Official Trustee in Bankruptcy v Sharrment Pty Ltd

Re: THE ESTATE OF THE LATE JOHN WALKER WYNYARD
Ex parte: THE OFFICIAL TRUSTEE IN BANKRUPTCY
And: SHARRMENT PTY. LIMITED; LEE WYNYARD; MARK WYNYARD; AUSTRALIAN BANK
LIMITED; LORREINE CLAIRE WYNYARD; MACQUARIE BANK LIMITED; ELDERCON PTY.
LIMITED; ROBERT IAN GRANT as the representative of the partners of the firm of
Sly & Russell and SEYTA PTY. LIMITED
No. W1158 of 1985
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Wilcox J.

CATCHWORDS

Bankruptcy - Administration of estate - Deceased estate - Entitlement to proceeds of sale of realty - Whether realty held upon a resulting trust for deceased - Whether deceased made settlement of purchase price of realty within five years of death.

Bankruptcy Act 1966 ss.120, 244, 247A, 249.

HEARING

SYDNEY

#DATE 8:7:1987

Counsel for the Applicant: Mr T Simos QC with Mr D M Yates

Solicitor for the Applicant: Australian Government Solicitor

Counsel for the First, Second, Third, Fifth, Eighth and Ninth Respondents: Mr V Bruce QC with Mr A S Martin

Solicitors for the First, Second, Third, Fifth, Eighth and Ninth Respondents: Sly & Russell

The Fourth, Sixth and Seventh Respondents: No appearance

ORDER

It be declared that the funds described in the Schedule hereto form part of the divisible property of the estate of the late John Walker Wynyard within the meaning of s.249 of the Bankruptcy Act 1966.

The fourth respondent pay to the applicant the monies comprising the funds described in paragraphs A and C of the Schedule hereto.

The sixth respondent pay to the applicant the monies comprising the funds described in paragraph B of the Schedule hereto.

The first, second, third, fifth and ninth respondents pay to the applicant his costs of this application.

SCHEDULE

A. The fund comprising the sum of forty-six thousand one

hundred and eighty dollars and five cents

($46,180.05) held on deposit by the fourth respondent in the name of the first respondent as at the date of this Application and all accretions thereto whether in the nature of interest or otherwise.

B. The fund comprising the sum of one hundred thousand

dollars ($100,000.00) held on deposit by the sixth respondent in the name of the partners of Sly & Russell as at the date of this Application (such sum having been deposited on or about 5 December 1985) and all accretions thereto whether in the nature of interest or otherwise.

C. The fund comprising the sum of one hundred and fifty

thousand dollars ($150,000.00) held on deposit by the fourth respondent in the names of the applicant and Robert Ian Grant being the monies paid by the seventh respondent in or about December 1986 in discharge of the mortgage by that respondent to the first respondent over the property known as "The Chase", Moss Vale and all accretions thereto whether in the nature of interest or otherwise..

NOTE: Settlement and entry of orders is dealt with in

Bankruptcy Rule 124.

JUDGE1

During the latter years of his life the late John Walker Wynyard controlled the activities of numerous "two dollar" proprietary companies, each beneficially owned by him jointly with his wife, Lorreine Claire Wynyard. The question for determination in this application is whether the applicant, the Official Trustee in Bankruptcy, is entitled, as trustee of Mr Wynyard's estate, to certain monies now held upon deposit with Australian Bank Limited and Macquarie Bank Limited, the fourth and sixth respondents respectively. The remaining respondents are Sharrment Pty. Limited, a company of which Mrs Wynyard and Mr J D McDonald -- an old friend of Mr Wynyard -- are the two current directors, Mrs Wynyard, the two sons of her marriage to the deceased, Lee Wynyard and Mark Wynyard, two companies, Eldercon Pty. Limited and Seyta Pty. Limited, whose role will appear later in these reasons, and Mr R I Grant as the representative of the partners of the legal firm of Sly & Russell. The real contest is between the applicant, on the one hand, and Sharrment on behalf of Mrs Wynyard and Lee and Mark Wynyard, on the other, for the entitlement to the monies on deposit. The applicant contends that he is entitled to those monies by reference to either of two alternative areas of law: the general equitable principles relating to resulting trusts and the operation of s.120 of the Bankruptcy Act 1966.

Mr Wynyard died on 24 August 1985. On 2 December 1985 Fox J made an order under s.244 of the Bankruptcy Act for the administration in bankruptcy of his estate.
The 1979 transactions
The relevant facts go back to September 1979, when -- in the space of a few days and with meticulous attention to formalities -- Mr Wynyard effected a remarkable and complex series of transactions. The participants in those transactions included four of Mr Wynyard's "two dollar" companies -- Jansigma Pty. Limited, Shareholder Pty. Limited, Dirce Pty. Limited and Belanto Pty. Limited -- the Wynyard Family Trust No.4 and Dare Reed Nominees Pty. Limited, a nominee company maintained by his then solicitors, Dare Reed, who subsequently amalgamated with Sly & Russell.
On the evening of 26 September 1979 Mr and Mrs Wynyard conducted, in rapid succession, meetings of the directors of each of Jansigma, Dirce and Shareholder. The business of the Jansigma meeting related only to the change of the registered office of the company and the opening of a bank account. At the other meetings it was resolved, respectively on behalf of Dirce and Shareholder, to enter into an agreement with Jansigma whereby Jansigma granted to Dirce and to Shareholder a joint option -- in proportions of 2/7 and 5/7 respectively -- to acquire the whole of the unissued capital of Jansigma. The consideration for the granting of the option was $420,000; of which $120,000 was to be paid by Dirce and $300,000 by Shareholder.
The agreement was executed in Canberra upon the following day; the precise right granted by the agreement being to subscribe at par for 9988 ordinary shares of $1 each in Jansigma. The term of the option was one week.
Also on 27 September 1979 one P D Dennis settled upon Dare Reed Nominees the sum of $10, thereby establishing the Wynyard Family Trust No.4, the beneficiaries of which were specified members of Mr Wynyard's immediate family.
On 28 September 1979 Mr and Mrs Wynyard attended a series of meetings, some of which were concerned merely with formalities to allow the substantive business to proceed. But those meetings included an extraordinary general meeting of the shareholders of Belanto at which it was resolved to increase the capital of that company from $10,000 to $430,000, by the creation of 420,000 redeemable preference shares of $1 each.
On that same day, 28 September, seven cheques were drawn and banked into the accounts of their respective payees:

(i) a cheque for $300,000 drawn upon the personal bank account of Mr Wynyard in favour of Shareholder;

(ii) a cheque for $300,000 drawn upon the account of Shareholder in favour of Jansigma; this being the option fee;

(iii) a cheque for $120,000 drawn upon Mr Wynyard's personal account in favour of Dirce;

(iv) a cheque for $120,000 drawn upon the account of Dirce in favour of Jansigma; this being the option fee;

(v) a cheque for $420,000 drawn upon the account of Jansigma in favour of Belanto; this being an interest free loan repayable at call;

(vi) a cheque for $420,000 drawn upon the account of Belanto in favour of Dare Reed Nominees; this also being an interest free loan repayable at call; and

(vii) a cheque for $420,000 drawn upon the account of Dare Reed Nominees in favour of Mr Wynyard; this being said by Mrs Wynyard in her evidence as also being an interest free loan repayable at call.

The net result, of course, was to leave the balance of each of the relevant bank accounts unaffected by the day's activities.
On 4 October 1979, extraordinary general meetings of Dirce and Shareholder were held, at each of which Mr and Mrs Wynyard passed resolutions that the company refrain from exercising the option taken from Jansigma at such high cost one week previously.
However, Mr Wynyard apparently desired to eliminate the debts of Belanto to Jansigma and of Dare Reed Nominees to Belanto. On 18 October Mr and Mrs Wynyard met as directors of Jansigma and decided to apply for allotment of 420,000 redeemable preference shares in Belanto. Ten minutes later they met as directors of Belanto and resolved to allot the shares. The subsequent allotment of shares pursuant to this resolution offset the debt.
The debt from Dare Reed Nominees to Belanto was terminated upon the following day when, constituting themselves successively as a meeting of directors and as an extraordinary general meeting of shareholders, Mr and Mrs Wynyard resolved that Belanto make a gift of $420,000 to Dare Reed Nominees as trustee of the Wynyard Family Trust No.4. A deed of release of the debt owed by Dare Reed Nominees was executed on that same day.
The effect of the transactions of September and October was to leave the cash position of each participant unaffected. Jansigma had enjoyed a windfall gain of $420,000 by way of the fee for the unexercised option. This good fortune was at the expense of Dirce and Shareholder but their loss had been offset by payments totalling $420,000 from Mr Wynyard. But Jansigma had spent its windfall on the purchase of the redeemable preference shares in Belanto; which company had, in turn, given away the $420,000 to Dare Reed Nominees. So, on the face of the matter, at the end of the day Mr Wynyard was $420,000 worse off and Dare Reed Nominees, as trustee of his family trust, was $420,000 better off. That difference was not represented in cash but in the fact that Mr Wynyard was a debtor at call to Dare Reed Nominees in that amount.
The 1980 transactions
Dare Reed Nominees retired as trustee of the Wynyard Family Trust No.4 on 30 June 1980, its place being taken by Leduke Pty. Limited, another company controlled by Mr and Mrs Wynyard.
On 15 August 1980 one J P Connell settled the sum of $10 on Seyta Pty. Limited to create the Wynyard Family Trust No.6, of which Seyta was to be the trustee. The beneficiaries of that trust were Mr Wynyard and specified members of his family. Seyta was a recently incorporated "shelf" company of which Mr and Mrs Wynyard became the sole directors on 15 August.
One week later, on 22 August 1980, Seyta contracted to purchase for $450,000 a farming property at Moss Vale known as "The Chase". This was apparently an arm's length transaction, the vendor having no association with Mr Wynyard. The deposit of $45,000 was paid by Mr Wynyard personally.
On 14 September, a meeting was held of the directors of Leduke. The necessary consent having been tabled, it was resolved to amend the trust deed so that the capital beneficiaries of the Wynyard Trust No.4 be replaced by Seyta as trustee of Wynyard Family Trust No.6. Effectively, therefore, Seyta as such trustee became the beneficiary of the transactions effected in September and October 1979. The position was made explicit by the issue by Leduke to Mr Wynyard on that same day of a notice advising him of the change in beneficiaries and concluding: "you are therefore authorised and directed to pay the debt of $420,000 owing by you to Leduke Pty. Limited as trustee of the Wynyard Family Trust (No.4) to Seyta Pty. Limited as trustee of the Wynyard Family Trust (No.6)".
The purchase by Seyta of "The Chase" was completed on 19 December 1980. A sum of $488,627 was paid on settlement, the difference between the balance due on the real estate and this amount apparently being attributable to other items such as plant, equipment and stock; subject to adjustments. A total of $534,816.13 was received by Dare Reed on behalf of Seyta. Of this sum $206,816.13 represented the proceeds of sale of a property owned by Madnara Pty. Limited -- yet another company controlled by Mr and Mrs Wynyard -- and $238,000 was paid out of the account of Shareholder. After payment of the balance of purchase price and costs, a surplus of $39,000 was paid out to Mr Wynyard personally. In evidence before the Registrar at his s.81 examination Mr Grant could not recall either the source of the remainder of the funds paid to his firm or the reason for the payment to Mr Wynyard. He said that, when acting for Seyta, he always took instructions from Mr Wynyard.
Sale of "The Chase"
After the completion of the purchase Mr and Mrs Wynyard went to live at "The Chase". They remained there until Mr Wynyard's death, notwithstanding that in December 1984 the property was sold by Seyta to Eldercon Pty. Limited. This also was an arm's length transaction, Eldercon having no connection with Mr Wynyard. However, there was a mortgage of the property from Eldercon to Sharrment for the sum of $250,000, being part of the total real estate purchase price of $650,000. Sharrment provided no monies to Eldercon. The contract for sale provided for the purchase price, to the extent of $250,000, being paid by way of mortgage to a company nominated by Seyta; and Sharrment was so nominated. Sharrment had by then become the trustee of the Wynyard Family Trust No.6. Under this mortgage $100,000 was payable on 5 December 1985, the balance being payable on 5 December 1986. The contract of sale and the mortgage provided for a lease of "The Chase" to Sharrment for two years from completion; and it was apparently pursuant to that lease that Mr and Mrs Wynyard continued to reside at the property until his death. Mrs Wynyard was still there in June 1986 when she swore an affidavit in this matter.
Upon the sale of "The Chase" Sly & Russell, on behalf of Seyta, received $400,000. Pursuant to directions given by them, upon the instructions of Mr Wynyard, the solicitor for Eldercon handed over three bank cheques drawn as follows: Mrs Wynyard $100,000, Sharrment $178,000, Sly & Russell $122,000. The cheque in favour of Mrs Wynyard was deposited to the credit of a bank account held in her name. The cheque for $178,000 was used to open an account no.182998 with Australian Bank, the authorized signatories being Mr and Mrs Wynyard, Mr McDonald and, subsequently, Mark and Lee Wynyard. On 3 October 1985 a sum of $44,500 was withdrawn from this account and placed on investment deposit with the Bank. Certain small payments have been made out of the investment deposit account to account no.182998 but the deposit is largely intact. The balance, which includes accrued interest, at 24 April 1986 was $44,368.29. At that time the balance in account no.182998 was only $689.40. Numerous cheques and cheque butts relating to that account are in evidence. Most of the cheques were drawn by Mr Wynyard, for a miscellany of purposes most of which were personal or domestic.
In his s.81 examination Mr Grant explained the payment of $122,000 to Sly & Russell. Apparently there were legal costs owing by Mr Wynyard to that firm. The title deed of "The Chase" had been left with Sly & Russell by way of security. When the sale was negotiated it was arranged between Mr Wynyard and Mr Grant that $122,000 out of the proceeds of sale would be paid on account of those costs. Mr Grant said that these were costs owed by Mr Wynyard personally, as distinct from being owned by one or more of his companies.
In December 1985 Eldercon made the first payment due under the mortgage, of $100,000. The cheque was cleared through the trust account of Sly & Russell and the proceeds were then paid to Macquarie Bank to be held on deposit. Pursuant to interim orders made in these proceedings that deposit is still so held.
In December 1986 the balance due under the mortgage, $150,000, was due to be paid by Eldercon. By that time the present proceedings had been commenced and an interim order had been made restraining Eldercon from paying Sharrment. Eldercon was anxious to discharge its liability. By agreement the existing interim orders were varied so as to enable the payment by Eldercon of this sum, upon the basis that it would be held on deposit by Australian Bank in the joint names of Mr Grant and the Official Trustee pending further order.
At stake, therefore, in the present application is the interest bearing deposit of Sharrment with Macquarie Bank, about $45,000, and the two mortgage payments totalling $250,000; together with the interest earned on these sums.
The first alternative: resulting trust
The argument based upon the equitable principles relating to resulting trusts takes as its starting point the proposition that "The Chase" was purchased by Seyta out of monies provided by Mr Wynyard. It follows, it is said, that Seyta held the property upon trust for Mr Wynyard, with the result that the remaining proceeds of the sale of the property are now held on trust for his estate. The relevant principle was stated by Gibbs C.J. in Calverley v. Green (1984) 155 CLR 242 at p 246 in these terms:

"Where a person purchases property in the name of another, or in the name of himself and another jointly, the question whether the other person, who provided none of the purchase money, acquires a beneficial interest in the property depends on the intention of the purchaser. However, in such a case, unless there is such a relationship between the purchaser and the other person as gives rise to a presumption of advancement, i.e., a presumption that the purchaser intended to give the other a beneficial interest, it is presumed that the purchaser did not intend the other person to take beneficially. In the absence of evidence to rebut that presumption, there arises a resulting trust in favour of the purchaser. ... For the presumption to apply the money must have been provided by the purchaser in his character as such -- not, e.g., as a loan."

There is no evidence to suggest that any monies provided by Mr Wynyard for the purchase of "The Chase" were provided by way of loan. Nor is there any presumption of advancement in relation to the purchase of a property on behalf of a company. As it appears to me, the issue whether there was in the present case a resulting trust depends upon the resolution of two questions: whether upon the probabilities the funds made available by Mr Wynyard for the purchase of the property were funds supplied on his personal account, as distinct from on account of some company; and, if so, whether in supplying those funds Mr Wynyard was providing uncommitted monies for the benefit of Seyta or was merely paying to Seyta monies already owed to it, which monies Seyta then chose to use for the purchase of the property on its own account.
It is clear that, at all material times, Mr Wynyard was the dominant person in the affairs of the various proprietary companies of which he was a director. Mrs Wynyard was a co-director of each of the companies involved in the present transactions but she has given evidence that she had little understanding of these transactions and that she simply co-operated in doing whatever her husband asked her to do. The position of Mr McDonald, to the extent of his limited involvement, appears to have been similar. Although Mr Grant acted as solicitor for Mr Wynyard at all relevant times, he seems not to have been taken extensively into Mr Wynyard's confidence. In particular he is unable to assist in relation to the transactions of September-October 1979 and the source of the funds to purchase "The Chase".

The evidence does not establish the reason why Mr Wynyard chose to incorporate or to acquire a string of "two dollar" companies. For some time before his death Mr Wynyard was engaged in disputation with the Commissioner of Taxation regarding his tax liabilities. On 13 August 1985, only days before his death, the Commissioner obtained judgment in the Supreme Court of New South Wales against Mr Wynyard in the sum of $4,090,534.92 being for taxation assessments made in respect of the years ended 30 June 1980, 30 June 1981 and 30 June 1982. The judgment does not reveal the distribution of the total sum over those years. Nor does it indicate whether this total sum includes an amount of $477,470.85 claimed as accruing for the year ended 30 June 1979 under an Amended Assessment issued 21 February 1985. But these documents do suggest that, in the years 1979 and 1980, Mr Wynyard was engaged in business activities on his own account from which he derived substantial income. It is clear that, at the time, he paid much less tax than the amount which the Commissioner thought to be appropriate. Although there is no material to suggest that the subject companies were used for tax-minimisation, the existence of the companies might not have been unrelated to Mr Wynyard's desire to limit the tax paid by him.
There is no evidence to suggest that any of the relevant companies carried on any trading or other income earning activity. The Official Trustee has sought in vain for any Balance Sheets or other financial records. So far as appears none of the Wynyard companies involved in the 1979 transactions, or Seyta prior to the purchase of "The Chase", had any assets other than the payments passed through their bank accounts as set out above. It is noteworthy that in order to effectuate the round robin of 28 September 1979 some bank accounts had specially to be opened.
I think that, in the light of this evidence, the only inference that can properly be drawn is that each of the Wynyard companies was a mere shell, an alter ego of Mr Wynyard himself; having nothing but what he chose to put in its name from time to time. It is significant that, despite the meticulous manner in which Mr Wynyard was accustomed to attend to formalities, he was prepared, without any formality or directors' meeting, to direct to Seyta sums of $206,816 and $238,000 nominally owned by Madnara and Shareholder respectively. He seems to have treated those substantial sums of money as if they were separate funds amongst his own assets. Having regard to the fact he had a source of income and that the companies did not, I think that the only realistic conclusion is that this is exactly what they were. It should be concluded that the funds supplied for the purchase of "The Chase" were in reality Mr Wynyard's own funds.
The conclusion just stated is supported by two additional circumstances of the case. The first is the fact that Mr Wynyard himself paid the deposit and took a refund of the surplus $39,000 held by his solicitors after completion. The second is that the provision of the money by Mr Wynyard to Seyta closely followed the giving to him personally of a direction by Leduke to pay Seyta $420,000. The September 1980 variations in the trust arrangements took place shortly after the execution of the contract by Seyta and at a time when, it having no money, some arrangements would obviously be necessary to put it in funds to complete the purchase. In the absence of some other explanation it seems reasonable to infer that the purpose of substituting Seyta as trustee was to provide a basis upon which Mr Wynyard could provide the necessary funds other than as a donation or a loan. It would be surprising if, after these arrangements had been made, the necessary funds were in fact provided by someone other than Mr Wynyard.
The question whether the monies provided by Mr Wynyard were provided by way of repayment of a loan liability incurred in 1979 depends firstly upon whether a genuine liability was then incurred. Counsel for the applicant argue that there was no genuine liability, that the various transactions of September-October were shams designed to allow Mr Wynyard to appear to decrease his personal worth by $420,000 and to appear to increase, to the same extent, the net assets of the Wynyard Family Trust No.4. Counsel concede that the same result might have been achieved in a simpler way; for example, by Mr Wynyard giving $420,000 in cash to the trustee and immediately taking from the trustee a loan at call for the same amount. But they submit that, if he took this simple course, the source of the money would easily be traced; as counsel put it: "So that if he ever got into any problems no one could say that this was his money or this was his property. He wanted to buy 'The Chase' stud, but he wanted to make it perfectly clear that it was not him that was putting up the purchase money".
The transactions of 28 September 1979 took place almost eleven months before the execution of the contract to purchase "The Chase". There is nothing to indicate that in September 1979 Mr Wynyard had in mind the purchase of this, or any other particular, property. But he may well have had in mind the desirability of converting some of his own assets to assets of his family trust, preferably by a means which was not obviously a settlement within the meaning of s.120 of the Bankruptcy Act. If the Commissioner's subsequent claims were well-founded, Mr Wynyard was earning a large income but substantially avoiding or evading tax. Mr Wynyard was a competent and experienced business person. I think that he would not have been unaware of the likely course of events if his tax gamble failed. The hypothesis offered by counsel for the applicant for the 1979 transactions is attractive.
My acceptance of counsel's hypothesis is partly attributable to the lack of any other explanation of those transactions. Upon their face they were absurd. There could be no commercial purpose in Dirce and Shareholder paying $420,000 to secure an option to take 9998 redeemable preference shares in Jansigma: a company whose sole apparent asset was its paid up capital of two dollars and which was, in any event, under the control of the directors of Dirce and Shareholder. If this option was valuable, it is difficult to see why it was decided only one week later not to exercise the option. Nor is there any apparent point in Belanto increasing its capital by $420,000 and promptly giving away this sum to the family trust.
Looking for an alternative to the hypothesis advanced on behalf of the applicant, I sought from counsel for the respondents possible explanations of these matters. Notwithstanding that they had Mrs Wynyard available to them for consultation, those counsel have been unable to offer any explanation. In putting himself to so much trouble, Mr Wynyard must have had some object in mind. I think that it must be concluded that his object was that suggested by counsel for the applicant.
Were, then, the transactions shams? In Snook v. London and West Riding Investments Ltd. (1967) 2 QB 786 at p 802 Diplock LJ considered what legal concept was involved in what he called "this popular and pejorative word". He went on:

"I apprehend that, if it has any meaning in law, it means acts done or documents executed by the parties to the 'sham' which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create."

His Lordship went on to point out that, for acts or documents to be a "sham", all participants must have a common intention that the acts or documents are not to create the rights or obligations which they give the appearance of creating; a qualification not presently significant since it is clear that the mind of Mr Wynyard was the mind of all participants. The critical question is whether Mr Wynyard intended to give to others the appearance of creating legal rights and obligations different from the actual legal rights and obligations (if any) which he intended to create. The respondents submit not. They say that it is perfectly understandable that Mr Wynyard may have wished to enrich his family trust at his own expense and that the various transactions were no more than the method chosen by him to achieve that end. Although it was not said, it could be added that, the more one assumed that he sought to disguise his footsteps for fear of future action by creditors, the more likely it would be that he would wish to ensure that the trust did actually gain an asset.
There is force in the submission put on behalf of the respondents; but in the end I have reached the conclusion that the transactions amongst the various Wynyard companies, and between them and Mr Wynyard, were what was described by Windeyer J in Scott v. Commissioner of Taxation (No.2) (1966) 40 ALJR 265 at p 279 as "a mere facade behind which activities might be carried on which were not to be really directed to the stated purposes but to other ends".
The "stated purposes" of the various transactions entered into in 1979 were, by an elaborate route, the enrichment of the family trust at the expense of Mr Wynyard personally. The "stated purposes" of the 1980 transactions were the conversion into a different form of the major asset of the trust: a conversion of a chose in action, the debt by Mr Wynyard, into realty. But it is apparent that Mr Wynyard himself did not regard the realty as being an asset of the family trust, but rather as an asset at his personal disposal. This is graphically illustrated by the instructions he gave to Sly & Russell regarding the disbursement of the proceeds of sale.
A suggestion was made that the $100,000 paid to Mrs Wynyard was to recompense her for expenditure on "The Chase", so this item may not be significant. But the same cannot be said of the remainder of the money, which was treated by Mr Wynyard -- without demur from anyone else -- as his own. The course taken by him in 1984 and 1985 in relation to the proceeds of sale of "The Chase" reflected the same attitude as in 1979 and 1980: assets held in the name of any of his companies were his own monies. In my view the claim based on a resulting trust is made out.
The second alternative: s.120
Under those circumstances it is strictly unnecessary to deal with the alternative claim based upon s.120. But I will shortly state the position as I see it. Section 120(2) of the Bankruptcy Act provides:

"120. (2) A settlement of property, whether made before or after the commencement of this Act, not being a settlement referred to in paragraph (1)(a) or (b) or a settlement that is void as against the trustee by reason of the operation of that sub-section, is, if the settlor becomes a bankrupt and the settlement came into operation after, or within 5 years before, the commencement of the bankruptcy, void as against the trustee in the bankruptcy unless the parties claiming under the settlement prove--

(a) that the settlor was, at the time of making the settlement, able to pay all his debts without the aid of the property comprised in the settlement; and

(b) that the settlor's interest in the property passed to the trustee of the settlement or to the donee under the settlement on its execution."

Sub-section (8) of s.120 provides that, in the section, "settlement of property" includes any disposition of property.

Section 120(2) relates to settlements made after, or within five years before, "the commencement of the bankruptcy". Section 247A provides for the determination of the date to which administration of the estate of a deceased person, by virtue of an order under s.244, has relation back. In a case where, as here, no act of bankruptcy was committed within the period of six months immediately prior to death but the deceased person was, on the day of death, unable to pay his or her debts as they became due from his or her own monies the relevant date is the date of death. So, in the present case, s.120(2) would operate only in relation to a settlement falling within its terms which was made after 24 August 1980. It follows that the section would not affect any gift made by Mr Wynyard in 1979 but it would affect any settlement made in connection with the purchase of "The Chase" in December 1980. Therefore, subject to one comment I shall make, it is critical to the use of s.120 in connection with this matter for the applicant to establish that the 1979 transactions were not what they purported to be, and that no genuine debt was then created which Mr Wynhard repaid in supplying the purchase money for "The Chase".
I have held that the 1979 transactions were shams, so that the initial step in the argument is made good. If, as I have held, Seyta purchased "The Chase" out of monies provided by Mr Wynyard under circumstances in which it held the property upon trust for him, there was no disposition of property and, therefore, no settlement within the meaning of s.120. But, if I am wrong and the monies were provided by Mr Wynyard for Seyta by way of a gift, there was a settlement of the amount of the gift. The amount of any gift made after 24 August 1980 is not entirely clear but it must have extended to the whole of the balance of purchase price of the realty: $405,000. So it exceeded the total of the three funds presently in issue. Upon this basis -- it being conceded that the respondents have not established the matters referred to in para.(a) of s.120(2) -- the whole of the monies now claimed are recoverable under s.120.
Another possibility, there being no debt truly owned by Mr Wynyard to the Wynyard Family Trust No.4, was that the funds were supplied by way of loan. As I have said, there is no evidence of this but such an hypothesis would not assist the respondents. The money having been loaned to a trustee, it would be recoverable from the successor of that trustee which had succeeded, in that role, to the assets and liabilities of the trust estate.
Exhibit N
Before concluding I should make reference to two documents (ex.N) which have perplexed me. These documents are each dated 30 June 1981. The first of them, signed by Mr Wynyard in the presence of a witness named William J Graves, is a deed of appointment of a new trustee of Wynyard Family Trust No.4; the new trustee being Leduke in lieu of Dare Reed Nominees. The second document is a notice executed under the common seal of Dare Reed Nominees, addressed to Mr Wynyard and authorizing and directing him "to pay the debt of Four hundred and twenty thousand dollars ($420,000) due to the company in its capacity as Trustee of the Wynyard Family Trust (No 4) to Leduke Pty. Limited the new Trustee thereof".
One problem about the documents is the date which they bear. It would be surprising if an incorrect year was stated in each of two carefully drawn documents, yet it appears to be clear that Leduke was appointed as the new trustee of this trust on 30 June 1980; exactly twelve months earlier.
Another problem about the documents is to know whether the notice under the common seal of Dare Reed Nominees was seen by Mr Wynyard at about that time. It is not signed, or otherwise acknowledged, by him. The two documents apparently came from a file held by Mr Grant but their earlier history is not disclosed. It has not been shown that they were in Mr Wynyard's possession. The documents each bear the same date. They appear to have been typed upon the same machine. It seems probable that they were created at the same time.
The documents have significance for this Application only if three assumptions are made: first, that they were in fact executed in June 1981 rather than in June 1980, second, that Mr Wynyard was aware of the content of the notice addressed to him and, third, that he acquiesced in the assumption which it made, namely that he still owed the Wynyard Family Trust No.4 the sum of $420,000. Upon those assumptions the documents would have great importance. They would make irrelevant the genuiness of the 1979 transactions. It would be possible for the applicant to accept genuiness but to say that, as the debt remained outstanding in June 1981, the payments made by Mr Wynyard to Seyta in 1980 could not have been in discharge of the debt. This would leave two possibilities: that the payments were made in December 1980 by way of gift or by way of loan. Upon either possibility, for reasons already given, the applicant would be entitled to the monies now claimed.
However, I do not think that it would be proper to determine the case in this manner. In my opinion it is not safe to make any of the three assumptions to which I have referred; particularly having regard to the problem about the date. I mention ex.N simply to indicate that the acceptance of these documents at face value, as documents known to Mr Wynyard, would not assist the present respondents.
Orders
I propose to make declarations that each of the subject funds form part of Mr Wynyard's divisible estate within the meaning of s.249 of the Bankruptcy Act and to order that the fourth and sixth respondents pay to the applicants the respective deposits held by them. The applicant's costs must be paid by those respondents who had an interest in resisting, and did in fact actively resist, the relief sought by the applicant: Sharrment, Seyta, Mrs Wynyard and Lee and Mark Wynyard.

[1987] FCA 351

08 JULY 1987