SUPREME COURT OF NORFOLK ISLAND

Smith v Edward [2006] NFSC 11

PROPERTY - Failure to satisfy judgment debt - whether the Fraudulent Conveyances Act 1571 (13 Eliz 1.c.5) applies to Norfolk Island - whether conveyance of land be set aside - valuable consideration - intention of defeating creditors.

Fraudulent Conveyances Act 1571 (13 Eliz 1.c.5)

Judicature Act 1960 (NI) s 3

Norfolk Island Act 1979 (Cth) s 16

Norfolk Island Act 1957 (Cth) ss 12, 13

Norfolk Island Act 1913 (Cth) s 4

Barlin v Bishop (1860)29 BEAV 417; 54 ER 689 Considered

Commonwealth Bank of Australia v Buffett (1993) 114 ALR 245 Cited

Noakes v J Harvey Holmes and Son (1979) 37 FLR 5 Cited

PATRICK THOMAS SMITH v JOHN GEORGE EDWARD, ADMINISTRATION OF NORFOLK ISLAND AND COLIN FRANCIS EDWARD

SC 7 OF 2004

LORRAINE RUTH SMITH v JOHN GEORGE EDWARD, ADMINISTRATION OF NORFOLK ISLAND AND COLIN FRANCIS EDWARD

SC 8 OF 2004

ANDREA LEANNE SMITH v JOHN GEORGE EDWARD, ADMINISTRATION OF NORFOLK ISLAND AND COLIN FRANCIS EDWARD

SC 9 OF 2004

KIEFEL J

8 DECEMBER 2006

BRISBANE

THE COURT ORDERS THAT:

1.                  Colin Francis Edward be joined as third defendant to each of the three proceedings SC 7, 8 and 9 of 2004.

2.                  The conveyance of Portion 52K on Norfolk Island and the life interest created on 19 September 2003 recorded in Absolute Sale or Conveyance 1408 be set aside.

3.                  The first and third defendants do all things necessary to make the property in Portion 52K available for the satisfaction of the judgments in favour of the plaintiff in each of the three actions SC 7, 8 and 9 of 2004.

4.                  The first and third defendants pay each of the plaintiff’s costs of and incidental to the proceedings, including any reserved costs.

THE COURT ORDERS THAT:

1                    Colin Francis Edward be joined as third defendant to each of the three proceedings SC 7, 8 and 9 of 2004.

2.         The conveyance of Portion 52K on Norfolk Island and the life interest created on 19 September 2003 recorded in Absolute Sale or Conveyance 1408 be set aside.

3.                  The first and third defendants do all things necessary to make the property in Portion 52K available for the satisfaction of the judgments in favour of the plaintiff in each of the three actions SC 7, 8 and 9 of 2004.

4.                  The first and third defendants pay each of the plaintiff’s costs of and incidental to the proceedings, including any reserved costs.

THE COURT ORDERS THAT:

1.                  Colin Francis Edward be joined as third defendant to each of the three proceedings SC 7, 8 and 9 of 2004.

2.         The conveyance of Portion 52K on Norfolk Island and the life interest created on 19 September 2003 recorded in Absolute Sale or Conveyance 1408 be set aside.

3.                  The first and third defendants do all things necessary to make the property in Portion 52K available for the satisfaction of the judgments in favour of the plaintiff in each of the three actions SC 7, 8 and 9 of 2004.

4.                  The first and third defendants pay each of the plaintiff’s costs of and incidental to the proceedings, including any reserved costs.

REASONS FOR JUDGMENT

1                     The plaintiffs in each of the three actions SC 7, 8 and 9 of 2004, are residents of Norfolk Island.  They were pedestrians on Taylors Road on the island on 29 June 2003 when they were struck by a motor vehicle driven by the first defendant and injured.  On 3 September 2003 the plaintiffs’ solicitors Norfolk Island agents wrote to the first defendant, requesting details of insurance which might be available to meet their claims.  On 19 September 2003 the first defendant transferred real property owned by him, being Portion 52K on Norfolk Island, to his nephew, the third defendant, for the sum of $1.  At the same time the third defendant granted the first defendant a life estate in the property.  Both of these transfers or conveyances were contained in Absolute Sale or Conveyance No. 1408.  The property is said to be worth in the order of $220 000.

2                     On 16 June 2006 judgment was entered in favour of the plaintiffs against the first defendant in each of their proceedings: in action SC 7 of 2004, in the sum of $69 764.98 together with costs; in action SC 8 of 2004, in the sum of $254 325.78 together with costs; and in action SC 9 of 2004, in the sum of $17 747.22 together with costs.  On 17 July 2006 the plaintiffs’ solicitors wrote to the first defendant’s solicitors requesting details of assets belonging to him and which were available for satisfaction of the judgment.  They advised that the transfer to the third defendant was regarded as fraudulent.  They did however also enquire as to whether the first defendant had an explanation for what was apparently a voluntary conveyance to the third defendant.  Enquiries have revealed that the first defendant has no other assets other than the vehicle involved in the accident in which the plaintiffs were injured and which is of little value.  

3                     The plaintiffs apply to have the transfer of Portion 52K to the third defendant set aside and for orders that the first and third defendants do all things necessary to make the property available for the satisfaction of the judgments in favour of the plaintiffs and any further consequential orders which may be necessary.  Each of the first and third defendants have been served with the application and supporting affidavits in these proceedings.  Neither of them have appeared. 

4                     The application is brought pursuant to the Fraudulent Conveyances Act 1571 (13 Eliz I.c.5).  The Act continues to apply to Norfolk Island.  Section 16(1) of the Norfolk Island Act 1979 (Cth) provides that all laws in force immediately before its commencement continue in force.  There are two bases for a conclusion that the statute in question, 13 Eliz I.c.5, was then in force.  The provisions of that statute were extended to Norfolk Island by a proclamation of 23 December 1913 and kept on foot by the Norfolk Island Act 1913, s 4 and the Norfolk Island Act 1957, ss 12 and 13:  see Noakes v J Harvey Holmes and Son (1979) 37 FLR 5 at p 9.  Further the Judicature Act 1960 (NI) s 3 provided that Imperial laws in force as at 25 July 1828 continued in force for the island.  The statute 13 Eliz I.c.5 continued in force as at that date:  see Commonwealth Bank of Australia v Buffett (1993) 114 ALR 245 at 256 and following.  It is not necessary to set out the provisions of the statute:  see Commonwealth Bank v Buffett at 256 – 257.  It is sufficient for present purposes that a conveyance of land which is not for valuable consideration and undertaken with the intention of defeating creditors may be set aside as void.

5                     The plaintiffs have also drawn my attention to the decision in Barling v Bishopp (1860) 29 BEAV 417; 54 ER 689 which dealt with the question whether a transfer was void under the statute because the plaintiff in proceedings, which had not been heard and determined, was not a creditor at the time of the conveyance.  The statute was held to apply because the defendant was taken to know that any legal action involves expense. 

6                     In the present case the first defendant was on notice of the plaintiffs’ proposed proceedings and it may readily be inferred that the conveyance was made as a response to that notice.  There would appear to be no other reasonable inference open and the first defendant has not availed himself of any opportunity to put forward any other explanation.  The transfer could not be said to be for valuable consideration, given the value of the land and the conveyance of the life interest.  The result intended by the first defendant is patently obvious.

7                     The conveyance of Portion 52K and the creation of the life interest with respect to it should be set aside and the first and third defendants ordered to do all things necessary to make the property available to partially satisfy each of the plaintiff’s judgments.  The first and third defendants should pay each of the plaintiff’s costs of these applications, in the case of the third defendant because he was a party to the conveyance.  If was not then fully apprised of the situation he was upon service of these applications.

Associate: 

Dated:         12 December 2006