Posner v Gibb - [2001] FMCA 93

FEDERAL MAGISTRATES COURT OF AUSTRALIA

POSNER v GIBB & ANOR [2001] FMCA 93

BANKRUPTCY – Trustee Application pursuant to s121 of the Bankruptcy Act 1966 (Cth) to declare transfer of land void – Transfer pursuant to s86 Family Law Act 1975 (Cth) agreement.

PRACTICE AND PROCEDURE – Default judgment order 13.3 Federal Magistrates Court Rules – analogous to Order 10 Rule 7 Federal Court Rules.

Chemaisse v Commissioner of Taxation (1990) 13 FLR 724
Ashton v Prentice, unreported decision, 23 October 1997
Official Trustee in Bankruptcy v Alvaro (1996) 138 ALR 341
Australian Securities Commission v MacLeod (1994) 54 FCR 309

Applicant:

MELVYN MALCOLM POSNER

Respondents:

DUNCAN SCOTT GIBB AND REGISTRAR OF TITLES

File No:

WZ53 of 2001

Delivered on:

25 September 2001

Delivered at:

Melbourne

Hearing Date:

25 September 2001

Judgment of:

McInnis FM

REPRESENTATION

Counsel for the Applicant:

Mr D W Thompson

Solicitors for the Applicant:

Phillips Fox

ORDERS

I declare that the transfer of land in favour of the first respondent registered on 7 April 2000 by the Western Australia Department of Land Administration as transfer H413674T the transfer in respect of the land registered as Certificate of Title Volume 1516 Folio 402, (the property) is void as against the applicant in his capacity as trustee in bankruptcy of the bankrupt estate of Lynn Gibb pursuant to s 121 of the Bankruptcy Act 1966.
Pursuant to s200 of the Transfer of Land Act (1893) Western Australia, the second respondent cancelled the registration of:
(a)the transfer, and
(b)the first respondent as registered proprietor of the property in the Western Australian Register of Titles.
The property vests in the applicant in his capacity as trustee in the bankruptcy of the bankrupt estate of Lynn Gibb.
The second respondent register the trustee in bankruptcy of the bankrupt estate of Lynn Gibb as the registered proprietor of the property in the Western Australian Register of Titles.
That the applicant's costs of this application including any reserved costs be taxed pursuant to order 62 of the Federal Court Rules and paid from the estate of Lynn Gibb.
There be no order for costs as against the second respondent.

FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH

WZ53 of 2001

MELVYN MALCOLM POSNER

Applicant

And

DUNCAN SCOTT GIBB and REGISTRAR OF TITLES

Respondents

REASONS FOR JUDGMENT

This is an application by MELVYN MALCOLM POSNER pursuant to s121 of the Bankruptcy Act 1966 (the Bankruptcy Act) seeking orders in relation to a property registered in the Western Australian Registry of Titles as Certificate of Title Volume 1516 Folio 402 (the property) seeking an order that that property be transferred to the applicant in his capacity as trustee in bankruptcy of the bankrupt estate of LYNN GIBB and seeking further orders which I shall refer to later in this judgment. As there was no appearance for DUNCAN SCOTT GIBB the first respondent, the Registrar of Titles the second respondent indicated that it would abide by the decision of the court provided there was no order for costs made against the Registrar.
Essentially before this court the applicant relies upon affidavit material in support of this application. Originally the applicant had relied upon both s120 and then the alternative s121 of the Bankruptcy Act. Before me today the applicant only seeks to rely upon s121.
I note in passing that the applicant correctly identifies as, at least on the face of it, a possible barrier to the prospect of relying upon s120, where s123(6) of the Bankruptcy Act may be seen to otherwise protect what in the present case appears to be a maintenance agreement entered into pursuant to s86 of the Family Law Act 1975 (the Family Law Act).
I mention that in passing because in other states it may be possible to pursue a course which appears to have been pursued in similar circumstances where a maintenance agreement has been entered into, and in particular I refer to the course which was followed in the Family Court of Australia in a matter of Chemaisse v Commissioner of Taxation (1990) 13 FLR 724. In that case, by way of example, on the application of a trustee in bankruptcy, of a s87 agreement was revoked due to fraud so that it then no longer fell within the definition of a maintenance agreement pursuant to s5 of the Bankruptcy Act and would not receive the benefit of the protection under s123(6) of the Bankruptcy Act. I accept, for the present purposes, that the course which was followed in that case to which I have referred, is not available to the applicant to pursue before this court solely by reason of the fact that the Family Court of Western Australia exercises the jurisdiction under the Family Law Act in that state and that the Federal Magistrates Court does not exercise that jurisdiction. Hence what would otherwise appear to be another option, at least in matters of this kind, is not available in this instance.
The applicant relies upon affidavit material and in particular an affidavit of the applicant which has been filed on 4 July 2001 and which has been sworn by the applicant on 22 June 2001. The affidavit to which I have referred briefly sets out the facts in this matter. Those facts have been usefully referred to in a chronology and the helpful submissions made by Mr Thompson of counsel who appeared for the applicant before me today. It is appropriate, therefore, to simply refer to that chronology by way of background in the present case.
It would appear that in the present case that the first respondent, DUNCAN SCOTT GIBB and the bankrupt LYNN GIBB, were married on 16 August 1982. On 13 October 1987, Ms Gibb was registered as the sole proprietor of the property. On 25 December 1995 the first respondent and Ms Gibb separated and on 1 February 2000, an award of $13,945 was made against Ms Gibb in favour of Masagee Pty Ltd (Masagee) in arbitration of a building dispute. On 18 February 2000 a judgment was entered for $13,945 and costs entered in the Supreme Court of Western Australia against Ms Gibb in favour of Masagee. On 24 March 2000, the solicitors for Masagee informed Ms Gibb's solicitors that they were instructed to issue a writ of fieri facias. On 3 April 2000, Ms Gibb and the first respondent executed a maintenance agreement pursuant to s86 of the Family Law Act 1975.
Also on 3 April 2000, Ms Gibb and the first respondent executed a transfer of land in respect of the property and that transfer of land, which appears now as exhibit MMP8 to the applicant’s affidavit refers to the consideration as being, "pursuant to s86 Family Law Act deed". On 7 April 2000, the executed transfer of land form was duly stamped. Again, on 7 April 2000, the transfer of land from Ms Gibb to the first respondent was registered. On 20 April 2000, Masagee's bill of costs was taxed in the Supreme Court of Western Australia and allowed at $12,940.
The proceedings before this court may briefly be summarised as follows. On 1 September 2000 a bankruptcy notice was filed by Masagee against Lynn Gibb and on 29 September 2000 an application by Ms Gibb was filed in the Federal Court of Australia seeking to have the bankruptcy notice set aside. It is noted in the affidavit material to which I have referred that in proceedings in the Federal Court by further affidavit dated 24 November 2000, Ms Gibb still refers to the property as her property, despite the purported transfer under s86 of the Family Law Act. On 1 December 2000, in the Federal Court of Australia, a Deputy District Registrar made orders dismissing Ms Gibb's application and made an order for the costs of the application to be borne by Ms Gibb.
On 12 December 2000, a creditor's petition was filed by Masagee against the estate of Lynn Gibb and on 17 April 2001, in the Federal Magistrates Court of Australia, a sequestration order was made against the estate of Lynn Gibb and other consequential orders made.
The application before this court is one which gives rise to consideration by the court of relevant sections of the Bankruptcy Act and, as I have indicated in particular, reliance is now placed upon s121. In considering that section, I have been taken in the written submissions of counsel for the applicant to the following submissions. It has been submitted that in relation to the trustee's cause of action, I should consider the factors set out in s121(1) of the Act which provides:
“A transfer of property by a person who later becomes a bankrupt (the “transferor”)) to another person (the “transferee”) is void against the trustee in the transferor’s bankruptcy if
(a)the property would probably have become part of the transferor’s estate or would probably have been available to creditors if the property had not been transferred; and
(b)the transferor's main purpose in making the transfer was:-
(i)to prevent the transferred property from becoming divisible amongst the transferor's creditors; or
(ii)to hinder or delay the process of making property available for division among the transferor's creditors.”
Counsel for the applicant quite properly took me to the provisions of s121(4) of the Bankruptcy Act and in particular indicated to me that the provisions which are set out in that subsection and parts (a) to (c) should be read as conjunctive and has submitted that at least parts (a) and (b) on the material before me have not been substantiated and therefore that subsection would not afford any protection against the trustee in relation to this application. In particular, it is submitted that in the present case, the situation is that s(4) of that section to which I have referred, cannot be relied upon and I accept the submissions made in that regard.
In the present case there is clearly an onus of proof upon the applicant pursuant to s121 and it needs to prove all of the elements of that section. Now I have been referred to and apply the unreported decision of his Honour Hill J in the matter of Ashton v Prentice, unreported decision, 23 October 1997 and I have also been referred to the decision of Official Trustee in Bankruptcy v Alvaro (1996) 138 ALR 341 and 346.
I am satisfied in the present case that this court, in the absence of the first respondent, does indeed have power, if it deems it appropriate to do so, to enter the judgment that is now being sought. I am satisfied that that power arises from rule 13.03 of the Federal Magistrates Court Rules and I am further satisfied that that rule, to the extent that it is applicable in matters of bankruptcy and other matters, is indeed analogous to the power granted to judges of the Federal Court of Australia by order 10 rule 7 of the Federal Court Rules. The ‘trigger’ event which activates rule 13.03 was no compliance of the first respondent of an order made by the Registrar on 23 July 2001 whereby the respondent was ordered to file and serve any notice of opposition with any supporting affidavit or affidavits by 10 August 2001.
I am further satisfied that the authorities upon which I can rely are similar in relation to the exercise of power under rule 13.03 of the Federal Magistrates Court Rules as they apply to order 10 rule 7 of the Federal Court Rules and in particular I apply the principle set out by the applicant's counsel in the authority of Australian Securities Commission v MacLeod (1994) 54 FCR 309. In that case it was decided that where final judgment was sought against a respondent pursuant to order 10 rule 7(1)(b) that the applicant must support its motion for judgment with material in legally admissible form sufficient to provide
(a)that the court has jurisdiction,
(b)all the facts necessary to prove the applicant's entitlement to relief claimed under the judgment applied for and
(c)the circumstances are such as to justify the grant of the discretionary remedy.
In the present case I have been invited to consider the affidavit material to which I have referred and that I should be satisfied that Lynn Gibb was made bankrupt by order of the court on 17 April 2001, that that bankruptcy commenced on 4 December 2000 and that on

3 April 2000 Ms Gibb transferred her fee simple interest in the property to the first respondent. I am further invited to conclude that the property which, had it not been transferred, would have fallen within the scope of s116(1) of the Bankruptcy Act and would not have fallen within the scope of s116(2) of the Bankruptcy Act and was therefore property which would have been part of Ms Gibb's estate and available to creditors in bankruptcy.
I have further been invited to infer that in the present case that there was a considerable period for which the property was the sole property of Ms Gibb during the marriage to the first respondent, that the maintenance agreement by which the property was transferred was executed some five years after separation and the fact that the maintenance agreement was executed shortly after judgment was entered against her, the sum of costs she would have been required to pay pursuant to the judgment was discussed with her solicitors and her solicitors had been informed of the judgment creditor's intention to execute against her property. I should conclude that the only provision made in the maintenance agreement was for the transfer of the land to the first respondent find that the transfer of land form by which the transfer of land to the first respondent was executed on the same day as the maintenance agreement was executed and further find that the transfer of land form was stamped and registered within four days of execution. All those matters, on the balance of probabilities, would lead me to infer and conclude that Ms Gibb's main purpose in transferring the land was to hinder or prevent her creditors from having access to the land to satisfy the debts she owed them.
I accept those submissions that have been made by counsel for the applicant and I am prepared to make the findings of fact that I have been invited to find and to draw the inferences which I believe are reasonably open on the material presently before me.
It was further submitted by counsel for the applicant, and I accept that it is open for this court to infer that there was a failure of the first respondent to appear to make good his claim to be the owner of the chattels found on the property in a Sheriff's interpleader proceedings referred to in the Posner affidavit and that statements made in the affidavit by Ms Gibb to which I have referred, that she still refers to the property as being "my property", combined with the failure of the first respondent to appear and respond or oppose the making of the orders sought by the applicant in this action, allow me to find, on the balance of probabilities, that the first respondent has, in the past, been willing to claim ownership of the property in order to prevent Ms Gibb's creditors from gaining access to it to satisfy the debts she owes them. Further I find that neither the first respondent or Ms Gibb consider the first respondent to have any real interest in the land. As a consequence upon that, I am invited to find and do find on the balance of probabilities that the transfer of land was undertaken with the main purpose of hindering, delaying or prevent the creditors of Ms Gibb from having access to the land to satisfy the debts she owed them.
In the present case, it is my view that the facts and inferences which I have been invited to find and draw in this case respectively are indeed reasonable and on the balance of probabilities open to this court to find. As a consequence of those findings, I am also entitled to find that in the present circumstances the property was indeed transferred to the first respondent for no consideration. I should mention in passing that the mere fact that the transfer of land refers to a “s86 maintenance agreement” does not of itself enable me to draw a conclusion that there was no consideration. I have drawn that conclusion based upon the other evidence and the chronology in this case which has been set out in the detailed outline of submissions provided by counsel for the applicant. It is on that combined basis of the interpretation of the facts in the present case that I find the reference to consideration of the s86 maintenance agreement is indeed to be interpreted, in this instance, as effectively being no consideration for the transfer of the land.
I have been asked to make orders consequent upon those findings and do so as follows:
(1)I declare that the transfer of land in favour of the first respondent registered on 7 April 2000 by the Western Australia Department of Land Administration as transfer H413674T the transfer in respect of the land registered as Certificate of Title Volume 1516 Folio 402, (the property) is void as against the applicant in his capacity as trustee in bankruptcy of the bankrupt estate of Lynn Gibb pursuant to s121 of the Bankruptcy Act 1966.
(2)Pursuant to s200 of the Transfer of Land Act (1893) Western Australia, the second respondent cancelled the registration of
(a)the transfer, and
(b)the first respondent as registered proprietor of the property in the Western Australian Register of Titles
(3)The property vest in the applicant in his capacity as trustee in the bankruptcy of the bankrupt estate of Lynn Gibb.
(4)The second respondent register the trustee in bankruptcy of the bankrupt estate of Lynn Gibb as the registered proprietor of the property in the Western Australian Register of Titles.
(5)That the applicant's costs of this application including any reserved costs be taxed pursuant to order 62 of the Federal Court Rules and paid from the estate of Lynn Gibb.
(6)There be no order for costs as against the second respondent.

I certify that the preceding twenty (20) paragraphs are a true copy of the reasons for judgment of McInnis FM

Associate:

Date: 25 September 2001