FEDERAL COURT OF AUSTRALIA De Santis v Aravanis [2012] FCA 1258 Citation: De Santis v Aravanis [2012] FCA 1258 Parties: LORRAINE JUNE DE SANTIS v ANDREW ARAVANIS and GEOFFRY PETER DE SANTIS File number: NSD 1658 of 2012 Judge: COWDROY J Date of judgment: 14 November 2012 Legislation: Administrative Decisions (Judicial Review) Act 1977 (Cth) s 11 Bankruptcy Act 1966 (Cth) s 116 Family Law Act 1975 (Cth) Federal Court Rules 2011 (Cth) rr 36.03, 36.05 Cases cited: Comcare v A'Hearn (1993) 45 FCR 441 Davies & Davies and Anor [2012] FMCAfam 866 Dix v Crimes Compensation Tribunal [1993] 1 VR 297 Golski v Kirk (1987) 14 FCR 143 Howard v Australian Electoral Commission [2000] FCA 1767 Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344 Jess v Scott (1986) 12 FCR 187 Juratowitch v Ianotti (2009) 4 ASTLR 54 SZQGO v Minister for Immigration and Citizenship (2012) 125 ALD 449 SZQHK v Minister for Immigration and Citizenship (2012) 125 ALD 458 Date of hearing: 6 November 2012 Date of last submissions: 12 November 2012 Place: Sydney Division: GENERAL DIVISION Category: No Catchwords Number of paragraphs: 32 Counsel for the Applicant: Mr D Allen Solicitor for the Applicant: Horowitz & Bilinsky Solicitors Counsel for the First Respondent: Mr A Combe Solicitor for the First Respondent: Sally Nash & Co Lawyers IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1658 of 2012 BETWEEN: LORRAINE JUNE DE SANTIS Applicant AND: ANDREW ARAVANIS First Respondent GEOFFRY PETER DE SANTIS Second Respondent JUDGE: COWDROY J DATE OF ORDER: 14 NOVEMBER 2012 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The Application for an Extension of Time in which to file a Notice of Appeal from the decision of Federal Magistrate Altobelli be granted. 2. The Applicant file its Notice of Appeal within seven days of this date. 3. The Applicant pay the First Respondent's costs of the application. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1658 of 2012 BETWEEN: LORRAINE JUNE DE SANTIS Applicant AND: ANDREW ARAVANIS First Respondent GEOFFRY PETER DE SANTIS Second Respondent JUDGE: COWDROY J DATE: 14 NOVEMBER 2012 PLACE: SYDNEY REASONS FOR JUDGMENT 1 By Application for an Extension of Time filed on 26 October 2012, the applicant seeks an order extending time pursuant to r 36.05 of the Federal Court Rules 2011 (Cth) ('the Rules') to file a Notice of Appeal from the decision of Altobelli FM delivered on 22 August 2012: see Davies & Davies and Anor [2012] FMCAfam 866. (Pursuant to s 121(9)(g) Family Law Act 1975 (Cth), the Federal Magistrate's judgment was published under a pseudonym.) A draft Notice of Appeal is attached to the application and raises nine potential grounds of appeal. The application is supported by an affidavit of the applicant sworn on 25 October 2012. 2 On 30 October 2012 the applicant filed an interlocutory application seeking, inter alia, a stay of the orders of the Federal Magistrates Court and an expedited hearing of this application. FACTS 3 The second respondent (Mr De Santis) is the husband of the applicant. He was made bankrupt in 2000 but by resolution of creditors made in 2006 the bankruptcy was annulled. On 3 September 2006 the applicant and Mr De Santis entered into a trust agreement and in the same year Mr De Santis purchased a residential property at 28 Taylor Street, West Pennant Hills ('the property') for a total purchase price of $670,000. Both the applicant and Mr De Santis claimed that the property was held on trust for the applicant pursuant to their trust agreement. The purchase price was paid partly by cash provided by the applicant and the remainder, namely $595,000, was provided by way of mortgage in the husband's name. 4 In October 2007 Mr De Santis filed a debtor's petition and a sequestration order was made against his estate in October 2007. The first respondent, Mr Aravanis ('the trustee'), was appointed trustee of Mr De Santis' bankrupt estate. Since the registered proprietor of the property was Mr De Santis, the property was vested in the trustee. The trustee determined to sell the home and to realise its value for Mr De Santis' creditors. Such course was opposed by both the applicant and Mr De Santis. 5 Accordingly the applicant instituted proceedings in the Federal Magistrate Court of Australia (proceedings SYC 5992 of 2010). Initially, the applicant raised claims arising under the Family Law Act 1975 (Cth). However, she abandoned those claims at the hearing before the Federal Magistrate. 6 In her application, the applicant claimed that the property was held in trust for her by Mr De Santis at the time of his bankruptcy and accordingly fell within the provision of s 116(2)(a) of the Bankruptcy Act 1966 (Cth) ('the Act'). Therefore, the property should not have vested in the trustee. The applicant argued that the property was held on trust either pursuant to the express trust agreement between the parties dated 3 September 2006 or pursuant to a resulting trust which arose because of the wife's contributions to the purchase of the property. 7 Before Altobelli FM the trustee denied the existence of the express trust and also disputed the existence of a resulting trust in favour of the applicant. The trustee further submitted that if the bankrupt was the trustee for his wife, then insofar as the bankrupt had expended monies through his own funds for the benefit of trust assets, the trustee was entitled to recoup the monies used to pay trust debts from trust assets and it was entitled to a charge or lien over the property to enforce that right. Such right of indemnity constitutes property vesting in the trustee: see Juratowitch v Ianotti (2009) 4 ASTLR 54. 8 Altobelli FM considered the evidence surrounding the express trust agreement and found that there was an express trust pursuant to the agreement between Mr and Mrs De Santis dated 3 September 2006. His Honour found that alternatively, there was a resulting trust in favour of the applicant because of the contributions she had made to the purchase price and mortgage repayments of the property. 9 His Honour found that it 'flowed naturally' from his decision that the property vested in the trustee, subject to an equitable charge in favour of the applicant to the extent of 32% of the equity of such property. Amongst other orders, his Honour made orders giving the trustee power of sale over the property and declaring that the trustee held the proceeds on trust, subject to the equitable interest of the applicant. EVENTS SUBSEQUENT TO DELIVERY OF THE PRINCIPAL JUDGMENT 10 On 6 September 2012 solicitors for the applicant informed solicitors for the trustee that they would be appealing the decision of Altobelli FM. 11 On 19 September 2012 the applicant filed a Notice of Appeal against the orders made by Altobelli FM in the Family Court of Australia's ('Family Court') appeals jurisdiction. This was done under the misapprehension that the Family Court was the appropriate forum for the appeal because the matter was initially filed in the Federal Magistrates Court Family Law Division. On 24 September 2012 the Registrar of that Court acknowledged the filing of the appeal and provided information concerning the requirements for appeal books. 12 By letter dated 25 September 2012 the applicant's solicitors provided information to the trustee's solicitor advising of the filing of the Notice of Appeal in the Family Court and advising that the sealed documents would be served. Such service was effected on 25 September 2012. 13 By letter dated 28 September 2012 the trustee's solicitors expressed their opinion that the Full Court of the Family Court was not the appropriate forum for this appeal and that instead an appeal should be made to this Court. Significantly, solicitors for the trustee wrote: We invite you within 7 days of the date of this letter to discontinue the current Appeal and commence in the Full Court of the Federal Court of Australia. If that step is taken we would consent to an appropriate extension of time for the commencement of the appeal in the Full Court of the Federal Court of Australia, being the appropriate course. 14 On 5 October 2012 the trustee's solicitors forwarded to the applicant's solicitors, by way of service, documents which had been filed in the Family Court, but no sealed copies of which had been returned. Those documents included a notice of address for service, a cross-appeal and an applicant with supporting affidavit. 15 On 11 October 2012 the applicant withdrew her appeal to the Family Court. On the same day a letter was sent by the trustee's solicitors to the applicant's solicitors, who had not been made aware of such withdrawal. The letter enclosed a notice of motion to strike out the appeal in the Family Court. The letter also referred to the fact of the trustee's solicitor being aware of the applicant's intention to discontinue their appeal in that jurisdiction. Subsequently, the trustee was informed that the appeal had been discontinued. 16 Thereafter followed a period of two weeks between 11 October and 26 October (when the present application was filed in this Court) where the applicant's solicitors took no steps to commence proceedings in the Federal Court. Counsel for the applicant was unable to provide any explanation for this delay. 17 Because the one week deadline referred to in the letter of the trustee's solicitors (set out at [13] above) had elapsed, the trustee now opposes leave to appeal being granted. As a consequence, an expensive interlocutory hearing has taken place in a situation in which very little actual value is at stake. The estimated total net equity of the applicant and of Mr De Santis after repayment of the mortgage over the property is $175,000. This is a highly unsatisfactory outcome and blame for it lies on both sides. 18 The applicant's solicitors have shown a lack of diligence in filing an appeal, even after the deficiencies in the proposed appeal to the Family Court were pointed out by the trustee. No explanation has been given for the delay. By failing to file the appeal within the relevant period, both the applicant and the trustee have incurred significant additional costs. 19 Likewise, the Court is dismayed that the trustee has elected to oppose leave being granted, given that it was previously the trustee's position that an application would not have been opposed had the applicant met the trustee's unilaterally imposed deadline. Although counsel for the trustee highlighted the difficulties caused by the applicant's delay, such as the decreasing value of the equity in the property and the concern that the applicant is unable to meet mortgage payments on the property, there is little to justify the complete reversal in the trustee's position from being amenable to resolving this application by consent to doggedly opposing it by raising complex technical issues. CONSIDERATION 20 The principles for consideration of applications for extension of time to file an appeal are well-settled. They are set out in Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344 ('Hunter Valley') at 348-349: 1. Although the section does not, in terms, place any onus of proof upon an applicant for extension an application has to be made. Special circumstances need not be shown but the court will not grant the application unless positively satisfied that it is proper so to do. The "prescribed period" of twenty-eight days is not to be ignored (Ralkon Agricultural Co. Pty Ltd v. Aboriginal Development Commission (1982) 43 A.L.R. 535 at 550). Indeed, it is the prima facie rule that proceedings commenced outside that period will not be entertained (Lucic v. Nolan (1982) 45 A.L.R. 411 at 416). It is a pre-condition to the exercise of discretion in his favour that the applicant for extension show an "acceptable explanation of the delay" and that it is "fair and equitable in the circumstances" to extend time (Duff at 485; Chapman v. Reilly unreported (Federal Court of Australia, Neaves J., 9 December 1983) at 7). 2. Action taken by the applicant, other than by making an application for review under the Act, is relevant to the consideration of the question whether an acceptable explanation for the delay has been furnished. A distinction is to be made between the case of a person who, by non-curial means, has continued to make the decision-maker aware that he contests the finality of the decision (who has not "rested on his rights": per Fisher J. in Doyle v. Chief of Staff (1982) 42 A.L.R. 283 at 287) and a case where the decision-maker was allowed to believe that the matter was finally concluded. Compare Doyle, Chapman, Ralkon and Douglas v. Allen (1984) 1 F.C.R. 287[PDF] with Lucic at 414-415 and Hickey v. Australian Telecommunications Commission (1983) 47 A.L.R. 517 at 519. The reasons for this distinction are not only the "need for finality in disputes" (see Lucic at 410) but also the "fading from memory" problem referred to in Wedesweiller v. Cole (1983) 47 A.L.R. 528. 3. Any prejudice to the respondent including any prejudice in defending the proceedings occasioned by the delay is a material factor militating against the grant of an extension: see Doyle at 287, Duff at 484-485, Hickey at 525-527 and Wedesweiller at 533-534. 4. However, the mere absence of prejudice is not enough to justify the grant of an extension: Douglas, Lucic at 416, Hickey at 523. In this context, public considerations often intrude (Lucic, Hickey). A delay which may result, if the application is successful, in the unsettling of other people (Ralkon at 550, Becerra at 12-13) or of established practices (Douglas) is likely to prove fatal to the application. 5. The merits of the substantial application are properly to be taken into account in considering whether an extension of time should be granted: Lucic at 417, Chapman at 6. 6. Considerations of fairness as between the applicants and other persons otherwise in a like position are relevant to the manner of exercise of the court's discretion: Wedesweiller at 534-535. 21 Although Hunter Valley considered s 11 of the Administrative Decisions (Judicial Review) Act 1977 (Cth), which concerns review of administrative decisions, the same principles have been applied in cases where an extension of time to appeal judicial decisions was sought: see for example SZQGO v Minister for Immigration and Citizenship (2012) 125 ALD 449. 22 It is wholly unsatisfactory that no explanation was provided by the applicant for the delay. Counsel for the applicant had not been instructed as to the reason and neither the applicant nor her solicitors filed an affidavit explaining the delay. 23 Nevertheless, as the Full Court stated in Comcare v A'Hearn (1993) 45 FCR 441 at 444, an acceptable reason for the delay is not an indispensible prerequisite for an application for extension of time being granted. To similar effect, see Dix v Crimes Compensation Tribunal [1993] 1 VR 297 at 302. 24 Although the Court cannot be certain, the events following delivery of the decision of Altobelli FM suggest that the delay in bringing proceedings in the appropriate venue is to a large extent the fault of the applicant's solicitors. The applicant was represented throughout the proceedings and it seems likely that she received incorrect advice that the appropriate forum for the appeal was the Family Court. At the least, the applicant's solicitors were made aware by the trustee's solicitors that the appeal had been brought to the inappropriate Court, but still took two weeks to rectify the situation. There may be valid explanations for this delay, for example, an inability to contact the applicant to obtain instructions. However, no apparent attempt was made by the applicant's solicitors during those two weeks to communicate with the trustee's solicitors or to keep them informed about the progress of the matter. A court should avoid punishing an applicant for the inattentiveness or inadvertent mistakes of his or her legal advisors: see Comcare v A'Hearn, Jess v Scott (1986) 12 FCR 187 and SZQHK v Minister for Immigration and Citizenship (2012) 125 ALD 458. 25 The trustee argued that he would be prejudiced if this Court were to grant the application. It is difficult to see why this is the case, particularly given their previous attitude towards a prospective appeal to this court as discussed above at [20]. It is true that the creditors of Mr De Santis are waiting anxiously for satisfaction of their debts. However had the applicant filed in this Court within 21 days as required by r 36.03 of the Rules, an appeal as of right would have been available and the creditors would have been obliged to await the outcome of the appeal. An additional six week delay does not change the position significantly. 26 The trustee also tendered a letter dated 18 September 2012 from Pepper Australia Pty Ltd, which is the broker of the property's mortgage. The letter confirmed that a hardship variance to the mortgage had been approved. The hardship variance provided for a three month moratorium on mortgage repayments and a cancellation of arrears of $22.51. The trustee stated that this was evidence of a danger that the applicant would not be able to meet necessary mortgage payments, raising the risk of default and thereby imperilling a major source of potential funds for creditors. 27 The Court takes the view that this evidence falls well short of establishing that the applicant is in danger of default. It may well be that with the three month moratorium in repayments and the cancellation of arrears the applicant will be able to satisfy her obligations under the mortgage. This evidence does not establish prejudice to creditors which would prevent the Court from granting the application. 28 As for the substance of the application, the applicant raises numerous issues as set out in the draft Notice of Appeal. Significant issues relating to the applicant's entitlement to the whole or a greater share in the property are raised. The nature of the matters raised suggests that the factual matters concerning the deposits made and payment of stamp duty for the property can be readily proved even by an agreed statement of facts upon production of the appropriate evidence. There may be issues of fact but they would be relating to the contributions made by the wife and the character of those contributions. 29 It is not possible for this Court to state that the appeal is without merit, and there is no basis for assuming that the appeal is not bona fide: see Howard v Australian Electoral Commission [2000] FCA 1767. In particular, the application of s 116(2)(a) of the Act given his Honour's finding that there was an express trust is an issue that deserves more detailed attention by a Court. Accordingly the Court is satisfied that the merits of the appeal support granting of the applicant's application. 30 As to the delay, the Court is satisfied that the delay involving the bringing of the proposed appeal causes negligible prejudice to the trustee. The appeal raises issues which should be more fully explored on an appeal and the additional prejudice and delay suffered by the trustee are not sufficient to deny the applicant's application. Taking all of these factors into consideration, the Court considers that it is appropriate to allow the application. 31 The parties were invited to provide submissions on the question of costs. The applicant submitted that if the applicant were successful, the trustee should pay the costs of the application as he would be the unsuccessful party. The trustee submitted that the applicant should pay the costs of the application even if she were successful, as the applicant sought the indulgence of the Court for the late application. 32 The Court's view is that despite her success, the applicant should pay the costs. This is for two reasons. First, the trustee is correct in stating that the party that seeks an extension of time should ordinarily pay the costs: see Golski v Kirk (1987) 14 FCR 143 at 157 and Hunter Valley at 353. The second reason is that had the applicant filed proceedings in the correct venue, the application would not have been necessary in the first place. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Cowdroy. Associate: Dated: 14 November 2012