Deryk Rowan Andrew as Trustee for Estate of Colin George Ward (Deceased) v Zant Pty Ltd & Ors (Judgment No.2) [2005] FCA 21 (25 January 2005)

Last Updated: 28 January 2005

FEDERAL COURT OF AUSTRALIA

Deryk Rowan Andrew as Trustee for Estate of Colin George Ward (Deceased) v Zant Pty Ltd & Ors (Judgment No.2) [2005] FCA 21

BANKRUPTCY - Bankruptcy Act 1966 (Cth), s 121 – whether Trustee in bankruptcy entitled to cash representing purchase price of relevant property or the property itself – bankrupt purchased property with own funds as trustee for a trust in favour ultimately of his son




Bankruptcy Act 1966 (Cth), s 121



Official Trustee in Bankruptcy v Alvaro (1996) 138 ALR 341 distinguished
Re Trautwein; Richardson v Trautwein [1946] ALR 129 followed



















DERYK ROWAN ANDREW AS TRUSTEE FOR ESTATE OF COLIN GEORGE WARD (DECEASED) v ZANT PTY LTD & ORS
N 122 of 2003

HILL J
25 JANUARY 2005
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 122 OF 2003

BETWEEN:	DERYK ROWAN ANDREW AS TRUSTEE FOR ESTATE OF COLIN GEORGE WARD (DECEASED) APPLICANT
AND:	ZANT PTY LTD (ACN 002 131 884) (RECEIVER AND MANAGER APPOINTED) FIRST RESPONDENT
AND:	FITSTAR INVESTMENTS LIMITED SECOND RESPONDENT
AND:	IAN LAWRENCE STRUTHERS THIRD RESPONDENT
AND:	ALLAN CHARLES RAPHAEL FOURTH RESPONDENT
AND:	SIMON ANTHONY WARD FIFTH RESPONDENT
AND:	BANALIJ PTY LIMITED (ACN 003 009 569) (RECEIVER AND MANAGER APPOINTED) SIXTH RESPONDENT
AND:	JIFRIN PTY LIMITED (ACN 003 438 006) SEVENTH RESPONDENT
AND:	FRANCO BATTISTI EIGHTH RESPONDENT
AND:	HELEN RUTHERFORD JOHNSON NINTH RESPONDENT
AND:	LYNETTE JEAN ROSS TENTH RESPONDENT
AND:	THOMAS JAMES HARPER ELEVENTH RESPONDENT
JUDGE:	HILL J
DATE OF ORDER:	25 JANUARY 2005
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. In relation to the whole of the land comprised in Certificate of Title Folio Identifier 334/624472 (formerly Volume 14753 Folio 232 and prior to that Volume 5397 Folio 67 and Volume 5397 Folio 68), situate at and known as 49-51 Thompson Street, Long Jetty ("the Long Jetty Property"):
1.1 Declare that title to the Long Jetty Property vested in the Applicant on 13 May 1998 pursuant to sections 58 and 116(1)(a) of the Bankruptcy Act 1966 ("the Act");
1.2 Declare that Mortgage X145152 to the Second Respondent is void as against the Applicant pursuant to section 121 of the Bankruptcy Act 1966 ("the Act");
1.3 Dissolve the Orders by way of Mareva Injunction made on 5 May 1988 in Supreme Court Proceedings No. 1223 of 1998 ("the SC Proceedings") then continued and varied by subsequent Orders made in the SC Proceedings on 9 May 1988, 13 May 1988, 20 May 1988, 24 May 1988, 7 December 1988 and 6 August 1990 and further varied by an Order made in Federal Court Proceedings no NG-157 of 1994 on 20 April 1998 (collectively referred to as "the Mareva Injunctions") in so far as they relate to the Long Jetty Property;
1.4 Note the Applicant’s undertaking to pay to the Third Respondent in his capacity as Receiver and Manager of the First Respondent from the proceeds of sale of the Long Jetty Property such of the Third Respondent’s reasonable fees incurred in his capacity as Receiver and Manager of the First Respondent as are unpaid at the date of these Orders;
1.5 Direct the Registrar-General, Land and Property Information New South Wales ("the Registrar-General") to cancel the exisiting Certificate of Title and issue a new Certificate of Title for the Long Jetty Property as follows:
1.5.1 Remove the First Respondent from the First Schedule and record the Applicant as the Registered Proprietor;
1.5.2 Remove Mortgage X145152;
1.5.3 Remove Order X543502;
1.5.4 Remove Request X549018;
1.5.5 Remove Caveat X576092;
1.5.6 Remove Request X627537; and
1.5.7 Remove Caveat O927195.
2. In relation to the whole of the land comprised in Certificate of Title Folio Identifier 12/755249 (formerly Volume 13897 Folio 162), situate at and known as 1405 Ourimbah Creek Road, Ourimbah ("the Ourimbah Property"):
2.1 Declare that the right, title and interest of Colin George Ward (deceased) ("the Bankrupt") to the Ourimbah Property vested in the Applicant on 13 May 1998 pursuant to sections 58 and and 116(1)(a) of the Act at all times during which the Fourth Respondent was the registered proprietor of the Ourimbah Property, subject to the interest of any Registered Mortgagee from time to time other than the Second Respondent; and
2.2 Declare that the proceeds of sale of the Ourimbah Property by St George Bank Limited (net of all monies owing to St George Bank Limited pursuant to Mortgage 2417662) vest in the Applicant pursuant to section 116(1)(a) of the Act.
3A. In relation to the whole of the land comprised in Certificate of Title Folio Identifier 1/581778 (formerly Volume 13055 Folio 151) situate at and known as 62 Darling Street, Balmain East ("the Balmain Property"):
3.1 Declare that the transfer by the Bankrupt of the Balmain Property to the Sixth Respondent is void against the Applicant pursuant to section 121 of the Act by reason that the Bankrupt’s main purpose in making the said transfer was to delay or hinder the process of making property available for division among the Bankrupt’s creditors;
3.2 Declare that all rental income or license fees derived from the Balmain Property during the period in which the Sixth Respondent was the registered proprietor vested in the Bankrupt at the commencement of his bankruptcy and are property divisible among the creditors of the Bankrupt pursuant to s. 116(1)(a) of the Act;
3.3 Subject to paragraph 3A.6 of these Orders, direct the Third Respondent to pay over to the Applicant all monies held by him in his capacity as Receiver and Manager of the Sixth Respondent representing the rental income or license fees derived from the Balmain Property in the period 5 May 1988 to date;
3.4 Declare that Mortgage X371623 to the Second Respondent is void as against the Applicant pursuant to section 121 of the Act;
3.5 Dissolve the Mareva Injunctions in so far as they relate to the Balmain Property;
3.6 Note the Applicant’s undertaking to pay to the Third Respondent in his capacity as Receiver and Manager of the Sixth Respondent from the proceeds of sale of the Balmain Property such of the Third Respondent’s reasonable fees incurred in his capacity as Receiver and Manager of the Sixth Respondent as are unpaid at the date of these Orders;
3.7 Direct the Registrar-General to cancel the exisiting Certificate of Title and issue a new Certificate of Title for the Balmain Property as follows:
3.7.1 Remove the Sixth Respondent from the First Schedule and record the Applicant as the Registered Proprietor, subject to Lease;
3.7.2 Remove Mortgage X371623;
3.7.3 Remove Order X543502;
3.7.4 Remove Request X549018;
3.7.5 Remove Caveat X576090; and
3.7.6 Remove Request X627537.
4. In relation to the whole of the land comprised in Certificate of Title Folio Identifier 3/SP13674 (formerly Volume 13782 Folio 113), situate at and known as 3/12 East Crescent Street, McMahon’s Point ("the McMahon’s Point Property"):
4.1 Declare that title to the McMahon’s Point Property vested in the Applicant on 13 May 1998 pursuant to sections 58 and 116(1)(a) of the Act;
4.2 Declare that Mortgage X422340 to the Second Respondent is void as against the Applicant pursuant to section 121 of the Act;
4.3 Declare that Lease X433911 to the Ninth Respondent has been surrendered or is otherwise void as against the Trustee;
4.4 Dissolve the Mareva Injunctions in so far as they relate to the McMahon’s Point Property;
4.5 Direct the Registrar-General to cancel the exisiting Certificate of Title and issue a new Certificate of Title for the McMahon’s Point Property as follows:
4.5.1 Remove the Eighth Respondent from the First Schedule and record the Applicant as the Registered Proprietor;
4.5.2 Remove Mortgage X422340;
4.5.3 Remove Lease X422341;
4.5.4 Remove Caveat X613098;
4.5.5 Remove Order X627537; and
4.5.6 Remove Notation X606925.
5. In relation to the whole of the land comprised in Certificate of Title Folio Identifier 93/755245 (formerly Volume 11741 Folio 134), siutate at and known as 93 Roper Road, Doyalson ("the Doyalson Property"):
5.1 Declare that title to the Doyalson Property vested in the Applicant on 13 May 1998 pursuant to sections 58 and 116(1)(a) of the Act;
5.2 Declare that all rental income or license fees derived from the Doyalson Property during the period in which the Tenth Respondent was the registered proprietor vested in the Bankrupt at the commencement of his bankruptcy and are property divisible among the creditors of the Bankrupt pursuant to section 116(1)(a) of the Act;
5.3 Dissolve the Mareva Injunctions in so far as they relate to the Doyalson Property;
5.4 Direct the Registrar-General to cancel the exisiting Certificate of Title and issue a new Certificate of Title for the Doyalson Property as follows:
5.4.1 Remove the Tenth Respondent from the First Schedule and record the Applicant as the Registered Proprietor, subject to Caveat Y94148; and
5.4.2 Remove Request Y51754.
6. There be no order as to costs, although the Applicant is entitled to its costs out of the estate of the bankrupt.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 122 OF 2003

BETWEEN:	DERYK ROWAN ANDREW AS TRUSTEE FOR ESTATE OF COLIN GEORGE WARD (DECEASED) APPLICANT
AND:	ZANT PTY LTD (ACN 002 131 884) (RECEIVER AND MANAGER APPOINTED) FIRST RESPONDENT
AND:	FITSTAR INVESTMENTS LIMITED SECOND RESPONDENT
AND:	IAN LAWRENCE STRUTHERS THIRD RESPONDENT
AND:	ALLAN CHARLES RAPHAEL FOURTH RESPONDENT
AND:	SIMON ANTHONY WARD FIFTH RESPONDENT
AND:	BANALIJ PTY LIMITED (ACN 003 009 569) (RECEIVER AND MANAGER APPOINTED) SIXTH RESPONDENT
AND:	JIFRIN PTY LIMITED (ACN 003 438 006) SEVENTH RESPONDENT
AND:	FRANCO BATTISTI EIGHTH RESPONDENT
AND:	HELEN RUTHERFORD JOHNSON NINTH RESPONDENT
AND:	LYNETTE JEAN ROSS TENTH RESPONDENT
AND:	THOMAS JAMES HARPER ELEVENTH RESPONDENT

JUDGE:	HILL J
DATE:	25 JANUARY 2005
PLACE:	SYDNEY

REASONS FOR JUDGMENT

HILL J:

1 On 23 December 2004 I delivered judgment in this matter and ordered the applicant to file with the Court on or before a date to be fixed a draft of the orders which the applicant submited should be made and such as to reflect the reasons for judgment. The applicant filed draft Short Minutes of Order on 18 January 2005. With the exception of those orders relating to the Balmain Property, I propose to make the orders in the form of the draft submitted.

2 In relation to the Balmain Property, although I found that its purchase by Colin Ward ("Mr Ward") as trustee for the Balmain Trust was a transaction that fell within s 121 of the Bankruptcy Act 1966 (Cth) ("the Act"), I did not resolve the question of whether it was the property itself or only the cash being the purchase price of $175,000 that vested in the applicant pursuant to that section. I invited Senior Counsel for the applicant to put further submissions in respect of this issue. Submissions have now been filed. I have considered them and have formed the view that on the facts found by me the proper analysis is that the Balmain Property itself vested in the applicant rather than the cash provided by Mr Ward. My reasons for so doing are shortly as follows.

3 The facts in relation to Balmain Property are to be found at [58]-[95] of my judgment delivered in this matter on 23 December 2004.

4 In the further written submissions, the applicant asserted that in the circumstances of this case, the relevant disposition to be avoided is the transfer of the Balmain Property itself, and to that end three submissions were made. First, it was submitted that the purchase funds moved directly from Mr Ward to the vendor, with the result that Mr Ward purchased the property for the trust, as opposed to the opposite where it would be said that the trust purchased the property with money given by Mr Ward. However, and this was recognised in the submission, the transfer of funds "might simply be explained by Mr Ward acting as a trustee having received the funds from himself". Without more, this can not found the conclusion that it is the property that was given to the trust.

5 Second, it was submitted that "Mr Ward became the owner of the Balmain property prior to the formation of his intention to hold it on the terms of the Balmain Trust Deed – that is, he purchased the property prior to the creation of the trust". Accordingly, the applicant says that the trust was declared over the property itself because it was already purchased when the trust was declared. The difficulty, however, with this submission is that I previously found that "the applicant has not satisfied me that the Balmain Property was owned beneficially by Mr Ward so that it became property of the bankrupt estate" (at [79]). Thus, I was not satisfied that Mr Ward purchased the property prior to the creation of the trust. This submission is not in accordance with the view I have of the facts.

6 Third, it was submitted that "Mr Ward identified and decided to purchase the Balmain property with the intention that the specific property be held by him on trust". Reference was also had to two cases, namely Official Trustee in Bankruptcy v Alvaro (1996) 138 ALR 341 and Re Trautwein; Richardson v Trautwein [1946] ALR 129. In Trautwein the bankrupt acquired a property in circumstances where title was vested in his son and daughter as volunteers. It was held that it was the property, not the purchase money, which vested in the trustee in bankruptcy. In Alvaro, a property was purchased with funds from a corporate trustee’s bank account in circumstances where part of those funds had been deposited into the account that day, and the same amount had been withdrawn from the bankrupt’s account. It was held that it was not open to find or infer that the entire purchase price had been provided by the bankrupt, with the consequence that the disposition by the bankrupt was only the cash withdrawn from his account, not the property.

7 The applicant submitted that the present case was similar to Trautwein and that it should be distinguished from what happened in Alvaro, particularly given Mr Ward provided all of the purchase money. I agree. The factual basis for this is to be found at [93] of my earlier judgment. I found that Mr Ward’s main purpose was to acquire the Balmain Property for his own benefit and to prevent his creditors from obtaining access to it. In the words of Senior Counsel for the applicant, "it is a case of Mr Ward buying a property for his own benefit and simply parking it in the Trust". It was always Mr Ward’s intention that it be the property (not the cash to purchase it) which was to be held in trust. Accordingly I am of the view that the orders to be made should reflect this conclusion.

8 I accordingly make the orders sought subject to the orders envisaged in these reasons relating to the Balmain Property.

I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Hill.

Associate:

Dated: 25 January 2005

Counsel for the Applicant:	M Aldridge SC and C Morris
Solicitor for the Applicant:	McCabe Terrill
Date of Hearing:	20, 22 October 2004, 26 November 2004 and 10 December 2004
Date of Judgment:	25 January 2005