Consideration
40 In Chamberlain v Tilbrook [2017] FCA 1586 at [22]-[28] Flick J conveniently set out a summary of the principles guiding the operation of s 139ZQ of the Act:
22 First, the legislative objective of s 139ZQ is to provide an administrative mechanism for the recovery of dispositions of property that are void as against the Official Trustee or the registered trustee. The section provides "an administrative shortcut whereby the necessity for protracted proceedings under ss 120, 121 and 122 of the Act could be circumvented": Re Rose; Godfrey v Whitton [2006] FCA 823 at [24] per Graham J. "The scheme of Subdiv J encourages the saving of costs by, on the one hand, compliance with the notice by the transfer to the trustee of property in respect of the value of which the notice requires payment (s 139ZQ(7)) and on the other, by the revocation or amendment of notices to accommodate a settlement (s 139ZQ(4))": Vale v Sutherland [2009] HCA 26 at [22], (2009) 237 CLR 638 at 647 per Gummow, Hayne, Heydon, Crennan and Kiefel JJ.
23 Second, the reference in s 139ZQ(1) to "a transaction that is void against the trustee" is but one of a number of provisions in the Bankruptcy Act directed at identifying transactions that are void and at identifying the circumstances in which property transferred by a bankrupt as a result of such transactions is available to the trustee for distribution to creditors. Sections 120 and 121, for example, are directed respectively at "[u]ndervalued transactions" and transfers of property that defeat creditors. Section 139ZQ is not drafted in terms of the Official Trustee being of the "opinion" or being "satisfied" that a person has received money or property as a result of a transaction that is void as against the trustee; the section is drafted in terms of there in fact being a transaction which is void. The power conferred is, accordingly, "dependent upon the existence of a jurisdictional fact": Re McLernon; Ex parte SWF Hoists and Industrial Equipment Pty Ltd v Prebble (1995) 58 FCR 391 at 401 per Carr J.
24 Third, s 139ZQ(1) also refers to the giving of a notice to pay "an amount equal to … the money or the value of the property received". "The term 'value' in this provision has the meaning given by the definition of 'value' in s 139K, namely 'the market value of the property when the notice is given'": Vale v Sutherland [2009] HCA 26 at [8], (2009) 237 CLR 638 at 643 per Gummow, Hayne, Heydon, Crennan and Kiefel JJ. See also: Combis (Trustee) v Spottiswood (No 2) [2013] FCA 240 at [73], (2013) 11 ABC(NS) 407 at 425 per Logan J.
25 Fourth, the amount stated in the notice, however, is not conclusive as to the value of the property that has been transferred: Re Aley; Ex parte Sweeney v Aley (1996) 63 FCR 294 at 300 to 301. Justice Drummond there observed:
I am reluctant to read s 139ZR of the Act as making a notice under s 139ZQ of the Act effective to charge property owned by the recipient of the notice with liability to pay the figure asserted in the notice as the value of the transferred property in contrast to the true value of the property at the date of receipt. Section 139ZR(1) of the Act charges the property "with the liability of the person to make payments to the trustee as required by the notice". Under s 139ZQ(1) of the Act, all that the notice can require by way of payment to the trustee is payment of "an amount equal to ... the value of the property received". It is that, not for example the amount stated in the notice, that is to be paid. Section 139ZQ(2) of the Act does not require any information as to how the figure demanded by the notice was arrived at to be set out in the notice. The figure stated in the notice as the value of the property received from the bankrupt is not given by the Act any evidentiary force. A notice issued in reliance on s 139ZQ is, in my opinion, only effective to give rise to a debt enforceable under s 139ZQ(8) of the Act and a charge within s 139ZR of the Act if the amount demanded by the notice is, in fact, equal to the value of the property at the relevant time. Such an interpretation should not create any significant difficulty since the concept of the value of property at a particular time will generally involve an imprecise rather than an exact assessment of worth.
Nor is a statement in the notice as to the facts upon which the notice was given conclusive: Vale v Sutherland [2009] HCA 26, (2009) 237 CLR 638 at 647. Gummow, Hayne, Heydon, Crennan and Kiefel JJ there observed:
[24] In an action by the Trustee to recover that amount as a debt, the appellant would be at liberty to establish such matters of fact, from which the liability was alleged to arise, as were disputed. The same would be so in any action to restrain the exercise of the power of sale conferred by s 139ZR(6).
(Footnote omitted.)
In an action to recover the amount claimed in the notice as a debt, the person receiving the notice would thus be able to dispute that amount: Vale v Sutherland [2009] HCA 26 at [24], (2009) 237 CLR 638 at 647 per Gummow, Hayne, Heydon, Crennan and Kiefel JJ. Similarly, in Halse v Norton (1997) 76 FCR 389 at 399, Lee and RD Nicholson JJ observed:
If a notice served on a person under s 139ZQ remains uncontested, service of the notice provides the trustee with a right that may be enforced against that person, namely, the right to recover as a debt the sum claimed in the notice. If the claim for the payment of money made in the notice is disputed, s 139ZS provides a means by which the controversy as to the application of Div 3 of the Act to the transaction is to be resolved and determined by the Court. In most cases it will be necessary for the trustee to be joined as a party to a proceeding commenced under s 139ZS, but if the applicant, or the Official Receiver, fails to have the trustee so joined the Official Receiver will stand in the trustee's place and be under the same onus of proof as the trustee.
26 Fifth, inaccuracies in the statement of facts in a notice may not be sufficient, without more, to result in an order under s 139ZS setting aside the notice: Official Trustee in Bankruptcy v Lopatinsky [2003] FCAFC 109 at [151], (2003) 129 FCR 234 at 256 per Whitlam and Jacobson JJ.
27 Sixth, in circumstances where the amount claimed as a debt is put in issue by the recipient of a s 139ZQ notice, the trustee bears the onus of establishing the facts alleged in the notice: Halse v Norton (1997) 76 FCR 389 at 392. In the context of resolving a question as to onus of proof and s 139ZS, Black CJ there observed:
a trustee has always carried the onus of proving the facts that make a transaction void and in instances in which the onus of proof is to lie elsewhere the Parliament has clearly so provided.
A little later, the Chief Justice further addressed as follows the question of onus in respect to proof of the "jurisdictional fact" upon which a notice proceeds, namely the basis upon which it is claimed that a transaction is "void" (at 392):
Clearly, too, s 139ZS is not the exclusive means of challenging a notice under s 139ZQ … and there may well be cases in which there is good reason for the trustee to bring what would be in effect a cross-application for a declaration that a transaction is void … It would be strange if the position of the trustee varied according to the procedure adopted in the particular case.
In these circumstances, but especially because of the nature of the "jurisdictional fact" upon which the power to issue a notice is dependent, I consider that the primary judge was correct in concluding that subdiv J has not changed the position with regard to the burden of proof other than requiring an applicant to put before the Court sufficient evidence to call the validity of the notice into question. Such a situation is not novel in the law; it is not unlike the situation where reliance is placed upon the presumption of regularity but sufficient evidence is put before the Court to challenge the application of the presumption in the particular case, or class of case …
Thus, for example, in Official Trustee in Bankruptcy v Lopatinsky [2003] FCAFC 109 at [152], (2003) 129 FCR 234 at 256, Whitlam and Jacobson JJ there observed with reference to the facts of that case that the Official Receiver "bears the onus of satisfying the Court that s 120 does apply".
28 Finally, non-compliance with a notice under s 139ZQ constitutes a criminal offence: s 139ZT. See: Official Trustee in Bankruptcy v Lopatinsky [2003] FCAFC 109 at [150], (2003) 129 FCR 234 at 256 per Whitlam and Jacobson JJ.
41 As the Trustee submits, the elements of the cause of action to recover a debt under s 139ZQ of the Act are the issue of the notice under s 139ZQ of the Act, service of the notice and the absence of an application under s 139ZS of the Act within 60 days of service challenging the alleged facts and circumstances set out in the notice. To that end, the Trustee has established that: the 139ZQ Notice was served on Ms Ripoll; there has been non-compliance with the 139ZQ Notice; and Ms Ripoll has not served an application pursuant to s 139ZS of the Act.
42 In Chamberlain at [35] Flick J found, in the circumstances of the proceeding before him, that the absence of either an application by the respondent pursuant to s 139ZS of the Act and/or an application to dispute any of the facts in the notice relied on to give rise to the debt was sufficient "to establish the debt on the facts and circumstances of the [case]". His Honour observed at [35]:
"If a notice served on a person under s 139ZQ remains uncontested, service of the notice provides the trustee with a right that may be enforced against the person, namely, the right to recover as a debt the sum claimed in the notice": Halse v Norton (1997) 76 FCR 389 at 399 per Lee and RD Nicholson JJ. To conclude otherwise, and to require the Trustee to also prove each of the facts upon which the notice was founded, would defeat the object and purpose of s 139ZQ: Re Rose; Godfrey v Whitton [2006] FCA 823 at [24] per Graham J; Vale v Sutherland [2009] HCA 26 at [22], (2009) 237 CLR 638 at 647 per Gummow, Hayne, Heydon, Crennan and Kiefel JJ.
43 However, here Ms Ripoll disputes the amount demanded in the 139ZQ Notice. That is an issue properly raised and to be resolved on the Trustee's application to recover the amount claimed in the 139ZQ Notice as a debt: see Chamberlain at [25].
44 Ms Ripoll says that the consideration she paid pursuant to the BFA is not limited to the cash consideration of $57,500 but includes the amount she would have recovered in an action for the recovery of damages at common law against Mr Ripoll for the treatment referred to at [7] above.
45 The starting point to consider whether that is so is the terms of the BFA.
46 Ms Ripoll relies in particular on cl C of the "Introduction" which provides that "Mary and Michael wish to enter into this Agreement to preclude claims of any nature relating to financial matters, both in relation to property and financial resources as well as spousal maintenance that either has or may have against the other pursuant to the Act and otherwise at law and in equity". That clause, along with the balance of the clauses appearing under the heading "Introduction", forms part of the recitals or background to the BFA.
47 The operative part of the BFA follows. It is preceded by the opening phrase: "[i]t is agreed". Some of the more salient terms of the BFA appear at [9] above. Relevantly, part 2 of the BFA sets out the respective assets, liabilities and financial resources of Mr and Ms Ripoll. It includes cl 2.12 which provides (emphasis added):
Mary and Michael agree that, in consideration of the terms and conditions of this agreement, including the distribution of personal and real property as set out in Annexures A, B and C neither Mary nor Michael will make any claim concerning the difference in value of that property.
48 Clause 2.12 refers expressly to the consideration given by each of Mr and Ms Ripoll for their entry into the BFA, namely the agreed distribution of the property set out in the schedules annexed to it and their respective agreement not to make any claim against each other in relation to the agreed distribution. Neither cl 2.12, nor any other clause, provides that as part of the consideration Ms Ripoll agrees to forbear to make any claim against Mr Ripoll for claims in tort or for personal injury.
49 Even if cl C of the BFA could be construed as part of its operative provisions, Ms Ripoll would not be assisted. That clause, as well as cl A (see [8(1)] above), also refers to "financial matters", namely matters relating to property, financial resources and spousal maintenance. It is intended that the BFA cover all "financial matters" between Mr and Ms Ripoll and to preclude claims in relation to those matters.
50 The BFA does not permit the construction contended for by Ms Ripoll. It does not permit me to conclude that the consideration she gave for entering into it or the transfer of the "property" covered by it included a forbearance from making any claim for damages against Mr Ripoll for personal injury arising out of the alleged domestic assaults or otherwise.
51 Even if that was not so there are other obstacles to Ms Ripoll's response to the Trustee's claim.
52 The first concerns the meaning of consideration for the purposes of s 120 of the Act.
53 In Official Trustee in Bankruptcy v Lopatinsky (2003) 129 FCR 234 a Full Court of this Court (Lee, Whitlam and Jacobson JJ) considered, among other things, whether there had been a transfer of property from Mr Lopatinsky to Mrs Lopatinsky in October 1999 which attracted the operation of s 120 of the Act.
54 Relevantly, a notice under s 139ZQ of the Act was served on Mrs Lopatinsky claiming payment of $81,387 or, in the alternative, transfer to the Official Trustee in Bankruptcy of a 30.71% interest in a property situated at Padstow Heights, New South Wales which she owned. The amount claimed by the Official Trustee in the notice was the amount which the Official Trustee contended Mr Lopatinsky was entitled to receive as part of his share of the proceeds of sale of the former matrimonial home at Peakhurst, New South Wales. There was an informal agreement between Mr and Mrs Lopatinsky pursuant to which Mrs Lopatinsky received $81,387 more than she would have received from the net proceeds if the funds were divided equally between the joint owners.
55 There were two issue before the primary judge: first, whether Mrs Lopatinsky held an equitable interest in the former matrimonial home equal to at least an 81% share such that there was no transfer to her on which s 120 of the Family Law Act could operate; and secondly, assuming there had been a transfer, whether Mrs Lopatinsky gave no consideration for the transfer to her of the additional sum of $81,837 or she gave consideration that was less than the market value of the sum transferred to her.
56 The primary judge considered the second issue first and found that Mrs Lopatinsky gave consideration for the transfer in the form of a forbearance to sue under s 79 of the Family Law Act for an adjustment of property rights to reflect her contribution to the acquisition of the property and to the welfare of the marriage and that the value of the consideration was not less than the market value of the additional amount that Mrs Lopatinsky received from the sale proceeds in October 1999. Thus the primary judge found that the claim under s 120 of the Act failed and set aside the s 139ZQ notice: Lopatinsky at [11]-[15].
57 The Official Trustee appealed from the findings of the primary judge contending: first, that it was not open to the primary judge to find on the evidence that Mrs Lopatinsky had agreed to compromise her claims under the Family Law Act; and secondly, even if there was an implied forbearance to sue by Mrs Lopatinsky, it was worthless because there were no consent orders entered under s 79 of the Family Law Act and the agreement between Mr and Mrs Lopatinsky was not approved under s 87 of the Family Law Act: Lopatinsky at [18].
58 The Full Court considered first the question that arose under s 120 of the Act. In doing so Whitlam and Jacobson JJ observed at [92] that s 120 requires the Court to determine the value of the consideration given. Their Honours said at [93]-[97]:
93 In carrying out this task, the Court is to treat as having "no value as consideration" the matters referred to in s 120(5)(a) to (d). Some of them, such as a promise to marry, would have been recognised as "valuable consideration" under the previous enactment: see Official Trustee in Bankruptcy v Mitchell (1992) 38 FCR 364.
94 There is nothing in s 120(5) to suggest that the Parliament intended that the term "consideration" in s 120(1)(b) is to be read in anything other than its legal sense. Plainer words would have been required: see Official Trustee in Bankruptcy v Mitchell at 368. Moreover, it would be inconsistent with the observations of Wilcox J and Branson J in Official Trustee in Bankruptcy v Mateo to proceed upon the basis that "consideration" could be something less than the ordinary legal and commercial understanding of that term. Indeed, it would be inconsistent with the statutory purpose of the section which is designed to protect creditors to hold that the Parliament intended to enable a transferee to provide something less than the well-established legal definition of "consideration".
95 Section 120(5) makes that very assumption. The intention of the legislation in s 120(5) must have been to ensure that matters which might otherwise be thought to have constituted good consideration at common law would have no value for the purposes of determining whether there was any disadvantage to creditors in the impugned transaction.
96 In our view, it is clear from the above analysis that the Parliament in enacting the 1996 amendments proceeded on the basis reflected in the history of this section that it was to be understood as commercial people would construe it. Thus, in applying s 120(1)(b) the first step is to identify the consideration which was actually given. The second step if consideration was given, is to determine whether its value was less than the market value of the property transferred: see Sutherland v Brien (1999) 149 FLR 321 at [20] per Austin J.
97 The primary judge at [39] proceeded upon the correct basis that Mrs Lopatinsky's contribution to the marriage could not be regarded as consideration for the transfer because it would have constituted past consideration: see McVeigh v Zanella [2000] FCA 1890 per Weinberg J.
59 Their Honours found that the primary judge's view of the value of the consideration given by Mrs Lopatinsky depended on factors which could not provide a basis for assessing the value of the consideration given by her, a finding which itself was an answer to the appeal. However, their Honours observed that there were two further answers.
60 The first was that actual forbearance to sue does not constitute consideration unless it is evidence of an implied promise to forbear or it is given at the express or implied request of the other party: Lopatinsky at [103].
61 The second was the principle that a wife cannot, by entering into an agreement with her husband, preclude herself from applying to the Court for an order for maintenance or property adjustment: Lopatinsky at [105]. Their Honours said at [106]-[109]:
106 After a full review of the earlier authorities the Court concluded as follows:
In our view the cases referred to above clearly indicate that the court's jurisdiction to grant relief under s 74 or s 79 can only be ousted by court order or by an agreement approved pursuant to the provisions of s 87 … [I]t is the dominant and unwavering thread of all of the cases that the parties cannot by their conduct or agreement oust the jurisdiction of the court.
107 Moreover, the Court went on to observe at 34-35, that the doctrine of equitable estoppel does not prevent it from exercising jurisdiction to make an order under s 74 or s 79, although the facts relied upon to establish circumstances which would otherwise give rise to the operation of an estoppel may well be relevant to the question of whether the Court should exercise its discretion to make an order under one or other of those provisions.
108 In our view, it follows that even if the informal agreement between Mr and Mrs Lopatinsky was supported by consideration in the form of an implied promise not to sue, it could not amount to a legally binding agreement for a compromise of Mrs Lopatinsky's entitlement to make a claim for a further property adjustment. It remained open to her, within the period limited by the Family Law Act, to apply to the Court for an adjustment in a larger sum than the $81,387 she received on the sale of the Peakhurst property.
109 It follows in our view that any forbearance given by Mrs Lopatinsky was of no commercial value because it did not prevent her from approaching the Family Court for an order under s 79 of the Family Law Act.
62 The same can be said here.
63 First, consideration is to be understood in its legal sense. The task for the Court under s 120(1) of the Act is to identify the consideration which was in fact given; and if consideration was given, to determine whether its value was less than the market value of the property that was transferred.
64 Secondly, forbearance to sue does not constitute consideration unless it is evidence of an implied promise to forbear, or it is given at the express or implied request of the other party. The BFA does not in its terms evidence an implied promise to forbear in relation to the choses in action identified by Ms Ripoll, namely her claims for damages for personal injury arising out of the alleged assaults. Nor is there any evidence that any forbearance was given at the express or implied request of Mr Ripoll.
65 Thirdly and most compellingly, I am satisfied that the conclusion in Lopatinsky that the forbearance in the informal agreement in that case was of no commercial value because it did not prevent Mrs Lopatinsky from approaching the Federal Circuit and Family Court of Australia for an order under s 79 of the Family Law Act applies equally to the BFA. In Lopatinsky the Full Court referred to and relied on authority of, as it was then, the Full Court of the Family Court of Australia that a wife cannot by entering into an agreement with her husband preclude herself from applying to the court for an order for maintenance or property adjustment: see In the Marriage of N C and P Woodcock (1997) 137 FLR 14. There is no reason why that principle would not apply to the BFA. While such an agreement is, subject to compliance with s 90G of the Family Law Act, binding as between the parties to it, it is not approved by the Family Court and it can be set aside. The same conclusion was reached in Sutherland v Byrne-Smith [2011] FMCA 632 at [27].
66 The second obstacle faced by Ms Ripoll concerns the quantification of the consideration constituted by the forbearance to sue. Ms Ripoll relies on the decision in Ruzica Varmedja v Svetozar Ved Varmedja [2007] NSWDC 385 and submits that the Court can and should form a view about the range of damages that might be recoverable if she were able to and in fact did pursue her claims for damages against Mr Ripoll. In other words, it should form a view about the value of the claims she has foregone based on determinations in other proceedings.
67 Varmedja was relied on for that purpose. It concerned a claim by the plaintiff for damages for a series of sexual assaults and batteries which she said occurred while she lived with the defendant, her husband at the time. It is not necessary to set out the detail of the assaults that the plaintiff alleged and the court found to have occurred in that case. Ms Ripoll relies, in particular, on Varmedja from [110] where the court commenced its consideration of how it should assess damages. The parties in Varmedja urged the court to adopt the approach in Kennon, which it did. That approach permits the assessment of a lump sum damages value on a series of assaults and batteries, once established. In doing so the court awarded the sums of $150,000 for general damages, $25,000 for aggravated damages and $50,000 for exemplary damages: Varmedja at [120], [126] and [128].
68 Ms Ripoll accepted that the conduct found in Varmedja was more serious than the conduct she alleged but said that, nonetheless, the Court would not be assisted by an expert opinion on likely damages but is best placed to form a view itself about the range of damages that would be assessed in a case like hers. I disagree. While Ms Ripoll has given somewhat detailed evidence about the alleged assaults there is no evidence before me that would permit me to assess her likely recovery should she bring a successful action for damages against Mr Ripoll. The decision in Varmedja turned on its own facts, is only one such decision and does not assist me in forming an opinion about the value of such claims, assuming I was satisfied that they were foregone by Ms Ripoll by her entry into, and formed part of her consideration for, the BFA.