McDonald v R

[1994] FCA 956

JUDGMENT No. ..... , .......J -2,- 9

IN THE FEDERAL COURT O F AUSTRALIA	1
NEW SOUTH WALES DISTRICT REGISTRY	) No NB 2172 of 1993
BANKRUPTCY DIVISION

RE:

-	LESLIE ROSS BURTON
EX PARTE:	HUGH JENNER WILY
BRANDOWN PTY LTD (ACN W3 830 304)

Flrst Respondent

N.J.W. CONTRACTORS PTY

LIMITED

(ACN 000 730 192)

12 DEC 1994	Second Respondent
AUSTRALIA	PATRICK JAMES HALLINAN
PRINCIPAL
F~EQILITRV	MAX DAVID RODGERS GEORGE FRANK RODGERS

Third Respondents

m:	Dav~es	J.
m:	Sydney

Date:  21 October 1994

REASONS FOR JUDGMENT

The proceed~ng before the court 1s an appl~catlon that seeks a declaration that a

transfer of shares in the cap~tal ot Brandown Pty L~mlted was vo~d as t~gd~nst the trustee

ot Mr Burton's estate. The appl~cat~on	seeks anc~llary	orders. The basis on whlch that
appl~cat~on	was brought was not stated, but when the appl~cat~on	was tlled there were

supporting affidavits including one from Mr George Kekatos of 5 November 1993 and

one from the trustee ot 17 December 1993.

There are two sections which could have been relevant; one is S 120(1) of the

1966 (Cth), which provides that a settlement of property not being a

settlement made in favour of a purchaser or encumbrancer in good faith and for valid consideration is, if the settler becomes a bankrupt and the settlement comes into operation after or withrn two years before the commencement of the bankruptcy, void as agarnst the trustee in bankruptcy.

Another possrbilrty is S 121 ot the Bankruotcv Act which provides that a

disposition of property made with intent to defraud creditors not being a disposition for

valuable consideration in favour of a person who acted in good faith is, if the person making the disposition subsequently becomes a bankrupt, void as against the trustee in the bankruptcy.

The application did not refer specifically to either oi those sections, nor d ~ d the

affidavits in support. Section 121 however, makes an allegation of fraud. The usual rule is that an allegation of fraud should be made clearly and explicitly and particulars should

be given. l refer for example to & v Pollard and Morris [l9301 1 KB 628 where, at

636. Lord Justice Greer said:

"

11 19 absolutely essential lhal where a charge o f fraud is made hy o n e of the parties to

Iltlgat~on agalnsl the other 11 should be ralsed w ~ l h parucularily"

In the same case, at 641, Lord Justice Slesser sald:

"Fraudulent conduct must hc di\tinctlv alleged and	dirtinctly proved. and it 1s not
allowable to leave fraud lo he inferred from the facls	A charge of fraud or

marcprc\enlatllon must he plcaded with the utmost particularity "

Thts is only one of very many cases whlch have applted the prlnclple which is descr~bed

in the pract~ce books.	See eg.. R~tchie's Supreme Court Procedure NSW, paras
15.13.6 and 16.2.1	It is a well known and very important principle. Even though t h ~ s

case d ~ d	not proceed by way ot pleadings, the basic prlnc~ple	nevertheless applies. It is
not necessary that the matter be raised in the form ot applicat~on	lodged w~th	the Court,

but Rule 103(1) of the Bankruptcy Rules specittcally provides that:-

"The grounds on which the Court will hc asked to make the ordcr specified in an appliutlon, and the facts on which the applicant proposes to rely in rupport of the appllcatlon for that order, shall he slated in the affidavit hled in \upport of the apphcauon "

In my view, that rule would require in bankruptcy proceedings that allegations ot fraud

should be clearly ra~sed in either the application Itself or in the supporting aftidav~t and

that particulars should be given.

In the present case only two matters were raised. The first matter appeared in the affidavit of Mr Kekatos who said that, in or about July 1992, he received instructions from Mr Burton to transfer hts two shares in Brtindown Pty Llmited, that his instructions

included the preparation of a share transfer for the two shares and that he was Instructed

to backdate it to 1989.

In paragraph 13 ot hr\ att~d;lvit, Mr Krkatos deposed that the "request ot Leslie Koss Burton in July 1992 for me to hackd;itr the Br;tndown Pty Limited share transfer was an attempt by him to defeat creditors." 1 would add that those part~cular words have not been received as evidence in the proceedings but, nevertheless, they put the respondents upon notice that instructions had been given to backdate the transfer and

it was alleged that those instructions were given with a vlew to defraud~ng creditors.

The second matter is that, in paragraph 15 ot Mr Wily's affidavit, ev~dence was

given that the shares transferred were valuable and worth much more than the $2 which was the cons~deration expressed for them. But that, of course, was a matter that could

readily go to the issues arlsing under s 120(1), namely, matters of good fa~th	and valuable
consideration.

In my opinion, there was no general allegation that there had been a d~spos~tion

hy Mr Burton w~th	Intent to defraud cred~tors. The matter was set down tor hear~ng
some time ago and it has now proceeded for a number of days.	I t would be wrong to

allow the trustee to raise a general allegat~on that the transfer was made to defraud creditors. That matter was not raised expressly or with particulars in the application or

in the affidavit supporting it.

Counsel for the trustee has wrltten out some part~culars wh~ch he would wish to

put. As I read those part~culars, they go no further than the matter raised in Mr

Kekatos' aftidav~t. The p,u . .L~~lars say that Mr Burton lnstr ucLLu .... ..skates to prGljd1~

a transter of his shares "and to backdate the transter to 1989 tor the purpose that those shares would not be available to his crediton In the event that he was made bankrupt"

I would read those partlculars as relatlng the traud to the matter of the backdating that

was raised in Mr Kekatos' att~davit.

That 1s not the polnt whlch counsel tor the trustee now wlshes to raise, and I a m

intormed that I have mlsread the particulars or the Intent ot them.	Counsel tor the
trustee w~shes	to ralse a general allegation that the transter of shares to NJW Contractors
from Mr Burton was a transfer with Intent to deteat creditors.	In my vlew, as that
allegat~on	was made expressly and with partlculars at a n early stage In the proceedings,

it ought not now to be allowed.

I ccrllfy that Ihlc and the 4 preceding pages

are a true copy of the	judgmenl hcrcln of
the Honourable Mr
Dare	21 October 1994

Counsel for the applicant,

Sollcltors for the applicant	Altkcn & Magney
Counsel for the 2nd
respondent:	J S Wheelhouse,
Mr P M Blsroc QC and Mr B Evans
Sol~c~lors	for the 2nd

recpondent Ferr~er and Ascor~ates and

Boylc and Assoc~ates

Counsel for the I t 1 & 3rd respundcnls	Mr J T Gleeson
Sol~cllors	fur the 1st & 3rd rerpondenls
Ddlc of hearlnp	21 Ortoher 1994
Dale (11 judgment	21 Octohcr 1994