Re: EILEEN MARY JOHNSTONE Ex Parte: ROBERT MOLESWORTH HOBILL COLE And: JOHN LAURENCE SULLIVAN and DAWN SULLIVAN No. 348 of 1982 Bankruptcy 3 FCR 32
COURT
IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA GENERAL DIVISION Smithers J.(1)
CATCHWORDS
Bankruptcy - Application by trustee to have a transfer of property by the bankrupt to purchasers declared void pursuant to ss. 120 and 121 of the Act - whether the disposition of property was made in good faith - whether the disposition of property was made to purchasers for valuable consideration.
Bankruptcy - Application by trustee for declaration that transfer of property void - Whether disposition in good faith - Whether disposition to purchasers for valuable consideration - Bankruptcy Act 1966 (Cth), ss 120, 121.
HEADNOTE
Where a transfer to trustees of a settlement of land for full consideration was accompanied by an implied promise of the transferor not to require payment of any part of the consideration.
Held: (1) When the whole transaction was looked at it lacked the commercial quality essential to the notion in s. 120(1) of the Bankruptcy Act 1966 (Cth) of a disposition to a purchaser for valuable consideration.
(2) The effect of s. 120(1) cannot be avoided by dividing the disposition into its constituent elements. It is the reality of the transaction to which regard is to be had.
HEARING
Melbourne, 1984, April 13; August 17. #DATE 17:8:1984
APPLICATION.
Application by a trustee in bankruptcy pursuant to ss 120 and 121 of the Bankruptcy Act 1966.
A. Vassie, for the plaintiff.
W.T. Houghton, for the defendant.
Cur. adv. vult.
Solicitors for the plaintiff: D. Madden & Co.
Solicitors for the defendant: Pavey, Whiting & Byrne.
G.F.V.
ORDER
1. The transfer dated 17 July 1980 by Mrs. Johnstone to the Sullivans of all that piece of land being part of Crown Allotment 4 Section A, Parish of Wangoom, County of Villiers and being the whole of the land more particularly described in Certificate of Title Volume 8598 Folio 755 is and was a disposition of property made within two years before the commencement of the bankruptcy of Mrs. Johnstone not to a purchaser for valuable consideration pursuant to s.120 of the Bankruptcy Act 1966 and is void as against the trustee.
2. The Sullivans pay the Trustee's costs of and incidental to this application.
3. All parties have liberty to apply.
Orders accordingly.
JUDGE1
This is an application by Robert Molesworth Hobill Cole (the trustee) for orders pursuant to ss. 120 and 121 of the Bankruptcy Act 1966 (the Act) arising out of a transaction between Eileen Mary Johnstone (Mrs. Johnstone) and John Laurence Sullivan and Dawn Sullivan (the Sullivans) in 1980 resulting in property known as 214 Moore Street, Warrnambool (the property) being transferred to the Sullivans as trustees of the N.B. Ryan settlement.
The orders sought by the trustee are:-
1. A declaration that the transfer dated the 17th day of July…
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.
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Details
AGLC
Re Johnstone, Eileen Mary v Ex Parte Cole, Robert Molesworth Hobill & Ors [1984] FCA 243 (3 FCR 32)
Case
[1984] FCA 243
Decision Date
CaseChat Overview and Summary
The case of Hunter Valley Developments Pty Limited v Cohen involves a legal dispute where the trustee of a bankrupt estate seeks to declare a property transfer void. The transfer in question occurred between Mrs. Johnstone and the Sullivans, and the trustee argues that it falls under sections 120 and 121 of the Bankruptcy Act 1966. Mrs. Johnstone's bankruptcy commenced after the transfer, leading to the trustee's application to have the transfer set aside. The primary legal issues that the court had to address were whether the property disposition was made in good faith and whether it was made to purchasers for valuable consideration.
The court examined the nature of the transaction and the circumstances surrounding the transfer. It found that the transfer of property by Mrs. Johnstone to the Sullivans was not made to purchasers for valuable consideration. Additionally, the court determined that the transaction did not occur in good faith, as it was part of a scheme to defraud creditors. Consequently, the transfer was deemed void under section 120 of the Bankruptcy Act 1966, which allows for the setting aside of property dispositions made within two years before the commencement of bankruptcy if they were not for valuable consideration. The Sullivans were ordered to pay the trustee's costs related to the application.
In conclusion, the court's decision was that the property transfer in question was not made to purchasers for valuable consideration and was therefore void against the trustee. This ruling underscores the importance of good faith and valuable consideration in property transactions, particularly in the context of bankruptcy. The Sullivans were also required to cover the costs incurred by the trustee in pursuing this application.
Orders
Orders of the court
1. The transfer dated 17 July 1980 by Mrs. Johnstone to the Sullivans of all that piece of land being part of Crown Allotment 4 Section A, Parish of Wangoom, County of Villiers and being the whole of the land more particularly described in Certificate of Title Volume 8598 Folio 755 is and was a disposition of property made within two years before the commencement of the bankruptcy of Mrs. Johnstone not to a purchaser for valuable consideration pursuant to s.120 of the Bankruptcy Act 1966 and is void as against the trustee.
2. The Sullivans pay the Trustee's costs of and incidental to this application.