Re Mannella, v Ex parte The Official Trustee in Bankruptcy
[1989] FCA 531
•08 SEPTEMBER 1989
Re: VINCENZO MANNELLA
Ex Parte: THE OFFICIAL TRUSTEE IN BANKRUPTCY
And: NUNZIATA GIORGIO and VINCENZO MANNELLA
No. 272 of 1987
FED No. 531
Bankruptcy
COURT
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Sweeney J.(1)
CATCHWORDS
Bankruptcy - s.121 Bankruptcy Act 1966 - application to have a disposition by a bankrupt declared void as against the trustee in Bankruptcy - use of transcript evidence of s.69 examination - desirability of making bankrupt a respondent to the application.
Bankruptcy Act 1966
Re Barnes (1961) 19 ABC 126
HEARING
MELBOURNE
#DATE 8:9:1989
Counsel for the applicant: Mr. G.T. Bigmore
Solicitors for the applicant: Mr. G.T. Bigmore
Counsel for the respondents: Mr. B. Bongiorno Q.C.
with Miss M. Warren
Solicitors for the respondents: Galbally & O'Bryan
JUDGE1
In this case, the trustee of the bankrupt estate of Vincenzo Mannella seeks the following:-
1. An order pursuant to s.121 of the Bankruptcy Act 1966 that
the disposition by the bankrupt to the respondent effected on or about 7 May 1981 by Instrument of Transfer lodged in the Land Titles Office Victoria in dealing No. J843606 of the bankrupt's estate or interest in the land described in Certificate of Title Volume 5007 Folio 291 (being the land at 12 Alister Street, East Brunswick) is void as against the applicant.
2. A consequential order that the respondent execute all
documents and take all steps necessary to effect a transfer to the applicant of title to one equal undivided half part or share in the said land.
3. Pursuant to the provisions of the Jurisdiction of Courts
(Cross-Vesting) Act 1987 (Victoria) and pursuant to the provisions of s.223 of the Property Law Act, 1958 (Victoria), an order that, upon registration of the said transfer, the said land be sold and the net proceeds of sale distributed equally between the applicant and the respondent.
4. Such further or other orders directions or relief as to this
Honourable Court may seem fit.
The application, dated and filed 7 March 1989, named only one respondent Nunziata Giorgio, who was at all material times, and is now the de facto wife of the bankrupt.
In the affidavit of the trustee sworn on 24 February 1989 in support of the application, he deposed as follows:-
"2. By virtue of the making on 20 May 1987 by this Honourable Court of a Sequestration Order, the applicant is the trustee of the estate of the abovenamed bankrupt, Vincenzo Mannella.
3. The date of the act of bankruptcy found by this Honourable Court at the time of the making of the Sequestration Order was 20 May 1986 and, in the premises, the date of the commencement of the bankruptcy is 20 May 1986.
4. At all times material until 4 March 1982, the abovenamed bankrupt and the respondent were registered as the joint proprietors of an unencumbered estate in fee simple in the land at 12 Alister Street, East Brunswick being the whole of the land more particularly described in Victorian Certificate of Title Volume 5007 Folio 291 ('the land'). At the hearing of this application, the applicant will produce a certified copy of the said certificate of title.
5. By Instrument of Transfer dated 7 May 1981, impressed with Victorian Stamp Duty on 27 January 1982 and lodged on 4 March 1982 in the Land Titles Office Victoria in dealing No.J843606 (a certified copy of which will be produced at the hearing of this application), the bankrupt transferred all his estate and interest in the land to the respondent.
6. It is to be inferred from the following matters that the disposition effected by the execution, delivery and registration of the said Instrument of Transfer, was made with intent to defraud creditors of the bankrupt and was not a disposition for valuable consideration in favour of a person who acted in good faith (within the meaning of s.121 of the Bankruptcy Act, 1966):-
(a) At all times material the respondent was the (de facto) husband (sic) of the bankrupt. See page 4 of the transcript of the examination of the respondent held pursuant to the provisions of s.81 of the Bankruptcy Act 1966 on 1 October 1987 ('the transcript').
(b) At all times material, the respondent has lived in the house on the land. See page 2 of the transcript.
(c) On or about 31 October 1980 (when the transfer of the title to the land into the names of the bankrupt and the respondent as joint proprietors was lodged at the Land Titles Office), the bankrupt and the respondent were 'both equal owners of the house' on the land. See page 3 of the transcript.
(d) On or about 20 February 1981, the bankrupt assaulted the petitioning creditor, Salvatore Care, by shooting him. See page 3 of the transcript. The debt owed by the bankrupt to the petitioning creditor is the amount of a judgment for damages in respect of that assault.
(e) At the request of the bankrupt, the respondent executed the said Instrument of Transfer on or about 7 March 1981. See pages 3 and 4 of the transcript.
(f) The execution by the bankrupt and the respondent of the said Instrument of Transfer occurred after and and (sic) as a result of the bankrupt's assault upon the petitioning creditor. See pages 4 and 5 of the transcript.
(g) The result in fact of the said disposition was that the bankrupt's estate or interest in the land has been placed beyond the reach of the petitioning creditor (subject to these proceedings), from which fact it is to be inferred that the bankrupt and the respondent intended such result.
(h) The only consideration for the disposition passing from the respondent was the desire of the bankrupt to make a gift to her. The said Instrument of Transfer recites as consideration 'the natural love and affection which I (the bankrupt) bear towards her Nunziata Giorgio', and see pages 4 and 5 of the transcript.
7. The said disposition by the bankrupt to the respondent of the bankrupt's estate or interest in the land was a disposition of valuable property which remains unencumbered and registered in the sole name of the respondent.
8. In the premises, pursuant to s.121 of the Bankruptcy Act 1966, the said disposition is void as against the applicant.".
When the application came on for hearing on 3 August 1989, Mr. Bigmore, who appeared for the trustee, invited me to read the transcript of an examination of the bankrupt which had been held pursuant to s.69 of the Act, doing so as the result of an agreement between him and Mr. Bongiorno Q.C. and Miss M. Warren, who appeared for the respondent. When asked, in effect, how the court could treat that transcript as part of the evidence in a case in which the bankrupt was not a respondent, Mr. Bigmore replied that it was by virtue of the agreement between the parties "in order to demonstrate, as background to the case, what it was the bankrupt said about this particular transaction, the subject of the application".
Section 69(20) provides that notes taken down and signed by the bankrupt and the transcript of the evidence given at the examination of the bankrupt under this section "may be used in evidence in any proceedings under this Act in which the bankrupt is a party".
I pointed out to the parties that I saw no warrant for treating the transcript of his examination as part of the evidence before the Court on the application as it stood.
The applicant was seeking to rely upon s.121(1) of the Act, which reads as follows:-
"...
121(1) Subject to this section, a disposition of property, whether made before or after the commencement of this Act, with intent to defraud creditors, not being a disposition for valuable consideration in favour of a person who acted in good faith, is, if the person making the disposition subsequently becomes a bankrupt, void as against the trustee in the bankruptcy.".
As Gibbs J., sitting as a judge of the Supreme Court of Queensland exercising federal jurisdiction in bankruptcy, pointed out in Re Barnes (1961) 19 ABC 126 at 131, the first question which arises in such a case is
"whether the evidence establishes that the transfer of the property by the bankrupt was fraudulent. Actual fraud, that is an actual intention to defeat or defraud creditors' must be established, and whether the existence of such an intention should be inferred from the circumstances is a question of fact.".
His Honour went on to point out (at p 132) that, if fraud were proved against the bankrupt, the second question was whether the transferee was privy to the fraud.
The bankrupt Barnes was a respondent to the application by the trustee. In the present case the bankrupt had not been made a respondent to the application.
The situation which arose here shows the wisdom of making a bankrupt a respondent in a case such as the present. It is very likely that a trustee who is considering whether he should make an application of this character will consider it wise to apply for the examination of the bankrupt pursuant to s.69. When such an examination is held, and the trustee decides to make an application to the court, he commonly seeks to rely upon the transcript of the examination. Sub-section (20) provides a statutory warrant for his doing so, where the bankrupt is made a party to the application. It is also quite common to find that the bankrupt and the disponee of the property make common cause and may be represented by the one counsel. In such cases, where the trustee bears the burden of proof that there was actual fraud, that is an actual intention by the bankrupt to defraud creditors, it will be of assistance to the court if the trustee makes him a party so that, if he has an answer to the allegation, he may have an opportunity of presenting it.
Mr. Bigmore sought leave to add the bankrupt as a respondent. Mr. Bongiorno consented to that course and the application was, by leave, amended accordingly. On Mr. Bongiorno's application, it was ordered that the trustee pay the costs thrown away as a result of the amendment and the necessary adjournment.
Mr. Bongiorno stated that his instructing solicitors would accept service of the amended application on behalf of the bankrupt. I directed that any affidavit by him be filed by 10 August and any further affidavit by the trustee by 15 August and adjourned the further hearing of the application to 21 August.
The bankrupt swore an affidavit on 8 August in which he deposed as follows:
"2. I have lived with the first Respondent, Nunziata Giorgio, for over twenty years as man and wife. We have two children presently aged 10 and 13. Many years prior to 1980, on a date I cannot now remember, my de facto wife and I bought the property, the subject of this application, on a terms contract. We became the registered proprietors of it when we paid it off in 1980. Since we bought the property we lived there and still do.
3. On 20th February, 1981, in the course of an argument, I shot Salvatore Care. Immediately after that event, I realised that I was in serious trouble. I was frightened that Mr. Care might die and I would be charged with murder. I gave myself up to the Police after a few days and was charged with attempted murder. After being charged I was released on bail and consulted a solicitor, Mr. Galbally.
4. I first consulted Mr. Galbally in late February or early March, 1981. Following that consultation, I believed that it was probable that I would be sentenced to a long term of imprisonment. My de facto wife did not work as she cared for the children who were then very small. I did not know how long I would be in prison for or what would happen to me when I was in prison. I was very fightened.
5. At the time I was charged, I was unemployed. I did not owe anyone any money. I decided to transfer my part of the property the subject of this application to my de facto wife for her and the children. I had always looked after them in the past and this seemed to me to be all I could do for them at that time before I went to jail.
6. I consulted Mr. Galbally again and told him that I wanted to transfer the property to my de facto wife and children for the children's
(sic) welfare. Mr. Galbally took me to another solicitor in his office who prepared a document. I cannot read or write English but I assumed that the document did what I wanted to do. I signed the document and arranged for my de facto wife to also sign it. I cannot now remember whether we signed it at the same time or separately but I do remember that it was signed some considerable time before the committal proceeding in my case. I now know that the committal was on the 18th May, 1981. I have been told that the document is dated 7th May, 1981. To the best of my recollection it was signed some weeks before that date.
7. At the time I transferred my interest in the property, the subject of this application, to my de facto wife, I had no idea that Mr. Care would sue me for money compensation for his injuries. I thought that the criminal charge which I was facing was all that would happen to me. There were no other people to whom I owed any money and I believed that I was entitled to do whatever I wanted to do with my own property. I had no intention whatsoever of defrauding any creditor by transferring this property to my de facto wife. My only intention was to provide for my de facto wife and children as best I could whilst I was in jail.".
In her affidavit of 15 May 1989 Nuziata Giorgio deposed as follows:
"2. I have been the de facto wife of the bankrupt, Vincenzo Mannella ('Mr Mannella') for over 20 years. There are 2 children of our de facto relationship. They are aged 13 and 11 years.
3. Mr Mannella and I became the joint registered proprietors of the property at 12 Alister Street, East Brunswick ('the property') on October 31, 1980.
4. In early 1981 Mr Mannella was charged with the assault of Salvatore Care. Messrs Galbally & O'Bryan ('the solicitors') were his solicitors in relation to that charge. Mr Mannella came home from the solicitors one morning before his committal, which was scheduled for May 18, 1981, and told me that he was likely to have a long jail sentence in front of him and that he did not know what would happen to him in jail. He requested that I attend the solicitors' office and sign papers so that the property would be in my name. He told me that this was necessary to ensure that the children and I were properly cared for in case anything happened to him in jail.
5. I went to the solicitors' office the same afternoon to sign the document. I had previously attended the solicitors' office and discussed the criminal charge against Mr Mannella. When I signed the document, I saw a different solicitor. I had no conversation about transferring the property into my name with that solicitor or with the other solicitor I had seen about Mr Mannella's criminal charge.
6. When I signed the document, I understood from my previous discussions with the solicitors and with Mr Mannella that Mr Mannella would go to jail as a result of the criminal charge. I did not then know that Salvatore Care could bring a civil action against Mr Mannella as a result of the shooting.".
On 21 August Mr. Bigmore cross-examined the respondents on their affidavits and submitted, in the first place, that the evidence showed that there was fraud on the part of the bankrupt. He was not able to persuade me that I should hold that there was either knowledge or apprehension on the part of the bankrupt that the victim of his crime might begin civil proceedings against him, which would result in a judgment against him. Having seen and heard the bankrupt, I had no reason to disbelieve his evidence that his sole object in transferring his interest in the family home was to provide for his de facto wife and their children whilst he was serving what he expected to be a long term of imprisonment. I did not believe that he had in mind the thought that his victim was likely to become his creditor by bringing action aginst him.
Accordingly, I did not call upon Mr. Bongiorno and announced that the application was dismissed with costs, including reserved costs and that I would publish my reasons in due course. I now do so.
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