Peldan & Anor v Anderson & Anor

[2005] HCATrans 1034

[2005] HCATrans 1034

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  No B80 of 2005

B e t w e e n -

MICHAEL PELDAN (AS TRUSTEE OF THE ESTATE OF RAYMOND KENNETH PINNA)

First Applicant

MORGAN LANE (AS TRUSTEE OF THE ESTATE OF RAYMOND KENNETH PINNA)

Second Applicant

and

BERNADETTE ANDERSON (EXECUTOR OF THE LATE DOROTHY RUTH PINNA)

First Respondent

ROBYN MOLLEE (EXECUTOR OF THE LATE DOROTHY RUTH PINNA)

Second Respondent

Application for special leave to appeal

GLEESON CJ
GUMMOW J
KIRBY J

TRANSCRIPT OF PROCEEDINGS

FROM BRISBANE BY VIDEO LINK TO CANBERRA

ON FRIDAY, 16 DECEMBER 2005, AT 11.57 AM

Copyright in the High Court of Australia

__________________

MR D.R. COOPER, SC:   If it please the Court, I appear with MR M.D. MARTIN for the applicants.  (instructed by Quinn & Scattini)

MR P.A. FREEBURN, SC:   May it please the Court, I appear with MR L.A. JURTH for the respondents.  (instructed by Klar & Klar)

GLEESON CJ:   We thought we would be assisted by hearing from Mr Freeburn first.  Yes, Mr Freeburn.

MR FREEBURN:   Your Honours, the first issue, namely whether the severance of a joint tenancy qualifies as a transfer of property for the purposes of section 121 of the Bankruptcy Act, ought not attract leave.

GUMMOW J:   Why not?

MR FREEBURN:   We make that submission for a couple of reasons.  One is that whilst it has some perhaps academic interest, it has no general application.  That is because in this case there was a peculiar sequence of events which we have identified in our outline.

KIRBY J:   But does not that peculiar sequence of events in a sense test the proposition that a transfer is only to prevent fraud on creditors and in this case you have facts which tend to show that things shade a little and that therefore maybe that criterion is not a very stable one in terms of defining what a transfer is for this purpose.

MR FREEBURN:   Your Honour is correct in the suggestion that this is at, one might say, the boundaries of interpretation.

GUMMOW J:   Why is that?  The term “property” is defined, is it not?

MR FREEBURN:   The term “property” is defined and the term “transfer of property” is extended in subsection (9) of ‑ ‑ ‑

GUMMOW J:   “[P]roperty . . . includes any estate”, right?

MR FREEBURN:   That is true.

GUMMOW J:   Not just the land, but:

any estate . . . present or future, vested or contingent, arising out of or incident to any such real or personal property.

Then “transfer of property” includes in paragraph (b):

a person who does something that results in another person becoming the owner of property that did not previously exist –

ie, some new estate brings up by virtue of merger and severance and all those principles.

MR FREEBURN:   That is true, and that extension, subsection (9), is dealt with by her Honour at page 93 ‑ ‑ ‑

GUMMOW J:   I know she dealt with it, but is there not a question whether she was correct?

MR FREEBURN:   In my submission, she was undoubtedly correct.  We say that because, as we said in our submissions, by the severance Mr and Mrs Pinna changed the character of what they held, that is the bundle of rights that they held, but they did not ‑ ‑ ‑

GUMMOW J:   Yes, and a new form of estate arose.  That is the sort of activity that paragraph (b) is getting at.

MR FREEBURN:   That is one interpretation, and that is certainly open, your Honour.

GUMMOW J:   Exactly.  So there is a question.

MR FREEBURN:   There is a question, but the question then is where ‑ ‑ ‑

GUMMOW J:   It also is a question, if I can put it to you, which accords with what one might say is common sense, otherwise there seems to be some gap in the Act which, as Justice Kirby has put to you, seems curious.

MR FREEBURN:   Yes.

GUMMOW J:   People have been severing joint estates for a long time.

MR FREEBURN:   Yes.  The question is then where you go from there.  If one accepts that it is possible for this to be a transfer of property, the question is in this case, where does that lead you?  In my submission, it leads you to the difficulty that her Honour identified at page 93 of the application book and that is, just broadly, if you would assume that section 121(9)(b) applies and you say the interest created is Mr Pinna’s new half interest as a tenant in common, then would that property, ie, that new half interest, have been available to the creditors but for the severance?  The answer to that question is always going to be yes in the case of Mr Pinna’s interest in the property and ‑ ‑ ‑

GUMMOW J:   The bankruptcy itself effects a severance.

MR FREEBURN:   That is right.  That is true.

GUMMOW J:   There is undoubted authority that says that.  This particular transfer is void as against the trustee.  So you are back to square one, and at square one the bankruptcy effects a severance.  Is that not how it works?

MR FREEBURN:   That is right, but the Act also requires that the transfer of property be – that the property would probably have been available to the creditors.  If one adopts a narrow construction of “property”, the question is, why would Mrs Pinna’s interest in the property have ever become available to the creditors?  In our submission, the factual question, the second issue which we have identified, which is would this interest probably have been available to the creditors, the answer in this case will always be no.

So both issues are decisive, that the applicants cannot succeed unless they succeed on both issues, and for those reasons our submission is that the case is not a suitable vehicle.

GLEESON CJ:   Thank you.  Mr Cooper, what do you say about that second issue that Mr Freeburn has raised?

MR COOPER:   Your Honour, Mrs Pinna’s interest would have become available because the way in which one approaches this problem was discussed by Justice Hill in a decision of Ashton v Prentice, which is in the bundle of material given to the Court this morning I believe by a clerk – the Post Office lost the originals ‑ ‑ ‑

GUMMOW J:   It only seems to have an electronic citation, is that right?

MR COOPER:   Yes, your Honour.  At flag 3, Ashton v Prentice.  If your Honour goes to the page which is numbered at the top right‑hand column “13 of 18”, your Honour sees at the bottom the page, page 22 of the report, under the heading “Would the property have been available or probably available to creditors if not transferred?”, his Honour said:

The section requires the hypothesis to be made that the property in question was not transferred (contrary to the actual facts) and for a conclusion to be formed, inter alia, as to what probably would then have happened.

Now, if there had been no severance on the facts of this case – Mrs Pinna died on 12 January 2004.  At that time, if one ignores the severance, her interest would have passed to the husband by survivorship, so that when he became bankrupt on 25 April, some three months later, he would have been the sole owner of the entire fee simple of the land and the entirety of the land would have been available to his creditors.

So if her Honour had approached this matter properly and disregarded the relevant transaction, or transfer of property, the land definitely – not probably, definitely – would have become owned by Mr Pinna and would have been available for the benefit of his creditors.

GUMMOW J:   This is on the footing that the survivorship occurred before the commencement of his bankruptcy?

MR COOPER:   Yes, which it would have, your Honour, because the wife died three months before he became bankrupt.

GUMMOW J:   Yes.

MR COOPER:   In that time you would assume they would still have a joint estate, and it being the matrimonial home, that is a pretty fair assumption to make, with respect.

GLEESON CJ:   I may be overlooking something that was in the papers, Mr Cooper, but did the evidence show for how long prior to Mrs Pinna’s death it was known that she was seriously ill, or is there no evidence on that?

MR COOPER:   No, your Honour.  No, your Honour, is the answer.

GUMMOW J:   The evidence is rather scrappy really.

MR COOPER:   On that point?

GUMMOW J:   Yes.

MR COOPER:   Yes, your Honour.

GUMMOW J:   Not just on that point I think.

MR COOPER:   I take your Honour’s point, but certainly on that point there is very little evidence about that.

GLEESON CJ:   Thank you, Mr Cooper.  Mr Freeburn, did you want to say anything in response to Mr Cooper’s point about the second issue?

MR FREEBURN:   Just one point, your Honours, and that is that the mistake in that approach, in my submission, is that he looks retrospectively, he looks backwards.  In my submission, when one looks at the section, one looks at the question of whether it was probable or not at the time of the transaction, at the time of the impugned transaction.  In my submission, that is fairly clear from reading section 121 itself and the opening words to that section.

GLEESON CJ:   That is why I wondered whether there was any evidence about the circumstances in which the transaction was entered into, including the health circumstances of Mrs Pinna.  I suppose it is pretty easy to infer what the financial circumstances of Mr Pinna were.

MR FREEBURN:   That is right.  In relation to the health situation, it was put to the solicitor who performed this transaction that Mrs Pinna was or may have been ill and the solicitor’s answer was, no, from his observation Mr Pinna was in poor health – they were both 80 or thereabouts.  But there is certainly no evidence that one or other of them was on their death bed or gravely ill at the time of the transactions.

GLEESON CJ:   Thank you.

MR COOPER:   Your Honour, might I just say something about the evidence on that seeing it is a matter of concern to your Honour?  The solicitor was asked:

What was her illness, do you know? --- I don’t know.  She was, I think, approaching 80 years of age.  I understand that for some 40

years she’d been getting by with one kidney.  But, you know, I don’t know the finer details.

And that is as far as it goes, your Honour.

GLEESON CJ:   Thank you.  In this matter there will be a grant of special leave to appeal. 

We will adjourn for a short time to make contact with Darwin.

AT 12.09 PM THE MATTER WAS CONCLUDED