Prentice v Boyle
[2010] FMCA 681
•14 September 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| PRENTICE v BOYLE | [2010] FMCA 681 |
| BANKRUPTCY – Undervalued transactions – aircraft purchased in name of bankrupt – transfer of title to wife for no consideration – claimed purchase as agent for wife and loan of purchase money – no independent evidence of agreements – claims disbelieved – property vested in trustee – orders for delivery to trustee. |
| Bankruptcy Act 1966 (Cth), ss.77A, 81, 120, 120(1), 120(5), 121, 121(3), 121(4), 188, 222(10) Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth) Sale of Goods Act 1896 (QLD), s.20 |
| For The Good Times Pty Ltd v Boyle & Anor [2009] FMCA 512 For the Good Times Pty Ltd v Coltern Pty Ltd [2007] NSWSC 807 Fox v Percy (2003) 214 CLR 118 McMurtrie v Commonwealth of Australia [2006] NSWCA 14 Watson v Foxman (1995) 49 NSWLR 315 |
| Applicant: | MAXWELL WILLIAM PRENTICE AS TRUSTEE OF THE PROPERTY OF NORMAN BOYLE |
| Respondent: | VICKI LYNNE BOYLE AKA VICKI SALON |
| File Number: | SYG 252 of 2010 |
| Judgment of: | Smith FM |
| Hearing dates: | 3 & 4 August 2010 |
| Date for Last Submission: | 16 August 2010 |
| Delivered at: | Sydney |
| Delivered on: | 14 September 2010 |
REPRESENTATION
| Counsel for the Applicant: | Mr J T Johnson |
| Solicitors for the Applicant: | Sally Nash & Co. |
| Counsel for the Respondent: | Respondent in person |
ORDERS
Declare that the Evektor Sportstar Plane registration number 24.4113 Airframe No: 2004 0303 (“Evektor Sportstar Plane”) was acquired by Norman Clifford Boyle beneficially under an agreement to purchase dated 3 May 2004 completed on or about 24 August 2004.
Declare that the Evektor Sportstar Plane was the property of Norman Clifford Boyle at the time it was transferred to the respondent on or about 28 June 2006.
Declare that the transfer of the Evektor Sportstar Plane by Norman Clifford Boyle to the respondent on or about 28 June 2006 is void against the applicant.
Declare that the Evektor Sportstar Plane is property vested in the applicant in his capacity as trustee of the bankrupt estate of Norman Clifford Boyle.
The respondent, by herself, her servants, employees or agents are restrained from using or seeking to use the Evektor Sportstar Plane in any way other than for the purposes of complying with these orders.
The undertaking as to damages given by the applicant to the Court on 16 February 2010 and 25 April 2010 is discharged.
The respondent by herself, her servants, employees and agents shall forthwith deliver up or cause to be delivered up to the applicant the Evektor Sportstar Plane, together with its logbook and all other documents and articles necessary for its use and registration. Delivery shall be given to any servant or agent of the applicant authorised by him in writing to take possession of the Evektor Sportstar Plane.
In the event of there being a default in compliance with order 7 above within 3 days, and following upon the applicant filing with the Court an affidavit to that effect, a writ of specific delivery may be issued to the sheriff for possession of the Evektor Sportstar Plane. The writ shall direct the sheriff to take possession of the Evektor Sportstar Plane, together with its logbook and all other documents and articles necessary for its use and registration, and to deliver the Evektor Sportstar Plane to the applicant or any servant or agent of the applicant authorised in writing by him for that purpose.
The applicant has liberty to apply for further orders should the respondent not deliver the Evektor Sportstar Plane, together with its logbook and all other documents and articles necessary for its use and registration, to either the sheriff or the applicant.
The respondent pay the applicant’s costs including reserved costs as agreed or taxed pursuant to the Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 252 of 2010
| MAXWELL WILLIAM PRENTICE AS TRUSTEE OF THE PROPERTY OF NORMAN BOYLE |
Applicant
And
| VICKI LYNNE BOYLE AKA VICKI SALON |
Respondent
REASONS FOR JUDGMENT
Mr Prentice (“the Trustee”) is the trustee of the property of Norman Clifford Boyle (“Mr Boyle”), pursuant to a sequestration order made on 10 June 2009 under s.222(10) of the Bankruptcy Act 1966 (Cth). This followed upon the setting aside of a Pt.X personal insolvency agreement, and Mr Boyle’s bankruptcy has relation back to 11 December 2007 when he signed an authority under s.188 (see For The Good Times Pty Ltd v Boyle & Anor [2009] FMCA 512). The Trustee now alleges that Mr Boyle became the owner in 2004 of an Evektor Sportstar Aircraft, and that in May 2006 he transferred property in the aircraft to his wife Vicki Lynne Boyle (“Mrs Boyle”) for no consideration. A certificate of aircraft registration issued by Recreational Aviation Australia Inc on 28 June 2006 in accordance with the Civil Aviation Orders shows Mrs Boyle, in her maiden name Vicki Salon, as the sole owner. The Trustee seeks declarations under s.120 of the Bankruptcy Act that this transfer was void, and orders requiring Mrs Boyle to deliver the aircraft to the Trustee.
Mr and Mrs Boyle claim that at all times since the aircraft was acquired in 2004 she has been its true owner, under an undisclosed agency agreement that Mr Boyle would effect the purchase and its initial registration in his name and with money lent to her by him at the time of purchase. They claim that the registration in 2006 did no more than recognise her previously acquired title. They also claim that Mrs Boyle fully repaid the loaned purchase money in sundry cash and bank transfers to Mr Boyle, and by assigning to him $100,000 from her share in a Lotto prize of $1m. There is independent evidence that such a prize was claimed by Mr Boyle on 21 February 2006, and was paid into his bank account on 7 March 2006.
For the reasons which follow, I have concluded that no such agreement was made in 2004, and that Mr Boyle was in all respects the sole owner of the aircraft when it was acquired. Notwithstanding mysteries about many money transfers between Mr and Mrs Boyle and their family trust in the subsequent years, including the ownership and distribution of the Lotto prize, I have concluded on the balance of probabilities that Mrs Boyle gave no consideration recognised by the Bankruptcy Act when the registration of the aircraft was transferred to her in 2006. That transaction was, therefore, void under s.120(1), and the aircraft forms part of the bankrupt estate of Mr Boyle. These conclusions mean that I do not need to consider the Trustee’s alternative contention that the transfer of the aircraft had the main purpose of defeating Mr Boyle’s creditors and was also void under s.121.
Section 120 provides:
120 Undervalued transactions
Transfers that are void against trustee
(1)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 transfer took place in the period beginning 5 years before the commencement of the bankruptcy and ending on the date of the bankruptcy; and
(b) the transferee gave no consideration for the transfer or gave consideration of less value than the market value of the property.
Note: For the application of this section where consideration is given to a third party rather than the transferor, see section 121A.
Exemptions
(2)Subsection (1) does not apply to:
(a) a payment of tax payable under a law of the Commonwealth or of a State or Territory; or
(b) a transfer to meet all or part of a liability under a maintenance agreement or a maintenance order; or
(c) a transfer of property under a debt agreement; or
(d) a transfer of property if the transfer is of a kind described in the regulations.
(3)Despite subsection (1), a transfer is not void against the trustee if:
(a) in the case of a transfer to a related entity of the transferor:
(i)the transfer took place more than 4 years before the commencement of the bankruptcy; and
(ii)the transferee proves that, at the time of the transfer, the transferor was solvent; or
(b) in any other case:
(i)the transfer took place more than 2 years before the commencement of the bankruptcy; and
(ii)the transferee proves that, at the time of the transfer, the transferor was solvent.
Rebuttable presumption of insolvency
(3A)For the purposes of subsection (3), a rebuttable presumption arises that the transferor was insolvent at the time of the transfer if it is established that the transferor:
(a) had not, in respect of that time, kept such books, accounts and records as are usual and proper in relation to the business carried on by the transferor and as sufficiently disclose the transferor’s business transactions and financial position; or
(b) having kept such books, accounts and records, has not preserved them.
Refund of consideration
(4)The trustee must pay to the transferee an amount equal to the value of any consideration that the transferee gave for a transfer that is void against the trustee.
What is not consideration
(5)For the purposes of subsections (1) and (4), the following have no value as consideration:
(a) the fact that the transferee is related to the transferor;
(b) if the transferee is the spouse or de facto partner of the transferor—the transferee making a deed in favour of the transferor;
(c) the transferee’s promise to marry, or to become the de facto partner of, the transferor;
(d) the transferee’s love or affection for the transferor;
(e) if the transferee is the spouse, or a former spouse, of the transferor—the transferee granting the transferor a right to live at the transferred property, unless the grant relates to a transfer or settlement of property, or an agreement, under the Family Law Act 1975;
(f) if the transferee is a former de facto partner of the transferor—the transferee granting the transferor a right to live at the transferred property, unless the grant relates to a transfer or settlement of property, or an agreement, under the Family Law Act 1975.
Protection of successors in title
(6)This section does not affect the rights of a person who acquired property from the transferee in good faith and by giving consideration that was at least as valuable as the market value of the property.
Meaning of transfer of property and market value
(7)For the purposes of this section:
(a) transfer of property includes a payment of money; and
(b) a person who does something that results in another person becoming the owner of property that did not previously exist is taken to have transferred the property to the other person; and
(c) the market value of property transferred is its market value at the time of the transfer.
The documented purchase of the aircraft
The purchase of the aircraft is well documented in records produced to the Trustee and to the Court by its vendor, Green Field & Company Pty Ltd trading as SilverWing Aviation (“SilverWing”), and by the relevant aircraft registration authority.
A written purchase agreement between SilverWing and Mr Boyle is signed by him and dated 3 May 2004. It identifies ‘the goods’ as a particular aircraft identified by serial number, together with various items of equipment. The total price is $147,372, but cl.2.4 records that a discount of $7,372 would be applied “for simultaneous ordering of, and payment for Goods” under another purchase agreement with Mr Richard Woods. An undated ‘variation’ of the agreement signed by Mr Boyle corrected an arithmetic error, so as correctly to identify $144,000 as “the overall cost of the Goods” after the discount. This amount is then shown in the SilverWing invoice addressed to Mr Boyle for the ‘final payment’ dated 24 August 2004, plus an additional charge of $2,150 for installation of “Falcon Direction Gyro as agreed by phone, 18 August 2004”.
Mr Woods was later nominated by Mr Boyle in his statement of affairs signed on 6 August 2009 as a ‘friend’ who would be “a contact person who does not live with you”. According to the judgment of Young J in For the Good Times Pty Ltd v Coltern Pty Ltd [2007] NSWSC 807, they had been business partners in land development activities in 2001, which ultimately led to both of them being ordered to pay substantial compensation for breaches of the Trade Practices Act. The reference to a simultaneous purchase by Mr Woods from SilverWing, and their business background, tends to point to a business reason for the acquisition of a light aircraft by Mr Boyle at this time, but this was unexplored in the evidence before me and I would not make that finding with any confidence.
I shall consider below the alternative claim of Mr and Mrs Boyle that the aircraft was purchased by Mrs Boyle for the use of her three children. I note that their eldest son was twelve in May 2004, and the other children were ten and eight. For this, and other reasons explained below, I have difficulty accepting their claims as to the dominant reason for the 2004 acquisition, although I accept that there was an intention of Mr and Mrs Boyle at the time of purchase that eventually the aircraft might be available for use by their children, and that it came to be regarded as the family’s aircraft and to be flown by their eldest son and his brother in recent years.
The purchase agreement contained clear provisions governing the transfer of property in the goods to Mr Boyle as ‘the buyer’. These took effect pursuant to s.20 of the Sale of Goods Act 1896 (QLD), as part of the ‘governing law’ agreed under cl.11. Clause 3 provided for payment of two ‘deposits’ of 10% and 40% of the total price, and for the balance to be paid “before the Goods are delivered to the Buyer in Australia”. The Buyer agreed “to pay the price in full, before the Supplier will release the Goods for delivery to the Buyer”, and “Delivery of the Goods will only be completed following payment in full”. To make abundantly clear that title only passed on delivery, cl.6 provided that “legal title passes to the Buyer only when the Goods are paid for in full”. Clause 14 provided that “neither the Supplier nor the Buyer may assign this Agreement without the express written agreement of the other party”.
Mr Boyle returned the purchase agreement signed by him to SilverWing by post on 3 May 2004, together with a cheque on his personal account for the $14,000 first ‘deposit’. Further payments were also made by him personally on 24 May 2004 of $400, and on 6 August 2004 of $57,600. A final payment of $74,000 was credited by SilverWing on 1 September 2004. They have annotated their file copy of the final invoice to note that there remained an outstanding $150. An invoice for this balance was sent to Mr Boyle on 6 September 2004, and is noted as ‘remains unpaid’, as does an invoice for some equipment sold to him on 24 January 2006.
The evidence undoubtedly establishes that Mr Boyle paid a total of $146,000 to acquire a title to the aircraft in September 2004. Neither he nor Mrs Boyle claim that his payments used funds provided by her, or were made to discharge an indebtedness or other obligation then owed to Mrs Boyle, and it is common ground that the aircraft was purchased with his own funds.
Delivery of the aircraft under the purchase agreement was due to occur at Merimbula Airfield. An acknowledgement of delivery to Mr Boyle personally is signed by him on 29 August 2004. Immediately prior to delivery, evidence was provided to SilverWing that Mr Boyle had become registered as the sole owner of the aircraft with Recreational Aviation Australia Inc. A certificate showing this was issued on 26 August 2004, and states:
RAA AIRCRAFT REGISTRATION CERTIFICATE
Date issued: 26 Aug 2004
This is not a certificate of title
This aircraft has been entered into the register of Recreational Aviation Australian Inc. in accordance with Civil Aviation Orders and this certificate is not transferable. It is the responsibility of the aircraft registrant to ensure that this aircraft complies with and is operated in accordance with all applicable Orders and Regulations. The period of validity is subject to the satisfactory completion of all relevant aircraft inspections. Any changes to the items on this certificate including change of registrant or change of ownership of the aircraft must be notified to RAA within 14 days of the change and must make this certificate available to the new registrant. This certificate becomes void on sale or transfer of the aircraft and the disposing registrant must notify RAA within 14 days of the sale or transfer. In the event of destruction of the aircraft, or when the aircraft is withdrawn from use, the registrant must notify RAA within 14 days and must forward this certificate to RAA. [details of registration omitted]
Also on the SilverWing file is a copy of a letter on ‘Norm Boyle’ letterhead, faxed to it from Mrs Boyle on 25 August 2004. It is signed by Mrs Boyle, and states:
Please note Norms address for registration is [address] Merimbula NSW 2548.
I apologise for the delay in getting this info to you Norm is in North Queensland and has been uncontactable for the last few days.
Manifestly, none of the above documentation and events provide any evidence to suggest anything other than that property in the aircraft was acquired only by Mr Boyle, that it was acquired personally by him and not as an agent for Mrs Boyle, and that this probably occurred with the knowledge of Mrs Boyle.
Additional documents were obtained by the Trustee from Recreational Aviation Australia Inc, showing the registration of the aircraft in the subsequent years. They show that renewals were made by Mr Boyle, and that certificates were issued to him as the sole owner on 20 May 2005, and 23 May 2006. It is common ground that Mr Boyle acquired a pilot’s licence and used the aircraft, after commencing training soon after the purchase of the aircraft. It is reasonable to infer that he then used it, inter alia, in the course of his business affairs, which must have required him frequently to travel between the South Coast and the Southern Highlands of NSW, and possibly elsewhere in Australia. I also accept that the aircraft was probably also used for family purposes.
On 28 June 2006, approval for a transfer of ownership was given in response to an application form requesting ‘change of ownership’. The new owner is identified as Vicki Salon with an AUF membership number, which must have been obtained by Mrs Boyle as a non‑flying member. The form identifies Mr Boyle as the ‘previous owner’, and shows 20 May 2006 as the ‘date of purchase’ by Mrs Boyle. Mr Boyle signed a declaration dated 20 May 2006 which states:
I certify that I own the aircraft described on this form and SHOWN ON THE ENCLOSED RECENT PHOTOGRAPH and state that to the best of my knowledge the total airframe hours and the hours flown by the aircraft in the last 12 months are as above and that the current status of the aircraft is that it is in a FLYABLE … condition. In addition I certify that I hold the aircraft log books in respect to the history of the aircraft.
A new registration certificate was then issued to Mrs Boyle in the name of Ms V Salon on 28 June 2006. There is evidence that it was renewed in that name on 6 June 2007, and 8 July 2008. All the renewal certificates were in the above terms, with some additional words correcting an immaterial omission.
There is no reliable evidence as to the source of the funds used to pay outgoings on the aircraft over the whole period from its acquisition in 2004, and no evidence as to how it was treated for taxation purposes. Mrs Boyle asserts that “during the period from 24 August 2004 to the date of this Affidavit I have been responsible for the payment of all outgoings for the aircraft including the insurance, maintenance, fuel (with the exception of whenever [Mr Boyle] used the aircraft he would refuel it) and any airport fees”. However, the only evidence of this tendered by her suggests that the registration fee in May 2007, and four insurance payments in December 2006 and in 2007, were paid from her bank account, and that insurance in May 2010 was paid from her son’s account. To account for the absence of any other records, she stated: “I did not keep copies of any other receipts for the aircraft because I did not believe I would be required to do so”. No evidence was tendered showing the name of the person to whom most of the outgoings were invoiced by suppliers.
For reasons which I shall explain, I am not prepared to accept Mrs Boyle’s uncorroborated assertions about payment of outgoings. I do not consider that there is any sufficient reliable evidence about the invoicing and payment of outgoings on the aircraft to assist my arriving at conclusions about the ownership of title to the aircraft at any time after its acquisition by Mr Boyle.
There is no documentary nor witness evidence from any independent source suggesting that Mrs Boyle claimed ownership of the aircraft prior to June 2006, nor that the registration in Mrs Boyle’s maiden name in June 2006 gave effect to an agreement between her and Mr Boyle made before the purchase in 2004. In particular, that he would, in effect, purchase and register the aircraft in his name and with his own funds as an undisclosed agent for her, and upon her promise to repay the purchase monies. There is also no independent nor reliable contemporaneous evidence showing that the transfer in 2006 was made by Mr Boyle for any consideration passing from Mrs Boyle to him at the time of transfer, other, perhaps, than consideration falling within an excluded item of ‘family relationship’ consideration listed in s.120(5).
There is sufficient evidence before me in the present case, without resort to the previous findings of Young J or of myself in the two above cited judgments, to find that Mr Boyle’s financial affairs were, by the middle of 2006, likely to have presented inducements to transfer to his wife or family trust the title to any substantial property remaining in his personal possession. In particular, Mr Boyle acknowledged in evidence that he must have been aware that the very substantial Trade Practices claims being pursued against him personally in the Supreme Court since 2004 would, or were likely to, come to trial in early 2007. An appreciation of the weaknesses of his defence is suggested by his failure to defend those claims by appearing at their hearing in February 2007. He must also have been aware that a string of personal guarantees in relation to failed or failing business ventures were at risk of being called up. Although he was slow to acknowledge these liabilities in his first statement of affairs signed on 11 December 2007, his list of unsecured creditors in his statement of affairs signed on 6 August 2009 listed 11 unsecured creditors totalling $28,522,443, of which he noted that substantial liabilities had been ‘incurred’ in ‘approx 2006’, and some in earlier years. I find it likely that in June 2006 Mr Boyle was consciously facing a real possibility of insolvency proceedings in the next year or two, and that he must have communicated this concern to his wife, even if it was not apparent to her at that time.
In all the above circumstances, an evidentiary onus passes to Mrs Boyle to displace a prima facie inference from the contemporaneous documents and the overt actions of Mr Boyle, that the aircraft was acquired in 2004 as the property of Mr Boyle alone, and that he transferred his title in it to Mrs Boyle in June 2006 for no consideration recognised by s.120 of the Bankruptcy Act. Where the present applicant is Mr Boyle’s trustee in bankruptcy, and where a close spousal relationship between Mr and Mrs Boyle continues to exist, it is appropriate to examine closely their evidence of conversations and transactions they claim gave rise to an agreement under which Mrs Boyle was at all relevant times the sole owner of the aircraft.
In this respect, I accept the submission of counsel for the Trustee, that considerations as to the fallibility of memory of spoken words, as well as the manifest inducements on Mr and Mrs Boyle to tailor their evidence, whether consciously or unconsciously, so as to withhold this family asset from Mr Boyle’s creditors, “pose serious difficulties of proof” for Mrs Boyle’s case, comparable to the situation explained by McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 318, and applied to “alleged contractual promises” by Hodgson JA in McMurtrie v Commonwealth of Australia [2006] NSWCA 14 at [6].
Mrs Boyle’s claim to have acquired title for full consideration
My assessment of the poor credibility of Mrs Boyle’s evidence, can be explained by narrating how her claims about her ownership of the aircraft were presented to the Trustee and then to the Court. As I shall explain, abundant reasons arise for concluding that Mr and Mrs Boyle’s evidence about her ownership of the aircraft is unreliable, and that the contrary inferences from “contemporary materials, objectively established facts and the apparent logic of events” should be preferred (cf. Fox v Percy (2003) 214 CLR 118 at [30]‑[31]). A strong impression arises that Mrs Boyle’s claims to have been since 2004 the legal owner of the aircraft for consideration subsequently paid by her, have been contrived and embellished over time, and are untrue.
In neither of his statement of affairs signed on 11 December 2007 and 6 August 2009, did Mr Boyle mention the aircraft or the Lotto prize in response to questions requiring him to identify assets which he had “sold, transferred or given away” in the last 5 years, nor in response to other parts of the forms.
The Trustee became alive to a possible asset of his bankrupt estate, when a creditor drew his attention to a newspaper report of December 2007, referring to Mr Boyle’s 15 year old son’s ambitions as a pilot. The report said: “Flying is a Boyle family tradition as his father Norm is a pilot and owner of a Sportstar Aircraft”.
The acquisition and ownership of the aircraft was then a matter explored in s.81 examinations of Mrs Boyle and Mr Boyle on 30 September 2009. Mrs Boyle gave evidence of herself conducting a business of property developments, through companies and a family trust of which she became the sole trustee under a deed dated 5 December 2006. She agreed that in 2006 “he wasn’t able to pay his debts and your company took over his assets and his liabilities” (Ex.A p.28).
In relation to the aircraft, Mrs Boyle denied that she had ‘acquired’ it from Mr Boyle, and she said: “I asked him to purchase an aeroplane for me, because at the time I didn’t have any money. I have subsequently paid him back for that” (Ex.A p.45). She said that she told him that “our son was flying and that I think I would like him to have an aeroplane” (Ex.A p.46). She said that she “would only be guessing” when asked to recount her conversations with Mr Boyle about his spending $140,000 to buy the aircraft, but claimed to have been personally involved in dealing with the vendor and looking at aircraft (Ex.A p.48). She said that she repaid Mr Boyle “from income … over a period of time … by transfers, like from one account to another … there may have been a couple of $10,000 lots, there may have been a couple of $20,000 lots. It was done, you know, every few months I might have given him …” (Ex.A p.49‑50). She said that she “possibly” did not receive a receipt from Mr Boyle for payments made between 2004 and 2006. After an adjournment, she agreed that she had “indicated that you paid the bankrupt $140,000 from your income” (Ex.A p.62).
Mrs Boyle explained the transfer of the aircraft’s registration in 2006:
He couldn’t – he couldn’t afford to keep up the insurance, to keep up the – or to pay any insurance. He never insured it or to pay the maintenance on it. He never paid maintenance on it. There was no reason for it to stay in his name … (Ex.A p.50)
… it was transferred to me, because I asked him to buy it on my behalf … And I paid him back for it. That’s why it was transferred back to me”. (Ex.A p.51)
In response to further questions:
MS NASH: Well, I think Mrs Boyle may have a better reflection, having gone through the specifics that she’s now been able to recall in relation to repayment of the money. So I just asked if she can now recall the words that were used between her and Mr Boyle?---No, not the exact words, no.
Now, why was the aeroplane purchased in his name and not you purchase it in your name, but use his money? Can you explain that to me?---I don’t know really how it ended up in his name to start with. I guess because he did the negotiations for it and it was just – it was just thought of at the time that he was purchasing it, so that’s how it ended up, you know, starting out in his name.
In fact it started out in his name because he was, in fact, purchasing it, wasn’t he?---On my behalf, yes.
What – why are you so adamant that he was purchasing it on your behalf?---Because I asked him to.
Well, you can’t recall the conversation?---No.
Was there a document drawn up?---No.
Much of this evidence at the public examination reads unconvincingly. It is notable, in view of her present evidence which I shall recount below, that Mrs Boyle maintained throughout her s.81 examination that she had paid for the aircraft from her own income, and made no claim to have assigned to Mr Boyle $100,000 from her share of a Lotto prize as a repayment of the claimed loan to buy the aircraft.
In his examination on 30 September 2009, Mr Boyle acknowledged that he had purchased the aircraft, and paid for it with several cheques from his personal accounts (Ex.A p.98‑99). He said that he had obtained a pilot’s licence before their son, who first obtained a student pilot’s licence on his 14th birthday in “January 2005 perhaps”. [In fact, the son turned 14 in January 2006.] Mr Boyle acknowledged the application for transfer of registration to Mrs Boyle in May 2006, and said that she paid “in excess of $140,000 … progressively from the time I purchased it to late 2000 and – possibly 2007 – early 2007”. He said: “when I purchased the aircraft I believed I’d purchased it on her behalf for her and the children … well, before the aircraft was even purchased Vicki asked me to look for an aircraft for the children and asked me to purchase an aircraft for her on their behalf” (Ex.A p.102).
Mr Boyle also made no mention of a substantial assignment to him by Mrs Boyle from a Lotto prize. He said the purchase money was paid to him by Mrs Boyle in “small amounts of cash on occasions and other amounts”. He did “keep a running tab somewhere of the payments” made by Mrs Boyle, which was “archived somewhere” in his house and would be available to the Trustee. He did not “recall exactly” how the balance was paid, “there were some things paid for me and other things – other things – other amounts paid for various things” (Ex.A p.103).
After the examination, the Trustee served on Mrs Boyle a s.77A notice requiring her to produce:
1.Your Personal income tax returns for the periods 30 June 2003, 30 June 2004, 30 June 2005, 30 June 2006, 30 June 2007, 30 June 2008 and 30 June 2009 inclusive.
2.Copies of your bank statements and records with respect to repayment of $140,000 to Norman Clifford Boyle (“The Bankrupt”) by cash or electronic funds transfer with respect to the evidence given by you on 30 September 2009 concerning the transfer of the Evektor Sports Star aeroplane by the bankrupt to you.
According to the evidence before me, Mrs Boyle responded by producing a copy of a tax return for the 2004/2005 year showing no income. In response to a subpoena served on her in the present proceedings, she produced another copy of this tax return, a tax return for 2005/2006 showing $8158 derived from the family trust, and a tax return for 2006/2007 showing directors fees of $8000 and a family trust distribution of $1933. Mrs Boyle’s tax returns provide no support for her claim to have incurred a personal loan of $140,000, nor to have been able to repay such a loan from income. No other documents were ever produced to the Trustee to support her claims.
Mrs Boyle also answered the s.77A notice by producing a photocopy of an annotated copy of the final payment SilverWing invoice to Mr Boyle dated 24 August 2004. It showed a copy of an annotation in Mr Boyle’s handwriting and his signature but no date. The annotation said: “Loan to Vicki $144K to be paid back as & when available”.
Another copy of the annotated invoice was attached to Mrs Boyle’s affidavit sworn on 19 May 2010, which she described as “a copy of the Invoice Number: 00343c noting the loan to me by NCB for the purchase of the aircraft”. This copy is identical to the document given to the Trustee in 2009, with an additional notation in Mr Boyle’s handwriting: “Plus extra $2150 Total $146,150”. Mr Boyle’s affidavit also attaches a copy of this document with both annotations, and he said that this “was written at the time I made the final payment to SilverWing Aviation on or about 24 August 2004”. Neither of the affidavits attempted to explain how the invoice with one annotation came to be forwarded to the Trustee in 2009.
When the discrepancy was put to Mr and Mrs Boyle in cross‑examination, they gave unsatisfactory evidence. Mrs Boyle appeared initially to claim that she had been given the fully annotated invoice “about the time that the aircraft was ordered, or before – I think it was before it was delivered”. She said that Mr Boyle would have put the reference to the extras on it “about the same time because this invoice has got that amount on there anyway”. However, I do not consider that her evidence showed any real recollection of receiving this document, in either versions, nor any satisfactory explanation as to how the different versions came to be presented to the Trustee and then to the Court.
Mr Boyle said that he was unable to find the original document with his handwriting on it. He said that he made the annotations “about the time that the invoice arrived … I wrote the first part on first and then realised that there was additional costs so I wrote them on separately … possibly a week or two” later. However, when presented with the version sent to the Trustee in 2009, his evidence about the annotations became vague and unconvincing. In short, their oral evidence did not clarify to my satisfaction how and when these annotated documents came into existence.
Due to the timing of the production of both versions of the annotated invoice, the unsatisfactory evidence about their creation and location, and my general opinion as to the unreliability of Mr and Mrs Boyle’s evidence, I do not accept the annotated invoice, in either of its versions, as corroboration of the claimed agreement between Mr and Mrs Boyle in 2004. I am inclined to conclude that the first annotations probably came into existence after Mr Boyle’s bankruptcy and after the public examinations, and that the further annotation was made later. However, it is also possible that the first document was created in 2006 or at the time of Mr Boyle’s bankruptcy to give a veneer of proof for a future claim that Mrs Boyle had acquired title to the aircraft for consideration.
Mrs Boyle also claimed in her affidavit that her repayment of a loan to buy the aircraft was corroborated by several bank statements from her personal account showing cash withdrawals of amounts ranging from $250, to $8,000 between August and November 2005. Some of these amounts appear to be traceable into the personal account of Mr Boyle. However, there was nothing on the face of these records which explain these cash withdrawals and transfers, nor point to the transaction now claimed by Mrs Boyle. There were other transfers between their accounts of similar amounts over the relevant years, which were not asserted to represent loan repayments by either of them. Even disregarding numerous unexplained cash withdrawals and deposits in both their accounts, an analysis of Mr Boyle’s bank account shows internet banking transfers between June 2004 and November 2006 from Mrs Boyle to Mr Boyle totalling $113,817, and from Mr Boyle to Mrs Boyle totalling $153,178. Mrs Boyle said: “I really don’t know what those payments were for”. Mr Boyle suggested that his transfers to Mrs Boyle were for “housekeeping and running costs”. In this situation, I do not consider that the particular cash withdrawals isolated by Mrs Boyle in her bank statements provide any corroboration of the loan agreement alleged to have been made by Mr and Mrs Boyle in 2004.
My scepticism about the weight to be given to these banking records is augmented by inconsistent, unverified, and unconvincing evidence of Mr and Mrs Boyle about their keeping contemporaneous informal accounts of the loan repayments, and of using them to identify the cash transfers which are identically listed in both of their affidavits.
As I have noted, Mr Boyle claimed to have kept “a running tab” in his public examination in September 2009. However, he never produced it to the Trustee, and did not attach any contemporaneous records of loan repayments to his affidavit in these proceedings. Under cross‑examination, Mr Boyle said that “there were a number of payments that were made that I jotted down, but I didn’t really keep an accurate record, because Vicki was keeping a record”. He claimed that he was able to list the payments in his affidavit “because I went back to bank statements and reconciled it against Vicki’s notes … Vicki had some handwritten, scribbled notes in her file that detailed each of the payments”. He said he gave them back to Mrs Boyle and now did not know where they were.
Mrs Boyle did not claim in her public examination that she had kept any account of the loan repayments from her income. Nor did she claim in her affidavit that such a record existed. However, under cross‑examination she said: “I think I scribbled down most of them on scrap bits of paper and I just, sort of, put them together from that”. She did not explain why she did not tender them in evidence.
The importance of contemporaneous records of loan repayments must have been apparent to Mr and Mrs Boyle and their solicitor who assisted them to prepare their affidavits. I do not accept that they would not have been tendered in evidence by them if they existed. Taking into account also their unsatisfactory evidence about these records, I do not accept that either of them kept an informal contemporaneous record of loan repayments, from which they were recently able to identify relevant cash withdrawals in Mrs Boyle’s bank statements. I find that no such record ever existed.
Mr and Mrs Boyle’s evidence about winning the Lotto prize in February 2006 is weakened by inconsistency and obscurity about the disposal of the proceeds. Its reliability is also affected by an impression that they both attempted before and during their public examinations to keep the Lotto win secret from their creditors and from Mr Boyle’s trustee in bankruptcy. The only reliable evidence about its ownership is shown in documents produced by NSW Lotteries. These all show Mr Boyle as the sole claimant and beneficiary of the prize. This appears not only from his being the sole claimant, noting that the claim form insisted upon a single claimant, but also from the subsequent nomination of his personal bank account for receiving the prize.
There is no independent evidence supporting Mrs Boyle’s claim in her affidavit that they had joint title to the prize, which is suggested in her language “NCB and I shared in a $1,000,000 Lotto win”, and “we won the prize”. Nor, is there any independent evidence supporting her claim in oral evidence that “I bought the Lotto ticket”, and that she asked Mr Boyle the next day “to check it” at the newsagent. She then claimed, in effect, to have made a gift of half the proceeds to Mr Boyle, via his loan account in the family trust, after assigning to him her right to $100,000 of the money. This version of events did not appear in the affidavits of either of them, but it was also maintained by Mr Boyle in his oral evidence.
It is uncontested that minutes and other records of their family trust were prepared by Mr and Mrs Boyle in February and March 2006 to show that the trustee was directed that $900,000 of the prize was transferred to its bank account from Mr Boyle’s bank account, upon his direction that the funds should “be held for my account and funds are to be paid by my direction or Vicki Boyle. All interest is to be credited to me”. Mrs Boyle claimed that this documentation was false, and that the true position in relation to the transferred Lotto money was later reflected in the family trust accounts prepared in late 2006 or 2007. In this respect, I note that I declined to accept the tender of some accounting documents to this effect, upon an objection that they had been prepared for use in pending litigation involving the liquidator of the former trustee company. However, if the documents had been received in evidence, they would not have altered any of my findings made in this judgment.
Neither Mrs Boyle nor Mr Boyle could give me a coherent explanation why family trust documentation was prepared in February and March 2006 falsely showing Mr Boyle as the sole beneficiary of the prize. Neither Mr nor Mrs Boyle gave evidence which I am prepared to accept, reconciling these documents with their claim that, in fact, Mrs Boyle had a legal interest in the Lotto prize, and that at the time of its receipt they agreed to share it, after appropriating $100,000 as repayment of a loan owed by Mrs Boyle to Mr Boyle.
Ultimately, I have concluded that I do not need to arrive at conclusions generally whether Mrs Boyle in fact ever had any legal claims on the Lotto prize, nor as to how the proceeds were in fact disbursed. These issues only arise indirectly in the present proceedings, when assessing the credibility of Mrs Boyle’s claim that she orally agreed in March 2006 to assign to Mr Boyle $100,000 from her rights in the Lotto prize by way of repayment of his loan for the purchase of the aircraft.
In relation to this, there is no evidence in any of the contemporaneous records concerning the Lotto prize, whether independently sourced or otherwise, providing any confirmation of such an explanation for $100,000 of the prize money not being transferred to the family trust, but being otherwise disbursed from Mr Boyle’s personal account. There are many other possible reasons why this amount might have been left in his account and spent by Mr Boyle. Their claimed agreement to appropriate $100,000 of the Lotto prize as repayment of a loan made in 2004 is, in my opinion, as unreliably corroborated as the claimed loan agreement itself.
Assessing all of the evidence about the Lotto win, in circumstances where neither Mr nor Mrs Boyle claimed at their public examinations that Mrs Boyle had repaid most of the claimed loan from a Lotto prize, I do not accept that such an appropriation ever occurred. I consider that their evidence about using the Lotto money to repay a loan was part of a fabricated case, which attempted to flesh out claims imperfectly propounded at their public examinations, that Mrs Boyle was the true owner and purchaser of the aircraft in 2004.
Mrs Boyle claims in her affidavit that, after taking into account the assigned Lotto monies, “I did a reconciliation of the payments I had made for the aircraft and on 4 May 2006 I paid the amount of $21,000 from my share of the Boyle Family Trust to NCB”. She does not produce any record of her ‘reconciliation’, nor explain how it was made. The only corroboration of a reconciliation payment which is tendered is a bank statement from Mr Boyle’s bank account, showing an amount of $21,000 being received on that day by way of ‘internet transfer’ from an unstated source for an unstated reason. I do not accept this bank record as corroboration of Mrs Boyle’s assertion that the monies were paid or received by way of completion of loan repayment under an agreement made in 2004. I am not persuaded that this transfer, nor any of the other bank transfers isolated by Mrs Boyle, evidences the existence of that agreement.
After assessing all of the evidence before me, including my assessment of the credibility of Mr and Mrs Boyle generally, I consider it more likely that Mr and Mrs Boyle have, in recent times, reconstructed a purported schedule of repayments, after locating unverifiable cash dealings in their banking records which total the claimed amount of the alleged loan. In a situation where their bank records which are in evidence show a multitude of similar cash transactions between Mr and Mrs Boyle and their family trust, there are numerous other possible family and business explanations for the transfers to which they now point. I therefore do not consider that the banking records now in evidence lend support to Mrs Boyle’s case.
My above findings identify the weaknesses in the corroborative evidence of the oral purchase and loan agreement which Mr and Mrs Boyle claimed to have been made in 2004. Significant weaknesses are also shown in their direct evidence of the oral agreement.
The principal weakness is the manifest contrivance of their affidavit evidence. The affidavits of Mr and Mrs Boyle prepared and filed by her solicitor, contain duplicate versions of two conversations, which are claimed to have constituted their agreements. The first was “during January 2004”, which both of them swear was “to the following effect”:
Me:Norm it would be great to buy an aeroplane for the kids, Mitchell has always shown an interest in flying and the other children will want to learn to fly as well.
NCB:That’s a great idea the flying lessons will be cheaper if we own our own aircraft, why don’t we got to the Narromine Air Show in Easter they have ultra lights on display and we can have a look at them and discuss it further and they will be able to tell us what we’ll be up for in terms of price.
Me:I won’t be able to go at Easter because of mum why don’t you go with the kids and tell me what you think, bring back some brochures.
The second conversation is claimed to have occurred when the family returned from a visit to Narromine Air Show in Easter 2004:
Me:What did you find out?
NCB:If we get an aircraft it has to be factory built and certified because an instructor won’t want to use one that hasn’t been factory built and certified. We should get a new one because if all three kids will be using it we want to have longevity of the motor, if we buy a second hand one then it will mean that we will have to replace the motor after the number of hours required for replacement.
Me:This is something I want to do for the kids. I want to buy the aeroplane from my money.
NCB:But I want to use it from time to time.
Me:That’s okay but the kids are the reason that I want to do this and I want to buy it for them, they will be using it the most.
NCB:How are you going to pay for it? It’s going to cost more than $130,000.00.
Me:Well you know I’m planning some property developments and I can pay you from time to time as they’re finished.
NCB:Well if that’s the case I’ll lend you the money for the aeroplane, so I’ll pay for it and you can pay me back, as long as I can use it without having to ask your permission each time.
Me:Yeah that’s okay but just remember the children will have first use of it.
It is conceivable that Mrs Boyle’s solicitor may have unwittingly thought that his client’s case would be assisted, rather than the converse, by attributing to both Mr and Mrs Boyle an identical memory of an otherwise unrecorded conversation occurring six years before taking instructions. It seems more likely, and I would infer, that he was presented with instruction that both witnesses now had identical recollections of the words spoken. This flies in the face of normal experience, and is plainly inconsistent with the very imperfect memories of their agreement given by Mr and Mrs Boyle during their public examinations. Neither of them showed, during their oral evidence to the Court, any capacity to recall with any clarity conversations occurring several years previously. I do not accept that the words set out in the affidavits, nor words ‘to their effect’, were actually recalled by Mr and Mrs Boyle as having been exchanged in 2004.
The apparent duplication of their affidavit evidence, confirms a general impression from their affidavits and their oral evidence that Mr and Mrs Boyle gave evidence which was not based upon their actual recollections, achieved without mutual discussion and preparation. These conversations were, in my opinion a reconstruction of what Mr and Mrs Boyle would like the Court to accept, rather than a genuinely recalled oral agreement. For these reasons alone, I consider that their evidence of the agreement is unreliable unless supported by independently reliable evidence. As I have noted above, such evidence does not exist.
Moreover, I found the oral evidence given by both Mr and Mrs Boyle to be generally unconvincing. Both of them appeared intelligent, careful witnesses, with experience in business matters. They both gave carefully considered responses to every question. Much of their evidence was plausible, if considered in isolation. However, at times they both gave vague and non‑committal responses to questions inviting precision and exact memories, and I was left with a firm opinion that on important issues they were both maintaining an agreed version of events, rather than speaking from personal recollection of true events. Their evidence as witnesses tended in my mind to confirm a concern that their claims about an agreement in 2004 and subsequent loan repayments were contrived, rather than to reassure me that this was not so. I reached a general conclusion that I should not accept their evidence as reliable unless it was independently corroborated or was obviously true.
Upon this assessment of Mr and Mrs Boyle as witnesses, and taking into account all the deficiencies in how they presented and attempted to corroborate their claims, I do not accept that Mr and Mrs Boyle ever had conversations about the purchase of the aircraft prior to or at the time of its acquisition, or subsequently, which were intended to give rise to legal consequences for either of them, and which negated or otherwise affected the legal title in the aircraft acquired by Mr Boyle in 2004 under the purchase agreement with SilverWing. I do not accept that Mrs Boyle ever came under legal obligations to reimburse Mr Boyle for the money used to purchase the aircraft. I do not accept that a ‘loan’ agreement for this purpose ever arose as part of an agreement in 2004 or subsequently. I do not accept that any transfers or assignments of money from Mrs Boyle to Mr Boyle between 2004 and 2006 were made pursuant to such an agreement, nor otherwise for any purposes related to the acquisition of the aircraft by Mr Boyle in 2004 and its subsequent registration in Mrs Boyle’s name in 2006.
Mrs Boyle does not claim, and there is no evidence, that she paid any consideration at the time of the transfer of registration, nor gave consideration referable to the transfer, other than by way of the earlier payments she claims to have made pursuant to a 2004 loan agreement.
My reasons for rejecting the claimed 2004 agreement asserted by Mr and Mrs Boyle also lead me to conclude, on the balance of probabilities, that in fact the registration in Mrs Boyle’s name in 2006 occurred for no consideration other than, perhaps, family considerations which are excluded from relevance by s.120(5).
Assuming that the registration and the transfer document signed by Mr Boyle at that time took effect as a transfer of the legal title in the aircraft to Mrs Boyle, then the transfer of property is void under s.120(1). Since the transfer occurred within 2 years before the commencement of the bankruptcy, it is unnecessary to consider the exceptions in s.121(3). Since I have found that no consideration recognised by s.121 was paid by Mrs Boyle, no refund is required under s.121(4). If the assumption of a legally effective transfer in 2006 is erroneous, then the aircraft at all times remained Mr Boyle’s property. On either basis, it is property which passed to the Trustee as part of Mr Boyle’s estate in bankruptcy.
I therefore accept that the Trustee has established an entitlement in these proceedings for declarations that the transfer to Mrs Boyle in 2006 is void, and that the aircraft is a vested part of the bankrupt estate. I accept that it is appropriate to give ancillary relief to allow the Trustee to take immediate possession of the aircraft and to realise its value for the purposes of his administration.
I can see no prima facie reason why costs should not follow the event, but I shall invite further submissions about costs.
I certify that the preceding sixty-six (66) paragraphs are a true copy of the reasons for judgment of Smith FM
Associate: Lilian Khaw
Date: 14 September 2010
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