Anderson v Peldan

Case [2005] FCA 1179

FEDERAL COURT OF AUSTRALIA

Anderson v Peldan [2005] FCA 1179

BANKRUPTCY – void transfers – where husband and wife owned property as joint tenants – where joint tenancy severed by mutual agreement to tenancy-in-common and subsequently wife died and husband declared bankrupt – whether severance of joint tenancy into tenancy-in-common is a ‘transfer of property’ for the purposes of s 121(1) of the Bankruptcy Act 1966 (Cth) – whether the defence of good faith is established under s 121(4) of the Act

Statutes

Bankruptcy Act 1966 (Cth) ss 121(1), 5, 121(2), 121(4), 121(9), 121(5)

Cases

Cannane v J Cannane Pty Ltd (1998) 192 CLR 557 Cited

Corin v Patton (1990) 169 CLR 540 Cons

Hardie v Hanson (1960) 105 CLR 415 Cited

Lyons v Lyons (1967) VR 169 Cited

Prentice v Cummins (No 5) [2002] FCA 1503 Cons

Williams v Hensman (1861) 1 John & H 546 Cited

Williams v Lloyd;  In Re Williams (1934) 50 CLR 341 Cited

Wright v Gibbons (1949) 78 CLR 313 Cited

BERNADETTE ANDERSON AND ROBYN MOLLEE AS EXECUTORS OF THE ESTATE OF THE LATE DOROTHY RUTH PINNA v MICHAEL PELDAN AND MORGAN LANE AS TRUSTEES OF THE BANKRUPT ESTATE OF RAYMOND KENNETH PINNA

QUD 73 OF 2005

KIEFEL J
BRISBANE
25 AUGUST 2005

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

QUD 73 OF 2005

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN:

BERNADETTE ANDERSON AND ROBYN MOLLEE AS EXECUTORS OF THE ESTATE OF THE LATE DOROTHY RUTH PINNA
APPELLANTS

AND:

MICHAEL PELDAN AND MORGAN LANE AS TRUSTEES OF THE BANKRUPT ESTATE OF RAYMOND KENNETH PINNA
RESPONDENTS

JUDGE:

KIEFEL J

DATE OF ORDER:

25 AUGUST 2005

WHERE MADE:

BRISBANE

THE COURT ORDERS THAT:

1.        The appeal be allowed.

2.        The orders of Jarrett FM made on 21 February 2005 be set aside.

3.        The respondents pay the appellants costs of the appeal and of the proceedings below.

Note:   Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

QUD 73 OF 2005

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN:

BERNADETTE ANDERSON AND ROBYN MOLLEE AS EXECUTORS OF THE ESTATE OF THE LATE DOROTHY RUTH PINNA
APPELLANTS

AND:

MICHAEL PELDAN AND MORGAN LANE AS TRUSTEES OF THE BANKRUPT ESTATE OF RAYMOND KENNETH PINNA
RESPONDENTS

JUDGE:

KIEFEL J

DATE:

25 AUGUST 2005

PLACE:

BRISBANE

REASONS FOR JUDGMENT

  1. The bankrupt Mr Pinna and his wife purchased a property at Carindale in Brisbane in 1995 and were registered as joint tenants.  It was their matrimonial home for many years.  On 11 September 2003 they executed a form of transfer (‘Form 1’).  Beside the printed words ‘Interest being transferred’ were inserted the words ‘One-Half Interest In Fee Simple’.  Mr Pinna was said to be both the transferor and transferee.  Beside the word ‘Consideration’ the words ‘The Unilateral Severance Of A Tenancy Pursuant To Section 59(2) Of The Land Title Act 1994’ were inserted. The…

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Details
AGLC
Anderson v Peldan [2005] FCA 1179
Case
[2005] FCA 1179
Decision Date

CaseChat Overview and Summary

In the matter of Anderson v Peldan, the court was tasked with determining the validity of a property transfer under the Corporations Act. The appellants, Mrs Anderson and her husband, contested the trustees' claim regarding the property transfer made by the respondents, Mr and Mrs Pinna. The central issue revolved around whether the transfer was made with the intent to defraud creditors, specifically if Mr Pinna was insolvent at the time of the transfer. Additionally, the court had to assess whether Mrs Pinna acted in good faith and was unaware of her husband's insolvency.

The court's analysis began by examining the mutual agreement to sever the joint tenancy, which was executed on 11 September 2003. The judge concluded that this mutual agreement constituted an equitable disposition of Mr Pinna's interest, thereby transferring property as defined under the Act. The court held that Mrs Pinna received valuable consideration for the property, equivalent to what was transferred. The judge dismissed the notion that Mrs Pinna, being married to Mr Pinna, would necessarily be aware of his financial affairs, as there was insufficient evidence to support this claim. Moreover, the court was satisfied with the evidence indicating Mr Pinna's insolvency as of September 2003, which was unchallenged. Consequently, the defence of good faith was deemed to have failed.

The court ultimately determined that the transfer was indeed made with the intent to defraud creditors, as Mr Pinna's insolvency was evident and Mrs Pinna's lack of knowledge about this insolvency did not absolve the transfer of its fraudulent intent. The appeal was allowed, the earlier orders were set aside, and the respondents were ordered to pay the appellants' costs for both the appeal and the proceedings below.

Orders

Orders of the court

1. The appeal be allowed.

2. The orders of Jarrett FM made on 21 February 2005 be set aside.

3. The respondents pay the appellants costs of the appeal and of the proceedings below.

Background

Background to the litigation

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Evidence

Evidence Before The Court

As to the defence of good faith, his Honour held that in accordance with his earlier reasons, Mrs Pinna had given consideration for the property as valuable as that which had been transferred. His Honour was also satisfied that Mrs Pinna did not know her husband’s purpose in effecting the transfer. At an earlier point in his reasons, his Honour had observed that the trustees would no doubt have him infer that Mrs Pinna knew of Mr Pinna’s financial affairs because they were married. His Honour however considered that that was insufficient for an inference to be drawn relating to her knowledge and there was no other evidence touching upon it. These findings are put in contention by the trustees. However, his Honour held that there was no doubt that Mr Pinna was insolvent as at September 2003. No issue is taken with that finding. His Honour then went on to say that ‘there was certainly sufficient evidence to suggest his insolvency at that point of time, and so I do not think that I can be satisfied … [that section 121(4)(c) is made out]’ The defence of good faith therefore failed.THE EVIDENCE In May or June 2003 the first appellant, Mrs Anderson, had a discussion with her mother and father. The father’s conversation was ruled inadmissible by his Honour as he was not called as a witness in the proceeding. Her mother said that the bank ‘had done something so that she was no longer on the title to their home anymore’. She said it was the bank’s fault that ‘they had taken her name off the title and that therefore Pinnacle Engineering Pty Ltd would get the house’. Pinnacle Engineering is a company in which Mr and Mrs Pinna were shareholders. Mrs Pinna was also the company secretary and director. She ceased being a director on 17 February 2003. After some further discussion Mrs Anderson told her mother that there were two ways in which the property could be owned in both of their names, either as joint tenants or tenants-in-common. She explained that in the first case, if one owner died the other would then own the entire property, but in the other case if one owner died, the share would pass under their will. Mrs Pinna then asked if that meant that if the house was held by her as a tenant-in-common her share would pass to her children and was advised that it would. She asked that if she signed at the solicitor’s office to this effect whether her share would pass. There was some discussion about arrangements to see the solicitor. Mr and Mrs Pinna saw the solicitor on 11 September 2003. He said that he had given them advice concerning the joint tenancy and what it entailed, including survivorship rights, some months before. On 11 September 2003 instructions were taken from Mr Pinna ‘and others’ in relation to the document Form 1 and their Wills. Mr Pinna wanted to leave his estate to his wife. When it was put to the solicitor, during the course of Mr Pinna’s public examination, that that did not require the severing of the joint tenancy he explained that this was done ‘because of other factors which I was aware of from other clients’. The solicitor later explained in his evidence that the matter developed in this way. Mr Pinna advised that, as a result of the solicitor’s prior advice, he had discussed the matter with his wife and she wanted to be in a position to leave an interest to her children. Mrs Pinna was at this time outside the room and the solicitor went out and spoke to her. He returned and advised Mr Pinna that if he did not want to agree to sever the joint tenancy his wife would do so in any event. The decision was then made by Mr Pinna to mutually sever. The transfer was prepared on that basis. It was requisitioned by the Land Titles Office for some reason and as a result it was amended to a unilateral transfer or severance. THE APPEAL

Decision

Reasons for decision

KIEFEL J
The definition of ‘property’ in s 5 of the Act includes any estate or interest, present or future, vested or contingent, arising out of or incident to any real or personal property. THE REASONS FOR JUDGMENT His Honour found that there had been an equitable disposition of Mr Pinna’s interest as a joint tenant on 11 September 2003 when he and his wife mutually agreed to sever the joint tenancy. This was to be inferred from the execution of the transfer. Severance at law came about on registration on 5 November 2003. His Honour held that all that was transferred at the point of registration was the bare legal title. By reason of the agreement, Mrs Pinna became the beneficial owner of the property as a tenant-in-common in equal shares on 11 September 2003. His Honour considered that the change in the nature of Mr Pinna’s interest carried with it a change in the bundle of rights attached to his interest in the property. Given the mutual promises to accept the change in the status of the ownership, there was valuable consideration. It is to be inferred from these matters, his Honour held, that property interests were disposed of. It followed that there was a transfer ‘of that part of his [Mr Pinna’s] interest in the property in the nature of the bundle of rights that came with being a joint tenant’. Section 121(9) provided guidance. The severance of the joint tenancy created in Mrs Pinna a new interest, an interest as a tenant-in-common that carried with it a different bundle of rights. There was, his Honour concluded, a transfer of property for the purposes of s 121(1) of the Act. Further, had there not been the transfer, Mrs Pinna’s interest in the property would have become available to Mr Pinna’s creditors upon her death. Mr Pinna’s main purpose was the purpose referred to in s 121(2). There is no issue taken with that finding on the appeal. As to the defence of good faith, his Honour held that in accordance with his earlier reasons, Mrs Pinna had given consideration for the property as valuable as that which had been transferred. His Honour was also satisfied that Mrs Pinna did not know her husband’s purpose in effecting the transfer. At an earlier point in his reasons, his Honour had observed that the trustees would no doubt have him infer that Mrs Pinna knew of Mr Pinna’s financial affairs because they were married. His Honour however considered that that was insufficient for an inference to be drawn relating to her knowledge and there was no other evidence touching upon it. These findings are put in contention by the trustees. However, his Honour held that there was no doubt that Mr Pinna was insolvent as at September 2003. No issue is taken with that finding. His Honour then went on to say that ‘there was certainly sufficient evidence to suggest his insolvency at that point of time, and so I do not think that I can be satisfied … [that section 121(4)(c) is made out]’ The defence of good faith therefore failed.THE EVIDENCE

Ratio Decidendi

Legal Principle Established

Established by: KIEFEL J

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