Sellers v Tsimiklis and Anor (No.1) - [2003] FMCA 139

FEDERAL MAGISTRATES COURT OF AUSTRALIA

SELLERS v TSIMIKLIS & ANOR (No.1)

[2003] FMCA 139

BANKRUPTCY – Transfer void as against Trustee pursuant to the former s.120 of the Bankruptcy Act.

Bankruptcy Act 1966, ss 5, 6, 58, 81, 115, 120, 120(1), 121
Bankruptcy Legislation Amendment Act 1966, (No. 44 of 1966 Schedule 1
Item 208)

Wigan v English and Scottish Law Life Assurance Assn [1909] 1 Ch 291
Jones v Dunkel (1959) 101 CLR 298
Rothmore Farms Pty Ltd (in liq) v Belgravia Pty Ltd (1999) 31 ACSR 88
Re Coram; Ex parte Official Trustee in Bankruptcy v Inglis (1992) 36 FCR 250)
Barton v Official Receiver (1986) 161 CLR 75
Lynn v White [1997] 1064 FCA (1 October 1997)
Wansley v Edwards (1996) 68 FCR 555
Freeman v Pope (1870) 5 Ch App 538
P T Garuda Indonesia Ltd v Grellman (1992) 35 FCR 515
Official Trustee in Bankruptcy v Mitchell (1992) 38 FCR 364 at 369

Applicant:

KENNETH STEWART SELLERS (AS TRUSTEE OF THE PROPERTY OF MARTHA TSIMIKLIS, A BANKRUPT)

Respondents:

MARTHA TSIMIKLIS & THEONI TSIMIKLIS

File No:

MZ 398 of 2001

Delivered on:

11 April 2003

Delivered at:

Melbourne

Hearing Dates:

7, 8 & 10 August 2001

Judgment of:

McInnis FM

REPRESENTATION

Counsel for the Applicant:

Mr M Galvin

Solicitors for the Applicant:

Gadens Lawyers

Counsel for the Respondent:

Mr M Goldblatt

Solicitors for the Respondent:

Giasoumi Papasavas Zervos Pty

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MZ 398 of 2001

KENNETH STEWART SELLERS (AS TRUSTEE OF THE PROPERTY OF MARTHA TSIMIKLIS, A BANKRUPT)

Applicant

And

MARTHA TSIMIKLIS & THEONI TSIMIKLIS

Respondents

REASONS FOR JUDGMENT

Introduction

Kenneth Stewart Sellers (the Applicant) in his capacity as trustee of the Bankrupt Estate of Martha Tsimiklis by an application on 19 May 1999 in the Federal Court of Australia seeking orders pursuant to s.120 or in the alternative s.121 of the Bankruptcy Act 1966 (the Bankruptcy Act).
Orders are sought against Martha Tsimiklis (now Milionis) (the Bankrupt) and Theoni Tsimiklis (the Second Respondent) as follows:-
1.A declaration that the disposition of Martha Tsimiklis (“the Bankrupt”) of all her estate in fee simple in the property situate and known as 12 Koroit Street, Nunawading in the State of Victoria, (“the property”) more particularly described in Certificate of Title Volume 10077 Folios 498 & 499, to Theoni Tsimiklis, expectant upon the determination of an estate for the life of the Bankrupt, is void as against the applicant pursuant to Section 120, alternatively Section 121, of the Bankruptcy Act 1966 (“the Act”).
2.An order that the respondents deliver up to the applicant the duplicate Certificates of Title to the property.
3.An order that the respondents procure the Registrar of Titles to register the applicant as the sole registered proprietor of the property.
4.Alternatively to paragraph 1, a declaration that the applicant is entitled to exclusive possession of the property for the life of the Bankrupt.
5.An order that the respondents give up vacant possession of the property to the Trustee.
6.Such further or other orders or directions or relief as this Honourable Court may seem fit.
7.Costs.
In addition to the relief sought in the application the Applicant in the Amended Statement of Claim further seeks payment of loss and damage being an amount of reasonable rental of the property from the date of demand for possession.
The Applicant was appointed the Trustee of the Bankrupt Estate of the Bankrupt in place of the Official Trustee in Bankruptcy on 17 December 1996 at a meeting of the creditors of the Bankrupt.
The Bankrupt became bankrupt on 31 May 1994 as a result of a sequestration order made that day on the petition of Antony Sdrinis & Co (Sdrinis & Co). The Second Respondent is the daughter of the Bankrupt. It is not disputed that on 2 November 1998 the Bankrupt filed an application in the Family Court of Australia seeking orders against her husband Joannis Tsimiklis (Mr Tsimiklis) for settlement of property of the marriage (the Family Court proceedings). The Second Respondent was a party to the Family Court proceedings and on

29 June 1990 the Family Court made final orders.
The petitioning creditor Sdrinis & Co. acted for the Bankrupt in the Family Court proceedings. On 11 December 1999 the solicitors delivered an itemised bill of costs to the Bankrupt in the total sum of $23,633.22 and a consent order was made by a Registrar of the Family Court of Australia on 27 May 1991 that the Bankrupt pay to Sdrinis & Co the fixed sum of $21,630.00.
On 6 November 1991 the Bankrupt became sole registered proprietor of the property situate at and known as 12 Koroit Street Nunawading being the land more particularly described in Certificate of Title Volume 8062 Folio 441 (the property).
By transfer dated 7 April 1992 the Bankrupt disposed of all her estate in the property to the Second Respondent with a life interest in the property to the Bankrupt (the property settlement).
On 8 May 1992 the Registrar of Titles cancelled the Certificate of Title of the property and created two new folios namely Certificates of Title Volume 10077 Folios 498 and 499. The Second Respondent became registered as proprietor in fee simple in remainder expectant upon the determination of estate for the life of the Bankrupt in relation to Certificate of Title Volume 10077 Folio 498 on 8 May 1992. On the same day the Bankrupt became registered as the proprietor of an estate for life in the property Certificate of Title Volume 10077 Folio 499.
In the pleadings the Applicant claims that the property settlement:
·    “was a settlement of property within the meaning of s.120 of the Bankruptcy Act;
·    was not made before any consideration of marriage;
·    was not made on or for the spouse or children of the bankrupt being a settlement of property that had accrued to the bankrupt after marriage in right of the spouse of the bankrupt; and
·    came into operation after, or within 5 years before, the commencement of the bankruptcy of the bankrupt.”
It is pleaded by the Applicant that the Second Respondent was not a purchaser or encumbrancer in good faith and for valuable consideration in respect of the property settlement. Accordingly the Applicant claims the property settlement is void as against the Trustee pursuant to s.120 of the Bankruptcy Act.
Alternatively as indicated the Applicant relies upon s.121 of the Bankruptcy Act and claims that the property settlement was a disposition of property by the Bankrupt with intent to defraud her creditors, not being a disposition for valuable consideration in favour of a person who acted in good faith within the meaning of that section and is therefore void as against the Trustee. Reliance upon s.121 according to the pleadings is to be inferred from the fact of the existence of the liability of the Bankrupt to Sdrinis & Co and that the Bankrupt entered into the property settlement with intent to defraud creditors within the meaning of ss.6 and 121 of the Bankruptcy Act 1966. The Second Respondent is said to have known or ought to have known of the liability of the Bankrupt to Sdrinis & Co and of the property settlement and it is to be inferred that she therefore knew of the Bankrupt’s intent. It is also claimed there was consideration for the property settlement.
As at the date of bankruptcy it is claimed that the Bankrupt as proprietor of the life estate in the property was entitled to exclusive possession of the property.
The Applicant relies upon the operation of s.58 of the Bankruptcy Act and asserts that all of the Bankrupt’s right title and interest in the property has vested in the Trustee and the Trustee is entitled to the benefit of the life estate in the property. The Trustee is entitled to exclusive possession of the property. It is claimed that demand was made that the Bankrupt and the Second Respondent give up possession of the property to the Trustee but that they have refused and/or failed to give up possession and hence the Applicant claims the orders set out in the Application.
In the Amended Defence of the Bankrupt filed 28 April 2000 the substantive defence relies upon an assertion that the property settlement was made in favour of the Second Respondent as purchaser in good faith and for valuable consideration. It is claimed that the settlement was made in consideration of payment of sums totalling $25,000 by the Second Respondent to the Bankrupt and of an agreement by the Second Respondent to provide personal care for and perform household duties on behalf of the Bankrupt.
The Second Respondent asserts in her further Amended Defence filed 28 April 2000 that the property settlement reflected an agreement and intention of the parties prior to and at the time of the acquisition of the property in November 1991 and/or reflected the contribution by the Second Respondent to the maintenance and improvement of the property after the acquisition in November 1991 and otherwise performance of an agreement by the Second Respondent prior to the disposition in April 1992. The Second Respondent claims to be entitled to the interest in the property by virtue of financial contributions made by her to the acquisition and upkeep of the property and pursuant to the agreement between the Bankrupt and herself and in consideration of those contributions the Second Respondent claims to be entitled to an unfettered interest in the property upon the death of the Bankrupt.
The Applicant in a Reply filed 5 May 2000 refers to payment of the purchase price for the property and asserts that on or about 23 August 1991 the Bankrupt received the sum of $108,481.97 from the sale of her matrimonial home pursuant to the orders of the Family Court made 29 June 1990 (the settlement proceeds). It is then asserted that the Bankrupt applied the whole or nearly the whole of the settlement proceeds towards the purchase of the property of which she became registered as sole proprietor on 6 November 1991. The payment of the purchase price was a settlement of property by the Bankrupt in favour of the Second Respondent within the meaning of s.120 of the Bankruptcy Act and that settlement was not made before or in consideration of the marriage, was not made in favour of a purchaser or encumbrancer in good faith and for valuable consideration. The settlement was not made on or for the spouse or children or of the Bankrupt being a settlement property that had accrued to the Bankrupt after marriage in right of the spouse of the Bankrupt. The settlement came into operation after or within five years before the commencement of the bankruptcy of the Bankrupt. In the alternative to the claim that the payment of the purchase price by the Bankrupt to the Second Respondent is void as against the Trustee pursuant to s.120 of the Bankruptcy Act, it is also asserted that the Applicant is entitled to rely upon s.121 as previously pleaded in the Statement of Claim. The Reply otherwise repeats the relief sought by the Applicant.

The evidence

Applicant’s evidence

The Applicant gave evidence and also relied upon an affidavit of Robert Bruce Gardiner sworn 3 August 2000 and an affidavit of Michael Lhuede sworn 7 August 2001. Mr Gardiner conducted a kerbside inspection of the property and assessed the weekly rental in 1998 at $110.00.

Kenneth Stewart Sellers

The Applicant adopted an affidavit sworn by him on 6 July 1999. That affidavit set outs the chronology to which I have referred and otherwise provides some evidentiary basis in support of the claims made in the Amended Application. Under cross-examination he was referred to the delivery of an itemised bill of costs from the Bankrupt’s solicitors for the total sum of $23,633.22 being delivered on 11 December 1990. The document was received as an exhibit in order to refer to it as the relevant document referred to by the witness.
During a great deal of cross-examination the witness was taken to documents referred to in the Affidavit including the transcript of the examination under s.81 of the Bankruptcy Act. Specifically he was cross examined in relation to a statement in his affidavit that an admission was made by the Bankrupt during the course of her examination that she had no assets or funds save for her interest in the property from which she could meet her liability to the creditor at the date of settlement. After perusing the transcript Mr Sellers referred to extracts of that transcript where the Bankrupt had given evidence that she had given the property to the Second Respondent who had agreed that there would be a mortgage over the property. From that part of the transcript the witness suggested that the Bankrupt had indicated there was no other asset to secure a loan from the bank to pay off the $25,000. It should be noted for the sake of completeness that the page referred to by Mr Sellers contains the following extract:
“When you transferred the property to your daughter in April 1992 did you have any other property which you could have Antony Sdrinis account?
Interpreter: No.”
Mr Sellers was referred to the statement of affairs dated 22 June 1994. He agreed that there was no debt set out there to the Second Respondent and otherwise referred to a dispute with solicitors as being the cause of the bankruptcy or insolvency. His income in the statement refers to a government pension of $8,200 and that she lives in the same house with the Second Respondent. It was confirmed that the transfer of the property to the Second Respondent was referred to in the statement of affairs and that it was dated 22 days after the sequestration order had been made.
Mr Sellers was cross examined about a statement in his affidavit where he said, “It is to be inferred from the existence of the liability of the Bankrupt to ASC that the Bankrupt entered into the property settlement with intent to defraud her creditors within the meaning of s.121 of the Act”. During discussion about this topic of cross examination Counsel for the Applicant indicated that a number of the paragraphs in Mr Seller’s affidavit related to conclusions which are properly in the Amended Statement of Claim and would ultimately be a matter for the Court. In my view that submission is correct as it is a matter for the Court to assess based upon evidence of those able to give evidence at the relevant time. Mr Sellers did not join issue with the suggestion that there had been disclosure of the property transferred but simply was concerned about whether or not there was a $25,000 debt. Mr Sellers was otherwise challenged in relation to the matters which are claimed in the application.

Respondents’ evidence

Martha Tsimiklis (now Milionis)

The Bankrupt adopted her affidavit sworn 28 June 2000. In that affidavit she admits becoming bankrupt on 31 May 1994 and she recites the procedure leading up to the bankruptcy hearing and provides further details concerning the offer of settlement to her former husband in Family Court proceedings to which reference has already been made. She claims not to have understood the consent order made against her for the legal costs of her then solicitor and did not understand the nature of the proceedings. She otherwise asserted the agreement with the Second Respondent prior to the acquisition of the property and that the property was bought in her name with the intention that she would only have the right to live in it with the Second Respondent owning the property. The Second Respondent was to contribute $25,000 in total towards the acquisition, maintenance and repairs of the property and continue looking after the Bankrupt as she had been doing for a number of years prior to the acquisition of the property.
In her affidavit the Bankrupt refers to a number of illnesses and medical conditions and what might be described as general deterioration of her health. She asserts in the affidavit that the settlement of the property with her daughter was for valuable consideration namely the sum of $25,000 invested in the property by the Second Respondent together with the care provided by the Second Respondent to the Bankrupt.
The Bankrupt refers to attending Mr Roussos, her solicitor in about March 1992 to effect transfer of the legal interest in the property to the Second Respondent and claimed the purpose of transferring the legal interest was to give effect to the agreement which she had reached with the Second Respondent. She exhibited a letter from the solicitors Roussos & Dolkas dated 1 April 1992 consistent with the instructions to create a life interest in the property with a fee simple estate to the Second Respondent.
The Bankrupt in her affidavit denies not having assets or funds and referred to amounts given to her by her father who was living in Greece which assisted her with her living expenses and generally. She claimed substantial sums of money had been forwarded to her over the years even after the purchase of the property. She strongly denies any suggestion that the settlement of the property was to defraud her creditors.
In her evidence the Bankrupt produced her confirmation of bankruptcy card to indicate that her date of bankruptcy was 31 May 1994. When asked to explain the expression “natural love and affection” in the transfer she gave evidence that that term was explained to her by the solicitor and was meant to be according to her evidence, “for the love I have of my daughter”. The witness was referred to the loan agreement dated 15 October 1993 between her and the Second Respondent where the sum of $25,000 is referred to as “loan monies”. She was asked in evidence in chief, “Is that a document that was explained to you before you signed it?” She answered, “He spoke in Greek, but exactly what is written in there I don’t know”.
Under cross-examination the Bankrupt said that when she purchased the property she did not have any other assets. She indicated that the Second Respondent paid the deposit for the property. When asked whether she had any documents demonstrating that the Second Respondent paid the money she answered “No.” When asked, “Why not?” She answered, “Because I didn’t know that I would end up in Court therefore I didn’t keep any documents”. She was then cross-examined extensively about further contributions allegedly made by the Second Respondent to the Bankrupt for the purchase of the property.
When asked to produce documents the Bankrupt ultimately produced a document which she claimed was a customer record of a bank cheque dated 9 October 1991 for the amount of $9,900 payable to LJ Hooker. When asked, “Where did the $9,900 come from?” The Bankrupt answered, “From Theoni but I think it was the cash money that I gave him in order to secure the property”.
Further reference was made to an initial deposit for the property of $1,100 and a receipt from LJ Hooker was produced. When specifically asked to look at the receipt (Exhibit A5) where reference to “cash” was crossed out and “cheque” is left remaining the Court asked the witness the question, “If you paid in cash, can you explain why he has given you receipt for a cheque?” The witness answered, “I don’t remember, I remember giving him cash.” The Bankrupt was re-called to give further evidence in relation to this issue and endeavoured to explain that there may have been an error in her evidence as she had put down payments on a number of houses and had given cash for those down payments. When asked details about how the total amount of $11,000 was paid and specifically in what form the Bankrupt said the following:
“INTERPRETER: As I said before, my daughter gave me the amount of money. I paid it, yes, because my daughter at the time was attending TAFE.
MR GALVIN: How did you get the money? I know you got it from your daughter but how did she give it to you? In what form – cash, cheque?
INTERPRETER: We went together to the bank, sorry we had been together to the bank where she got one in a cheque form and the rest in cash.
MR GALVIN: Now your daughter would have bank statements demonstrating that wouldn’t she?
INTERPRETER: I don’t know if she has them.
MR GALVIN: You haven’t asked her for them?
INTERPRETER: She told me she doesn’t.
MR GALVIN: You haven’t thought to ask the bank for copies?
INTERPRETER: Well because I have got these documents, no.

In her evidence the Bankrupt confirmed that she and the Second Respondent used the same branch of the same bank.
In relation to the balance of the $25,000 reference was made to various work done on the property including cement columns, stumps and repairs to the roof. She was then specifically asked the following:
MR GALVIN: Are you able to say how much was spent on renovations?
INTERPRETER: I don’t remember, no.
MR GAVLIN: Who were the tradesmen that you engaged to do the work?
INTERPRETER: It was a gentleman. It was a Greek gentleman.
MR GALVIN: What was his name?
INTERPRETER: I don’t remember his name now.
MR GALVIN: Have you thought to contact him in relation to this action, this case.
INTERPRETER: I don’t know where he is, if he exists, I don’t know.
MR GALVIN: Did you keep any documents, receipts, invoices, quotes that sort of thing in relation to the work that he did?
INTERPRETER: I don’t remember what I did with them because I never thought or I didn’t think I would ever need them.
MR GALVIN: … Have you kept any documents demonstrating payment to this Greek gentleman who did the work?
INTERPRETER: He did give me receipts but I don’t know what I’ve done with them.
MR GALVIN: … Have you or your lawyers made any attempts to identify the man who did the work?
INTERPRETER: No.
MR GALVIN: Has your daughter or her lawyers made any attempt to identify who the man was?
INTERPRETER: No, as far as I know.
MR GALVIN: Have you talked to your daughter about identifying this man?
INTERPRETER: No.
Under cross-examination it was put to her that during her public examination she said that her daughter had paid $10,000 for renovation. In answer to that question the Bankrupt said, “But you must understand, she gave me the money and I actually paid it.”
When asked about expenditure and other items including curtains, the Bankrupt was further pursued on the question of documentation and indicated that she had not looked for any documents. She stated, “I do not have any documents on me and nor have I looked, no.” The Bankrupt was then questioned about the evidence in the affidavit of the Second Respondent who claimed to have paid $10,000 towards the deposit on the property and then another $5,000 towards settlement. When that matter was put to her the Bankrupt said, “Perhaps she can remember better.”
When asked questions about the agreement with the Second Respondent the Bankrupt confirmed that it was an oral agreement before she purchased the property. The Bankrupt was asked several questions directed to the issue of when agreement was reached with the Second Respondent and precise details regarding payments. An example of the difficulties encountered in establishing the details is evident in the following exchange:
MR GALVIN: Did she agree to put the money she received from her car accident towards the purchase of the property or something else?
INTERPRETER: We agreed that she would put it towards the house.
MR GALVIN: When did you agree to that?
INTERPRETER: When we were looking to find a house, but we always spoke about it we always discussed it.
A further exchange is indicative of the vagueness in relation to the evidence of the Bankrupt:
MR GALVIN: I see that’s $11,000 towards the deposit. What was the next payment that your daughter made to you?
INTERPRETER: I don’t remember how it was given to me after that.
MR GALVIN: You don’t remember how but you assert that she gave you money making up $25,000?
INTERPRETER: Because that was when all these things were happening and I could remember them.
MR GALVIN: Are you able to say whether you remember the amounts or not?
INTERPRETER: I don’t.
Ultimately during the course of cross-examination the Bankrupt agreed that she was not able to demonstrate by reference to documents that a total of $25,000 was paid. She maintained a denial however that the Second Respondent did not make any payments towards the purchase of the property. She agreed that she was going to leave the property to the Second Respondent in her will and this was the agreement at the time she was given the amount of $25,000. The Bankrupt agreed that in her s.81 examination there was no reference to the agreement alleged that the Second Respondent would get the property in exchange for payment of $25,000.
At one stage during the evidence the Bankrupt claimed that she and the Second Respondent bought the house together. Then when asked why the house was registered in her name she stated, “Because I didn’t think correctly at the time. It was only later that I realised that I was doing an injustice to my daughter.”
The Bankrupt was taken to the further extracts from the transcript of the s.81 examination and then after referring to an extract where she had stated, “We hadn’t made any arrangements, we just bought a house so we could live in it.” She was asked the following:
MR GALVIN: Now it’s the case isn’t it that the $25,000 that you have been talking about you never intended that your daughter would get anything in exchange for that other than perhaps an entitlement to the property in your will.
INTERPRETER: But Theoni would also live there all her life.
MR GALVIN: Yes, I see. In the transfer that we looked at of

7 April 1992 you didn’t just give your daughter a life interest?
INTERPRETER: Well, what can I say to you? I simply spoke to the solicitor. I told him that I wanted it put in a way that I could live there whilst I was alive and also I was concerned about a will in case it was contested by my son. The solicitor did the rest.
During cross-examination when taken to the transfer of land document which refers to “natural love and affection” as consideration, the Bankrupt said that she had told the solicitor who had prepared that document that the Second Respondent had paid $25,000 and she could not explain why that had not been referred to in the document. She agreed that the document had been read to her in Greek. The Bankrupt agreed that she had made two wills, one dated 21 December 1989 and another dated 30 May 1992. The first will provided that the beneficiaries were both children, that is her son and daughter and the later will only provided for the daughter as a beneficiary. She wrote the son out of the will in May 1992 having executed the transfer of the property in April of the same year. She agreed that in April and May of 1992 she wanted to ensure that none of the property could go to her son after her death.
Though admitting that she knew that the only asset she had which might pay the debt to the then solicitors was the property, the Bankrupt denied transferring the property in order to keep it from the reach of the creditor. She referred to assistance she expected from her father to help pay the debt to the solicitor but otherwise reiterated in re-examination her belief that she did not in any event owe the solicitors any money.
When re-called for further examination in chief the Bankrupt explained that she had applied to the Commonwealth Bank on the day she received her Bankruptcy Notice for $25,000 which was approved. She asked the bank to delay that advance to see if she could reach agreement with her creditor. She confirmed that she did not proceed with the loan.

Theoni Tsimiklis

The Second Respondent adopted two affidavits sworn by her, one sworn 17 March 2000 and the second on 3 April 2000. In the affidavits she confirms payment to her from the Family Court proceedings and paying $10,000 as deposit for the purchase of the property together with a further $5,000 contribution towards the balance of the purchase price. She then referred to an additional $10,000 being paid after residing in the property over a period of 12 months and that that amount was paid towards renovation and repairs. She confirmed the Bankrupt’s significant health problems and that she requires the assistance of the Second Respondent.
She confirmed an agreement prior to the purchase of the property with the Bankrupt that the Bankrupt would have a life interest in the property with the remainder to the Second Respondent in recognition of the financial contributions made and the care she had given to the Bankrupt. In her first affidavit she states,
“The transfer of the interest in the property to me accurately reflects this agreement between us.”
In her second affidavit the Second Respondent refers to the defence being prepared by previous solicitors dated 20 March 2000 which had been served but not filed. Paragraph 12 of that document which was not before the Court was said to not accurately reflect the Second Respondent’s instructions to her previous solicitors. Reliance was placed upon an Amended Defence which asserted the agreement now relied upon which involved a contribution of $25,000 by the Second Respondent towards the acquisition of the property and repairs to the property. In her affidavit the Second Respondent referred to the earlier defence which had stated that, “At all relevant times she was beneficially entitled to an interest in the property and that the Bankrupt held that interest on trust for the Second Respondent”. In her affidavit the Second Respondent states that she had instructed her solicitors at all relevant times that it was always intended (by both my mother and I) that I would be the owner of that property and that my mother would have the right to live in the property. The witness claims that her right to the property subject to the Bankrupt’s right to live there was absolute and was not simply intended that the Bankrupt would leave it to the Second Respondent in her will or that the Second Respondent would have some beneficial interest. In her affidavit the witness claimed that it was “always intended that I would be the owner subject only to my mother’s right to live there until she died”. After explaining a further paragraph of the draft of the Defence which was not filed the witness then relied upon an Amended Defence which reflected the matters raised in her affidavit.
In evidence in chief the Second Respondent was taken to an extract of her s.81 examination where reference is made to the payment of $25,000. The relevant extract provides:
“… The $25,000 referred to, would that have anything at all to do with the proposed housing loan of $25,000 which was to be taken out with the Commonwealth Bank? --- No.
So it has no relation to that at all? --- No.
Even though – well page 12 of the bundle of documents, if I could ask you to have a look at that again, that is document dated 20 October 1993 and it is the confirmation from the Commonwealth Bank that the housing loan for $25,000 has been approved? --- Yes.”
The witness denied in that exchange that the $25,000 amount was related to the Commonwealth Bank loan. When asked in evidence in chief whether she understood that extract and in particular a further part of the extract where it was pointed out by the Registrar that the borrower had applied the loan monies exclusively for the purpose of purchasing or acquiring the real estate situated at and known as 12 Koroit Street. It also affected various repairs renovations and improvements of the property. In her evidence in chief when taken to that question which included a reference to $25,000 therefore relating to the property, the witness said, “I don’t understand it now.”
In cross-examination the Second Respondent was again referred to the transcript of her s.81 examination where she agreed that she gave the money to the Bankrupt and did not expect to be repaid and it was a gift. In that transcript she referred to the solicitor advising them to prepare a loan agreement. In cross-examination after referring to the transcript the Second Respondent agreed that the Commonwealth Bank approved the loan but that they did not actually advance the money. The Second Respondent agreed in evidence that she did not give $25,000 to the Bankrupt when the property was purchased but rather gave $15,000 which she did not expect the Bankrupt to be able to pay back.
When specifically asked about the initial holding deposit of $1,100 which the Bankrupt stated she obtained from the Second Respondent, the witness stated that she did not remember giving that amount to the Bankrupt.
Whilst agreeing in her evidence that the Bankrupt talked about leaving the property to her in her will, the Second Respondent asserted that that would not be sufficient and she required an acknowledgment that she had contributed money to the property. The acknowledgment was going to occur by putting the Second Respondent’s name on the title.
The Second Respondent confirmed that she converted a garage into a studio at the property for her own use as an art student and in other respects referred to the re-stumping of the property as being the major expense with other repairs. She did not remember the name of the person who carried out the work and claimed to have only met him “briefly”. She had not tried to find out the identity of the person that carried out the repairs nor did she look for any documents which show payments of about $10,000. She asserted that her mother (the Bankrupt) had looked for documents. This was contrary to the evidence of the Bankrupt. The Second Respondent claimed that all money was given to the Bankrupt in cash drawn from bank accounts. She claimed to have lost her bankbook many years ago and had not sought copy records from the bank.
The Second Respondent confirmed the arrangements concerning the second will of the Bankrupt which was intended to ensure that her brother was not going to be a beneficiary.
When asked questions about the alleged agreement between herself and the Bankrupt the Second Respondent referred to it as being “an understanding”. She stated, “Its just something that we understood between the two of us.” She was unable to be more precise about the terms of the agreement or indeed when specifically an agreement was reached.
When the Second Respondent was taken to the transfer and the reference to “natural love and affection” representing the consideration, she claimed not to know what that meant. When asked why did she sign the document if she did not understand it, she said, “I never understand legal documents.”
The witness was further taken to a document entitled “Confirmation of Life Estate” dated 7 May 1992 and in particular a recital to that document which reads,
“By transfer of land made the 7^th day of April 1992 between Martha and Theoni a life estate in the said land was transferred to Martha with the remainder in fee simple to Theoni expectant on the death of Martha (hereinafter called the ‘life estate’) the consideration being for natural love and affection.”
Again, the witness claimed that when she signed the document she did not understand what it meant. She conceded however that the solicitor explained the document to her but could not remember what he explained.
The witness was then taken to the loan agreement made on 15 October 1993 between her and the Bankrupt prepared by the solicitor Mr Peter Hambros. She claimed Mr Hambros was probably more the Bankrupt’s solicitor than hers and agreed that she signed the document and when asked whether she understood it said, “Probably not really”. Despite that loan document stating that the Second Respondent lent to the Bankrupt the sum of $25,000 in her evidence the witness stated, “Well I didn’t really lend it to her”. The witness was then taken to the transcript of her s.81 examination and in particular the following extract,
“You say you gave the money to your mother. Was it given pursuant to any loan agreement or anything like that? --- Not at the time, not really.
So it was just a straight gift to your mother of the $15,000? --- It was to help her out.
Right. And at the time you gave that money to your mother you did not expect to get it back? --- No.
Did you give any other monies or make any other contributions to the purchase price of the house? --- Not to the purchase, just to fixing it.
In evidence the witness then was asked, “So you didn’t lend the money to your mother, did you?” She answered, “No.” Similarly she agreed that she did not lend the $10,000 for renovations to her mother. She agreed therefore that the loan agreement created in 1993 was not accurate, not true or correct insofar as it suggests the money was a loan.
The witness confirmed that the Bankrupt did not have any other property to pay the creditors claim and did not know whether the Bankrupt had any cash. If the Bankrupt had any cash then she indicated in evidence that it would have come “from the house”.

Submissions

Applicant’s submissions

It was submitted on behalf of the Applicant that as a result of the orders made by the Family Court on 29 June 1990 the Bankrupt had become entitled to and indeed received half the proceeds of sale of the former matrimonial home at 18 Kelvin Street East Doncaster. She then subsequently purchased the property and became registered as proprietor on 6 November 1991.
In dealing with the alleged contributions of the Second Respondent it was submitted that there were significant deficiencies in the documentary material produced in support of the claim that the Second Respondent contributed $15,000 towards the property. Documents produced at trial included a receipt for a sum of $1,100. This was claimed by the Bankrupt to be paid by way of cash as a “holding deposit”. It was noted that the receipt refers to a “cheque”. Although the Bankrupt confirmed that the payment was made by her, she asserted that the money was given to her by the Second Respondent. A second document being a receipt from LJ Hooker for a sum of $9,900 was the subject of a claim by the Bankrupt that she attended the Commonwealth Bank with the Second Respondent who had purchased a bank cheque for the sum of $9,900. This was applied it was claimed towards the payment of the balance of the deposit on the property.
It was submitted that no document had been produced demonstrating that the Second Respondent rather than the Bankrupt contributed the amounts which were the subject of the receipts. It was submitted that this could easily have been the subject of bank statements or indeed records from the Second Respondent and the bank in relation to the payments.
In relation to the claim that the Second Respondent contributed $10,000 towards renovations which include converting a garage into a studio for the Second Respondent, it was submitted that the Bankrupt was unable to identify the tradesmen who carried out the work and again was unable to produce any documents providing evidence in relation to the renovations. No attempt was made by the Respondents to identify tradesmen or obtain evidence of the work done or indeed that payments were made. It was submitted that the Court should draw an adverse inference against the Respondents.
Whilst it was noted by the Applicant that the Bankrupt asserted that there had been a total contribution of $25,000 the only amount capable of quantification based on documents appeared to be the initial $15,000 advanced allegedly by the Second Respondent. The balance of the $25,000 was referred to in “discussions” which the Bankrupt had with the Second Respondent. The Bankrupt was unable to give evidence of precise amounts advanced to her by the Second Respondent after the property had been purchased.
If the Court were to find that the Second Respondent had made the alleged contributions then it was submitted that evidence as to the basis upon which $25,000 was advanced was inconsistent. The Court was invited to consider the evidence in the primary documents including the transfer of the deed of confirmation, the life estate and loan agreement compared with the transcript of public examinations, the Respondents’ Affidavits and evidence given by the Respondents at trial. Those matters could not be reconciled on a proper analysis of the material.
Three mutually exclusive possibilities were advanced on behalf of the Applicant with each being supported and contradicted by parts of the evidence. The three possibilities were stated in the written submissions of the Applicant to be the following:
A.That the second respondent lent amounts totalling $25,000 to her mother for the purchase and renovation of the property on the basis that that repayment of that amount would be secured against the property.
B.That prior to the purchase of the property, the respondents entered into an oral agreement, or an understanding, that that the second respondent would contribute $25,000 towards a property, in consideration for which she would own the property, subject to her mother’s retaining a life interest.
C.That the bankrupt acquired, and possibly renovated the property, with funds advanced by way of gift or (which is less likely) by way of unsecured loan, and intended to leave the property to her daughter in her will.”

In relation to contributions by way of a secured loan it was submitted that the loan agreement created “ex post facto” purports to give a loan secured over the property. The security is effected by paragraph 3 of the agreement. The agreement to create the security occurred approximately a year after the purchase of the property, and was not supported by present valuable consideration. (See Wigan v English and Scottish Law Life Assurance Assn [1909] 1 Ch 291).
It was submitted that s.120(1) of the Bankruptcy Act would apply to this charge.
In relation to the contributions made in consideration for beneficial ownership of the property subject to the life interest, it was submitted the only evidence supporting that proposition is the Respondents’ Affidavits and some evidence given by the Bankrupt at trial. Those assertions, it was submitted, are irreconcilable with the fact that the Respondents signed the transfer and deed of confirmation of life interest stating that the transfer was for “natural love and affection”. Further, the property was registered in the Bankrupt’s name and that loan agreement purports to evidence that the Second Respondent was entitled to no more than a charge or mortgage over the property to secure repayment of $25,000. In addition, evidence given by the Respondents at the public examination contained no reference to any such agreement as that now alleged in the affidavits.
Criticism was made of the Bankrupt’s evidence and in particular under cross-examination where she asserted an agreement or understanding arising in discussions with her daughter prior to the purchase of the property. It was submitted the terms of the understanding were unclear and although there appeared to be an understanding that the Second Respondent would care for the Bankrupt in exchange for beneficial ownership of the property, there had been no mention of this made by the Bankrupt in her public examination. Throughout evidence in cross-examination it was noted that the Bankrupt consistent with what she had said in the public examination referred to an intention to leave the property to the Second Respondent. It was submitted that evidence is consistent with the Bankrupt retaining the entire beneficial interest.
Having regard to the evidence of the intention to leave the property to the Second Respondent in her will, it was then submitted that the most likely scenario is that the Bankrupt purchased and renovated the property with the daughter’s financial assistance either by gift or loan for the benefit of the Bankrupt with the intention to ultimately devise it to the Second Respondent. The Court should accept the consistent evidence both at the public examination and at trial apart from the assertion at trial of some agreement and draw the appropriate conclusion that there was no agreement and the Court was invited to conclude that the only decision made was that the Bankrupt would leave the property to the Second Respondent in her will.
The Court was invited to consider specific evidence of the Bankrupt in relation to writing her son out of a will which she had made in May 1992. That will had been made about the same time as the transfer and had been executed along with the deed of confirmation of life estate. In the context of the Bankrupt’s wish that the Second Respondent should be sole owner of the property after the Bankrupt’s death, the Court was referred to the following extract from evidence of the Bankrupt:
“ … let’s go back to February [1992]. So why did you go and see Mr Roussos? --- I didn’t have a will, I didn’t have anything with my daughter.
Was it your intention that you wanted Mr Roussos to draw a will for you? – Yes.
And did you wish Mr Roussos to do anything else for you? --- We discussed things, and I also have a son in the meantime, and I didn’t want my son to get a share in the event that something happened to me because my son also received moneys from the trustee, and he dissipated that money within a month.
Is it correct that you wanted in your will to leave the property – that’s the Koroit Street property – to your daughter? --- Yes. I made the house a gift to my daughter, a gift.
As a result of that meeting with Mr Roussos, what in the end happened? --- He said to me that the will spoils; that my son could challenge it.
So what --- ‘Spoil it’ was the words she used, and he said to me to gift the property to my daughter, and I gifted it.”
Reference was made to the transcript of the evidence of the Second Respondent at the public examination in support of the conclusion that contributions made by her were by way of gift without an expectation of anything in return. I was referred to the following:
“You say you gave the money to your mother. Was it given pursuant to any loan agreement or anything like that? --- Not at the time, not really
So it was just a straight gift to your mother of the $15,000? --- It was just to help her out.
Right. And at the time you gave that money to your mother you did not expect to get it back? --- No.
…
When you gave those amount [$10,000 for repairs] to your mother was it pursuant to any agreement? ---No, I don’t think so.
So you just gave the money to your mother at the time? --- Yes.
And you did not anticipate that your mother would repay the money to you at any time? --- No.”
Likewise, at the public examination I was referred to the following extract of the Bankrupt’s evidence:
“You say Theoni gave you the money --- Yes
Was that given to you to keep and deal with as you wished? --- She gave it to me for the house that we bought.
Did you ever intend to repay the money to Theoni?
We hadn’t made any arrangements. We just bought a house so we can live in it.”
Reference was then made to evidence in relation to the creation of the loan agreement which it is said had been created at the suggestion of the Respondents’ solicitor Mr Hambros in anticipation of the bankruptcy. Evidence at trial by the Bankrupt was that after Mr Hambros saw bankruptcy documents relating to her he “insisted” that he prepare a loan agreement. The Bankrupt claimed that the document was read to her daughter but not to her.
I was then invited to consider the evidence of the Second Respondent of public examination relating to the loan agreement as follows:
“You have indicated previously that you gave the money to your mother, that is both the $15,000 and the $10,000, and when you gave the money you did not expect it to be repaid, it was a gift. Is that correct? --- Yes.
Why then are you know putting –or why have you now signed a document headed, A Loan Agreement, in which you have said you in fact lent the money? Why was this document prepared? --- I think that’s what the solicitor advised us to do.
So did you ask the solicitor to prepare this document? --- I think my mother did.”
Having referred to that extract of evidence it was submitted on behalf of the Applicant that the loan agreement was created ex post facto purports to be evidence of a loan secured over the property and it was submitted that it was fabricated at the instigation and according to the Bankrupt’s evidence at the “insistence” of the solicitor. The solicitor it was noted had not been called to give evidence.
It was submitted at the time of the transfer the Bankrupt had been aware of the claim for legal costs which had subsequently lead to the bankruptcy and was aware of the extent of her assets. The Second Respondent likewise was aware that the solicitors were pursuing a claim for costs against the Bankrupt and was aware of the extent of the Bankrupt's assets.
An important part of the chronology was a notice dated 27 October 1998 where the Trustee gave notice to the Respondents to vacate the property.
The Court was invited to apply the principles of Jones v Dunkel (1959) 101 CLR 298 in relation to the failure of the Respondents to call evidence from Mr Hambros solicitor and Mr Roussos as to instructions which might have been given in relation to the transfer and the loan agreement. The Court was invited to conclude that the evidence of those two witnesses would not have assisted the Respondents’ case.
The Applicant has submitted that he was able to rely upon the transcript of the public examinations of both the Bankrupt and the Second Respondent and that the transcript was admissible pursuant to s.81 of the Bankruptcy Act unless the Court had made an order to the contrary (see s.255(2)). In any event the transcript is admissible as it contains admissions made by both Respondents (see Rothmore Farms Pty Ltd (in liq) v Belgravia Pty Ltd (1999) 31 ACSR 88).

Section 120 – void settlement

It was noted in submissions by the Applicant that ss.120 and 121 of the Bankruptcy Act were substantially amended by the Bankruptcy Legislation Amendment Act 1966 (No. 44 of 1966 Schedule 1 Item 208). The amended provisions apply to bankruptcies the date of which is on or after 16 December 1996. It is submitted and it is common ground that the provisions which apply to the present case are those which were in place prior to the amendments.
Section 120 of the Bankruptcy Act (as it stood prior to 16 December 1996) provides:-
“A settlement of property, whether made on or before the commencement of the Act, not being:
(a)a settlement made before and consideration of marriage, or made in favour of a purchaser or encumbrancer in good faith and for valuable consideration;
…
is, if the settlor becomes a bankrupt and the settlement came into operation after, or within two years before, the commencement of the bankruptcy, void as against the trustee in bankruptcy.”
It was submitted that within the meaning of ss.5 and 115 of the Bankruptcy Act, the bankruptcy in the present case commenced on

23 October 1993 when the Bankrupt had committed the relevant act of bankruptcy. The transfer therefore was well within the statutory two year period given that the transfer occurred on 7 April 1992.
The purpose of the old s.120 a “settlement of property” includes any disposition of property (s.120(8)) to devise property to a beneficiary in a will it was submitted is quite different to a transfer ‘inter vivos’ . A disposition under a will creates the mere expectancy ‘spes successionis’ and is not property (see Re Coram; Ex parte Official Trustee in Bankruptcy v Inglis (1992) 36 FCR 250). The transfer ‘inter vivos’ is a disposition of property according to the submissions of the Applicant.
It was submitted that a transfer in favour of a purchaser in good faith and for valuable consideration requires both elements of good faith and valuable consideration to be established (see Barton v Official Receiver (1986) 161 CLR 75).
In relation to the issue of “valuable consideration” it was submitted that this does not have to be adequate or equal consideration but must be real and substantial and not merely nominal, trivial or colourable (see Barton v Official Receiver at p 86). It should be noted that both Counsel referred to the principles applicable to the old provisions arising out of the High Court decision in the Barton case and it should also be indicated that there does not appear to be any significant dispute between the parties that the old provisions apply and nor is it challenged that disposition of property pursuant to a will is not property but rather creates simply a mere expectancy.
In considering valuable consideration it was submitted by the Applicant that “natural love and affection” does not qualify as valuable consideration (see Lynn v White [1997] 1064 FCA (1 October 1997).
If the Court were to find despite the use of the term “natural love and affection” in a transfer and deed of confirmation of life estate that the transfer was executed in “consideration” or “recognition” of the Second Respondent’s past advances to the Bankrupt then that would amount in any event to past consideration which would not be valuable consideration for the purposes of s.120 (see Wigan v English and Scottish Law Life Assurance Assn [1909] 1 Ch 291).
In dealing with the issue of good faith it was submitted that if the Second Respondent knew or suspected that the effect of disposition would be to disadvantage creditors then the Court can find that she has not acted in good faith for the purpose of s.120 of the Bankruptcy Act. It is not necessary for lack of good faith that the Second Respondent should be aware of any intention on the part of the Bankrupt to disadvantage her creditors and it is sufficient, according to the Applicant’s submissions that the Second Respondent knew that the consequence of the transfer was that the Bankrupt’s creditors might not receive the costs as the only significant asset of the Bankrupt at that time was the interest in the property (See Wansley v Edwards (1996) 68 FCR 555).
It was submitted that the Applicant is entitled to an order that the disposition effected by way of the transfer on 7 April 1992 is void as against the trustee.

Section 121 – transfer to defeat creditors

The old version of s.121 of the Bankruptcy Act provides:
“Subject to this section, a disposition of property, whether made before or after the commencement of this Act, with intent to defraud creditors, not being a disposition for valuable consideration in favour of a person who acted in good faith, is if the person making the disposition subsequently becomes a bankrupt, void as against the trustee in bankruptcy.”
It was submitted that where a settlement of property otherwise and for valuable consideration occurs in circumstances where the inevitable result of the settlement is the settlor’s creditors are left unpaid, the Court should presume an intention on the part of the settlor to defeat her creditors (see Freeman v Pope (1870) 5 Ch App 538 and P T Garuda Indonesia Ltd v Grellman (1992) 35 FCR 515).
It is submitted in the present case that transfer of the Bankrupt’s interest in the property to the Second Respondent had the effect of defeating the creditor’s claim for legal costs and in the absence of any direct evidence the Court should presume that this was the intention of the Bankrupt.

Vesting of the Bankrupt’s interests in the property

In the alternative it was submitted by the Applicant that if the Court was not satisfied that the elements of either ss.120 or 121 have been made out then the Court ought to give effect to the intent evidenced by the loan agreement and hold that the transfer was effected by way of security only and not absolutely. The Court should then declare that the life interest retained by the Bankrupt in the property has vested in the Applicant and declare the Bankrupt’s equity of redemption has vested in the Applicant by operation of s.58 of the Bankruptcy Act.

Damages flowing from refusal to give possession

It was submitted the Applicant is entitled to damages which flow from the refusal of the Respondents to give possession from the date of service of the Applicant’s Notice of Vacate namely on or about

27 October 1998. The loss and damage is the amount of rent which might have been received by the Applicant during the period of the Respondents unlawful possession of the property namely an amount of $110.00 per week according to the evidence of Robert Bruce Gardiner.

Respondents’ submissions

It was submitted on behalf of the Respondents that the primary issue for the Court to determine is whether the transfer could be regarded as a transfer in good faith and for valuable consideration pursuant to s.120 of the Bankruptcy Act. As indicated earlier the relevant sections of the Bankruptcy Act are those which were referred to by the Applicant, that is the old provisions.
It was submitted that the Court needs to determine whether pursuant to s.121 a fraudulent disposition with an intent to defraud creditors and not being a disposition for valuable consideration in favour of a person who acted in good faith is sustainable by the Applicant.

Consideration

The Respondents submitted that the evidence is clear that the Second Respondent contributed $25,000 to the purchase and/or renovation and/or maintenance of the property. Those monies had been forthcoming shortly prior to the purchase on 6 November 1991 ($15,000) and in a relatively short period thereafter for the purpose of conducting maintenance and renovations ($10,000).
Reference was made to the Bankrupt’s evidence. It was suggested that the renovations occurred nearly ten years ago and therefore documentation was not able to be produced though she was able to produce some documents showing bank cheques were obtained and payment of monies to the vendor’s estate agent. It was submitted that under cross-examination the Bankrupt maintained the position that the money was paid and this had been corroborated in evidence given during the s.81 examination in January 1998 and the disclosure of her transfer and consideration in her statement of affairs dated 22 June 1994. There is sufficient evidence to support the proposition that the amount of $15,000 had been received by the Second Respondent from her father out of Family Court proceedings and $10,000 from a personal injury payment. Although not making any proof of debt in the Bankrupt’s bankruptcy it was noted that the trustee in correspondence to the Bankrupt’s solicitor noted the Second Respondent as having a claim for $25,000.
Reliance was placed on correspondence from the Bankrupt to her solicitors Roussos & Dolkas in February 1992 prior to the transfer of the property and her bankruptcy. That letter dated 27 February 1992 is a file copy of a letter which clearly refers to the contribution of the Second Respondent of $25,000 to the purchase of the house. It is useful to set out the relevant extracts of the letter as follows:
“This letter is to go over what was discussed in our meeting with regards to the change of title of 12 Koroit Street Nunawading from my name to my daughter Theoni’s name.
The following reasons applies
(a)I want to make the change in name to protect Theoni’s interest in that house should something happen to me in the future.
(b)Theoni contributed $25,000 to the purchase of the house which I was supposed to return when the Ministry of Housing loan was approved. The loan was not approved and I now cannot return to her the $25,000. …”
The letter refers to the Second Respondent’s interest in the house being protected in the event that the Bankrupt should remarry and apparently to stop her son from being able to “break my will and take a share in the house”.
It is clear on this evidence that according to the Respondents the Second Respondent did contribute not only $25,000 but that it was contributed towards the purchase of the property. It is claimed that the Bankrupt’s solicitors knew of the contribution at the time of preparing the transfer but omitted to include this as proper consideration. The loan agreement is a document, it was claimed, prepared on the advice of a solicitor to protect the contribution to the property made by the Second Respondent. Whilst the solicitor who gave advice and obtained the Respondent’s signature on the document should be criticised as the protection given to the Second Respondent did the opposite. It was submitted the Court should not have regard to a document which clearly “flies in the face of the facts” including what is contained in the statement of affairs and in the letter from the Bankrupt to Mr Roussos.
It was submitted that the Court should also rely upon the evidence in the affidavit material and the transcript of the s.81 examination. It was submitted that the Court should be satisfied that the Second Respondent contributed $25,000 for the purchase and repairs of the property and that this constituted valuable consideration. It was noted that the Applicant concedes that if the amount is treated as consideration then it constituted “valuable consideration” under the old provisions of the Bankruptcy Act.
Having regard to the life interest to the Bankrupt it was submitted that the amount paid by the Second Respondent constitutes full consideration for the interest obtained. In applying the law set out in Barton’s case the Court should also determine that it is appropriate to have regard to the relevant circumstances of the Respondents. Allowance should be made for the Bankrupt due to her language difficulties, lack of understanding of legal concept and reliance upon solicitors acting on her behalf and that she was unrepresented during the s.81 examination. The Court should make allowance for the Second Respondent due to her youth and inexperience in legal matters, reliance on solicitors and that she was unrepresented during the course of the s.81 examination (see Official Trustee in Bankruptcy v Mitchell (1992) 38 FCR 364 at 369).

Good faith

It was submitted on behalf of the Respondents that the Court should conclude from the evidence that the Bankrupt had no intention or any motive to seek to defraud her creditor nor did she act in bad faith. The transfer occurred at a time when the Bankrupt believed the debt to her only creditor was not properly owing due to the conduct of her creditor, that is her former solicitor in the family law proceedings. Reliance was placed upon what was said to be a strong case in negligence against the solicitors failure to file a Notice of Compromise in the Family Court as required by that Court’s Rules.
Reference was made to the Bankrupt’s evidence concerning the Family Court proceedings and that there was no attempt to hide the transfer of property from the Bankrupt’s trustee in bankruptcy.
It was conceded that the Second Respondent was aware of the debt owing to the solicitors of the Bankrupt and was aware that the Bankrupt regarded the debt as not being properly owed. The amount of consideration paid by the Second Respondent for the remainder of interest represented full consideration and left the Bankrupt solvent with sufficient assets by virtue of her life interest to satisfy the whole of the creditor’s debt if it was not set off by her intended negligence claim. It was submitted that negligence, stupidity or blindness to what others might well be able to see are not equivalent to lack of good faith.

Section 121

Fraud to be established must be actual fraud, that is an actual intention to defeat or defraud creditors must be established according to the Respondents’ submissions. It is essential to show that the transferee acquiesced in the fraudulent intent of the transferor, that is accepted the transfer of property with full knowledge that the "sole reason which induced the assignor to convey it was to delay, hinder or defeat creditors”. A claim under s.121 is unsustainable. It was noted the Applicant conceded disclosure of the transfer by the Bankrupt in her Statement of Affairs within a month after having been made Bankrupt and acknowledged the claim in respect of the $25,000 contributed by the Second Respondent even though no proof of debt had been lodged. The examination of the Respondents and their affidavit material together with the evidence before the Court under cross examination separately or collectively it was submitted cannot support a finding of fraud. The Applicant therefore has failed to satisfy the onus to prove fraud or establish bad faith.
In the event that the Court would not be prepared to categorise the $25,000 contributed as consideration within the meaning of the Bankruptcy Act it was then submitted that the Court should categorise the money as a debt owing by the Bankrupt to the Second Respondent. If the debt is viewed in accordance with the terms of the loan agreement interest at a rate applicable in the early 1990’s ran on the loan from 21 November 1991. The calculation of that interest compounding yearly was said to amount to $110,888.11 as at November 2000 and if the disposition were to be declared void pursuant to either ss.120 or 121 then the Second Respondent should be entitled to prove in the bankruptcy the amount of the debt.
The main submission however on behalf of the Respondents was that the transfer of the remainder of the interest in the property from the Bankrupt to the Second Respondent in April 1992 was for valuable consideration and in good faith and not tainted by any attempt to defraud the creditor of the Bankrupt.

Reasoning and findings

Both parties have relied upon the transcript of the s.81 examination and I am satisfied that the transcript is admissible as evidence in the current application for the reasons advanced by the Applicant relying upon the authority of Rothmore Farms Pty Ltd (in liq) v Belgravia Pty Ltd (1999) 31 ACSR 88.
It is clear from the material that both Respondents have vague recollections of the nature and extent of any agreement between them prior to the purchase of the property. In my view it is more likely that the contribution, if any, by the Second Respondent to the Bankrupt in relation to the property which may be established was a contribution to assist in the renovation of that property by the construction of a studio for the benefit of the Second Respondent.
I am not satisfied that there was an agreement in place whereby the Second Respondent would advance $25,000 to the Bankrupt for the purchase of the property in return for caring for the Bankrupt and with the Bankrupt having a life interest in that property.
In my view the Court would be unwise to go beyond the transfer of land document which clearly refers to the transfer occurring as stated for “natural love and affection”. This was recorded in the confirmation of life estate deed dated 7 May 1992.
The evidence in relation to payments by the Second Respondent to the Bankrupt is unsatisfactory. I am satisfied that there has been ample opportunity for both Respondents to have relied upon further documentary material and/or explain satisfactorily the absence of other witnesses who may be able to corroborate the suggestion that the Second Respondent had paid a total of $25,000 towards the acquisition of the property either by way of assisting with the deposit and/or paying for renovations.
I reject the evidence of both Respondents in relation to payments to an unidentified tradesman without any documentary material to support those payments. Failing to call any evidence to corroborate the Respondents version of events is relevant for the Court to take into account at least to the extent that I can draw a Jones v Dunkel inference that that evidence if available would not have assisted the Respondents. I do not accept that any reasonable attempt has been made to locate or identify those witnesses and/or that any reasonable attempt was made to locate and produce relevant documents either in the possession of the Respondents or their bank.
In this application it does not assist the Bankrupt to now assert that there was a good claim to the amount which formed the basis of the creditor’s petition. Rather it demonstrates that there is an ongoing resentment and denial of that indebtedness. It had been submitted by Counsel for the Respondents that the complaints about the validity of the debt demonstrates that the Respondents were not trying to avoid the creditor and the obligations to the creditor. In my view at least for the purposes of the old s.120 of the Bankruptcy Act if anything that evidence demonstrates an attitude and approach where both Respondents were prepared to sign documents and then ultimately give evidence upon s.81 examinations which were different in substance to the evidence now provided to this Court. I am satisfied that there was no evidence of a kind that could be remotely similar to the present suggestion of an agreement between the parties and in any event I prefer to rely upon the Second Respondent’s interpretation of the discussions as being merely an understanding reached between her and the Bankrupt. The documentary material to which I have referred including the transfer document and the deed accurately reflect the true situation in relation to this transfer. That being so I accept that the transfer based upon a consideration described as “natural love and affection” is not sufficient to qualify as valuable consideration for the purposes of the old s.120 of the Bankruptcy Act (see Lynn v White).
There is no issue in the present case that the old provisions of the Bankruptcy Act apply to the present application.
In the present case I am further satisfied that the real intention of the Bankrupt was to provide a bequest to the Second Respondent in the second will which clearly had the intention of excluding the Bankrupt’s son as a beneficiary. The transfer may be seen by the Bankrupt on the evidence that I have found to provide further protection and security as indicated to ensure that the Bankrupt achieved her testamentary objective of excluding the son from any benefit of the property.
In my view this is not a case where there is simply due allowance to be made for parties failing to recollect events but rather significant contradictions both in the evidence before this Court, the affidavit material and the s.81 examinations together with inconsistencies between that evidence and the documentary material including the transfer document, the deed to which I have referred and the loan agreement dated 15 October 1993. I am not prepared to make a finding contrary to the transfer document and the other documents to which I have referred which would enable me to conclude that the transfer was for anything other than natural love and affection.
I further accept the submission by Counsel for the Applicant that the disposition of property for the purposes of the old s.120(8) of the Bankruptcy Act would not include the mere expectancy arising from a disposition under the will.
In the present case applying the principles of the decision in Barton’s case and having regard to the findings that I have made I am satisfied that there has not been a transfer in favour of the Second Respondent either in good faith or for valuable consideration. I accept in the alternative that even if I were to find that the use of the term “natural love and affection” was a transfer or deed of confirmation of life estate in consideration of the Second Respondent’s past advances to the Bankrupt that would in any event amount to past consideration which would not constitute valuable consideration for the purpose of s.120 of the Bankruptcy Act.
I am further satisfied in relation to the issue of good faith that both the Respondents were aware at the time of the transfer that the consequence would be that the then only known creditor might not receive access to what I find to be the only significant asset of the Bankrupt at the time namely her interest in the property.
It follows therefore that the Applicant is entitled to an order that the disposition by way of transfer on 7 April 1992 is void against the Trustee.
In relation to the s.121 claim it seems to me on the evidence that this claim was not pursued with a degree of vigour by the Applicant.

I accept that in circumstances it is necessary for the Applicant to establish under the terms of the old s.121 that there was an intent to defraud creditors. Whilst I have found that there is a lack of good faith in terms of the Respondents’ knowledge that the transfer may lead to a denial of the then only known creditor having access to the then only available asset, it is not necessary for me to further make a finding in the present case of fraud or intent to defraud the creditor. As I have indicated I am not prepared to find actual fraud nor find that the transfer was entered into with the sole purpose of defeating a creditor. As already indicated in my reasons I am satisfied that the transfer may have been arranged to advance the prospect of excluding the Bankrupt’s son from any benefit of the property though as I have found in circumstances where both Respondents were aware that it may also have the effect of defeating the creditor’s claim. That is sufficient in order to dispose of the matter pursuant to s.120 of the Bankruptcy Act but not in my view sufficient to make a finding of fraud for the purposes of the old s.121 of the Bankruptcy Act.
In reaching the conclusions regarding the purpose of the transfer and the inadequacy of the either documentary or other evidence concerning payment of the alleged amount of $25,000 the Court is entitled to note that solicitors then advising the Respondents were not called to give evidence in the present application. I only draw the inference that that evidence would not have assisted the Respondents.
It is clear to me from the evidence before this Court and the s.81 examinations that the reality of any amount advanced as indicated earlier by the Second Respondent to the Bankrupt is that it was by way of gift and it was never expected by the Second Respondent that the amount would be repaid. The gift I am satisfied was for the purpose of renovating the property with the main renovation being the creation of a studio for the benefit of the Second Respondent who at all times was aware that in any event the Bankrupt intended to leave the property to her in her will.
Whether the Second Respondent can now claim to have a secured loan or debt will be a matter for the Trustee. It is not necessary for me to determine that issue though it is noted that the loan agreement was entered into some 12 months after the transfer.
It is important for the Court to rely upon the content of the documents duly executed by the parties which I am satisfied have been explained by legal advisers and importantly explained to the Bankrupt in the Greek language. To seek to retrospectively assert a vague agreement and then without proper evidence suggest payments of $25,000 were made towards the acquisition of a property pursuant to that agreement is no substitute for clear evidence of a contemporaneous kind based upon accurate documentation. As indicated the vague nature of the evidence of both Respondents and lack of documentary material to support the claims of an earlier agreement leads me to conclude that the submissions on behalf of the Applicant in relation to s.120 of the Bankruptcy Act should be upheld.
As indicated the appropriate order subject to any submissions from Counsel will be that the transfer of land dated 7 April 1992 is void as against the Trustee.
It is noted that the Applicant submitted an entitlement to damages which flow from the refusal of the Respondents to give possession from the date of service of the Applicant’s Notice of Vacate namely on or about 27 October 1998. The loss and damage is said to be rental in the sum of $110.00 per week. In my view although the notice was served and the claim may at least appear reasonable, it seems to me that where there is a dispute which has been properly pursued by the Respondents though unsuccessful that it would be contrary to the interests of justice to permit damages to be awarded of the kind sought by the Applicant retrospectively where the issue had to be agitated and decided by the Court and where at least it may be said that the Respondents believe they had a valid basis upon which they should refuse to give possession of the property until determination of the issues before this Court.

I certify that the preceding one hundred and thirty-two (132) paragraphs are a true copy of the reasons for judgment of McInnis FM

Associate:

Date: 11 April 2003