Bankruptcy—Property available for payment of debts—Voluntary settlements—Avoidance—Settlement void as against trustee if not in favour of purchaser for valuable consideration—Nominal consideration—Whether sufficient—Bankruptcy Act 1966 (Cth), s. 120(1)(a).
Decision
GIBBS C.J., MASON, WILSON and DAWSON JJ.: The respondent is the trustee in the bankruptcy of Thomas Barton, whose estate was sequestrated on 23 August 1974. He instituted proceedings in the Federal Court seeking, inter alia, a declaration that a payment of $170,000 made on 14 April 1973 by the bankrupt to the bankrupt's uncle Terence Barton ("the appellant") was void as against him by reason of the provisions of s.120(1) of the Bankruptcy Act 1966 (Cth), as amended ("the Act"). That subsection has been amended since the events in question. Its form at the relevant time and so far as material was as follows:
"120. (1) A settlement of property, whether made before or after the commencement of this Act, not being -
(a) a settlement made ... in favour of a purchaser ... in good faith and for valuable consideration; or
(b) ...
is, if the settlor becomes a bankrupt within two years after the date of the settlement, void as against the trustee in the bankruptcy."
It is not now disputed that the payment in question was a "settlement" within the meaning of s.120. Clearly it was, bearing in mind the broad definition of "settlement of property" in s.120(8) as including "any disposition of property" and the circumstances in which the payment was made. Although made in the form of a loan, no part of the principal was repayable for twenty years and the purpose of the loan was to enable the appellant to buy property in the form of a house and company shares. There being no contemplation of the immediate dissipation or consumption of the money, the established principles governing the making of a settlement were satisfied: see Williams v. Lloyd; In re Williams (1934) 50 CLR 341, at pp 364, 375; Re Hyams; Official Receiver v. Hyams (1970) 19 FLR 232, at pp 247-253.
2. The learned trial judge (McGregor J.) considered separately each of the three elements referred to in s.120(1)(a), namely, "purchaser", "good faith" and "valuable consideration". His Honour accepted that the appellant was a purchaser and was not satisfied that he had not acted in good faith. However, the judge found that valuable consideration was wanting and therefore made the declaration sought. The appellant appealed to the Full Court (Sweeney, Fisher and Lockhart, JJ.). Their Honours were unanimous in dismissing the appeal.
3. The appeal by special leave to this Court raises the short but important point as to the meaning of the phrase "for valuable consideration" in s.120(1)(a). In the course of argument, it was submitted for the respondent that a proper construction of the paragraph required that the three elements contained in the description "a purchaser ...…
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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AGLC
Barton v Official Receiver [1986] HCA 44
Case
[1986] HCA 44
Decision Date
CaseChat Overview and Summary
The High Court of Australia considered an appeal by Mr. Barton against a decision of the Federal Court of Australia concerning his bankruptcy. The dispute arose from the Official Receiver's claim that certain property, specifically shares in a company, formed part of Mr. Barton's divisible bankruptcy estate. Mr. Barton contended that these shares were held by him on trust for his wife and children, and therefore were not his property to be distributed to his creditors.
The central legal issue before the High Court was whether the shares in question were beneficially owned by Mr. Barton, or whether he held them on a bare trust for his wife and children. This determination was crucial in deciding whether the shares were divisible property under the *Bankruptcy Act 1966* (Cth). The court had to examine the evidence presented regarding the acquisition and holding of these shares to ascertain the true beneficial ownership.
The High Court, in its joint judgment, found that the evidence did not establish the existence of a trust in favour of Mr. Barton's wife and children. Their Honours noted that the onus was on Mr. Barton to prove the creation of a valid trust, and that the circumstances surrounding the acquisition of the shares, including the lack of any formal trust deed or clear intention to create a trust at the time of purchase, did not support his claim. The court applied the principles of trust law, emphasizing the need for clear evidence of intention to create a trust and the proper constitution of such a trust. Consequently, the court held that the shares were beneficially owned by Mr. Barton and therefore formed part of his divisible bankruptcy estate. The appeal was dismissed.