Nauen Holdings Pty Ltd v Prentice, Maxwell William

[1998] FCA 1720

NAUEN HOLDINGS PTY LIMITED v MAXWELL WILLIAM PRENTICE
No. NG 8366 of 1997
FED No. 1720/98
Number of pages - 8
Bankruptcy

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

HILL J

Bankruptcy - application to set aside bankruptcy notice - transaction involving three cars - no arguable issue made out except in respect of one car claimed to be owned by Bankrupt's daughter - trustee satisfies onus of showing not owned by daughter - otherwise transaction in respect of all cases admitted.

Bankruptcy Act 1966 (Cth) - ss 120, 121, 139ZQ

SYDNEY, 9 September 1998 (hearing), 24 December 1998 (decision)

#DATE 24:12:1998

Appearances

Counsel for the Applicant: Mr A J McQuillen

Solicitor for the Applicant: Duker & Associates

Counsel for the Respondent: Mr J A Halley

Solicitor for the Respondent: Clayton Utz

THE COURT ORDERS THAT:

1. The application to set aside the bankruptcy notice be dismissed.

   2. The Applicant pay the Trustee's costs of the application.

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

HILL J

The Applicant, Nauen Holdings Pty Limited, applies to the Court to set aside a notice dated 14 November 1997 issued under s 139ZQ of the Bankruptcy Act 1966 ("the Act") and served upon it on or about that day by the Respondent, the Trustee of the bankrupt estate of Mr Eric Abraham Jury ("the Trustee"). The time for compliance with the notice was ultimately extended to the earlier of 12 February 1998 or the date allocated by the Court for the hearing of the application. Although nothing turns upon this no further extension was granted at the time of hearing.

Mr Jury became a bankrupt as a result of a sequestration order made against him and his wife at the instance of Westpac Banking Corporation ("the Bank") on 22 May 1997. The act of bankruptcy relied upon was the failure on 28 March 1996 to comply with a bankruptcy notice founded upon a judgment debt of the bank in the amount of $15,352,210.12.

By the notice the Trustee required the Applicant to pay to him the amount of $28,000, being the money or value of three Mercedes Benz motor vehicles (registration nos, MOM 830, SJ 315 and KSJ 527, referred to in the notice) which motor vehicles were said to have been transferred to it by Mr Eric Abraham Jury ("the Bankrupt"). Those transfers were said to be void as against the Trustee. The notice states that the obligation of the Applicant to pay pursuant to the notice will be satisfied by the transfer of the motor vehicles to the Trustee.

THE TERMS OF THE NOTICE

The notice given by the Trustee sets out the facts and circumstances upon which the Trustee relies. These are said to be:

* The three Mercedes Benz vehicles were registered by the Roads and Traffic Authority ("RTA") to either the Bankrupt or the Bankrupt trading as JC Car Sales until 18 November 1994

* The vehicles were each transferred on 18 November 1994 to the Applicant.

* The Bankrupt and members of his family had the exclusive use of the vehicles during the periods that they were registered in the name of the Bankrupt or the Bankrupt trading as JC Car Sales.

* Three business names, each bearing the name JC Car Sales with different registration numbers, were deregistered on 18 July 1980, 29 November 1985 and 8 August 1986 respectively.

* The RTA application for transfer documents record that the Bankrupt signed as a transferor and described a Mr Nassif (a director of the Applicant) as the contact person for the transferee. Mr Nassif is said to be the Bankrupt's brother-in-law.

* No consideration passed from the applicant to the Bankrupt in respect of the purported transfers.

* Each of the vehicles continues to be garaged at the Bankrupt's residential address.

* The Bankrupt's children have exclusive use of the motor vehicles.

* The expenses associated with the vehicles are paid by the Bankrupt and members of his family.

The matter was heard immediately after a related set of proceedings. Both matters were the subject of applications that I disqualify myself from hearing the matter and an application for an adjournment. I have explained my reasons for refusing so to do in my judgment in that other matter and it is unnecessary to repeat those reasons here (see Andrew Craig Ashton v Maxwell William Prentice, unreported, 23 October 1998).

It is unnecessary to repeat here also the discussion in that judgment of the onus of proof in proceedings brought to set aside a notice given under s 139ZQ. I adopt that discussion. It suffices to say that the applicant must adduce either sufficient evidence to show there was a real issue to be decided in the proceedings, or sufficient evidence to call the validity of the notice into question. It should, however, be noted that unlike the situation in the Ashton case, no cross claim has been brought by the Trustee seeking a declaration that the property referred to in the notice vested in the Trustee.

CLAIMS AND EVIDENCE

The Applicant relied on the evidence of Ms Sonia Jury, the Bankrupt's daughter, on an affidavit of a Mr Croysdale as well as some documentary evidence. Ms Jury's evidence was almost exclusively concerned with one of the Mercedes Benz vehicles, that bearing registration number SJ 315.

A number of factual matters may be briefly summarised:

1. The vehicles KSJ 527 and MOM 830 were registered to "Eric Abraham Jury, T/A J C Car Sales" from 16 September 1983 to 18 November 1994 (for KSJ 527) and from 17 March 1984 to 18 November 1994 (for MOM 830). The vehicle SJ 315 was also registered to "Eric Jury on behalf of J C Car Sales". On 18 November 1994, the Bankrupt signed as transferor the Certificates of Registration in the name of the Applicant for each of the three vehicles and registration of them was transferred to the Applicant.

   2. The Certificate of Registration papers signed by the Bankrupt record the market values of the vehicles at the time of transfer to Nauen Holdings Pty Ltd as $10,000 (MOM 830), $10,000 (SJ 315) and $8,000 (KSJ 527).

   3. The directors of Nauen Holdings Pty Limited are Elie and Eva Nassif. Elie Nassif is the Bankrupt's brother-in-law.

   4. One of the vehicles, MOM 830, was involved in an accident in November 1997, approximately a week before the notice was served, and was subsequently written off. The insurance claim form in respect of this accident was completed by the Bankrupt with Ms Jury's assistance. The form noted that the Bankrupt was driving the vehicle at the time of the accident. A cheque in the amount of $22,500 was sent to Minjara Investments payable to Minjara Investments Pty Limited, Tranhill Pty Limited and Axxis Pty Limited. Ms Jury's evidence was that the money was later transferred to a company called Lismore Holdings.

   5. Each of the vehicles was kept at the Jury home at 4 Molloy Avenue, South Coogee and was used by members of the Jury family, except, obviously after the date of the accident, the vehicle MOM 830 which at the time of the notice was presumably undriveable and was ultimately written off.

A letter dated 7 July 1995, to which was attached a statement of Mr Jury's assets, and which was signed by Mr Ashton, then Mr Jury's internal accountant, showed that as at 30 June 1995, Mr Jury had as an asset a motor vehicle with an estimated value of $50,000. However, there is nothing to connect the vehicle referred to in that letter to any of the vehicles the subject of the notice.

Solicitors acting for the Applicant advised the Trustee that their client had no bank statements evidencing the payment of the purchase price of the three motor vehicles to Mr Jury for what they claimed was a total consideration of $28,000. The solicitors said that as at 15 October 1997 the three vehicles were located at the Bankrupt's home and were "on loan" to the Bankrupt, Mrs Houda Jury, the Bankrupt's wife, and Ms Sonia Jury. They said that Mr Nassif's sister (Mrs Houda Jury) had requested Mr Nassif to "lend her and her family the three (3) motor vehicles". No reference was made to the request by the Trustee under s 77A of the Act to provide balance sheets of the Applicant recording the three vehicles as assets of that company. None of Mr Nassif, Mrs Houda Jury or the Bankrupt gave evidence.

Searches of the Corporate Affairs Commission showed the last extant registration of the business name J C Car Sales in respect of a business of retailing motor vehicles had been lodged with the Commission showing a proposed date of commencement of trading to be 1 February 1986, although there had been a previous registration of the same name. The person shown as owner of the business was said to be a Mr James Croysdale. It would seem, from evidence given by the Bankrupt's daughter, that Mr Croysdale was a "former business associate" of the Bankrupt. The relationship between them was not explored. From 1 May 1974 until, it would seem, 1 October 1982 the business name had been under the proprietorship of a Mr John Van Campenhout. Nothing is known of him. Mr Croysdale in an affidavit deposed that he had operated the business name JC Car Sales since the late 1970s and that the Bankrupt had never owned that business or traded under the name.

An affidavit of Ms Sonia Jury was read. That part of it which was admissible said that the motor vehicles in question had been garaged at the family home and that the Bankrupt and his wife "occasionally use any one of the motor vehicles."

Ms Jury then gave oral evidence concerning SJ 315. She said that she was given the car as a gift for her twenty-first birthday on 31 December 1982, at a birthday party at a restaurant then owned by the family at Chippendale. She said that on that evening she was given the keys to that vehicle by her father in front of the assembled guests, some 300 to 400 of them and had driven it home from the party. She said that she had had the vehicle in her possession since then and had driven it since then. She said she paid for the registration, petrol and the servicing of the vehicle. Her father, mother and sometimes her brother had used it occasionally.

After the luncheon adjournment Ms Jury corrected this evidence to the extent that she said that on the night of her twenty-first birthday the car was not physically available, although she did receive the keys to it. She said that she had driven a Rolls Royce home that evening.

Under cross-examination it became clear that Ms Jury had turned twenty-one on 31 December 1981. That discrepancy is not material. It may be quite possible to be confused with the year when a party is on the last day of it. But that was only the beginning of Ms Jury's difficulty under cross-examination.

When pressed, she said that she did not know that the vehicle was SJ 315 at that time; the vehicle could have had a different number plate. Ms Jury was then asked how much time elapsed between the party and her taking possession of the car. She said that while she thought it was not more than twelve months, it could have been as much as twelve months but more than one month. She said that there was on loan a different Mercedes vehicle, "very similar". Ms Jury was then shown an extract from the records of the NSW Roads and Traffic Authority which showed that the car had been acquired by her father on 19 March 1985, that is to say some three and a quarter years later than the events of the birthday party which she had narrated.

It emerged, also, that the car had been in an accident and damaged and that repairs would cost $7,000. It was garaged at a repair shop.

There were other attacks on her credit. One concerned apparently inconsistent answers between those given before me as to when she had first learned that the registration of the car was not in her name and what she had said in the course of a bankruptcy examination conducted by the Trustee. I do not think that anything really turned on this. She admitted, also, that prior to 1994 comprehensive insurance had been paid by companies under her father's control and not by her, companies in the organisation with the administration of which she was concerned. Records in 1996 showed insurance effected in the name Minjara Investments Pty Ltd (a Jury company) along with the other vehicles the subject of the notice as well as others vehicles. No attempt was made to demonstrate Ms Jury's payment of other outgoings. Her evidence that they were cash outlays would, if accepted, answer such a criticism.

She said that her use of the car was entirely personal (including driving to and from work) but 1995 registration records showed that the car was used for business purposes. She was unclear when she had found out that the car had been transferred by her father to the Applicant. She recalled no conversation with her father about that matter. She never received any consideration for such a transfer.

Ms Jury under cross-examination by counsel for the Trustee said that the Bankrupt was a regular driver of the Mercedes Benz vehicle MOM 830, ultimately the subject of an accident and written off. She also said that she drove the vehicle from time to time and was noted on the insurance policy as a regular driver of it.

The Applicant submitted that the RTA records showed that JC Car Sales was the registered owner of each of the vehicles, the Bankrupt being named on the certificate as "nominee" only. It was submitted that a Mr Croysdale carried on business under that name and that the Bankrupt did not own or have any interest in that business. The Applicant further submitted that the registration records were "never adjusted to reflect the true owner and in particular Sonya [sic] Jury of motor vehicle SJ 315." It was suggested that the fact that the vehicles were at all times (when in working order) kept at the Jury home and that SJ 315 was driven regularly by Sonia Jury strengthened the inference that they were owned by the Jury children.

Ms Jury was adamant that she was given SJ 315 as a twenty-first birthday gift and that it remained her car. No evidence at all was given in respect of the vehicle KSJ 527.

It must be said that Ms Jury's evidence is far from satisfactory. I am loathe to say that she was deliberately lying. Perhaps she merely has difficulty of recollection. It certainly would not be said that she was unintelligent. I accept that her memory of past events was often not good but at times she gave evidence which appeared quite strongly supportive of the case that SJ 315 was her car, until it was attacked. I note that the vast majority of her evidence was not corroborated.

Even if I were to accept her evidence, and I do not, that she paid all outgoings on the vehicle, was the principal driver and regarded the vehicle as her own - all factors which support a finding that she owned the vehicle, there are many other difficulties with her evidence. For example it seems inherently improbable that her father, after giving her the car, would transfer it, without her knowledge, to the Applicant, stating the transfer to be for consideration. It is also improbable that she would have failed for years to notice registration in the name of another on the certificate of registration of a car which she says she believed to be hers. I find it even more improbable that after noticing the change of registration to the name of the Applicant, she had no conversation about it with the Bankrupt nor made any inquiries as to the reason for the change.

I find it more likely than not that Mr Jury purchased all three cars, arranging for the initial registration. There is no explanation why there appeared the reference in that registration to a business name. Clearly the cars had nothing to do with the owner of that business name. The inference of initial ownership, which is easily available from the certificates of registration coupled with the fact that the cars were continuously garaged at the Bankrupt's house, may more readily be drawn, in the absence of Mr Jury giving evidence.

It may be interpolated here that a certificate of registration of a motor vehicle does not provide evidence of title: s 10 Road Transport (Vehicle Registration) Act 1997 (NSW). However, the form of transfer which is expressed to be a form of transfer of registration could constitute a sufficient note or memorandum in writing to satisfy the Sale of Goods Act 1923 (NSW).

I find that SJ 315 was never the subject of a gift to Ms Jury and thus never owned by her. I accept that she had, generally, possession of that vehicle, subject to her father, mother or brother occasionally using it. But such possession falls far short of ownership.

The failure of the Applicant to produce any records dealing with any purchase from Mr Jury leads easily to the conclusion that if it ever became the owner at law or in equity of the car on the transfer of registration to it, it gave no consideration for any transfer to it. That inference is confirmed by the apparent failure of that company to receive the insurance monies in respect of MOM 830 after it had been the subject of an accident.

There is much to be said for the view that the three cars were at all times from their acquisition, and remained as at the date of the notice, the property of the Bankrupt so that on bankruptcy they vested in the Trustee. It is hard to accept that the completion of the transfer of registration documents recorded a real transaction between the Applicant and the Bankrupt, coming as it did three days after the Bankrupt was served with notices of demand in respect of personal guarantees in the sum of some millions of dollars and but a few days before legal proceedings began for the recovery of the money demanded.

However, neither party sought to submit that the cars were legally (or for that matter equitably) the property of the Bankrupt. The case for the Applicant, such as it was, rather concentrated upon SJ 315, and the suggestion that that vehicle belonged to Sonia Jury. The Applicant's written submissions advance the untenable proposition that J C Car Sales is the owner of the relevant vehicles, when the evidence of the only person in relevant times who traded under that name made it clear that he was not the owner of them.

But for one matter I would have set aside the notice, not for any reason advanced by the Applicant, but on the basis that s 139ZQ requires that the addressee of the notice either receive money or property "as a result of a transaction that is void against the trustee". Failure to demonstrate any transaction between the Bankrupt and the recipient of the notice must inevitably lead to the conclusion that the notice must be set aside. However, there is the letter written by the then solicitors of the Applicant dated 15 October 1997 in response to a notice given by the Trustee under s 77A of the Act requiring the Applicant, inter alia, to produce various documents relating to the purchase of the three vehicles. The response, omitting formal parts, was as follows:

"We are instructed that our client does not have any bank statements evidencing the purchase of the three (3) Mercedes Benz motor vehicles from Eric Jury Senior on 18 November 1994 for the total consideration of $28,000.00. Nor does our client have any balance sheets recording the three (3) vehicle [sic] as assets of the company.

The three (3) vehicles are currently located at the premises of Eric Jury Senior as they are on loan to Eric Jury Senior, Houda Jury and their daughter.

...We are instructed that Mr Nassif's sister requested her brother to lend her and her family the three (3) motor vehicles."

While the first paragraph quoted, standing on its own, could not be taken as an admission that the vehicles had been transferred to the Applicant, I think, when read with the second paragraph referring to a loan of the cars, it does. The Applicant could hardly "lend" the vehicles, unless it had title to them, as against the Bankrupt. It was hardly in the interests of the Trustee to challenge the existence of a transaction upon which the validity of the notice depended. Nor, I suppose, was it in the interests of the Bankrupt to intervene, since to do so would only have resulted in a finding that the vehicles were property of the Bankrupt which vested on bankruptcy in the Trustee, and to which the Trustee was entitled to possession.

Once the existence of a transfer of the cars to the Applicant is accepted, it is obvious enough that the transfer was void as against the Trustee. There has been no suggestion in evidence that the Applicant gave, or that the Bankrupt received any consideration for the transfer. No corporate records of the Applicant apparently record payment of any consideration. The transfer took place at a time when the Bankrupt was being called upon to pay monies under a guarantee and it can be inferred that he was insolvent. The commencement of the bankruptcy, that is to say the happening of the first available act of bankruptcy before the filing of the petition upon which a sequestration order was made, was 28 March 1996, which is less than two years from the transfer. Accordingly, if s 121 did not apply, s 120 would. The transfer was void as against the Trustee both under s 121 and s 120.

I turn shortly to consider the situation with each car. The rejection of the claim that Sonia Jury is the owner of SJ 315 together with the admission of a transaction in favour of the Applicant without consideration leads to the conclusion that the Trustee is entitled to have the transfer of SJ 315 set aside.

The total absence of any attempt to adduce evidence in respect of KSJ 527 brings about the result, in my opinion, that that Applicant has not shown any real issue to be decided in respect of the setting aside of the notice to the extent of that vehicle.

MOM 830 was, at the time of the notice, already the subject of an accident. Clearly the Applicant can no longer return it, as it is in the possession (if still in existence) of the insurer and, having been written off by it, has been the subject of payment, presumably to a company acting as agent either for the Bankrupt or the Applicant.

Counsel for the Applicant criticises the case for the Trustee on the basis also that there had been no evidence of value. In respect of MOM 830 it can safely be accepted that, the car having been in a state of disrepair and write off at the time of notice for which an insurer ultimately paid $22,500, the value can be taken as that figure. It is a figure significantly higher than the figure the Trustee has called upon the Applicant to pay.

In the case of the SJ 315 there is evidence from the insurance company that it valued the car as at 27 November 1997 at $23,000. Again that figure is substantially higher than the figure the Trustee has called upon the Applicant in the notice to pay.

As to the remaining car, KSJ 527, the only evidence is the figure stated to be the market value in November 1994 at the time of change of registration. While the provisions of the NSW Stamp Duties Act 1920, operating to impose duty on transfers of certificates of registration by reference to market value, require a correct statement of market value so that that figure could safely be accepted if the relevant valuation date were in 1994, the figure can hardly be treated as evidence of the value at the time of the notice. However, as I have said, the Applicant has not raised any arguable issue to be tried in respect of that vehicle and so is not entitled to have the notice set aside in respect of it.

Although I have concluded, at least in respect of two of the three vehicles, that their value was greater than the amount which the Trustee required the Applicant to pay, that can not invalidate the notice. It operates to the benefit, not the detriment of the Applicant. It can, of course, in respect of the two vehicles still in its possession elect to give them up to the Trustee.

CONCLUSION

In my view, for the reasons outlined above, the application to set aside the notice will be dismissed. The Applicant must pay the Trustee's costs of the Application.