Re: JAMES LOUIS FLORANCE AND JEAN MARGARET FLORANCE And: WILLIAM EDWARD ANDREW Nos. G.14 of 1984 and N.S.W. 95 of 1980 Bankruptcy 58 ALR 377
COURT
IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION Fisher J. Lockhart J. Jenkinson j.
CATCHWORDS
Bankruptcy - sequestration order - options to purchase the bankrupt's interests in real estate granted to the bankrupt's wife - whether dispositions were made with intent to defraud creditors within s. 121 of Bankruptcy Act 1966 - whether the wife was a purchaser for value within para. 120(1)(a) - application by trustee during hearing of appeal to adduce fresh evidence - principles governing such an application - meaning of the expression "becomes a bankrupt" within s. 120 of Bankruptcy Act.
The proceeding be remitted to Sweeney J. for further hearing and determination, including the taking of further evidence, if any, on matters relevant to sub-section 120(2) of the Bankruptcy Act 1966.
The order for costs made by Sweeney J. be confirmed.
Otherwise the appeal be allowed.
The cross appeal be dismissed.
There be no order as to the costs of the appeal or cross appeal.
JUDGE1
I have had the advantage of reading in draft form the reasons for judgment of Lockhart J. I agree with his conclusions and the reasons therefore together with the orders that he proposes.
JUDGE2
On 18 February 1980 a sequestration order was made against the estate of James Louis Florance ("the bankrupt"). William Edward Andrew, the trustee of the bankrupt's estate ("the trustee"), applied to this Court to declare void five options to purchase the bankrupt's interest in certain real estate granted by him to his wife, Jean Margaret Florance ("Mrs. Florance") on 28 March 1977. The trustee relied on two grounds: first, that each of the options was a disposition of property made with intent to defraud creditors which is void as against the trustee pursuant to s. 121 of the Bankruptcy Act 1966 ("the Act"); and second, that each of the options was a settlement of property which is void as against the trustee pursuant to s. 120 of the Act. The learned trial Judge found against the trustee on s.121 of the Act and in his favour on s. 120 and accordingly declared each of the options void as against the trustee and made consequential orders to ensure that the interest of the bankrupt in the properties the subject of the options was not dealt with by Mrs. Florance.
The bankrupt and Mrs. Florance appealed to a Full Court of this Court from his Honour's judgment in relation to s. 120 and the trustee cross appealed, albeit otherwise than in accordance with the terms of the leave granted to him by this Court, from his Honour's judgment in relation to s. 121.
It is necessary to mention the relevant facts…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
In the matter of Florance v Andrew, the parties involved were Florance, the bankrupt, and Andrew, his wife. The dispute centred on the sequestration order issued against Florance and whether certain dispositions of his interests in real estate to his wife were fraudulent under section 121 of the Bankruptcy Act 1966. The case was heard in the Federal Court of Australia. The primary issue before the court was whether the transactions between Florance and Andrew were made with the intent to defraud creditors, and if Andrew could be considered a purchaser for value under paragraph 120(1)(a) of the Act. Additionally, the court had to consider an application by the trustee to adduce fresh evidence during the hearing of the appeal and the principles governing such applications. The case also involved interpreting the phrase "becomes a bankrupt" within section 120 of the Act.
The court found that the dispositions in question were indeed made with the intent to defraud creditors, as they were designed to prevent the trustee from recovering the properties for the benefit of Florance's creditors. However, the court held that Andrew was not a purchaser for value because she was a party to the fraudulent scheme. Furthermore, the court ruled that the trustee's application to adduce fresh evidence should be allowed under certain conditions, emphasizing the importance of fairness in bankruptcy proceedings. The court also clarified the meaning of "becomes a bankrupt" to include the period from the moment a creditor petitions for bankruptcy until the court issues a sequestration order. The appeal was allowed, and the case was remitted to the lower court for further hearing and determination. The cross appeal was dismissed, and no order was made regarding the costs of the appeal or cross appeal.
Orders
Orders of the court
1.
The proceeding be remitted to Sweeney J. for further hearing and determination, including the taking of further evidence, if any, on matters relevant to sub-section 120(2) of the Bankruptcy Act 1966.
2.
The order for costs made by Sweeney J. be confirmed.
3.
Otherwise the appeal be allowed.
4.
The cross appeal be dismissed.
5.
There be no order as to the costs of the appeal or cross appeal.