Re Taylor, N.F. & E.A. v Ex Parte The Official Trustee in Bankruptcy & Duke, C

[1989] FCA 761

1b \ $7

JUDGMENT NO. . ........ A---

IN THE FEDERAL COURT OF AUSTRALIA	1	1
GENERAL DIVISION	)	QLd B19 of 1989
BANKRUPTCY DISTRICT OF THE SOUTHERN	)
DISTRICT OF THE STATE OF QUEENSLAND	)

RE:  NOEL FRANK TAYLOR AND ELIZABETH ANNE TAYLOR

Bankrupts

EX PARTE:  THE OFFICIAL TRUSTEE IN BANKRUPTCY

Applicant

AND :  CHARLOTTE DUKE

Respondent

MINUTES OF ORDER

JUDGE MAKING ORDER:	PINCUS J.
DATE OF ORDER:	22 NOVEMBER 1989
WHERE MADE:	BRISBANE
THE COURT DECLARES THAT:

1. the mortgage over the land and house property situated at 66 Tingiringi Street, Algester, in the State of Queensland and being all that land described as Lot 753 on Registered Plan No. 137444 contained in Certificate of Title Volume 6522 Folio 59 and Certificate of Title Volume 6522 Folio 60 purportedly granted by each of the male bankrupt NOEL FRANK TAYLOR and the female bankrupt ELIZABETH ANNE TAYLOR in favour of one CHARLOTTE DUKE is void against the Official Trustee in Bankruptcy pursuant to s.122 of the Bankruptcy Act 1966;

THE COURT ORDERS THAT:

2.    the respondent pay to the applicant its of and incidental to this application.

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

; 2 DEC 1989

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IN THE FEDERAL COURT OF AUSTRALIA	1
GENERAL DIVISION	) QLD B19 of 1989
BANKRUPTCY DISTRICT OF THE SOUTHERN	)
DISTRICT OF THE STATE OF QUEENSLAND	)

RE:  NOEL FRANK TAYLOR AND ELIZABETH ANNE TAYLOR

Bankrupts

EX PARTE:  THE OFFICIAL TRUSTEE IN BANKRUPTCY

Applicant

AND :  CHARLOTTE DUKE

Respondent

PINCUS J . 22 NOVEMBER 1989

EX TEMPORE REASONS FOR JUDGMENT

This is an application in relation to the estates of Noel Frank and Elizabeth Anne Taylor, who became bankrupt on 10 January 1989 on their own petitions. The application seeks a declaration that certain real property at Algester is the property of the bankrupts, an order that their interests be vested in the Official Trustee in Bankruptcy, a declaration that a certain

mortgage purportedly granted by the bankrupts in favour of one	Charlotte Duke is void under ss.120, 121 or 122 of the Bankruptcy
Act 1966 and other .relief. The only questions which have been argued before me are the claims under ss.120 and 122 of the Act; the claim under s.121 has been abandoned.
The mortgage in question was given on 6 December 1988 at a time when, it is plain, the bankrupts were in financial trouble, and no point is taken by Mr Stephens, who I appeared for the respondent, on that score. The question becomes whether, as Mr Stephens submitted, the mortgage did not advantage the mortgagee or did not advantage her to the full extent of the sum secured by it, for the reason that, as he submitted, there was a prior security in respect of that sum or part of it. The argument which Mr Stephens advanced requires some more details of the facts to be given.
The land in question was owned by the bankrupts as tenants in common in equal shares, and at a time when one of the bankrupts, Mr Noel Taylor, was in financial trouble, he was assisted by the respondent, Mrs Duke, and her husband, since deceased, on the basis that the Dukes would be given a security for the money which was advanced. I have been given a copy of that security; it is a bill of mortgage executed by M Noel Taylor in favour of Mr and Mrs Duke on 8 July 1983, which was subsequently registered.
When Mr Duke died, the whole interest in the mortgage became that of the respondent, Mrs Duke, and had matters remained
in that state, this problem would never have arisen. However, the
evidence shows that pursuant to agreement between the parties, the mortgage was released. Unfortunately, the events which immediately prompted that were apparently a desire to give security to another lender, and the evidence shows that Mrs Duke agreed to the mortgage being released for that purpose. There is no evidence to which I have been referred on which I can find that, at the time of the release of the mortgage, it was agreed that it would be replaced at any specific time in the future. The closest one gets to that is a statement that the mortgage was intended to be replaced. Mr Noel Taylor says in his affidavit that he found it necessary to borrow money from another party, and that for that purpose, he says, in effect, it was necessary to release the mortgage in favour of the respondent. Mr Taylor states:

"It was my intention to replace that mortgage as a third mortgage as soon as possible, and we had promised to give them a mortgage in 1983."

He goes on to give reasons why the intention to replace the mortgage was not carried out. The principal argument which Mr Stephens relied on was that part of the money advanced under the first mortgage was expended on improvements to the property in question, to a value approaching $7,000. Mr Stephens says that, at least to that extent, the respondent should succeed in obtaining a declaration that there is an equitable charge.

Although the respondent has not made any cross-claim, no

point is taken about that and I am prepared to consider the matter

applicant, to Mr Stephensl main submission depends on the dates.	as if she had. The answer which is given by Mr Dutney, for the	The evidence shows that the work which Mr Stephens refers to was finished about May and the mortgage which was given to secure that expenditure and others was not executed until July.
Mr Dutney contends that, assuming in favour of the respondent that at the time when the expenditure on the property was made, it gave rise to an equitable security!, that right merged in the legal security the existence of which became complete when the mortgage by M Noel Taylor was registered, an event which occurred on 20 September 1983. Mr Dutney's argument is that any equitable right to a security could not have survived that event.
The broader aspect of the matter which (although not so prominent) needs some attention is the general question of the application of s.122. The time requirements are satisfied because the mortgage was given only about a month before the bankruptcy. It is clear that the mortgage was given because it was thought that the bankrupts, as they ultimately became, were likely to be in financial trouble. The evidence shows that on 20 December 1988, McPhercon J. gave judgment in the sum of over $43,000 against the bankrupts, in the Supreme Court of Queensland. It was that pending or apprehended liability which was the immediate cause of the impugned mortgages being given. The general question is whether or not there was a preference given. The answer has to be that there was, because there is simply no evidence of a subsisting and unsatisfied agreement to give a mortgage predating
6 December 1988, the date upon which the mortgage impugned was
executed.
On the narrower point which appears to be the one on which Mr Stephens places most reliance, the expenditure of moneys on the property in question in 1983, in my opinion, the same answer must be given. There is evidence (as Mr Stephens contends) in support of the proposition that at the time that money was expended, it was done on the basis that security would be given, and there is evidence which would, were there dothing else in the matter, amply justify a finding that the sum is secured in equity. The difficulty which seems to me to be insuperable (at least, I can see no answer to it) is that after all that happened, the security was actually given and became effective in law, not merely in equity; but subsequently Mrs Duke, no doubt out of the goodness of her heart, decided to release it, and she did so, as the evidence shows, unreservedly.
The case is, in a sense, an unfortunate one and it is, as it seems to me, a pity that Mrs Duke has lost her money. She, like many dutiful and loving parents, has lost because she has assisted her family.
The application must therefore succeed in relation to the mortgage. There will be a declaration under paragraph (e) of the application, that is, under s.122 of the Bankruptcy Act. I do not propose to make any declaration under the other provision, which it seems to me unnecessary to refer to.
The applicant also seeks a declaration as to the ownership of the property. It seems not to be in issue, and I do
not propose to make that declaration. Lastly, the applicant seeks an order that the interest be vested in the official trustee. I do not understand why that is necessary; it seems to be merely a mechanical matter.

There will be a declaration in terms of paragraph (e),

and the order will be that the respondent pay the costs in terms

of paragraph (g).

I certify that this and the five

preceding pages are a true copy of the

reasons for judgment herein of

Mr. Justice Pincus. ! /

Associate

Dated 22 h v d u W'