Donnelly (Trustee), in the matter of Hedrlin v Hedrlin

[1990] FCA 832

JUDGMENT NO. ..,....,.,,,,,,,/ a32 40 --

IN THE FEDERAL COURT OF AUSTRALIA	)
GENERAL DIVISION	)
BANKRUPTCY DISTRICT	) No W448 of 1983
OF THE STATE OF NEW SOUTH WALES AND	)
THE AUSTRALIAN CAPITAL TERRITORY	)

Re:  JOSEPH HEDRLIN

FEDERAL COURT

of AUSTRALIA	EX Parte: lrwt CHRISTOPHER DONNELLY
2 1 l AN 2003	property of Joseph
(The trustee of the

UBRARY 0	.*.	Hedrlin, a discharged
bankrupt )

Applicant

HELENE HEDRLIN

Respondent

CORAM: Einfeld J

-	DATE : 5 April 1990
PLACE: Sydney

RULING ON PRELIMINARY ISSUE

In this application dated 28 July 1988 under sections 120 and 121 -. - .

bankrupt. Originally Mr Hedrlin's Son Peter was a second transferee of the properties, the wife (Helene) of the discharged

of the Bankruptcy Act 1966 (the Act), the applicant trustee seeks orders and declarations to set aside transactions entered into by the now discharged bankrupt Mr Joseph Hedrlin on 10 March 1982 and 23 April 1982, in respect of properties in Wentworth Falls and Surry Hills. The respondent to this application is the

respondent to th~s.~.ap~i'~~d2tion but the action against him was

; , , .

, .

discontinued.

The Facts

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A sequestration order was made against the est+te,,,.of	Mr Jo%eph	a,
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Hedrlin on 18 May 1983. The bankruptcy was d i s i ~ i ! r ~ g 8 ~ : : i g f f c 2 ~ & . ~ @ ~

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1988, after having been extended for two years &y the frus,teer4 , , . a , .

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The first transfer in question was for a prope:rty situated in Hume Avenue, Wentworth Falls, New South Wales, certificate of title volume 13103 folio 199. The disposition of this property to Mrs Helene Hedrlin was done by way of transfer number T70736 dated 10 March 1982. The second was a property situated at 213 Commonwealth Street, Surry Hills, New South Walesj certificate of title identifier 4/255879 (formerly comprised in certificate of title volume 13622 folio 107). The disposition was made by way of transfer number T88409 dated 23 April 1982, also to Mrs Hedrlin.

The applicant also seeks a declaration that he, as trustee of the

property of the bankrupt, is the beneficial owner of a one half	interest as tenant in common, in both properties. He seeks
orders and declarations on the basis that:
1. the respective transfers constituted settlements and as such were void as against the trustee in bankruptcy under section 120 of the Act;

2.  the respective transfers were made with intent to defraud creditors of the bankrupt and were and remain void as against the trustee in bankruptcy under section 121 of the ~ c t .

The facts appear to reveal that prior to the transfers, Mr and Mrs Hedrlin were owners as joint tenants of the two properties. It appears to be alleged that by purporting to transfer his interest to his wife, Mr Hedrlin severed the joint tenancy arrangement, so that the trustee would now become an owner of a half interest as tenaGt in common if this application is successful. ~t is not necessary for the present determination to decide whether a fraudulent transfer would have the effect of terminating the joint tenancy as apparently alleged. This matter may well have to be argued at the hearing of the application if it is open to the trustee to make.

The respondent argues that the trustee cannot make such an application after the discharge of the bankruptcy and the application is in any event statute barred. I was therefore asked to rule first on the preliminary point of whether the applicant trustee can bring the action. The applicant trustee

discharge of the bankruptcy and that he is not barred by the six	submits he has the power to commence these proceedings after
year limitation period prescribed by section 1 2 7 ( 3 ) . Applicant Trustee's Submissions
Statute of Limitations and Time Constraints
The applicant trustee acknowledges, and it is common ground, that he is bound by the Statute of Limitations: see McDonald, Henry and Meek, Australian Bankruptcy Law (fifth editiQn) at paragraph 610, Re Mansell EX parte Norton [l8921 9 Mor 198, South Sea CO v Wymondsell [l7321 3 PW 143; 24 ER 1004, and Re Narbey Ex parte Official Receiver, Simpson [l9611 19 ABC 201. However, he claims that in relation to fraud or fraudhent breach of trust, or recovery of trust property, the limitation peniod is governed by the New South Wales Limitation Act 1969, section 47 of which prescribes a limitation period of twelve years.
There is differing authority as to whether the time for
initiating proceedings runs from the date of discharge, date of
sequestration, or the date which would base the action: Ex parte
Hemming Re Chatterton [l8791 13 Ch D 163, Christensen v Davidson
[l9711 Qd R 208. In the applicant trustee's submission, this is
not important in this application because the New South Wales Act
allows twelve years and the application is in any event within

the various time constraints of section 127 of the Act.	This
section provides:

(1) After the expiration of 20 years from thg date on which a person became a bankrupt, a claim shall not be made by the trustee in the bankruptcy to any property of the bankrupt, and that property shall, subject to the rights, if any, of a person other than the trustee in respect of the property, be deemed to be vested in the bankrupt, or a person claiming through or under him, as the case may be.

(2) An action under sub-section 118(9) with respect to a charge or charging order shall not be commenced by the trustee of the estate of a bankrupt after the expiration of 6 years from the date on which the bankrupt became a bankrupt.

(3) An action under section 120 with respect to a settlement, covenant, contract, payment or transfer shall not be commenced by the trustee of the estate of a bankrupt after the expiration of 6 years from the date on which the bankrupt became a bankrupt.

(4) An action under section 121 with respect to a

disposition of property may be commenced by the
trustee of the estate of a bankrupt at any time.

(5) An action under section 122 with respect to a conveyance, transfer, charge, payment or obligation shall not be commenced by the trustee of the estate of a bankrupt after the expiration of 6 years from the date on which the bankrupt became a bankrupt.

The applicant trustee maintains that section 127 extends his powers as trustee beyond discharge and since this application was brought within six years of the sequestration order, it is not affected by the time constraints provided by section 127.

Debt Incurred by Fraud

The applicant trustee also relies on section 153(2)(b) as he says that the debt Mrs Hedrlin owed Mr Hedrlin bespoke fraud as

against Mr Hedrlinls creditors.

Section 153 (1) and (2) provides:

(1) Subject to this section, where a bankrupt is discharged from a bankruptcy, the discharge operates to release him from all debts (including secured debts) provable in the bankruptcy, whether or not in the case of a secured debt, the secured creditor has surrendered his security for the benefit of creditors generally.

(2) The discharge of a bankrupt from a bankruptcy does

not -

(a)

release the bankrupt from -

(i)	a debt on a recognizance; or
(ii)	a debt with which the bankrupt is chargeable at the suit of the sheriff or other public officer on a bail bond entered into for the appearance of a person prosecuted for an offqnce against a law of the Commonwealth or 'of a State or Territory of the Commonwealth;

(b)

release the bankrupt from a debt incurred by means of fraud or a fraudulent breach of trust to which he was a party or a debt of which he has obtained forbearance by fraud;

(c)

subject to any order of the Court made under subsection (2A), release the bankrupt from any liability under a maintenance agreement or maintenance order; or

(d)

release the bankrupt from any liability under a pecuniary penalty order or interstate pecuniary penalty order.

This submission depends on evidence of fraud; as I see it, it has no relevance to the preliminary question now beingi considered.

Power to Recover following Discharge

The applicant trustee points to a number of instaqnces where the

property of a bankrupt after discharge and the ancillary	Courts have recognised a power in the trustee to recover the
entitlement to pursue examination of the bankrupt for that purpose.
In Mayne v The Public Trustee [l9451 70 CLR 395 a voluntary bankruptcy in 1922 resulted in discharge in 1928. Throughout the bankruptcy the bankrupt received income from government stocks of which the trustee was not aware. After the bankrupt's death in 1940, the trustee sought to recover the income the bankrupt had received since 1922. The trustee was allowed to recover but was limited to the previous six years by the Statute of Limitations.
In Re A Debtor [l9391 1 Ch 489 the trustee was held to be entitled to make an application for the variation of the discharge by the addition of conditions to the discharge, where property that should have been available to the creditors would be otherwise lost by discharge.
In Re Balhorn Ex parte Balhorn (19811 39 ALR 223, twenty months after discharge, the bankrupt produced title deeds at a section 81 examination. It was held that the trustee was entitled to them. At page 227 Lockhart J said:

The land vested in the Official Receiver upon his becoming a bankrupt. The title deeds were also the property of the bankrupt and likewise vested in the Official Receiver. The Official Receiver was, and the Official Trustee continues to be, obliged to take possession of the title deeds; and the court may, on the application of the Official Trustee, enforce possession accordingly: s 129(1) and (2).

Mr Balhorn was obliged during his bankruptcy to deliver	the title deeds to the Official Receiver. The Official
Receiver could have required Mr Balhorn to surrender them to him by various means, including orders pursuant to S 129 or s 30(1) or perhaps pursuant to the two sections together. The discharge of Mr Balhorn from his bankruptcy did not alter this position.

and at page 226:

The effect of a discharge from bankruptcy is to release a bankrupt from all debts provable in the bankruptcy except the debts mentioned in s 153(2). The discharge "does not put an end to the bankruptcy regarded as a series of judicial and administrative acts and rights and powers": Re A Debtor (No 946 of 1926); The Debtor v Official Receiver 119391 1 All ER 735, per 'Sir Wilfrid Greene MR, at 742; followed in Re A Debtor (No 12 of 1958); Ex parte Trustee of Property of Debtor v Clegg, 119681 2 All ER 425.

The property of a bankrupt divisible amongst his creditors (property of the bankrupt at the commencement of the bankruptcy and property acquired thereafter but before discharge: S 116) remains vested in the trustee of his estate. A bankrupt is entitled to ,any surplus remaining after payment in full of the coslts, charges and expenses of the administration of the bankruptcy; all debts that have been proved in the bankruptcy; and interest on interest bearing debts that have been proved in the bankruptcy: s 148.

The trustee of a bankrupt's estate is still bound to collect, realize and distribute such of the bankrupt's property as was vested before discharge in the trustee,

A discharged bankrupt continues "to be liable 'to certain obligations which flow from what I may describe as his state of bankruptcy": per Clyne J in Re Walker [l9521 16 ABC 69 at p 72. A bankrupt remainsobliged to perform the duties prescribed by the Act during his bankruptcy.

The applicant trustee also referred to the powbr that exists after discharge to examine the bankrupt in aid of 'recovery.

In Official Receiver v Todd 119861 14 FCR 177 the power of the trustee to pursue enquiries against the discharged bankrupt to

considered. At 185, Lockhart J summarised the purpose of section	enable recovery of property for the benefit of creditors was
81 of the Act (on the discovery of the bankrupt's property):

Section 55(8) properly construed provides no barrier to the exercise of the power conferred by s 81(1) after the bankrupt is discharged from bankruptcy. It map be said that this produces harsh consequences. A person may be discharged from bankruptcy and many years later brought before the court pursuant to s 81 to provide information relating to events long past. There is no substance in this argument. A discharged bankrupt is expressly required by s 152 to give assistance to the trustee in the realisation and distribution of such of his property as vested in the trustee upon pain of contempt of court. Since the undistributed property of the bankrupt remains vested in the trustee after discharge there are sound reasons of policy why the machinery of the law and the administration of bankruptcy should continue to be available to the trustee and the creditors to assist the trustee in the performance of his continuing duties of collection, realisation and distribution of such of the bankrupt's assets as are vested in him before the discharge. Section 81 is an important weapon in the trustee's armoury. Also, the person to be examined is protected against any misuse of the power. It is necessary for the trustee or a creditor who seeks to examine the bankrupt to satisfy the court or the Registrar that the circumstances are appropriate for the issue of a summons under s 81(1). Where a summons is issued by the Registrar it is subject to review by the Courts: s 14(5). It is well established that the power conferred by s 81 must be exercised for legitimate purposes to aid the process of finding, recovering, realisinn and distributing assets of the bankru~t and - not as an instrument of - oppression: Re Csidei; E; parte Andrew (1979) 39 FLR 387 and cases there cited by me.

At the time of discharge there may be assets which were not known of or in the control of the trustee, yet they had always vested in him. To aid the finding and recovery of such assets, the trustee is entitled to call for assistance pursuant to section 152 of the Act and if that assistance is not forthcoming then the discharge may be rescinded or set aside under sub section (3)(a) and (b) of that section.

Re Coulsen [l9341 1 Ch 45 in support of the proposition that	In Todd, Lockhart J referred to Re Brealey [l9001 26 VLR 209 and
subsequent to discharge, assets which vested in the trustee were still available to creditors and could still be realised by the trustee. The applicant trustee submits that this extends to and includes the present action.

bankrupt upon discharge is released from all debts provable in bankruptcy and all legal rights are restorled. There are

no ties with the original estate but he is bound by section

152 to give such reasonable assistance as the trustee

requires. different terms for the trustee refers to two different stages of the trusteeship. She says that a trustee of the estate of a discharged bankrupt is called the trustee in bankruptcy and a bankrupt is called a bankrupt whether discharged or not. She says she has support for this proposition in (above) at page 183, where Lockhart J said:

The Respondent's Submissions

There were written submissions from Mr Joseph Hqdrlin and from and on behalf of Mrs Helene Hedrlin in reply to, the submissions of the applicant trustee, as well as two supplements to these submissions. The status of Mr Hedrlin's submissions is curious, but I have read them and taken them into account. There was substantial repetition in these submissions. I shall address all these as the respondent's submissions. The respondent set her submissions out under headings which I shall deal with in order.

1.  By force of section 127 the applicant trustee is not entitled

to begin actions under sections 120 and 121 agter discharge.

The respondent claims that section 127 prohibits the applicant trustee from making this application by clearly limiting the time for such claims. In tHe respondent's submission there is a distinction between the trustee of the estate of a bankrupt and a trustee in bankruptcy. Section 153 describes the effect of an order of discharge, A

The definition applies unless the contrary intention appears: S 5(1). The definition of "bankrupt" in S 5(1) is not subject to any temporal constraints. Once a sequestration order has been made against the estate of a person or once a person has become a bankrupt by virtue of the presentation of a debtor's petition, that person fulfils the description required by the statutory definition. The description applies to him as aptly after, as

it does before, he is discharged from

bankruptcy or his bankruptcy is annulled.

The power conferred by S 81 with respect to "the bankrupt" applies therefore to the person who answers the statutory description of "bankrupt" in the definition section (S 5(1))

and is sufficiently wide to include a person who has become a bankrupt but has been discharged from bankruptcy or whose bankruptcy has been annulled.

The respondent claims that the Act's distinction between a

bankruptcy is because after discharge the bankrupt is free to	trustee of the estate of a bankrupt and a trustee in
acquire a new estate over which the trustee has no control. Were the trustee to be called the trustee of the estate of a bankrupt, and this term applied to the person after discharge, then the trustee would still have access to the person's property acquired post discharge, whereas a trustee
in bankruptcy can only deal with property that vested in the trustee in right of the bankrupt up to discharge. This, she says, is a reflection of the fundamental change which occurs upon the discharge of the bankrupt.
Sections 120, 121 and 127(1) use the term "trustee in bankruptcy1', whereas sub sections (3) and (4) of section 127 relating to sections 120 and 121 use "trustee of the estate of a bankrupt". In the respondent's submission, the term "trustee in bankruptcy" applies to trustees of discharged and undischarged bankrupts and in effect limits the life of the bankruptcy to twenty years.
~hus, the respondent submits, section 127(3) applies only to the trustee of an undischarged bankrupt and such a trustee may commence an action for up to six years fdom the date of the sequestration order. Likewise she says that section 127(4) applies only to the trustee of an undischarged bankrupt and that such a trustee may commence an action at any time and maintain it up to the twenty 'year limit in section 127(1).
present application, the respondent says that it appears that In applying these submissions on this distinction to the
sections 120 and 121 could have affected the bettlements in question but as the applicant had not begun his1 action before the discharge of Mr Hedrlinls bankruptcy, he is not entitled to pursue them after discharge. Accordingly the respondent requested that the application be dismissed.
The respondent also refers to the 1980 amendments to the Act. In particular she cites sections 43(2) and 127(2)(3)(4) and (5), the first of which she says is similar to sections 55(8), 56(16) and 57(10). Section 43(2) provides:

Upon the making of a sequestration order against the estate of a debtor, the debtor becomes a bankrupt and continues to be a bankrupt until:

(a)	he is discharged by force of section 149;
(b)	he is discharged by order of the court; or

(C) his bankruptcy is annulled under section 74 or

154.

The respondent says that under section 43 a person is no longer bankrupt after discharge even though the bankruptcy continues. The trustee, although still a trustee in bankruptcy, is no longer a trustee in relation to the bankrupt, and no longer trustee of the estate of the bankrupt. Consequently this trustee is unable to initiate this action. The respondent says that support for this proposition may be found in the British Insolvency Act 1985 which provides in section 128(1) that the discharge of a

bankruptcy shall have no effect on the functions of the	trustee of the estate. The respondent says that this is also
supported by the terminology of the schedule and forms of the Act, in that they specify insertion of the name of the debtor or bankrupt. The respondent submits that it is defamatory to call a person a bankrupt after discharge.

2.  The trustee is not entitled to pursue the section 121 proceedings.

Section 121 relates to dispositions of projperty and makes void as against the trustee in bankruptcy ,any disposition made with intent to defraud creditors. Section 120 defines the retrospective reach of that section as being either two years or five years before the commen~cement of the bankruptcy, depending on the circumstances\, to ascertain whether a settlement of property is affected by the section.

Because section 121 does not have such a limit defined, the respondent argues that guidance must be sought from the Act. 1 The section concerns property and it is within Division 3 of i the Act, which is where property available for the payment of debts is defined. I had some difficulty understanding this submission. It appeared to be that because section 121 is in Division 3, such property is also divtsible amongst creditors. If this were not the case, the respondent says that property affected by section 121 could never be divided among the creditors. Correspondingly she says, I think, that such property being an identifiable sub-set of property

payment of debts under section 121, divisible amongst creditors, must be property, available for

In section 116 property divisible amongst creditors is defined as all property belonging to or vested in the bankrupt at the commencement of the bank!ruptcy. The commencement of the bankruptcy is defined in section 115 and where there is a creditor's petition, this is at most six months before the petition is presented.

The respondent submits that the period of relation back is generally applicable to all sections in Division 3 of the Act unless specifically excluded or altered in the wording of the individual sections. Sections 118, 120 and 122 alter the application of this period by providing extensions to the ordinary relation back period. As I understand the submission, it is that since section 121 does not specifically do so, then it must be as affected by the usual period as all other similarly limited sections in that Division. Thus the reach of section 121 is only as far back as six months prior to the creditor's petition and dispositions made before that time are unaffected.

In respect of the dates of the transactions with which this application is concerned, 10 March 1982 and 25 April 1982, the respondent says that she is outside the reach of section 121 as the creditor's petition was dated 28 February 1983. The scheme of the Act as set out in Part VI, Division 3 and applicable through section 121, limits transactions available

the relation back period. Further, while the bankrupt is to be avoided by the trustee to those having occurred within

undischarged, there is a twenty year period for the trustee of the estate of a bankrupt to bring an action under section

3.  The trustee is time barred from pursuing hi6 application by force of the Statute of Limitations.

The respondent submits that the alleged dispositions took place more than six years before this application and that therefore the applicant trustee is statute barred. The respondent submits that although the Statute of Limitations

l

does not operate directly upon equitable remedies, such remedies are affected by analogy by the statute. The respondent says that authority for this exists in Dixon J c s judgment in Cohen v Cohen [l9291 42 CLR 91, so that the trustee is time barred from seeking remedies in law and equity by the Statute of Limitations.

The respondent discusses the possible dates on which time begins to run for the purpose of the Statute of Limitations, and submits that at the latest, time begins, to run on the date of the dispositions.

In Reeves v Butcher 118911 2 QB 509 at 511 Lindley L J said:

The right to bring an action may arise on various

statute runs from the earliest time at which an	events; but it has always been held that the
action could be brought.

On this basis, the respondent submits that time had run out
before July 1988 when this action began.
The respondent referred to old authorities to show that once
time begins to run, it continues to run despite the
intervention of other events: see Prideaux v weber 116611 1
Lev 31, and Bowring-Hanburyts Trustee v Bowring Hanbury
[l9421 1 Ch 276. In Rhodes v Smethurst [l8381 4 M & W 42 at
59, 150 ER 1335 , Lord Abinger CB said:

It appears to me that the general interpretation of the Statute has been this: that where an action has once accrued, and the statute has begun to run, there being then a capacity of suing and of being sued, the statute continues to run.

and at 62:

We have therefore, as I think, both authority and reason for concluding that the period of time from which the computation is to begin, is when the action accrued: and that when the statute has begun to run, any portion of time in which the parties are under disabilities must nevertheless form part of the six years.

The respondent submits that the applicant trustee is not prosecuting a new cause of action, but is pursuing an old debt for which a remedy was available a long time ago. They say that the trustee has been tardy and that there has been

time.	nothing to prevent him bringing the action at a much earlier
By analogy the respondent argues that if the applicant trustee is not barred by the Statute of Limitations, then a situation would exist where commercial transactions could be voidable by a trustee in bankruptcy for a period of fourteen

to twenty-six years. Although I have some problems with the arithmetic, she says that this is comprised of the six year limitation period plus two years under sectton 120(1), five years under section 120(2), six months under section 121 for the relation back period and a further six years for section 120 applications (S 127(1)), or a further twenty years for a section 121 application in that section 127 permits a twenty year period for the trustee to claim the property.

If the application is allowed, the respondent says that there would be huge numbers of bankruptcy petitions by persons who are statute barred from proceeding. She sags that this is exactly the type of situation the Statute of Limitations is designed to avoid.

4.  The applications of the trustee are ill founded as his only recourse, if any, is to pursue the debt due unber contract.

The respondent does not admit that there is a debt but says that Mr Hedrlin conveyed his legal title in the two properties to her in 1982. Ostensibly, the nespondent says she owed Mr Hedrlin a debt of $61,000.

The respondent provided a chronology of Mr Hedrlints

bankruptcy to illustrate her point as follows:

18 May 1983	Mr Hedrlin declared bankrupt.
12 October 1983	Trustee placed caveats on the two properties on the grounds that the transfers were void as against the trustee under section 121 of the Act.
15 December 1983	Mr Hedrlin examined under section 69 of the Act.
3 May 1984	Mrs Hedrlin and Mr Peter Hedrlin examined under section 81 of the Act.
28 July 1988	The trustee makes this application.

The respondent submits that the applicant trustee is estopped from pursuing this application under section 120 because the caveats were only based on section 121 of the Act. She also submits that the applicant trustee was reckless when he locked himself into action under section 121 of the Act, before he had any evidence and prior to the examinations under sections 69 and 81 of the Act.

The respondent submits that the applicant trustee has

acknowledged his inability to rely on Mr Joseph Hedrlinrs

statements against the respondent and yet the allegations of fraud were made six months before he examined Mrs Hedrlin so he must have based them on Mr Hedrlin's evidence.

The respondent contends that the applicant i:s mistaken in his claim because the law regarding land transactions is that once a person has sold and conveyed away his title to land, he loses any lien over the land, and is estopped from seeking a reconveyance. If the purchase price is not paid the vendor may sue for the monies as a debt. Such a debt is recoverable from the general funds of the purchaser and is not related to any specific asset. The respondent cites authority for this finality of conveyance in Clare v Lamb [l87531 10 LRCP 334 at 338-339; Allen v Richardson [l8791 13 Ch D 524 at 537-540; Joliffe v Baker I18831 11 QBD 255 at 265-7, 272-3; Brownlie v Campbell [l8801 5 AC 925.

In McDonald v Dennys Lascelles Ltd [l9331 48 CLR 457 Dixon J, quoting Sir John Salmond, said at p 475:

"As a general rule, on the failure or refusal of a purchaser to complete an executory contract for purchase of land the vendor is not entitled to sue for the purchase money as a debt. He is entitled merely to sue for specific performance or for damages for the loss of his bargain. It is only when the contract has been completed by the execution and acceptance of a conveyance that unpaid purchase money may become a debt and can be recovered accordingly. This general rule is sufficiently illustrated and established by the

case of Laird v Plm 118411 7 M & W 474; 151 ER 852.

The sale of land is in this respect simiJar to the sale of goods. In the case of goods sold and delivered, and of goods bargained and sold, the property in each case having passed to ithe buyer, the seller's remedy is to sue for the price. But if under any executory contract the buyer wrongfully refuses to accept the goods, the seller's only remedy is an action for damages. The general rule, however, that in an executory contract for the sale of land the vendor ,cannot sue for the price is excluded whenever contrary intention is shown by the express term6 of the contract. And it seems established by! authority that a contrary intention is sufficiently shown in all cases in which by the express terms of the contract the purchase money or any part thereof is made payable on a fixed day, not being the agreed day for the completion of the contract by conveyance. In all such cases the purchase money or such part thereof becomes, on the day so fixed for its payment, a debt immediately recoverable by the vendor irrespective of the question whether a conveyance has been executed and notwithstanding the fact that the purchaser may have repudiated his contract. Notwithstanding such repudiation the vendor is not bound to sue for damages or specific performance, but may recover the agreed purchase money" (Ruddenklau v Charlesworth [l9251 NZLR 161 at p 164).

Where a contract has been substantially executed and has conferred some real benefit on B, the promises to perform are construed as independent so that A having performed his own promise has to be content with an action for damages for any defects in B's performance: B o o m v Eyre [l7771 2 Black. W 1312, 96 ER 767.

The respondent argues that with respect to the relevant transactions, the property, if any, which vested in the trustee was a right of action in regard to a debt for $61,000. Specific performance may be granted against a trustee in bankrutcy of a vendor. The trustee has no right to claim that the estate would be better off with the land

than the purchase money.

Therefore, in the respondent's submission, actions under sections 120 and 121 are not competent to recover a debt possibly due under the contract. She submits that the trustee should have pursued the purchase price when he first became trustee of Mr Hedrlin's estate. In relation to this

the respondent says that the applicant trustee is mistaken if	I
l

he thinks he can seek a reconveyance of the, two properties:

Re Condon Ex parte James (18741 LR 9 Ch App 609.

5. The applications of the trustee are djlatory, harsh,

I

oppressive and an unfair use of his power.

The respondent says that bankruptcy involves a change of status and quasi-penal consequences: Sari~a v Shire of Wollondilly [l9801 48 FLR 372. She also refers to Re Csidei Ex parte Andrew [l9791 39 FLR 387 where Justiice Lockhart set aside summonses on the ground that the pleadings were harsh and oppressive. And in in Re Metropolitan Bank (Heiron's Case) 118801 15 Ch 139, the English Court of Appeal said that the powers of the liquidator were very inquisiltorial, and the more inquisitorial they are, the more the Coyrt is bound to take care that they are not used for the purposes of vexation or oppression.

Further the respondent complains that the apdlicant trustee makes no mention of giving credit to Mrs ~edrkin for paying out the mortgages on the properties. It would thus be unfair	to the respondent, who claims she is an innocent third party,	to allow the application. The respondent clgaims that the
contracts for the sale of the properties were for amounts determined by the Registrar-General, although/ there is no evidence of this before me at present. The respondent also seems to move beyond the threshold point and argue that the dispositions were not fraudulent and therefpre that the
trustee's application is unwarranted. No money was actually due to Mr Hedrlin, according to the respondent, as he held the legal interest in the properties in trust for Mrs Hedrlin. Mrs Hedrlin actually purchased the properties with her own money and has paid all the outgoings on the properties. The respondent has not provided any evidence for these submissions at this stage and, interesting as they are and compelling as they could become, they do not seem relevant to the legal question whether the trustee can make this application.
The respondent stresses that as an officer of the Court the trustee must act in an honourable and high-minded way: - Re Condon (above). Settlements are only avoided as far as is necessary to satisfy the debts and costs of the bankrupt: - Re Sim; Ex parte Sheffield I18961 3 Mans 340, Re Parry; Ex parte Salaman [l9041 1 KB 129, Carruthers v Peake [l9111 55 Sol. JO. 291, Re MacDonald; EX parte McCullum [l9201 1 KB 205. The respondent submits that the trustee has spent seven years recovering $7000 for creditors and has caused the estate great expense. She submits that the trustee has neglected his duty to the Court, and that if he had concentrated on one	property then all the creditors could have been paid out in	full. He achieved a temporary hold on a block of land at
Woolgoolga in November 1987, but allowed that to lapse. He now claims rights to these two properties. The respondent submits that the Court should take into account the waste of the estate's funds and Court time by the trustee acting in this way. She says that it is outrageous of the trustee to
suggest that she has spent a great deal of money over the past five years attempting to conceal a fraudulent transfer of property worth $61,000 to avoid her husband's debt of
$7000, when in fact she has paid $3,500 in fees and costs in
relation to the transfer.
Again the points made by the respondent in tqese regards are potentially significant and far reaching in another context, but they do not bear on the preliminary issue now being determined.
As to the submission that the applicant trustee cannot make such an application against a third party post discharge, the respondent says that the trustee has the power to oppose discharge of bankruptcy, but once discharge has taken place, then the trustee may not act as though the deljtor is still a bankrupt. It is only when the trustee has been surprised by new information that the Court will allow a fresh application like this one. This is to encourage trustees to act promptly and bring the bankruptcy to an end as quickly as possible.
The respondent says that this application is thus a punitive
measure and in retaliation for Mr Hedrlinrs allegations that the trustee has embezzled funds from the estate.
It is also submitted by the respondent that hacl it been the intention of the legislature to extend the application of the time constraints in section 127 to a time beyond discharge, it would have done so explicity.

6.  The Trustee's application is compromised by his use of inadmissible evidence in his affidavit in support.

The respondent asserts that the trustee is not entitled to rely on the evidence of a bankrupt in his examination against

a third party from whom he wishes to recover. Yet he relies

on evidence in the examination of Mr Joseph Hedrlin against his wife who is the respondent. If this is so, it is not relevant to the present question.

7.  The Court may have been misled on 1 June 1989 regarding the Woolgoolga property.

The respondent asks the Court to take into account that the circumstances of the Woolgoolga property were completely different to those surrounding the properties involved in this application. She says that despite a Court order that the trustee list the Woolgoolga property for sale on 12 November 1987, it was not listed for sale by the trustee until 19 January 1988. As far as I can see, this submission has no bearing on the matter presently before the Court.

Conclusions

It is clear that to the extent to which this application represents what section 127(3) calls "an action under section 12lV, there is no time limit for its commencement. Likewise section 120 actions by the trustee of the bankrupt's estate may be brought within 6 years from the date of the bapkruptcy. These

actions are therefore manifestly within time, provided the applicant is still "the trustee of the estate of the bankrupt" within the meaning of those words in section 127. I think that he is. Section 127 would have virtually no meaning at all if it were otherwise, because it would only apply to undischarged bankrupts. In my opinion, this cannot have been Parliament's intention or be its natural meaning.

I am not as certain about the question raised by dhe applicant as to whether in any event the applicable time limit in this case is that prescribed by the New South Wales Limitation Act 1969. Sections 120 and 121 seem to be based on the concept of a statutory fraud in that they in effect deem thaf activities of the bankrupt considerably before the bankruptcy, were designed, probably deliberately, to deprive creditors of the benefit of assets which the bankrupt would otherwise still have held at the date of sequestration. However, in view of my interpretation of section 127, it is not necessary to decide that question finally.

It is my opinion that this action is competent and that the

applicant had power to commence it when and in the role and way

he did. I certi?! !h;t :hi5 ?: . ,S th?

Reassns :cr Ju:l;::?r!:  hcrein ot his Honour

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