Re Webster, Eric David Ex Parte Pegler, Roy Leslie & Anor

[1980] FCA 211

34

IN THE FEDERAL COURT OF AUSTRALIA )

1

.GENERAL DIVISION

BANKRUPTCY DISTRICT OF THE STATE 1 NO. 330 of 1980	OF NEW SOUTH WALES AND THE
AUSTRALIAN CAPITAL TERRITORY i

RE: ERIC DAVID WEBSTER

A Bankrupt'

EX PARTE: ROY LESLIE PEGLER

Applicant ,

PENINSULA HOLDINGS PTY. LIMITED

Respondent

ORDER

MAKING JUDGE ORD R: LOCKHART J.

DATE OF ORDER: MOniDAY 22 SEPTEMBER I980

WHERE MADE:	AT SYDNEY
THE COURT ORDERS THAT:

1. It be declared that the trusts contained deed of trust

dated 26 November 1979 (which is Exhibit E in the proceedings

before the Court) be void as against the trustee in the

bankruptcy of the bankrupt;

2 . It be declared that the trusts contained in deed of

settlement dated 26 November 1979 (which is Exhibit D

in the proceedings before this Court) be void as against

the trustee in the bankruptcy of the bankrupt;

3. It be declared that all shares in the issued capital

of Peninsula Holdings Pty. Limited allotted to the

bankrupt or purporting to be held by him upon the trusts

\

referred to in either of the said deeds be and are hereby

vested in Roy Leslie Pegler as trustee of the bankrupt's estat l

. . . / 2

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4. The bankrupt, Brian Eric Cairns and Peninsula Holdings Pty. Limited by itself its servants and agents be restrained until further order from selling, offering for sale, conveying,

transferring, encumbering, leasing or otherwise dealing with
or disposing of the property known as lot 1414 Pittwater Road, Narabeen in the State of New South Wales;
5.	The costs of this application including all reserved costs '

1

and the costs of all occasions when the application has been

before the Court be the trustee's c o s t s in the bankrupt's

estate and be paid out of the assets of the estate;

6. Liberty be granted to any party to apply in relation to any

matter that may arise	in the implementation	of these orders
and generally.

P

IN THE FEDERAL COURT	OF AUSTRALIA
GENERAL DIVISION

BANKRUPTCY DISTRICT OF THE STATE

OF NEW SOUTH WALES AND THE

AUSTRALIAN CAPITAL TERRITORY

RE: WEBSTER DAV D ERIC

A Bankrupt

EX PARTE: ROY LESLIE PEGLER

Applicant

PENINSULA HOLDINGS PTY. LIMITED

Respondent

REASONS FOR JUDGMENT

22 1980 LOCKHART J.

/

This is an application for orders declaring that two

settlements of property are void as against Roy Leslie Pegler

("the trusteef1) as trustee of the estate of Eric David Webster

("the bankruptff). The application is made pursuant to S. 120

o f the Bankruptcy Act 1966 ("the Act"). The trustee also seeks

ancillary relief.

A sequestration order was made against the estate of the

bankrupt on 17 April 1980 upon the petition presented by The

Commercial Banking Company of Sydney Limited on 8 October 1979.

The act of bankruptcy was the failure of the bankrupt to compl:

on o r before 26 September 1979 with the requirements of

bankruptcy notices served on him on 12 September 1979 and issued

in respect of a District Court judgment for $22,319.61 signed

on 12 March 1976.

. . . / 2

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On 19 December 1979 the bankrupt authorised Barry Norman

Askew to call a meeting of his creditors and to take control

of his property in accordance with the provisions of S. 188

of the Act. Mr. Askew gave evidence that there were no moneys

brought to the credit of the bankrupt's estate during the

period he was the controlling trustee. He said the bankrupt

did not make full and frank disclosure of his affairs and did

not co-operate with him in his endeavours to fulfil his role'

e

as trustee. Mr. Askew subsequently supported the application

by the petitioning creditor	for a sequestration order against
the estate of the bankrupt.

At the first meeting of creditors held in the bankrupt

estate on 13 June I980 the creditors resolved to appoint the

trustee as trustee of the bankrupt estate.

On 26 November 1979 the bankrupt caused a company k own

as Peninsula Holdings Pty. Limited ("Peninsula HoldingsI1)

to be incorporated of which he was a director and shareholder.

On 4 December 1979 Peninsula Holdings purchased premisew

known as No. 1414 Pittwater Road, rabeen, the purchase W

price being $235,000.00. The property is subject to a mortgage

in favour of Wardley Australia Limited to secure	an advance of
$155,000.00.

On 26 November 1979 the bankrupt executed two deeds. The

first is called a deed of trust in which the bankrupt is

described as "The Trustee" and the beneficiary is described

as 'Ithe Trustee for the time being of the Eric Webster Family

Discretionary Trust?'. I shall refer to this deed as "the

first deed!'. It recites that there has been allotted or

transferred to the bankrupt the whole of the issued share

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capital of Peninsula Holdings. It also recites that the

allottments or transfers were made to the bankrupt	as a
nominee of the beneficiary.

Under the first deed the bankrupt declares that he holds

the shares and all dividends and interest relating thereto

upon trust for the beneficiary and agrees to deal with them as

the beneficiary may direct (clause 1). The bankrupt agrees to

attend all meetings of shareholders at the request of the

beneficiary and, in effect, to do whatever he may be told to

do by the beneficiary (clause The second recital says:

"...and it is ac.knowledged that the Beneficiary

provided the acquisition price thereof.I1

i.e. the price paid for the acquisition of the said shares.

The second deed is styled "Deed of Settlement1! between a

company, D.K.L.R. Holding Co. Pty. Limited, as Settlor and a

company, D.K.L.R. Holding Co. (No. 2) Pty. Limited, as Trustee.

I shall refer to this deed as ?!the second deed". It recites

that the settlor wishes to make provision for the beneficiaries

(i.e. the bankrupt, his wife, his step son, the wife of his step

son and the children of his step son) and for that purpose ha

paid or is about to pay to the trustee the sum of $5.00 which

is described as !?the settled sum11. The settlor declares

that the trustee shall be entitled to the Trust Fund subject

to the terms of the trust. The IITrust Fund1f is defined as

meaning the settled sum together with all moneys and property

paid or transferred to and accepted by the trustee as additions

to the trust fund together with certain other money and

property.

The second deed creates what is generally known as a

discretionary trust. It empowers the trustee to appoint . . . . /4

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any person other than certain excluded persons to be a

beneficiary and to revoke any such appointment prior to

the vesting day; and provides that such power of revocation

shall extend to the persons named as beneficiaries in the

schedule to the deed (Clause 3 (a)). The deed then contains

elaborate provisions for appointment of beneficiaries and

restrictions upon appointment. It is unnecessary to set out

the further terms of the deed which are somewhat lengthy.

The name of the trust constituted by the second deed is

the "Eric Webster Family Discretionary Trust". Thus it is

this trust which is the beneficiary under the first deed.

A l l persons interested in this application have been

joined as respondents. None have appeared except Mr. Cairns

who was represented on the morning of the hearing by a solicitor

and who submitted to such order as the Court may see fit to make.

It is in these circumstances that this application s brought.

Section 120 of the Act so far as relevant provides:-

"120. (1) A settlement of property, whether made

before or after the commencement of this Act.

being -

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

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 settlor 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.

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(5) A payment of money or transfer of property

made by the settlor in pursuance of such

a covenant or contract, whether before or

after the commencement of this Act, is void

as against the trustee in the settlor's

bankruptcy, unless the persons to whom the

payment or transfer was made prove -

(a) that the payment or transfer was

made more than two years before

the commencement of the bankruptcy;

(b) that at the date of the payment or

transfer the settlor was able to

pay all his debts without the aid

of the money so paid or the property

so transferred; or

that the payment or transfer was made

in pursuance of a covenant or contract

to pay or transfer money or property

expected to come to the settlor from,

or on the death of, a particular person

named in the covenant or contract and

was made within three months after the

money or property came into the

possession or under the control of the

settlor.

Where any such payment of money or transfer of

property is void as against the trustee in the

settlor's bankruptcy by virtue of the last

preceding sub-section, the persons to whom the payment was made or the property was transferred

are entitled to claim for dividend under the

covenant or contract as if it had not been

executed at the commencement of the bankruptcy.

Nothing in this section shall be taken to

affect or prejudice the title or interest

of a person who has, in good faith and for

valuable consideration, purchased or acquired

from the persons entitled to the benefit of

the settlement, covenant or contract or from

the trustee of the settlement the money or

property the subject of the settlement,

covenant or contract or an interest in that

money or property.

(8)	In this section, 'settlement of property'
includes any disposition of property.I1

. . . /7

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A settlement of property, whether made before

or after the commencement of this Act, not

being a settlement referred to in paragraph

(a) or (b) of the last preceding sub-section

or a settlement that is void as against the

trustee by reason of the operation of that

sub-section, is, if the settlor becomes a

bankrupt and the settlement came into operation

after or within 5 years before the commencement

of the bankruptcy, void as against the trustee

in the bankruptcy, unless the parties claiming

under the settlement prove -

(a) that the settlor was, at the time of

making the settlement, able to pay all

his debts without the aid of the property	W
comprised in the settlement; and

(b) that the settlor's interest in the property

passed to the trustee of the settlement or

to the donee under the settlement	on its
execution.

(3) A covenant or contract made, whether before or

after the commencement of this Act, in consideration

of marriage either -

(a)	for the future payment of money to the settlor's spouse or children; or
(b)	for the future settlement of property on or
for the settlor's spouse or children,

being money or property in which the settlor did

not, at the date of the marriage, have any estate u v

or interest, whether vested or contingent, in

possession or remainder, and not being money or

property of, or in right of, the settlor's spouse,

is, if the settlor becomes a bankrupt and the

covenant or contract was executed after the date

of the bankruptcy, void	as against the trustee	in
the bankruptcy.

( 4 )	The persons entitled under the covenant or contract may claim f o r dividend in the settlor's bankruptcy
under the covenant or contract, but such a claim
shall be postponed until all claims of the other
creditors (including claims under section 111
of this Act, claims in respect of excess interest
under section 112 and claims for interest on
interest-bearing debts in respect of a period
after the date of the bankruptcy) have been satisfied.

. . . / G

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I need not refer to the evidence in support of the

application except to say that	it establishes all the elements
required by S. 120 (1 ) and (2)..

Accordingly it is an appropriate case f o r the making

of the declarations sought and ancillary orders.

The order of the Court is as follows:-

1. Order that it be declared that the trusts contained

in deed of trust dated 26 November 1979 (which is

Exhibit E in the proceedings before the Court)

be void as against the trustee in the bankruptcy

of the bankrupt;

2. Order that it be declared that the trusts contained

in deed of settlement dated 26 November 1979 (which

is Exhibit D in the proceedings before this Court)

be void as against the trustee in the bankruptcy

of the bankrupt;

3 .	Order that it be declared that all shares in the
issued capital of Peninsula Holdirigs Pty. Limited

allotted to the bankrupt or purporting to be held

by him upon the trusts referred to in either of

the said deeds be and are hereby vested in Roy

Leslie Pegler as trustee of the bankrupt's estate;

4. Order that the bankrupt, Brian Eric Cairns and

Peninsula Holdings Pty. Limited by itself its

. . . /8

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servants and agents be restrained until further

order from selling, offering for sale, conveying,

transferring, encumbering, leasing or otherwise

dealing with or disposing of t h e property known

as lot 1414 Pittwater Road, Narabeen in the State

of New South Wales;

5. Order that the costs of this application including

W

all reserved costs and the costs of all occasions

when the application has been before the Court be

the trustee's costs in the bankrupt's estate and be

paid out of the assets of the estate;

6. Liberty to any party to apply in relation to any

matter that may arise in the implementation of

these orders and generally.