Re Abrahams, S. v Ex parte Thomas, H.c. Fuzi, G.I.

[1989] FCA 419

Re: STEPHEN ABRAHAMS ex parte HUGH CHARLES THOMAS
And: GEORGE IVAN FUZI; IAN WAYNE FUZI; GRANT ADAM FUZI and
GREGORY ALEXANDER FUZI
No. W290 of 1982
FED No. 419
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Burchett J.(1)

CATCHWORDS

Bankruptcy - settlement - application to declare Deed of Family Arrangement void as against trustee in bankruptcy under s.120(1) or s.121(1) Bankruptcy Act 1966 - whether settlement under the Deed made in favour of "a purchaser ... in good faith and for valuable consideration" - meaning of "in good faith" - whether beneficiary under Deed is a "purchaser ... for valuable consideration" - discussion of the question who is the "purchaser" where several persons give consideration for a vesting of property on trust for infant third parties and whether the good faith of one can sustain a settlement on the third parties.

Bankruptcy Act 1966 s.120(1)

HEARING

SYDNEY

#DATE 4:8:1989

Counsel for the Applicant: Mr J K Chippindall

Solicitors for the Applicant: Blessington Judd & Co

Counsel for the Respondents: Mr C A Evatt with

Mr M J Bleasel

Solicitors for the Respondents: Teakle Ormsby & Associates

ORDER

The applicant be directed to bring in, on a date to be fixed, Short Minutes in accordance with the Reasons for Judgment of the Court.

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

JUDGE1

This is an application, by the trustee of the bankrupt estate of Stephen Abrahams, for a declaration that a deed made by the bankrupt and others on 2 June 1981 is, in whole or in part, void as against the trustee pursuant to s.120(1), or in the alternative s.121(1), of the Bankruptcy Act 1966.

1. The deed the subject of the application was executed just over four months prior to the act of bankruptcy, committed on 16 October 1981, as a result of which the estate of the bankrupt was sequestrated on lo May 1982. It was made between the bankrupt, Stephen Abrahams (therein called "the Administrator"), his deceased wife's mother Ilona Vertes (therein called "the Beneficiary") and the first respondent George Ivan Fuzi, who is the father of the second respondents, (therein called "the Joint Tenant"). The deed was entitled a Deed of Family Arrangement. It recited that the Administrator had applied for letters of administration in the estate of his deceased wife, that he and the Beneficiary had become entitled to the assets in the estate upon the intestacy of the deceased, that the estate was liable to death and estate duties, and (in summary) that the Joint Tenant had agreed to pay the duties in consideration of the covenants of the deed. In the operative terms of the deed it was provided that the Administrator should do all things necessary to:
   

"(a) Complete his application for Letters of Administration but for the payment of death and estate duties,

(b) do all things and sign all necessary papers to effect the transfer of such assets as are more fully set out in the First Schedule hereto in the manner set out in the Second Schedule hereto."

The following further provisions were made:

1. That the Beneficiary should also do all things and sign all necessary papers to effect the same transfers;

2. That the "Joint Tenant shall forthwith upon assessment by the Commissioner of Stamp Duties and the Commissioner of Taxation make available funds for the purposes of paying all death and estate duties payable in respect of the Estate including all interest payable thereon."

3. Transfers by the Administrator and the Beneficiary were expressed to be "conditional upon due payment by the Joint Tenant of the death and estate duties".

4. The Joint Tenant covenanted to "pay to the Beneficiary the sum of Seventeen thousand dollars ($17,000.00)."

5. The Joint Tenant covenanted to "pay all principal moneys and interest secured by any mortgages over the assets referred to in the First Schedule" and to indemnify the Administrator and Beneficiary in respect thereof.

The First Schedule listed three properties:

1. the deceased's interest as owner in fee simple in a strata title unit number 17/63 Darling Point Road, Darling Point;

2. the deceased's one half share as tenant in common in land known as 29 Cook Road, Marrickville;

3. the deceased's shareholding in a company Pronto Trading Company Pty Limited, being ten thousand fully paid ordinary shares having a face value of $2.00 each.

There was added a note: "NOTE: All other assets of Estate to pass by the laws of survivorship and Intestate succession." The Second Schedule then provided that the first of these properties, that is, the unit at Darling Point, should be held by the Administrator upon trust for the second respondents, any stamp duties to be borne by the Joint Tenant; that the half share of 29 Cook Road, Marrickville be transferred to the Joint Tenant, all stamp duties to be borne by him; and that the deceased's shareholding in Pronto Trading Company Pty Limited should be transferred to the Joint Tenant, all stamp duty to be borne by him.

1. There was a long and somewhat complex background to the Deed of Family Arrangement. Mr George Fuzi is the son of the late Alexander Fuzi, who died on 3 November 1968. George Fuzi's mother died when he was two years old, and Alexander Fuzi then married Clair, the daughter of Ilona Vertes, in Hungary, from where Alexander and Clair Fuzi migrated to Australia with their son George. Ilona Vertes also came to Australia. George Fuzi regarded Clair Fuzi as his mother and Ilona Vertes as his grandmother. He was himself treated as Clair's son.

2. On 26 February 1970 probate of the will of Alexander Fuzi was granted to Clair Fuzi and Leslie Marton (the family solicitor) as executors. The will made a small bequest to George Fuzi and gave the entire residue upon trust for Clair Fuzi:
   

"until her death or remarriage whichever shall first occur AND FROM AND AFTER the death of the survivor of myself and my said wife or her remarriage should she be the survivor for my son George Ivan Fuzi ... ."

1. In about early 1970 Clair Fuzi told George Fuzi that she wished to remarry, and he was introduced to Stephen Abrahams (now the bankrupt) as her intended husband. George Fuzi expressed willingness to forego his rights under the will of his father on the basis that Clair Fuzi would transfer to him the shares the father had owned in Pronto Trading Company Pty Limited, these shares being sufficient, when added to the shares George Fuzi already held, to give him full control of the company. (In fact, Mr Fuzi already owned half of the shares, the other half being divided between the estate of Alexander Fuzi, as to one third of them, and Clair Fuzi, as to the remaining two thirds.) They attended the solicitor, Mr Marton, to instruct him accordingly, early in February 1970. However, on 24 February 1970 Clair Fuzi married Stephen Abrahams, before anything had been done to carry out the proposed resettlement of the property disposed of by the will.

2. The marriage of Clair Fuzi to Stephen Abrahams caused confusion in more than one way. The family solicitor, Mr Marton, took the view that if the marriage was valid it might have become too late to draw up a deed of family arrangement resettling Alexander Fuzi's estate, since the terms of the will would already have operated to bring Clair Fuzi's life estate to an end and confer the entire interest in the residue upon George Fuzi. However, the complicating factor was a doubt as to the validity of the marriage. For Stephen Abrahams had previously gone through a ceremony of marriage, and had not obtained a divorce. He had been told that his previous marriage was a nullity. Mr Marton, accordingly, submitted a brief to counsel to advise, in which he pointed out that if Clair Fuzi had succeeded in effecting a valid marriage, the costs (including gift duty) of rectifying the situation might well be prohibitive. The brief was submitted in March 1970, but little seems to have come of it, except that proceedings were instituted by Stephen Abrahams in the matrimonial causes jurisdiction of the Supreme Court of New South Wales to obtain a decree of nullity of his previous marriage. Pursuant to those proceedings, on 15 October 1971 Selby J. declared Mr Abrahams' former marriage to one Suzanna Abrahams null and void, on the ground that the marriage was not a valid marriage, under the law of the place where it was celebrated, by reason of a failure to comply with the requirements of the law of that place with respect to the form of solemnization of marriage. On the basis that the marriage to Suzanna Abrahams was always void, and not merely voidable, it was not necessary for Stephen Abrahams to obtain the decree of nullity before marrying Clair Fuzi, and his marriage to her was valid: De Reneville v. De Reneville (1948) p 100 at 111.

3. Although the decree of nullity made it clear that the life estate of Clair Fuzi (now Clair Abrahams) had terminated upon her marriage to Stephen Abrahams, and that George Fuzi was entitled to the corpus of his father's estate, no steps were taken to effect any formal transfer to him or, so far as appears, to deliver any of the property to him. It all seems to have remained in the name of Clair Abrahams, and to have been treated as hers. The family had been a close one, and I conclude from the evidence that Stephen Abrahams was accepted into it, and that George Fuzi was satisifed that his rights would be respected in the long run, being content for the present that his mother (as he regarded Clair Abrahams) should continue to enjoy the property inherited from his father. I think the spectre of possibly large duties being exacted in respect of any deed of family arrangement operated as a deterrent.

4. During this period, George Fuzi carried on the business of Pronto Trading Company Pty Limited as a company wholly owned by himself and his step-mother. By virtue of the operation of his father's will upon his step-mother's remarriage, he was strictly entitled to a controlling interest, but he treated the company as if it had been equally owned by his step-mother and himself. According to Mr Fuzi's evidence, which I accept, Clair Abrahams repeatedly made it clear that she wished him to control the company, and that she intended his children to receive the unit at Darling Point of which she was the sole owner by survivorship, it having been held as joint tenants by Alexander Fuzi and herself. However, she executed no documents to these ends.

5. Just prior to Alexander Fuzi's death, properties numbers 21-27 Cook Road, Marrickville had been purchased by George Fuzi and Clair Fuzi. The properties had been bought as premises to be occupied by Pronto Trading Company Pty Limited. About 1971, a further property, contiguous with the others, number 29 Cook Road, Marrickville, was acquired. It was a vacant block of land, and the intention was to erect a building on it to cater for the expansion of the company. Clair Fuzi provided money for the original purchase of numbers 21-27 by the sale of other property of hers, but the cost of number 29 was paid by moneys drawn from the company. The erection of a building on number 29 was paid for partly by George Fuzi, partly by Clair Abrahams, partly by moneys obtained from the company, and in large measure by the raising of a mortgage.

6. It is common ground that numbers 21-27 were purchased by George Fuzi and Clair Fuzi as joint tenants, and the title documents confirm this position. George Fuzi's evidence is that there were no discussions between himself and his step-mother in which any different arrangement was suggested or agreed in respect of number 29. He thinks he probably gave the instructions in respect of the conveyancing himself. It was attended to by a solicitor different from the family solicitor previously mentioned. It was not Mr George Fuzi's intention that the property number 29 should be acquired as tenants in common and he always assumed it had "been done the same way". His intention was that it should be acquired "exactly the same as the other two pieces of property" (ie numbers 21-23 and 25-27). He did not become aware of the fact that, in the case of number 29, the title was held as tenants in common until after the death of his step-mother. I found Mr George Fuzi an impressive witness. If he had been willing to exaggerate his case, he could easily have asserted that Clair Abrahams expressly said the title to number 29 should be the same as the title to numbers 21-27. All the circumstances suggest that this was in fact her intention. The whole group of properties formed the premises of the company which George Fuzi operated and which she clearly intended him to control. Instructions dated March 1970 noted by Mr Marton show that she intended George Fuzi to receive all shares held by her in the company upon her death. The initial purchases were in joint names although some of the money was provided by the sale of a property of hers. It does not make sense that the further purchase, made by the use of the company's funds and a mortgage clearly intended to be repaid out of its profits at a time when George Fuzi was strictly entitled to control the company, should be held on a title less favourable to George Fuzi. The purpose of the acquisition of the additional land was that it should be an accretion to the land already held, so that the premises of the company could be extended. It was a purchase of vacant land, and much of the value would be provided by the erection of a building for the company. On 14 July 1982, nearly four years before the position was queried upon the examination of Mr Fuzi by the trustee, Mr Fuzi alleged, in answering a Stamp Office requisition, that number 29 Cook Road should have been transferred to the deceased and himself as joint tenants.

7. I accept the evidence of Mr Fuzi, and having regard to the whole of the surrounding circumstances I conclude that it was the intention of both Clair Abrahams and George Fuzi that the additional property should be held upon the same basis as the other properties, that is, as joint tenants. In the light of George Fuzi's generous attitude towards his step-mother in the matter of his father's will, it is in fact very unlikely that Clair Abrahams would have had any other intention. The stamp affidavit subsequently sworn by Stephen Abrahams in support of an application for letters of administation in the estate of Clair Abrahams shows George Fuzi as entitled to number 29 Cook Road by survivorship. This is an acknowledgement against interest, made at a time well before any of the problems which led to his bankruptcy had arisen. It is indicative of the understanding of the family. I have reached the conclusion I have indicated without reference to this additional circumstance, but I note that it is consistent with that conclusion.

8. Clair Abrahams died suddenly, on 9th May 1974, of a heart attack suffered during convalescence from saphenous vein by-pass graft surgery. At the time of her illness, although such an outcome was not expected, Clair Abrahams said in the presence of her mother, her husband, and Mr Fuzi:
   

"I want the unit at Darling Point to go to George's children. I want Pronto Trading to go to George."

However she left no valid will.

1. After the death of Clair Abrahams, Stephen Abrahams, Ilona Vertes and George Fuzi verbally agreed that Stephen Abrahams would stay in the property at Darling Point, but the children of George Fuzi would be entitled to receive it, and George Fuzi would receive the shares in the company. There was no discussion about number 29 Cook Road; I infer that this was because all parties understood George Fuzi would receive it by survivorship together with the other Cook Road properties. Ilona Vertes pointed out that she was legally entitled to moneys from the estate upon the intestacy, and asked George Fuzi to pay her the sum of $17,000.00 which she claimed was in any case owing to her under some earlier family arrangements. George Fuzi agreed to arrange for payment of this sum through Pronto Trading Company Pty Limited, not acknowledging her claim but as a term of the verbal agreement, and in fact she was paid regular weekly amounts of $250.00 until her death on 2 January 1984 of a heart attack at the age of 80 years. She is described in the death certificate, not as retired, but as a self employed manager, and the evidence of George Fuzi reveals her as a formidable old lady. I have no doubt she was aware of her rights under the intestacy. It was common ground at the hearing that by virtue of the law of New South Wales in force at the time, Stephen Abrahams was entitled to the first $6,000.00 of his wife's estate, and he and Ilona Vertes were entitled to the balance in equal shares. It follows she was making a substantial concession, though doubtless entirely in accordance with her own desires, in agreeing that the unit at Darling Point should go to George Fuzi's children, whom she regarded as her great-grandchildren. George Fuzi also agreed, in these discussions, to pay the death and estate duties in the estate of Clair Fuzi, and to indemnify Stephen Abrahams and Ilona Vertes in respect of the obligations under the mortgages over the properties at Darling Point and Marrickville.

2. The evidence concerning the arrangements is substantially the evidence of George Fuzi, as Ilona Vertes is now deceased and Stephen Abrahams was not called by either party, though the transcript of his evidence upon his examination as a bankrupt was tendered by the applicant and received. Mr Fuzi's evidence under cross-examination was quite vague on a number of matters, but not I think more so than the lapse of time would warrant. Indeed his demeanour seemed to me to be that of a witness who was endeavouring to recollect what had transpired to the best of his ability and to tell the truth. I have already said I found him an impressive witness. His evidence derives substantial support from documents held by the solicitor Mr Marton who has since retired, being now a consultant to his former practice. Mr Marton also had some difficulties of recall, and he is not a young man.

3. Mr Marton thought that instructions to act in the estate of Clair Abrahams were given to him by Mr Abrahams and Mrs Vertes. His evidence confirms that he received further instructions, which involved Mr Fuzi, in about November 1977 to draw a deed of family arrangement. That matter proceeded very slowly. On 19 June 1978 Mr Marton wrote a letter to Mr Fuzi for instructions as to "the final outlines of the proposals". It seems that by November 1977 the problem of the tenancy in common in respect of number 29 Cook Road had been appreciated, and a resolution of this problem had been added to the other matters verbally agreed by the family. The letter provides confirmation that in November 1977 Mr Marton had been instructed it was proposed Mr Fuzi should undertake to make a payment to Mrs Vertes (the amount is not specified in the letter and Mr Marton could not remember what it was, but I am satisfied this was a reference to the $17,000.00), that Mr Fuzi would undertake to pay all death and estate duties, and that Mr Abrahams would make a declaration of trust in respect of his interest in the unit at Darling Point in favour of Mr George Fuzi's children. There is a handwritten note (which was not explained in evidence) at the foot of Mr Marton's copy of this letter: "Payts to continue", underneath which has been written "C.P.I.?" This note is consistent with Mr Fuzi's evidence that he paid the $17,000.00 (and indeed much more) by continuing to make payments of $250.00 per week to Mrs Vertes long after an original entitlement to these payments had been exhausted. Mr Fuzi replied to the letter by sending it back with a handwritten endorsement, bearing his signature and dated 9 February 1979, as follows: "I hereby irrevokably (sic) authorize and instruct you to proceed in terms as outlined above." Despite this reply, nothing seems to have been done at that stage. There are a number of possible reasons - the failure of Mr Abrahams to have the duties assessed in the estate of Clair Abrahams, concern about the incurring of further cost including duties, dilatoriness on the part of Mr Abrahams. Mr George Fuzi's evidence is that Mr Abrahams agreed to have a suitable deed prepared, but nothing happened. Relations between the members of the family were friendly and George Fuzi did not press the point, although from time to time he reminded Stephen Abrahams that their arrangement required implementation. There never seems to have been any dispute about the matter, but merely delay.

1. A claim of the kind made by George Fuzi naturally requires scrutiny. Mrs Vertes is now deceased. The personal interest of Mr Abrahams is affected by his bankruptcy. However, Mr Marton's evidence, and his papers, make it clear that at least the broad outlines of some agreement of the kind alleged by Mr Fuzi had been discussed. The circumstances provide a foundation for such an agreement. Mr Fuzi clearly had an entitlement under his father's will in respect of so much of Clair Abrahams' estate as had been received by her from Alexander Fuzi (or if that property had been dissipated he had an entitlement against her estate in respect of her dissipation of assets in which she had only a life interest). Once the state of the title to 29 Cook Road was ascertained, he also had a claim in respect of that property. His rights certainly included a claim to a parcel of shares in Pronto Trading Company Pty Limited, which was then an active company of some value. At the same time, Ilona Vertes had a legal entitlement to almost fifty percent of the estate of Clair Abrahams upon her daughter's intestacy, and had a natural interest in the proposal that George Fuzi's children should receive the Darling Point property by virtue of her affection for her deceased daughter and the children her daughter had regarded as her own grandchildren. All these circumstances make the alleged agreement perfectly probable. Equally, they make it improbable that Stephen Abrahams would have been permitted, without some such agreement, to retain possession of the Darling Point unit, and other property left by Clair Abrahams, without accounting in any way to Ilona Vertes. Mr Marton, though his difficulties of memory must be borne in mind, swore in his affidavits that the deed ultimately entered into and set out at the beginning of these reasons was in accordance with the instructions received by him a number of years earlier. In all the circumstances, I am satisfied that verbal agreement was reached as alleged by Mr Fuzi. I think it was reached at least as early as 1977 in the terms later recorded in the deed, and probably much earlier in similar terms except for the reference to number 29 Cook Road which was originally assumed to have passed to Mr Fuzi by survivorship.

2. That the agreement was treated as operative, though not reduced to writing, is confirmed not only by the exclusion of Ilona Vertes from her virtually fifty percent entitlement in the estate of her daughter, and her receipt of moneys, to which she was not otherwise entitled, from George Fuzi, but also by the fact that Mr Abrahams and Mrs Vertes allowed Mr Fuzi complete control of Pronto Trading Company Pty Limited, and allowed him to take all profits from the company. If they had retained their entitlement, under the intestacy of Clair Abrahams, to a substantial part of her fifty percent shareholding (and on paper to the whole of her fifty percent shareholding), it is unlikely they would have allowed this position to continue. The applicant placed reliance on the fact that Mr Fuzi did not pay the duties, but the estate was dilatorily administered and it is clear that all parties were content to allow the assessment to be delayed. He has not yet received any assessment to pay. He did arrange payment off of one of the mortgages; another still subsists, and payments under it are being made from the rents of the Marrickville properties. Something was sought to be made for the applicant of the issue by the company, of which Mr Fuzi and his wife were directors, of additional shares in the name of the estate of Clair Abrahams, in equal proportion to additional shares issued on account of Mr Fuzi's shareholding. But it cannot follow that Mr Fuzi had no entitlement to the estate's shares, since he was clearly entitled, by his father's will, to at least one third of these shares. The true explanation of his action redounds to his credit - he was meticulous, in his capacity of a director, to observe, where he thought it was called for, equality of treatment of the shareholders as recorded in the books of the company.

3. The family association between Mr Abrahams and Mr Fuzi led to Mr Fuzi agreeing to guarantee certain advances made to a company in which Mr Abrahams was the principal shareholder, Quality Confections Pty Limited. He also entered into guarantees of another company, Quality Confections Imports Australia Pty Limited. Mr Abrahams, too, was prepared to be a guarantor in respect of a loan to Mr and Mrs Fuzi, as is evidenced by a deed of loan and guarantee made 28 April 1977 in respect of an advance of $200,000.00 by AGC (Securities) Limited. Both the company controlled by Mr Fuzi, Pronto Trading Company Pty Limited and the company controlled by Mr Abrahams, Quality Confections Pty Limited, borrowed moneys from Balfour Williamson & Co Ltd and companies associated with that company (the Balfour Williamson Group).

4. At some stage, about early 1981, the Balfour Williamson Group was desirous of expanding its operations in Australia, and for that purpose acquiring a suitable trading vehicle. Mr Stephen Abrahams told Mr George Fuzi (who also received some confirmation from officers of the Balfour Williamson Group) that the Balfour Williamson Group had offered to take over Quality Confections Pty Limited for a sum of $1.8 million. But while Mr Fuzi was on a business trip in England, in April and May 1981, he received a telephone call from a Mr Scudamore of the Balfour Williamson Group, who told him that information had been received from the accountant of Quality Confections Pty Limited that the company was in trouble. Mr Fuzi returned to Australia about 27 May 1981, when he attended a meeting at the offices of the Balfour Williamson Group in Sydney. Mr Scudamore told him they found it hard to believe that the company they were considering taking over was in trouble, and that they did not at that time intend to appoint a receiver. The effect of Mr Fuzi's evidence is that he was made aware about 27 May 1981 that there were difficulties for the company, but not that the appointment of a receiver was imminent, and certainly not that the company's position was such as to lead him to infer that Mr Abrahams was in a serious financial situation which might lead to bankruptcy. In fact the company continued to trade under the management of a receiver for some time after a receiver was appointed, which occurred on 3 June 1981. Mr Abrahams did not tell Mr Fuzi of any threat to appoint a receiver, nor did he tell him that the company was in difficulties. The appointment, when it occurred, was a complete surprise to Mr Fuzi. Even after the appointment of the receiver, Mr Scudamore told him: "We will allow the receiver to operate the company for at least 12 months and we will not be calling upon your guarantee for at least this period of time." There was no cross-examination as to this evidence, and no evidence from Mr Scudamore to the contrary. There is also uncontradicted evidence from Mr Fuzi that the receiver effected changes in the factory and management, in which Mr Fuzi himself gave assistance, and that the Quality Confections companies appeared to operate effectively under the receiver's management, so that, until Mr Abrahams' act of bankruptcy in October, Mr Fuzi remained confident they would trade their way out of their problems. Until then, the companies appeared to have a future.

5. This evidence, like the evidence of the verbal family arrangement, calls for some scrutiny. It would certainly be somewhat remarkable if the deed of 2 June 1981 was executed, one day before the appointment of a receiver, without Mr Fuzi being aware of the seriousness of Mr Abrahams' situation. However, there was no evidence to contradict Mr Fuzi's assertions that, even after the receivership, the companies appeared to operate in such a way that their demise was not to be expected, nor was he cross-examined on these assertions. Some confirmation is to be found in the evidence of a Mr Kelly whose affidavit was read on behalf of the applicant. Mr Kelly, in May 1981, held the position of accounts manager for Balfour Williams (Australia) Pty Limited. On 22 May 1981, he attended a meeting with Mr Scudamore and Mr Rosen, the accountant for the two Quality Confections companies. Mr Rosen stunned Messrs Scudamore and Kelly by announcing his concern at the amount of the bad debts accumulated by those companies. He said there was about half a million dollars of bad debts and another half million dollars of doubtful debts. He was concerned at the "general lack of credit control exercised". He felt his financial advice had been ignored by Mr Abrahams. Mr Scudamore asked Mr Rosen what was the reaction of Stephen Abrahams, to which Mr Rosen replied: "Stephen does not agree with my assessment of the position and feels that everything is OK." This evidence tends to confirm Mr Fuzi's evidence that Mr Abrahams did not tell him the situation was serious.

6. Although Mr Rosen precipitated the question of action by the Balfour Williamson Group, he also said (according to Mr Kelly):
   

"Well I would be concerned to know who you are thinking about appointing (ie if they were going to appoint a receiver and manager) because it is in the company's interests as well as your own not to appoint a butcher to break up the company. I worked with a fellow by the name Evan Groombridge and he would be an ideal fellow for this type of situation."

It was in fact Mr Groombridge who was appointed receiver and manager, and this evidence tends to confirm both that Mr Rosen by no means despaired of the Quality Confections companies and also that the Balfour Williamson Group itself at that time accepted his point of view. No reliable evidence was put before me on behalf of the applicant to show that in fact the position appeared to any of the principal actors, as at the beginning of June 1981, to be one where the Quality Confections companies were not expected to trade their way out - unless the transcript of Mr Abrahams' examination is such evidence. On a number of points, that transcript shows that Mr Abrahams gave evidence contrary to the evidence of Mr Fuzi, but neither party called Mr Abrahams to give oral evidence before me. Some of his answers were in response to leading questions, and I have not been able to assess his demeanour. Particularly having regard to the affidavit of Mr Kelly and my favourable impression of Mr Fuzi, I do not think I should accept the answers of Mr Abrahams in preference to the evidence of Mr Fuzi. Despite the timing of events, which in another case might be conclusive, and which I am sure was not merely fortuitous so far as Mr Abrahams was concerned, I am not satisfied that on 2 June 1981 Mr Fuzi thought or suspected Mr Abrahams was or would become insolvent, or that any fraud or preference was intended by the transaction which took place on that day, or that the transaction was in any way tainted by dishonesty.

1. According to Mr Fuzi's account, on 2 June 1981, Mr Abrahams called on Mr Fuzi, saying he was in a hurry and delivering to him the deed of family arrangement, which had already been executed both by Mrs Vertes and Mr Abrahams. Mr Fuzi took the deed to his solicitor, who was a Mr Michael Conn of Messrs Teakle Ormsby & Associates, and executed it. Mr Fuzi's signature is in fact witnessed by Mr Conn. This tends to confirm that the deed was not prepared on Mr Fuzi's instructions at that time, since, if he had had it prepared, one would have expected his signature to have been witnessed by the solicitor who prepared it. On the face of the deed, it was prepared by Messrs Swaab & Associates, the successors to the practice of Mr Marton.

2. As I have said, the application was brought under ss.120(1) and 121(1). But in the circumstances of this case, if the application does not succeed under s.120(1), I do not think it can succeed under s.121(1). So I shall turn to the former section. Section 120(1) provides:
   

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

(a) a settlement made before and in consideration of marriage, or made in favour of a purchaser or encumbrancer in good faith and for valuable consideration; or

(b) a settlement made on or for the spouse or children of the settlor of property that has accrued to the settlor after marriage in right of the spouse of the settlor, is, if the settlor becomes a bankrupt and the settlement came into operation after, or within 2 years before, the commencement of the bankruptcy, void as against the trustee in the bankruptcy."

1. The question in the present case is whether the settlement made by the deed was, within the meaning of this provision, "made in favour of a purchaser ... in good faith and for valuable consideration". The authorities have usually broken this expression up into its component parts, in order to consider them separately. However, in Barton v. Official Receiver (1986) 161 CLR 75 at 79 and 86, it was made clear that at least the expression "purchaser ... for valuable consideration" should be held together as a single concept, and that often each of the elements will overlap so that the view taken by the court in respect of one will influence the view taken in respect of another. In the present case, I shall first consider the issue of good faith separately, in accordance with the approach which has traditionally been taken by the authorities, but my ultimate conclusion will be derived from an application to the facts of the entire statutory expression.

2. In Official Assignee of the Estate of Cheah Soo Tuan v. Khoo Saw Cheow (1931) AC 67, it was held by the Privy Council, upon the true construction of a section indistinguishable from s.120(1), that the onus of establishing that the settlement challenged was not "made in favour of a purchaser ... in good faith and for valuable consideration" lay upon the Official Assignee. This decision was expressly applied to s.94 of the Bankruptcy Act 1924 in Re Trautwein; Richardson v. Trautwein (1944) 14 ABC 61 at 75-76, a decision of Clyne J. (See also Re Barton; Ex parte Official Receiver v. Barton (1983) 52 ALR 95 at 105, 107.) On appeal to the High Court (Trautwein v. Richardson (1946) ALR 129), the judgment of Clyne J. was affirmed, but the report, which is not complete, does not refer to the question of onus.

3. In Re Hyams; Official Receiver v. Hyams (1970) 19 FLR 232 at 256, Gibbs J. held that the expression "in good faith" in the predecessor of s.120(1) meant "without notice that any fraud or preference contrary to the statute is intended". Fisher J. has commented that Re Hyams was a case where it was not necessary, on the facts, to decide whether a wider meaning can in appropriate circumstances be given to these words, and has suggested that they may refer to "dealings ... made with honesty and propriety": Barton v. Official Receiver (1984) 58 ALR 328 at 337-338. It was conceded that the trustee had to show lack of good faith, not merely on the part of the bankrupt, but on the part of the "purchaser": Mackintosh v. Pogose (1895) 1 Ch 505 at 509; Re Barton (supra) at 115.

4. The circumstances, including his admissions upon his examination, point to the conclusion that the bankrupt suspected his own impending inability to pay debts as they should fall due (cf. Barton v. Official Receiver (1984) 58 ALR 328 at 337). The argument for the trustee was then presented on the footing that the element required to be shown for proof of lack of good faith was lack of good faith on the part of Mr Fuzi. He was treated as the "purchaser" for relevant purposes, not only in respect of the shares and the property at number 29 Cook Road, but also in respect of the interest of the children in the unit at Darling Point. The children were infants, and Gregory Alexander Fuzi is still an infant. (An order was made appointing George Ivan Fuzi his guardian ad litem for the purposes of the proceedings.) It was not suggested that the children personally lacked good faith, and of course they did not provide any consideration. I have no doubt that, so far as the interest conferred on the children is concerned, Mr Fuzi is a relevant "purchaser" of that interest: Hance v. Harding (1888) 20 QBD 732 at 737-738, per Lord Esher, M.R., a passage cited in the joint judgment of the High Court in Barton v. Official Receiver (supra) at 81. But was not Ilona Vertes also a relevant "purchaser"? Lord Esher, in the passage to which I have referred, regarded as a purchaser someone who had "given something to get something for other persons, viz. the family of his son". He added:
   

"He has given up his interest in certain leaseholds to induce his son to give up his interest in these policies. That being so, I think he is a purchaser from the bankrupt within the meaning of the section."

Mrs Vertes gave up, to the extent necessary to effectuate the dispositions made by the Deed of Family Arrangement, her interest in the intestate estate of her daughter. There was no suggestion in the evidence that she possessed any knowledge which would have resulted in her lacking good faith. But it is unnecessary to pursue this aspect of the matter, since I am satisfied that the trustee fails on the issue of good faith on the basis on which he sought to put it. Upon the facts as I have found them, I cannot be satisfied that Mr Fuzi at the relevant time had any such knowledge or suspicion as would have negatived his good faith.

1. Up to this point, it has been assumed that Mr Fuzi was a "purchaser" in a relevant sense. It is now necessary to examine that assumption, and to decide whether he was relevantly a "purchaser ... for valuable consideration". The governing authority on this matter for Australian courts is the decision of the High Court in Barton v. Official Receiver (supra). It was there held that fully adequate consideration is not required, but what is advanced as consideration must be real and substantial. The section refers to a person "who has given consideration for his purchase 'which has a real and substantial value, and not one which is merely nominal or trivial or colourable'" (as it was put in the joint judgment of the High Court at 86). On this basis, I do not think there is any doubt in the present case. The consideration given by Mr Fuzi was far from merely nominal or trivial or colourable. He covenanted to pay a very substantial sum of death duty and estate duty together with a potentially large liability to interest. In addition, he covenanted to pay $17,000.00 to Mrs Vertes (which I am satisfied was paid by instalments, though not as a lump sum), and incurred an obligation to pay unquantified amounts in respect of mortgages. It is also plain (although I find it unnecessary to rely on this matter) that the wider arrangements, out of which the Deed of Family Arrangement had arisen, involved his giving up rights against the estate of Clair Abrahams pursuant to the terms of his father's will. The wider arrangements, pursuant to which the deed there in question was executed, were treated as relevant to consideration by the Full Court of the Federal Court and by the High Court in Barton v. Official Receiver (supra), though in that case they did not amount to substantial consideration. In my opinion, Mr Fuzi was, within the meaning of the section, "a purchaser ... in good faith and for valuable consideration". It follows that the application should be dismissed.

2. I should add that, as I have found the facts, Mr Fuzi, independently of the deed, was beneficially entitled to the property at 29 Cook Road and to the parcel of shares which derived from the estate of Alexander Fuzi. If, as to the remainder of the property, I had been of a different opinion, it would have been necessary to consider whether he was entitled to any indemnity in respect of any expenditure by him pursuant to the deed: Trautwein v. Richardson (supra); cf. In re Holden. Ex parte The Official Receiver (1888) 20 QBD 43; Merry v. Pownall (1898) 1 Ch 306.

1. At the hearing, I was asked to hear counsel, as to the proper costs orders to be made in this matter, after announcing my decision. Accordingly, the only order I make at this stage is that the applicant bring in, on a date to be fixed, short minutes of the orders contended for by him in the light of these reasons.