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5
Supreme Court 19 February 1999

SILVERA V. SAVIC & ANOR.

[1999] NSWSC 83

Also reported as 46 NSWLR 124
Fraud & dishonesty
FRAUDULENT CONVEYANCES JUDGMENTS AND ORDERS TRANSFER OF THE PROPERTIES

Citation: Silvera v Savic & Anor [1999] NSWSC 83
Court: Supreme Court of New South Wales, Equity Division
Date: 19 February 1999
Judge(s): Hodgson CJ in Eq

Background

The plaintiff obtained a District Court judgment for over $83,000 against the first defendant, arising from a claim of sexual assault at a party. However, shortly after the District Court proceedings were served on him, the first defendant moved to divest himself of substantially all his assets.

The first defendant sought and obtained consent orders in the Fairfield Local Court under the De Facto Relationships Act 1984, purportedly settling property rights with the second defendant, with whom he had three children. Those orders required him to transfer two properties to the second defendant: one at Budgewoi and one at Macquarie Fields. The transfers were duly registered under the Real Property Act.

When the plaintiff obtained her District Court judgment, the first defendant had little left to satisfy it. She commenced Supreme Court proceedings seeking orders under s 37A of the Conveyancing Act 1919, which allows courts to set aside dispositions of property made with intent to defraud creditors.

  • Whether the first defendant transferred the properties with intent to defraud creditors within the meaning of s 37A of the Conveyancing Act 1919.
  • Whether the second defendant shared that fraudulent intent, and if so, whether she could still rely on the indefeasibility protections of the Real Property Act (Torrens system).
  • Whether s 37A prevailed over those indefeasibility provisions in any event.
  • Whether the Supreme Court could grant relief that was inconsistent with the Local Court consent order, and what form such relief could take.
  • Whether s 37A empowered the Supreme Court to set aside the Local Court order itself, or to direct the parties to apply to the Local Court to have it set aside.

Decision

The court found that the timing and circumstances of the transfers were decisive on the question of intent. The first defendant was served with the District Court proceedings in March 1995. Shortly thereafter, he began taking steps to transfer both properties to the second defendant, culminating in registered transfers in March 1996. The court held that his purpose in seeking the Local Court order and completing the transfers was to place his assets beyond the reach of the plaintiff, satisfying the intent-to-defraud requirement under s 37A.

The court also found that the second defendant shared that intention. Because she was not a transferee in good faith without notice, she could not rely on the indefeasibility provisions of the Real Property Act to protect her title. The court noted, without finally deciding the point, that s 37A would in any event prevail over those indefeasibility provisions.

On the question of relief, the court reasoned that simply declaring the transfers void would create an inconsistency with the still-standing Local Court consent order. However, the court held it could mould its orders to avoid that inconsistency. Ordering a re-transfer of the properties back to the first defendant, rather than merely voiding the transfers, was one such approach. The court therefore did not need to decide finally whether s 37A gave it power to set aside the Local Court order itself, though it expressed the tentative view that it did, given the whole alienation, including the obtaining of that order, was part of the fraudulent transaction.

The court also held that, if necessary, it could order the parties to apply to the Local Court to have its consent order set aside, given the Local Court order had been obtained as part of a fraudulent scheme. The plaintiff was ultimately entitled to relief in respect of the transferred interests, save for a one-half interest in the Macquarie Fields property that the second defendant had held prior to the impugned transaction. Costs were to follow the event.

Orders Made

• Plaintiff Ms. Silvera is entitled to the relief sought, except in relation to the one-half interest in the Macquarie Fields property which Ms. Arsenic owned prior to the impugned transaction
• Matter adjourned for a short time to see if agreement can be reached as to how the judgment can be given effect to
• If agreement cannot be reached, orders for re-transfer may be made but stayed for a short time to allow more efficient means of dealing with the matter to be agreed
• Plaintiff to prepare short minutes of order
• Costs to follow the event

The court directed the plaintiff to prepare short minutes of order and adjourned briefly to allow the parties to reach agreement on how best to give effect to the judgment. The court indicated it would, if necessary, order re-transfer of the properties but stay those orders temporarily to allow a more efficient resolution to be agreed.

Key Takeaways

  • A transferee who shares a transferor's intent to defraud creditors cannot rely on the indefeasibility provisions of the Real Property Act to retain registered title: the Torrens system's protection does not extend to a party implicated in the fraud.
  • Under s 37A of the Conveyancing Act 1919, the relevant "alienation" can encompass the entire course of conduct, including the fraudulent procurement of a court order as well as the consequent property transfers.
  • Where granting relief under s 37A would be facially inconsistent with a subsisting Local Court consent order, the Supreme Court can mould its orders, for example by directing a re-transfer rather than simply voiding the disposition, to avoid direct inconsistency.
  • The tentative view expressed in this decision is that s 37A confers power on the Supreme Court to set aside a Local Court order that formed part of a fraudulent alienation, and that this power would prevail over s 69 of the Local Courts (Civil Claims) Act 1970.
  • Separately, the Supreme Court may order parties to a fraudulent transaction to apply to the Local Court to set aside an order they fraudulently procured, as an additional or alternative avenue of relief.

Legislation and Cases Referenced

Legislation:
- Conveyancing Act 1919 (NSW), s 37A
- De Facto Relationships Act 1984 (NSW), ss 10, 12, 18
- Local Courts (Civil Claims) Act 1970 (NSW), ss 12, 69, 84
- Real Property Act (NSW) (indefeasibility provisions)

Cases:
- Re Baxter (1986) 10 FamLR 758 (distinguished)
- Morris v Maroudas (1986) 70 ALR 98 (distinguished)
- Buzera Pty Limited v Mezan Enterprises Pty Limited (1998) NSWConvR 55-851 (cited)