Woods, J.J. v Woods, A.D - [1995] FCA 133

CATCHWORDS

BANKRUPTCY - transfer of properties from bankrupt to wife pursuant to orders made by consent under s.79 of the Family Law Act - whether void against trustee in bankruptcy - whether intent to defraud creditors - relevance of a second intent relevant - whether valuable consideration paid

EVIDENCE - hearsay - admissibility of out of court statement of intent made after the time at which speaker's state of mind is relevant to a fact in issue - weight of such evidence if admitted

Bankruptcy Act 1966 (Cth) ss 120, 121

Williams v Lloyd [1934] 50 CLR 341
Vocisano v Vocisano [1974] 130 CLR 267
Barton v Deputy Commissioner for Taxation [1974] 131 CLR 370
Barton v Official Receiver [1986] 161 CLR 75
Walton v R [1989] 166 CLR 283
P T Garuda Indonesia Ltd v Grellman [1992] 35 FCR 515
Re Hymans; Official Receiver v Hymans [1970] 19 FLR 232
Noakes v J Harvey Holmes & Son [1979] 37 FLR 5
Re Barnes; Ex parte Stapleton [1962] Qd R 231
Re Holland; Greg v Holland [1902] 2 Ch 360
In re Abbott [1983] 1 Ch 45
Re McInnes; McInnes & anor v Official Receiver Einfeld J, unreported 18 November 1994

Re JOHN JEFFERSON WOODS; PETER DAVID WOODS v ANN DENISE WOODS

No. NB 491 of 1994

EINFELD J

SYDNEY

22 FEBRUARY 1995

IN THE FEDERAL COURT OF AUSTRALIA     )
BANKRUPTCY DISTRICT OF THE STATE      )    No NB 491 of 1994
OF NEW SOUTH WALES              )

Re:JOHN JEFFERSON WOODS
Bankrupt

Ex Parte:PETER DAVID RODGERS
Applicant

And:ANN DENISE WOODS
Respondent

MINUTE OF ORDERS

The application is dismissed.

The applicant to pay the respondent's costs of the application.

Note: Settlement and entry of orders are dealt with in accordance with Rule 124 of the Bankruptcy Rules.

EINFELD

SYDNEY

22 FEBRUARY 1995

IN THE FEDERAL COURT OF AUSTRALIA     )
BANKRUPTCY DISTRICT OF THE STATE      )    No NB 491 of 1994
OF NEW SOUTH WALES              )

Re:JOHN JEFFERSON WOODS
Bankrupt

Ex Parte:PETER DAVID RODGERS
Applicant

And:ANN DENISE WOODS
Respondent

REASONS FOR JUDGMENT

EINFELD J SYDNEY 22 FEBRUARY 1995

On 9 March 1994 Mr Woods was declared bankrupt on his own petition and the applicant was appointed trustee of his estate. By application filed 1 August 1994 the applicant has applied for declarations that certain properties of the respondent, the bankrupt's estranged wife, is the property of the estate or, in the alternative, for orders that the properties be transferred to the trustee by the respondent. The dispute involves two properties in New South Wales: one at 50 Parsonage Road, Castle Hill (the Castle Hill property) and the other being Lot 18 Serpentine Lane, Bowen Mountain (the Bowen Mountain property).

Factual background
The bankrupt and the respondent married in November 1986. The respondent worked as an administration manager in mining

companies from before her marriage until 1989. In February of that year she resigned from her job and commenced work in a similar position within the group of…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [1995] FCA 133
Decision Date: 22 FEBRUARY 1995

CaseChat Overview and Summary

In the case of Woods, J.J. v Woods, A.D., the Federal Court of Australia was required to decide whether the transfer of properties from a bankrupt to his estranged wife, pursuant to consent orders made under the Family Law Act, was void against the trustee in bankruptcy. The legal issues involved determining whether the transfer was made with the intent to defraud creditors, and whether the wife acted in good faith and for valuable consideration. The court examined the evidence, including statements made by the bankrupt and documents tendered by the trustee, to assess the circumstances surrounding the transfers. It concluded that there was insufficient evidence to infer an intent to defraud creditors, and that the wife acted in good faith. Consequently, the trustee's application was dismissed.

The court emphasized that fraud on the part of the disponor was the primary factor in a successful application under section 121 of the Bankruptcy Act. However, there was no direct evidence of any fraudulent intent put before the Court. The only evidence of fraud tendered by the trustee was the ambiguous and inadequate conversation between the bankrupt and an employee of the trustee. The court found that the statements made by the bankrupt were made up to a year after the consent orders were signed and had little or no probative value on the issue of the bankrupt's state of mind at the relevant time.

Regarding the issue of valuable consideration, the court found that there was a prima facie indication that some consideration was passed. However, the trustee failed to provide sufficient evidence to demonstrate that the consideration did not have a real and substantial value.

Lastly, the court found that the wife acted in good faith. The respondent was obviously aware of the bankrupt's serious financial difficulties and his involvement in the businesses in which she too had been involved. However, the court found that there was no evidence that the respondent anticipated her husband's bankruptcy at the time the agreement for the property transfers was reached, and no evidence that the transaction was a sham. In the circumstances of this case, the court believed that the respondent accepted the properties as a genuine attempt to settle a marital dispute between herself and the bankrupt.

In conclusion, the trustee's application was dismissed under both section 120 and section 121 of the Bankruptcy Act. The court found that there was insufficient evidence to infer an intent to defraud creditors, and that the wife acted in good faith. As a result, the transfers of properties from the bankrupt to his estranged wife were not void against the trustee in bankruptcy. The application was dismissed with costs.

Orders