Dare v Nowbrook Pty Ltd - [2002] FMCA 364

FEDERAL MAGISTRATES COURT OF AUSTRALIA

DARE & ANOR v NOWBROOK PTY LTD & ANOR

[2002] FMCA 364

BANKRUPTCY – Declaration that transfer by bankrupt is void.

Bankruptcy Act1966, ss.120, 121

Cannane v J Cannane Pty Ltd (in liq) (1998) 28 ACSR 603

Appellant:

TRACEY JOY DARE & PHILIP ARTHUR HENNESSY

Respondent:

NOWBROOK PTY LTD & ROBYN PATRICIA GREEN

File No:

BZ 297 of 2002

Delivered on:

19 November 2002

Delivered at:

Brisbane

Hearing Date:

19 November 2002

Judgment of:

Rimmer FM

REPRESENTATION

Counsel for the Appellant:

Mr Martin of Counsel

Solicitors for the Appellant:

Hewlett & Company, Solicitors of Brisbane

Solicitors for the Respondent:

Respondent appeared in Person

ORDERS

The Court declares that the Transfer by ROBYN PATRICIA GREEN to NOWBROOK PTY LTD on 26 July 2000 No.704221153 is void against the Applicants pursuant to both section 120 and section 121 of the Bankruptcy Act 1966.
That the Applicants’ costs of and incidental to this application be taxed in accordance with the Federal Court Rules and be paid for from the estate of the RESPONDENT in accordance with the Bankruptcy Act 1966.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
BRISBANE

BZ 297 of 2002

TRACEY JOY DARE & PHILIP ARTHUR HENNESSY

Applicant

And

NOWBROOK PTY LTD & ROBYN PATRICIA GREEN

Respondent

REASONS FOR JUDGMENT

Proceedings

This is an application by the trustees in bankruptcy, Tracey Joy Dare and Phillip Arthur Hennessy, against the bankrupt, the first respondent Robin Patricia Green. The original application was also against the second respondent, a company Nowbrook Proprietary Limited, ACN 093901065, who was the trustee of the Robin Patricia Estate Planning Discretionary Trust until August 2002 and is the registered proprietor of the property situated at 26 Myrtle Street, The Grange. That property is the focus of this application.

Applications

The application is brought by the trustees pursuant to Sections 120 and 121 of the Bankruptcy Act. The trustees seeks a declaration that the transfer by Robin Patricia Green to Nowbrook Proprietary Limited on 26 July 2000 is void against the trustees pursuant to those two sections. The trustee further seeks an order for costs to be paid as part of this bankruptcy.
The first respondent Ms Green opposes this application and seeks that it be dismissed. She filed a notice of intention to oppose the application on 26 July 2002. That was then amended by her filing an amended notice to oppose the application on 21 August 2002.

Background facts

On 3 August 2001 the Federal Magistrates Court made a sequestration order against the estate of Robin Patricia Green and the Official Bankruptcy in Trustee was appointed as the trustee in bankruptcy. The deemed commencement date of the bankruptcy is 14 May 2001. On or about 7 December 2001 the Official Trustee in Bankruptcy appointed Mr Hennessy and Ms Dare as his agents for the purpose of administering the estate. On 30 January 2002 a meeting of the creditors of Ms Green resolved that Mr Hennessy and Ms Dare be appointed the trustees of the bankrupt's estate in place of the Official Trustee in Bankruptcy.
The bankruptcy was founded upon a series of orders for costs made against Ms Green after unsuccessful litigation brought by her in the District Court of Queensland against Dr Bruce Chenoweth for negligence. Judgment was obtained against Ms Green in November 1996. Ms Green had appealed the District Court decision to the Queensland Court of Appeal in November 1997. Such appeal was not successful.
In August/September 2000 she then made an application for special leave to appeal to the High Court of Australia which was again unsuccessful. Costs orders resulted against Ms Green as a result of all of those proceedings and on 20 November 2000 the Supreme Court of Queensland ordered that she pay costs of the trial and appeal to the Court of Appeal in the sum of $41,000.00. The High Court issued a certificate of taxation in relation to the failed special leave application in the sum of $15,849.60. The relevant transfer of the property by Ms Green to the trust took place on 26 July 2000.
The bankruptcy notice was serve upon Ms Green on 22 April 2001 and the act of bankruptcy took place on 14 May 2001. It is clear that Ms Green, the bankrupt, remains of the view that she had a good claim for negligence against the doctor and that she should have been successful in her original proceedings in the District Court and subsequently on appeal. She remains of this view to date. At the conclusion of her submission to the court she indicated that it was her view that paying Dr Chenoweth’s’ legal costs would feel like she was paying the costs of her murderer.
The costs outstanding as a result of these proceedings remain unpaid and they found the basis of the bankruptcy notice which then founded the sequestration order.
On 18 April 2002 Ms Green brought proceedings in the Federal Magistrates Court seeking annulment of her bankruptcy pursuant to section 153(b) of the Bankruptcy Act. Those proceedings were opposed by the trustees and the matter was determined after a hearing before Federal Magistrate Driver on 9 July 2002 and her application was dismissed.
Ms Green appeared at that time on her own application. She gave evidence and was cross examined in those prior proceedings. The transcript of those proceedings is in evidence before me as annexure TJD1 of the affidavit of Tracey Joy Dare filed on 11 November 2002. The application for annulment was dismissed by Federal Magistrate Driver with an order for costs.

Preliminary matters raised by the respondent

There were two preliminary matters raised by Ms Green before me today. At the commencement of these proceedings Ms Green indicated that she opposed this court hearing the application on the basis it lacked jurisdiction and that she did not consent to the court's jurisdiction to hear the matter. The court determined that this court did have jurisdiction to deal with the matter as section 27 of the Bankruptcy Act as amended provides that the Federal Magistrates Court has concurrent jurisdiction with the Federal Court of Australia to deal with matters (except in matters involving a jury) arising under the Bankruptcy Act.
After that decision Ms Green initially refused to speak, identify the affidavit material to be relied upon in her case for the court, answer any of my questions to her or take part in any part in the proceedings. She simply stood mute before the Court.
At that point the court stood the matter down and indicated to Ms Green that the proceedings would continue whether she decided to take part in them or not and that she should carefully consider whether she should continue to refuse to take part in the proceedings as that may result in my determining the matter without reference to any of the evidence contained in the affidavit material by her. The court explained that if that were the course of action she adopted that I would not be in a position to consider any matters she felt were of importance to the court in her case
The court made it clear to her that if she adopted that course of action this would not allow her to give further evidence in the proceedings or make submissions and that would be highly prejudicial to her as it would mean she would not be heard in the matter. It was made clear that she should think seriously about this whilst the matter was stood down for me to read material and if necessary seek to telephone for legal advice as to the prejudice she may suffer by refusing to take further part in these proceedings in circumstances where the Federal Magistrates Court clearly had the jurisdiction to hear and determine this matter
When the Court resumed, Ms Green made an oral application for adjournment. She did so on the basis that she wished to seek legal advice given that the matter was very complicated for a lay person without the benefit of such advice to conduct on their own behalf. Ms Green was permitted to file a further affidavit by leave which is before me today and to give some oral evidence about the basis of her application for adjournment. The court indicated that it would be particularly important for her to address in her oral evidence to the court the benefits that would flow to her from the court granting her such adjournment.
Ms Green gave evidence that she did not have the funds to obtain legal advice and that she had relied upon advice given by her good friends in a consumer support group made up of people such as herself who have problems with matters arising in litigation before courts. She gave evidence that she had sought the assistance from the court of a pro bono lawyer but had been advised that such advice was not available as a pro bono scheme was not set up in the Federal Magistrates Court in Brisbane (this is in fact correct).
She gave evidence she had been to seek advice from the Caxton Street Legal Service but that her problem was too complex and beyond the scope of advice available to be given to her under such a scheme.
The application was opposed by the trustees on the basis that there was no possible benefit that could be discerned for Ms Green in granting the adjournment and that Ms Green had already had a considerable period of time from service of the application until the date of hearing when she had not taken appropriate steps to obtain any legal advice. Counsel for the trustees submitted that Ms Green was no stranger to litigation given the years of prior litigation she had been involved in and apart for at the hearing before Federal Magistrate Driver she had always had access to legal advice.
It was further submitted for the trustees that given the admissions that Ms Green had made in her evidence before Federal Magistrate Driver at the hearing of her annulment application on 9 July 2002, as disclosed in the transcript in evidence before the court, she had no possible grounds upon which she could oppose the application of the trustee before the court under either sections 120 and 121 of the Act.
Ms Green submitted that where she clearly had made such admissions before Federal Magistrate Driver, she was confused by the eloquence of questions put to her by Mr Martin, Counsel for the trustees when he cross examined her. She maintained that she was so confused that she did not know what she was saying.
It was clear from the transcript that in fact the questions which gave rise to the admission were largely put to her by Federal Magistrate Driver. I have discerned from reading that transcript that he did so carefully, very clearly and often repeated his questions in an attempt to understand the basis upon which she maintained that she was in fact solvent.
The application for the adjournment was refused on the basis that, firstly, the respondent had had ample time to obtain legal advice between June of 2002 and November 2002, a period of some months particularly in light of the fact she was no stranger to the legal process and the obtaining of appropriate legal advice and secondly, that the evidence in the proceedings before Federal Magistrate Driver meant that prima facie there was little benefit to respondents in such an adjournment in circumstances such as these where it was highly likely to result in a further order for costs which would be of some prejudice to her as it would increase her ultimate liability in the bankruptcy.
This was determined to be particularly so where there was likely to be, as pointed out by the trustee, if the application were successful and the property sold by the trustee, some proceeds of sale from the property left to be paid to Ms Green after all her debts were paid and the bankruptcy annulled.

The applications under ss.120, 121 of the Bankruptcy Act

Evidence

The facts which found the basis upon which the trustee makes such application are set out in evidence and include that the investigations of the trustee into Ms Green's financial affairs and dealings by the trustees have revealed that she had transferred her ownership of a property situated at 26 Myrtle Street, the Grange in Queensland. This property was registered in Ms Green name as the sole registered proprietor until on 26 July 2000 it was transferred by her to Nowbrook Proprietary Limited as trustee for a trust which Ms Green says was established to provide for her estate planning. There is a copy of the transfer with respect to that property annexed to the affidavit of Ms Dare filed on 20 June 2002.
It is also clear that Nowbrook is trustee of the Robin Patricia Green Estate Planning Discretionary Trust and a copy of the deed of trust is annexed to that same affidavit. It is also clear that the apparent consideration which is reflected in the transfer document was expressed to be $150,000 but a deed of forgiveness of debt was entered into on the same day, 26 July 2000, between Ms Green and the company, Nowbrook. This deed in effect totally forgave payment of the purchase price in total of $150,000 payable by Nowbrook to Ms Green.
It is the submission of the trustee that the transaction of 26 July 2000 between Ms Green and Nowbrook Proprietary Limited is void against the trustee as trustees in her bankruptcy pursuant to the provisions firstly of section 120 and/or section 121 of the Bankruptcy Act.
Ms Green has filed in the proceedings a number of affidavits and she gave evidence further today with respect to these matters and was cross-examined.
Her evidence is that which contained in a series of affidavits filed in the proceedings and an affidavit filed by leave in the proceedings today and her oral evidence to the court.
An affidavit was filed by Ms Green on 21 August 2002 in which she sets out that the property at 26 Myrtle Street, The Grange was, until

2 August 2002, held by Nowbrook Proprietary Limited as trustee pursuant to a trust deed dated 26 July 2000, but that under the relevant trust deed she, as the principal of the trust, duly exercised the power of removing Nowbrook Proprietary Limited as trustee of the said trust. The deed of appointment of a new trustee shows that Ms Green herself is now the trustee of the said trust to the legal and beneficial title on trust of the said house property. It appears that Nowbrook Proprietary Limited is no longer the legal and/or beneficial owner of the house property and holds the bare title only because of the registration on the title with the Department of Natural Resources.
In effect, her evidence is that the essence of the transfer between herself and Nowbrook Proprietary Limited was totally at the suggestion of her then solicitor, Mr Robert Allen of Whitman and Company. She gave evidence to the effect that she did not provide him with specific instructions to do any thing that but that she had just placed herself in his hands about this matter. She swears that at the time that she attended upon Mr Allen, she was extremely ill and was concerned that she would not live.
She swears that as a result of her illness and state of distress at that time all she wished to do was to protect her property for her family and all matters were then taken over by Mr Allen. Her evidence-in-chief today was that she simply went to Mr Allen’s office and did not have to tell him anything or provide him with detailed information or instructions because he just she knew so much about her what she needed him to do to help her. She gave evidence that he knew this without her having to tell him and when questioned about how this was possible she said that she thought that somebody else (a friend of hers) must have spoken to him for her and explained the problem she had before she had gone there.
There was no evidence before the court either from Mr Allen or any other person about what had been discussed with Mr Allen and who had discussed it with him or what were the instructions he received about the transfer from any evidence from the third person who gave those instructions on behalf of Ms Green with respect to the transaction which took place on 26 July 2000. There was no evidence that any other person had a valid power of attorney for Ms Green and as the property was owned by Ms Green, I must infer in the absence of evidence to the contrary that Mr Allen fulfilled his obligation as a solicitor to obtain proper instructions from Ms Green and that he was of the view that she was competent to provide him with those instructions at the relevant time.
It is clear that the trustee seriously raises doubts with respect to the veracity of the evidence given by Ms Green and points out to the court a number of anomalies with respect to the evidence given between that which she tells the court today and that which she swore on oath before the Federal Magistrate, Federal Magistrate Driver on 9 July 2002.
As the credibility of Ms Green is a critical issue in this matter it is important to refer very carefully to the transcript which is in evidence before me, and in particular the matters which were being put to Ms Green in the witness box when she was giving her evidence with respect to the ownership of the property and the basis of the transfer.
The relevant matters in my view arising from the evidence she gave in the previous proceedings is reflected in the transcript at approximately paragraph 20 on page 19. The question was put:
Now, you transferred the house to this company, Nowbrook Proprietary Limited so that Dr Chenoweth couldn't have access to it. That was the reason you did it?‑‑‑The reason was with a solicitor. I went to a solicitor.
I told him what the situation was. He did it to protect my house.
So that Dr Chenoweth couldn't have access to it to satisfy the judgment he had against you?‑‑‑Well, in actual fact I probably could have borrowed from my father to pay it….
He then transferred it to this company so Dr Chenoweth wouldn't have access to it to satisfy the judgment he had made against you?‑‑‑I wouldn't say that….
Well, why did you transfer it?‑‑‑I mean I could have. It was to protect my house. I mean that's what the solicitor did. You'll have to ask the solicitor.
The matter then progressed on another topic and it was then submitted by the counsel for the trustee that I should have reference to page 13 of the transcript. I have had reference again to the said transcript from page 12. At this point, Federal Magistrate Driver was trying to understand the basis of the application for annulment and was putting a series of questions to Ms Green to discern and enlighten his understanding. He said, starting at paragraph 20 on page 12:
Isn't it fair to conclude that you purported to divest yourself of any interest in the house?‑‑‑No, because I still owned it. To me I still own the house because my family were really – to me they were the beneficiaries if anything happened to me, you know, like if I died because I've been sick so much that it was one of the concerns that we, the solicitor and I, had discussed, and the trust would leave the house – the family trust would leave the house to my family.
His Honour then said:
So tell me then what because I don't quite understand?‑‑‑I know I don't either.
His Honour then said:
What was the purpose, as you understood it, of the transfers to the company and then to the discretionary family trust?‑‑‑It was the solicitor's way around securing my interests I guess and my interest in the house.

His Honour then pointed out:
But you already had an interest before you gave it away?‑‑‑But I guess in case Dr Chenoweth tried to take it off me I guess. I don't know.
His Honour then said:
So what was the purpose then, to protect the property from Dr Chenoweth's claim?‑‑‑That wasn't – that wasn't what he – that wasn't the way he said it.
The question then was:
What did you think you were doing and why?‑‑‑Oh, look, I get so stressed out with all this stuff, I don't know what I'm doing half the time. He just came up with that idea and I said, "Well, it sounds okay", and he went ahead and did it.

The question was then:
How do you understand after these transfers you could get access to the equity in the property?‑‑‑Well, I hadn't got to thinking that far, but to me I always – it was always still my house.
The question was:
You still regard it as your own?‑‑‑Oh, I still regard it as my house, yes.
And it's where you live?‑‑‑Yes.
So how would you propose raising the money on the house?‑‑‑I'd have – I'd sell it. I'd have to sell it, that's all.
And how would you go about selling it given you're not the legal owner any more?‑‑‑Well, if my family are the beneficiaries of the trust, that would mean – they didn't even know they were the beneficiaries of the trust, so presumably the same solicitor would have been able to work out how I would be able to sell it. That was something that we had never gone into.

It is clear from that evidence of Ms Green that at that time when she was seeking to formulate the basis of an application to annul her bankruptcy, the evidence of Ms Green that although she contended in those proceedings that she did not understand all of the legal ins and outs of what was done by her solicitor, it was clearly her understanding that she was transferring the property to the trust to protect her property from Dr Chenoweth and that in her mind (at the time she gave that evidence) she still owned the property in the sense that she still had all the control and could decide herself what happened to the property, whether it was sold or whether it was retained. She has certainly always retained the right to reside in it.
In her affidavit filed by leave today, Ms Green gives evidence that she has obtained from her former solicitor, Mr Allen, an e-mail which is annexure RG10 to the affidavit filed by leave today. This is an e-mail from her to her solicitor on Sunday, 17 November which says as follows:
“Hi, something that came to memory the other day. I can remember when you were running off the trust deeds that you said something about protecting my family. Can you remember your exact words? I haven't thought about when I've been in court before but I may be able to use it on Tuesday to prove that the transfers, etcetera, weren't done as a means of dodging the creditors. Regards, Robin Green.”
The reply from her solicitor was:
“Yes, the whole purpose of your trust arrangements was to perform estate planning without waiting to die, i.e. that is in lieu of a will. It's quite legitimate activity estate planning.”
Ms Green relies upon that as the basis of her contention to the court that she did not in any way seek to transfer the property to the trust to defeat the claims of her creditors.
I find that the evidence leads me to the finding that the transaction took place on 26 July 2000 and clearly was at a time when Ms Green was very concerned about her interest in her property for a number of reasons. I am satisfied from her evidence both in these proceedings and in the evidence she gave on oath before Federal Magistrate Driver included as her primary purpose the protection of her property for her family and herself against any claims that might be made by Dr Chenoweth against her in respect of the costs.
There were perhaps it appears from her evidence, a number of other less significant reasons why she transferred the property to Nowbrook Pty Ltd but clearly none of those reasons would have existed for her if she was not worried about protecting her property from any claim that might be made by Dr Chenoweth. While it may have been the case that she was feeling very distressed and concerned about her health, there was no evidence to support her hysterical contention that she really believed at the time she was about to die. I am more than satisfied that her evidence leads the court to the conclusion that any alleged illness she may have thought she suffered from was not the main reason she transferred her property to the trust at that time.
She had been involved in lengthy unsuccessful litigation with Dr Chenoweth, she was dissatisfied with the legal outcome. She knew she had to pay his legal costs and she had no intention of doing so. In light of those facts and findings I have no doubt it was her primary purpose in transferring her property as she did, that it was protected from claims made by Dr Chenoweth, as she said before Federal Magistrate Driver. Where she seeks in her evidence today to resile from her earlier evidence given, I reject such evidence.
I find that overall Ms Green was a witness whose credit was very suspect. I find that she was prepared to say and do whatever suited her purpose. I find that her evidence has to be seen in light of that finding and in light of the fact that she swore to this court when constituted by another Federal Magistrate that she was in effect solvent because she still owned the real property in question and could sell it to satisfy her debts. She had no explanation as to why she had not sold the property to date and paid her creditor except that it was clear that she felt extremely wronged by the previous decisions of the District Court and she was not going to satisfy Dr Chenoweth’s outstanding claim.
I'm satisfied when one looks at all the evidence of Ms Green surrounding this matter as a whole that she did everything within her power to ensure that Dr Chenoweth and now the trustees in bankruptcy would be subject to prolonged and expensive litigation. Further I find that the establishment of the trust and the subsequent transfer/s were decisions made by her when at least in her mind it was important to arrange her financial affairs in such a manner that would prevent Dr Chenoweth from obtaining satisfaction in relation to the claims for costs he had against her. I am satisfied that at the time of the establishment of the trust and the simultaneous transfer that Ms Green was very aware of and concerned about the claim that Dr Chenoweth had against her for costs.

Section 120

The trustees’ application is brought in part pursuant to sections 120 of the Bankruptcy Act. Section 120 sets out that:
A transfer of property by a person who later becomes a bankrupt, the transferor, to another person, the transferee, is void against the trustee in the transferor's bankruptcy if:
(a)the transfer took place in the period beginning five years before the commencement of the bankruptcy and ending on the date of the bankruptcy; and
(b)the transferee gave no consideration for the transfer or gave consideration of less value than the market value of the property.
There are certain exemptions set out in that subsection (2) which do not apply in this matter and there are certain matters where transfers are not void set out in subsection (3) of that section as follows:
(3)Despite subsection (1), a transfer is not void against the trustee if:
(a)the transfer took place more than 2 years before the commencement of the bankruptcy; and
(b)the transferee proves that, at the time of the transfer, the transferor was solvent.
That subsection is not applicable in this matter as the transfer took place within two years of the commencement of the bankruptcy
It is not disputed in the present case that the bankrupt transferred her property at the Grange within five years prior to the bankruptcy. It is disputed that the transferee gave no consideration. Ms Green submits that consideration was given by the trust but that she then forgave the trust the debt it owed to her.
It was not disputed that the transfer was one which took place more than two years before the commencement of her bankruptcy or that the transfer by reason of that fact Ms Green was provided with the benefit of the exclusions in s.120(3) of the Bankruptcy Act. The transfer took place on the 26 July 2000. The sequestration order was made against Ms Green on the 8 August 2001, a year and some weeks after the transfer of the Grange property.
It was submitted by Ms Green therefore that the application under s.120 of the Bankruptcy Act ought to be dismissed.
It was submitted on behalf of the trustees that Ms Green has failed to discharge the burden of proof that consideration was paid for transfer of the property because objectively it could not be said to be consideration where she did not receive any valuable consideration when it was simply a round robin of transactions between herself and the transferee to have the property transferred at the same time as the payment of consideration for the transfer was simultaneously forgiven by the transferor.
It was submitted that the trustees had discharged the onus of proving the facts that make the transfer void by establishing that the transfer had occurred for no proper consideration within 5 years before bankruptcy and that Ms Green had failed to establish that consideration had been paid at all.
I find that the facts in the matter are such that Ms Green within 5 years of her bankruptcy transferred her property at the Grange to a trust, the trustee of which was Nowbrook Pty Ltd. It was expressed to be transferred for consideration in the sum of $150,000.00. However I find that the transaction entered into simultaneously between Nowbrook Pty Ltd and Ms Green to forgive an alleged debt of the same amount, $150,000.00 had the effect when assessed on an objective basis, of ensuring that no consideration at all was given by Nowbrook Pty Ltd or received by Ms Green for the transfer of entire interest in her property at the Grange to Nowbrook Pty Ltd.
The court’s task is twofold; firstly to identify as precisely as one can, the consideration, if any, which was given for the transfer of property and if consideration was given, to determine whether the value of the consideration at the time of transfer was less than the market value. There is no evidence in this matter about the consideration being for an undervalue. It is submitted that in effect no consideration at all was given for the transfer.
The value of the consideration must be assessed on an objective basis, not dependant on any special value which the transferor may have subjectively placed on the consideration. If when one objectively assesses the consideration purportedly given by Nowbrook to Ms Green in this matter, I find that no consideration was in fact given for the transfer. The benefit experienced to be given to Ms Green in the transfer was that she was to receive $150,000.00 in exchange for a transfer of her property to the trustee Nowbrook Pty Ltd. She never received that benefit. She simultaneously forgave Nowbrook the obligation they had legally to provide that sum to her. Viewed objectively Ms Green got nothing of value for the transfer. She relinquished a valuable asset, her home and then forgave a debt that arose only because of the fact she made that transfer. I find that does not amount to valuable consideration or any consideration at all.

Section 121

The applicant trustees also rely upon section 121 of the Bankruptcy Act in support of this application. Section 121 states as follows:
A transfer of a property by a person who later becomes a bankrupt to another person is void against the trustee in the transferor's bankruptcy if:
(a) the property would probably have become part of the transferor's estate and would probably have been available to the creditors if the property had not been transferred.
There is no dispute that in these circumstances the property was owned by Ms Green. Had it not been transferred in July of 2000 upon her subsequent bankruptcy that property would have vested in the trustee.

And (b):
The transferor's main purpose in making the transfer was firstly to prevent the transferred property from becoming divisible among the transferor's creditors or, secondly, to hinder or delay the process of making property available for division amongst the transferor's creditors.

It is submitted on behalf of the trustee that clearly, given the chronology of events in this matter, that during the period from November 1996 at the time that judgment was obtained against the bankrupt in the District Court in Brisbane, Ms Green was aware that at law there was a debt due and payable by her to Dr Chenoweth in respect of the costs. Those costs were later quantified by a variety of steps including taxation certificates issuing from both the High Court and the Supreme Court of Queensland, steps were being undertaken actively by Dr Chenoweth's legal advisers to sort out the issue of cost over the whole period of 2000. It was in the midst of these steps being taken that on 26 July 2000 the bankrupt transferred her only asset, the house property at the Grange to Nowbrook Proprietary Limited. At the time she was the sole director and shareholder of the company and since that time she has been appointed the trustee of the trust instead of Nowbrook Proprietary Limited but legal ownership remains registered in the name of that company.
It is submitted on behalf of the trustee that the only available inference that can be drawn by the court was that the transfer was for the purpose of preventing the property from becoming divisible amongst the transferor's creditors. It is submitted that the transfer was not an arm's length transaction and that such is evidenced by the fact that on the same day the transfer was executed by Ms Green in her capacity as Director of the trustee company, as transferee and in her other capacity as transferor, so was a deed of forgiveness signed by herself which totally forgave any obligation that Nowbrook had to pay Ms Green the total amount of consideration required by the transfer.
It is also submitted that there is no doubt that at the time of the transfer, the bankrupt was insolvent. At that time she had conducted an unsuccessful trial in the District Court, an unsuccessful appeal to the Court of Appeal and an unsuccessful application for special leave to the High Court all of which resulted in costs orders which had exceeded $40,000. It is submitted it is clear that apart from the properties which the bankrupt then owned at Myrtle Street, the Grange, she had a car with a very small value, no other assets, nor any income or ability to meet the judgment debt.
It is submitted further that the court should pay particular regard at this point to the evidence which was given in the proceedings before Federal Magistrate Driver which constituted prior admission by Ms Green that the property was transferred on the advice of a solicitor to protect her house, and in fact went further on page 13, "it was done in case Dr Chenoweth tried to take it off me".
It is clearly submitted on behalf of the trustee that in support of the application under section 121 the bankrupt had previously applied to have the bankruptcy annulled on the grounds that she was solvent and that the grounds of solvency were in fact that with respect to her alleged ownership of the house property registered in the name of the company, Nowbrook, where she said it was really her only asset available to her to pay her creditors.
It is further submitted that the recent resignation of Nowbrook as trustee of the Robin Green Trust and the appointment of the bankrupt can only be described as a sham, and in any event does not avoid the initial transfer from the bankrupt to Nowbrook Proprietary Limited. It is submitted that that is further evidence of the bankrupt's propensity to do anything to avoid paying her creditors.
It was submitted that this section had been contravened as the property would have become part of the bankrupt’s estate and would have been available to creditors if the property had not been transferred. The purpose in transferring the property was to prevent the transferred property being available to satisfy Ms Green’s creditors, the main one being Dr Chenoweth.
It was submitted that the trustee had discharged the overall onus of proving that the transfer of the land was in contravention of s.121 of the Bankruptcy Act.
It was submitted by Ms Green that s.121 cannot be relied upon in the circumstances. To do so the trustees would need to establish pursuant to that provision that the property would probably have become part of the bankrupt’s estate or would probably have been available to creditors if the property had not been transferred and that the bankrupt’s main purpose in making the transfer was to prevent the transferred property from becoming divisible amongst the bankrupt’s creditors or to hinder or delay the process of making property available for division amongst the bankrupt’s creditors.
It was submitted on behalf of Ms Green that her intent at the time of disposition is material and she only intended to protect her property for her family in the event she were to die.
She submitted in effect that the Court should not conclude from her earlier admissions before Federal Magistrate Driver those matters that she was deceitful to this Court but rather that she was a litigant in person who was confused by the processes of the court and the questions she was previously asked and the questions she was asked today.
It was submitted that she was at the relevant time solvent and could have paid her debts as they fell due. She submits that the Court should consider she was always able to obtain a loan from her father to pay the debt owing to Dr Chenoweth and she asserted that she could do this now. She denied that transfer was to defeat or delay or hinder creditors or prevent the transferred property from becoming divisible among creditors but rather it was for estate planning purposes only.
I also find that Ms Green was not able to establish that she was solvent upon the transfer having taken place. She had divested herself by the transfer of the ownership of the only property she had that effectively would have enabled the court to find she was solvent. She had no income apart from her disability pension which was only sufficient to just meet her day to day needs. She had no significant asset at the relevant time. She had household furniture and an old car of little value. She had no source from which to pay her debt to Dr Chenoweth which at that time was costs that had been ordered but not yet finally assessed in relation to the District Court proceedings, the appeal to the Court of Appeal and the special leave application to the High Court.
It is clear from the correspondence sent between Ms Green and Dr Chenoweth’s solicitors in June 2000 that she was clearly aware she had a significant liability outstanding to Dr Chenoweth for costs and was seeking to negotiate the amount and payment of those costs as she was unable to pay them at the lump sum sought. It was shortly after this time that she transferred the property at the Grange to the trust.
In the joint decision of Brennan CJ and McHugh J in Cannane’s case and in particular at p 608 where the Court states:
“Although the party impugning the disposition of property must show an actual intent to defraud creditors at the time of the disposition, the intent may be inferred from the making of a disposition which, to adopt the words of Lord Hatherley LC in Freeman v Pope, `subtracts from the property which is the proper fund for the payment of [the] debts, an amount without which the debts cannot be paid’. The `proper fund’ may consistent in assets out of which future creditors as well as present creditors would be entitled to be paid a dividend in respect of what is owing to them. Therefore a subtraction of assets which, but for the impugned disposition, would be available to meet the claims of present and future creditors is material from which an inference of intent to defraud those creditors might be drawn. Whether that inference should be drawn depends upon all the circumstances of the case.
If property be disposed of by sale and the sale price received by the disponor is equal to the true value of the property at the time of the disposition, the creditors have an undepleted fund against which to prove their debts. But if property is sold for an undervalue or is given away, that fact is relevant to the intent to be attributed to the disponor in disposing of the property. …. But disposition of property at an undervalue is only a fact from which, dependent on the surrounding circumstances, an inference of fraudulent intent may be drawn.”

It was appropriate to further refer to the following passage from the same case where the Court states again at p 608 the following:
“Section 121 is not enlivened merely by showing that the disposition has reduced the assets available to the creditors when the disponor is adjudicated bankrupt. It is the disponor’s intent to deprive creditors of assets against which (or against the process of which) they would otherwise be entitled to prove their debts that enlivens the operation of s 121. As Dixon CJ said in Hardie v Hanson:
‘The phrase ‘intent to defraud creditors of the company’ suggests that present or future creditors of the company will, if the intent is effectuated, be cheated of their rights.’”
I find that clearly the main purpose of this transfer of property was so that Ms Green could divest herself of her only valuable asset in a manner which would mean that no money or assets were available to her creditor to satisfy the costs award. She did it in a manner that ensured that even though a transfer “on paper” occurred, the property was still available to her beneficiaries who were her family and she still had the right to reside in it and to make decisions concerning the property, that is, decisions concerning whether it was retained or sold, and would retain the right to reside in the property. That is clear from the evidence she gave before Federal Magistrate Driver on 9 July 2002.
I do not accept the evidence of Ms Green that she is simply a victim of the advice that she was given by her solicitor or that her state of mind at the time was such that she does not recall giving specific instructions to her solicitor as to why she transferred the property at all and that she simply placed herself and her trust in the hands of her solicitor to do what was necessary to protect her property for her family.
I do not accept her evidence and submission that she did not transfer the property in any way to defeat the creditors because "It was nothing about the house. I could have borrowed the money from my father". She sought to prove before Federal Magistrate Driver in July of this year that she was solvent. She gave evidence at that time. Her evidence is now inconsistent with a lot of her earlier evidence given before Federal Magistrate Driver. When I put to her the proposition if that were the case why had she not done so and paid the debt, she indicated that to her it would be like paying her murderer and why should you pay his bills when he has done what he has done to her.
It is clear that there is a great deal of emotional distress and anger felt by Ms Green towards Dr Chenoweth as a result of the medical procedure he undertook on her which was the ultimate subject of the litigation in the District Court of Queensland. It is also clear that since that time because of her distress as a result of these proceedings and her anger towards Dr Chenoweth that commenced on a course of action which has increased her indebtedness with respect to legal costs and that has continued in respect of proceedings before this court, both the application for annulment of the bankruptcy and her contest of this application today. I find, very sadly that her level of distress and anger does not permit her to tell the court the truth about this transfer. An objective review of all her actions to date can only lead to the conclusion that she would do and say anything in order not to pay Dr Chenoweth’s legal costs, so wronged does she feel by the decision of the District Court.
Whilst it is clear that Ms Green has very strong views with respect to what occurred in those proceedings, the situation is that those proceedings have been properly and conclusively determined in the jurisdiction which gives legal relief with respect to those matters as high as an application seeking special leave to the High Court of Australia and those proceedings have been unsuccessful.
I am satisfied that in this particular matter the evidence which Ms Green has given in these proceedings today and the evidence which was given before Federal Magistrate Driver indicate, as I have previously found, that while she may have had a number of reasons to establish the trust and transfer her property, her primary purpose was to defeat Dr Chenoweth’s claim for costs with respect to the intent and purpose of the transfer of the property to the trust on 26 July 2000.
I'm satisfied that when it suited her purpose before Federal Magistrate Driver to establish the grounds to have her bankruptcy annulled, she clearly gave evidence that she was solvent and her only basis for this was her evidence that she was at the time that the bankruptcy notice issued was that she in effect was the person who had control over and the right to make determinations to sell the property at Myrtle Street, The Grange for the purpose of payment of her creditors.
It is clear that before the court today she tells a very different story and I am satisfied therefore that the court should place no weight upon the evidence which she has given to the court and that it would be a situation whereby Ms Green would very sadly say anything to the court to enable her to keep the property which she transferred to the trust in July of 2000.
It is clear to me and I find that her primary motivation, and the most critical intention with respect to the transfer of the property, as I have already determined, was to defeat any claim that might be made against her by Dr Chenoweth, and that she does so with the motivation that she expressed to the court in her final address today that she has not and will not pay Dr Chenoweth’s costs because it would feel like paying her murderers costs.
She clearly does not believe she should pay those costs. She clearly has very strong emotional reasons for feeling the way she does. I do not question her emotions, however, it was clearly her statement to the court that she felt that it would be like paying her murderer and that she should not have to pay his bills when he has done to her what he has done.
I'm satisfied therefore that section 121 of the Act also applies with respect to the transfer of property in that the trustee has established firstly, that there was a transfer of property; secondly, that the transferor's main aim and purpose was to prevent that transferred property becoming divisible amongst or for the benefit of her major creditor, Dr Chenoweth, and that it can be inferred from all of the circumstances that she was at the time of that transfer about to become insolvent.
It is clear that she was not able to pay the amount of in excess of $40,000.00 in July 2000 as is evidenced by the annexure to Ms Dare's affidavit which is an offer to pay the costs which were assessed in the Supreme Court at the rate of $10 per week. I find that this is consistent with her financial position at the relevant time and clearly establishes that she was unable to pay the total amount due and owing at that time with respect to the costs in the sum of $41,000. In relation to her submission that she could borrow the money from her father to pay her debts, this must fail as there is no evidence from her father that such a loan is available to her. I find that I cannot reasonably infer that at the time of the transfer on 26 July 2000 Ms Green was solvent.
Consistent with my earlier findings, no consideration was paid by the transferee for the transfer. The transferee was in effect a creation of Ms Green’s and could therefore be held to have known that her main purpose in making the transfer was as I have found.
I am satisfied that, as a result of all my findings, the court should make the declarations sought by the trustee, both pursuant to section 120 and section 121 of the Bankruptcy Act. I propose to order in terms of paragraph 1 of the application which is that, the court declares that the transfer by Robin Patricia Green to Nowbrook Proprietary Limited on 26 July 2000, number 7042211153 is void against the trustees pursuant to both sections 120 and section 121 of the Bankruptcy Act of 1966.
The other application which is sought by the trustees is the application with respect to costs. In proceedings such as these, costs follow the cause. The application has been successful and the applicants are therefore entitled to the costs as taxed to be paid in the bankruptcy.
The orders made are those which are set out in at the commencement of these reasons.

I certify that the preceding eighty-nine (89) paragraphs are a true copy of the reasons for judgment of Rimmer FM

Associate:

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