FEDERAL COURT OF AUSTRALIA

Combis (Trustee) v Brent, in the matter of Combis [2019] FCA 1122

REASONS FOR JUDGMENT

RANGIAH J:

1    The applicant (the Trustee) is the trustee of the bankrupt estate of Peter Leonard Brent. The Trustee applies for declarations that three transactions between the bankrupt and the first respondent are void against the Trustee, and for consequential relief.

2    The Trustee alleges that the transactions are undervalued transfers of property within s 120 of the Bankruptcy Act 1966 (Cth) (the Act) and transfers to defeat creditors within s 121 of the Act. The transactions are:

(1)    A payment to the first respondent of $200,000 from the proceeds of the sale of real property part-owned by the bankrupt, known as the “Home Farm”.

(2)    A second payment to the first respondent of $401,154.99 from the proceeds of the same sale.

(3)    The grant of a registered mortgage to the first respondent over the bankrupt’s interest in a real property known as “Peter’s Farm”.

3    The Trustee does not pursue relief against the second respondent, having settled the proceeding against him.

4    The first respondent defends the proceeding principally on the basis that she provided adequate consideration for the transactions. She contends that she had an equitable interest in the Home Farm and, accordingly, provided consideration for the amounts she was paid upon its sale. She also contends that she has an equitable interest in Peter’s Farm which is secured by the registered mortgage. The Trustee denies that the first respondent had such equitable interests and denies that she provided any consideration for the transactions.

5    The transactions stem from the operation of a family farming and vegetable processing business near Boonah in Queensland. It is convenient to begin by describing the various members of the family and the business.

The Brent family and the business

6    The bankrupt, Peter Leonard Brent, is the brother of the second respondent, John Charles Brent. Their father was Leonard (Len) Brent and their mother was Hazel Brent.

7    Len Brent’s father owned several farming properties near Boonah, which were inherited by Len and his sisters. These included properties known as the “Home Farm” and “Peter’s Farm”. Most of the Brent family, including Len Brent’s sisters, lived in separate houses on the Home Farm.

8    The Home Farm consists of several parcels of land, including land located at 54 and 100 Brent Road. Peter’s Farm is bounded by Boonah-Rathdowney, Mt Alford and Bunburra Roads. The amended originating application describes Peter’s Farm as Lots 1 and 2 on Registered Plan 81838, Lot 7 on Survey Plan 173815, Lot 8 on Registered Plan 15047 and Lot 21 on Survey Plan 233699, Local Government of Scenic Rim.

9    In 2005, Peter and John Brent bought the Brent family properties, including the Home Farm and Peter’s Farm, from their father and aunties. It is important to note that Peter and John Brent held each property as tenants in common in equal shares.

10    In 1972, John Brent married the first respondent, Eleanor Elsie Brent (known as Helen Brent). Peter Brent became the brother-in-law of Helen Brent.

11    Helen and John Brent lived in a separate house at 78 Brent Road. They have two adult children, Sally and Matthew.

12    John and Helen Brent separated in 2001, and Helen moved to the Gold Coast. Despite their separation, they have not divorced.

13    Helen Brent resides at 28A Abalone Avenue at Paradise Point in Queensland (the Abalone Ave property). The Abalone Ave property was initially owned by John and Helen Brent as tenants in common in shares of 1/10th and 9/10ths respectively, but John transferred his interest to Helen as part of a family law property settlement in 2013.

14    Matthew and Sally Brent are the trustees of the Brent Family Trust. The Brent Family Trust has been described as an “investment vehicle” for John Brent. The trust property included agricultural investment properties in the Childers region that were mortgaged to Banksia Mortgages Ltd.

15    Peter and John Brent were directors and equal shareholders of Bunjurgen Pty Ltd (Bunjurgen). Bunjurgen built a vegetable processing factory at the Home Farm and operated a business called “Bunny Bites Food”. The factory opened in 1993.

16    By 2013, Bunjurgen’s business was in financial difficulty. In April 2013, Bunjurgen sold the Bunny Bites Food business to Vegpro 4 Pty Ltd (Vegpro), a company controlled by Stephen Jermyn, who was a family friend of Helen Brent. At the same time, Peter and John Brent sold the part of the Home Farm consisting of 54 and 100 Brent Road to Vegpro. It is convenient to refer to 54 and 100 Brent Road as “the Home Farm” in the remainder of these reasons.

17    The Trustee alleges that there was an elaborate scheme involving John, Peter, Helen, Sally and Matthew Brent, Sally’s husband and Mr Jermyn, devised by an accountant, to protect the Brent family’s assets from creditors. The Trustee tendered, without objection, the transcript of the public examination of Peter Brent and the documents that were tendered in that examination. Apart from making some sweeping statements, referring to a few of the thousands of pages of documents in evidence and engaging in some cross-examination of Helen Brent upon the issue, the Trustee did not attempt to explain precisely how the scheme worked. However, it is unnecessary to decide whether there was such a scheme and what its content was in order to resolve the proceeding.

Background to the impugned transactions

18    C.A.R.S. Pty Ltd (CARS) was a major trade supplier to Bunjurgen. On 20 February 2011, Peter Brent executed a Deed of Guarantee and Indemnity in favour of CARS in respect of the obligations of Bunjurgen under certain vegetable supply agreements. Another Deed of Guarantee and Indemnity contained a signature that appeared to be that of John Brent.

19    CARS supplied vegetables to Bunjurgen between February 2011 and November 2012. Between December 2012 and April 2013, CARS made demand upon Peter and John Brent under the guarantees for the sum of $913,307.54. On 31 July 2013, CARS commenced proceedings in the Supreme Court of Tasmania against Peter and John Brent. On 30 June 2015, judgment for the sum of $1,811.926.90 was given in favour of CARS against Peter Brent, but not against John Brent. The trial judge accepted that John Brent’s signature had been forged by a person unknown.

20    On 1 September 2015, Peter Brent presented a debtor’s petition and become bankrupt.

21    The Trustee’s further amended statement of claim pleads that Peter was insolvent from April 2013. The Trustee has deposed to his opinion that Peter Brent was insolvent since prior to that date. The Trustee’s affidavit was admitted into evidence without objection and he was not required for cross-examination. I accept that Peter Brent was insolvent from April 2013, as pleaded.

22    On 26 April 2013, Peter and John Brent entered into a contract for the sale of the Home Farm to Vegpro for $3,500,000. Settlement occurred on 12 June 2013.

23    On 2 April 2013, both Peter and John signed an irrevocable trust account authority addressed to Australian Law Group in respect of the sale of the land and buildings to, inter alia, pay out the loan of $400,000 secured over the Abalone Ave property.

24    From the proceeds of the sale of Home Farm, an amount of $2,112,661.23 was paid to Mathew and Sally Brent as trustees of the Brent Family Trust to discharge the mortgages in favour of Banksia Mortgage Service Ltd in respect of the Childers properties. From the settlement proceeds, $200,000 was also paid to Helen Brent. In addition, $401,154.99 was paid to discharge a mortgage registered to Tonto Homes Mortgages over the Abalone Ave property. While it seems possible that the second payment was made directly to Tonto Homes Mortgages, Helen Brent accepts in her amended defence that the payment was made to her and John Brent.

25    Peter’s evidence in the public examination was that no money was paid to him from the proceeds of the sale of the Home Farm. I accept that evidence.

26    On 11 June 2013, Peter and John Brent each executed mortgages in favour of Helen Brent in respect of their respective interests in Peter’s Farm. The mortgages were registered on 12 March 2014.

27    Clause 3.1 of the mortgage executed by Peter Brent requires him to pay the “Secured Money” to the mortgagee as agreed, or otherwise when the mortgagee demands. The “Secured Money” is defined in cl 1.1 to mean:

all amounts and liabilities that the Mortgagor or John Charles Brent is or at any time may be liable…to pay the Mortgagee…on any account or in any way whatsoever under or in connection with the Consent Orders or a Collateral Security …[and] includes any liability under a judgment or court order against the Mortgagor or John Charles Brent in favour of the Mortgagee.

Under cl 1.1, the term “Consent Orders” is defined to mean:

the consent orders agreed to by the Trustee and the Respondent in proceedings in the Family Court of Australia in the matter Eleanor Elsie Brent v John Charles Brent.

28    On 12 June 2013, Helen and John Brent signed consent orders proposed to be made by the Family Court of Australia. The applicant for those orders was Helen and the respondent was John. The orders were ultimately made on 9 January 2014.

29    Order 1 required John to do all acts and things necessary to execute a contract of sale of Bunny Bites Food to Vegpro. Under orders 2.3 and 3.1, John Brent authorised Mullins Solicitors to pay $200,000 to Helen Brent from the net proceeds of his entitlement to sale proceeds from the contract of sale.

30    Under order 4, John Brent was to pay Helen Brent a further amount equal to 50% of the net proceeds of sale attributable to John Brent’s interest from the sale of assets listed in Sch 2, which included Peter’s Farm. Under order 4, John Brent agreed to deliver to Helen Brent, at or prior to the completion of the contract of sale, executed mortgages in registrable form over the real property referred to in Sch 1, which included Peter’s Farm.

31    Under order 8, John Brent agreed to transfer to Helen Brent all his right title and interest in the Abalone Ave property. Under cl 9, John Brent agreed to do all acts and sign all documents necessary for the release of the Tonto Home Loans mortgage over the Abalone Ave property.

32    The Bunny Bites Food business and processing plant was also sold to Vegpro. The distribution of the proceeds of that sale is not challenged in this proceeding. It may be noted that although the terms of the Family Court consent orders required $200,000 to be paid to Helen Brent from the sale of the Bunny Bites Food business, the money was paid from the proceeds of the sale of the Home Farm, as the amended defence admits. The amended defence admits that the $401,154.99 was also paid from the proceeds of the sale of the Home Farm.

The evidence

The evidence of Helen Brent

Evidence in chief

33    Helen Brent deposes as follows.

34    After Helen married John Brent in 1972, they moved to the Home Farm. She was taught how to be a farmer’s wife by John’s mother, Hazel Brent. Hazel taught her everything, including working on the harvester, working in the shed, cattle work and mustering cattle. Helen became very close to John’s parents and referred to them as “Mum” and “Dad”.

35    Helen Brent worked on the farm on a daily basis and also looked after her home. When she had children, she was also responsible for looking after them. Her children were born in 1975 and 1977.

36    Helen Brent was never paid for any of her work, but was very busy and worked very hard. Most of her farm work related to crop farming and grazing, but she did anything that needed to be done. She worked every weekday and sometimes on the weekends. The work she did included planting, growing and harvesting crops (mainly beetroots and carrots), looking after and mustering cattle and general farm maintenance.

37    Helen Brent never had her name on any assets, property or title, although many properties and assets were purchased during her marriage. However, she was of the understanding that she was a party to all of the property sales and purchases as they occurred throughout her marriage.

38    Helen Brent deposes:

I was however a part of discussions between Johnnie, Peter, Len and Hazel on many occasions over the years when assets were acquired and it was always discussed openly by all of us that Johnnie would be holding his share of the particular asset in question for “us”. By “us” we meant for Johnnie, myself and our children. I know this because we discussed it openly between ourselves and also with Peter, Len and Hazel. We were a family and we all worked on the farm and we all contributed to it so it was openly understood that we were all in this together and that the assets were held for all of us.

39    On many occasions between 1972 and 2001, John, Peter and Len said to Helen that she was a part of the family and that the property at 78 Brent Road was for John and her because that was where their home was. They also said that:

As to the other properties, after Len and Hazel had passed, I would receive 1/3 of the properties at 54 and 100 Brent Road having worked so hard on them for so long (with the other thirds to go to Johnnie and Peter because they had similarly worked so hard on them).

40    If Helen Brent had understood that she would receive nothing at the end of the day, she would have insisted on being paid, or on being given a legal interest in the properties, as she needed to protect her family. She understood that the farm was always partly hers.

41    In 1995, Peter and John decided to build a processing factory. Helen Brent recalls there being 70 to 80 people working in the factory. She was working in the factory on most days, although she continued to work on the farm as well. With the development of the factory, she worked there more when it was busy, but there was always something to do, so if she was not required for cropping or grazing work, she would be at the factory. She helped with the processing line and with anything that needed to be done.

42    John Brent became a councillor on the Boonah Shire Council in 1976. In about 1990, John became the Mayor of the Boonah Shire and Helen became the Lady Mayoress. She continued to work on the farm.

43    Helen and John Brent separated in 2001, and she moved to the Gold Coast. She did not worry about formalising her separation because she lived in a unit provided for her and John paid her an allowance. John Brent said that he would ensure that he continued to do this until they sorted out a financial settlement. John told her that she would get a payment representing half the value of 78 Brent Road because it was hers and John’s property and that she would get a payment that represented her further one-third interest in the rest of the Brent properties given all her work over the years. She has only recently become aware that there was no formal divorce.

44    John Brent ultimately called Helen Brent and said that he was going through the process of documenting a financial settlement and would make sure she was looked after. Later, John told her on the telephone that the way the settlement would work was that she would receive the Abalone Ave property unencumbered in part-payment of her interest in 78 Brent Road, and that she would receive further payments over a number of years representing the payout of further monies to her. She was happy with this. John explained that it was difficult for the whole of her interest to be paid out at once and it would need to happen over time. He did not suggest to her that there were any financial problems behind this.

45    At the time of receiving the payments in question, Helen Brent had no concerns regarding Peter or John’s financial status. She had never been across the books or records of the farm or the business, and was only involved in the periphery of decisions to take large steps or purchase significant assets. She had no concerns at all in relation to the financial settlement she received, that there would be a difficulty in being paid, or that there might be creditors chasing funds.

46    Helen Brent states that from the beginning, John Brent’s parents treated her like a daughter. Even after the separation, she would visit John’s mother. She cared for her father-in-law when John’s mother was very sick at home. She was also a part-time carer for John’s aunties.

Cross-examination

47    A substantial part of the cross-examination of Helen Brent was directed towards demonstrating that she had worked on the farm and in the factory less frequently, regularly and extensively than she claimed. Under cross-examination, she maintained that she had done the work claimed in her affidavit.

48    It was suggested to Helen Brent that the mortgage payments for the Abalone Ave property were paid out of the Bunjurgen bank account. She accepted that the payments had been made by Bunjurgen, but said that she had no idea it was happening. She said she thought that it was John Brent who was making the mortgage payments.

49    Helen Brent accepted that John Brent paid her a living allowance of around $2,000 per month from the time they separated in 2001 until June 2013.

50    Helen Brent was taken to a document entitled “Financial & Superannuation Agreement” made between her and John Brent on 20 January 2006, apparently made under ss 90C and 90MH of the Family Law Act 1975 (Cth). That document set out in Annexure “D”, the property, liabilities and financial resources of Helen and John Brent. Annexure “D” included the Home Farm and Peter’s Farm. Under the heading, “Nature of Interest Held by Husband and/or Wife”, it was recorded in respect of those properties that John had a half-interest in fee simple as tenant in common with Peter Brent. Helen Brent accepted that the document did not mention her alleged one-third interest in the Home Farm. It was put to her that she did not tell her solicitor about the alleged agreement that she would receive one-third of the Home Farm. Her answer was, “No. Because I just knew that it would happen.”

51    Helen Brent was taken to her application to the Family Court for consent orders signed by her on 12 June 2013. She accepted that a solicitor named Andrew Doyle had prepared the document on her behalf based on her instructions. She accepted that the document did not record in Part H of the application any one-third interest that she had in the Home Farm or Peter’s Farm. She agreed that she had sworn an affidavit on 25 September 2013 in which she agreed that she had no interest in property which was not described in Column 1 of Part H of the application.

52    It was put to Helen Brent that she was never told that she would be getting one-third of the sale proceeds of the Home Farm or the factory business. She answered:

I just assumed, and everybody assumed, also, that—I would be getting a third in the family.

53    It was then put to Helen Brent that it was never expressed in that way, and her answer was:

I don’t know, to be quite honest.

54    It was put to Helen Brent that in the application to the Family Court, she had only stated that she had made contributions as a homemaker and parent, including by entertaining John Brent’s business clients and colleagues.

55    Helen Brent accepted that Mr Jermyn asked Mr Doyle to look after her financial settlement. She was asked about the alleged scheme put in place arising from Bunjurgen’s financial problems, but denied that she knew the sale proceeds were going to be funnelled to her. She said that she knew that the money was going to come from the sale of the property, but she had no way of knowing exactly where it was coming from. She just knew that she was going to be paid. She denied any knowledge of a scheme to ensure that the Brent family assets were not lost in a fire sale by the creditors.

56    When asked about the mortgage over Peter’s Farm, Helen Brent accepted that Peter did not owe her any money.

The evidence of Diana Hynard

57    The Trustee called Diana Hynard to give evidence. Ms Hynard worked in the position of process manager at Bunny Bites Farm for nearly 17 years, commencing in about 1993. She deposed that Helen Brent never worked in the factory at any time.

58    Under cross-examination, Ms Hynard accepted that she had no knowledge of any work that Helen Brent might have done before 1993. She accepted that if Helen Brent was working on the farm, she would not have known about it.

59    It was put to Ms Hynard that Helen Brent could have helped out in the factory from time to time without Ms Hynard noticing, but her response was that she was there from when the factory started in the morning until when it finished and she continually travelled throughout the factory during the day. Ms Hynard accepted that it was possible that Helen Brent might have answered phones in the administration area of the factory, but Ms Hynard said she was in good communication with all areas and could not recall Helen Brent being there.

The evidence of Neville Schubring

60    The Trustee called Neville Ross Schubring to give evidence. Mr Schubring was a farm hand at the Home Farm for some 43 years, commencing in 1971.

61    Mr Schubring deposed that he assisted Len and Hazel Brent with cattle work and did not recall Helen Brent being involved in checking on the cattle on a regular basis. He deposed that Helen Brent only assisted on the farm during the harvest season (April through to November) and generally as a “cover” employee. If someone was sick or there were circumstances that required more hands, she would assist occasionally as the need arose.

62    Mr Schubring did not recall Helen Brent being a full-time employee during his time on the farm. He said that she did not work on the farm every day, but only occasionally when required. He did recall Helen Brent working on the harvester during the harvest season, but after the introduction of bulk harvesting machinery in the late 1980s, he did not recall her working on the harvester at all, as there was only one operator.

63    Under cross-examination, Mr Schubring accepted that Len Brent taught Helen Brent a lot about farming when she first came to the farm, including about horses, mustering, cattle work and crop farming. He accepted that she would help with the harvest. He did not accept that she helped with general duties in the factory after it was constructed, but conceded that she could have worked there without him observing her.

The evidence of Robert Allison

64    The Trustee called Robert Southier Allison to give evidence. Mr Allison was a former director of Bunjurgen and was also engaged to assist Bunjurgen to find a buyer for its business between January 2011 and November 2012.

65    At one point, Helen Brent told Mr Allison that she wanted her house and car to be paid off out of John’s share from any sale. She did not mention that she had been promised a third of the farm for her unpaid work.

The evidence of Ceri Taylor

66    The Trustee called Ceri Taylor to give evidence. Ms Taylor was a former partner of John Brent, having been in a relationship with him from 2006 to 2013. Ms Taylor provided evidence principally about her observations of the extent of any care that Helen Brent may have provided to Len and Hazel Brent and Len’s sisters.

67    Ms Taylor has only known the Brent family since 2006, and Helen left the Home Farm in 2001. Ms Taylor’s evidence as to the amount of work Helen Brent may have done on the farm was either largely speculative or based on what she had been told. I do not regard her evidence as carrying any weight.

The evidence of Michelle Woodard

68    The Trustee called Michelle Woodard to give evidence. She was a former employee of Bunjurgen, acting as an administrator from 2010 to 2013. I do not regard her evidence as relevant to the issues to be decided.

The evidence of Richard Worley

69    The Trustee called Richard Worley to give evidence. He is the first cousin of Peter and John Brent. He worked at the Home Farm between about 1976 and 1989.

70    Mr Worley deposes that the amount of care that Helen Brent provided to Len and Hazel Brent and to his mother and the aunties, Alice, Ethel and Beryl, was more limited than Helen has suggested. He deposes that his aunties were healthy and independent women who looked after each other. He accepts that Helen Brent cared for Len and Hazel Brent when Len was diagnosed with cancer in 2006, an illness he died from the following year. He deposes that until then, Len and Hazel were active and independent and able to look after themselves.

71    Mr Worley also deposes that Helen Brent only worked occasionally on the farm and that the extent of her work was very limited. Before she had children, he saw her help on the harvester or in the carrot shed on rare occasions, but certainly not daily. After having children, she would only fill in when one of the regular casual workers was away. He never saw her do any cattle work, as this was always done by the men.

72    Under cross-examination, Mr Worley denied that Helen Brent regularly helped with working in the carrot shed and harvesting. He accepted that she did help out from time to time when required. He denied that it was possible that Helen Brent assisted with mustering. He conceded that he did not know whether Helen Brent might have assisted in the factory on occasions.

Consideration

73    The Trustee challenges three transfers of property from Peter Brent to Helen Brent on 11 and 12 June 2013. The first was the payment of $200,000 from the proceeds of the sale of the Home Farm. The second was the payment of $401,154.99 to discharge a mortgage over the Abalone Ave property from the proceeds of the same sale. The third was the grant of a registered mortgage over Peter’s Farm to secure money owed by John Brent to Helen Brent.

74    The Trustee contends that the transfers of property are void against the Trustee under s 120 and 121 of the Act as undervalued transfers and transfers made to defeat creditors respectively.

75    Helen Brent defends the proceeding principally on the basis that she had equitable interests in the Home Farm and Peter’s Farm. She argues that her equitable interests, or the compromise of her entitlement to make any claims in respect of her equitable interests, provided adequate consideration for the transfers of property. Her equitable interest is said to arise from the work and care she provided in reliance upon representations or an agreement made by Peter, John and Len Brent that she would have a one-third interest in the Brent farming properties.

76    Consideration of Helen Brent’s defence must start with whether her evidence as to the alleged arrangements with Peter, John and Len Brent should be accepted.

Whether Helen Brent’s evidence should be accepted

77    In her affidavit, Helen Brent deposes that on many occasions between 1972 and 2001, John, Peter and Len Brent told her that:

As to the other properties, after Len and Hazel had passed, I would receive 1/3 of the properties at 54 and 100 Brent Road having worked so hard on them for so long (with the other thirds to go to Johnnie and Peter because they had similarly worked so hard on them).

78    Helen Brent does not specifically depose that she was also told she would receive a one-third interest in Peter’s Farm. However, that may be implied or encompassed by more general statements, such as being told by John Brent that she, “would get a payment that represented my further 1/3 interest in the rest of the Brent properties given all my work over the years.”

79    For the reasons that follow, I do not accept that these aspects of Helen Brent’s evidence are reliable or credible.

80    Helen Brent’s evidence that representations were made that she would have a one-third interest in the Home Farm and Peter’s Farm is inconsistent with what she says was the arrangement in respect of other assets and property acquired by the Brent family. In respect of those assets and property, she says that it was discussed that, “Johnnie would be holding his share of the particular asset in question for ‘us’”. She explained that “us”, meant John and Helen Brent and their children. Helen Brent has not explained why there was to be a different arrangement in respect of the Home Farm and Peter’s Farm, where she would not merely have an interest in John’s half share, but also an interest in Peter’s half-share.

81    Under cross-examination, when it was suggested that no representation was expressed in a way that indicated she would be getting a one-third interest, Helen Brent’s answer was, “I would always have my share, and I assumed that that’s what would happen.” Later she said “I just assumed, and everybody assumed, also, that—I would be getting a third in the family.” When it was suggested again that it was never expressed in that way she said, “I don’t know, to be quite honest.”

82    In my opinion, these passages of Helen Brent’s evidence tell strongly against the proposition that representations were made by John, Peter and Len Brent that she would have a one-third interest in the Home Farm and Peter’s Farm. At best, that was merely an assumption made by her.

83    There are, however, substantial reasons to doubt that Helen Brent even made such an assumption. In the 2005 “Financial & Superannuation Agreement”, a table in Annexure “D” set out the “Nature of Interest Held by Husband and/or Wife”. In respect of both the Home Farm and Peter’s Farm, it was stated that John Brent held a half interest in fee simple as tenant in common with Peter Brent. But, there was no reference to Helen Brent’s one-third equitable interest in the property. Further, the application for consent orders filed in the Family Court listed both Helen and John Brent’s assets. Helen Brent did not claim any ownership interest in the Home Farm or Peter’s Farm. In both transactions, Helen Brent was represented by lawyers. If, as she now claims, she was promised one-third interests in the Home Farm and Peter’s Farm, those interests were likely to have been recorded in the documents.

84    Further, I consider that Helen Brent has exaggerated the extent of the farming and factory work she did. I accept that she did perform some farming work from time to time, particularly before the birth of her children. However, I consider that Mr Schubring, Mr Worley and Ms Hynard were independent and reliable witnesses, and I prefer their evidence.

85    The evidence of Mr Schubring and Mr Worley is against Helen Brent’s evidence that the farm work she did was initially full-time and, later, was still frequent and extensive. I accept that she did do some harvesting work, but that occurred sporadically when her help was needed. I accept that she may have done some limited work with cattle, but again I do not consider that it was of the extent she suggests. Further, after she had children, and particularly during the period when she was the Lady Mayoress, the evidence suggests that she did very little work on the farm. In light of the evidence of Ms Hynard, I do not accept that she did any substantial work in the vegetable processing factory, apart from perhaps having done some processing work in the early days and answering telephones on a few occasions.

86    My conclusion that Helen Brent has exaggerated the extent of the work that she performed on the farm is relevant for two reasons. First, the exaggeration casts further doubt upon the credibility of her evidence that Peter, John and Len Brent said she would have a one-third interest in the Home Farm. Second, I do not accept her evidence that the basis upon which Peter, John and Len agreed that she was entitled to a one-third interest in the property was that she had “similarly worked so hard” as Peter and John Brent.

87    Helen Brent’s amended defence alleges that the circumstances that should lead to a finding that she had the equitable interests she claims include that she took care of Len and Hazel Brent and Len’s sisters, Alice, Ethel and Beryl, without payment.

88    However, I consider that Helen Brent has exaggerated the amount of care that she provided for Len and Hazel Brent. The evidence demonstrates that Len and Hazel Brent were independent when Helen left the Home Farm and moved to the Gold Coast in 2001. I accept that she then visited them and provided them with assistance from time to time, particularly when Len Brent was very sick in 2006, but I think she has overstated the frequency and extent of her assistance. Further, her affidavit does not indicate that she spent any substantial time caring for the aunties, and the evidence of Mr Worley satisfies me that she did not.

89    I have no doubt that Helen Brent performed her familial duties as the wife of John Brent and the relative of his parents and aunties. However, I am satisfied that she has exaggerated the extent of the farm and factory work she did and the care she provided to John’s relatives.

90    Helen Brent was the sister-in-law of Peter Brent. The evidence does not suggest that the relationship between Peter and Helen Brent was any closer than a usual relationship of that kind. There is nothing that satisfies me that Peter Brent, who owned a half interest in the Home Farm and Peter’s Farm as tenant in common with John Brent, would have any reason to agree to Helen Brent having a one-third interest in those properties.

91    Helen Brent did not call Peter Brent or John Brent to give evidence. I do not draw any adverse inference by reason of her failure to call them, but their failure to give evidence means that her evidence as to the discussions she alleges they had is uncorroborated.

92    I am willing to accept Helen Brent’s evidence only to the extent that it is uncontested or corroborated. I do not accept that Peter, John and Len Brent made any representations or made any agreement that Helen Brent would receive a one-third interest in the Home Farm or Peter’s Farm. I do not accept that there was any conduct on the part of Peter, John and Len Brent that could have caused her to assume that she would have a one-third interest in the properties. I do not accept that she did farming work, or worked in the vegetable processing factory, or cared for Len, Hazel and the aunties in reliance upon any such representations or agreement.

The Trustee’s case under s 120 of the Act

93    Section 120 of the Act provides, relevantly:

120    Undervalued transactions

Transfers that are void against trustee

(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.

…

Refund of consideration

(4)    The trustee must pay to the transferee an amount equal to the value of any consideration that the transferee gave for a transfer that is void against the trustee.

What is not consideration

(5)    For the purposes of subsections (1) and (4), the following have no value as consideration:

(a)    the fact that the transferee is related to the transferor;

(b)    if the transferee is the spouse or de facto partner of the transferor—the transferee making a deed in favour of the transferor;

(c)    the transferee’s promise to marry, or to become the de facto partner of, the transferor;

(d)    the transferee’s love or affection for the transferor;

(e)    if the transferee is the spouse, or a former spouse, of the transferor—the transferee granting the transferor a right to live at the transferred property, unless the grant relates to a transfer or settlement of property, or an agreement, under the Family Law Act 1975;

(f)    if the transferee is a former de facto partner of the transferor—the transferee granting the transferor a right to live at the transferred property, unless the grant relates to a transfer or settlement of property, or an agreement, under the Family Law Act 1975.

Protection of successors in title

(6)    This section does not affect the rights of a person who acquired property from the transferee in good faith and by giving consideration that was at least as valuable as the market value of the property.

Meaning of transfer of property and market value

(7)    For the purposes of this section:

  (a)    transfer of property includes a payment of money; and

(b)    a person who does something that results in another person becoming the owner of property that did not previously exist is taken to have transferred the property to the other person; and

(c)    the market value of property transferred is its market value at the time of the transfer.

94    Helen Brent does not dispute that the three transactions identified by the Trustee occurred and that she received the funds and the security. She does not dispute that they involved transfers of property from Peter Brent. She does not dispute that the transfers took place within five years of Peter Brent’s bankruptcy commencing. She does not argue ss 120 and 121 of the Act do not apply because of the Family Court consent orders: cf Official Trustee in Bankruptcy v Mateo (2003) 127 FCR 217 at [69].

95    Helen Brent defends the proceeding on the basis that the Trustee has not proved, under s 120(1)(b) of the Act, that she gave no consideration, or gave consideration of less value than the market value of the property transferred. Further, she contends that under s 120(6), the Trustee has not proved that she did not acquire the property in good faith, and failed to give consideration of at least the market value of the property transferred. She argues that her equitable interests in the Home Farm and Peter’s Farm, or the compromise of her entitlement to make any claims in respect of her equitable interests, provided adequate consideration for the transfers. Helen Brent asserts that the extent of her equitable interests was a one-third interest in each of the Home Farm and Peter’s Farm.

96    The burden of proof under s 120 of the Act is on the Trustee: see PT Garuda Indonesia Ltd v Grellman (1992) 35 FCR 515 at 528.

97    The requirement of “in good faith” under s 120(6) means without notice that any fraud or preference contrary to the statute is intended: PT Garuda at 528.

98    It may be accepted that if property is sold and part of the proceeds of sale is transferred to a person on account of his or her equitable interest in the property, the person has provided some consideration for the transfer. In this case, Helen Brent contends that she had equitable interests arising from the circumstances of a joint relationship or joint endeavour between her and members of the Brent family, including Peter, John and Len.

99    Helen Brent relies upon Giumelli v Giumelli (1999) 196 CLR 101, where it was held that the plaintiff was entitled to equitable relief in circumstances where he had remained on the family farm and worked without wages in reliance upon a promise that the farm would be subdivided and a portion provided to him. The High Court said at [6]:

…[T]he equity which founded the relief obtained was found in an assumption as to the future acquisition of ownership of property which had been induced by representations upon which there had been detrimental reliance by the plaintiff. This is a well recognised variety of estoppel as understood in equity and may found relief which requires the taking of active steps by the defendant.

100    In Donis v Donis (2007) 19 VR 577, Nettle JA, referring to Giumelli, said at [19]:

In such cases the remedy relates to the understanding of the parties and the expectation that has been encouraged. Prima facie the estopped party can only fulfil his or her equitable obligation by making good the expectation which he or she has encouraged. The estopped party, having promised to confer a proprietary interest on the party entitled to the benefit of the estoppel, and the latter having acted upon the promise to his or her detriment, is bound in conscience to make good the expectation. It follows that the detrimental reliance that supports the estoppel need not constitute in any sense a consideration moving to the party bound. It is a unilateral element of the estoppel and not the price paid for it.

101    In Sidhu v Van Dyke (2014) 251 CLR 505, the High Court, referring to Donis v Donis, observed at [77]:

This category of equitable estoppel serves to vindicate the expectations of the

representee against a party who seeks unconscionably to resile from an expectation he or she has created.

102    In Muschinski v Dodds (1985) 160 CLR 583, Deane J at 620, identified a principle of equity operating in the following circumstances:

…[T]he principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do.

(Citation omitted.)

103    In Baumgartner v Baumgartner (1987) 164 CLR 137, Mason CJ, Wilson and Deane JJ referred at 148 to a general equitable principle:

which restores to a party contributions which he or she has made to a joint endeavour which fails when the contributions have been made in circumstances in which it was not intended that the other party should enjoy them.

104    Their Honours continued at 149:

Their contributions, financial and otherwise, to the acquisition of the land, the building of the house, the purchase of furniture and the making of their home, were on the basis of, and for the purposes of, that joint relationship. In this situation the appellant's assertion, after the relationship had failed, that the Leumeah property, which was financed in part through the pooled funds, is his sole property, is his property beneficially to the exclusion of any interest at all on the part of the respondent, amounts to unconscionable conduct which attracts the intervention of equity and the imposition of a constructive trust at the suit of the respondent.

105    I have rejected Helen Brent’s evidence that Peter, John and Len Brent told her that she would have a one-third interest in the Brent family properties, or otherwise engaged in conduct that would cause her to make any assumption to that effect. I have rejected her evidence that she worked and provided care to her elderly relatives in reliance upon any representations made to her or any agreement reached. Her claim of a proprietary interest in the Home Farm and Peter’s Farm based upon equitable estoppel cannot succeed.

106    Helen Brent was part of the broader Brent family. The limited assistance she provided at the Home Farm and the factory and the care she provided from time to time are consistent with her position as the wife of John Brent and the affection that she undoubtedly developed for members of the family. Helen Brent also received benefits from the Brent family, including the provision of a home at 78 Brent Road. In my opinion, her exertions and the benefits she received were simply part of the give and take of being a member of a farming family. There is no reliable evidence that the respective contributions were made with any expectations of receiving any material reward in return. I do not accept that Helen Brent’s exertions were intended to be reflected in the creation of any ownership interest.

107    The position may be contrasted with the relationship between Helen and John Brent. They were married for 29 years before they separated. Helen Brent’s evidence that the Brent family discussed that John would be holding his share of assets for John, Helen and their children is entirely consistent with the nature of their relationship. The married relationship between Helen and John Brent is comparable to the marriage-like relationships considered in Muschinski v Dodds and Baumgartner v Baumgartner. It may readily be accepted that, in the absence of the property settlement between them, it would be unconscionable for John to have retained his beneficial interest in the Home Farm and Peter’s Farm to the exclusion of any interest on the part of Helen Brent.

108    However, any equitable interest held by Helen Brent was only in John’s share of the property owned by Peter and John Brent as tenants in common. In my opinion, there is nothing in the relationship between Peter Brent and Helen Brent that would make it unconscionable for Peter Brent to retain his full beneficial interest in his share of the property.

109    I find that Helen Brent did not hold any equitable interest in Peter Brent’s half-share of the Home Farm and Peter’s Farm.

110    Therefore, to the extent that the payments of $200,000 and $401,154.99 were made from Peter’s share of the proceeds from the sale of the Home Farm, Helen Brent provided no consideration for the transfers. However, it remains to be decided whether those transfers were made from Peter’s entitlement or John’s entitlement or both.

111    Peter Brent gave Helen Brent a registered mortgage over his interest in Peter’s Farm. Peter did not, and does not, owe Helen Brent any money. The purpose of the mortgage given by Peter Brent was to secure money owing by John to Helen under the Family Court orders. Helen has no equitable interest in Peter’s interest in Peter’s Farm. Helen Brent provided no consideration to Peter for the mortgage. Therefore the mortgage is void against the Trustee.

112    Even if, contrary to my finding, Helen Brent had equitable interests in the Home Farm and Peter’s Farm, it would have been necessary to determine whether the value of those interests was at least as great as the value of the transfers to her. If some consideration is given, s 120 of the Act requires the Court to determine the value of that consideration: Official Trustee v Lopatinsky (2003) 129 FCR 234 at [92], [96]. Helen Brent’s quantification of her equitable interests relied upon the alleged representations or agreement that she would have a one-third interest in the properties. She has not otherwise attempted to demonstrate the value of her interests. That exercise would have required, in part, consideration of potentially offsetting factors against the value of her equitable interests, such as payments of about $2,000 per month to her made by Bunjurgen and the mortgage payments in respect of the Abalone Ave property made by John Brent. In my opinion, Helen Brent has the onus of proving the value of her equitable interests: see PT Grauda at 528. She has failed to discharge that burden. Even if it were assumed that she had equitable interests, once the one-third representation is rejected, it could not be concluded that their value was greater than the amounts of the transfers.

The Trustee’s case under s 121 of the Act

113    Section 121 of the Act provides, relevantly:

121    Transfers to defeat creditors

Transfers that are void

(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)    property would probably have become part of the transferor’s estate or would probably have been available to creditors if the property had not been transferred; and

  (b)    the transferor’s main purpose in making the transfer was:

(i)    to prevent the transferred property from becoming divisible among the transferor’s creditors; or

…

Showing the transferor’s main purpose in making a transfer

(2)    The transferor’s main purpose in making the transfer is taken to be the purpose described in paragraph (1)(b) if it can reasonably be inferred from all the circumstances that, at the time of the transfer, the transferor was, or was about to become, insolvent.

Other ways of showing the transferor’s main purpose in making a transfer

(3)    Subsection (2) does not limit the ways of establishing the transferor’s main purpose in making a transfer.

Transfer not void if transferee acted in good faith

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

(a)    the consideration that the transferee gave for the transfer was at least as valuable as the market value of the property; and

(b)    the transferee did not know, and could not reasonably have inferred, that the transferor’s main purpose in making the transfer was the purpose described in paragraph (1)(b); and

(c)    the transferee could not reasonably have inferred that, at the time of the transfer, the transferor was, or was about to become, insolvent.

…

Meaning of transfer of property and market value

(9)    For the purposes of this section:

  (a)    transfer of property includes a payment of money; and

(b)    a person who does something that results in another person becoming the owner of property that did not previously exist is taken to have transferred the property to the other person; and

(c)    the market value of property transferred is its market value at the time of the transfer.

114    Solvency is dealt with in subsections 5 of the Act as follows:

(2)    A person is solvent if, and only if, the person is able to pay all the person’s debts, as and when they become due and payable.

  (3)    A person who is not solvent is insolvent.

115    Helen Brent does not dispute that the three transactions were transfers of property by Peter Brent to her. She does not dispute that the property would probably have become part of Peter Brent’s estate, or would have been available to his creditors, if the property had not been transferred. She does not dispute that it can reasonably be inferred from all the circumstances that, at the time of the transfers, Peter Brent was insolvent.

116    The effect of s 121(2) of the Act is that Peter Brent’s main purpose in making the transfers of property is deemed, or conclusively presumed to be, to prevent the property from becoming divisible among his creditors: see Re Jury; Ashton v Prentice (1999) 92 FCR 68 at [58], [59]; Marchesi v Apostolou [2007] FCA 986 at [95]; Lo Pilato (Trustee) v Kamy Saeedi Lawyers Pty Ltd (2017) 249 FCR 69 at [158], [160]; Lane v Oakley #1 [2019] FCA 107 at [151].

117    However, Helen Brent defends the claim on the basis that s 121(1) of the Act does not apply because each of the conditions set out in s 121(4) is satisfied.

118    The first condition, under s 121(4)(a) of the Act, requires that the consideration that the transferee gave to the transferor be at least as valuable as the market value of the property. I have already held that Helen Brent gave no consideration for the three transfers of property. Therefore, s 121(4)(a) of the Act is not satisfied.

119    The second condition, under s 121(4)(b) of the Act, is that the transferee did not know, and could not reasonably have inferred, that the transferor’s main purpose in making the transfer was the purpose described in s 121(1)(b). I am prepared to accept that this requirement is satisfied. I consider that Helen Brent’s concern was simply to obtain the property under the settlement she had agreed with John Brent, and she was content to do as she was asked without making enquiries as to the reasons for the underlying transactions. She had separated from John Brent in 2001, and it is unlikely that she was aware of Peter Brent’s financial difficulties in 2013. There is no evidence that she was aware of the proceedings taken against Peter by CARS. In her evidence in the public examination, she said had assumed that Peter Brent had granted the mortgage over his interest in Peter’s Farm out of “brotherly love”—an assumption that is plausible. I consider that the requirements of s 121(4)(b) are met.

120    The third condition, under s 121(4)(c) of the Act, is that the transferee could not reasonably have inferred that, at the time of the transfer, the transferor was, or was about to become, insolvent. I accept that Helen Brent did not in fact know that Peter was, or was about to become, insolvent at the time of the transfers.

121    However, the Trustee submits that Helen Brent is to be fixed with the knowledge of her solicitor. The Trustee relies on Sargent v ASL Developments Pty Ltd (1974) 131 CLR 634 at 649 and 658 and Bell Group Ltd (in liq) v Westpac (2008) 39 WAR 1 at [6186]–[6189] for the proposition that knowledge of facts obtained by a solicitor may be imputed to the client.

122    Mr Doyle was acting for Helen Brent in the property settlement and was also acting for Mr Jermyn or Vegpro in the sale transactions. The documents pointed to by the Trustee demonstrate that John Brent was in some financial difficulty, but not that Peter Brent was, or was about to become, insolvent. In his evidence in the public examination, Mr Doyle said, “I became aware that there were issues with creditors wanting their money, and that’s - that’s it”. Even if Helen Brent is to be fixed with the knowledge of her solicitor, I do not accept that Mr Doyle knew of facts from which he (and therefore Helen Brent), could reasonably have inferred that Peter Brent was, or was about to become, insolvent at the time of the transfers.

123    However, as I have found that Helen Brent did not give Peter Brent consideration that was at least as valuable as the market value of the property transferred, s 121(4)(a) of the Act is not satisfied. Therefore, under s 121(1) of the Act, the transfers are void against the Trustee.

Whether the payments were made from the property of Peter Brent or John Brent

124    Helen Brent argues that as she had at least an equitable interest in John Brent’s share of the Home Farm, she provided consideration for at least half the money transferred to her. She argues that if judgment is entered against her, it should be for no more than $300,577.50, because that represents half the money transferred in circumstances where John Brent held a half interest in the Home Farm.

125    John Brent held a half interest in the Home Farm as a tenant in common with Peter Brent. He is not bankrupt. He was entitled to half the net proceeds of its sale and was free to distribute his share as he wished. It is necessary to examine whether the money transferred to Helen Brent was paid from John’s share of the proceeds, or Peter’s share, or both.

126    The contract price for the sale of the Home Farm was $3,500,000. From the net proceeds of the sale, an amount of $2,112.661.23 was paid to Matthew and Sally Brent as trustees of the Brent Family Trust to discharge a mortgage to Banksia Mortgage Service Ltd in respect of farming properties near Childers in Queensland, and amounts of $200,000 and $401,154.99 were paid to Helen Brent.

127    The Trustee’s case has been conducted on the basis that Peter Brent received no benefit from the sale of the Home Farm. The whole of the net proceeds of the sale went to pay mortgages over properties of the Brent Family Trust and to pay Helen Brent under the terms of the Family Court consent orders made in her favour. I find that Peter applied the whole of his share of the net proceeds of the sale of the Home Farm for John’s benefit, and that Peter received part of the proceeds of the sale.

128    There is no evidence that when the distributions were made, any distinction was drawn between distributions coming out of Peter Brent’s share and distributions coming out of John Brent’s share. The Trustee argues that the $2,112.661.23 to the Brent Family Trust should be treated as having been paid principally from John’s share of the net proceeds and that the entirety of the payments of the $601,154.99 to Helen should be treated as having come from Peter’s share. However, there is no evidentiary basis for the treatment of the distributions in that way. In Australian Securities and Investments Commission v Piggott Wood and Baker (A Firm) (No 6) [2019] FCA 672, Kerr J at [38]–[39] considered that pro-rata apportionment (the pari passu principle) was prima facie applicable where funds in the hands of a liquidator were not properly capable of being attributed to any specific loan. Applying a similar approach, it seems sensible to regard Peter’s share of the net proceeds as having been mixed in with John’s, and to treat proportionate amounts of their shares as going to the Brent Family Trust and Helen Brent. Since Peter and John Brent were tenants in common in equal shares, they were each entitled to half the net proceeds of the sale of the Home Farm. On that basis, I find that amounts of $100,000 and $200,577.50, a total of $300,577.50, were transferred to Helen Brent from Peter Brent’s share of the net proceeds of the sale of the Home Farm.

Conclusion

129    The transfers of $100,000 and $200,577.50 from Peter Brent’s share of the proceeds of the sale of the Home Farm to Helen Brent are void against the Trustee pursuant to s 120 and 121 of the Act. The grant of the registered mortgage by Peter Brent to Helen Brent over his interest in Peter’s Farm is also void against the Trustee pursuant to s 120 and 121 of the Act.

130    The parties have not made submissions upon the form of any declaratory relief and orders for the release of the registered mortgage. I observe that in Lane v Oakley (No 2) [2019] FCA 488, I considered the appropriate form of orders to be made where the grant of a registered mortgage is void.

131    I will hear the parties as to the appropriate form of orders and costs.

Associate:    

Dated:    24 July 2019