Re: Harris (bankrupt); Ex Parte: Official Trustee in Bankruptcy v Harris
[1996] FCA 1205
•24 Jun 1996
JUDGMENT No. .dzG2zm?&
| IN THE FEDERAL COURT OF AUSTRALIA | ) | ||
| BANKRUPTCY DISTRICT |
| ||
| OF THE STATE OF NEW SOUTH WALES | 1 |
Re: GRAGME JOHN HARRIS
Bankrupt
| Ex parte: OFFICIAL | TRUSTEE | IN |
BANKRUPTCY
Applicant
And: GRAGME JOHN HARRIS
First Respondent.
ALPHEGA FRENCHS FOREST PTY
LIMITED
Second Respondent
ALPHEGA MANAGEMENT SERVICES
PTY LIMITED
Third Respondent
KERRY BLAKEMAN
Fourth Respondent
| k!5' | REASONS FOR JUDGMENT |
| EINFELD J | SYDNEY | 24 JUNE 1996 |
By an amended application filed on 7 May 1996, the Official Trustee sought one declaration, three orders apart from costs and, as an alternative, the issue of a warrant for the arrest of the bankrupt. The subject matter involved is the ownership of a 1986 Porsche 911 convertible (the vehicle) with engine and
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chassis numbers and originally a registration number as set out in the application. In the course of the hearing today, orders
3 and 4 were not pressed. Accordingly the matters for resolution are whether a declaration should be made that the vehicle vests and has vested since bankruptcy in the Official Trustee as trustee of the bankrupt's estate, and whether there should be an. order that such of the respondents as are in possession of the vehicle deliver possession of it to the Official Trustee.
It appears from the evidence that the bankrupt, Dr Harris, was the original owner of the vehicle when it was purchased at some time not later than April 1992. At the time he entered into an asset purchase agreement with AGC and apparently made the initial instalment payments under the agreement. On 24 February
1993 Harris was made bankrupt and some 8 months later was engaged as the medical director of the second respondent, Alphega Frenchs Forest Pty Limited (Alphega) . Part of his employment agreement was that he would be provided with a suitable car to enable him to carry out his obligations in the position.
The history that follows is covered in vagueness due to Harris' deliberate choice not to produce evidence to the Court and
Alphega's decision to deliver only a selected portion of the evidence which it was otherwise obviously in a position to give.
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The third respondent did not appear before the Court but submitted a letter saying that it had no interest in the vehicle and presumably would submit to any order of the Court.
The fourth respondent, Kerry Blakeman, whose wife is in substance Alphega, and who has been the possessor of the vehicle since not later than November 1994 and possibly a little earlier, informed the Court, both by a letter attached to his wife's affidavit and also in oral evidence, that he makes no claim to own the vehicle and apparently is perfectly willing to deliver it up, but seeks a sum in excess of $2000 for storage charges since November 1994. From whom is not clear. Apparently, the vehicle has been stored at or outside Blakeman's
residence in Artarmon to the knowledge of all parties in the matter. As at the date of his letter on 20 May 1996, the claimed amount, for storage was $2075 but it is increasing at the rate of $25 a week so that each 4 weeks adds another $100 to the amount claimed.
The question for determination here is whether at the time of his bankruptcy in February 1993, Harris was the effective owner of the vehicle or at least had the right to ownership at the conclusion of all the instalment payments under the asset purchase agreement in May 1995.
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From about July 1994 to the payout of the agreement, the payments under the asset purchase agreement were all made by Alphega by cheques signed by Mrs Blakeman as its director and shareholder, and as secretary of the company. From the evidence, Alphega appears to have two shareholders: Mrs Blakeman is the holder of one fully paid $1 share; the other shareholder, with nine shares, is a company called Phoenix Consultants Pty Limited (Phoenix) whose accountants have notified the Australian Securities Commission that its registered office is, of all places, at Cassia Place, Kumul Highway, Port Vila, Vanuatu. There is no satisfactory evidence as to who this company is in reality but it does not seem to play any part at all in the management of Alphega unless it is a cover for one or more of the existing players. Apart from Mrs Blakeman, the other director of Alphega is a Dr Ian Coyle whose address is given as
2 St Tropaz Terrace, Sorrento, Queensland. Dr Coyle has no
shares in the company.
Soon after Harris commenced his work as Alphega's medical director, he made it known that he sought to assign his debt to
| AGC into Alphega's name. | In his section 81 examination on 1 4 |
February 1994, he answered a series of questions concerning the car as follows:
Do you also pay for a car from your practice?-Yes.
What sort of a car is that?-It is a Porsche.
How much does that cost?-I think it is about $1500 a month.
The North Sydney practice pays for that?-Yes.
That is on lease, is it?-Yes.
To whom is the lease?-AGC.
How long does the lease have to run?-About another 2 years I think, off the top of my head.
Is there a residual on that lease?-Yes.
How much is the residual ?-I'm not quite sure.
Is the lease in your name or in a company's name?-It's in my name at the moment but I would like to assign the lease to . . .
Although the questioning was cut off at that particular moment, it seems to be perfectly clear from the rest of the evidence
that it was Alphega to whom he sought to assign the lease. There is no evidence, however, that the lease was ever assigned in fact. Indeed, the evidence is that whilst it remained
registered, the vehicle was always in Harris' name. The latest certificate from the Roads and Traffic Authority of 2 February
1996 certified that on that day the vehicle which had the
registration number, engine number and chassis number of the vehicle referred to in the amended application was registered in the name of Graeme John Harris, whose address was given. However, the certificate stated rather anomalously that the
registration had expired on 22 January 1995. According to the
evidence, it has not been registered since then and the
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whereabouts of the former registration plates are said to be at
present unknown.
Although in her affidavit and her evidence Mrs Blakeman obviously sought to have the inference drawn that the company was or became the owner of this vehicle, it is quite telling that this was not put expressly. There are annexed to the affidavit various documents seeking to show the interest of the company in the vehicle but most of the affidavit deals with describing these annexures and does not actually assert
ownership of the vehicle in the company.
Alphega's financial records show it that it has never included the vehicle in its assets or contingent assets. It has not depreciated the vehicle in its tax returns or company returns. It has obviously not paid the registration fee because the vehicle has been unregistered for some time. In other words, Alphega has done nothing other than to pay the instalments under the asset purchase agreement for the 9 months to which I have referred.
It was argued on Alphega's behalf that none of these things have appeared on the records because in fact the ownership of the vehicle did not become crystallised in the company until all the payments were made to AGC in May 1995. It was said that the returns of the company for 1996 have not yet been done, and that
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absence of reference to them in the 1995 returns does not mean anything. On the other hand, there was at least a month in which according to the evidence, Alphega would have owned this vehicle in the year ending June 1995 but it has not placed before the Court any evidence as to how it treated the vehicle
in its accounts then, nor any evidence to suggest that the
vehicle has been treated in its books subsequently as in its possession or ownership. It has apparently not paid to maintain the vehicle because the photographs in evidence show the vehicle in a somewhat dishevelled state, and Blakeman's claim for
garaging fees suggests that it has not paid him for its storage.
Blakeman's evidence that he had some sort of understanding with someone about the garaging of the vehicle, and his claim for garaging fees, might have had some greater weight if it had been clear that Alphega was in fact paying, or had agreed to pay, these amounts. If he had had an agreement with Alphega -- meaning in substance his wife -- to this effect, there would have been evidence from both of them about the agreement and
some evidence that Alphega was or had said it was willing to pay the necessary fees. If there was a contract, it would have been a contract to pay the fees while the vehicle was being garaged, and not at some later time during a court case considering the matter. The amount concerned, $25 a week, is not exceptionally large and Mrs Blakeman's evidence is that she herself signed all
the cheques and decided which cheques should be signed, to whom
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they should be made out, and when they should be sent. Her failure to pay her own husband the cost of the garaging fees of Alphega's vehicle, if that is what it is, is stark indeed.
In his statement of affairs, Harris makes no mention of this vehicle, yet Blakeman gave evidence that he took possession of the vehicle and its keys from Harris himself. Mrs Blakeman's evidence that Alphega provided Harris, as part of his salary package, with a vehicle totally different in kind and value to the vehicle in question, is not at all inconsistent with his continued ownership of that vehicle, as distinct from its transfer to Alphega.
All this unmistakably manifests to me that this case has been conducted with a view to obstruct the emergence of the truth and to make proof of the various necessary facts as difficult as possible. Neither Harris nor either of the Blakemans has given any evidence about the ownership, possession and use of the vehicle when each was obviously in a position to do so. I have heard nothing from Dr Coyle, the other director of the company. No books or records have been produced. Whilst, in theory, respondents may play, as it were, a "straight bat" to everything an applicant brings along and make the applicant prove its case, once facts are raised which point to the relief sought, a great deal of suspicion must arise that the Court is being toyed with
when relevant facts in the possession of the respondents are not
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then disclosed. Such conduct is at best reprehensible. It may
be much worse.
However categorised, the attitude taken cannot lead to favourable inferences being drawn in favour of the participating respondents. If the respondents had been able to establish any of the matters that arise only inferentially or prima facie in the trustee's case in a way that was helpful to their cause, no doubt the evidence would have been given. This is one of those
stark cases where the absence of evidence tells heavily against
those who prefer silence to disclosure.
It seems to me clear that whatever the nature of the residual ownership of a hirer under an asset purchase agreement -- a matter which has troubled lawyers for quite a long time, whoever was the relevant beneficiary or appropriate recipient of the vehicle when the agreement was paid out, it was certainly not Alphega. In bankruptcy terms, it is my opinion that the vehicle was at least a contingent asset of Harris, and was probably conditionally owned by him subject to the payments being made to AGC under the asset purchase agreement. As such, it should have been declared in his statement of affairs as an asset of which
at the very least he was entitled to become the owner in possession when the agreement was paid out. I have no doubt that it vested in the Official Trustee on the date of bankruptcy. I do not accept the argument that this was after-
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acquired property which Alphega took in good faith and for valuable consideration after the date of bankruptcy, as dealt with by section 126(1) of the Act.
I therefore make the declaration set out in paragraph 1 of the amended application, and order that Blakeman, the fourth respondent, as the possessor of the vehicle, deliver possession of it to the Official Trustee in Bankruptcy.
[After discussion1
I order that the costs of the trustee prior to 7 May 1996 be paid by the first and second respondents and that subsequently they be paid by the second respondent.
| I certify that this and the | dl &G |
preceding pages are a true copy of the
Reasons for Judgment herein of his Honour
Justice Einfeld
| /v%%- | Associate |
| Dated: | &/L /77 |
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