some time after we separated.

3. As a result of this relationship the Applicant and I have 3 children namely:-

Stojan born on 23 October 1985

Simon born on 19 march 1988

Nicholas born on 6 January 1992.

All these boys reside with me at 15/142 The Horsley Drive, Fairfield.

4. The Applicant has never provided me any maintenance or financial assistance for the boys. I have been solely responsible for providing a caring (sic) for the boys.

5. I am a part-time cleaner and earn approximately $280.00 per week.

6. I am responsible for the upkeep and maintenance of my family home. Further I am also responsible for the maintenance of the properties which are subject of these proceedings.

7. In light of the Applicant's poor financial situations since his work accident in 1987 have (sic) been making the mortgage repayments on the property at 5 Argyle Place, Macquarie Fields which is registered to the Applicant. I pay approximately $260.00 per month and have agreed to continue to meet the same in the future.

I understand that the Applicant is not likely to be in a strong financial situation in the near future and readily consent to the transfer of the said properties into my name in lieu of maintenance and financial assistance for our children.

25 On 2nd November 1995, Watson Stafford, on behalf of Mr. Savic, lodged at the Fairfield Local Court an application for property settlement under the De Facto Relationships Act, supported by affidavit by Mr. Savic of the same date. This affidavit gave his address as 10 Vine Street, Fairfield. The body of the affidavit was as follows:

1. I am the Applicant in these proceedings.

2. In 1982 the Respondent and I commenced living together in a defacto relationship. This relationship officially lasted for five (5) years at which point the Respondent and I separated. Although we were no longer living together, the Respondent and I continued to have a relationship for some time after this.

3. As a result of this relationship the Respondent and I have three (3) children. There (sic) names are: Stojan born 23 October 1985, Simon born 19 March 1988 and Nicholas born 6 January 1992. The three (3) boys reside with the Respondent at 15/142 The Horsley Drive, Fairfield.

4. The Respondent has sole responsibility for providing and caring for the children. I provide no maintenance or any financial assistance to the Respondent.

5. As a result of a work accident in 1987, I have been on a disability pension ever since. My income is $321.00 per fortnight and my expenses include $40.00 per week for board plus expenses for food.

6. The Respondent is a part-time cleaner and earns approximately $280.00 per week. She is responsible for the upkeep and maintenance of the property she resides in with our children. The Respondent also contributes solely to the maintenance of the properties in question.

7. Due to my financial situation since the accident, the Respondent has been making the mortgage repayments on the property 5 Argyle Place, Macquarie Fields, which is in my name. These mortgage payments are approximately $260.00 per month. The Respondent has agreed to continue to meet these payments.

8. The Respondent is entitled to financial assistance for the care and provision of our children. I am not in a position to provide this maintenance nor am I in a position to maintain the properties in question. The Respondent will continue to maintain the properties as before, meet the mortgage repayments as they fall due. It is my desire that the two properties be transferred into the name of the Respondent.

26 On 7th November 1995, Fairfield Local Court made a consent order in the following terms:

1. An order by consent under Division 2 Part 3 of the De Facto Relationships Act 1984 to transfer interest in respect to properties, namely:

60 Doyle Avenue, Budgewoi and

5 Argyle Place, Macquarie Fields

from the applicant to the respondent.

27 Thereafter, the Argyle Place property was transferred by an undated transfer, which specified the consideration as being "Local Court order". The Budgewoi property was transferred by an undated transfer, which left the stated consideration blank. Both transfers were registered on 5th March 1996, with the result that Ms. Arsenic became the registered proprietor of both properties. As a result of the transfers, Mr. Savic was left without any significant assets.

28 On 1st May 1996, Ms. Arsenic signed an enquiry with Westpac seeking a loan of $100,000.00 for the purpose of building a house on the Macquarie Fields property. In the form, the marital status was stated as "divorce". The assets were stated as follows:

Lot 70 Macquarie Fields $ 70,000.00

60 Doyle Avenue $120,000.00

15/412 The Horsley Drive $150,000.00

58 Doyle Avenue $ 65,000.00

Commonwealth Bank $ 12,000.00

Cash $ 20,000.00

Furniture $ 40,000.00

29 The form then gave monthly income as $1,816.00 and rent $1,360.00.

30 Westpac granted a mortgage loan on 8th May 1996, and thereafter the loan has been used to build a house on the property, in which Ms. Arsenic now resides.

31 On 22nd August 1996, Mr. Savic swore a Defence to the District Court proceedings, in which he gave his address as 15/412 The Horsley Drive, Fairfield.

32 On 26th September 1996, a process server Stephen Goodwin went to 15/412 The Horsley Drive, Fairfield. In an affidavit sworn 2nd October 1996, he gave the following account of what happened:

On Thursday, 26 September 1996 at approximately 6.20am I attended the address of 15/412 The Horsley Drive, Fairfield. I spoke to a female occupant and I said to her "Could you tell me your name please?" She said my name is "Cveta Arsenic". I said "Does Victor Savic live here?" She replied "Yes, he does". I said "Is he at home at the moment?" She replied "He's not here, he will be home at about 3.00pm".

33 On 20th November 1996, the hearing of the District Court proceedings took place. In evidence, Ms. Arsenic gave evidence to the effect that she was never at any time the de facto wife of Mr. Savic. Also in evidence she agreed that a process server had spoken to her at around the time and in the general circumstances suggested in Mr. Goodwin's affidavit, but she denied that on that occasion she said to the process server that Mr. Savic lived at the property.

34 On 29th November 1996, the District Court judge gave judgement in favour of Ms. Silvera against Mr. Savic for $83,316.00 plus costs. On 19th December 1996, Mr. Savic lodged an appeal to the Court of Appeal from that decision: this appeal was dismissed on 17th July 1998.

35 Ms. Arsenic gave evidence at the hearing of the proceedings before me, but Mr. Savic did not appear and did not give evidence; and no explanation was offered on behalf of Ms. Arsenic for the absence of evidence from Mr. Savic. No evidence was called from any solicitor involved in the application to the Local Court.

ISSUES

36 The decision of the case involves consideration of the following issues.

37 First there is the question of the credibility of Ms. Arsenic: it has been submitted on behalf of Ms. Silvera that I should find that Ms. Arsenic was prepared to give deliberately false evidence on oath.

38 Next, there are a number of evidentiary issues. Some of the material in the case, including assertions by Mr. Savic referred to in my outline of facts as having occurred on 14th September 1994, 26th November 1994, 2nd June 1995, 2nd November 1995, and 22nd August 1996, and also the general comment in relation to the application dated 6th June 1995, have been unconditionally admitted only against Mr. Savic; and it was left for submissions and decision at the end of the case whether they were admissible at all against Ms. Arsenic and if so, to what extent and for what purpose. There is also a question as to whether there is any Jones v. Dunkel inference to be drawn against Ms. Arsenic by reason of the absence of evidence from Mr. Savic.

39 Next, it is necessary to consider what was the relationship between Ms. Arsenic and Mr. Savic at the time of the Local Court proceedings and the challenged transactions, and also their legal and equitable rights in respect of their assets prior to these events.

40 It is then necessary to consider what were their intentions and understandings in relation to the transactions.

41 It is then necessary to consider whether the plaintiff has made out a case under s.37A of the Conveyancing Act 1919, at this stage leaving aside any question as to the effect of the Local Court orders. That section is in the following terms:-

37A.(1) Save as provided in this section, every alienation of property, made whether before or after the commencement of the Conveyancing (Amendment) Act 1930, with intent to defraud creditors, shall be voidable at the instance of any person thereby prejudiced.

(2) This section does not affect the law of bankruptcy for the time being in force.

(3) This section does not extend to any estate or interest in property alienated to a purchaser in good faith not having, at the time of the alienation, notice of the intent to defraud creditors.

42 Since transfers to Mrs. Arsenic have been registered, I may need to consider whether she is protected by the indefeasibility provisions of the Real Property Act.

43 Finally, if I come to the view that relief should be given under s.37A leaving aside any consideration of the Local Court order, it will be necessary to consider the effect of the Local Court order and whether any relief can be given having regard to its existence, and if it can, precisely what relief should be given. This may also involve considering an application to amend made by the plaintiff.

44 I will deal first with all issues apart from the effect of the Local Court order, and then I will consider the effect of that order.

ISSUES APART FROM LOCAL COURT ORDER

Submissions

45 Both sides have provided written outlines of submissions, and I will leave them with the papers. In my outline here, I will refer mainly to the oral submissions.

46 Mr. Harris for the plaintiff first dealt with the credibility of Ms. Arsenic. He pointed to what he claimed was inconsistent evidence which she gave concerning the existence or otherwise of a de facto relationship with Mr. Savic, and also concerning assistance from Mr. Savic in making mortgage payments, particularly from rent from the Budgewoi property. He pointed out that Ms. Arsenic admitted that she doesn't always tell the truth, although she claimed that she did tell the truth when she took an oath on the Bible. He also submitted that she was not responsive to many questions, such as the signature on the document evidencing loans from Drago Posudio. Mr. Harris submitted I should find that she did not set out to tell the truth to the Court.

47 Mr. Harris submitted that s.37A of the Conveyancing Act may apply even if the debts in question are not in existence or even in contemplation at the time of alienation: Barton v. Deputy Commissioner of Taxation [1974] HCA 43; (1974) 131 CLR 370 at 374; Mackay v. Douglas (1872) LR 14 Eq. 106. "Intent to defraud" in s.37A includes an intention to defeat, delay or hinder: Lloyds Bank v. Marcan (1973) 1 WLR 1387 at 1392, Electrical Enterprises v. Rodgers (1988) 15 NSWLR 473 at 497. The intent can be inferred from the circumstances: P.T. Garuda Indonesia v. Grellman (1992) 35 FCR 515; Cannane v. J. Cannane Pty. Limited [1998] HCA 26; (1998) 72 ALJR 794 at 798. Where a defendant elects to give no evidence, a court can be bold in drawing inferences: S.S. Pharmaceutical Co. v. Qantas (1991) 1 Ll.LR 288 at 293; Jones v. Dunkel [1959] HCA 8; (1959) 101 CLR 298.

48 The evidence of Ms. Arsenic as to her intentions was irrelevant. She was not a purchaser within s.37A. In any event, her evidence as to her intentions should be rejected.

49 Mr. Aldridge for Ms. Arsenic submitted that she was a purchaser: by accepting the particular orders under the De Facto Relationships Act, she put herself in a worse position as regards making a further claim. In agreeing to the consent orders, she gave up any further rights under the Act, and undertook to accept obligations under the mortgage. Furthermore, she acted in good faith. She was concerned to make provision for her children. Although she was aware of Ms. Silvera's court proceedings, her evidence was that she was told they had very little prospects of success. The case against Mr. Savic was a novel one, and the Court should accept Mrs. Silvera's evidence that her intention was to protect her children. Furthermore, the Court should accept Mrs. Savic's evidence concerning her relationship with Mr. Savic, and in particular that there was no continuing de facto relationship. He was a regular visitor to the house, he looked after the children, and slept over on occasions. Ms. Arsenic herself worked most nights.

50 If any order was made, it should be limited to the Budgewoi property. There was a mortgage to the bank of the Macquarie Fields property, and third parties should not be prejudiced. Furthermore, Ms. Arsenic had borrowed money from the bank in order to build a house on the property, and she was paying off this mortgage.

51 In addition to referring to the cases of Cannane and Grellman, Mr. Aldritch also relied on Official Trustee in Bankruptcy v. Mitchell [1992] FCA 521; (1992) 38 FCR 364 at 371-3, and Williams v. Lloyd [1934] HCA 1; (1934) 50 CLR 341.

Decision

52 On the question of the credibility of Ms. Arsenic, in my opinion she was prepared to give false evidence to the Court when she believed it suited her interests. In her affidavit to the Local Court, sworn to support an application for a consent order under the De Facto Relationships Act, she swore that she entered into a de facto relationship with Mr. Savic in 1982, which spanned approximately five years. In her evidence to the District Court on 20th November 1996, she asserted that there never was a de facto relationship. In her affidavit sworn for these proceedings, she swore "I have never considered the relationship as living together as husband and wife". In her oral evidence before me, she claimed confusion as to what constituted a de facto relationship. I accept that there are cases in which the existence or otherwise of a de facto relationship is unclear, and that this may be so particularly where one of the parties spends a lot of time away from the other, as apparently was the case here between 1982 and about 1988. However, from the terms and manner of her evidence before me, I have reached the clear opinion that Ms. Arsenic is prepared on this matter to say what she believes at the time to be to her advantage, and to take refuge in confusion when this suits her purpose.

53 In my opinion also, Ms. Arsenic is prepared to give false evidence about her financial means. I do not rely at all on the claim she made for privilege against self-incrimination. In her affidavit in the Local Court, she asserted to the effect that she had made the mortgage repayments on the Macquarie Fields property, because of Mr. Savic's poor financial situation since his work accident. However, it is clear that Mr. Savic was for most of the relevant time receiving over $600.00 per month rental on his Budgewoi property, in addition to an invalid pension; and Ms. Arsenic conceded that at least some of the mortgage payments were made from money he provided. In my opinion, Ms. Arsenic prevaricated about her own means, and failed to produce documents which would be expected if she were honestly setting out to properly inform the Court about her financial situation.

54 Turning to other evidentiary issues, I accept that in general statements made out of court by Mr. Savic are not any evidence against Mrs. Arsenic, even on the question of what Mr. Savic's intention was in making the transfers. However, some of his statements are admissible against Ms. Arsenic, for limited purposes.

55 Mr. Savic's loan application of 14th September 1994, and associated documents, are in my opinion business records showing that he obtained a loan of $25,000.00 towards the purchase of the Macquarie Fields property for $70,000.00. I do not think the fact that he gave his address as 15/412 The Horsley Drive, Fairfield in that document, to the police on 26th November 1994, and in his affidavit in support of his District Court Defence, is admissible against Ms. Arsenic. However, I note that Ms. Arsenic said in her evidence that Mr. Savic gave her address as his mailing address. The statements made by Mr. Savic about his intention on 2nd June 1995 and again on 6th June 1995 are in my opinion admissible evidence of his intention or wishes at the time: Evidence Act s.72. The contents of his affidavit of 2nd November 1995 may be admissible as to his intention, as against Ms. Arsenic, if I find them to be deliberate lies.

56 On the question of whether the failure of Mr Savic to give evidence in the case can give rise to a Jones v. Dunkel inference against Ms. Arsenic, I consider that other material in the case justifies a conclusion that there is a continuing close relationship between them, so that such inference can be drawn. First, there is Ms. Arsenic's admission that he would use her address as his mailing address, and the fact that it was given as his address in their joint document of 6th June 1995. Next, there is the process server's evidence that on 26th September 1996, Ms. Arsenic said that Mr. Savic lived at that address: the process server was not cross-examined on that evidence, and I accept it. Next, there is the payment by Ms. Arsenic over a considerable period of time of Mr. Savic's very substantial legal fees. The continuing relationship may or may not be a de facto relationship, but in my opinion it is sufficiently close and cordial to make it appropriate that the Jones v. Dunkel inference be drawn.

57 Next, I consider the relationship and legal and equitable rights of Ms. Arsenic and Mr. Savic at the time of the Local Court proceedings.

58 In my opinion, there was then a close and reasonably cordial relationship. On the balance of probabilities, I find they were living in the same premises, with their three children. I find that this was so on 6th June 1995 and 26th September 1996, so that it may be concluded that it was also the case in November 1995.

59 Turning to their legal and equitable rights in the various properties, it seems clear that Mr. Savic was the sole owner of 60 Doyle Avenue: Ms. Arsenic claims she lent him $5,000.00 to help with the purchase of the land, and $8,000.00 to help with the building of the house, but she does not claim that these were other than loans. It also seems clear that Ms. Arsenic was the sole owner of 58 Doyle Avenue and the unit in The Horsley Drive. As regards Macquarie Fields, Ms. Arsenic says she put in $20,000.00, Mr. Savic put in $30,000.00, and the bank contributed $25,000.00. She also says that Mr. Savic owed her $13,000.00, and that instead of repaying that, he would help her buy the land. Although for reasons I have given, I cannot rely on her evidence, I think all the circumstances support the view that she made a substantial contribution to the purchase of that property $10,000.00 of the $15,000.00 borrowed from Drago Posudio was borrowed at a time when that money too could have gone towards the property. On the whole, I am satisfied that Ms. Arsenic had an equitable interest in the Macquarie Fields property, and that is confirmed by contributions which I am satisfied she has made towards repaying mortgages on the property. Doing the best I can on the meagre and unsatisfactory evidence that I have, I find that her interest in the Macquarie Fields property, prior to the Local Court proceedings, was a one-half interest.

60 Next, I consider the intentions and understandings of the parties at the time of the Local Court proceedings, and the subsequent transfers.

61 In my opinion, there was no substantial change in their relationship at any time prior to the Local Court proceedings that would have given rise to any occasion for the application for such orders or the making of such orders. They were still living together in the same house. In my opinion, the Vine Street address given by Mr. Savic was a deliberately false address. In my opinion, both parties gave knowingly false evidence to the Local Court concerning their relationship, their means (in particular, omitting reference to Mr. Savic's rent from the Budgewoi property), and the source of payments for the Macquarie Fields mortgage. The consequence of the transaction was that Mr. Savic was left with substantially no assets. The timing of the transaction was shortly after Ms. Silvera's Statement of Claim was served. I have no evidence from Mr. Savic. I have found that Ms. Arsenic has given false evidence. In those circumstances, in my opinion I am justified in drawing the inference against Ms. Arsenic that the application for the Local Court orders and the consequent transfers were made by Mr. Savic with intent to defraud creditors, within the meaning of s.37A of the Conveyancing Act; and in particular, to defeat any claim Ms. Silvera might have against him.

62 In my opinion, Ms. Arsenic shared this intention with Mr. Savic, so that she is not protected by s.37A(3). In those circumstances, I do not need to consider whether the exercise of rights under the De Facto Relationships Act could be regarded as making her a 'purchaser' within that subsection. Furthermore, because of that finding, it is in my opinion clear that the indefeasibility provisions of the Real Property Act do not protect Ms. Arsenic. I am inclined to think that if a transferee acted in good faith and had no notice of the intent to defraud creditors, but did not have any protection from s.37A(3) because he or she was not a purchaser, the provisions of s.37A of the Conveyancing Act would prevail over the indefeasibility provisions of the Real Property Act. It is clear that the indefeasibility provisions of the Real Property Act do operate in favour of volunteers, but s.37A is a more specific provision which itself identifies the transferees against whom it is not to prevail. However, for reasons I have given, this is something I need not decide in this case.

63 It follows that, apart from the possible effect of the Local Court order, my opinion is that a case is made out in relation to the 60 Doyle Avenue property and a one-half interest in the Macquarie Fields property.

EFFECT OF LOCAL COURT ORDER

Submissions

64 Mr. Harris submitted that the Local Court had no power to make the order made on 7th November 1995. The evidence of the parties was that the de facto relationship ended in about 1987 and, since no leave was sought under s.18(2) of the De Facto Relationships Act, the two year limitation provided by s.18(1) of the Act applied. Furthermore, s.10 of the De Facto Relationships Act provides that a Local Court shall not have jurisdiction under the Act in relation to property of a value in excess of the amounts prescribed by s.12 of the Local Courts (Civil Claims) Act 1970, namely $40,000.00. In any event, an order that Ms. Arsenic transfer to Mr. Savic certain property would not be inconsistent with the Local Court order: it contained no declaration of the interests of the parties, but merely required certain transfers which were carried out. The Local Court order accordingly is spent.

65 Alternatively, Mr. Harris submitted that the Local Court could set aside an order made pursuant to a deception of the Court: Brooke v. Lord Mostyn [1864] EngR 324; (1864) 33 Beav. 457 at 459. This Court could make an appropriate declaration, and then make orders providing for an application to the Local Court to set aside its own order. Any necessary amendment to the summons to provide for that type of relief should be granted.

66 Mr. Aldridge submitted that while the Local Court order was on foot, Ms. Silvera could not seek orders which conflicted with it: Re Baxter (1986) 10 Fam.LR 758; Chamberlain v. Deputy Commissioner of Taxation [1988] HCA 21; (1988) 164 CLR 502. Further, the fact that the transfers were effected under compulsion of law meant that the requisite intent under s.37A of the Conveyancing Act must be lacking. This Court does not have the power to declare the Local Court order was made without jurisdiction, as sought in the summons: any approach to this Court must be by appeal or application for certiorari. Certiorari would not be available: Craig v. The State of South Australia [1995] HCA 58; (1995) 184 CLR 163. In any event, s.12(5) of the De Facto Relationships Act states that any failure of the Local Court to comply with the requirement to transfer matters where the property concerned was beyond the prescribed value does not invalidate any order; and failure to obtain leave under s.18(2) of the Act could not invalidate a consent order.

67 Mr. Aldridge submitted that no amendment had properly been sought to seek orders providing for an application to the Local Court. In any event, such orders would be inappropriate. There was no set priority between the rights of de facto spouses and the rights of creditors: cf. Deputy Commission of Taxation v. Swain [1988] FCA 238; (1988) 20 FCR 507.

Decision

68 Dealing first with Mr. Aldridge's submission that the intent required by s.37A could not be shown where the transfer was made pursuant to a Court order, I note that in this case I have found that the intent to defraud creditors applied to the whole transaction of applying for the consent order and effecting the transfers. In those circumstances, I see no reason why s.37A should not apply.

69 The case of Re Baxter (1986) 10 Fam.LR 758 does support Mr. Aldridge's contention that this Court should not make orders inconsistent with the Local Court order, while it stands. In that case, a husband and wife in 1959 entered into a terms contract with the Victorian Housing Commission to purchase a house as joint tenants. In 1971, the husband became bankrupt; and in 1976, he was discharged from bankruptcy. As a result of the bankruptcy, the Official Trustee in Bankruptcy claimed that the equity of the house was owned by himself and the wife as tenants in common in equal shares. In 1984, the wife applied to the Family Court for orders under the Family Law Act with respect to the house. In October 1984, the Family Court declared that the wife was the sole proprietor of the equity in the house, and ordered the husband to transfer all his interest in the terms contract to the wife. Subsequently, the Trustee applied to the Federal Court seeking directions as to whether the husband's interest in the house was vested in the Trustee. Northrop, J. held that the Federal Court should not determine the Trustee's application for orders inconsistent with the Family Court orders until the Family Court orders were set aside. This was notwithstanding his view that certain authorities to which he referred suggested that the Family Court had no power to make the declaration which it made in October 1984.

70 To somewhat similar effect is the case of Morris v. Maroudas (1986) 70 ALR 98. That case concerned a franchise agreement entered into in April 1983 between Mr. and Mrs. Maroudas and Mr. and Mrs. Morris. Mr. and Mrs. Morris breached that agreement in June 1983. In July 1983, Mr. and Mrs. Maroudas commenced action in the District Court of Western Australia for damages for breach of that agreement. In September 1984, Mr. and Mrs. Morris executed deeds of assignment of their property to a trustee appointed for the purposes of Pt.X of the Bankruptcy Act 1966 (Cwlth). In January 1985, Mr. and Mrs. Maroudas obtained judgment in the District Court for $48,660.00 for breach of the franchise agreement. In December 1985, Mr. and Mrs. Morris applied to the Federal Court for orders that the judgment of the District Court be set aside (or that execution of the judgment be stayed), and for a declaration that they were released from the debt or liability claimed in the District Court proceedings. The Full Federal Court (Toohey and Spender, JJ., Northrop dissenting) held that the Federal Court had jurisdiction to hear the application; that there was no power in the Federal Court to set aside the District Court judgment; that Mr. and Mrs. Maroudas were owed a provable debt by Mr. and Mrs. Morris at the date of execution of the deeds of assignment; and that the appellants were entitled to a declaration that, by reason of s.230(1) of the Bankruptcy Act, the deeds of assignment executed by Mr. and Mrs. Morris operated to release them from their liability for breach of the franchise agreement. Spender, J. expressed the view that the Federal Court could also have made an order preventing Mr. and Mrs. Maroudas from executing their District Court judgment. Toohey, J. considered that such an injunction should not be granted, because it would effectively tie the hands of the District Court, notwithstanding the judgment entered by that Court.

71 However, in my opinion, the present case can be distinguished from both those cases. In both those cases, there was a plain inconsistency between the orders made in the Family Court and District Court respectively, and the orders sought from the Federal Court. In the former case, the Family Court had made a declaration of right; and in the latter case, there was a judgment for a sum of money. In the present case, the Local Court order did no more than to order a transfer of particular property from one person to another. Particularly in circumstances where that order was made by consent, and was obtained with the intention of defrauding creditors, as I have found, it should be given no wider effect. I am prepared to accept that an order directly setting aside the actual transfer made pursuant to the Court order would be inconsistent with the Court order; but in my opinion, s.37A can be given effect to in this case by other means.

72 What s.37A says is that the "alienation" is "voidable". In my opinion, when an application is made under s.37A to the Supreme Court, that Court can achieve the effect of avoiding the alienation by such measures as seem appropriate in the particular case. For example, the Court could declare that the effect of the Local Court order is spent by reason of its being carried out by the subsequent transfers, and then order appropriate re-transfers of the property. Such orders would not be inconsistent with the Local Court orders, nor could they give rise to any possible embarrassment by reason of the existence of conflicting Court orders.

73 For those reasons, notwithstanding the existence of the Local Court order, I would be prepared to order that Ms. Arsenic transfer to Mr. Savic the whole of her interest in the 60 Doyle Avenue property and one-half of her interest in the Macquarie Fields property. However, the object of this exercise is to provide property against which enforcement of the District Court judgment can be obtained. The re-transfer of the properties to Mr. Savic, followed by Writs of Execution and possible sale by the Sheriff, may not be the most effective way to achieve that end. It may be more appropriate to make declarations and orders that bring about an early sale of the 60 Doyle Avenue property, and the application of those proceeds towards that judgment, and possibly the costs in this case. If those proceeds are not sufficient, then consideration could be given as to what steps should be taken in relation to the Macquarie Fields property.

74 Because of the view I have taken, it is not necessary for me to decide whether or not I could have declared the Local Court order to have been made without jurisdiction, or set it aside, or made some provision for an application to be made to the Local Court to set that order aside. Because those matters were argued, I think it appropriate for me to express tentative views on them.

75 In my opinion, it would not have been appropriate to declare that the order was made without jurisdiction. In any event, as submitted by Mr. Aldridge, a lack of jurisdiction has not been affirmatively shown. Furthermore, there are difficulties in the way of this Court setting aside orders of the Local Court. Section 69(1) and (2) of the Local Courts (Civil Claims) Act 1970 are in the following terms:

69(1) Subject to subsection (2), all judgments and orders of a court exercising jurisdiction under this Act shall be final and conclusive.

(2) A party to proceedings under this Act who is dissatisfied with the judgment or order of the Court as being erroneous in point of law, may appeal to the Supreme Court therefrom.

76 Section 84(1) of that Act authorises the Rule Committee to make rules for or with respect to "(r) prescribing the circumstances in which judgments and orders may be set aside". Part 26 r.3 of the Local Court Rules provides:

A judgement or order of the Court in any proceedings may, on sufficient cause being shown, be set aside, on terms, by order of the court, if the judgment was given or entered up, or the order was made, irregularly, illegally or against good faith.

77 Despite the absolute words of s.69, it seems clear from the combined effect of s.84 and Pt.26 r.3(1) of the Rules that the Local Court could set aside the order made in this case as being an order made against good faith. It would not be necessary to appeal to any possible inherent power of the Local Court as discussed in Hoskins v. Van Den-Braak (1998) 43 NSWLR 290; cf. Coles v. Burke (1987) 10 NSWLR 429. However, it may be questioned whether this Court could take that course: this is not an appeal under s.69, the remedy of certiori is probably inapplicable (see Craig v. South Australia [1995] HCA 58; (1995) 184 CLR 163 and Kriticos v. State of New South Wales (1996) 40 NSWLR 297), and it is doubtful whether the general granting of jurisdiction under s.23 of the Supreme Court Act would overcome the effect of s.69 of the Local Courts (Civil Claims) Act (cf. Buzera Pty. Limited v. Mezan Enterprises Pty. Limited (1998) NSWConv.R. 55-851).

78 However, it seems to me that s.37A itself may provide the necessary power to the Supreme Court. In my opinion, the "alienation" in this case was the whole process of obtaining the Local Court order and the consequent transfer; and it is that whole alienation which is made voidable by s.37A. In my opinion, if one step in that alienation is the fraudulent obtaining of a Local Court order, then s.37A itself purports to give power to set that step aside. The question would be whether that legislative grant of power prevails over the possible exclusion of that power by s.69 of the Local Courts (Civil Claims) Act. On the whole, I am inclined to think that s.37A would prevail: the very existence of s.84(1)(r) in the Local Courts (Civil Claims) Act shows that s.69 of that Act is not intended to prevail over more particular inconsistent statutory provisions.

79 The final possibility, namely a declaration and orders making provision for an application to the Local Court to set aside its order is also, in my opinion, one that would be open to this Court. Having found that the whole process was undertaken with the intent to defraud creditors, the Supreme Court can, in my opinion, order the parties to the transaction to apply to the Local Court to set aside the order which they obtained. However, for reasons I have given this is not necessary in this case.

CONCLUSION

80 For those reasons, the plaintiff Ms. Silvera is entitled essentially to the relief that she seeks, except in relation to the one-half interest in the Macquarie Fields property which Ms. Arsenic owned prior to the impugned transaction. However, for reasons I have given I will not immediately make orders for the transfer of the relevant properties from Mr. Savic to Ms. Arsenic. I will adjourn the matter for a short time to see if agreement can be reached as to how this judgment can best be given effect to. If agreement cannot be reached in a short time, what I may do is to order the re-transfer, but stay those orders for a short time in the hope that some more efficient means of dealing with the matter can be agreed. I direct the plaintiff to prepare short minutes of order.

81 As regards costs, at present I see no reason why costs would not follow the event.

*************

I certify this and the preceding 25

pages (81 paragraphs) to be a true

copy of the reasons for judgment of

Justice D.H. Hodgson, CJ in Eq.

Date 19/2/99

Associate

LAST UPDATED: 19/02/1999