PANGAS v LORD SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL MASON P 16 December 1997 [1997] NSWCA 244 Mason P. Late yesterday afternoon application was made before me on notice of motion for an order that certain orders made by Bryson J on 7 October 1997 be stayed pending the determination of an appeal in this court. In about 1977 Mr Peter Pangas and his then wife, Robynne Pangas, separated. Peter Pangas is the brother of Winston Pangas, who is the applicant for the stay. The separation led to proceedings in the Family Court for divorce which were resolved, it would appear, some time in 1985 when the property settlement was made by Peter Pangas in favour of his former wife. That lady is now known as Robynne Lord. The property settlement was not met and, in 1994 and 1995, three judgments were entered in favour of Mrs Lord in proceedings in the Supreme Court. Damages were ordered to be paid. That liability is not presently in dispute. The money is, however, still outstanding and stands at approximately $1 million, so I was informed yesterday. On 8 June 1995 Mrs Lord caused a writ of execution to issue from the Supreme Court to enforce the judgment debt. She proposed to execute it against a property at 15 Hunter Street, Sydney belonging to her former husband, Peter Pangas, and apparently his only asset at the time. The writ was registered against the title on 14 July 1995. On 11 August 1995 a mortgage apparently executed in 1991 between Peter Pangas as mortgagor and Winston Pangas as mortgagee was registered against the title. It secured a debt of $3.5 million. Mrs Lord then commenced proceedings to assert the priority of her rights under the writ of execution over the mortgage. Those proceedings came before Bryson J on 22 November 1995. After refusing an adjournment based upon medical grounds advanced on behalf of one of the Pangas brothers, Bryson J held that Mrs Lord's writ of execution had priority over the mortgage in favour of Winston Pangas. Winston appealed and the matter was heard by the Court of Appeal on 27 March this year. The appeal was partly successful in that the declaration made by Bryson J was set aside and the matter remitted for further hearing to the Equity Division. However, that hearing was limited to the issue of whether the Registrar General should have declined to record Mrs Lord's writ upon the ground that there was not annexed to the application to record the writ an office copy of the writ as required by s 105A of the Real Property Act. Otherwise the appeal was dismissed. The Court of Appeal directed that the matter be put into the duty judge's list in the Equity Division on 14 April 1997. This direction was obviously an expression of concern that matters had not advanced, at least so far as Mrs Lord's interests were concerned. On 7 April 1997 Mrs Lord filed a notice of motion in the proceedings in the Equity Division. She sought an order under s 85 of the Family Law Act that the mortgage dated 1991, pursuant to which Peter granted a mortgage to Winston, 2 UNREPORTED JUDGMENTS should be said aside. There were ancillary orders sought in the notice of motion. That notice of motion was returnable on 14 April. It would appear that it was adjourned for hearing on 5 June. On 5 June the matter came before Young J, who was asked to adjourn the hearing — I may be wrong, but I do not think the evidence disclosed the basis upon which the adjournment was sought. Nevertheless his Honour gave directions on that occasion that included a direction about the filing of evidentiary material to be relied upon by the parties. Those directions included a requirement that all evidentiary material by Peter and Winston Pangas be filed no later than 26 June 1997. It was also noted that if any further application for extension of time or adjournment was made, then the court would, if the application was not by consent, require the medical practitioner to be present in court to give oral evidence and to be cross-examined on it. The adjourned proceedings came before Bryson J on 15 July. Mr Johnston, of counsel, appeared for Mrs Lord, and Mrs Cominos appeared for the brothers Pangas. Early in the proceedings Mr Johnston submitted that if the notice of motion seeking relief under s 85 of the Family Law Act was successful, then the remitted matter would be withdrawn. Mrs Cominos applied for an adjournment. She read two affidavits, one by each of the Pangas brothers, and tendered certain documents being some of the documents later relied upon before Bryson J and later still relied upon before me, as evidence of the genuineness of the loan transaction between Peter and Winston. The trial judge indicated he was not prepared to adjourn the proceedings. He gave no reasons at that stage but reasons were given in his final judgment. The application then proceeded with Mrs Cominos directing his attention primarily to the s 85 application. Evidence was tendered on her behalf. Mrs Cominos then applied for leave to adduce oral evidence from Winston and Peter Pangas each of whom, it appears, were in court at the time. That leave was refused. Again his Honour did not give reasons until his final judgment, although it was fairly apparent, even at that stage in the proceedings, that the refusal was based upon the fact that no substantive affidavits had been filed by either brother in relation to the s 85 application notwithstanding Young J's prior directions. Mrs Cominos tendered some documents primarily in relation to the remitted matter. Those documents indicated that the writ of execution that had been the subject of the proceedings that went to the Court of Appeal had been withdrawn by Mrs Lord and had been replaced with another writ of execution. However, the materiality of this was that the new writ of execution was registered after the mortgage. The learned trial judge noted this in the transcript. It was clear, however, that this was not the end of the matter because, as I have already recorded, Mrs Lord's position was that she primarily relied upon her notice of motion attacking the mortgage whatever its date and priority in the light of s 85 of the Family Law Act. The judge heard addresses and reserved judgment. On 29 July Bryson J delivered his reserved judgment. His Honour noted — p 2 — that it was appropriate for the s 85 application to be made in the proceedings in the Equity Division because setting aside the mortgage would be a step ancillary to execution of judgments and orders in the proceedings. In the Supreme Court his Honour then set out — at pp 2-5 — his reasons for having refused the adjournment that had been sought at the hearing. He indicated that that adjournment had been refused, notwithstanding the recent shift in the law — at least according to some observers — in the High Court's decision in URJ PANGAS v LORD (Mason P) 3 State of Queensland v J L Holdings Pty Ltd.1 His Honour also gave reasons — at pp 5 and 6 — for having refused leave to call oral evidence. The terms of s 85 of the Family Law Act were set out and it was noted that that empowers a court to set aside a disposition whose effect was likely to defeat an order made under the Act. An intent to defeat did not have to be established. Parenthetically at p 9 his Honour addressed the remitted issue and found that an office copy of the writ of execution had been annexed to the application to register the original writ. His Honour did not, in his judgment, take that matter any further. Nor did he refer to the matter previously noted and established on the evidence, namely, that the original writ of execution had been withdrawn. Commencing at p 9 of his judgment his Honour addressed the evidence, such as it was, which had been tendered by Mrs Cominos in support of her submission that the mortgage secured a genuine loan. He noted that the letters that had been put into evidence showed that Winston Pangas had large sums of money available to him after the settlement of a property sale. His Honour also noted that no evidence had been led to show that Winston had actually applied these sums in making loans to Peter. His Honour then turned to the issue raised by s 85 of the Family Law Act. In addressing that matter he appears to have accepted that there was an earlier unregistered mortgage followed by a registered mortgage — see p 10 of the judgment. The date of the unregistered mortgage, namely, 9 August 1991, was, however, according to his Honour, a significant fact because it was a short time after Mrs Lord had commenced proceedings in the Family Court on 19 June 1991. Presumably these were proceedings to enforce the 1985 property settlement. It was held that the grant of a statutory mortgage was a disposition within the meaning of s 85(1) of the Family Law Act. His Honour also held — p 13 — that Peter Pangas would have been aware of the proceedings commenced against him in the Family Court by his former wife, and of the impact of those proceedings upon his property interests as they stood in 1991. In a passage commencing at p 13 and going through to p 15 of the judgment his Honour addressed the critical issue under s 85. He held that the actuality of a grant of a mortgage for $3.5 million over Peter's substantial asset would defeat an anticipated order was obvious. His Honour inferred from the circumstances that the mortgage was granted and a caveat was entered in support of it almost immediately after the commencement of those proceedings that the mortgage was granted with the intention of defeating the anticipated orders in the proceedings. His Honour noted that s 85(3) required him to have regard to the interests of bona fide persons interested. He held, however, that the circumstances of the transactions did not show it was bona fide and that those circumstances raised suspicions as to its bona fides. He noted that the two men involved were brothers who had acted together in the litigation with common representation, even though they did not have a common interest. His Honour held: Where the asserted case is that loans and other obligations were incurred, and over a period of years, the sequence of long inattention to the grant of a written mortgage, followed by prompt attention in executing a document and lodging a caveat soon after the commencement of these proceedings makes it improbable that the seventh defendant acted without knowledge of the first defendant's claim, and improbable that he did not intend to sow difficulties in her way by taking the mortgage and lodging the 1. (1997) 141 ALR 353. 4 UNREPORTED JUDGMENTS caveat. A person seeking to have the benefit of a finding that that person acted bona fide in a transaction cannot in all practicality refrain from giving evidence explaining circumstances of the transaction and the state of his own mind and knowledge. No evidence establishes the bona fides of the seventh defendant with respect to the transaction in which he took the mortgage. He does not come under consideration for the purposes of s 85.' (The seventh defendant was Winston Pangas.) As indicated that reserved judgment was handed down on 29 July 1997. However, orders were not made until 7 October. The orders that were made on that day declared that the registered writ was a prior encumbrance upon the land. I pause to note that the writ referred to was the original writ. His Honour also made an order pursuant to s 85 of the Family Law Act setting aside Winston's mortgage to the extent necessary for the enforcement of the judgments and orders for payment of money, including orders for costs made in favour of Mrs Lord against Peter Pangas in the proceedings, and to the extent necessary for carrying out the orders made by his Honour. After making an order charging the land with payment of certain costs his Honour ordered that the land at 15 Hunter Street be taken in execution. Various ancillary orders were made designed to secure the cooperation of Mrs Lord and Peter Pangas in an efficient sale by auction. Those orders included an injunction that Peter Pangas forthwith vacate the property and not thereafter enter or approach it. His Honour provided, then, in his orders, that on completion of the sale of the propertythe proceeds should be distributed in the following order and priority: (a) Payment of any real estate agent's commission or other fees. (b) Payment of all legal costs of or incidental to the sale. (c) Payment to the first defendant of her costs pursuant to order 4. (That order dealt with costs of Mrs Lord's various notices of motion in the Equity Division.) (d) Payment to Mrs Lord of all amounts required to satisfy the judgments in her favour that had been entered in 1994 and 1995 and including interest accrued upon such judgments. (e) The balance, if any, to be paid to the second defendant, Peter Pangas. Ihave said those orders were made on 7 October. It is significant, however, that the orders were made following a series of hearings in which the parties were invited to put submissions as to the proper form of the orders that should flow from the judgment that had been given on 29 July. In the concluding paragraph of that judgment his Honour had stated he was not limited by the terms of s 85(1) to setting aside a mortgage wholly. He held that it could be set aside to a limited extent and that it should be set aside to no greater extent than was necessary for the protection of Mrs Lord so that 'except for that purpose the rights arising under the mortgage between the second (Peter) and seventh (Winston) defendants would not be affected by my order.' His Honour proposed a draft order which at that stage contemplated the nett proceeds of sale under the execution to be paid into court to abide the court's further order. The matter was before his Honour again on 31 July. In some reasons described as 'Observations' given that date his Honour noted that an order for payment into court of the proceeds of sale was authorised by s 85(2). He said that the court couldthen make a further order about payment out of the moneys and, in doing so, was not limited to protecting costs or maintenance. It could award equitable execution so as to give effect to rights and obligations under judgments of URJ PANGAS v LORD (Mason P) 5 persons interested in funds in court. The parties were asked to consider those Observations and bring the matter before his Honour when settlement of the draft orders could be taken further. On 23 September his Honour published a further judgment, again described as 'Observations.' He noted that he had considered submissions made in writing by Mrs Lord's counsel and that the solicitor for Peter and Winston Pangas had made no further submissions on the draft order. His Honour stated in those 'Observations' that the parties were to have a final opportunity to make written submissions on the draft but that if there were none he would make the order as drafted on his return from vacation on 7 October. Copy of those Observations and the draft order which accompanied them were sent by letter to Mrs Cominos from his Honour's associate. The draft order as it stood at that stage contained the provision which remained in the final order to the effect that the balance of the auction proceeds, if any, would be paid to Peter Pangas. On 7 October there was a further hearing. It would appear that Mrs Cominos was before his Honour, because his Honour's Observations record a submission made by her to the effect that there should not be an immediate order requiring Peter Pangas to vacate the property. His Honour explained why such an order was necessary in order to ensure that the execution against the property would not be frustrated. His Honour then addressed some submissions that were made which he characterised as an attempt, in effect, to reopen the substantive decision made in the reservedjudgment. He was not prepared to accept those submissions and, having indicated he would adhere to the draft orders, he made the orders in the form in which they finally appeared. In response to Mrs Cominos" application on behalf of Peter Pangas that 15 Hunter Street was his home and that he had nowhere to stay, his Honour directed that Peter would have until 21 October to vacate the property. Nothing appears to have happened between that date and 21 October but, on 21 October, an application was made by Mrs Cominos, on behalf of Peter Pangas, for a stay of the orders made on 7 October. Peter was seeking an extension until 3 November 1997 of the direction that he vacate the property. His Honour refused a further stay. Later that day Mrs Cominos, representing Peter Pangas, made application to Beazley JA for a stay. Mr Johnston represented Mrs Lord in those proceedings. As happened to me yesterday, Beazley JA took a little time to understand the rather complicated factual situation presented to her in a situation of urgency and, if I may say so, unnecessary urgency. There was some discussion about a possible consensual stay which ebbed and flowed. It was pointed out that there was no notice of appeal on foot. Mrs Cominos indicated that she had handed Mr Johnston a Notice of Appeal without appointment which would be filed. Her Honour obviously accepted that assurance and continued to address the application for a stay. Ultimately her Honour refused the stay. The reasons are set out in the transcript commencing at p 23. They include some comments about her Honour's assessment of the prospects of success in the foreshadowed appeal. On 22 October a Notice of Appeal without appointment — otherwise known as a holding appeal — was filed. Apart from stating that the appellants, who were Peter and Winston, appealed from the whole of the decision of his Honour Bryson J, the document was entirely unenlightening. There were no grounds, and no steps were taken after that date to put the appeal in order. This notwithstanding 6 UNREPORTED JUDGMENTS the exchange between Beazley JA and Mrs Cominos in which the delay in prosecuting the appeal had been a matter of comment. It is also relevant to note that on 4 November an appeal was filed in the Family Court. There was — there may still be — some issue or doubt about the jurisdiction of the Court of Appeal to entertain an appeal from Bryson J. However, I should indicate I am hearing this matter on the assumption (made solely for the purpose of today's proceedings) that there is an appeal, and an appeal as of right, to this court. Yesterday morning there was an application made before the Full Court of the Family Court for a stay in aid of the appeal pending in that court. Apparently that application was unsuccessful. Yesterday afternoon application was made before me for a stay in aid of the appeal to this court. It was supported by an affidavit sworn 15 December by Winston Pangas. Mrs Cominos appeared for Mr Winston Pangas, and Mr Johnston appeared for Mrs Lord. The affidavit deposes that Winston first saw an advertisement on 6 December advertising the sale by public auction on 16 December of the property at 15 Hunter Street. He states he was not aware, prior to the 6th, that the property was scheduled to be sold by public auction on the 16th. He does not state — and I would not think he would even assert — that he was unaware that an auction was proposed. After all,that had been the purport of the orders that had been made by Bryson J. In the affidavit, at para 5, Mr Pangas stated that he advised Mrs Cominos in mid-November 1997 that he wished to appeal against Bryson J's refusal to grant him a stay of his orders made on 7 October. He sought to explain why nothing had come of those instructions by stating that, prior to 9 December, he was unable to give Mrs Cominos adequate instructions due to ill health. There were medical certificates attached to the affidavit addressing that issue. The bulk of the affidavit then addressed the prospects of success in the appeal and contained material which, had it been put before Bryson J, would have been relevant to the genuineness of the loan and the mortgage. I shall assume the intention is to rely upon that material in support of the appeal though, obviously, there would need to be an application to that effect before it could be relied upon. In the course of debate yesterday Mrs Cominos outlined the grounds of the appeal. I will refer to these grounds and my attitude towards them because that is obviously relevant to the application for a stay. The first ground of appeal was that the 1995 writ of execution had been withdrawn and that it was, therefore, incapable of having any priority. It seems to me that that is correct but irrelevant. The matter proceeded, substantially, on the s 85 application which, because it was successful, meant it did not matter when the mortgage was registered. It was set aside as a disposition in breach of s 85. The second ground of appeal was that Bryson J had wrongfully refused an adjournment. As Beazley JA pointed out in her reasons, an appeal based upon a refusal of an adjournment has _ significant difficulties given the essentiallydiscretionary nature of that exercise. These difficulties become heightened in the present case when one looks at the final paragraphs of the two affidavits from the brothers Pangas that were read to Bryson J in support of the adjournment application. Each of them deposes to ill health, but in what I will I think charitably describe as fairly perfunctory terms. They were not supported by medical certificates and they were certainly not supported by medical evidence as 'Young J had expressly contemplated in the directions that he had given. The URJ PANGAS v LORD (Mason P) 7 medical evidence placed before me which is indicative of that which might have been placed before Bryson J reveals, in the case of Winston Pangas, a long-term medical condition which is doubtless disabling but not of such a nature as to prevent him giving instructions. In his own words, he has 'good days and bad days.' It is clear that, on his good days at least, he is able to give instructions to prepare the type of affidavit that was placed before me. On the material that was put before Bryson J in support of the adjournment, I think that the appeal against the wrongful refusal of an adjournment has very little prospect of success. The third ground of appeal challenged that part of his Honour's orders which provided that the nett balance of the auction proceeds should be paid to Peter instead of to Winston. In the light of his Honour's reasons — given on 29 July, and in particular p 15 of those reasons — it is surprising that the order did not provide that the balance of the money from the auction should be paid to Winston to the extent necessary to satisfy his mortgage. His Honour's intent appears to have been to set aside the mortgage only so far as it is necessary to give effect to Mrs Lord's rights under the judgments. However, no complaint appears to have been made to his Honour in relation to this matter. Mrs Cominos, who appeared for both parties at that stage, did not appear to have raised any complaint about that portion of his Honour's orders which was clearly foreshadowed in at least the penultimate draft ofthose orders. It seems to me that the court should infer that there is sufficient cooperation and trust between Winston and Peter to mean that Peter is quite safe and that Winston will pay him out of any nett proceeds of the auction after discharging his obligations to Mrs Lord. If that is not the case then no doubt Mrs Cominos will advise the two brothers that there is a conflict of interest and will promptly advise Winston of his right to seek a mareva injunction to restrain the disposal of the nett proceeds of the auction but that is a matter for the future. The fourth ground of appeal was that his Honour erred in holding that the loan fell foul of s 85 of the Family Law Act. Mrs Cominos sought to rely upon the material in Winston Pangas" affidavit sworn yesterday which advanced material showing the 1991 loan was genuine, and that it picked up advances previously made, particularly the advance of $2.8-million made in 1988. She also submitted that the evidence did not support the finding by Bryson J that the mortgage was an attempt on Peter's part to defeat his former wife's claim. The difficulty that this ground has is it depends upon leave being granted by the Court of Appeal for fresh evidence to be placed before it in support of the appeal. If the adjournment was correctly refused it is hard to see the basis upon which leave to adduce the fresh evidence would be granted, particularly, as is the case, that a lot of that fresh evidence is documentary. I find it inconceivable that Winston was so disabled that he was unable to give that documentary material to Mrs Cominos prior to the hearing before Bryson J. Some documentary material was in fact tendered by her in that hearing, as I have already recounted. The attack on the finding that the mortgage was an attempt to defeat Mrs Lord's claim has the difficulty that there was no evidence led by the two brothers. It also has the difficulty that that finding does not seem to have been critical to hisHonour's reasoning in that it was sufficient that the effect of the disposition was to defeat the former wife's claim as his Honour had already indicated. Finally, it was foreshadowed that the notice of appeal would challenge his Honour's refusal to allow oral evidence to be called. In the light of Young J's direction for the filing of affidavits and the reasons given by Bryson J for having 8 UNREPORTED JUDGMENTS refused to give that leave, I think the fairest thing to say is I do not consider that ground of appeal has many prospects of success. The court is therefore faced with this: an appeal that has been prosecuted with supine indifference and an appeal which does not appear to have any great prospect of success. The only point, as I have indicated, that appears to me to have some possible chance of success is the possible slip in his Honour's orders relating to the rights as between Peter and Winston with respect to Winston's mortgage. But nothing turns upon that with respect to the present stay and Winston's rights can be protected, assuming he is given proper advice by a solicitor who does not have a conflict of interest. An application seeking a stay must show persuasive grounds. The general principle is that the orders of the court are to be obeyed and followed, notwithstanding an appeal. To grant a stay would further frustrate the long-established rights of Mrs Lord to enforce the property settlement made in 1985 in circumstances where there is, to say the least, a very real suspicion that the two brothers are acting in cahoots one with the other to defeat and frustrate her rights. Whilst I have that suspicion it is not material to the order which I make. Sufficient to say that the balance of convenience clearly favours refusal of the stay as do the other reasons which I have given. Yesterday afternoon I indicated to Mrs Cominos that I was concerned that my attention had not been drawn by her to the fact that Beazley JA had refused a stay on 21 October 1997. Whilst that stay application was made on behalf of Peter Pangas and was sought, apparently at least, on the basis of his need to have longer time before vacating the property, it is significant that the stay was refused on grounds that included an assessment by her Honour of the prospects of success of the foreshadowed appeal and critical comments by her Honour about the delay on the part of both brothers in prosecuting their rights both before Bryson J and in this court. In my view the court is entitled to expect a level of assistance and candour that would have had that matter brought to the court's attention promptly. The matter was heard yesterday afternoon and proceeded for several hours at great inconvenience to court staff. The matter was clearly material even though I accept that the application before Beazley JA was on behalf of Peter Pangas. The fact remains, however, that Peter and Winston have at all times acted in tandem in this matter and have at all times been represented by Mrs Cominos. Mrs Cominos has offered an explanation this morning for her failure to have brought this matter to my attention. She has indicated she was under stress and pressure yesterday. I propose to give the matter further consideration in relation to that aspect of the matter. I can say to Mrs Cominos I will not take any further steps in the matter without contacting her, but I do regard this matter as of very considerable concern that, in an otherwise competently presented application by an advocate who was clearly on top of the detail of this matter, such an obvious matter was not drawn to my attention. The orders are that the application for a stay is refused with costs. Orders accordingly.