Re Eustace, N.B. v Ex parte Abermere P/L Re Butler, J.H. v Ex parte Abermere P/L

[1994] FCA 65

( Y U ~ /615, 9

JUDGMENT No. ,... m,,m J mmmm,mm,QQ, ‘f

IN THE FEDERAL COURT OF AUSTRALIA	)
GENERAL DIVISION	1 No. QB 2302 of 1991
BANKRUPTCY DISTRICT OF THE	) No. QB 2668 of 1991
STATE OF OUEENSLAND	)

RE:  NOEL BRAITHWAITE EUSTACE

EX PARTE: ABERMERE PTY LTD

RE:  JAMES HARKNESS BUTLER

EX PARTE: ABERMERE PTY LTD

MINUTES OF ORDER 2 8 FEE 1994

AUSTRALIA

JUDGE MAKING ORDER:	Spender J	PRINCIPAL REGISTRY
DATE OF ORDER:	9 February 1994
WHERE MADE:	Brisbane
THE COURT DECLARES THAT:

(i)     the purported transfer of one share in Transborder Transport Pty Ltd by Noel Braithwaite Eustace to Russell Charles Urwin dated 13 July 1991 is void;

(ii)    the transfer of one share in Transborder Transport Pty Ltd by James Harkness Butler to Joan Urwin dated 13 July 1991 is void;

(iii)   Alan Richard Taylor as trustee of the estate of each of the bankrupts is entitled to a share in Transborder Transport Pty Ltd in consequence of the bankruptcy of each of Noel Braithwaite Eustace

NOTE:	Settlement and entry of orders is dealt with in Rule
124 of the Bankruptcy Rules.

and James Harkness Butler; and

(iv) Alan Richard Taylor is the registered holder of
one share in Transborder Transport Pty Ltd
formerly held by Noel Braithwaite Eustace and
James Harkness Butler respectively.

9	A	)
GENERAL DIVISION

No. QB 2302 of 1991

E - No. QB 2668 of 1991

STATE OF OUEENSLAND 1

RE: NOEL BRAITHWAITE EUSTACE
EX PARTE: &BERMERE PTY LTD
RE: JAMES HARKNESS BUTLER

EX PARTE: ABERMERE PTY LTD

C O W :	Spender J.
PLACE :	Brisbane
DATE :	9 February 1994

These are two applications made by Alan Taylor ( 'the trustee') who is the trustee of the estates of two bankrupts, Noel Braithwaite Eustace and James Harkness Butler. Each application seeks an order that the transfer of one share in the company Transborder Transport Pty Ltd ('Transborder') by the respective bankrupts to, in the case of Mr Eustace, Russell

Charles Urwin, and in the case of Mr Butler ,to Joan Urwin, is	void.
Each application also seeks an order that the trustee is entitled to a share in Transborder as a consequence of the bankruptcy of each bankrupt, and that as trustee he is registered as holder of the share in Transborder formerly held by the respective bankrupts.
The ultimate value of the success of the application to the creditors of the bankrupts may be a matter of some conjecture having regard to separate proceedings touching the question of the capacity in which Transborder operated. It is suggested in some material in another matter that it was, at least for some time, a bare trustee of a particular lease in respect of which not insubstantial rents have been, and continue to be, paid.
That question is, however, a separate question from the entitlement of the trustee to the two shares in Transborder and to registration as a holder of each of those shares. Mr Butler was made bankrupt by a sequestration order of 21 November 1991, the date of commission of his act of bankruptcy being 7 August
1991. M r Eustace was made bankrupt by a sequestration order of
10 October 1991, the commission of his act of bankruptcy being 23 July 1991.
The present applications deal with two transfers of $1 shares executed on 13 July 1991, the consideration being $1. Mr

Butler transferred one share to Joan Urwin and	Eustace
transferred one share to Russell Charles Urwin.

Regulation 19 of the Articles of Transborder provides for pre-emptive rights whereby the secretary is given notice of any intended transfer. The Articles require that the notice must state what the intending transferor considers a fair price, and provide that any dispute as to the fair price is to be fixed by arbitration. The secretary shall thereupon send to each of the other members of the company a copy of the notice of transfer and naming a day, being 28 days after the date of receipt of the notice of transfer, on or before which offers to purchase will be received. No correspondence envisaged by that regulation has been produced.

It appears, however, that the transfers were lodged for stamping and the Commissioner of Stamps requested supporting evidence of the value of the shares. That evidence seems not to have been provided. In the affidavit of Mr Taylor filed 25 February 1993, he speaks of his inquiries of the Office of State Revenue to determine whether any reply to the letter of that office of 13 September 1991 was received. It appears that no response was made to that letter and the transfers do not appear to have been stamped.

No share certificates appear to have been produced nor any register of Transborder been produced. The evidence before me indicates that Mr Taylor has asked for the share register for Transborder. Neither bankrupt, nor Messrs Clayton Utz,

register or produce any share certificates, any minutes of	eolicitors for the bankrupts, have been able to locate any share
directors meetings, or any material to show that the Articles of Transborder in respect of the transfer of shares has been complied with.
It seems to me on that material that the transfers have not been registered. In the view I take of the matter, the shares vested in the trustee upon the bankruptsr bankruptcy, and he is entitledtobe registered as shareholder ofthose two shares.
In accordance with Regulation 21 of the Articles of Transborder on 3 April 1992, the trustee elected to be registered himself as a shareholder, he held a general meeting of Transborder, he appointed new directors, and he established a share register and took control of the bank account and the assets of Transborder.
The trustee says that the principal asset of Transborder is a sublease over a service station in Victoria, the tenant of which has paid monthly rental of $8000 regularly and should continue to do so for the remaining seven or so years of the lease. There is a reference to a notice dated 6 April 1992, subsequent to the bankruptcy of each of the bankrupts, by which the bankrupts purported to exercise the powers of the appointor of the Baker and Eustace Unit Trust. There are questions concerning the efficacy of such an exercise which are unnecessary to resolve in the present applications.
Independently of the conclusion I have earlier expressed there are two other grounds, each of which requires the as to the nature of the purported transfers, it seems to me that
conclusion that if there were dispositions of shares pursuant to the purported transfers of 13 July 1991, they are voidable.
Each transfer was a dispensation of property, and therefore constitutes a settlement: S . 120(8) of the Bankru~tcy

1966 ('the Act'). Each settlement was within two years

before the commencement of the respective bankruptcies, and in my opinion was not made for valuable consideration. The trustee is entitled to rely on S. 120(l)(a) of the Act.

Alternatively, S. 120(2) of the Act has the effect that the transfers are void unless Mr and Mrs Urwin, respectively, prove that the bankrupt was, at 13 July 1991, able to pay all his debts without the aid of the property the subject of the transfer and that the bankrupts' interest in the shares passed to the Urwins on the execution of the transfer.

Proof of the solvency of the respective bankrupts at the relevant date has not been essayed by the Urwins, and the evidence, far from indicating that at 13 July 1991 each of Mr Butler and Mr Eustace was able to pay all of his respective debts without the aid of the property the subject of the transfer, seems to show that at the time of the purported execution of the transfer, each of them was insolvent.

However, it is not necessary to conclude positively that that was the case. There has been a failure by the Urwins to	establish that which the Act requires and, in those
circumstances, the transfers are void.
For the reasons which I have indicated earlier, I declare that the purported transfer of one share in Transborder Transport Pty Ltd by Noel Braithwaite Eustace to Russell Charles Urwin dated 13 July 1991 is void. I declare that the transfer of one share in Transborder Transport Pty Ltd by James Harkness Butler to Joan Urwin dated 13 July 1991 is void. I declare that Alan Richard Taylor as trustee of the estate of each of the bankrupts is entitled to a share in Transborder Transport Pty Ltd in consequence of the bankruptcy of each of Mr Eustace and Mr Butler, and further that he is registered as the holder of one share in Transborder Transport Pty Ltd formerly held by Mr Eustace and by Mr Butler respectively.

I	cer t i fy t h a t	t h i s and	t h e p r e c e d i n g
five	( 5 ) pages	a r e a	t r u e c o p y o f t h e

r e a s o n s f o r judgment h e r e i n o f t h e

Honourable Mr J u s t i c e Spender.

Counsel f o r t h e a p p l i c a n t : Mr F . Redmond

i n s t r u c t e d b y :  James Walker, S o l i c i t o r

Date o f Hearing:  9 February 1994