Ashton v Prentice, in the matter of Jury

REASONS FOR JUDGMENT THE COURT: 1 On 11 December 1998, a single Judge of this Court, Hill J, gave judgment in a matter involving (relevantly) Messrs Maxwell William Prentice and Andrew Craig Ashton. 2 Mr Eric Abraham Jury had transferred some real property to Mr Ashton and had later become a bankrupt. Mr Prentice was the trustee in Mr Jury's bankruptcy. Mr Prentice claimed before Hill J that the transfer of the real property concerned by Mr Jury to Mr Ashton was void against him, Mr Prentice, by reason of subs 121(1) of the Bankruptcy Act 1966 (Cth) ("the Act"). 3 Hill J held in favour of Mr Prentice on that claim and, among other things, made orders which would have the effect that Mr Prentice would become the registered owner of the real property concerned. 4 In the course of determining Mr Prentice's claim, Hill J found that the consideration which Mr Ashton had given Mr Jury for the transfer to him of the real property concerned was less valuable than the market value of that property (see par 121(4)(a) of the Act). Specifically, Hill J found that, while the market value of the real property concerned was $595,000, Mr Ashton had given Mr Jury consideration for the transfer to him of that property of only $345,000. 5 Subsection 121(5) of the Act provides that 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. However, Mr Ashton had financed the acquisition of the real property concerned by borrowing money on mortgage and the amount owing under the mortgage at the time of Hill J's decision was at least $345,000. Hill J, having held that the transfer by Mr Jury to Mr Ashton was void against Mr Prentice, therefore ordered in effect that Mr Prentice pay the $345,000 concerned to Mr Ashton's mortgagees. 6 Mr Ashton appealed to a Full Court against Hill J's judgment and that appeal was heard and determined by the Court as presently constituted: see Ashton v Prentice; in the matter of Jury [1999] FCA 671 (unreported; 21 May 1999). 7 We allowed the appeal in a minor respect. In substance, our orders doing so had the effect of releasing Mr Prentice from the obligation to pay forthwith to Mr Ashton's mortgagees the $345,000 concerned. We recognised that Mr Prentice would become the registered owner of the real property concerned subject to the mortgage in favour of Mr Ashton's mortgagees and that Mr Prentice would find it necessary at some time to pay the $345,000 to Mr Ashton's mortgagees. We, however, left it to him to choose that time, rather than requiring him to do it immediately. 8 There are now before us two motions, one by Mr Ashton and one by Mr Prentice. We will deal first with Mr Ashton's motion. 9 Mr Ashton's motion seeks the following order: "That the Orders of Hill J made on 11 December, 1998 as varied by the Orders of the Full Court made on 21 May, 1999, be varied pursuant to Order 35 r7 of the rules of this Court to provide for payment to the Applicant [that is, Mr Ashton] by the Respondent of an amount equal to the value of consideration given for the transfer of the property at 4 Molloy Avenue, South Coogee[, New South Wales]." 10 In support of his motion for the order just set out, Mr Ashton filed an undated affidavit, in which he deposed to having paid the following sums in connection with the property: $112,931.93 in interest to his mortgagees between 1 September 1995 and 27 August 1999; $55,740 for a loan establishment fee, security costs and stamp duty; $4,225.51 in land rates between approximately November 1995 and 22 March 1999; and $2,525.30 in water rates between approximately November 1995 and 10 June 1999. Those sums totalled $175,422.74. 11 It was not clear merely from reading it what the purpose of Mr Ashton's affidavit was, nor was that purpose made much clearer by submissions subsequently made on his behalf in support of his motion. However, it appears to have been thought that, if this Court were to amend its orders by providing that Mr Prentice pay to Mr Ashton an amount equal to the value of the consideration that Mr Ashton had given for the transfer of the real property concerned, then that would have the effect of requiring Mr Prentice now to pay to Mr Ashton the sum of $175,422.74. 12 It is plain that Mr Ashton's motion is entirely misconceived. As we have already mentioned, Hill J found that Mr Ashton had given Mr Jury consideration of $345,000 for the transfer to him of the real property concerned, a finding which this Court declined to set aside on appeal. Further, there is uncontested evidence before us that, since our determination of Mr Ashton's appeal, Mr Prentice has paid $399,991.50 to Mr Ashton's mortgagees in order to obtain a discharge of their mortgage over the real property concerned. In those circumstances, Mr Prentice has already paid to (the benefit of) Mr Ashton (by releasing him from his personal covenant to his mortgagees) an amount equal to the value of the consideration which Mr Ashton gave for the transfer of the real property to him from Mr Jury. Mr Prentice's obligation under subs 121(5) of the Act has therefore already been satisfied. Even if it had not been, we fail to see how the sums referred to in Mr Ashton's affidavit could be said to fall within the notion of "consideration that the transferee gave for [the] transfer" of the real property concerned, a matter on which Mr Ashton's submissions were silent. Moneys paid by Mr Ashton by way of interest on the mortgage sum borrowed to fund the purchase from Mr Jury were not part of "the consideration that [he] gave for [the] transfer". That consideration was what flowed to or for the benefit of the transferor, Mr Jury. Local government rates and the like, incurred while Mr Ashton owned the real property concerned, were, for the same reason, not part of the consideration which he gave for its transfer to him. 13 We turn now to Mr Prentice's motion. It seeks an order that Mr Ashton pay to Mr Prentice the sum of $54,991.50. That sum is obviously the difference between $399,991.50, the sum which Mr Prentice paid to Mr Ashton's mortgagees to discharge the mortgage, and $345,000, the sum which Mr Ashton had given as consideration for the transfer of the real property concerned. 14 Mr Prentice's motion is likewise misconceived. 15 Before Hill J, Mr Prentice made no claim to be subrogated to the rights against Mr Ashton of Mr Ashton's mortgagees, to the extent to which any sum which he, Mr Prentice, paid to discharge the mortgage exceeded the sum which Mr Ashton had given as consideration for the transfer of the real property concerned. In principle, it would appear that such a claim can be made by a person in Mr Prentice's position, at least once that person has paid off the mortgage: see, for example, Rogers v Resi-Statewide Corporation Limited (No 2) (1991) 32 FCR 344 (von Doussa J). Whether Hill J would have permitted a claim of the type we have just described to be made together with Mr Prentice's claim under subs 121(1) of the Act or would have refused to do so on the basis that it was premature cannot now be said with certainty. However, the fact is that no such claim was made before Hill J. It is not for this Court now to entertain a similar claim made for the first time after the determination of Mr Ashton's appeal with respect to Mr Prentice's subs 121(1) claim, especially when Mr Prentice's claim is made to depend on an event which occurred after the determination of the appeal, namely, his paying off of the mortgage. If it is to be pursued, such claim will have to be made, it appears to us, in a court which presently has jurisdiction with respect to it, such as the District Court of New South Wales. 16 In the circumstances, we dismiss both motions. There will be no orders as to the costs of either motion. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Ryan, Heerey & Katz JJ.