Cole v Borg - [2011] FMCA 152

FEDERAL MAGISTRATES COURT OF AUSTRALIA

COLE v BORG

[2011] FMCA 152

BANKRUPTCY – Trustee’s claim for moneys paid to bankrupt’s daughter within 5 years of sequestration order – daughter argued that consideration given by provision of accommodation, both past and future – no consideration – gift of money void as against the trustee – declarations made as sought.

Bankruptcy Act 1966, ss.120 and 139A

McVeigh (Trustee of the Bankrupt Estate of Zanella) v Zanella [2000] FCA 1890

Applicant:

ROBERT MOLESWORTH HOBILL COLE (AS TRUSTEE OF THE BANKRUPT ESTATE OF JUDITH PATRICIA WATSON)

Respondent:

NAOMI REBECCA BORG (ALSO KNOWN AS NAOMI REBECCA WATSON)

File Number:

MLG 1256 of 2010

Judgment of:

O’Dwyer FM

Hearing date:

14 December 2010

Date of Last Submission:

14 December 2010

Delivered at:

Melbourne

Delivered on:

15 March 2011

REPRESENTATION

Solicitors for the Applicant:

Mr Broberg
Irlicht and Broberg Lawyers

The Respondent:

In person

THE COURT DECLARES THAT:

A payment of $50,000 by Judith Patricia Watson to the Respondent and Paul Alexis Borg in or about May 2007 is void against the Applicant by virtue of s120 of the Bankruptcy Act 1966 (the Act).
The Applicant is entitled, pursuant to s139A of the Act, to the $50,000 from the proceeds presently held by the Applicant’s solicitors in respect of the sale of the property at 11 Cowan Parkway, Point Cook in the State of Victoria.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT MELBOURNE

MLG 1256 of 2010

ROBERT MOLESWORTH HOBILL COLE (AS TRUSTEE OF THE BANKRUPT ESTATE OF JUDITH PATRICIA WATSON)

Applicant

And

NAOMI REBECCA BORG (ALSO KNOWN AS NAOMI REBECCA WATSON)

Respondent

REASONS FOR JUDGMENT

Introduction

By this proceeding the Applicant, who is the trustee in bankruptcy of the estate of Judith Patricia Watson (the bankrupt) seeks pursuant to s120 of the Bankruptcy Act 1966 (the Act), a declaration that a payment of $50,000 by the bankrupt to the Respondent and Paul Alexis Borg in or about May 2007 is void against the Applicant. Further, the Applicant seeks a declaration that he is entitled pursuant to s139A of the Act to the net proceeds of sale of the property at 11 Cowan Parkway, Point Cook (the property).
The Respondent opposes the application on the grounds that:
i)The payment of $50,000 to her by the bankrupt was a gift to her and her then husband, Paul Alexis Borg; and
ii)The claim by the Applicant is unconscionable and has no legal or factual basis.
In addition to her formal grounds in opposition to the application, the Respondent also argued that the gift by the bankrupt was in consideration, for market value, for past and future accommodation provided by her and her then husband to the bankrupt.
The Respondent sought orders to the effect that the net proceeds of the sale of the property be released to her, together with interest calculated from the date of settlement of the sale of the property to date.
The Applicant relies upon two affidavits, one being that of the Applicant sworn on…

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.

Continue reading Cole v Borg

Details

AGLC: Cole v Borg [2011] FMCA 152
Case: [2011] FMCA 152
Decision Date: 15 March 2011

CaseChat Overview and Summary

In this case, the Federal Magistrates Court of Australia was tasked with determining a claim by the trustee in bankruptcy of Judith Patricia Watson, the bankrupt, against Naomi Rebecca Borg, the bankrupt’s daughter, regarding a payment of $50,000 made by the bankrupt to the Respondent and her then husband in May 2007. The Applicant sought a declaration that the payment was void against him under the Bankruptcy Act 1966 and that he is entitled to the net proceeds of the sale of a property at 11 Cowan Parkway, Point Cook. The Respondent opposed the application, arguing that the payment was a gift and that the claim was unconscionable and baseless. She also argued that the payment was consideration for past and future accommodation provided to the bankrupt.

The primary legal issue before the court was whether the payment of $50,000 made by the bankrupt to the Respondent and her then husband constituted a gift that was void under the Bankruptcy Act 1966, or whether it was a valid transaction supported by consideration. The court needed to determine if the provision of accommodation by the Respondent to the bankrupt could be considered as valid consideration for the payment, as argued by the Respondent. Additionally, the court had to assess if the Applicant's claim was unconscionable and devoid of any legal or factual basis, as contended by the Respondent.

The court found that the payment of $50,000 by the bankrupt to the Respondent and her then husband was indeed a gift, as acknowledged by the Respondent herself. The court held that the Respondent's argument regarding the provision of past and future accommodation as consideration was not valid, as past consideration does not qualify under the Act. The court also rejected the argument that the costs of living attributed to the bankrupt’s presence in the household constituted valid consideration. Consequently, the gift was deemed void against the Applicant, and the Applicant was entitled to the net proceeds of the property sale held in trust by the Applicant’s solicitors. The court dismissed the Respondent’s contention that the Applicant’s claim was unconscionable and baseless.

The final orders declared that the payment of $50,000 made by the bankrupt to the Respondent and her then husband was void against the Applicant. The Applicant was entitled to the $50,000 from the proceeds of the property sale held in trust by the Applicant’s solicitors.

Orders