FEDERAL COURT OF AUSTRALIA

Cottrell v Nicholls, in the matter of Cottrell [2003] FCA 1351

DAVID MERVYN COTTRELL v ALAN NICHOLLS AND JOHN A WILCOX IN THE MATTER OF DAVID MERVYN COTTRELL

N 1976 of 2003

BRANSON J

19 NOVEMBER 2003

SYDNEY

THE COURT ORDERS THAT the application for an interlocutory order restraining the Sheriff from placing the first respondent in possession of Lot 361 DP 756447 be dismissed.

REASONS FOR JUDGMENT

1                     Mr David Mervyn Cottrell (‘Mr Cottrell’), a bankrupt, has applied to set aside a notice pursuant to s 139ZQ of the Bankruptcy Act 1966 (Cth) (‘the Bankruptcy Act’) given to Ms Robin Margaret Grant (‘Ms Grant’) by the Official Receiver on the application of the trustee of the estate of Mr Cottrell (“the Trustee”).  Ms Grant is Mr Cottrell’s sister.  No application has been made to the Court by Ms Grant.  The s 139ZQ notice asserts that a certain transfer of land from Mr Cottrell to Ms Grant is voidable at the option of the Trustee pursuant to s 120 or alternatively s 121 of the Bankruptcy Act.  The land in question is Lot 361 DP 756447 (‘the relevant land’).  The relevant land is Mr Cottrell’s present place of residence.  The notice claimed payment of $78 000 to satisfy the notice.

2                     I proceed on the assumption, but without deciding the issue, that Mr Cottrell is an interested person within the meaning of s 139ZS of the Bankruptcy Act.  Section 139ZS authorises the Court on application by a person to whom a notice has been given under s 139ZQ, or by any other interested person, to set aside a notice under section 139ZQ if it is satisfied that Subdivision J, Division 4(B) of Part VI of the Bankruptcy Act does not apply to the person on the basis of the alleged facts and circumstances as set out in the notice. 

3                     The grounds upon which the application is pressed is that the majority of the facts, dates and details set out in the s 139ZQ notice are either untrue, incorrect or inaccurate in detail and are not supported by documentation.  Complaint was also made that the notice was unsigned, undated and unsealed but that complaint has been shown to be without substance.  Mr Cottrell himself placed before the Court a copy of an affidavit sworn by Ms Grant on 22 August 2003 in Supreme Court proceedings, Common Law Division, File No 12995/02.  Ms Grant annexed a copy of the notice to her affidavit.  The copy notice shows the date 11 December 2001 and is signed by the Official Receiver.  There is no statutory requirement for the notice to be sealed.  Ms Grant deposes in her affidavit to receiving the notice in December 2001.

4                     Mr Cottrell seeks urgent interlocutory relief to stay execution of a writ of possession issued by the Supreme Court of New South Wales in the proceedings referred to above until his application under s 139ZS of the Bankruptcy Act can be heard and determined.  A Sheriff’s officer has signed a notice to vacate dated 31 October 2003 directed to Mr Cottrell, Ms Grant or the occupier of the premises on the relevant land.  The notice warns those to whom the notice is directed that theymust vacate the premises without delay - in any event no later than 9.30 am on Wednesday, 19 November 2003 (ie today) otherwise action to evict will proceed without further warning.

5                     No time is stipulated by the Bankruptcy Act or the Rules for bringing an application under s 139ZS.  The application should therefore be made within a reasonable time (Re McLernon; Ex parte SWF Hoists and Industrial Equipment Pty Ltd v Prebble (1995) 58 FCR 391).  Mr Cottrell’s application to set aside the s 139ZS notice directed to Ms Grant was filed on 17 November 2003, that is approximately 23 months after the service of the notice on this Ms Grant.  I start from the position that the application has, on the face of it, not been made within a reasonable time.

6                     The other evidence before me confirms this position.  It is not in dispute that the Trustee commenced the proceedings in the Supreme Court of New South Wales referred to above on 1 November 2002.  By those proceedings the Trustee claimed possession of the relevant land.  The defendants to the proceeding were Mr Cottrell and Ms Grant.  Default judgment was entered in the proceedings on 30 June 2003 and a writ of possession issued.  On 19 August 2003 Mr Cottrell filed a notice of motion in the Supreme Court to have the default judgment set aside.  The motion was dismissed on 29 August 2003.  It appears that Mr Cottrell did not pursue his application because it was considered that he lacked standing to bring the application.

7                     By a notice of motion filed in the Supreme Court on 2 September 2003 Ms Grant applied to have the default judgment set aside.  Ms Grant's application also failed.  The Registrar in his reasons for judgment at [12] observed:

‘Ms Grant's affidavit does not explain the delay in bringing the application, nor outline why she failed to contest the statement of claim and so allowed the judgment to be entered by default.  A notice of grounds of defence is not attached to the affidavit so Ms Grant’s apparent prospects of success at trial cannot be gauged.  Her only explanation for any of her failings is that she did not know what to do and awaited further advice from the Court.  She now considers that the hearing of this application is the first opportunity she has had to ventilate any issues.  Her evidence and submissions does not sit well with the facts.  The documents annexed to her affidavit show that she has been represented on some occasions by lawyers and was so represented at the return date of her motion when the hearing date was set.  She has not raised any issue that could be argued at trial and does not appear to have any genuine ground of defence.  For these reasons, the application fails.’

The Registrar noticed that a stay of the execution of the writ of position issued on 30 June 2003 expired at 2.00 pm on 1 October 2003 and that there was no reason for a further stay to be granted.  The decision of the Registrar has apparently not been challenged in the Supreme Court. 

8                     In my view, even if it be assumed that a reasonable time within which to apply to have the s 139ZQ notice set aside had not expired as at 1 November 2002, the institution by the Trustee of proceedings claiming possession of the relevant land rendered it unreasonable for the making of any such application to be further delayed.  The Supreme Court proceedings were based upon the unchallenged s 139ZQ notice.  The explanation cannot, it seems, be that Ms Grant lacked legal advice.  Her affidavit, to which I have already referred, by par 13 states:

‘Early in 2002 I engaged a Solicitor Roberts Nehmer and McKee to put my case forward.  This met with little success or feedback’

Ms Grant annexed to her affidavit a letter from the firm Roberts Nehmer & McKee dated 2 February 2003 addressed to the Trustee.  By that letter Ms Grant’s solicitor challenged the applicability of s 120 and s 121 of the Bankruptcy Act to the transfer of the relevant land.  The Trustee’s reply is also annexed to the affidavit.  The Trustee noted that Ms Grant had been served with a s 139ZQ notice with which she had not complied.  No application under s 139ZS was thereby provoked.

9                     I turn to consider the merits of the present application which, as I have already observed, is made by Mr Cottrell and not Ms Grant.  Mr Cottrell places particular reliance on an alleged error in [13] of the notice which states:

‘On the 20^th January, 1999 the Bankrupt, [Mr Cottrell] then executed a Transfer of [the relevant land] to his sister Robyn [sic] Margaret Grant for nil consideration.  The Transfer document in fact for consideration states “Love and Affection”.’ 

10                  Mr Cottrell places reliance on a copy of the relevant form of transfer that bears the date 28 April 1998 under his signature as transferor.  It appears that this transfer was stamped on or about 2 June 1998.  The difference in the dates, that is between 28 April 1998 and 20 January 1999, is explained by Ms Grant’s affidavit at [5] which states:

‘The transfer could not immediately be effected as the previous holder of Title for the property “Callatoota” did not complete a Notice of Discontinuance or honour the agreement made at Dandenong Magistrate Court on 25 September, 1997 to do all things possible to complete the transfer from herself to my brother. …’

At [12] of her affidavit Ms Grant confirms expressly that the transfer of the relevant land took place on 20 January 1999.  The technical difference between the date of the execution of the transfer by Mr Cottrell in the sense of the date on which he signed it and the date of its registration is in my view of no significance for present purposes.  The possibility that Ms Grant may have held an equitable interest in the land prior to the registration of the transfer does not change my view in this regard.

11                  Mr Cottrell has also placed reliance on an unstamped agreement between himself and his sister.  He places reliance on the agreement to contradict the statement contained in the stamped transfer that the consideration for the transfer was ‘Love and Affection’.  Significantly each of s 120 and s 121 of the Bankruptcy Act provides that the transferee’s love and affection for the transferor has no value as consideration.  The unstamped agreement, which predates the signature of the transfer, states that Mr Cottrell will transfer the relevant property to Ms Grant:

‘For the love and affection she has afforded me as well as the care and attention and financial support in helping me meet my legal costs, provide food for the home when she can and help to lighten the financial burden of my everyday running costs.  My sister Robin has travelled from Townsville to take care of me on several occasions to this date and has agreed to come when my health requires.’

12                  By the same document Ms Grant agrees as follows:

‘I [Ms Grant] agree to accept the Transfer of the Property “Callatoota” into my name as payment for my support to my Brother David Cottrell of “Callatoota” and I further agree that I will, when required, travel to Urana to give my Brother care and attention, provide food for the home when necessary, assist with his Legal costs when I am financially able and generally help him with his day to day running expenses when and where I can.’

13                  A number of difficulties attend this agreement.  First, as I have mentioned, it is unstamped.  Standing alone this problem could probably be rectified.  It may be, although I have not heard argument on the point, that Mr Cottrell might face an estoppel by deed by reason of the registration of the transfer from seeking to disprove the truth of the statement of consideration contained in the transfer.  I also put that consideration aside.  More significantly, Ms Grant’s past support for her brother at the time of the transfer would constitute past consideration and thus relevantly no consideration for the transfer.  Ms Grant’s promises as to her future conduct would seem to be so uncertain as to be unenforceable, or if enforceable, to have any appreciable value as consideration.

14                  Section 120 relevantly provides:

‘(1)      A transfer of property by a person who later becomes a bankrupt (the transferor) to another person (the transferee) is void against the trustee in the transferor's bankruptcy if:

(a)               the transfer took place in the period beginning 5 years before the commencement of the bankruptcy and ending on the date of the bankruptcy; and

(b)               the transferee gave no consideration for the transfer or gave consideration of less value than the market value of the property.

…

(3)       Despite subsection (1), a transfer is not void against the trustee if:

(a)               the transfer took place more than 2 years before the commencement of the bankruptcy; and

(b)               the transferee proves that, at the time of the transfer, the transferor was solvent.’

15                  Mr Cottrell’s bankruptcy commenced on 18 September 2000.  No proof has been put in front of this Court either by the transferee or by Mr Cottrell of Mr Cottrell’s solvency at the time of the transfer. 

16                  Assuming, but without deciding, that this Court has in the circumstances of this case the power to stay the execution of a judgment of the Supreme Court of New South Wales, I am not satisfied that it would be proper in the circumstances of this case to do so.  This application in my view, not been brought within a reasonable time.  It has not been brought by the person on whom the s 139ZQ notice has been served.  I am not satisfied that the challenge to the applicability of s 120 or alternatively s 121 of the Bankruptcy Act to the transfer of the relevant land from Mr Cottrell to Ms Grant has merit.  While I am mindful of the stress that the requirement to vacate his home will cause to Mr Cottrell, who I accept is not in good health, I do not consider that it would be an appropriate exercise of the discretion of this Court to grant the interlocutory relief sought by Mr Cottrell.

17                  In summary, even if issues of comity between this Court and the Supreme Court of New South Wales are put to one side, I am not satisfied that there is a serious issue to be tried as to the validity of the notice.  Moreover, the delay of nearly two years in challenging the notice, considered together with the fact that the litigation in the Supreme Court was allowed to run to completion without an application being made to this Court to set aside the s 139ZQ notice, strongly suggests against the balance of convenience favouring the grant of the interlocutory relief sought.

18                  The application for a stay of proceedings, by which I understand for an interlocutory order restraining the Sheriff by placing Mr Cottrell’s trustee in possession of the relevant land, must be dismissed.

Associate:

Dated:              24 November 2003