Re McInnes, E.D. Ex parte McInnes, B.A. & Anor v Caddy, G.L. - [1994] FCA 882

Re: ENID DAWN McINNES
Ex Parte: BRUCE ANTHONY McINNES and KAREN LORRAINE McINNES v. GEORGE LIONEL
CADDY, OFFICIAL RECEIVER FOR THE BANKRUPTCY DISTRICT OF NEW SOUTH WALES
Ex Parte: OFFICIAL TRUSTEE IN BANKRUPTCY v. BRUCE ANTHONY McINNES and KAREN
LORRAINE McINNES
No. NB234 of 1990
FED No. 882/94
Number of pages - 23
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES
GENERAL DIVISION
EINFELD J

CATCHWORDS

Bankruptcy - bankrupt financed building on daughter's land - intention to convey house and land to bankrupt when building completed - whether fraud - whether settlement - notices under section 139ZQ - benefit of a transaction - non-party to transaction - interrelationship between sections 120/121 applications and application to set aside s. 139ZQ notices.

Bankruptcy Act 1966 ss 6, 120, 121, 139ZQ, 139ZS

Williams v Lloyd; Re Williams (1934) 50 CLR 341
N.A. Kratzman v Tucker (No. 1) (1966) 123 CLR 257
Barton v Deputy Commissioner for Taxation (1974) 131 CLR 370
Barton v Official Receiver (1986) 161 CLR 75
Re Ward; Official Trustee v Dabnas Pty Ltd (1984) 3 FCR 112
Re Mannella; ex parte Official Trustee (1989) 21 FCR 50
P T Garuda Indonesia Ltd v Grellman (1992) 35 FCR 515
Re Pearson; ex parte Wansley (1993) 46 FCR 55
Noakes v J Harvey Holmes and Son (1979) 37 FLR 5
Re Trautwein (1944) 14 ABC 61
Re Pahoff; ex parte Ogilvie (1961) 20 ABC 17
Re: Fiorino; ex parte Woodgate Gummow J unreported 14 April 1994
Re Barnes; ex parte Stapleton (1962) Qd R 231
Freeman v Pope (1870) 5 Ch App 538
Ex parte Mercer; re Wise (1886) 17 QBD 290

HEARING

SYDNEY, 7 July 1994
#DATE 18:11:1994

Counsel and Solicitor for the B.J. Skinner instructed by
Trustee P.J. McNally of Lobban McNally

and Harvey

Counsel and Solicitor for the A.T. McInnes QC instructed
Respondents by J. Griffin of Ferrier

and Associates

JUDGE1

Introduction
EINFELD J Section 139ZQ of the Bankruptcy Act 1966 (the Act) provides:

(1) If a person has received any money or property as a result of a transaction that is void against the trustee of a bankrupt under Division 3, the Official Receiver:

(a) if the Official Trustee is the trustee - on the initiative of the Official Receiver... ...

may require the person, by written notice given to the person, to pay to the trustee an amount equal to the money or the value of the property received. ...

(7) If a person is required by a notice under this section to pay to the trustee the value of any property, the requirement is taken to be complied with if the property is transferred to the trustee.

(8) An amount payable by a person to the trustee under this section is recoverable by the trustee as a debt by action against the person in a court of competent jurisdiction.

By notices dated 8 June 1993 issued under section 139ZQ of the Act the Official Receiver required…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [1994] FCA 882
Decision Date: 18 NOVEMBER 1994

CaseChat Overview and Summary

The matter before the court involved a dispute between the bankrupt, McInnes, and the trustee of his estate, Caddy. The central issue was whether certain transactions conducted by the bankrupt constituted fraud under the Bankruptcy Act 1966 (Cth), specifically whether these transactions involved an intention to defeat creditors. The transactions in question included the bankrupt financing a building on his daughter's land with the expectation of conveying the house and land to himself upon completion. The court also had to consider whether these actions constituted a benefit of a transaction under section 139ZQ of the Act, and if so, whether the daughter, who was not a party to the transaction, could be affected by notices issued under that section.

The court examined the legal principles surrounding fraudulent transactions and the interplay between sections 120/121 applications and an application to set aside notices issued under section 139ZQ. The bankrupt argued that the transactions were not fraudulent as they were part of a settlement arrangement with his daughter. The court had to determine if these transactions fell within the scope of section 139ZQ, which deals with the benefit of a transaction, and whether the daughter could be affected despite not being a party to the transaction. The court also considered whether the interrelationship between the sections necessitated a specific approach to the application to set aside the notices.

The court found that the transactions did constitute a benefit under section 139ZQ and that the daughter, as a non-party, could still be affected by the notices. The court held that the bankrupt's intention to convey the house and land to himself upon completion of the building was indicative of a fraudulent intent. Consequently, the court ruled that the trustee was entitled to set aside the notices issued under section 139ZQ, allowing the proceedings to continue as intended. The court's decision highlighted the importance of understanding the nuances of bankruptcy law, particularly concerning fraudulent transactions and the implications of non-party involvement.

The final orders of the court mandated that the notices issued under section 139ZQ be set aside, enabling the trustee to proceed with the examination of the bankrupt's affairs and the recovery of assets. The court's decision underscored the need for careful consideration of the interrelationship between various sections of the Bankruptcy Act 1966 (Cth) to ensure just and equitable outcomes in bankruptcy proceedings.

Orders