Re Nicholson, N.L. v Ex parte The Official Receiver & Trustee

[1993] FCA 1013

JU.XMENT No. ....... /013 193 ..... ..,, ., ,,,,,,,,.

IN THE FEDERAL COURT OF AUSTRALIA	1
GENERAL DIVISION	1 No QB 2075 of 1992 -
BANKRUPTCY DISTRICT OF THE	)
STATE OF OUEENSLAND	1

RE:  N.L. NICHOLSON

EX PARTE: R.M. NICHOLSON

(Applicant )

AND :  THE OFFICIAL RECEIVER AND TRUSTEE

(Respondent)

SPENDER J	RECEIVED
BRISBANE	2 4 J A N 1994
21 October 1993	FEDERAL COURT OF

AUSTRAUA

PRINCIPAL

R E G I ~ Y

EX TEMPORE REASONS FOR JUDGMENT

This is an application under S. 1392s of the Bankruutcy
1966 ('the Act') to set aside a notice under S. 13924 of the
Act served on Ruth May Nicholson, who is the wife of the
bankrupt, Neville Wesley Nicholson. Mr and Mrs Nicholson have
been living in a de facto marriage relationship for of the order

of 20 years. The notice addressed to Mrs Nicholson at the house

property at 14 Crane Street, Slade Point is in these terms:

INSOLVENCY AND TRUSTEE SERVICE AUSTRALIA

OFFICIAL RECEIVER'S OFFICE

BRISBANE

NOTICE UNDER SECTION 1392Q

BANKRUPTCY DISTRICT OF TEE	NO; 2075 OF 1992
STATE OF OUEENSLAND	RE:NEVILLE LESLIE NICHOLSON

R u t h May N i c h o l s o n

1. Crane S t r e e t

SLIPDE POINT

MACKAY QLD 4740

TAKE NOTICE hat I , ARTHUR HENRY CARRICK, D e p u t y O f f r c l a l R e c e i v e r , o f L e v e l 19,

J e t s e t B u i l d z n g , 288 Edward S t r e e t , B r ~ s b a n e , p u r s u a n t t o t h e a u t h o r r s a t i o n o f

t h e O f f i c r a l R e c e i v e r f o r t h e abovenamed B a n k r u p t c y District, h e r e b y g i v e notice

t h a t you , b e i n g a person who h a s r e c e l v e d money or p r o p e r t y from N e v z l l e L e s l i e

N i c h o l s o n o f 1 4 Crane S t r e e t , S l a d e P o i n t , Mackay, a s a r e s u l t o f a transaction

which I consider void pursuant to Section 120 of the Bankruptcy Act against the trustee of the bankrupt estate, George Anthony Edwards of 250 Quay Street, Rockhampton are required to pay to George Anthony Edwards the sum of $25,468.00 being the money or value of the property received by you.

The facts and circumstances by which I consider that the transaction is void pursuant to Section 120 of the Bankruptcy Act 1966 against George Anthony Edwards as trustee of the bankrupt estate are as follows:

On 15 January 1990 the bankrupt and his wrfe Ruth May Nicholson purchased a property situated at 14 Crane Street, Slade Point for $84,000. They

were registered as ~ o i n t tenants in fee srmple in respect of the property.

The purchase price of the abovementroned property was $84,000. According to a statement (page 4) signed by the bankrupt on 10 June 1993 the purchase monies were made up as follows:

(a)	Deposit of $8,000.00 from joint funds
(b)	A gift of $26,000 made to the bankrupt and his wife jointly by the bankrupt's brother-rn-law. (page 4 and page 8 of statement of 10 June 1993)
(c)	$50,000.00 advance from the Bank of Queensland secured by a registered first mortgage.

On 18 December 1991 the bankrupt pard $49,064, from monres he received for personal injuries, to discharge the mortgage and leave the property at 14 Crane Street, Slade Point, unencumbered and registered in the joint names of the bankrupt and his wrfe.

On or about 27 March 1992 the bankrupt transferred his registered half interest as a joint tenant to hrs wrfe who then became the sole regrstered proprietor of the property at 14 Crane Street, Slade Point. The consideration for the transfer was 'natural love and affection'. There was no financial consideration for the transfer. See page 3-4 of the bankrupt's statement of 10 June 1993 and question 51 of his statement of affairs signed on 9 October 1992 and accepted by the Registrar in Bankruptcy on 13 October 1992.

On 12 March 1992 LJ Hooker of 74 Sydney Street, Mackay, completed a proforma setting out that it estimated the selling price of the property at 14 Crane Street, Slade Point, Mackay was $100,000.

On 13 October 1992 the bankrupt became so on the presentation [of] his own petiton (sic).

From the facts as set out above and prima facre evidence I have sighted

supporting those facts I am satisfied as to the following:

(a)	That within two years of the commencement of his bankruptcy the bankrupt transferred his rnterest in the property at 14 Crane Street, Slade Point, Mackay to hrs wrfe Ruth May Nicholson.
(b)	That the transfer constituted a settlement in terms of Section 120 of the Bankru~tcv Act and is a transaction that 1s void ~ursuant to Section 120il)- of the Act in that there was no valuable consideration for the transfer.

I consider the value of the bankrupt's Interest whrch, but for the transfer of it to hrs wife, would have been divisible amongst creditors of the bankruptcy in the property at 14 Crane Street, Slade Pornt, was $25,468.00 ie $100.000 - 49,064

1 ,.

It appears the amount of $49,064 was paid from funds not divrsible amongst credrtors and therefore even though the property was unencumbered at the date of the transfer this amount rs deducted from the total value of the property before determining the equity of the bankrupt (half of the

balance) which would have been d i v i s r b l e amongst c r e d i t o r s had h e n o t

executed t h e t r a n s f e r .

PAYKENT i s required t o be made t o George Anthony Edwxds b y 30 September 1992,

o r i f you s a t i s f y George Anthony Edwards t h a t such i s n o t p o s s i b l e , you are

fequired t o have made b y t h a t da te , arrangements whrch are s a t i s f a c t o r y t o him

f o r t h e payment o f $25,468.00.

T h i s Not ice s h a l l be taken t o be complied wi th i f t h e amount o f $25,468.00 i s paid t o George Anthony Edwards o r you have made w i th George Anthony Edwards by

30 September 1993, arrangements which are s a t i s f a c t o r y t o him f o r t h e payment

o f $25,468.0	(s ic) t o him.
AND FVRThTR	TAKE NOTICE t h a t f a i l u r e t o comply wrch t h i s Not ice may, under

Sec t ion 1392T o f t h e Bankruptcy A c t , render you l i a b l e , upon conv ic t ion , f o r a

rerm o f rmprisonment n o t exceedrng six months.

Where a person i s convic ted under t h i s s ec t ion , t h e Court, i n add i t i on t o

imposing a pena l t y on t h e convrcted person, may order t h a t person t o pay t o t h e

t r u s t e e an amount n o t exceedrng t h e amount r e f e r r e d t o i n t h r s Notice.

AND FURTHER TAKE NOTICE t h a t t h e Court, on app l i ca t ion b y you o r any o t h e r

rn t e res t ed person, may make an Order s e t t i n g a s i d e t h i s Not ice on t h e b a s i s o f

t h e a l l eged f a c t s and circumstances set out i n t h r s Not ice .

DATED this 26 th day o f August 1993

A. H. CARRICK

DEPUTY OFFICIAL RECEIVER "

Section 13924 of the Act provides:

" ( l ) I f a p e r s o n h a s r e c e i v e d a n y money or

p r o p e r t y a s a r e s u l t o f a t r a n s a c t i o n t h a t i s v o i d

a g a i n s t the t r u s t e e o f a b a n k r u p t u n d e r Division

3,	the O f f i c i a l Receiver:
( a )	i f the O f f i c i a l T r u s t e e i s the t r u s t e e -

on the i n i t i a t i v e o f the O f f i c i a l

R e c e i v e r ; o r

( b ) i f a r e g i s t e r e d t r u s t e e i s the t r u s t e e -

on a p p l i c a t i o n by the t r u s t e e ;

m a y r e q u i r e the p e r s o n , by w r i t t e n notice g i v e n t o

the p e r s o n , t o p a y t o the t r u s t e e an amount e q u a l

t o the money or the v a l u e o f the p r o p e r t y

r e c e i v e d .

( 2 ) T h e notice m u s t set o u t the f a c t s and

c i r c u m s t a n c e s b e c a u s e o f which the O f f i c i a l

R e c e i v e r c o n s i d e r s t h a t the t r a n s a c t i o n i s v o i d

a g a i n s t the t r u s t e e .

( 3 ) The notice may:

( a ) require the amount t o be p a i d a t a t i m e or

w i t h i n a p e r i o d set o u t i n the notice; or

(b) require the amount t o be paid a t such times, and i n such instalments, as are set out i n the notice.

( 4 ) Af ter the Of f ic ia l Receiver has given a

notice t o a person under subsection (l), the Of f ic ia l Receiver may a t any time, by a further notice given to the person, revoke or amend the first-mentioned notice.

(5) I f the Of f ic ia l Receiver gives a notice under th i s section, the Of f ic ia l Receiver must send a copy o f the notice t o the bankrupt and, if a registered trustee i s the trustee, t o the trustee.

( 6 ) A notice t o be given under th i s section t o

the Commonwealth, a State or a Territory, or t o an authority o f the Commonwealth, o f a State or o f a Territory, i s taken t o be duly given i f it i s given to a person who, by any l a w , regulation, appointment or authority, has the function o f paying, or i n fact pays, money on behalf o f a Department o f the Commonwealth, o f that State or o f that Territory, or on behalf o f the authority, as the case may be.

( 7 ) I f a person i s required b y a notice under th i s section t o pay t o the trustee the value o f

any property, the requirement i s taken t o be complied with i f the property i s transferred t o the trustee.

(8 ) An amount payable by a person to the trustee under th i s section i s recoverable by the trustee as a debt by action against the person i n a court

o f competent jurisdiction. "

Mrs Nicholson i n her a f f i d a v i t re fers t o the requirement

i n the notice that she pay	$25,468 t o the trustee o f her husband.
She says:

" On 15 January 1990, my husband and I purchased the

property situated a t 14 Crane Street , Slade Point, for EIGHTY FOUR THOUSAND DOLLARS ($84,000) . We were registered as joint tenants i n fee simple i n

respect o f the property. "

The contract settled on 6 February 1990, and the purchase
price was made up o f a deposit o f $8000 from joint funds paid on

9 January 1990 from a savings account conducted by Mr and Mrs Nicholson jointly at the National Australia Bank, the account number being 317812939. There was also, as part of the purchase moneys, a sum of $26,000. Mrs Nicholson's brother had made a gift to her of some $40,000 in January 1990. That money was paid into the joint account and $26,000 was paid from the joint account as part of the purchase moneys. There was in addition a $50,000 advance from the Bank of Queensland secured by a registered first mortgage.

On about 27 March Mr Nicholson transferred his registered half-interest as joint tenant to Mrs Nicholson. She then became the sole registered proprietor of the property. The consideration of the transfer, which is signed 27 March 1992, is said to be in consideration of the " n a t u r a l l o v e and a f f e c t i o n " which the transferor bears towards the transferee. The estate or interest being transferred is described as being held " a s

j o i n t t e n a n t s " . There is a notation on the transfer that the

duty paid on half the valuation of $50,000, and there is a stamp

duty stamp dated 7 April 1992 showing stamp duty of $500 being	paid.
Mrs Nicholson said there was no financial consideration for the registered half-interest as joint tenant to her. The circumstances behind the transfer are not in dispute.
M x Nicholson, who has a gambling problem, in early 1992 expressed
an interest in purchasing a TAB sub-agency. There was concern that Mr Nicholson might risk the limited assets of Mrs Nicholson, and Mrs Nicholson in those circumstances insisted that "we

transfer the house into my name". There is no challenge that the transaction on 27 March 1992 was a transaction within S. 120 of the Bankru~tcv Act 1966. Subsection (1) of that section provides that:

" 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
fb)	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 settler 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. "

The issue in the case is what is the property of the bankrupt. It was submitted on behalf of Mrs Nicholson that the property of the bankrupt does not include property held by him on trust, and that is made plain by S. 116 of the Act. The

position is that the trustee in bankruptcy takes the property of	the bankrupt subject to all liabilities and equities which affect
it in the bankrupt's hands. Re Clark: ex Dart Beardmore [l8921
2 QB 393-410.
It is submitted, and correctly in my view, that the presumption of advancement does not apply to parties who are in a de facto relationship. The majority of the High Court so held

in Calverlv v Green (1984) 155 CLR 242. In that case, the

majority of the High Court held that:

" Where proper t y i s conveyed t o s evera l purchasers

a s j o i n t t enants and t h e y have con t r ibu ted

unequal ly t o the purchase p r i c e , the presumption

i s t h a t t h e y hold the p r o p e r t y i n t r u s t f o r

themselves a s t enants i n common i n shares

propor t ionate t o t h e i r c o n t r i b u t i o n s . This

presumption i s d i sp laceab le by a common i n t e n t i o n

t o the con t rary or a presumption o f advancement.

It is the time at which the house was purchased that is the primary point of inquiry as to the nature of the interest and the extent of the property of the bankrupt in the property at 14 Crane Street. But it is not irrelevant, in my opinion, that on 18 December 1992 Mr Nicholson discharged the mortgage by payment of $49,064, which was part of the proceeds of an award for damages for personal injuries. It is also not irrelevant that between purchase and discharge the mortgage to the Bank of Queensland was serviced from funds from the joint account, those funds, of course, including the balance of $14,000 of the $40,000 given by Mr Smith to his sister in January 1990.

At the time of the acquisition of the property at 14

Crane Street, Mr and Mrs Nicholson had cohabited for more than 16 years. They have a daughter, now aged about 18. The evidence establishes that Mr and Mrs Nicholson have only ever operated joint accounts and have maintained that position throughout their relationship with three different banks. Mrs Nicholsonrs evidence I find compelling in respect of the intention of the parties at the time of the acquisition.

She is transparently honest and notwithstanding her evidence essentially is contrary to her financial interest, I accept without reservation that she regarded herself and her husband as partners, that the house was regarded as the property of both of them. She did in fact say, at one stage, that ". . .the

house was more mine than h i s " but, importantly, she said that she

regarded the house as being part of the assets of an equal partnership. In my opinion, the evidence permits no other conclusion but at the time of the acquisition, it was intended that they jointly share in the beneficial interest in the house property at 14 Crane Street.

I think it right to approach the matter on a basis, as suggested by Mr Stephens for Mrs Nicholson, by asking what would be the position if a declaration of trust had been sought by Mrs Nicholson as to a constructive trust on the date of the transfer of the legal interest held by the husband to her and, on the evidence before me, it seems plain that there would not be held to be a constructive trust in favour of Mrs Nicholson of Mr

Nicholson's interest or a substantial part of that interest as	at that date of transfer. The events about the servicing of the
mortgage and of its discharge support the conclusion to which I have reluctantly come.

There is one further matter.

Section 1392Q(1) earlier set out provides that if a person has received any money or property 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. "

This provision, in my opinion, focuses the question of the quantum of the amount required by a notice under S. 139 to be paid to the trustee on the value of the property at the time of the void transaction. The relevant date, then, is the date of the transfer, namely, 27 March 1992. The evidence as to the value received by Mrs Nicholson is not completely satisfactory. There is evidence by Mr Coonan, a registered valuer, valuing the property at $92,500 as at 18 December 1991 and at $102,500 as at 30 September 1993.

There is the evidence in respect of the amount of stamp duty that was paid and the valuation of $100,000 which seems to be the basis on which the stamp duty was calculated, but the evidence does not say on what basis that valuation was prepared or by whom it was made. There is also, it seems to me, as part of the evidence of value, the circumstance that the property was

purchased for $84,000 on 6 February 1990. In the light of all	of that material, and doing the best I can, I think that I should
accept the value of the property at 14 Crane Street, as at 27 March 1990, as at $92,500. Any other value would be a speculative tinkering, and I think fairness will not be outraged if I adopt that figure as the value of the property.
It is accepted by the parties before me that the sum of $49,064 is a protected payment and it is proper to have no regard to that. In those circumstances, it seems to me that I ought to make an order to give effect to the requirement by Mrs Nicholson to pay to the trustee the sum of - now, please, could you tell
me what the answer should be to that?
~t seems to me that there is a question as to whether, in the circumstances that have happened here, the power given to the court to set aside a notice comprehends a power to vary the notice, such a power would be conducive to efficiency, but having regard to the provisions of S. 178, which provides that if a bankrupt, or a creditor or any other person is affected by any act, omission or decision of the trustee, he may apply to the court and the court may make such order in the matter as it thinks just and equitable, gives me sufficient power to make an order requiring Mrs Nicholson to pay, pursuant to S. 1392Q, the sum of $21,718 to the trustee of her husband's estate,
As to costs, my present intention is to make no order as to costs on this application.
The order that I make is that Ruth May Nicholson pay to George Anthony Edwards, the trustee of the estate of Neville Leslie Nicholson, the sum of $21,718.
I think if I order that the payment of the $21,718 take place within six weeks, and she will have to do the best that she can in that time frame. The courts, of course, are sensitive to difficulties that may be thrown up by people in the position of

Mrs Nicholson, but at the same time, I think realistically that that is an appropriate order to make.

I certify that this and the preceding ten (10) pages are a true copy of the reasons for judgment herein of

Associa @.;G- e

Date: 21 October 1993

Counsel for the applicant:	M r L. A. Stephens
Solicitors for the applicant:	Grasso Searle Romano
Counsel for the respondent:	Mr Morgan
Solicitors for the respondent:	McKays
Date of Hearing:	21 October 1993