Baker v Official Trustee in Bankruptcy - [1995] FCA 565

CATCHWORDS

APPEALS - whether new point could be taken on appeal - question of fact involving credibility and "estimate of the man".

BANKRUPTCY - declaration that trusts were shams and property belonged to the bankrupt - principles - circumstances in which sham could be inferred - evidence of ownership of works of art by bankrupt - whether moneys belonging to others could be traced into property - principles of tracing - whether company holding property for bankrupt could set up a jus tertii - form of relief available - requirement that property to be traced can be identified at every stage of its journey - fraudulent conveyance - in absence of direct assignment, ability of s. 121 to get at beneficial interest in property debtor caused to be received - title of recipient prior to intervention of Official Trustee - right of recipient subject only to rights of creditors - absence of any personal liability against a recipient who has disposed of the property by sale, or by receipt of payment in the case of assignment of a debt - requirement in such a case that Official Trustee be able to trace the proceeds.

TRUSTS - constitution - necessity of a real intention to create - transfer of property to a trust - Nemo dat qui non habet - necessity of a real intention to subject property to the trust - circumstances where holding of property in trusts was a sham.

Bankruptcy Act 1966, s. 121

Jones v Hyde (1989) 63 ALJR 349
Abalos v Australian Postal Commission (1990) 171 CLR 167
Devries v Australian National Railways Commission (1993) 177
CLR 472
Daniels v Burfield (1994) 125 ALR 33
Westpac Banking Corporation v Spice (1990) 12 ATPR 51,386
Donnelly v Edelsten (1994) 49 FCR 384
S.S. Hontestroom v S.S. Sagaporack [1927] AC 37
The Commissioner of Stamp Duties (Queensland) v Jolliffe
(1920) 28 CLR 178
Joyce v Ashfield Municipal Council (1967) 14 LGRA 133
Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18
FCR 449
Snook v London and West Riding Investments Ltd [1967] 2 QB 786

Re State Public Services Federation; Ex parte Attorney-General

for the State of Western Australia (1993) 178 CLR 249

Dalco v Federal Commissioner of Taxation (1988) 82 ALR 669
Re La Rosa; Ex parte Norgard v Rocom Pty Ltd (1990) 21 FCR 270

Norgard as Trustee in Bankruptcy of the Estate of La Rosa v
Rocom Pty Limited 16 August 1990, unreported, Northrop,

Davies and Lee JJ.

Hancock v Federal Commissioner of Taxation (1961) 108 CLR 258
In re Watson. Ex parte Official Receiver in Bankruptcy (1890)
25 QBD 27
Coulton v Holcombe (1986) 162 CLR 1
Biddle v Bond (1865) 6 B & S 225; 122 ER 1,179
Betteley v Reed (1843) 4 QB 511; 114 ER 991
Shields v Jeffries [1953] NZLR 666
Remnant v Savoy Estate Ltd [1949] 1 Ch 622
Bishopsgate Investment Management Ltd (in Liquidation) v Homan
[1995] Ch 211
Official Trustee in Bankruptcy v…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [1995] FCA 565
Decision Date: 3 AUGUST 1995

CaseChat Overview and Summary

In this appeal, the appellants, James Andrew Baker and three companies associated with him, challenge the orders of the Federal Court of Australia made against them in relation to the ownership and control of an art collection and certain sums of money. The Federal Court found that the art collection belonged to Mr Baker and that certain transactions involving the transfer of moneys were fraudulent. The appellants' primary contentions are that the art collection was held in trusts and that the transfers of moneys were legitimate. The court dismissed the appeal in relation to the art collection but allowed the appeal in relation to the sum of $286,000. The art collection was found to belong to Mr Baker, as he had never intended to subject it to any of the trusts he claimed existed. The trial judge's conclusion, based largely on credibility, was supported by the evidence and could not be disturbed on appeal. As for the $286,000, the court found that the Official Trustee in Bankruptcy could not recover the proceeds from the company Vestos Pty Ltd, as the company had a defeasible title to the debts until it was set aside. The appeal in relation to the art collection was dismissed, but the orders were varied to exclude the proceeds of dealings consummated prior to the bankruptcy. The appeal in relation to the $286,000 was allowed, and the declaration and judgment for payment were set aside. The appellants were ordered to pay two thirds of the respondent's costs of the appeal and five sixths of the respondent's costs at first instance.

Orders