Green v Dare

[2003] FCA 172

FEDERAL COURT OF AUSTRALIA

Green v Dare [2003] FCA 172

Bankruptcy Act 1966 (Cth) s 120, 121

ROBYN PATRICIA DARE v TRACY JOY DARE and PHILLIP ARTHUR HENNESY AND NOWBROOK PTY LTD
Q182 OF 2002

KIEFEL J
BRISBANE
6 MARCH 2003

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	Q182 OF 2002

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT

BETWEEN:

ROBYN PATRICIA GREEN
APPELLANT

AND:

TRACY JOY DARE and PHILLIP ARTHUR HENNESY
FIRST RESPONDENT

NOWBROOK PTY LTD
SECOND RESPONDENT

JUDGE:

KIEFEL J

DATE OF ORDER:

6 MARCH 2003

WHERE MADE:

BRISBANE

THE COURT ORDERS THAT:

1.        The appeal be dismissed with costs.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	Q182 OF 2002

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT

BETWEEN:

ROBYN PATRICIA GREEN
APPELLANT

AND:

TRACY JOY DARE and PHILLIP ARTHUR HENNESY
FIRST RESPONDENT

NOWBROOK PTY LTD
SECOND RESPONDENT

JUDGE:	KIEFEL J
DATE:	6 MARCH 2003
PLACE:	BRISBANE

REASONS FOR JUDGMENT

1. Prior to 28 July 2002, the appellant was the registered proprietor of a house property situated at 26 Myrtle Street, The Grange.  On 28 July 2000 the appellant transferred the property to Nowbrook Pty Ltd, a company which she effectively controlled, as trustee for the Robyn Patricia Green Estate Planning Discretionary Trust (“the Trust”).  On 26 July 2000, a deed of forgiveness of debt had been entered into between the appellant and Nowbrook Pty Ltd.  It recited that she had conveyed her interest in the property to the Trust for full market value, the sum of $150,000.  The appellant relieved the Trust of liability for the debt.  Her intention was expressed to be the distribution of her estate inter vivos. At the time these transactions were undertaken the appellant was liable to pay costs to a person as a result of litigation in various courts. The house property was her only asset of substance. On 3 August 2001, a sequestration order was made against the appellant’s estate, and on 20 January 2002 the trustees of that estate applied to have the transfer set aside pursuant to s 120 or s 121 of the Bankruptcy Act 1966 (Cth) (“the Act”). Those sections provide, in relevant part:

   “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.

   …”

   “121 Transfers to defeat creditors

   Transfers that are void

   (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 property would probably have become part of the transferor’s estate or would probably have been available to creditors if the property had not been transferred; and

   (b)the transferor’s main purpose in making the transfer was:

   (i)to prevent the transferred property from becoming divisible among the transferor’s creditors; or

   (ii)to hinder or delay the process of making property available for division among the transferor’s creditors.

   Showing the transferor’s main purpose in making a transfer

   (2)The transferor’s main purpose in making the transfer is taken to be the purpose described in paragraph (1)(b) if it can reasonably be inferred from all the circumstances that, at the time of the transfer, the transferor was, or was about to become, insolvent.

   Other ways of showing the transferor’s main purpose in making a transfer

   (3)Subsection (2) does not limit the ways of establishing the transferor’s main purpose in making a transfer.  …”

2. The appellant opposed the application on the grounds that Nowbrook Pty Ltd had by then been removed as trustee and because she now held the property as trustee.  The sale of the property to that company had, in any event, been at market value and her main purpose in conveying the property was not to prevent the property from becoming divisible amongst her creditors, she argued. 

3. On 31 January 2003, a Federal Magistrate made the orders sought by the trustees in bankruptcy.  The Federal Magistrate did not accept the appellant as a credible witness and found that the transfer to Nowbrook Pty Ltd was undertaken in order to prevent her principal creditor, Dr Chenowerth, from having recourse to the property in order to satisfy the costs which the appellant had been ordered to pay him.  The appellant had made admissions to that effect in earlier proceedings in the Magistrates Court when she had sought to have the sequestration annulled for the reason that she was solvent.  The Federal Magistrate did not accept that the transfer was effected as part of her estate planning.  Insofar as she had had the assistance of a solicitor with respect to the transfer, the solicitor would have acted upon her instructions.  The Federal Magistrate appears to have accepted the submission that the recent removal of Nowbrook Pty Ltd as trustee and her appointment was a mere sham and that it was, in any event, ineffective to avoid the initial transfer from the appellant to the company.  The appellant appeals from that decision.

4. The appellant now contends that relevant documents were not placed before the Federal Magistrate.  The documents in question are a deed of assignment of debt dated 4 August 2000, by which she purported to assign the debt from Nowbrook Pty Ltd, which she had earlier forgiven, to herself in her capacity as Trustee.  By a deed poll dated 9 October 2000, the appellant rescinded the deed of forgiveness.  The reason for doing so appears to have been that the Office of State Revenue sought to impose stamp duty on the deed.  Two further deed polls repeated that endeavour.  Were it relevant, there is no suggestion that Nowbrook Pty Ltd consented to the rescission.

5. The appellant contends that these documents should have been placed before the Federal Magistrate by the trustees.  The documents were, however, prepared by her solicitor and it is difficult to accept that it did not occur to her to check the solicitor’s file if she did not have copies of them.  The appellant shows some familiarity with what the documents were designed to achieve.  She was in as good a position to put the documents before the Court, in my view.  In any event, it does not seem to me that the documents affect the Federal Magistrate’s determination. 

6. The essential question for the Federal Magistrate with respect to s 120 was whether Nowbrook Pty Ltd gave consideration for the property. There is no suggestion that that company could pay or that it was ever intended to pay. It does not matter, in my view, whether the deed of forgiveness was later rescinded. No consideration was provided. So far as concerns Section 121, the Federal Magistrate found that the appellant’s main purpose in effecting the transfer was in preventing Dr Chenowerth, who had orders for costs against her, having recourse to her property. The documents now relied upon tend to underline that objective and, in my view, in no way negate it. No other ground of appeal is apparent. No error has been shown on the part of the Federal Magistrate and the appeal will be dismissed with costs.

I certify that the preceding six (6) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kiefel.

Associate:

Dated:             12 March 2003

For the Appellant	In Person
Counsel for the First and Second Respondents:	Mr PN Hackett
Solicitor for the First and Second Respondents:	Hewlett & Company
Date of Hearing:	6 March 2003
Date of Judgment:	6 March 2003