Gomez v Carrafa

1. The appeal be dismissed.
2. The appellants pay the respondent's costs of the appeal, to be taxed if not agreed.
3. If any party wishes to seek a variation of paragraph 2, it may within seven days file and serve an outline of submissions (of no more than two pages). In that event, the opposing party may within a further seven days file and serve an outline of submissions in response (of no more than two pages). Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 The respondent (Mr Carrafa), who was the applicant below, is the trustee in bankruptcy of the estate of Kalaiselvi Gomez (Mrs Gomez), who is also known as Selvi Gomez. The first appellant, Irwin Gomez (Mr Gomez), is her husband. The second appellant, JNGO Pty Ltd (JNGO), is a company associated with their son, Nathan Gomez. 2 The proceeding below was an application by Mr Carrafa for declarations under ss 120 and 121 of the Bankruptcy Act 1966 (Cth) and consequential orders. Although the application was brought under both ss 120 and 121, it is sufficient for present purposes to refer to s 120. This provides, in summary, that a transfer of property by a person who later becomes bankrupt to another person is void against the trustee in bankruptcy of the transferor if: (a) the transfer took place in the period beginning five 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 than the market value of the property. The expression "transfer of property" is defined to include a payment of money. 3 On 21 August 2014, a sequestration order was made against the estate of Mrs Gomez. The date of commencement of the bankruptcy was 2 July 2014, when she failed to comply with a bankruptcy notice. The proceeding below concerned the following transfers of property: (a) Transfers of two properties from the joint names of Mr and Mrs Gomez to Mr Gomez alone on 25 June 2014. The properties are situated at 2 Hatherley Grove, Altona North (the Altona Property) and in Hinrichsen Drive, Hallam (the Hallam Property). The total consideration for both transfers was $60,000. (b) A transfer of $171,480 from Mrs Gomez to JNGO on 27 February 2014. In relation to the transfer of money, JNGO no longer has all of the amount transferred. Mr Carrafa was only able to locate an amount of $123,139.01. Hence, he sought an order for payment of that amount. 4 Mr Gomez did not appear at the hearing before the primary judge. An application by him for an adjournment of the trial was refused. Nathan Gomez appeared, with leave, on behalf of JNGO. 5 In brief summary, JNGO submitted at trial that Mr Gomez was entitled to an equity of exoneration. This was said to arise in the following way. Mr and Mrs Gomez had been the joint registered proprietors of certain properties, including the Altona and Hallam Properties. The properties in their joint names had been mortgaged to secure loans to J Renee Nominees Pty Ltd (J Renee), a property and investment company owned and controlled by Mrs Gomez. It was contended that, in these circumstances, Mr Gomez had acted as surety for a debt incurred for the benefit of Mrs Gomez and was entitled to an equity of exoneration. 6 In relation to the transfer of $171,480, JNGO contended that this was in fact a loan by Mr Gomez to JNGO. On this basis, the equity of exoneration contention was also relied upon in connection with the transfer of money. 7 The primary judge held that, putting to one side the equity of exoneration contention, the requirements of s 120 of the Bankruptcy Act were satisfied. In relation to the equity of exoneration, the primary judge examined in some detail financial transactions involving Mrs Gomez, Mr Gomez, J Renee and another company, Nathans Solutions Pty Ltd (Nathans Solutions). The primary judge found that: the history of the transactions indicated that the purposes of Mrs Gomez were not distinct from those of Mr Gomez; and the answer to the question, "who got the money?" was that they both did. In support of this conclusion, the primary judge found that: J Renee and Nathans Solutions were incorporated for the mutual benefit of Mrs Gomez and Mr Gomez, to further their joint property investment and property development goals; and consequently, things done ostensibly for the benefit of J Renee could not be regarded as solely for the benefit of Mrs Gomez. In the circumstances, the primary judge did not accept that the claim for an equity of exoneration could be maintained. In relation to the transfer of $171,480, the primary judge did not accept the claims of the Gomez family that the payment was in reality a loan from Mr Gomez to JNGO. Accordingly, the primary judge made declarations to the effect that the transfers of property were void pursuant to s 120 of the Bankruptcy Act. The primary judge also ordered that the amount of $123,139.01 held in a Rabobank account in the name of JNGO be paid to Mr Carrafa. 8 Mr Gomez and JNGO appeal to this Court from the orders of the primary judge. They challenge a number of the factual findings made by the primary judge and the conclusion that the equity of exoneration was not established. Mr Gomez also challenges (with leave) the primary judge's refusal of his adjournment application. 9 For the reasons set out below, the appellants have not established that the primary judge erred in relation to the factual findings or the overall conclusion. Further, no error is shown in the refusal of the adjournment. It follows that the appeal is to be dismissed.