Rumpf, B.J. v The Official Trustee in Bankruptcy

[1990] FCA 343

Re: BARRY JAMES RUMPF EX Parte: THE OFFICIAL TRUSTEE IN BANKRUPTCY (as trustee
of the bankrupt estate of BARRY JAMES RUMPF)
And: BARRY JAMES RUMPF; DAMIEN NOLAN; JEEPS PTY LTD and TRIANGLE PACKING CASE
PTY LTD
No. 533 of 1986
FED No. 343
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

EXERCISING FEDERAL JURISDICTION IN BANKRUPTCY
Northrop J.(1)

CATCHWORDS

Bankruptcy - vesting of property of bankrupt in Official Trustee - whether land was property of bankrupt at time of commencement of bankruptcy.

Bankruptcy Act 1966 s.s.55, 58, 69 and 81

HEARING

MELBOURNE

#DATE 16:7:1990

Counsel for the official Mr G. Pagone
Trustee in Bankruptcy :

Solicitors for the official Australian Government Solicitors
Trustee in Bankruptcy :

Mr Barry J. Rumpf for : Mr Barry J. Rumpf, the bankrupt

ORDER

Lot 1 on registered plan number 172357 on the county of Canning Parish of Maroochy Town of Peregian Beach in Queensland more particularly described in Certificate of Title Volume 5992 Folio 137 was beneficially owned by the bankrupt at the commencement of his bankruptcy and is property divisible amongst the creditors of the bankrupt.

Jeeps Pty. Ltd. executes such instruments of transfer as maybe necessary to vest the said land in the Applicant.

Note: This order is to be settled and filed in accordance with rule 124 of the Bankruptcy Rules.

JUDGE1

On 14 June 1986, Barry James Rumpf presented to the Registrar his own petition under s.55 of the Bankruptcy Act 1966. The Registrar accepted the petition. Thereupon Barry James Rumpf became a bankrupt. Under s.58 of the Bankruptcy Act the property of the Bankrupt vested forthwith in the Official Trustee. By application dated 24 July 1989 the Official Trustee, as the trustee of the estate of the Bankrupt, is seeking orders that land being an allotment on a sub-division at Peregian Beach at the Sunshine Coast of Queensland and being the land described in Certificate of Title Volume 5992 Folio 137 ("the land") "was beneficially owned by the Bankrupt at the commencement of his bankruptcy and is property divisible amongst the creditors of the Bankrupt" and "that Jeeps Pty. Ltd. and/or such other person or persons as the Court may direct executes such instruments of transfer as may be necessary to vest the land in" the Official Trustee. There are four respondents to the application being the Bankrupt, Damien Nolan, Jeeps Pty. Ltd. and Triangle Packing Case Pty. Ltd. The Bankrupt gave notice of intention to oppose the orders sought on the ground that the land was not his property. He appeared at the hearing of the application. The other respondents did not appear nor were any of them represented, at the hearing of the application.

1. The evidence before the Court is that contained in the affidavit of Dennis James Healy, the Acting Official Receiver in the State of Victoria, sworn 20 July 1989 and the exhibits to that affidavit, two affidavits sworn by the Bankrupt on 22 September 1989 and 23 April 1990 respectively and the exhibits thereto, the oral evidence of the Bankrupt who was cross-examined on his affidavits and the oral evidence of David Sidney Butterfield who, at one time, held a power of attorney from the Bankrupt. Among the exhibits to the affidavit of Dennis James Healy are the transcripts of evidence given in examinations under s.81 of the Bankruptcy Act by Ross David Clarke, Solicitor, a member of the firm Messrs Clarke and Kann, Brisbane, the respondent Damien Nolan, Roma Elaine Rumpf, the wife of the bankrupt, Ross Gordon Palmer, a brother of Roma Rumpf and Janice Leighton Campbell, a sister of Roma Rumpf. The Bankrupt expressly agreed that the evidence given by those people in relation to the s.81 examinations are admissible as evidence in this application and as against the Bankrupt. In addition, there is before the court the transcript of the evidence given by the Bankrupt in an examination under s.69 of the Bankruptcy Act. That evidence is admissible in this application pursuant to sub-section 69(20).

2. The evidence before the Court discloses a tangled web of dealings controlled by the Bankrupt through manipulation of companies controlled by the Bankrupt. The Bankrupt did not keep any proper records of his dealings and in many instances well after events occurred documents were executed which purported to have binding effect but in reality were executed in an attempt to give validity to a state of affairs of the Bankrupt which would protect the property of the Bankrupt from liability from other sources. The Bankrupt, obviously, is a very capable and clever person who through design rather than ignorance, blurred the distinction between a corporate body and the person, himself, who controlled that corporate body with the result that, in my opinion, although the Bankrupt "owned" all the property involved in a multitude of transactions, he claimed they were owned by other bodies. The absence of contemporaneous documents permitted the Bankrupt to make claims after the events occurred as to the real nature of those events. In all the circumstances, I find the Bankrupt to be an unreliable witness whose evidence is not to be trusted with the result his evidence should not be relied upon in the absence of other satisfactory evidence to support it.

3. Certificate of Title 5992 Fol. 137 shows that Link Pacific Holdings Pty. Ltd. became registered as the proprietor of the land on 17 February 1981 pursuant to a transfer produced to the Registrar of Titles on 17 December 1980 and that by transfer produced to the Registrar of Titles on 21 August 1981 Jeeps Pty. Ltd. became registered as the proprietor on 17 September 1981. Jeeps Pty. Ltd. still is registered as the proprietor of the land.

4. On 18 February 1981 the Bankrupt wrote two memoranda to Mr Butterfield with a copy of each to Mr Leon Gorr, a partner in the Melbourne law firm of Messrs Herbert Geer and Rundle. Mr Gorr was the solicitor for the Bankrupt. The first memorandum was lengthy and contained detailed instructions. The Bankrupt stated that he was attempting to arrange for the purchase and development of the land "on my own account" from Pacific Holdings Pty. Ltd., that he was buying it "for an all up price of $143,000 with a Building Permit already issued", and that he planned to build nine units on the property and to have the units sold "off the Plan" by his agent Geoff Haack. The purpose of this memorandum was to authorise Mr Butterfield to complete the sale while the Bankrupt was overseas. The power of attorney had been given to Mr Butterfield to enable him to sign all the necessary documents to give effect to the instructions contained in the two memoranda. The Bankrupt was a director and shareholder of Link Pacific Holdings Pty. Ltd. which was involved in a number of property and financial dealings. Mr Butterfield did not sign any of the documents. It should be noted that no units had been built on the land at the time of the bankruptcy on 14 June 1986.

5. On 19 February 1981, a cheque in the sum of $143,000 was drawn on the account of a company called Tenth Wakool Pty. Ltd. in favour of Link Pacific Holdings Pty. Ltd. The cheque was paid. Tenth Wakool Pty. Ltd. was a company owned and controlled by the Bankrupt. On all the evidence, I find this cheque was for the payment of the land.

6. On 27 February 1981 Mr Haack wrote two letters one to Mr Butterfield and one to the Bankrupt c/o Mr Butterfield enclosing copies of building contracts for the construction of the units of the land and other agreements. The agreements show the Bankrupt as the proprietor of the land as well as the developer. Mr Butterfield was requested to sign the documents pursuant to the power of attorney held from the Bankrupt. The letter to Mr Butterfield stated that Link Pacific Holdings Pty. Ltd. had been restructured and that was the reason the Bankrupt was undertaking the development on the land in his own right. By letter dated 17 April 1981, Mr Haack wrote to the Bankrupt c/o Mr Butterfield to say that the local council had refused to consent to the planned development of the land. The letter contained other proposals for the development of the land. Proposals were then discussed by letters between the Bankrupt and Mr Haack about other possible developments on the land. In his letter of 22 May 1981 to Mr Haack, the Bankrupt noted he was back from overseas, indicated his new postal address and that the power of attorney to Mr Butterfield operated only while he was overseas. The letter indicated that "if my land can be sold for $200,000 net" he would be prepared to sell subject to conditions. Reference was made also to the tax implications of the activities of the Bankrupt and Mr Haack.

7. On a memorandum of transfer said to be sealed on 28 July 1981, Link Pacific Holdings Pty. Ltd. sealed a memorandum of transfer transferring the land to Jeeps Pty. Ltd. The transfer was said to be in consideration of the receipt of $143,000 from Jeeps Pty. Ltd. The transfer was said to be sealed in the presence of the Bankrupt and a Mr Luigi Grollo, a director of Link Pacific Holdings Pty. Ltd. In an accompanying declaration dated 28 July 1981 the Bankrupt, as a director of Link Pacific Holdings Pty. Ltd., declared that the transfer was not intended to operate as security for any obligation and that the consideration expressed in the memorandum of transfer was the true and sole consideration for the transfer. This transfer, apparently, was produced to the Registrar of Titles on 21 August 1981 and was registered on 17 September 1981. Jeeps Pty. Ltd. was the nominee company of Messrs Clarke and Kann, a firm of solicitors in Brisbane. By a declaration of trust dated 18 September 1981, Jeeps Pty. Ltd. acknowledged that it held its estate and interest in the land "upon trust for Link Pacific Holdings Pty. Ltd. and its assigns". The declaration of trust states also that the purchase moneys for the land had been paid out of moneys belonging to Link Pacific Holdings Pty. Ltd. Apart from the declaration made by the Bankrupt, there is no other acceptable evidence of how the $143,000 referred to in the memorandum of transfer was paid by Jeeps Pty. Ltd. The evidence suggests, and I accept, that the $143,000 was paid to Link Pacific Holdings Pty. Ltd. by the cheque drawn on Tenth Wakool Pty. Ltd.

8. The Bankrupt claims that Jeeps Pty. Ltd. was in error when it declared that it held the land upon trust for Link Pacific Holdings Pty. Ltd. and its assigns and that in fact Jeeps Pty. Ltd. held that land in trust for Tanaman Investments Pty. Ltd. and that subsequent to the declaration of trust dated 18 September 1981 Jeeps Pty. Ltd. made a declaration of trust in favour of Tanaman Investments Pty. Ltd. which was a nominee company controlled by the Bankrupt and which held the land in trust for the respondent Damien Nolan and Triangle Packing Case Pty. Ltd. It appears this second declaration of trust was never reduced to writing. Subsequent correspondence from Messrs. Clarke and Kann shows that they thought the land was being held by Jeeps Pty. Ltd. as trustee for Tanaman Investments Pty. Ltd. Further, correspondence to and from the land tax and local government authorities suggests that Tanaman Investments Pty. Ltd. was the beneficial owner of the land although it was the Bankrupt who directed the action being taken with respect to the land. The shareholders and directors of Tanaman Investments Pty. Ltd. were the Bankrupt and Walma Mining Co. Pty. Ltd. which was controlled by the Bankrupt but is now dissolved. Tanaman Investments Pty. Ltd. is dissolved also.

9. During his examination under s.81 of the Bankruptcy Act Mr Clarke stated that Jeeps Pty. Ltd. had acquired the land as a nominee for such companies as the Bankrupt later nominated. He had no knowledge of anyone else having any interest in the land, including Triangle Packing Case Pty. Ltd. or the respondent Mr Nolan. Mr Clarke, who was a director of Jeeps Pty. Ltd., said that Jeeps Pty. Ltd. did not claim any interest in the land.

10. The evidence given by the Bankrupt will be considered later, but at present it is helpful to note that the Bankrupt claims that the land was brought for the benefit equally of the respondent Mr Nolan and Triangle Packing Case Pty. Ltd., the latter in its capacity as the trustee for the Hepburn Family Trust, a trust set up by the father of Mrs Rumpf.

11. At all relevant times, the Bankrupt was the controller of all the companies, apart from Jeeps Pty. Ltd., involved in the purchase of the land. At the time of the purchase of the land the Bankrupt was a director of Link Pacific Holdings Pty. Ltd., Tanaman Investments Pty. Ltd., Walma Mining Co. Pty. Ltd., Tenth Wakool Pty. Ltd. and for practical purposes, controlled each of those companies. He was the Secretary of Triangle Packing Case Pty. Ltd. and controlled that company. He was a practicing chartered accountant conducting business on his own account in Melbourne. He was involved in promoting and conducting a taxation avoidance business as well as development deals. He had been a partner in the accountancy firm of Touche Ross and Co. but he had retired from that firm in about June 1980.

12. The Hepburn Family Trust had been established by the father of Mrs Rumpf in November 1976 for the benefit of the children of the Bankrupt and Mrs Rumpf. The trust had been created for the purpose of acquiring units in the Touche Ross Unit Trust sponsored by the partners of Touche Ross and Co. Upon his retirement from that firm, the units held by the Hepburn Family Trust were redeemed for cash. That money and other moneys owing to the Bankrupt upon his retirement were paid into the bank account of Tenth Wakool Pty. Ltd. which was controlled by the Bankrupt as if it were his own bank. There is no written record of the receipt and expenditure of moneys into and out of the accounts of Tenth Wakool Pty. Ltd. except some bank statements in evidence. The Bankrupt says he received some $90,000 on his retirement from the firm. The Bankrupt does not dispute the fact that the $143,000 paid to Link Pacific Holdings Pty. Ltd. came from the Tenth Wakool Pty. Ltd. bank account.

13. The Bankrupt says that at the time the cheque was paid to Link Pacific Holdings Pty. Ltd., he, either personally or through unspecified companies, owed money to the respondent Mr Nolan for work done by Mr Nolan in assisting the Bankrupt in his business activities. There is no written record of the moneys owing to Mr Nolan but were said to be of the order of $70,000. In making the payment of $143,000 for the land, the Bankrupt claims that he intended to use the money which had been received from the redemption of the Touche Ross Unit Trust for the benefit of the Hepburn Family Trust. The balance of the money was to be by way of payment to Mr Nolan with the effect that the Hepburn Family Trust and Mr Nolan were to be treated as the owners in common in equal shares of the land. There is no evidence of any contemporaneous documents in which this intention was expressed. The payment of the $143,000 illustrates the manner in which the Bankrupt used money in the bank account of Tenth Wakool Pty. Ltd. The Bankrupt used the moneys for whatever purpose he wanted. Apparently no written records were kept. If they were, they have not been presented in Court. Mr Nolan, in his evidence in the examination under s.81 of the Bankruptcy Act, is very vague as to the relationship between himself and the Bankrupt and the moneys owing to him for work done by him. Mr Nolan makes no claim to the land.

14. The Bankrupt says that in saying in his memorandum to Mr Butterfield and to Mr Gorr "I am buying" the land from Link Pacific Holdings Pty. Ltd., he was adopting his common practice of not distinguishing his personal matters from those of the companies he controlled and that that phrase, and other phrases, should not be taken to mean that he was buying the land for himself.

15. The Bankrupt explains the fact that the building and development contracts were in his own name was because he was to be the proprietor of the development of the land which was in fact owned by another identity. He said this is not an unusual practice, which may well be the case, particularly from a taxation point of view. In these circumstances, the fact that the development did not proceed is fortuitous. One is left to speculate how the Bankrupt would have manipulated the facts to suit his own purposes if the development had progressed.

16. One further set of facts should be mentioned. The Bankrupt says that Jeeps Pty. Ltd. is holding the land in trust for Tanaman Investments Pty. Ltd. which is controlled by the Bankrupt. He says that Tanaman Investments Pty. Ltd. is holding the land for Triangle Packing Case Pty. Ltd. and for Mr Nolan in equal shares. The Bankrupt controls Triangle Packing Case Pty. Ltd. which, he says, is holding the land in trust for the Hepburn Family Trust. There are no written records of this.

17. Having regard to all the evidence before the Court and the demeanour of the Bankrupt, I do not accept the evidence he gave except where corroborated from other sources. In these circumstances, relying particularly on the memoranda to Mr Butterfield and Mr Gorr, together with what the Bankrupt must have told Mr Haack who prepared the documentation for the development of the land, I find that the Bankrupt purchased the land with moneys which he considered his own to be used for his benefit as he saw fit. Thus when the land was transferred into the name of Jeeps Pty. Ltd. that company held it in trust for the Bankrupt. The fact that the Bankrupt then dealt with the land as if it was owned by Tanaman Investment Pty. Ltd. does not alter the position. That was an investment company controlled by the Bankrupt. The Bankrupt continued to deal with the property as if it was his own. I reject the evidence that Tanaman Investments Pty. Ltd. held the land in trust for Triangle Packing Case Pty. Ltd. and for Mr Nolan. In the result I find that the land was at the time of the bankruptcy, namely 14 June 1986, beneficially owned by the bankrupt and thus vested in the Official Trustee.

18. Accordingly, orders will be made as sought in the motion.