Re Ian John Walsh Between: William James Hamilton v Yvonne Lorraine Walsh [1983] FCA 10; (1983) 67 FLR 294 (7 February 1983)

FEDERAL COURT OF AUSTRALIA

Re: IAN JOHN WALSH
Between: WILLIAM JAMES HAMILTON
And: YVONNE LORRAINE WALSH [1983] FCA 10; (1983) 67 FLR 294
No. NSW W382 of 1982
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
THE BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Sheppard J.(1)

CATCHWORDS

Bankruptcy - settlement of property - whether gifts of jewellery, a fur and a cutlery set were settlements and, if so, whether the settlements were "in consideration of marriage" - Bankruptcy Act 1966, s.120.

Bankruptcy - Settlement of property - Whether gifts prior to marriage were settlements "in consideration of marriage" - Whether gifts formed part of estate of bankrupt - Bankruptcy Act 1966 (Cth), s. 120. Within the period of two years prior to his bankruptcy on 15 June 1982, the bankrupt had met and commenced to live with the respondent. In February 1981 he acquired an engagement ring for her and between May and September 1981 he purchased wedding and eternity rings for her. In September-October 1981, his previous marriage was dissolved and in April 1982 he married the respondent. The applicant, the trustee of the bankrupt's estate, sought declarations that the gifts formed part of the estate of the bankrupt. It was conceded by the respondent that all the gifts were settlements of property within s. 120 of the Bankruptcy Act 1966.

On the issue of whether the gifts were made "in consideration of marriage":

Held: (1) A settlement made "in consideration of marriage" must be made: (a) on the occasion of the marriage; (b) conditioned only to take effect on the marriage taking place; (c) by a person for the purpose of or with a view to encouraging or facilitating the marriage.

In re Densham (1975) 1 WLR 1519 per Goff J. at 1526-7, applied.

(2) In the present case, as none of the above tests was satisfied, the settlements were within s. 120 of the Act and were not made "in consideration of marriage". The property which was the subject of the settlements therefore formed part of the estate of the bankrupt.

Declaration and consequential orders.

HEARING

1983, 7 February. 7:2:1983
APPLICATION.

Application by the trustee of the bankrupt estate of Ian John Walsh for a declaration that certain gifts to the respondent were settlements which were void as against the applicant. The facts are set out in the judgment below.

J.C. Lindsay, for the applicant.

A. Jamieson, for the respondent.

Solicitors for the applicant: Freehill, Hollingdale and Page.

Solicitors for the respondent: Morgan, Ryan and Brock.
D.L.

ORDER

THE COURT DECLARES THAT the items of property referred to in the schedule appended to the application form part of the estate of the bankrupt.

THE COURT ORDERS THAT :

1. There be liberty to apply.

2. The respondent, Yvonne Lorraine Walsh pay the applicant's costs of the

application including any reserved costs. Respondent to pay the applicant's costs.

DECISION

This is an application made pursuant to s.120 of the Bankruptcy Act 1966 by the trustee in bankruptcy of the bankrupt estate of Ian John Walsh. The application was originally against two respondents, the applicant's wife, Yvonne Lorraine Walsh and a firm, Cornelius Furs. For reasons which need not be mentioned it was not ultimately proceeded with in respect of the second respondent.

During a relationship which Mr. and Mrs. Walsh had before their marriage on 8 April, 1982, Mr. Walsh made a number of gifts to Mrs. Walsh, mostly of jewellery. The gifts are specified in the affidavits of the parties and may be summarised as being gifts of a gold pendant, a gold Chinese bracelet, a diamond engagement ring, a diamond and gold watch, some diamond earrings, a mink coat, two further rings, described in the evidence as a wedding ring and an eternity ring, a gold cutlery set, a pearl necklace and pearl earrings. There is no dispute between the parties that the gifts were made nor as to the dates when they were made.

Prior to the marriage of Mr. and Mrs. Walsh they lived for a time as man and wife. They first met, according to Mrs. Walsh's evidence, which is unchallenged, towards the end of 1980. They made various visits to places outside Sydney, including Perth and certain places in the United States of America.

The first of the items, the subject of these proceedings, was acquired by Mr. Walsh for Mrs. Walsh in February 1981. The engagement ring was purchased on or about 14 February, 1981, from a firm of jewellers, Bruce and Walsh. Its purchase price was $6,000. According to Mrs. Walsh's evidence, which is not challenged, not long before the acquisition of the engagement ring, there had been a conversation between them at Little Bay Beach, Sydney, in which amongst other things she had said to Mr. Walsh, "No matter how much I loved a man I would never marry him unless he could provide for me". Mr. Walsh said, "That's OK I wouldn't be offering to marry you if I could not provide for you". I take it from that evidence that prior to the acquisition of the engagement ring there had been an offer of marriage made by Mr. Walsh which Mrs. Walsh had accepted.

The wedding ring and the eternity ring were purchased at the same time. They were purchased, according to Mrs. Walsh, in August or September 1981. Mr. Walsh puts the date as being May 1981. There is no documentary evidence to indicate which of Mr. or Mrs. Walsh is correct in his or her recollection, but it is immaterial to come to a conclusion on the matter.

At the time Mr. and Mrs. Walsh met, Mr. Walsh was married. His marriage remained on foot until September or October 1981 when the marriage was dissolved. From about May or June 1981 the two commenced to live in the de facto relationship to which I have earlier referred. It is common ground that they continued to live together in this way until late in October 1981 when the relationship was discontinued due to disagreements between them. According to Mrs. Walsh, she had a conversation with Mr. Walsh at Christmas time 1981 and the two agreed to resume their relationship. In his affidavit Mr. Walsh agrees that the two did go back to live together, but not until February 1982. Again, any difference in their evidence is immaterial.

Accordingly, the engagement ring, the wedding ring and the eternity ring, like the other items of property which are in dispute, were acquired and given to Mrs. Walsh well before the marriage, which, as I have said, took place on 8 April, 1982.

Mr. Walsh's estate was sequestrated by order of this Court on 15 June, 1982. The act of bankruptcy upon which the petition which led to Mr. Walsh's bankruptcy was based, was committed on 8 March, 1982. Thus all the items in dispute were the subject of gifts to the respondent within the period of two years from the commencement of the bankruptcy.

Mr. Walsh's statement of affairs disclosed debts in total of almost $1,000,000, and assets of only a little over $30,000.

Section 120 of the Bankruptcy Act upon which this application is based provides in sub-section (1):

"A settlement of property, whether made before or after the commencement of this Act, not being - (a) a settlement made before and in consideration of marriage, or made in favour of a purchaser or encumbrancer in good faith and for valuable consideration; or
(b) a settlement made on or for the spouse or children of the settlor of property that has accrued to the settlor after marriage in right of the spouse of the settlor,
is, if the settlor becomes a bankrupt and the settlement came into operation after, or within 2 years before, the commencement of the bankruptcy, void as against the trustee in the bankruptcy."

As I have said the evidence establishes that each of the acquisitions of property and gifts was made within two years of 8 March, 1982. It is conceded by the respondent, Mrs. Walsh, through her counsel, that the gifts are settlements of property within the section. In the light of the decision in In re Vansittart (1893) 1 Q.B. 181, the concession was clearly one which was properly made.

The only issue which has been raised relates to the question of whether in each case the settlement or gift was made, not only before, but also in consideration of marriage. These words have not been the subject of a great deal of judicial attention, at least so far as the researches of counsel disclosed. It seems to me that I should adopt what was said of the words by R.W. Goff J., as he then was, in In re Densham (1975) 1 W.L.R. 1519. The English section with which his Lordship was concerned is in similar terms to the Australian section. After referring to the decision of the House of Lords in Rennell v. Inland Revenue Commissioners (1964) A.C. 173, his Lordship said (pp.1526-1527):

"Lord Cohen and Lord Guest, in considering whether a settlement was made in consideration of marriage within section 59(2) of the Finance (1909-10) Act 1910 (not the legislation in question in the Densham case), adopted three tests (1) it must be made on the occasion of the marriage; (2) it must be conditioned only to take effect on the marriage taking place; (3) it must be made by a person for the purpose of or with a view to encouraging or facilitating the marriage. Of these three conditions, the settlement with which I am dealing plainly satisfies the first, for it was made on the occasion of the marriage, but, in my judgment it "fails to satisfy either the second or the third. It is true that some conveyancing difficulty seems to have been felt about the wife executing the contract or the transfer before marriage, but I do not think the settlement of a share of the beneficial interest on her was in any way conditional on the marriage taking place, but even if I am wrong about that, on the facts of this case it was not made for the purpose of or with a view to encouraging or facilitating the marriage."

Counsel for the respondent did not submit that I should not apply the test which Goff J. adopted for the purposes of his judgment in In re Densham, and I am satisfied that I should apply it. I think one needs, when considering this provision, to have it clearly in mind that the words used by the legislature are "in consideration of marriage". These words are very different from words which are sometimes seen in other legislation - I instance s.111A of the Marriage Act 1961 - "in contemplation of marriage". More will be required where the words, as here, are "in consideration of marriage", than in cases where they are "in contemplation of marriage". In my opinion the evidence here does not disclose any of the gifts - that is, any of the settlements - was made in consideration of marriage. It could not be suggested that any was made on the occasion of the marriage; a fortiori it could not be said that any was conditioned only to take effect on the marriage taking place. Each of the gifts had taken effect a substantial time prior to the marriage.

It seems to me to be likely, although the evidence does not spell it out, that the engagement ring, and subsequently the wedding ring and the eternity ring, were acquired so that Mrs. Walsh would have conventional rings to wear in her role as the de facto wife of Mr. Walsh. In his affidavit he said:

"When I gave the above gifts to Mrs. Walsh (I interpolate to say he refers to each of the gifts in question) I did not state in any form to Mrs. Walsh or anyone else that I would take back any of the above gifts from Mrs. Walsh if we did not get married, nor did I make a statement to that or similar effect."

Mr. Walsh was not cross-examined on that statement and, accordingly, I accept his evidence. In any event, there is no evidence given by Mrs. Walsh to a contrary effect.

Some reliance was placed by her counsel on a letter annexed to her affidavit. The letter was sent by solicitors acting for Mr. Walsh to solicitors acting for Mrs. Walsh; it is dated 6 November, 1981, and was written during the time that the parties were separated between October 1981 and the end of that year or early 1982. The letter demanded the return of all of the jewellery and other items which had been given Mrs. Walsh down to that time, except for the cutlery set. It was suggested that this indicated that Mr. Walsh regarded the items as returnable to him in the light of the break up between the parties which had occurred on the basis that they were given only in consideration of marriage, and taking the position as it was at that time, the marriage having not taken place, the articles properly belonged to him. All I say about that submission is that it is contrary to what Mr. Walsh himself has said. No cross-examination of him took place and no contrary evidence was given by Mrs. Walsh herself. The submission therefore fails.

It was also submitted by counsel for Mrs. Walsh that the onus of proof throughout was upon the trustee. I agree that that is right; but this, so it seems to me, is not a case to be decided upon the onus of proof. The evidence, as I remarked during the course of the argument, is sketchy and one might in other circumstances have had some of the gaps filled in. But the essential things are there. The parties are in agreement really as to when and under what circumstances these various acquisitions of property were made. Thus there is no room for any decision of the case based upon the applicant's failure to discharge the onus of proof. The essential facts are known. These, as I have indicated, militate against any finding that the facts fit any of the requirements laid down by Goff J. in Densham's case.

For the reasons I have given, I have reached the conclusion that the applicant is entitled to succeed.

I make the declaration sought in paragraph 1 of the application, with liberty to apply. I order the respondent, Yvonne Lorraine Walsh, to pay the applicant's costs of the application, including any reserved costs.