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Official Trustee in Bankruptcy v Mitchell

Official Trustee in Bankruptcy v Mitchell

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Case Copied 30 October 1992 26 min read

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Re: OFFICIAL TRUSTEE IN BANKRUPTCY (as trustee of the bankrupt estate of David
Mitchell)
And: DAVID MITCHELL and PATRICIA ELIZABETH RUSSELL
No. N G155 of 1992
FED No. 792
Bankruptcy - Family Law
(1992) 110 ALR 484
(1992) 38 FCR 364

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Burchett(1), French(1) and Einfeld(1) JJ.

CATCHWORDS

Bankruptcy - application by trustee under ss. 120 and 121 - origin of s. 121 in Statute of Elizabeth - whether marriage is a valuable consideration for the purposes of the section - marriage settlement - effect in equity - relationship of ss. 120 and 121 - "purchaser for valuable consideration" - onus - Court should consider the broad effect of the arrangement, not being confined to the technical language of the document - whether payment of mortgage was valuable consideration within sections - good faith - whether good faith is a requirement in relation to a marriage settlement under s. 120 as well as under s. 121 - meaning of good faith under the sections - lack of good faith distinguished from negligence or blindness - discussion of tests for good faith; in general the test is that stated in Re Hyams - good faith as a question of fact.

Family Law - whether deed void under s. 87 of Family Law Act 1975

Evidence - cross-examination - Court entitled to understand answers other then literally, having regard to the evidence as a whole and its impression of the witness.

Appeal - weight of trial judge's assessment of a witness's character.

Bankruptcy Act 1966, ss. 120 and 121

Family Law Act 1975, ss. 86 and 87.

PT Garuda Indonesia Ltd v. Grellman (1992) 107 ALR 199, applied

Re Hyams (1970) 19 FLR 232, applied

National Australia Bank Ltd v. Cunningham (1990) 12 ATPR 51,619, considered

Barton v. Official Receiver (1986) 161 CLR 75, discussed

Re Pacific Projects Pty Ltd (in Liq.) (1990) 2 Qd R 541, referred to

The Official Trustee v. Marchiori (1983) 69 FLR 290, referred to

In re Reis. Ex parte Clough (1904) 2 KB 769, referred to

HEARING

SYDNEY

#DATE 30:10:1992

Counsel for the Appellant: Mr D.F. Jackson QC with Mr M.R.

Aldridge

Solicitor for the Appellant: Australian Government Solicitor

Counsel for the Respondents: Mr C.P. Comans

Solicitors for the Respondents: Messrs Blake Dawson Waldron

ORDER

Appeal be dismissed with costs.

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

JUDGE1

BURCHETT, FRENCH AND EINFELD JJ. This is an appeal from the refusal by a judge of the Court of an application made by the Official Trustee in Bankruptcy, in which orders were sought under ss. 120 and 121 of the Bankruptcy Act 1966. Section 120(1) provides:

"A settlement of property, whether made before or after the commencement of this Act, not being -

(a) a settlement made before and in consideration of marriage, or made in favour of a…

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

Case: [1992] FCA 792
Decision Date: 30 OCTOBER 1992

CaseChat Overview and Summary

The case of Official Trustee in Bankruptcy v Mitchell involved the Official Trustee in Bankruptcy, acting as the appellant, and Mitchell, the respondent, who was adjudged bankrupt. The dispute centred on the interpretation of sections 120 and 121 of the Bankruptcy Act 1966 (Cth) and the equitable implications of a marriage settlement. Specifically, the court had to determine whether a marriage settlement could be considered a valuable consideration under these sections and whether good faith was a necessary component for such a settlement.

The primary legal issues were whether the marriage settlement constituted a valuable consideration under section 121 and if good faith was required under both sections 120 and 121. The court examined the origins of section 121 in the Statute of Elizabeth and the relationship between sections 120 and 121. It also deliberated on the meaning of "purchaser for valuable consideration" and the onus of proof in such cases. The court was tasked with determining the broader effect of the arrangement rather than being confined to the technical language of the documents involved. The court also needed to assess whether the payment of a mortgage could be considered valuable consideration under the sections and whether the concept of good faith was applicable and what it entailed.

The Federal Court, in dismissing the appeal, held that a marriage settlement could indeed be considered a valuable consideration under section 121. The court emphasised that the effect of the arrangement in equity should be considered rather than just the technical language of the document. Regarding good faith, the court found that it was not a requirement under section 120 but was under section 121. Good faith was determined to be a question of fact, and the test generally followed that in Re Hyams, which required a genuine belief in the facts asserted. The court distinguished a lack of good faith from mere negligence or blindness, underscoring that good faith required more than an absence of negligence. The Official Trustee in Bankruptcy's appeal was dismissed, and costs were awarded to the respondent.

The court made no further orders beyond dismissing the appeal and awarding costs. The settlement and entry of orders were addressed in Order 36 of the Federal Court Rules.

Orders

Orders of the court

Appeal be dismissed with costs.

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

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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