FEDERAL COURT OF AUSTRALIA

Cook (Trustee), In the matter of Benson [2000] FCA 1777

BANKRUPTCY - application by trustee of bankrupt estate for declarations and orders in respect of payments made by bankrupt to respondents prior to date of commission of act of bankruptcy - whether each such payment was void against the trustee by force of ss120 or 121 of the Bankruptcy Act 1966 (Cth) - whether there was a disposition of property of the bankrupt within two years before the commencement of the bankruptcy and if so, whether that disposition was not in favour of a purchaser for valuable consideration - whether s116(2)(d) of the Bankruptcy Act 1966 (Cth) applied so that payments were excluded from the operation of ss120 and 121

Bankruptcy Act 1966 (Cth) ss116(2)(d), 120, 121

N M Superannuation Pty Ltd v Young (1993) 41 FCR 182 referred to

Barton v Official Receiver (1986) 161 CLR 75 applied

PETER ROBERT BENSON (a Bankrupt) and PAUL JOHN COOK (as Trustee of the Bankrupt Estate of PETER ROBERT BENSON) v PETER ROBERT BENSON, LEGAL & GENERAL SUPERANNUATION SERVICES PTY LTD, PRUDENTIAL CORPORATION AUSTRALIA LIMITED (ACN 066 649 241) and MERCANTILE MUTUAL CUSTODIANS PTY LTD (ACN 008 508 496)

VG 7527 OF 1998

MARSHALL J

MELBOURNE

12 DECEMBER 2000

THE COURT ORDERS THAT:

1.                  It is declared that the payment made at the direction of the first respondent to the second respondent in the sum of $20,000 in September 1990 be void against the applicant.

2.                  The second respondent pay the applicant the sum of $20,000 plus any further amounts standing to the credit of the applicant referrable to the investment of $20,000.

3.                  It is declared that the payment made at the direction of the first respondent to the third respondent in the sum of $40,000 in September 1990 be void against the applicant.

4.                  The third respondent pay the applicant the sum of $40,000 plus any further amounts standing to the credit of the applicant referrable to the investment of $40,000.

5.                  It is declared that the payment made at the direction of the first respondent to the fourth respondent in the sum of $20,000 in September 1990 be void against the applicant.

6.                  The fourth respondent pay the applicant the sum of $20,000 plus any further amounts standing to the credit of the applicant referrable to the investment of $20,000.

7.                  The first respondent pay the applicant’s costs of, and incidental to, the application including reserved costs.

8.                  Liberty to apply be reserved with respect to the second, third and fourth respondents’ costs.

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

REASONS FOR JUDGMENT

1                     The applicant, Mr Paul John Cook, is the trustee of the bankrupt estate of Mr Peter Robert Benson (“the bankrupt”). Mr Cook has applied pursuant to ss120 and 121 of the Bankruptcy Act 1966 (“the Act”) for declarations and consequential orders in respect of certain payments made by the bankrupt to the other respondents in the proceeding.

Factual background

2                     On 21 July 1992 a sequestration order was made against the estate of the bankrupt by Registrar Cooper in Hobart. The Registrar’s order records the date of commission of the act of bankruptcy as 18 September 1991.

3                     From July 1972 until 20 April 1990, the bankrupt was employed by Industrial Sales and Service (TAS) Pty Ltd (“ISAS”). During that employment, the bankrupt was a member of ISAS’s superannuation fund and he accrued benefits in that fund.

4                     In January 1990, Bridge Wholesale Acceptance Corporation (Australia) Limited (“Bridge”) commenced a proceeding in the Supreme Court of Victoria against the bankrupt and R F Benson Pty Ltd. Bridge made a claim for the sum of $222,588.32 plus interest and costs regarding a floor plan bailment agreement concerning a tractor dealership business.

5                     ISAS was wound up on 4 June 1990. On account of the termination of his employment, the bankrupt obtained a vested interest in a benefit in the company’s superannuation fund in the sum of $96,192.36. Although it was disputed by his counsel, the bankrupt received that sum as an eligible termination payment. Annexed to Mr Cook’s first affidavit is a true copy of the declaration of trust of ISAS by which its superannuation fund was established. Clause 13(b) of the declaration of trust provides that if a member of the fund leaves the service of his employer prior to his normal retirement date and such retirement is accepted by the employer as “early retirement”, the benefits held in the scheme in respect of the member are to be transferred to him. That is what happened in this case. The bankrupt left the service of ISAS before his normal retirement age. He was in his forties at the time. In September 1990, the bankrupt authorised Norwich Union Life Australia Ltd (“Norwich”) to pay the greater part of the funds which were transferred to him to each of the three corporate respondents as “roll-over” institutions. This is apparent from the Australian Taxation Office’s Statement of Termination Payment Form signed by the bankrupt which authorised Norwich to pay the funds which had been transferred to the bankrupt onto the following entities in the following amounts:

·        The second respondent in the sum of $20,000.00.

·        The third respondent in the sum of $40,000.00.

·        The fourth respondent in the sum of $20,000.00.

6                     A further sum of $16,192.36 was paid to the Macquarie Bank.

7                     The trustee has admitted at least two proofs of debt in respect of the estate of the bankrupt. One relates to the action by Bridge (now known as Textron Financial Corporation Australia Limited). That claim is in the sum of $133,341.00. The other claim relates to the sum of $43,057.00 owing to Esanda (Wholesale) Pty Ltd as a consequence of judgment being entered in favour of that company against the bankrupt in the Supreme Court of Tasmania on 16 May 1990. The writ in that matter was served on 8 May 1990.

8                     The respondents, other than the bankrupt, advised the Court through their solicitors, Messrs Clayton Utz, that they did not wish to make any submissions to the Court. As at the day of the trial the bankrupt had not complied with the order of the Court made as long ago as 29 March 1999 that contentions of fact and law be filed within 14 days of the trial. Further, the bankrupt did not present any evidence to the Court or object to any part of the two affidavits of Mr Cook upon which reliance was placed.

9                     Mr Bigmore QC, who appeared for Mr Cook, submitted that pursuant to s120 of the Act, each payment made by the bankrupt to each other respondent was a “settlement” within the meaning of that section and therefore was a transfer which was void against the trustee. Alternatively, Mr Bigmore  submitted that each payment was a disposition of property by the bankrupt with intent to defraud his creditors. It was further contended that each payment was not a disposition for valuable consideration in favour of a person who acted in good faith within the meaning of s121 of the Act. Consequently, it was submitted that each such payment was void against the trustee by force of s121 of the Act.

10                  Mr Denton of counsel appeared for the bankrupt. He contended that the bankrupt’s interest in the funds which emanated from the ISAS superannuation scheme was never received by the bankrupt. As indicated above, the declaration of trust commands a contrary conclusion. Mr Denton further contended that there was no “settlement” within the meaning of s120 of the Act because the property (if it be that) was immediately dissipated. Mr Denton also submitted that the three corporate respondents were purchasers in good faith and for valuable consideration. He further submitted that proceeds from the ISAS fund were excluded property by virtue of s116(2)(d) of the Act as it stood at the relevant time.

11                  Mr Denton also submitted that there was no evidence upon which the Court could find that fraud had occurred within the context of s121 of the Act.

Consideration

12                  I accept the following submissions made by Mr Bigmore:

·        the bankrupt’s entitlement to his eligible termination payment was a chose-in-action which belonged to the bankrupt; and

·        the chose-in-action attracted no relevant exemption under s116 of the Act. Section 116(2)(d) of the Act, as it applied at the relevant time, only made reference to policies of life assurance and endowment assurance and not superannuation per se: see N M Superannuation Pty Ltd v Young (1993) 41 FCR 182 at 190, per Hill J.

13                  Under s120 of the Act, it must be shown by the trustee that there was a disposition of property of the bankrupt within two years before the commencement of the bankruptcy. The relevant disposition here occurred about one year prior to the date of bankruptcy.

14                  Next, it must be shown that the disposition was not in favour of a purchaser for valuable consideration in the context of s120 of the Act. I accept Mr Bigmore’s submission that the respondents, other than the bankrupt, did not give any consideration for the payment to them of the relevant sums. What occurred was that each of those respondents pledged to manage and preserve the funds given to each such entity in return for management fees or charges. The second, third and fourth respondents were not “buyers” in a commercial sense of the relevant interests passing to them: see Barton v Official Receiver (1986) 161 CLR 75 at 86, per Gibbs CJ, Mason, Wilson & Dawson JJ. I also reject Mr Denton’s submission that the funds which were “rolled-over” were immediately dissipated. What occurred was that the bankrupt became entitled to them and then authorised their investment elsewhere.

15                  It is unnecessary to consider whether the payments made to the second, third and fourth respondents were void against the trustee having regard to s121 of the Act, it being plain that the payments were void against the trustee having regard to s120 of the Act.

Orders

16                  The appropriate orders to be made in the circumstances are:

1.                  It is declared that the payment made at the direction of the first respondent to the second respondent in the sum of $20,000 in September 1990 be void against the applicant.

2.                  The second respondent pay the applicant the sum of $20,000 plus any further amounts standing to the credit of the applicant referrable to the investment of $20,000.

3.                  It is declared that the payment made at the direction of the first respondent to the third respondent in the sum of $40,000 in September 1990 be void against the applicant.

4.                  The third respondent pay the applicant the sum of $40,000 plus any further amounts standing to the credit of the applicant referrable to the investment of $40,000.

5.                  It is declared that the payment made at the direction of the first respondent to the fourth respondent in the sum of $20,000 in September 1990 be void against the applicant.

6.                  The fourth respondent pay the applicant the sum of $20,000 plus any further amounts standing to the credit of the applicant referrable to the investment of $20,000.

7.                  The first respondent pay the applicant’s costs of, and incidental to, the application including reserved costs.

8.                  Liberty to apply be reserved with respect to the second, third and fourth respondents’ costs.

17                  An issue was raised by Mr Denton as to whether the second and third respondents were in control of any funds on behalf of the bankrupt. No relevant problem about such control was raised by the solicitors for those respondents. If any problem exists in that regard the Court may deal with it pursuant to liberty to apply.

Associate:

Dated:              12 December 2000