FEDERAL COURT OF AUSTRALIA
Ng v Van Der Velde [2011] FCAFC 35
Citation: Ng v Van Der Velde [2011] FCAFC 35 Appeal from: Van Der Velde v Ng (No 3) [2009] FCA 1563 Parties: KYM HON YOKE NG v TERRY VAN DER VELDE AND DAVID STIMPSON and RIBY PTY LTD (ACN 081 153 219) IN LIQUIDATION AS TRUSTEE FOR THE JADE TRUST File number: QUD 4 of 2010 Judges: DOWSETT, EDMONDS AND GORDON JJ Date of judgment: 15 March 2011 Catchwords: CORPORATE INSOLVENCY - consideration of whether particular arrangements for the transfer of trust property and the ultimate transfer of that trust property constitute transactions rendered voidable by operation of s 588FE of the Corporations Act 2001 (Cth) and whether the transfer of the property is rendered void by operation of s 468 of the Act
FAMILY LAW – the interaction between s 90AC of the Family Law Act 1975 (Cth) and ss 588FA, 588FB and 588FDA of the Corporations Act 2001 (Cth)
EVIDENCE - whether the Court should exercise its discretion under s 30AI of the Federal Court of Australia Act 1976 (Cth) to receive further evidence on appeal
Legislation: Corporations Act 2001 (Cth) ss 468, 471A, 474, 477, 588, 588FA, 588FB, 588FC, 588FD, 588FDA, 588FE
Family Law Act 1975 (Cth) ss 4, 79, 90AA, 90AC, 90AE, 113, 114, 114AB
Federal Court of Australia Act 1976 (Cth) s 30AI
Trusts Act 1973 (Qld) ss 65, 71, 72
Companies Act 1961 (NSW) s 233
Companies Act 1961 (Qld) s 233Cases cited: Federal Commissioner of Taxation v Bruton Holdings Pty Ltd (In Liquidation) & Ors (2008) 173 FCR 472 considered
RWG Management Ltd v Commissioner for Corporate Affairs [1995] VR 385 followed
Re Crest Realty Pty Ltd (in liquidation) (1977) 1 NSWLR 664 distinguished
Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 distinguishedGronow M, McPherson’s Law of Company Liquidations, (Thomson Law Book Co., subscription service) at [11.120] (update No 10)
Heydon JD, Jacobs’ Law of Trusts in Australia (7th ed, LexisNexis Butterworths, 2006)Date of hearing: 14 May 2010 Date of last submissions: 16 December 2010 Place: Brisbane Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 89 Counsel for the Appellant: Ms S Fajardo Counsel for the Respondents: Mr MK Stunden Solicitor for the Respondents: Mills Oakley Lawyers
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 4 of 2010
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
BETWEEN: KYM HON YOKE NG
AppellantAND: TERRY VAN DER VELDE AND DAVID STIMPSON
First RespondentRIBY PTY LTD (ACN 081 153 219) IN LIQUIDATION AS TRUSTEE FOR THE JADE TRUST
Second Respondent
JUDGES:
DOWSETT, EDMONDS AND GORDON JJ
DATE OF ORDER:
15 MARCH 2011
WHERE MADE:
BRISBANE
THE COURT ORDERS THAT:
1.The motion for leave to adduce further evidence on appeal be dismissed;
2.the appeal be dismissed; and
3.the appellant pay the respondents’ costs of the appeal and of the motion.
Note:Settlement and entry of orders is dealt with in Order 36 of the…
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CaseChat Overview and Summary
In the case of Ng v Van Der Velde, the primary issue before the court was whether certain transactions involving the transfer of property by Riby Pty Ltd to Ms Ng, which took place while the company was insolvent, were voidable under the Corporations Act 2001 (Cth). The court also considered whether the transfer of property was rendered void due to the company's insolvency. Additionally, the court examined the interaction between the Family Law Act 1975 (Cth) and sections of the Corporations Act, specifically sections 588FA, 588FB, and 588FDA. Furthermore, the court deliberated on whether it should exercise its discretion under section 30AI of the Federal Court of Australia Act 1976 (Cth) to receive further evidence on appeal.
Greenwood J concluded that the transfer of property by Riby Pty Ltd to Ms Ng was indeed voidable under various sections of the Corporations Act, including sections 588FE(2), (3), (4), (5), and (6A), as it constituted an insolvent transaction that conferred an unfair preference on Ms Ng, who was the spouse of the company's director. The court found that the transfer of property to Ms Ng was made at an undervalue of approximately $76,000.00, which prejudiced the creditors of Riby Pty Ltd. The court also held that the transfer was an unreasonable director-related transaction, as it involved a disposition of property by the company to Ms Ng, a close associate of the director, without any benefit to the company. Moreover, the court ruled that the transfer was made for the purpose of defeating the rights of creditors and constituted an insolvent transaction with a related entity.
In light of these findings, the court determined that the transfer of property to Ms Ng was rendered void under section 468 of the Corporations Act due to the company's insolvency. The court dismissed Ms Ng's motion for leave to adduce further evidence on appeal, finding that the additional evidence did not significantly advance the case. Consequently, the appeal was dismissed, and the appellant was ordered to pay the respondents' costs of the appeal and the motion.
Greenwood J concluded that the transfer of property by Riby Pty Ltd to Ms Ng was indeed voidable under various sections of the Corporations Act, including sections 588FE(2), (3), (4), (5), and (6A), as it constituted an insolvent transaction that conferred an unfair preference on Ms Ng, who was the spouse of the company's director. The court found that the transfer of property to Ms Ng was made at an undervalue of approximately $76,000.00, which prejudiced the creditors of Riby Pty Ltd. The court also held that the transfer was an unreasonable director-related transaction, as it involved a disposition of property by the company to Ms Ng, a close associate of the director, without any benefit to the company. Moreover, the court ruled that the transfer was made for the purpose of defeating the rights of creditors and constituted an insolvent transaction with a related entity.
In light of these findings, the court determined that the transfer of property to Ms Ng was rendered void under section 468 of the Corporations Act due to the company's insolvency. The court dismissed Ms Ng's motion for leave to adduce further evidence on appeal, finding that the additional evidence did not significantly advance the case. Consequently, the appeal was dismissed, and the appellant was ordered to pay the respondents' costs of the appeal and the motion.
Orders
Orders of the court
1. The motion for leave to adduce further evidence on appeal be dismissed;
2. the appeal be dismissed; and
3. the appellant pay the respondents’ costs of the appeal and of the motion.
Note:
Background
Background to the litigation
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Evidence
Evidence Before The Court
Further terms of settlement dated 3 April 2006 were incorporated into further consent orders made on 10 April 2006, using the same mechanism. Neither those terms of settlement nor those orders purported to vacate or vary the earlier terms of settlement and orders. The April terms of settlement were in similar form to those dated 23 November 2005, save that references to 58 Brookvale Drive were deleted. Again, Riby was shown as a party to the terms of settlement but again, it did not execute them. It is reasonable to infer that the parties intended that the April terms and orders revoke and replace the earlier terms and orders. The proposed date of settlement does not appear from the terms of settlement. The transfer was lodged and registered on 17 May 2006. MS NG’S FURTHER EVIDENCE On this appeal, Ms Ng seeks to lead further evidence. She has sworn three further affidavits, two filed on 29 January 2010 and one on 17 March 2010. Of the two affidavits filed on 29 January 2010, one seems to take the matter no further than does the other material in the case. There is also an affidavit by Ms de Guzman who is her solicitor. To one of the affidavits filed on 29 January 2010 is exhibited the trust deed constituting the Jade Trust. Some parts of the submissions made on behalf of Ms Ng rely upon the terms of the trust deed. It is therefore appropriate that we treat it as being in evidence on appeal for the purpose of considering the parties’ submissions. In the affidavit Ms Ng asserts that the Jade Trust is a family trust of which she and Mr Hastings are the primary beneficiaries. The list of primary beneficiaries is much more extensive. Ms Ng’s sister is one other primary beneficiary as is any company of which Mr Hastings is a director or shareholder. The trust deed is dated 23 December 1997. Ms Ng swears that Riby was incorporated on 24 December 1997, with Mr Hastings as sole director and secretary, and that it was incorporated for the purpose of acting as trustee of the family trust “which held the matrimonial home”. In particular, Ms Ng asserts that “to my knowledge, Riby Pty Ltd did not otherwise trade”. It is not clear whether the words “to my knowledge” mean that Ms Ng positively knew that Riby did not otherwise trade or merely that she was unaware of its having so traded. She returns to the matter at a later stage. Mr Hastings arranged finance for the acquisition of 15 Brookvale Drive. The property at 58 Brookvale Drive was acquired as an investment property by Riby as trustee. It was subsequently rented. In para 13 Ms Ng asserts that:It had always been my understanding that Riby Pty Ltd and the Jade Trust did not trade but were there just for the two properties. The only business of my husband that I was aware of was Solartech Solutions because he kept stock in the garage at 15 Brookvale Drive, Underwood. Ms Ng then describes the circumstances surrounding negotiation of the property settlement and asserts in para 24 that:Since I was going to be solely responsible for both properties and since he had shown that he could not be relied upon to act responsibly as the trustee of the Jade Trust, I caused the change of trustee to Meownco Pty Ltd … my own company in November 2005.
Decision
Reasons for decision
At the hearing of the appeal counsel for Ms Ng was asked to identify the additional evidence upon which she sought to rely. In addition to the affidavits, she referred generally to various documents evidencing the financial dealings of entities associated with Mr Hastings. There was also reference to the affidavit of Mr Ewart to which we have referred. It was before the primary Judge and therefore is not fresh evidence. We have referred to the statement of evidence of Ms Ng filed on 10 November 2009. Greenwood J did not take it into consideration. As Ms Ng did not give oral evidence, and as the statement was not sworn, he could not properly have done so. In any event, it does not take the matter much further.THE DECISION AT FIRST INSTANCE Greenwood J summarized the issues as follows:2The [respondents] contend that a sole director of the company, Mr Ross Hastings, caused Riby to make a disposition of real property of the company to [Ms Ng] his wife, on 17 May 2006 pursuant to a transfer arrangement made with her on 21 April 2006, at a transfer price of $254,914.16 which was, they contend, approximately $76,000.00 below its true value of $330,000. …3…4The [respondents] contend that the disposition is void pursuant to s 468 of the Corporations Act … as it occurred after the commencement of the winding up by the Court on 26 April 2006. The winding up is taken to have commenced on that day: s 513A(e) of the Act. The applicants also say that the transfer; a document described as the “Terms of Settlement” relating to consent orders made by the Family Court of Australia on 10 April 2006, related to the transfer; and the ultimate transfer registration all represent transactions of the company (so defined by s 9 of the Act) rendered voidable by s 588FE(2) of the Act as insolvent transactions; s 588FE(3) as insolvent and uncommercial transactions; s 588FE(4) as insolvent transactions made with a related entity; s 588FE(5) as insolvent transactions of the company made for the purpose of defeating the rights of creditors; s 588FE(6) as insolvent transactions constituting an unfair loan to Ms Ng; and, s 588FE(6A) as unreasonable director-related transactions. At [26]-[29] his Honour rehearsed certain factual matters, concluding at [30]:Having regarding to the unpaid arrears based on the default notice of 5 May 2005, the unpaid accelerated debt, the unpaid Drake debt and the loan arrangements with APH, Riby was unable to pay its debts from 26 February 2005. The reference to 26 February 2005 may be an error. The relevant date is 26 September 2005. See [36] of his Honour’s reasons. There is no challenge to his Honour’s implicit finding of insolvency as at that date. His Honour continued:32The Terms of Settlement became the subject of consent orders under the Family Law Act … of 10 April 2006. Mr Hastings was the sole director of Riby from 24 December 1997 and sole shareholder from 27 January 2004, when the arrangements with Ms Ng were struck. She was at that time his spouse. On 17 May 2006, Riby was the registered proprietor of the Underwood property. On that day, Riby transferred all its right, title and interest in the property to Ms Ng. The transfer was registered in the Queensland Land Title Office on 17 May 2006. Riby had been registered as the sole registered proprietor of the Underwood property since 12 May 1999. The transfer was for an amount of $254,914.16. The property was valued at $330,000.00 at the date of transfer. No other consideration was paid by Ms Ng. 33The Terms of Settlement between Mr Hastings and Ms Ng and the consent order of 10 April 2006 reflects [sic] terms advantageous to both Mr Hastings and Ms Ng. Those arrangements conferred clear benefits upon them. No benefit was conferred upon Riby by those arrangements. The transfer was ultimately made in consideration of the discharge of the existing mortgage held by Perpetual of $254,914.16. The transfer took place at an undervalue of approximately $76,000.00. The creditors of Riby have been prejudiced by the disposition at an undervalue as, but for the disposition there would have been at least some dividend paid to the creditors of Riby.34Between 10 August 2005 and 26 September 2005, several loan agreements were made between Riby and APH. By September 2005, Riby was insolvent. On 31 October 2005, APH lodged a caveat over property at 58 Brookvale Drive, Underwood (“No. 58”) previously registered in the name of Riby. That property was sold by the mortgagee. On 8 November 2005, Ms Ng lodged a caveat over the Underwood property (ie. No. 15). On 22 November 2005 Mr Hastings and Ms Ng entered into an agreement by which Riby agreed to transfer its interest in the Underwood property to Ms Ng. On 20 December 2005, consent orders were made in the Family Court of Australia at Southport. On 23 December 2005, Mr Hastings signed a transfer. The Terms of Settlement document by which Riby undertook to transfer the property to Ms Ng was signed by Mr Hastings and Ms Ng on 3 April 2006. The settlement of the transfer took place on 17 May 2006 with funds provided to Ms Ng by RAMS, of approximately $256,000.00. On 14 September 2007, the liquidator lodged a caveat against dealings in the Underwood property claiming an interest in the whole of the fee simple.35Under the Terms of Settlement of 22 November 2005, Ms Ng was to lend Riby money to pay out a caveat lodged by APH supporting its claims. Under the April 2006 settlement terms and consent order, Riby was to transfer its interest in the property to Ms Ng. Ms Ng acquired a beneficial interest in the Underwood property pending completion. The transfer on 17 May 2006 took place after the commencement of the winding-up. A non-exempt disposition of property occurred upon registration.36That registration occurred pursuant to events along a continuum consisting of the agreement of 22 November 2005; the consent orders of 20 December 2005; the execution of the Terms of Settlement on 3 April 2006; the consent orders of 10 April 2006; and, the transfer on 17 May 2006. All of those arrangements took place after 26 September 2005, being the date on which Riby was unable to pay its debts as and when they fell due. In any event, Riby was ordered to be wound up on 26 April 2006, based on an application of 24 March 2006. During the six-month period ending on the relation-back date of 24 March 2006, (that is, from 24 September 2005 to 24 March 2006), Riby entered into all of the above transactions as defined (s 9 of the Act, “Transaction”) in circumstances where the transactions constituted insolvent transactions within s 588FC as the transactions conferred an unfair preference on Ms Ng to the prejudice of the creditors of the company who could not then be paid when debts fell due and owing, by transferring the whole of the value of the Underwood property to her in satisfaction of her claim both on Mr Hastings personally and, more importantly, in respect of the creditor aspects of her relationship with Riby.37The transaction consisting of the agreement to transfer and the transfer is an uncommercial transaction as a reasonable person in the circumstances of Riby would not have entered into a transaction to transfer the Underwood property to Ms Ng at an undervalue of $76,000.00 as Riby obtained no benefit from the transaction.38The agreement to transfer and the transfer of the Underwood property to Ms Ng are unreasonable director-related transactions as they constitute a disposition of property of the company brought about by Mr Hastings, to Ms Ng, a close associate of Mr Hastings; and, at the time those transactions were entered into, it was within the expectation of a person standing in the shoes of Riby, that Riby would derive no benefit from the disposition. A “close associate” of Mr Hastings is defined to include a “relative” of the relevant “director” and a “relative” in relation to a person includes the spouse of the person.39The agreement to transfer and the transfer of the Underwood property was [sic] entered into by Riby, through Hastings, for a purpose of removing the Underwood property from the reach of creditors and thus for a purpose of defeating the rights of creditors on a winding-up of the company, having regard to the circumstances of Riby at the time those transactions were struck.40The agreement to transfer and the transfer were insolvent transactions made with a spouse of a director of a company and thus transactions made between the company and a “related entity” as that term is defined in s 9 of the Act.41I am satisfied therefore that the agreements to transfer and the transfer of the Underwood property to Ms Ng involved contraventions of ss 588FE (2), (3), (4), (5) and (6A) of the Act. The “transaction” is thus rendered voidable by the operation of those provisions.42In addition, the transfer of the property to Ms Ng on 17 May 2006 is rendered void by operation of s 468 of the Act.MS NG’S CASE
Ratio Decidendi
Legal Principle Established
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