On petition by bankruptcy Trustee and to
assure availability of his assets for creditors, Australian Federal Court
grants Mareva injunction regulating widow’s sale of valuable Florida real
estate owned by bankrupt former husband at time of his death
Langley
George Hancock died on March 27, 1992, owning several valuable properties in
Australia and one in Orlando, Florida. In May 1995, the Western Australia
Supreme Court granted probate as to the Hancock estate to executors named in
his will. Questions later arose as to whether Hancock had been solvent at the
time of his death. Pursuant to a creditor’s petition filed by Hancock
Prospecting Pty. Ltd. in December 1997, a federal bankruptcy proceeding began.
The Federal Court of Australia ordered the estate to be administered under Part
XI of the Bankruptcy Act 1966 (Cth) and appointed a Mr. Donnelly as Trustee.
The
Trustee alleged that, despite his insolvency, Mr. Hancock had given Mrs.
Rosemarie Porteous (the former Mrs. Rose Hancock) $254,129.71 on October 23,
1991 and that this gift amounted to an act of bankruptcy under the statute. If
true, bankruptcy administration would relate back to that date. As the Court
notes: “[t]his commencement date is significant for the reason, among others,
that under s120 of the Act, gifts made within a period of 5 years prior to the
commencement date are, subject to one exception, void as against the Trustee.
The exception is that a gift made more than two years prior to the commencement
date will not be void as against the Trustee if the transferee proves that the
transferor was solvent at the time of the transfer.” [Slip op. 2-3]
In
essence, the Trustee was trying to recover under s120 of the Act many gifts of
money Mr. Hancock had allegedly made to Mrs. Porteous during the five years
prior to October 23, 1991 plus interest on these amounts. He alleged also that
Mrs. Porteous used some of these funds to invest in various properties in
Australia as well as one property in Orlando, Florida. On March 15, 2001, the
Trustee moved the Court to issue several injunctive orders to make sure that
these properties or the proceeds from their sales are available to satisfy any
orders issued in favor of the Trustee.
As
to the United States property, the Trustee sought an order restraining
respondents or their representatives from selling, charging, mortgaging,
encumbering or otherwise disposing of the property located in Seminole County,
Florida (the Orlando property) during the pendency of the bankruptcy
proceedings without giving 21-days written notice to the Trustee.
Moreover,
in the event the Orlando property is sold, the Trustee asked the Court to order
that respondents give not less than 21 days’ written notice to the Trustee
before the settlement date on the sale. In addition, the Trustee requested
that, in the case of a sale of the Orlando property, the Court order the
retention of any proceeds of the sale in a joint bank account in the names of
the Trustee and of the solicitor for the respondents in an amount equal to the
total claims of the Trustee with respect to the Orlando Property plus interest
pursuant to the Federal Court Act.
The
Court first notes that injunctive relief against the parties to a proceeding
focuses on preventing abuse or frustration of the Court’s process. It then
points out that a party seeking a Mareva injunction [see Mareva Compania
Naviera S.A. v. International Bulkcarriers S.A. [1975] 2 Lloyd's Rep. 509;
[1980] 1 All E.R. 213] must show three elements.
The
first element is, that he has a good arguable case or a sufficiently realistic
prospect of success in the proceedings. Secondly, the applicant has to show
that, without such an order, a real risk exists of inability to satisfy a
favorable judgment because a defendant will have hidden or dissipated the
assets in question. The final element demands a showing that the balance of
convenience requires the entry of the requested order.
In
the Court’s view, a vital aspect of a good arguable case here turns on evidence
of Mr. Hancock’s insolvency at time of death. The Trustee alleges that, at this
point, the deceased was unable to repay debts owed to Clough Building Pty.
Ltd., The Hancock Family Memorial Foundation Ltd. and Hancock Mining Ltd. The
trustee attached voluminous documentary evidence about Mrs. Porteous’ finances
and the gifts she got from deceased. Defendants argued that this so-called
“evidence” contains nothing but contested allegations, insufficient to show an
arguable case. The Court, however, disagrees.
The
Court then considers the danger of dissipation of assets based mainly on a
four-day deposition of Mrs. Porteous. At an earlier time, it appears that she
may have intended to bring any assets from the sale of the Orlando Property
back to Australia.
“The
impression created by the whole of the transcript, however, is that Mrs
Porteous's life plans are presently rather fluid. The question of her
purchasing a French chateau was discussed along with other plans she has for
her future. While the particular property might be beyond her reach, the
discussion shows that she is not inimical to living overseas. In addition there
is, as counsel for the applicant observed, a certain inconstancy of intention.
In my opinion there is a strong possibility that Mrs Porteous may alter her
plans and deal with the properties in a manner inconsistent with preserving the
assets (or their proceeds) in a form accessible to the Trustee.” [Slip op.
17-18]
Finally,
the Court decided that, since the parties main dispute was over the amount of
interest due, the balance of convenience favors the granting of the Trustee’s
motion as to the Orlando Property.
The
Court then issues the restraining orders. As to the potential sale of the
Orlando Property, and the advance notice of settlement, the Court grants the
order essentially in the terms requested above.
With
respect to the joint bank account for the proceeds of the sale, the Court’s
order reads more specifically as follows: “In the event of sale of the Orlando
Property, there shall be retained out of the proceeds of such sale and placed
in a joint bank account in the names of the Applicant [Trustee] and the
solicitor for the Respondents, an amount of $ 1,590,531.54 together with
interest on that amount calculated in accordance with the rates of interest
prescribed under Schedule J of the Supreme Court Rules 1970 (NSW) from 8 April
1999 to the date of settlement of such sale.” [Slip op. 22-23]
Citation: Donnelly (Trustee) in matter of bankrupt estate of Hancock
(deceased) v. Porteous, [2001] F.C.A. 345, 2001 Aust. Fed. Ct. Lex. 5 (Aust.
Fed. Ct., New S. Wales, April 2) (Reed Intl. Books, Aust.).
**** Mr. Richard Ehrlich is a specialist in Corporate, Estate and Personal Financial Planning in Florida. In the course of his career, he has prepared hundreds of estate plans and helped hundreds of small businesses navigate the various issues involving insurance, retirement and employee retention. He has helped numerous families deal with the difficulties of taking care of elderly relatives and assisted with all of their long-term planning and long-term care needs. Finally, he has helped investors with their losses in unsuitable investments. LinkedIn Profile: https://www.linkedin.com/in/richard-ehrlich-777b513/; Attorney Profile: http://www.eldercounsel.com/profile/richard-ehrlich-ehrlich-law-center-pa/; Attorney Profile: https://solomonlawguild.com/richard-ehrlich%2C-esq; Attorney News: https://attorneygazette.com/richard-ehrlich%2C-esq#c35a1098-f039-43ab-b0dc-06cff6dabf61
