Cook v Benson

Case [2003] HCA 36

HIGH COURT OF AUSTRALIA

GLEESON CJ,
GUMMOW, KIRBY, HAYNE AND HEYDON JJ

PAUL JOHN COOK (As Trustee of the   APPELLANT
property of Peter Robert Benson)

AND

PETER ROBERT BENSON & ORS  RESPONDENTS

Cook v Benson

[2003] HCA 36

19 June 2003
M2/2003

ORDER

Appeal dismissed with costs.

On appeal from the Federal Court of Australia

Representation:

G T Bigmore QC with M J Galvin for the appellant (instructed by Gadens Lawyers)

M J L Rajanayagam for the first respondent (instructed by IFS Fairley)

M N C Harvey for the second to fourth respondents (instructed by Clayton Utz)

Notice:  This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

CATCHWORDS

Cook v Benson

Bankruptcy – Avoidance of settlement of property – Roll-over of superannuation entitlements – Superannuation entitlements applied in payment of contributions to other superannuation schemes – Whether settlements of property – Whether trustees were purchasers – Whether trustees purchasers for valuable consideration – Bankruptcy Act 1966 (Cth), s 120(1).

Words and phrases: "purchaser", "valuable consideration", "settlement of property".

Bankruptcy Act 1966 (Cth), ss 120(1), (8).

  1. GLEESON CJ, GUMMOW, HAYNE AND HEYDON JJ. The question in this appeal is whether s 120 of the Bankruptcy Act 1966 (Cth) ("the Act"), in the form in which it stood at the relevant time (September 1990), operated so as to render void as against the trustee in bankruptcy payments made as contributions to superannuation funds by a person who later became bankrupt.

  2. Section 120 of the Act provided:

    "120(1)  A settlement of property, whether made before or after the commencement of this Act, not being:

    (a)a settlement made before and in consideration of marriage, or made in favour of a purchaser or encumbrancer in good faith and for valuable consideration; or

    (b)a settlement made on or for the spouse or children of the settlor of property that has accrued to the settlor after marriage in right of the spouse of the settlor;

    is, if the settlor becomes a bankrupt and the settlement came into operation after, or within 2 years before, the commencement of the bankruptcy, void as against the trustee in the bankruptcy.

    ...

    (8)In this section, 'settlement of property' includes any disposition of property."

  3. The term "property" was defined, in s 5, to include real or personal property of every description.  A disposition of property, therefore, included a payment of money.

  4. The appeal in this Court was conducted, by both sides, on the basis that the payments in question each constituted a settlement of property within the meaning of s 120, and that the issue was whether the recipients were purchasers for valuable consideration. No question of want of good faith arose. Although at one stage of the proceedings there had been a claim that the conduct of the first respondent involved fraudulent dispositions within s 121 of the Act, the Federal Court resolved that issue in his favour, and it was not pursued in this Court.

  5. The facts may…

Continue reading Cook v Benson

Sign in free to access the full text

Details
AGLC
Cook v Benson [2003] HCA 36
Case
[2003] HCA 36
Decision Date

CaseChat Overview and Summary

The appeal concerned the application of section 120(1) of the *Bankruptcy Act 1966* (Cth) to a disposition of property by Mr Peter Benson, the first respondent, within two years of his bankruptcy. The appellant, Mr Cook, as trustee in bankruptcy, sought to avoid the disposition of $80,000, which represented a significant portion of superannuation entitlements Mr Benson received upon termination of his employment. Mr Benson had directed that this sum be rolled over into other superannuation funds. The central dispute was whether the recipients of these funds were "purchasers" who had given "valuable consideration" for the disposition, thereby exempting it from avoidance under section 120(1).

The High Court was required to determine whether the transfer of $80,000 from Mr Benson to the superannuation funds constituted a "settlement of property" that was voidable by the trustee in bankruptcy. Specifically, the Court had to consider whether the corporate respondents, as recipients of the rolled-over superannuation funds, qualified as "purchasers" who had provided "valuable consideration" for the disposition, as required by section 120(1) of the *Bankruptcy Act 1966* (Cth) to avoid avoidance. The Court also considered the commercial context of the transaction and the legislative history of section 120(1).

The Court reasoned that bankruptcy legislation operates as a special code and that while commercial sense is relevant, it does not alone exempt a disposition from avoidance. To fall within the exemption in section 120(1), a party must have given valuable consideration sufficient to make them a "buyer" in a commercial sense. The Court found that the corporate respondents were not "purchasers" or "buyers" in the ordinary commercial sense of the sums of money they received. The Court noted that the inclusion of the word "purchaser" in the legislation suggested an element beyond merely valuable consideration, a point reinforced by the legislative history. The Court concluded that the disposition of property was not made in favour of a purchaser for valuable consideration, and therefore, the property was available to the trustee in bankruptcy.

The appeal was dismissed with costs.

Orders

Orders of the court

Appeal dismissed with costs.

Background

Background to the litigation

Such considerations do not solve the legal question that is presented by this appeal. But they do render the opinion of the majority surprising when the terms of s 120 of the Act are read on their face. The appeal cannot be decided by intuition or impression. It requires analysis of the facts, of the precise language and intended operation of the section, of the decisional authority that has considered its meaning and of the issues of legal principle and legal policy that inform the correct approach to the section, as it is to be applied in the circumstances of this case.The facts Most of the facts relevant to my reasons are set out in the reasons of Gleeson CJ, Gummow, Hayne and Heydon JJ ("the joint reasons")[27]. The facts so stated include the circumstance that Mr Peter Benson ("the first respondent") became entitled to a lump sum of $96,192.36 on the termination of his previous employment and that the sum of $80,000, in issue in this appeal, constituted the "rolling-over" of most of that sum into "other superannuation funds"[28]. Presumably, these facts are stated to support a suggestion that the payment involved "was an ordinary commercial dealing, being a re-investment of funds representing the proceeds of superannuation benefits" that fell in "prematurely"[29].[27]Joint reasons at [5]-[20].[28]Joint reasons at [7].[29]Joint reasons at [8]; cf Trust Company of Australia Ltd v Commissioner of State Revenue [2003] HCA 23 at [61]. Because a full understanding of the facts of a case can sometimes affect an appreciation of how legislation was intended to operate, it is perhaps relevant to add some more facts to the foregoing[30]. In January 1990, whilst the first respondent's original employment (and original superannuation entitlements) were continuing, Bridge Wholesale Acceptance Corporation (Australia) Ltd commenced a proceeding in the Supreme Court of Victoria against the first respondent and R F Benson Pty Ltd claiming a sum of $222,588.32 together with interest and costs in respect of a floor plan bailment agreement concerned with a tractor dealership business in which he was engaged. On 16 May 1990 Esanda (Wholesale) Pty Ltd obtained judgment against the first respondent for an amount in the order of $35,216.25. That judgment was unpaid. On 20 April 1990, the first respondent's employment with ISAS[31] was terminated when that company ceased to carry on business. That company was wound up on 4 June 1990. [30]Trust Company of Australia [2003] HCA 23 at [66].[31]The same descriptions will be used as appear in the joint reasons. See joint reasons at [7]. The first respondent was not therefore, as it were, a hapless employee who became a victim of the collapse of his employer with its superannuation scheme. He was a trustee of the ISAS superannuation fund. It was in that capacity, on 27 June 1990, that he wrote to the insurance company with whom, pursuant to its superannuation deed, ISAS had effected a retirement accumulation and group life insurance policy. In his letter the first respondent confirmed that the trustees of that fund had determined that he, as beneficiary, should receive 51.2% of the funds held by that insurer. It was pursuant to that letter that the insurer, on 17 September 1990, paid the sum of $96,192.36 in favour of the first respondent. That amount of money was duly received. When received, it was wholly within the first respondent's disposition.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

GLEESON CJ, GUMMOW, HAYNE AND HEYDON JJ KIRBY J (dissent)
To the complaint that the first respondent's superannuation assets would have been unavailable to the appellant, as trustee, had his former employer not ceased to trade, resulting in his demand for the payout from his original superannuation policy, the answer is clear. In 1993, the Parliament amended the Act[71] to enlarge the scope of exemptions to include the interest of a bankrupt in "a regulated superannuation fund" within the meaning of the Superannuation Industry (Supervision) Act 1993 (Cth)[72]. Although subsequent amendments to legislation do not necessarily control the construction of statutory language as it existed prior to the amendment[73], in some cases the perceived need for a specific exemption may reinforce an impression, derived from the pre-amendment statutory provisions, that they did not go so far as the later amending provisions did[74]. That is the conclusion that I have reached in this case.[71]The amendments were introduced by the Superannuation Industry (Supervision) Consequential Amendments Act 1993 (Cth), s 7.[72]See the Act, s 116(2)(d)(iii)(A), as now appearing. [73]Grain Elevators Board (Vict) v Dunmunkle Corporation (1946) 73 CLR 70 at 85-86; R v Reynhoudt (1962) 107 CLR 381 at 388; Zickar v MGH Plastic Industries Pty Ltd (1996) 187 CLR 310 at 351.[74]Taikato v The Queen (1996) 186 CLR 454 at 471-472; Trust Company of Australia [2003] HCA 23 at [89]-[91]; cf [87], [92].Conclusion: the property was available to the trustee The primary judge and Hely J in the Full Court were therefore correct to conclude that the two contested elements in s 120 of the Act did not apply to exempt the disposition of property made on the direction of the first respondent from the sum of $80,000 that he disposed of within two years before the commencement of his bankruptcy. The recipients were not "purchaser[s]". No "valuable consideration" was paid for the disposition of the property as such. This conclusion is reinforced by the dictum of Dixon CJ in Tooheys Ltd v Commissioner of Stamp Duties (NSW)[75], to which Hely J referred in the Full Court[76]:"The placing of the trust fund in the trustee's hands was no consideration for the present or future equitable interests created."[75](1961) 105 CLR 602 at 616.[76](2001) 114 FCR 542 at 572 [139]. To like effect were the remarks of Walsh J in Tooheys Ltd v Commissioner of Stamp Duties (NSW)[77]:"An acceptance of a trust and an agreement to hold the trust property upon the terms of the trust and to administer it accordingly, do not constitute the giving of consideration by the trustees for the property so accepted. If it were so, every trust would have to be regarded as created for full consideration."These observations have been endorsed in this Court[78] and applied elsewhere[79]. [77][1960] SR(NSW) 539 at 548.[78]DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431 at 442 per Gibbs CJ.[79]BL & M Grollo Homes Pty Ltd v Comptroller of Stamp [1983] 1 VR 445 at 450.

Ratio Decidendi

Legal Principle Established

Established by: GLEESON CJ, GUMMOW, HAYNE AND HEYDON JJ,

Bankruptcy is a "special code" of law[56]. The repeated judicial statements that transactions impugned under s 120(1) of the Act are to be judged in "a commercial sense"[57], do not mean that proof that a bankrupt had good commercial reasons for divesting himself or herself of property would alone bring that disposition within the exemption in s 120(1). Were that so, in many or most cases, the bankrupt would have "commercial" reasons for so acting. It remains in each case to decide whether the party who acquired part of the bankrupt's property at the critical time did so as a "purchaser" and gave "valuable consideration" for the disposition concerned[58].The recipients were not "purchaser[s] … for valuable consideration"[56]Ex parte Hillman; In re Pumfrey (1879) 10 Ch D 622 at 625 per Jessel MR.[57]Barton (1986) 161 CLR 75 at 86.[58]cf In re Pope; Ex parte Dicksee [1908] 2 KB 169 at 172. When the problem presented by this appeal is analysed in this way, I would conclude that the primary judge and Hely J were right to decide that the corporate respondents were not entitled to the exemption provided by s 120(1) of the Act. Correctly, Hely J[59] approached the problem, citing and applying what this Court said in Barton[60], namely that, to fall within s 120(1), a purchaser must have "given such valuable consideration as is sufficient in all the circumstances to make him a 'buyer' in a commercial sense of the interest passing to him under the settlement".[59](2001) 114 FCR 542 at 571 [134].[60](1986) 161 CLR 75 at 86. Note that this Court used the word "buyer" in Barton (whose authority was accepted by all as governing this case) as a synonym for "purchaser" as appearing in the Act. It was in that sense that the primary judge used the word "buyer" at first instance[61] and that Madgwick J cited it in analogous circumstances in Official Trustee in Bankruptcy v Trevor Newton Small Superannuation Fund Pty Ltd[62]. [61][2000] FCA 1777 at [14].[62](2001) 114 FCR 160 at 175 [40]. It is extremely difficult, if not impossible, to describe the corporate respondents in this case as the "buyers" of the respective sums making up the $80,000 paid to them at the direction of the first respondent. It is true that an entitlement to a sum of money may constitute a chose in action. A bundle of currency may amount to a form of personal property and thus may, in some circumstances be sold to a "buyer". However, this would ordinarily be possible only where the sale contemplated the purchase of foreign money for a quantity of local money or, possibly, different money for a quantity of local money that was subject to a risk of devaluation or withdrawal as legal tender. None of those circumstances applied here. It is therefore artificial in the extreme to describe the disposition of property made by Spectrum at the direction of the first respondent as a settlement "in favour of a purchaser". In this context, in the ordinary use of the language, the corporate respondents could not be described as "purchasers" or "buyers" in the commercial sense of the sums of money that they so received[63]. With respect, the mistake of the majority in the Full Court was to overlook the importance of context and of the insertion in the Act of the word "purchaser". As Hely J pointed out[64]:"The history of the legislation suggests that the element of 'purchaser' adds something to the requirement that the disposition be for valuable consideration, as the requirement that there be a purchaser as well as valuable consideration was introduced by s 91 of the Bankruptcy Act 1869 (UK)[65]".In the task of statutory construction, it is an elementary rule that a court must give weight to anything relevant in the history of the provision and to each component part of that legislative expression in question[66].[63]cf Trust Company of Australia [2003] HCA 23 at [76]-[77].[64](2001) 114 FCR 542 at 571 [133].[65]Citing In re Pope; Ex parte Dicksee [1908] 2 KB 169.[66]Eastman v Director of Public Prosecutions (ACT) [2003] HCA 28 at [8], [83], [85].