Tronson v White [1919] HCA 70; (1919) 27 CLR 344 (11 December 1919)

HIGH COURT OF AUSTRALIA

Tronson Appellant; and White Respondent.

H C of A

On appeal from the Supreme Court of Queensland.

11 December 1919

Isaacs, Gavan Duffy and Rich JJ.

Power, for the appellant.

Graham, for the respondent.

The judgment of the Court, which was read by Isaacs J., was as follows:—

Dec. 11

Isaacs, Gavan Duffy and Rich JJ.

This is an appeal from a judgment of the Full Court of Queens land. That Court, consisting of Cooper C.J., Real J. and Lukin J., unanimously upheld the decision of Chubb J. sitting in insolvency jurisdiction, whereby that learned Judge held (1) that the present appellant, Mary Tronson, was bound to pay to the trustee of Thomas Bleakeley Tronson's insolvent estate £100 ultimately retained by one Wessling, and (2) that a transaction between her and Thomas Bleakeley Tronson of sale and purchase of land was fraudulent and void against the trustee. The grounds upon which the judgment of the Full Court (read by Lukin J.) proceeded were not in all respects identical with those of Chubb J., but the conclusions arrived at were the same.

As to the £100, we see no reason for disturbing the conclusion of the Supreme Court. The appellant was the owner of a farm, but she jointly with one Wessling worked the farm, raised produce, and disposed of it to various persons including the insolvent, who was her father-in-law. She says that on 4th November 1918 the insolvent owed to her and Wessling jointly a sum of £200, a debt which had existed for some considerable time. She, living in the same house with her father-in-law, a storekeeper, and knowing of his financial embarrassments, requested him to pay the debt. He gave the appellant's husband a cheque for £200; the husband at the appellant's request presented the cheque at the Bank, got the money, brought it to the appellant, who took half, and in her presence the husband handed the other £100 to Wessling. The transaction was a joint one, in which the appellant and Wessling were jointly concerned in the whole payment. The division of the money was not a matter for the debtor, the insolvent: it was not that he owed two separate sums of £100 each; but he owed one indivisible debt of £200, and when it was paid it was, so far as the insolvent was concerned, paid to both of the creditors jointly. The appellant, therefore, is as much responsible for the Wessling £100 as for her own £100—the division between them being a matter for their mutual concern.

Neither in the primary nor in the appellate Court was any reference made to the question whether the payment of the £200 was made by Tronson "with a view" of giving the two creditors a preference, so as to satisfy the requirements of sec. 107 of the Act. This essential circumstance may have been assumed by the parties or the Court; but in any case, reading the facts for ourselves, we think it is clear—particularly having regard to the proviso as to "pressure"—that the insolvent did make the payment with that view. The appellant, as found by Chubb J., affirmed by the Full Court, and, we think, sustained by the evidence, was fully aware of the circumstances of the insolvent, and cannot be said to have been a payee in good faith within the meaning of sec. 107. She therefore fails as to the £100.

With respect to the land, the matter stands thus:—The notice of motion in insolvency undoubtedly attacked the transfer of the land simply as "a fraudulent preference," adding a consequential claim that the lands were recoverable from the appellant by the respondent. That would, strictly speaking, not include any reference to sec. 109, which does not deal with fraudulent preferences. But it appears that the matter proceeded before Chubb J., and his Honor dealt with it, on the footing that sec. 109 as well as sec. 108 was relied on, and in the Full Court the same attitude was observed, and so we must deal with it. We agree with the Full Court that the question arises under sec. 109, since the transaction was between the insolvent and the appellant, not as creditor, but in the separate character of purchaser. The transfer by the insolvent was held to "diminish the property to be divided amongst his creditors." No doubt these words in sec. 109 must be read reasonably with regard to the circumstances, and the diminution must be a substantial one in relation to the circumstances which will call into operation the drastic provisions of the section. But the difference in value found by Chubb J. as a minimum difference is fully supported by the evidence, and is sufficiently substantial to call upon the appellant to discharge the burden put upon her by the section of establishing good faith in relation to the transaction. If it be a correct view of the facts that the £500 was really money belonging to the insolvent, the appellant of course fails. Further, if she leaves the matter in such a position that the Court is not satisfied that she bonâ fide paid that sum out of her own money, as distinguished from the insolvent's money, she equally fails to sustain her statutory burden. That is the case here in our opinion. The transfer therefore, must be deemed fraudulent and void against the trustee (sec. 109) and an act of insolvency (sec. 44), and absolutely void against the trustee (sec. 105). The trustee has a legal right—legal, because statutory—to the land, subject to the Bank's rights, and those rights are conserved by the order made. The Court, by sec. 22 of the Act, has full power to make any order in the matter "for the purpose of doing complete justice," and, if the appellant could establish any equity or just reason for qualifying the order for transfer, the Court could require it to be satisfied. But as she is, on the one hand, protected by the implied covenant for indemnity enacted by sec. 66 of the Real Property Act so far as the registered mortgage is concerned, and as, on the other hand, she has failed to satisfy the Court that the £500 was her own money, she also fails to establish any equity or qualification which ought to be attached to the order for transfer.

Learned counsel for the respondent undertook not to raise in any subsequent proceeding the defence of res judicata as to the £500, should the appellant either attempt to prove for it or to recover it in any other way. We therefore guard our expression as to that sum by saying that she has failed in this proceeding to prove affirmatively that it came out of her money and not out of the insolvent's money.

Appeal dismissed with costs, except so far as the costs were increased by the transfer of the appeal from Brisbane to Sydney, the respondent to pay to the appellant the amount of such increase, the one amount to be set off against the other.

Solicitors for the appellant, Atthow & McGregor, Brisbane.

Solicitors for the respondent, Chambers, McNab & McNab, Brisbane.