Bellach v Chamberlain

Judgment 1The plaintiff, Mr Tait Power Bellach, is the registered proprietor of a small grazing property known as "Wyebeleena" near Canowindra. Mr Chamberlain, the defendant, is the liquidator of a company, Bulk Logistics Services Pty Ltd (in liquidation) ( "Bulk" ). Mr Chamberlain, and eventually Bulk, entered a caveat against the title to Wyebeleena claiming that the property of an interest in it is held by Mr Bellach on resulting trust for Bulk. 2By summons Mr Bellach seeks a declaration that Mr Chamberlain has no caveatable interest in Wyebeleena. By cross-summons in which Mr Chamberlain is the first cross-claimant and Bulk the second cross-claimant, the cross-claimants seek declarations that Wyebeleena, or part of it, is held on resulting trust for Bulk. There is an alternative claim for a charge over Wyebeleena to secure $188,666 plus interest and a further and alternative claim that payments by Mr Bellach to Bulk in the amount of $209,466, are voidable transactions pursuant to s 588FE of the Corporations Act 2001 (Cth)(the "Act" ). 3While there is little point in complaining at this stage, it was quite inappropriate for this action to proceed without pleadings. Facts 4Mr Bellach is the registered proprietor of Wyebeleena. The property was purchased under a contract for sale dated 10 September 2008 for $375,000. A deposit of $37,500 was paid on exchange with money drawn from the bank account with the ANZ Bank of Bulk. There was an extended period for settlement to 6 October 2009 on the basis that the property would be leased from the vendor to Bellach for the sum of $20,000. That money came from the account of Bulk. 5On settlement, $185,000 of the balance purchase moneys came from a mortgage loan by Mr P R Predebon secured by a first mortgage over Wyebeleena. The full amount of that loan was not put towards the purchase; there were deductions from it for an amount for pre-paid interest, costs and a brokerage fee. In any event the mortgagor is Mr Bellach and it was accepted that he, by means of the borrowed moneys, paid $185,000 towards the purchase price. 6The balance of the purchase money and costs were provided as follows: $3,070.68 was paid to Garden and Montgomerie, solicitors, for costs on the purchase by cheque drawn on the bank account of Bulk; the sum of $151,166.61 was withdrawn from Bulk's account to purchase a bank cheque in favour of the Commonwealth Bank of Australia, the outgoing mortgagee. When settlement took place it appears that the balance of about $1,334 was being paid by Mr Bellach. There is no evidence to the contrary. 7On 12 March 2010, Bulk went into administration and Gavin Moss and Christopher Darin were appointed as administrators. On 23 April 2010, Mr Christopher Chamberlain and Mr Steven John Priest were appointed joint and several liquidators pursuant to a resolution of creditors. 8Mr Chamberlain lodged a caveat No. AF765713 against the title to Wyebeleena on 15 September 2010. He claimed that Wyebeleena was held on a resulting trust for him. It was not. Mr Chamberlain had no caveatable interest. While the first caveat remained on the title a second caveat No. AF803312 dated 7 October 2010 was lodged without authority. This time the caveator was Bulk. The caveat claimed that Mr Bellach held the land on trust for the caveator as the caveator paid part of the purchase price for the land. 9Orders were made by consent on 17 December 2010 for the two caveats to be removed and leave given to lodge a further caveat claiming the same interest in Wybeleena. That is not in evidence but caveat No. AG57838 lodged by Bulk is entered on the Register. If the plaintiff succeeds the caveat will have to be withdrawn. Claims 10The real issues in this action arise on the cross-claim. In paragraphs 1 and 2 of it, Bulk seeks a declaration that Wyebeleena is held on trust for it and an order for transfer. There is no basis for those orders. Next a declaration is sought that the property is held by Mr Bellach on trust for Bulk and himself in such shares as the Court should decide and an order for transfer pursuant to such determination. This is the main preferred claim of the liquidator. In the alternative, there is the claim for a charge, which I will refer to but which was not strongly pressed. Finally there is sought a declaration that payments by Bulk to Mr Bellach totalling $209,466.61 are voidable transactions and if so found Bulk seeks judgment for that amount. I should add that counsel for Bulk sought an order that in the event Bulk succeeds on the voidable transaction claim, that an interest in Wybeleena based on the amount determined should be transferred to Bulk. 11After the plaintiff went into possession of Wybeleena, livestock of Bulk were agisted on the property. It was the plaintiff's case, at least until he gave evidence, that the payment of $151,166.61 from the bank account of Bulk and probably the payment for the deposit were both made to discharge or repay monies owed to him by Bulk for agistment on Wybeleena and for some agistment fees paid by Mr Bellach on behalf of Bulk to other property owners. Mr Bellach said he decided to formalise this arrangement in August 2008 by a written agreement. The document was never signed. Although some doubt was cast on its authenticity, nothing further need be said about that. 12The submission of Mr A G Martin, counsel for the plaintiff, in his written outline preliminary statement, was that there was a running account between the plaintiff and Bulk. The company loan account for Mr Bellach said to record transactions from 1 January 2007 to 10 March 2011 do show the payment to Garden and Montgomerie for the costs but not the payment of the $151,166 nor does it show any moneys due by Bulk to Mr Bellach for agistment. In cross-examination, Mr Bellach said that he was not a creditor of Bulk on 1 August 2008 nor on 2 October 2009. That may have been because he went on to say that all services provided and charged to Bulk had been paid or satisfied. However later Mr Bellach said the money was paid as a loan. He was asked about this and on page 26 of the transcript, the following appears: "NEWTON Q. Sir I had understood that your earlier evidence was that the withdrawals and payments from the company's account with the ANZ Bank on the 1 August 2008 and the 2 October 2009 were loans to you and I understood that your more recent evidence was that the purpose of the payments was to discharge an existing debt you alleged was owed by the company to you. My question is what is the position, were the payments on the 1 August 2008 and the 2 October 2009 loans to you or were they payments made for the purpose of discharging existing debts you allege were owing by the company to you? A. They were loans made. Q. They were loans by the company to you? A. Yes. Q. So is your statement in the second sentence of paragraph 17 of your affidavit made the 28 September 2010 that "the money which Bulk paid towards the purchase of the property was owing to me by Bulk and which I directed Bulk to pay" false? A. In that context, yes." 13It was clear from the way that Mr Bellach was answering questions at this stage, in trying to deal with his contradictory answers, that he realised the importance of the questions and answers and I thought he was answering them in a way which he hoped might assist his case. But in the long run, he must be found to have accepted the money paid was not owing to him, yet having claimed it was a loan, even though not recorded, he was not prepared to accept the loan remained unpaid although there was no evidence to show any repayment. I find there was no loan; there was certainly no gift. The evidence of there being some contra account was contradicted. In these circumstances I find that the payment of the deposit of $37,500 and the payment of $151,166.61 from the bank account of Bulk were payments made by Bulk for the purchase price paid for the property. I have some doubts about the costs. That is because while they were paid from Bulk's bank account, this is shown in the loan account of the plaintiff in the books of the company. Costs payments can be treated as part of the purchase moneys: Ryan v Dries [2002] NSWCA 3 at [52]-[53]. There was no real argument about this but I do not consider the case to include costs as part of the purchase price has been made out. If there is a debit balance on the loan account the amount will be due to Bulk and the liquidators can endeavour to collect it. The costs should not be treated as a contribution by the plaintiff. That is because there were deductions from the mortgage loan for prepaid interest, broker's fees and costs which amounted to more than the purchase costs figure. No real attempt was made to work this out but a fair result is to disregard the costs payment. 14Where money is paid by a payer as part of the purchase price for a property transferred to the name of another who pays the balance of the purchase price, there is as presumption that the person to whom the property is transferred holds the property "upon resulting trust in favour of those who provided the purchase price in the shares in which they provided it": Calverley v Green (1984) 155 CLR 242 at 261 per Deane J. a purchaser means there is a presumption of a resulting trust in favour of the payer. No evidence was given to rebut the presumption. 15Of the purchase price of $375,000, I find that Bulk paid $188,666. The plaintiff therefore holds 188,666/375,000 th share in Wybeleena on trust for Bulk free of any mortgage debt except insofar as such debt is not satisfied by Mr Bellach out of his share of the property or otherwise. Insolvency 16In view of the decision of the resulting trust claim, it is not necessary to consider this. However, in case I am not correct I will state briefly the reasons which I consider would determine this claim. 17The liquidator does not argue for preference. That is because the plaintiff no longer claims to be a creditor of Bulk. The claim is that the payments of the deposit and the balance purchase moneys were each voidable transactions because Bulk was insolvent at the time each payment was made; and that each transaction was an uncommercial transaction; and for the purpose of the time at which the deposit was paid it was an insolvent transaction to which Mr Bellach, a related party to Bulk, was a party: see s 588FE(4) of the Act. 18As at 6 October 2009, Bulk had a deficiency of current assets over current liabilities of over $300,000, accepting the figures in the books for the current debtors and current creditors are correct but adjusting cash to accord with bank statements. These were liabilities for unpaid PAYG tax and unpaid superannuation payments. Mr Bellach told the liquidator that these were not paid because there were no funds. If the payment of the $151,166 was a loan it was not recorded as such in the books of the company. On that basis it is clear the books were not properly kept. The same would apply had moneys been due to the plaintiff for agistment as the accounts did not have entries to support this. There is a breach of s 286 of the Act. Accordingly, although I am reluctant to find this for a relatively small company, there is a presumption of insolvency under s 588E(4) of the Act. The presumption applies also to the time the deposit was paid on 10 September 2008. There has been no attempt to rebut this or to adduce any evidence of solvency. 19In each case the payment was uncommercial. That is because Bulk received no benefit from the payments unless perhaps in the case of the deposit it was to obtain cost-free agistment but this was not suggested. It was Mr Bellach who obtained the sole benefit having the moneys with no obligation to pay interest on them or give any security for them. Having regard to the financial position of the company as to current assets and liabilities after each payment was made, it was clearly detrimental to the company. I consider a reasonable person in the position of the company would not have entered into the transaction. 20I will now address the argument of Mr Martin as to transaction. Here, as in every other aspect of the case, Mr Martin carefully argued everything that could be put forward for his client. "Transaction" is defined in s 9 of the Act in a non-exclusive way. It does include "a payment by the company" and "a loan to the company". It does not specifically include a loan by the company. Payment by way of loan is still a payment in ordinary language. I consider the payments, if made as loans, were transactions. Thus if necessary an order would have been made under s 588FF of the Act that Mr Bellach pay to Bulk $188,666. In the alternative I may have made an order requiring the same interest to be transferred as results from my finding on resulting trust. That is an order which could be made under s 588FF(1)(d)(i) of the Act. There is no need to consider this further. Orders 21As far as orders are concerned, it seems that the appropriate order is that the summons should be dismissed. Separate orders have been made on motions concerning the caveats. In the circumstances it seems no further orders as to costs on summons should be made. 22So far as the cross-summons is concerned, there should be an order for transfer of the proportionate interest in Wybeleena to Bulk, the second cross-claimant. The registered mortgagee has an indefeasible interest. I have indicated in paragraph 15 the terms of a proposed order. Counsel can address on this. The cross-defendant should pay the costs of the cross-claimants on the cross-claim.