Downey (In His Capacity as trustee of Kotsopoulos) v Deakin

[2017] FCCA 2076

FEDERAL CIRCUIT COURT OF AUSTRALIA

DOWNEY (IN HIS CAPACITY AS TRUSTEE OF KOTSOPOULOS) v DEAKIN [2017] FCCA 2076

Catchwords:
BANKRUPTCY – Bankrupt transferred interest in real property to Respondent 11 days prior to bankruptcy – notice issued to Respondent pursuant to s.139ZQ(8) of the Bankruptcy Act 1966 (Cth) – Respondent a related entity of bankrupt – no consideration for transfer – voidable transaction – judgment entered against Respondent.

Legislation:

Bankruptcy Act 1966 (Cth), ss.5, 120(1), 139ZQ(8), 139ZS

Transfer of Land Act 1958 (Vic), s.45

Applicant: JAMES PATRICK DOWNEY (IN HIS CAPACITY AS TRUSTEE OF ANDONIOS ANTHONY KOTSOPOULOS)

Respondent: ELIZABETH JOAN  DEAKIN

File Number: MLG 1336 of 2017

Judgment of: Judge Hartnett

Hearing date: 16 August 2017

Delivered at: Melbourne

Delivered on: 16 August 2017

REPRESENTATION

Counsel for the Applicant: Mr Purton

Solicitors for the Applicant: McMahon Fearnley Lawyers

The Respondent: No Appearance

ORDERS

1. There be judgment in the sum of $61,720.76 in favour of the Applicant pursuant to s.139ZQ(8) of the Bankruptcy Act 1966 (Cth) (‘the Act’).

2. The Respondent pay to the Applicant interest in the sum of $684 plus any interest that shall accrue from this date.

3. The Respondent pay the costs of the Applicant fixed in the sum of $5,953.50.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLG 1336 of 2017

JAMES PATRICK DOWNEY (IN HIS CAPACITY AS TRUSTEE OF ANDONIOS ANTHONY KOTSOPOULOS)

Applicant

And

ELIZABETH JOAN  DEAKIN

Respondent

REASONS FOR JUDGMENT

(Edited Ex Tempore Reasons)

1. Before the Court is an application filed 23 June 2017 wherein the Applicant seeks judgment against the Respondent in the sum of $61,720.76 pursuant to a s.139ZQ(8) notice issued in accordance with the Bankruptcy Act 1966 (Cth) (‘the Act’), together with interest and costs.

2. The Applicant relies upon an affidavit sworn by Mr David Robert Holland on 24 July 2017, which is an affidavit as to service, and an affidavit of evidence sworn by Mr James Patrick Downey on 22 June 2017. The Respondent has failed to file a notice of appearance in the registry and fails to appear on the hearing of the application this day. 

3. The Respondent, Ms Deakin, was served by personal service on 15 July 2017 with:-

   a)a copy of the notice of relisting dated 28 June 2017 advising of the new listing date of 16 August 2017 at 10.00am;

   b)a copy of the sealed application filed 23 June 2017; and

   c)a copy of the sealed affidavit of James Patrick Downey sworn on 22 June 2017 with annexures JPD1 to JPD3.

4. Ms Deakin was served at her home at 7 Haricot Way, Lilydale in the State of Victoria. She was identified by the process server. The Respondent had previously been served with the Official Receiver’s s.139ZQ notice issued under the Act on 25 March 2017.

Background 

1. On 2 August 2016, Mr Downey was appointed as trustee of the bankrupt estate of Andonios Anthony Kotsopoulos (‘the bankrupt’) by order of the Court made 2 August 2016.  The date of the act of bankruptcy was 8 June 2016.  On 17 March 2017, the Official Receiver issued a notice pursuant to s.139ZQ of the Act to the Respondent. 

2. The s.139ZQ notice (‘the notice’) stated, amongst other things, that:-

   “To comply with this notice you must pay the amount of $61,720.76, representing the value of the property received by you at the time of transfer from the debtor, to James Patrick Downey, on or before 28 days from receipt of this notice. Payment may be made at the following address;

   McMahon Fearnley Lawyers, Level 3, 256 Queen Street, Melbourne, Victoria, 3000.

   The notice shall also be taken to be complied with if the debtor’s interest in 7 Haricot Way, Lilydale in the State of Victoria (Lot 595 on Plan of Subdivision 445690N Parent title volume 10538 folio 308) is transferred to James Patrick Downey on or before 28 days from receipt of this notice.”

3. Following service of the notice on 25 March 2017, the Applicant has received no notice from the Official Receiver revoking or amending the s.139ZQ notice under s.139ZQ(4) of the Act, and nor has the Applicant been served with any application to set aside the s.139ZQ notice under s.139ZS of the Act. Further, as at the date of Mr Downey swearing his affidavit on 22 June 2017, and as at this date, the Applicant has not received any payment from the Respondent in connection with the notice. The amount of $61,720.76 remains outstanding.

4. The notice was issued in the following circumstances:-

   a)as at 8 June 2016, the bankrupt was a joint registered proprietor of the property situate at 7 Haricot Way, Lilydale in the State of Victoria (‘the property’) as joint proprietor with Elizabeth Joan Deakin, the Respondent, and her daughters Jessica Elizabeth Deakin and Elini Olivia Deakin; 

   b)pursuant to s.5 of the Act, Elizabeth Joan Deakin, the Respondent, being the bankrupt’s de facto partner, is considered a related entity of the bankrupt;

   c)on 28 May 2016, some 11 days before the date of the act of bankruptcy, the bankrupt and Ms Deakin, together with her two daughters, executed a transfer of land under s.45 of the Transfer of Land Act 1958 (Vic). The transfer of land was registered on the Victorian Land Registry on 12 July 2016 under dealing number AM930900Y with a noted consideration of “natural love and affection” (‘the transfer’);

   d)the effect of the transfer was that the debtor transferred his interest in the property to Ms Deakin, the Respondent, and that once the transfer of land was registered, the property was held by Ms Deakin and her two daughters in unequal shares, being shares as to 50 per cent by the Respondent, and 25 per cent each to each of the Respondent’s two daughters; 

   e)at the time of the transfer, the property was subject to a mortgage held by the Commonwealth Bank of Australia (‘CBA’), mortgage reference AK827701Y. The CBA home loan account number 062370 775105705 held by the bankrupt, the Respondent and the Respondent’s two daughters had a debit balance of $493,941.93 at the time of the transfer. The retrospective valuations of the property obtained by Mr Downey, quoted the value of the property at the time of the transfer as around $735,000. The trustee claimed that the transfer of the debtor’s share of the property was voidable pursuant to s.120(1) of the Act.

5. Section 120(1) of the Act is contained in Division 3 of Part 6 of the Act and is relevantly as follows:-

   “ BANKRUPTCY ACT 1966 - SECT 120

   Undervalued transactions

   Transfers that are void against trustee

   (1)  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 5 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.

Note:          For the application of this section where consideration is given to a third party rather than the transferor, see section 121A.”

1. Mr Downey submitted to the Official Receiver that the essential elements of s.120 of the Act were satisfied with respect to:-

   a)the transfer on or around 12 July 2016 was to Ms Deakin;

   b)the transfer took place on or around 12 July 2016, being a date prior to the date on which the debtor became bankrupt on 2 August 2016;

   c)the transfer took place on or around 12 July 2016, which is within the period beginning five years before the commencement of the bankruptcy and ending on the date of the bankruptcy; and

   d)the Respondent Ms Deakin, gave no consideration for the transfer.

2. The Official Receiver calculated that the Respondent, Ms Deakin, is indebted to the bankrupt estate in the amount of $61,720.76. 

3. On these facts the Court shall accede to the application filed 23 June 2017 and in the exercise of the Court’s discretion there shall be an order for costs against the Respondent.  The Respondent failed to participate in the proceedings. The Applicant has been entirely successful in his application. 

I certify that the preceding twelve (12) paragraphs are a true copy of the reasons for judgment of Judge Hartnett

Associate: 

Date:  30 August 2017