Jabbour v Sherwood

REASONS FOR JUDGMENT Introduction 1 Marie-Vone Jabbour is the wife of Naji Matta Jabbour who became bankrupt on 2 November 2000. On 24 July 1997 he had signed a transfer into his wife's name of their house property which was at that time registered in his name alone. This was done for a consideration of $1. In February 1998 he sold her his business, the Malaga Pantry, for $60,000 of which $20,000 was paid and the balance of $40,000 orally forgiven in March 1998. 2 The Official Receiver issued a notice to Mrs Jabbour under s 139ZQ of the Bankruptcy Act 1966 (Cth) in March 2001 requiring her to pay the sum of $87,900 being the total value of property received by her from her husband at the time of the two transfers. 3 Mrs Jabbour applied to the Federal Magistrates Court to set aside the notice and her husband's trustees in bankruptcy cross-applied for orders that the transfer of the house was void as against them pursuant to s 121 of the Bankruptcy Act. They also sought a declaration that the Official Receiver's notice was valid. 4 In the event, Mrs Jabbour's application was dismissed and the declarations sought by the trustees in bankruptcy were made. 5 She now appeals against that decision on a number of grounds raising questions about many of the learned magistrate's findings and asserting that having contributed to the mortgage repayments on the house, she had an equitable interest in it which has not been recognised in the learned magistrate's orders. Events Leading up to the Bankruptcy of the Appellant's Spouse 6 On 2 November 2000 Naji Matta Jabbour was made a bankrupt on his own petition. Initially the Official Trustee was appointed as his trustee in bankruptcy. However on 10 November, Charles Nilant and Oren Zohar became his joint and several trustees in lieu of the Official Trustee. The history of events leading up to Jabbour's bankruptcy follows. 7 In November 1990 Jabbour had an association with Fouad Antoun Khoury who arrived in Australia at that time and began sharing rental accommodation with Jabbour and his family in Ballajura. After his arrival he commenced employment with Jabbour and his brother Elias who were in partnership operating a food wholesalers business. According to an affidavit sworn by Khoury in proceedings in the Supreme Court of Western Australia in January 1998 he received, in mid 1991, approximately $24,000 from his bank in Monaco. As Jabbour and his brother were not getting on well at the time, Khoury offered to use the money to finance the purchase by Jabbour of a business which they would operate in partnership. He said he transferred $18,000 of the money from his bank account with the Wangara Branch of the Commonwealth Bank to Jabbour's bank account at the same branch to be used for the purpose of buying the business. He advanced a further cash amount of about $6,000 to Jabbour. 8 According to Khoury's evidence, in the proceedings before the learned Federal Magistrate, Jabbour, without his permission, used the funds to purchase a block of land at 4 Fawk Corner, Ballajura. It seems from Khoury's evidence in the Supreme Court proceedings that Jabbour explained that the land would be used as security for a bank loan to acquire a business and that it would be owned by them in equal shares even though registered in Jabbour's name. 9 In about August 1994 Jabbour started a business at the Malaga Markets in Western Australia selling bulk foods under the name and style of the Malaga Pantry. Khoury said the business was started by Jabbour on behalf of both of them using money borrowed from the Commonwealth Bank against the Ballajura property as a collateral security. However Khoury continued working for Jabbour's brother until he was dismissed upon his return from leave in February 1995. He said that whatever spare money he had he made available to Jabbour to finance the business at the Malaga Markets and also, on occasion, to finance the building of a house on the block acquired by Jabbour on their behalf. He also said that from the time that the Malaga Pantry started trading he worked weekends with Jabbour in the business. A company called Rosemist Holdings Pty Ltd trading as Jabkho Foods operated the Malaga Pantry and another wholesale food business. 10 A dispute arose between Jabbour and Khoury as a result of which Khoury instituted proceedings in the Supreme Court against Jabbour and the company. These proceedings were settled on terms set out in a Deed dated 11 February 1998 in which Jabbour acknowledged his indebtedness to Khoury in the amount of $32,000 in respect of money loaned to him by Khoury from time to time. Rosemist Holdings also acknowledged its indebtedness to Khoury in an amount of $48,000 in respect of loans advanced from time to time. Under the terms of the Deed Khoury agreed to sell Jabbour his five ordinary shares in the company which Jabbour agreed to purchase for a sum of $5 on a Settlement Date to be on or before 12 February 1998. On the Settlement Date Jabbour was to repay Khoury the sum of $20,000. Four weeks thereafter he was to repay the balance of $12,000 and the company was to repay the sum of $48,000. Subsequently Jabbour paid Khoury $20,000 but did not pay the balance of $12,000. He repudiated the Deed. 11 On 23 February 1998 Rosemist Holdings summarily terminated Khoury's employment on the ground that he had stolen money from the company and had retained books of the business contrary to the terms of the Deed of 11 February 1998. Khoury brought proceedings in the Western Australian Industrial Relations Commission against Rosemist Holdings for unfair dismissal. Jabbour gave evidence at the hearing on behalf of the company. The Commission found his evidence to be "quite unsatisfactory". It rejected his assertion that there had been a change in the employment relationship to that of casual employment following the execution of the Deed of 11 February 1998. It found that the real reason underlying Khoury's dismissal was the fact that he had commenced Supreme Court proceedings against Jabbour and his company. In the event the Industrial Relations Commission declared that Khoury had been harshly, oppressively and unfairly dismissed from his employment by Rosemist Holdings on or about 23 February 1998. It declared that reinstatement was impracticable and ordered Rosemist Holdings to pay Khoury, within twenty one days, the sum of $13,800 less any amount payable by way of income tax to the Commissioner of Taxation. 12 Subsequently Khoury commenced proceedings in the District Court of Western Australia against Jabbour and Rosemist Holdings. He alleged that Jabbour was in breach of the deed and that although he had paid $20,000 of the amount due, the remaining sum of $12,000 had not been paid. He also said that Jabbour had repudiated the deed. On 14 August 2000 Deane DCJ gave judgment in favour of Khoury directing Jabbour to pay him $12,000 with interest at 6 per cent from 12 March 1998 until the date of judgment. A counterclaim raised by Jabbour against Khoury was dismissed. In the meantime in November 1998 a statutory demand had been served on Rosemist Holdings requiring payment of the sum of $13,800 which the Western Australian Industrial Relations Commission had ordered should be paid to Khoury. Rosemist Holdings failed to comply with the statutory demand as a result of which Khoury, on 19 January 1999, filed an application for an order that the company be wound up. After a contested hearing in which Jabbour gave evidence on behalf of the company, an order was made by a Registrar of the Court that the company be wound up and that Ronald Gamble be appointed as its liquidator. 13 Relying upon the judgment debt resulting from the District Court proceedings Khoury issued a bankruptcy notice against Jabbour. This was overtaken by Jabbour's debtor's petition filed on 2 November 2000. The Events Giving Rise to Proceedings in the Federal Magistrate's Court 14 The proceedings under appeal concerned two transactions which occurred prior to Jabbour's bankruptcy. The first was the transfer, on 24 July 1997, of the property at 4 Fawk Corner, Ballajura from Jabbour's name into that of his wife, the appellant. A consideration of $1 was given for the transfer. The second was the sale by Jabbour to the appellant of the business known as the Malaga Pantry. This sale took place on 20 February 1998 for a purchase price, expressed to be $60,000 of which $20,000 was paid and the balance of $40,000 forgiven in March 1998. 15 On 28 March 2001 the Official Receiver issued a notice to the appellant under s 139ZQ of the Bankruptcy Act 1966 (Cth). The first paragraph of the notice was in the following terms: 'I, John Francis Sherwood, of 2 The Esplanade, Perth, acting Official Receiver for the abovenamed Bankruptcy District, hereby give notice that you, being a person who has received a transfer of property being land on or about 27 November 1997 and a transfer of property being a debt forgiven in March 1998 that are void under section 121 of the Bankruptcy Act 1966 ("the Act") against the trustees in bankruptcy, Mr Charles Philippe Louis Nilant and Oren Zohar require you to pay Charles Philippe Louise Nilant and Oren Zohar of Clout & Associates, Level 4, 19 Pier Street, Perth, the sum of $87,900 being the total value of the property received by you from Mr Naji Matta Jabbour ("the bankrupt") at the time of the transfers.' The notice set out facts and circumstances by which the Official receiver considered the transactions to be void under the Bankruptcy Act which were stated to be as follows: '1. Charles Philippe Louis Nilant and Oren Zohar were appointed as Joint and Several Trustees of the bankrupt on 10 November 2000. The bankrupt lodged his debtor's petition on 2 November 2000 and the Official Trustee was previously his trustee. 2. The bankrupt was the registered proprietor of a property located at 4 Fawk Corner, Ballajura being the whole of the land described in Certificate of Title Volume 1885 Folio 96 ("the property") from August 1991 until 27 November 1997. 3. By transfer of land document dated 24 July 1997, the property was transferred by the bankrupt to you as sole proprietor. The transfer was registered on 27 November 1997. 4. You did not give market consideration for the transfer of the property. A search of the transfer from the Land Titles Office shows consideration of $1.00. 5. At the time of transfer the market value of the property was $120,000 and $72,100 was owing under first mortgage to the Commonwealth Bank of Australia Limited ("bank"). The total equity in the property was $47,900.' 16 On 23 April 2001 the appellant filed an application in the Federal Magistrates Court for an order that the notice issued by the Official Receiver against her be set aside. Messrs Nilant and Zohar were subsequently joined as second respondents and by leave of the Court, given on 25 September 2001, filed a cross application for orders under s 121 of the Bankruptcy Act. In that cross application they sought a declaration that the transfer by Jabbour of his interest in the property at 4 Fawk Corner, Ballajura to his wife was void as against them pursuant to s 121 of the Bankruptcy Act. A similar declaration was sought in respect of the transaction by which Jabbour forgave the debt of $40,000 owing to him by the appellant. A declaration was sought that the s 139ZQ notice was valid. An order was also sought that the appellant pay the trustees the sum of $87,900 as required by the notice and interest on that sum from 2 November 2000 until payment or judgment at such rate as the Court might think fit to impose pursuant to s 51A of the Federal Court of Australia Act 1976. 17 The application came on for hearing in the Federal Magistrates Court before His Honour McInnis FM and on 26 June 2002 he made orders in the following terms: '1. The application filed 23 April 2001 be dismissed. 2. It is declared that the transfer by the bankrupt Naji Matta Jabbour (the bankrupt) of interest in the property at 4 Fawk Corner Ballajura being the land comprised in Certificate of Title Volume 1885 Folio 96 (the land) to the applicant by transfer dated 24 July 1997 registered on 27 November 1997 is void as against the second respondents pursuant to s 120 and/or 121 of the Bankruptcy Act 1966 (the Bankruptcy Act). 3. It is declared that the transaction whereby the bankrupt forgave in March 1998 a debt of $40,000 owing to him by the applicant is void as against the second respondents pursuant to s 120 and/or s 121 of the Bankruptcy Act. 4. It is declared that the notice dated 28 March 2001 issued by the first respondent against the applicant pursuant to s 139ZQ of the Bankruptcy Act is valid insofar as it relates to a claimed breach of s 121 of the Bankruptcy Act. 5. The applicant shall pay the second respondents the sum of $87,900.' 18 On 5 September 2002 the learned magistrate further ordered that: '1. The Applicant shall pay the Second Respondents' interest on the agreed sum of $77,900 on and from 28 March 2001 up to and including the date of judgment at the rate of 6 per cent per annum. 2. The Applicant shall pay the Second Respondents' costs including reserved costs, if any, pursuant to Order 62 of the Federal Court Rules in accordance with the Federal Court scale.' 19 By a notice of appeal filed on 17 July 2002, the appellant appealed against the magistrate's decision. Statutory Framework 20 Section 120 of the Bankruptcy Act provides: '120(1) A transfer of property by a person who later becomes a bankrupt (the "transferor") to another person (the "transferee") is void against the trustee in the transferor's bankruptcy if: (a) the transfer took place in the period beginning 5 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 value than the market value of the property.' Subsection (2) relating to exemptions from the operation of subs (1) is not relevant for present purposes. '120(3) Despite subsection (1), a transfer is not void against the trustee if: (a) the transfer took place more than 2 years before the commencement of the bankruptcy; and (b) the transferee proves that, at the time of the transfer, the transferor was solvent. (4) 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. (5) For the purposes of subsections (1) and (4), the following have no value as consideration: (a) the fact that the transferee is related to the transferor; (b) if the transferee is the spouse or de facto spouse of the transferor - the transferee making a deed in favour of the transferor; (c) the transferee's promise to marry, or to become the de facto spouse of, the transferor; (d) the transferee's love or affection for the transferor. (6) This section does not affect the rights of a person who acquired property from the transferee in good faith and by giving consideration that was at least as valuable as the market value of the property. (7) For the purposes of this section: (a) "transfer of property" includes a payment of money; and (b) a person who does something that results in another person becoming the owner of property that did not previously exist is taken to have transferred the property to the other person; and (c) the "market value" of property transferred is its market value at the time of the transfer.' 21 Section 121 in the relevant part provides: '121(1) A transfer of property by a person who later becomes a bankrupt (the "transferor") to another person (the "transferee") is void against the trustee in the transferor's bankruptcy if: (a) the property would probably have become part of the transferor's estate or would probably have been available to creditors if the property had not been transferred; and (b) the transferor's main purpose in making the transfer was: (i) to prevent the transferred property from becoming divisible among the transferor's creditors; or (ii) to hinder or delay the process of making property available for division among the transferor's creditors. (2) The transferor's main purpose in making the transfer is taken to be the purpose described in paragraph (1)(b) if it can reasonably be inferred from all the circumstances that, at the time of the transfer, the transferor was, or was about to become, insolvent. (3) Subsection (2) does not limit the ways of establishing the transferor's main purpose in making a transfer. (4) Despite subsection (1), a transfer of property is not void against the trustee if: (a) the consideration that the transferee gave for the transfer was at least as valuable as the market value of the property; and (b) the transferee did not know that the transferor's main purpose in making the transfer was the purpose described in paragraph (1)(b); and (c) the transferee could not reasonably have inferred that, at the time of the transfer, the transferor was, or was about to become, insolvent. (5) 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.' Subsection (6) specifies what is not consideration and does so in the same terms as subs (5) of s 120. Subsection (7) exempts a transfer of property under a debt agreement. Subsection (8) protects the rights of the person who acquires property from the transferee in good faith and for at least market value. The terms 'transfer of property' and 'market value' are defined in subs (9) in the same way as they are defined in subs (7) of s 120. 22 Where a person has received money or property as a result of a transaction that is void against the trustee of a bankrupt the Official Receiver, on application by the trustee in bankruptcy, may pursuant to s 139ZQ, require the person by written notice to pay to the trustee an amount equal to the money or the value of the money received. The notice must set out the facts and circumstances because of which the Official Receiver considers the transaction to be void against the trustee (s 139ZQ(2)). In s 139ZQ(8) it is provided that: 'An amount payable by a person to the trustee under this section is recoverable by the trustee as a debt by action against the person in a court of competent jurisdiction.' 23 Where such a notice is given in respect of any property, the property is charged with the liability of the person to make payments to the trustee as required (s 139ZR(1)(a)). 24 Section 139ZS confers upon the Court the power to set aside a notice under s 139ZQ in the following terms: '139ZS(1) If the Court, on application by a person to whom a notice has been given under section 139ZQ or by any other interested person, is satisfied that this Subdivision does not apply to the person on the basis of the alleged facts and circumstances set out in the notice, the Court may make an order setting aside the notice. (2) A notice that has been set aside is taken not to have been given.' 25 Under s 139ZT a person who refuses or fails to comply with a notice under s 139ZQ is guilty of an offence punishable upon conviction by imprisonment for a period not exceeding six months. The Magistrate's Reasons for Decision - Review of the Evidence 26 The learned magistrate, after reciting the procedural background, found there was no dispute that the property at 4 Fawk Corner, Ballajura was registered in the appellant's name by a transfer registered on 27 November 1997 and that the payment of $1 for the transfer of the property did not represent market value. He also found that the business of the Malaga Pantry was transferred by Jabbour to the appellant on 20 February 1998 for a purchase price fixed, by agreement on that date, at $60,000. He also noted that it was agreed by the parties that only $20,000 was paid by the appellant to Jabbour as consideration for the Malaga Pantry and that the amount of $40,000 was forgiven by the bankrupt in March 1998. 27 He then referred to evidence given by a number of witnesses, the first of which was the appellant herself. In that evidence the appellant said that in or about July 1997 her husband decided that the house property at 4 Fawk Corner, Ballajura should be transferred into her name. She said that the primary reason for the transfer was that if anything should happen to him the property would already be in her name and it would enable her to look after their children without any worries. She asserted there was no other reason for the transfer of the property and that Khoury witnessed the transfer. 28 The appellant said that she and Jabbour did not have any substantial debts and paid approximately $1,000 a month in mortgage repayments. She had been receiving $884.60 social security payments per month and produced bank statements showing regular withdrawals of $500 fortnightly which she relied upon as evidence that she and Jabbour had made payments of approximately $1,000 per month against the mortgage. She also said that at the time the property was transferred Jabbour was involved with the Malaga Pantry business and was earning about $2,000 a month from it. She disputed the notice and in particular disputed any intention by Jabbour to defeat creditors. She said she held no suspicion that Jabbour was insolvent or about to become insolvent at the time. The appellant disputed the value of the property and said it was worth $110,000 rather than the amount of $120,000 claimed by the trustees. She had made contributions of about $15,000 to $20,000 towards the mortgage. 29 As to the Malaga Pantry the appellant said she had purchased it from Jabbour on or about 20 February 1998 for $60,000 of which she paid $15,000 on 23 February 1998 and $5,000 on 27 March 1998. She said the balance was forgiven by her husband because he wanted her to use that sum to provide for their children. She also claimed that at his request she paid legal fees and provisional tax of approximately $40,084.40 from December 1998 to September 2000 and other amounts since that date bringing the total to $50,684.40. She said that the transfer price for the Malaga Pantry was market value. In cross-examination she said that until the transfer of the Malaga Pantry her husband ran the business. After the transfer she ran the business without his assistance. She said she did not know what he did at the Malaga Pantry and did not know what he had done since transferring the business to her. 30 The appellant was unable to remember precise details of the source of the funds from which she found $20,000 towards the purchase price of the Malaga Pantry. She said the $15,000 payment came from her father but she couldn't remember how she paid the remaining $5,000. She couldn't exactly remember the amount paid by her father but suggested it was in American dollars. She was unable to explain how an amount of $27,250 was calculated in relation to 'plant and equipment' which formed part of the purchase price of the business. The price of $60,000 was arrived at by reference to the stock, the business returns and the rent paid. However she took no part in determining the purchase price. When she was referred to the Deed of Settlement which had been executed between Khoury and Jabbour on 11 February 1998, just nine days prior to her purchase of the business, she said she was aware of their dispute. She could give no reason for deciding to purchase the business on 20 February 1998 and not at some earlier date. She also agreed it would be a fair interpretation of financial documents produced to conclude that in 1997 her income was low enough to receive a significant family allowance payment but that by March 1998 the family income had increased to the extent that the family allowance decreased quite significantly. 31 Evidence was given by Jabbour who swore three affidavits filed in the proceedings. They were sworn on 16 July 2001, 7 August 2001 and 5 October 2001. He endeavoured to corroborate the substance of the appellant's evidence. He said that the only reason he transferred the Ballajura property to her was a belief that should anything happen to him she would own a property and be able to look after the children. He disputed that he had any intention of preventing the property from becoming divisible among creditors. He asserted his solvency, although he did admit to being prosecuted for non-payment of company tax and said he was paying back small amounts each month for the fine he received in relation to that matter. He asserted he was solvent in 1997 and that his financial position was stronger in 1998. 32 Under cross-examination Jabbour said he had been sole proprietor of the property at Ballajura from August 1991 until it was registered in his wife's name on 27 November 1997. He was asked why the transfer had not occurred earlier and gave a detailed explanation about his marriage and attitude towards property ownership. He claimed that when he was married he was set in his ways in what he regarded as 'the middle Eastern belief' that everything belongs to the man or the husband. Eventually he thought the best way to protect his wife and his children's interests was to give her the house. He said there was no other reason why it occurred in 1997 and not earlier. He did not seek advice on the possibility of a joint tenancy which would have resulted in the property divesting to his wife should anything happen to him. He was unable to give any reason for the delay of four months between the signing of the transfer of the property in July 1997 and its registration in November 1997. He claimed that Khoury had never advanced any money to buy the property and denied that Khoury had no knowledge of the transfer of the property to the appellant prior to September 1997. He claimed that Khoury knew exactly what he was doing in relation to the transfer of the Ballajura property. 33 Jabbour was asked about charges laid against him arising out of the underpayment of sales tax. He agreed he had pleaded guilty to those charges and was convicted on 19 February 2001. There were some fifty complaints in all covering a period between July 1996 and 10 September 1997. He said he had pleaded guilty because it was the cheapest way for him to do it. He was also cross-examined about the Deed signed between him and Khoury but continued to deny his indebtedness despite the acknowledgement of indebtedness under cl 6 of the deed. 34 In relation to the Malaga Pantry Jabbour said he had some negotiations with relatives concerning a possible sale of the business for $60,000 but there was difficulty in agreeing the terms of payment of the purchase price. His relatives wanted to pay it out of trading receipts of the business. He said his wife had suggested that she would give him the deposit and buy the business herself. Asked why he had forgiven the sum of $40,000 he referred to the improved state of the wholesale food business which he was then running, namely Jadkho Foods, and said he was in no need of money. He relied upon MasterCard statements to establish his solvency. He agreed in cross examination that his practice was to pay accounts on MasterCard and then ensure the monthly balance was paid so it wouldn't incur interest. The payments made on the MasterCard account did not come from any other account. He agreed that the profit and loss statement of the Malaga Pantry for the year ended 30 June 1997 showed a net loss of $16,124 for that year compared with $531 from 1996. His gross income from employment for the year ending 30 June 1998 was $23,900 with a taxable income for that year of $20,351. He said he had a document which indicated his income for the year was $30,028. 35 A handwriting expert, John Gregory, was called by the appellant and gave evidence that the witness signature on the transfer of land document was that of Khoury. However he could not be satisfied that the signature and writing were applied on the same day. Khoury did not recollect witnessing the transfer in relation to the Ballajura property but conceded he might have done so along with other documentation which Jabbour asked him to sign. 36 Khoury gave evidence about his Supreme Court proceedings, the settlement negotiations with Jabbour and the Deed of Settlement concluded on 11 February 1998. He confirmed Jabbour's payment of $20,000, the non payment of the outstanding balance of $12,000 and the subsequent District Court proceedings. He referred to his dismissal by Rosemist Holdings and his successful action in the Western Australian Industrial Relations Commission. 37 A further witness for the respondents was Mohamed Noor Ghobj. In his affidavit evidence he said he had worked for Jabbour's brother in or about 1988 in Perth. He had met Khoury in 1990 and recalled that in about 1991, at a house shared by Jabbour with Khoury, Jabbour had said he was going to start a business with Khoury and that Khoury had given him an amount of some $24,000 to buy the business. He also said that Jabbour told him he had purchased land and had done so with money which had come from Khoury but had been given to him by Khoury to buy the business. He said he had borrowed money from the bank to buy the land and the land would be used for a loan to buy a business. 38 After reviewing the evidence the learned magistrate then referred to the respective submissions of the parties in detail. The Magistrate's Reasons - Conclusions 39 In his reasons for judgment the learned magistrate found that the transfer of the property occurred for an amount which was less than market value. He found there was a delay of some months in registration of the transfer for which no satisfactory reason was given. There was, in his view, sufficient evidence to regard the transfer of the property as a transfer which came within the meaning of s 120 of the Bankruptcy Act. The real issue was whether, at the time of transfer, the bankrupt was solvent. For the purpose of applying s 120 he accepted that the time of transfer was 24 July 1997. 40 His Honour referred to the onus on the appellant to prove the solvency of Jabbour at the time of the transfer. He found that the Malaga Pantry had made a net loss of $16,124 for the year ending 30 June 1997 and a net loss of $531 in the previous year. He accepted that on the material before him the business was a significant part of the business conducted by Rosemist Holdings, the company in which Jabbour had an interest. He then said: 'I further find that although a detailed analysis was made of payments by the bankrupt and the applicant out of a MasterCard account, there is a significant deficiency in the evidence which would enable me to make a finding in relation to the source of income which was applied to the MasterCard account to ensure that the monthly balance was paid when due." This I take to be a finding that the evidence did not enable him to make any finding about the source of income for payments of the MasterCard account. He said that mere evidence of payments did not in itself provide evidence of solvency unless it were demonstrated that they had been made by Jabbour along with payment of other debts when they became due from Jabbour's own money or resources. He found it was clear that by February 1998, upon entering into the Deed with Khoury, both Jabbour and the company did not then have an ability to pay their debts. Although this post-dated the date of the transfer of the property it provided him with a sufficient doubt about the financial circumstances of Jabbour to find as a matter of fact that the appellant had not discharged the onus of establishing that in July 1997 Jabbour was solvent. 41 The learned magistrate noted that Jabbour's taxable gross income was $20,351 for the financial year ended 30 June 1998. A significant portion of that was derived from the company which itself was the subject of the appointment of a receiver in January 1998. He said: 'The financial difficulties of the company coupled with the acknowledged indebtedness in the Deed by the company and the bankrupt to Mr Khoury in February 1998 provides further material to support the conclusion that the applicant has failed to establish to the satisfaction of the court that the bankrupt was solvent at the time of the transfer which occurred albeit some months earlier in July 1997.' On this basis he found that the cross application by the respondents relying upon s 120 of the Bankruptcy Act had been established. 42 In connection with the forgiveness of the debt in relation to the sale of the Malaga Pantry, he said it was clear that the original sale agreement could not be said to be a transfer for no consideration. It was not clear that the sum of $60,000 was the correct market value of the business. 43 The learned magistrate held that the forgiveness of the debt was a transfer of property for the purposes of s 120 and s 121 of the Act having regard to the definition of 'property' in s 5 which includes personal property and thus choses in action. He found that as the appellant had failed to establish solvency as at July 1997 and the evidence indicated a deterioration of Jabbour's financial circumstances by 1998, he could not be satisfied about solvency in February 1998. On this basis s 120 applied in relation to the forgiveness of the debt for the Malaga Pantry. 44 The learned magistrate then considered the application of s 121 to the transfers and identified as the relevant issue under that section '… the main purpose of making the transfer on each occasion'. In this respect he did not accept Jabbour's evidence that he desired to make provision for his family. While the July transfer of the Ballajura property occurred prior to significant disputation with Khoury he was satisfied that at that time there was at least a suggestion based on the evidence of Ghobj and to a lesser extent Khoury, that a dispute was imminent. The magistrate said: 'I am further satisfied that there is no other reasonable basis upon which the transfer occurred at that date and in the manner where the property was transferred in July from sole proprietorship of the bankrupt to sole proprietorship of the applicant. I am not satisfied that there has been any or any adequate explanation to the court which would demonstrate that the court should not infer from all the circumstances that the main purpose in making both transfers was anything other than to prevent the transferred property from becoming divisible among the creditors of the bankrupt, the main one in the present case being Mr Khoury.' His Honour rejected the appellant's evidence and that of Jabbour that there was a sudden desire on Jabbour's part to make provision for his wife and children in July 1997 and further in February 1998. He was satisfied that it was the threat of disputation with Khoury and other business disputation including difficulties with the Australian Taxation Office from July 1996 to September 1997 which prompted the transfer at the time of July 1997. 45 His Honour found that it could not be suggested that Jabbour was in a sound financial state at the time of either transfer. He was aware of potential claims in July 1997 and February 1998. From 1996 the appellant was aware of dispute between the bankrupt and Khoury and that her reference to what she described as 'the catastrophe' was a reference to that dispute. Its significance was sufficient to encourage her to collaborate with Jabbour to make arrangements for the transfer of the property and to agree to the forgiveness of the debt in relation to the Malaga Pantry. The learned magistrate was satisfied that the transfer of the property in July 1997 also had as its main purpose the prevention of the transferred property becoming divisible among creditors of the bankrupt. 46 The learned magistrate found Khoury had witnessed the signatures on the transfer of land document. He did not accept that Khoury then understood the contents of that document or fully appreciated what was happening. He accepted Khoury's evidence that from time to time he witnessed documents in relation to the business he was then conducting with the bankrupt and the company and that he did not have an independent recollection of the particular document. 47 In general terms, the learned magistrate was 'not satisfied' with the evidence given by the appellant and by Jabbour concerning the circumstances surrounding the transfer of the Malaga Pantry and the Ballajura property. He was satisfied on the evidence before him that the appropriate value of the property was $120,000 not $110,000 as asserted by the appellant. He accepted the evidence of the respondents and in particular the valuation by Mr Colin Lawrence in a report dated 15 February 2001 which did not appear to be seriously challenged. 48 In relation to the s 139ZQ notice, the learned magistrate held that it was defective to the extent that it did not include reference to s 120 as well as to s 121 of the Act. It was his view that such a notice should properly refer to all relevant sections to be relied upon by the Official Receiver. However it clearly referred to s 121 and in the circumstances he had found that the facts and circumstances set out in reliance upon that section had been established. 49 The only issue which might arise in relation to the claimed defect in the s 139ZQ notice would be the issue of the date when interest would commence. Given the absence of any reference to s 120 in the notice, he held as a matter of discretion that it would be appropriate that he make the orders sought in the cross application. It was his view that interest, if any, should commence on and from the date of the cross application as amended being the date on which leave was granted to amend the cross application. The Grounds of Appeal 50 The grounds of appeal were set out in an amended notice of appeal filed on 12 November 2002 and amended by leave at the hearing on 9 December 2002. Omitting particulars, the grounds are as follows: 1. The learned magistrate erred in fact and in law in holding that the bankrupt was not solvent in July 1997 at the time of the transfer of the property 4 Fawk Corner, Ballajura. 2. The learned magistrate erred in fact and in law in holding that the bankrupt's main purpose in transferring his interest in 4 Fawk Corner to his wife was to prevent the property becoming divisible among his present or future creditors then known to him. 3. The learned magistrate erred in law in failing to hold that the applicant held an equitable interest in the bankrupt's interest in the property by reason of her payments off the mortgage, and in failing to hold that the transfer was of only the bankrupt's remaining interest. 4. The learned magistrate erred in fact in finding that the property was worth $120,000 at the time of the transfer, the respondent through counsel having conceded it was worth $110,000. 5. The learned magistrate erred in law and in fact in finding the $40,000 owing of the purchase price of the business was forgiven: the evidence was the applicant paid that amount and more to or for the bankrupt. 6. The learned magistrate erred in law in holding that the forgiveness of the debt was transfer of property: the debt is property but forgiving a debt is not transferring it. 7. The learned magistrate erred in law and in fact in holding the respondent had proved the bankrupt was insolvent in March 1998. 8. The learned magistrate erred in fact and in law in holding that the bankrupt's main purpose in forgiving the debt was to defeat his creditors, in that the bankrupt had no creditors other than Khoury for $12,000, there was cogent evidence from the applicant and the bankrupt that the applicant wanted to look after his children, and there was cogent evidence that the bankrupt felt threatened by Khoury. 9. The learned magistrate erred in law and in fact in that by questioning the genuineness of the sale of the business and the price of it the learned magistrate took into account an irrelevant consideration, and in finding that the sale and price were not genuine and in finding that the evidence was unsatisfactory (when it was extensive and cogent) and that there should have been corroboration of the applicant's and the bankrupt's evidence. 10. The learned magistrate erred in law in admitting evidence during cross examination of the bankrupt, of the bankrupt's sales tax convictions, and in concluding that the convictions were one reason the bankrupt transferred the property out of his name. First Ground of Appeal - Finding as to Solvency at the time of House Transfer 51 The first ground of appeal asserted error of fact and law by the learned magistrate in holding that Jabbour was not solvent in July 1997 at the time of the transfer of the Ballajura house property into his wife's name. 52 This ground proceeds upon the false premise that the learned magistrate found that Jabbour was not solvent in July 1997. In the context of his consideration of the application of s 120 to the facts of the case, no such finding was necessary nor was it made. The section requires proof of a transfer of property for no consideration or for a consideration at less than market value by a person who becomes a bankrupt within five years of the transfer. In that event, absent any of the exempting conditions, the transfer is void against the trustee. In the circumstances of the present proceedings before the magistrate that conclusion could only be averted if the transfer took place more than two years before the commencement of the bankruptcy, which it did, and: '… the transferee proves that at the time of the transfer the transferor was solvent.' 53 What was necessary for the appellant's case was a positive finding of solvency. The learned magistrate made no such finding. It was sufficient for him to find as he did that solvency had not been made out. The learned magistrate referred to a number of matters at [103] of his judgment which he said supported his conclusion '… that the applicant had failed to establish to the satisfaction of the court that the bankrupt was solvent at the time of the transfer'. 54 Assuming for the sake of argument that ground 1 was in truth directed to the finding that the learned magistrate actually made it relied upon three particulars of error: 1. The learned magistrate was wrong to go beyond the evidence of the bankrupt having the ability to pay his debts, and paying his debts, and to question the source of the moneys into his MasterCard (which in any event included moneys paid in by the appellant (herein "applicant") herself, she receiving substantial family payments at the time); 2. The learned magistrate erred in holding that, as the bankrupt was insolvent in February 1998, so he was insolvent in July 1997 at the time of the transfer of the property, in that the bankrupt was not insolvent in February 1998 and in any event the inference was not available on the facts; 3. The learned magistrate erred in holding that as the bankrupt's company was in financial difficulties in March 1998 and the bankrupt signed a Deed in February acknowledging his indebtedness for $32,000, the bankrupt was insolvent in July 1997; that was an error because the company was not in financial difficulties in March 1998 and because the bankrupt paid $20,000 of the $32,000 owing under the Deed and contested his liability to pay the balance. 55 With respect to the first particular of error, it was open to the magistrate, in weighing up the evidence that Jabbour met MasterCard payments, to find that in the absence of evidence about the source of those payments he would not conclude that they demonstrated solvency. The line of his reasoning in this respect is made clear by his statement in the reasons at [103] that: "The mere evidence of payment of accounts does not of itself provide evidence of solvency unless it can be demonstrated that those payments have been made by the bankrupt along with other debts when it became due from the bankrupt's own money or resources." 56 The second particular of error again depends upon the wrong premise that the learned magistrate made a positive finding as to insolvency in February 1997. Certainly he held that it was '… clear that by February 1998 upon entering the Deed with Mr Khoury that both the bankrupt and his company did not then have an ability to pay their debts'. The consequence of the finding was that it provided the magistrate '… with a sufficient doubt about the financial circumstances of the bankrupt to find as a matter of fact that the appellant has not discharged the onus upon her to establish that in July 1997 the bankrupt was solvent'. 57 It was submitted in support of the second particular of ground 1 that there was no evidence to suggest any deterioration in the bankrupt's financial position between July 1997 and February 1998. The deterioration of the bankrupt's position between July 1997 and February 1998 would have been a factor favourable to the appellant in respect of the assertion of her husband's solvency in July 1997. In truth it was a finding made in [108] of the learned magistrate's reasons to support the conclusion that he could not be satisfied as to the solvency of Jabbour in February 1998. 58 The third particular of ground 1 again proceeded on the wrong premise that the learned magistrate found Jabbour to have been insolvent in July 1997. It also involved a contention that Rosemist Holdings was not in financial difficulties in March 1998 and Jabbour had paid $20,000 of the $32,000 owing under the Deed and contested his liability to pay the balance. 59 In reply to this particular and under ground 7, the trustees say that Rosemist Holdings showed small accumulated profits according to its financial statements of 30 June 1997 and 1998. The equity of the company showed no more than those accrued profits. It had admitted its liability for a debt to Khoury in the amount of $48,000. The debt, according to Jabbour's evidence, had '… started arising, from memory, around end of 95 or 96…'. 60 In my opinion the magistrate was justified in coming to the conclusion he did that he was not satisfied of Jabbour's solvency at the time of transfer of the house property to his wife. 61 Evidence relied upon by the appellant that Jabbour's wife was providing financial support to him does not establish his solvency at the relevant time. The first ground, which proceeds on a misconception as to the nature of the magistrate's finding on the question of solvency, is not made out. The Second Ground 62 In the second ground it is said that the learned magistrate erred in holding that Jabbour's main purpose in transferring the house to his wife was to prevent the property being divisible amongst his present or future creditors. The particulars of the ground were as follows: 1. There was no evidence of any dispute with Khoury in July 1997; the applicant's reference to a catastrophe involving Khoury was to events which occurred in 1998; 2. Khoury witnessed both signatures on the transfer of land formed and at the hearing denied his signature, and there was no basis for holding that Khoury failed to understand or appreciate the nature of the document which was entitled 'Transfer of Land'; in any event the learned magistrate failed to consider that the bankrupt signing the transfer of land before Khoury, of proffering it to him, disproved the claim that the bankrupt signed the transfer in order to put the property out of reach of Khoury, the principal creditor in the bankruptcy; 3. There was no evidence of disputation with the Australian Taxation Office such that the bankrupt would transfer his interest in the house to put it beyond the Australian Taxation Office's reach; 4. Having found the bankrupt desired to protect his family, for which finding there was extensive and cogent evidence, there was no basis for holding that there was lacking any explanation which would prevent the court in inferring the main purpose was to defeat creditors. 63 The relevant finding of the learned magistrate was that in which he rejected Jabbour's evidence that provision for his family was the real reason for the transfer of the home and the forgiveness of the Malaga Pantry sale debt to the extent of $40,000. On the face of it the magistrate was right to reject this evidence. The explanation given by Jabbour of his reasons for the transfer were inherently improbable. The learned magistrate was entitled to form that view and there is no basis upon which the Court could properly interfere with his finding. 64 The learned magistrate was also entitled to find that Jabbour was aware that a dispute was brewing with Khoury. The transfer occurred some seven months before the execution of the Deed which itself referred to 'a dispute' having arisen between Khoury and Jabbour in relation to the company. 65 In the circumstances, the learned magistrate was entitled to draw the inference he did that the only plausible reason for the transfer of the house into his wife's name was in order to defeat his creditors. Ground 3 66 In this ground it is claimed that the learned magistrate erred in law in failing to find that the appellant held an equitable interest in the bankrupt's interest in the property by reason of her payments of the mortgage and in failing to hold that the transfer was of only the bankrupt's remaining interest. 67 This issue was not specifically pleaded. However, counsel for the appellant who also appeared for her in the Federal Magistrates Court, did open on the issue. What he said, as appears from the transcript of the proceedings in the Federal Magistrates Court was this: 'The last issue that we raise is: does the applicant Mrs Jabbour have an equity in the house, nevertheless by the contributions that she's made, both in terms of contributions to paying off the mortgage and in terms of contributions to the family and to the opportunity of Mr Jabbour to have purchased the house? I'll be submitting that if this was a case of de factos and being fought out in the Supreme Court, it would be most unlikely that Mrs Jabbour wouldn't obtain a declaration that she had a significant equity in the property. But that's of course a point that we'll say that we don't need to get to, but a point which needs to be covered.' 68 The matter was touched on briefly by the appellant in her affidavit evidence where she stated that she would intermittently withdraw cash amounts from her Commonwealth Passbook account and BankWest accounts to give to her husband who would then pay such sums towards reducing the mortgage held by the Commonwealth Bank over the property. She referred to annexures to Jabbour's affidavit which were copies of mortgage loan statements from the Bank covering the period August 1991 to 31 December 1998. She also exhibited copies of statements relating to her own BankWest account and Commonwealth Passbook accounts covering the period April 1992 to July 1998 which were said to evidence these withdrawals. She said she had been informed by BankWest that no record of her account before January 1994 could be obtained. The Commonwealth Bank had also informed her that they were experiencing difficulties in obtaining statements from her Commonwealth Passbook account prior to April 1992. Nevertheless she said: 'I believe that I have made a financial contribution of at least $15,000.00 to $20,000.00 towards the Mortgage.' 69 The appellant was cross-examined before the learned magistrate on this aspect of her affidavit evidence. She said that whatever money she earned she would '… put towards the house payments'. She said Jabbour was using her money to pay for the house. She knew that he took money from her to pay for the house. She was asked whether there was any reason why she didn't pay her contributions to the mortgage by cheque. She said there was none. When counsel put it to her that there was no way to objectively identify whether the cash withdrawals actually went towards the mortgage she said: 'They were withdrawn from my account and they were transferred into the house mortgage account payments.' She said that was what Jabbour told her he was doing. When it was put to her that she didn't know that personally but that was what her husband told her, she said: 'I didn't do it, he did it.' One of the Commonwealth Bank accounts which she relied upon was an account which she held as trustee for her son. 70 She was referred to a schedule of payments which had been prepared to show the dates and amounts of withdrawals from her accounts in the period 8 August 1994 to 12 January 1998 and payments made into Jabbour's mortgage account in the period 9 August 1994 to 12 January 1998. This schedule was intended to show a correlation between withdrawals from the appellant's accounts and mortgage repayments in relation to the house. The appellant was cross-examined on the schedule. She said that she used to receive money from her family allowance payment and '… transferred it towards the house mortgage'. She was referred to some withdrawals which had been made the day after a mortgage payment was made. She said that she was helping her husband with the payments because at the end of the day the house was for the children. When it was put to her that some of the cash withdrawals were used for other purposes such as shopping, she said that she took money from her husband for the shopping. 71 Counsel for the appellant argued the issue of an equitable interest before the learned magistrate who identified in his reasons, as one of the questions arising under s 120: 'Does the applicant have an equity in the house by contributions?' See [68] The learned magistrate referred at [98] to the submissions of counsel for the appellant saying: 'It was also argued that the applicant had an equity in the house as a consequence of contributions she made paying off the mortgage and her contributions to the family and that hence there is some equitable interest that the applicant had in any event to the property.' Reference was also made in the learned magistrate's reasons at [81] to the respondents' submissions: 'In relation to any claim for a constructive trust between the bankrupt and the applicant in relation to the property, it was noted this had not been specifically pleaded and was not part of the original application nor part of the applicant's reply to the cross application. It was noted there was no claim by the applicant directly against the second respondents in respect to an order to declare the second respondents as holding the property for the benefit of the applicant in the event of the cross application succeeding. It was further submitted that in fact the applicant at present in any event holds the property as registered proprietor. It was submitted there was no sound basis upon which the court should make any finding of a constructive trust based on the applicant's alleged contributions to the property.' Surprisingly, the learned magistrate made no finding on this question. 72 The appellant contended, albeit briefly in support of this ground, that there was ample evidence that the mortgage on the house was repaid using money belonging to the appellant. Her contributions amounted to about half the mortgage instalments. Reference was then made to Muschinski v Dodds (1986) 160 CLR 583, Baumgartner v Baumgartner (1987) 164 CLR 137 and McVeigh v Zanella [2002] FCA 1890. 73 In supplementary written submissions after the close of argument on the appeal, counsel for the appellant referred again to Muschinski v Dodds, Baumgartner v Baumgartner and submitted that the appellant was proven to have contributed significant sums from her own income albeit these were family allowance payments. He submitted that there must be an accounting of the contributions towards the mortgage and a declaration that even before July 1997 the property was owned beneficially by the appellant and the bankrupt in the proportions which the accounting reveals. 74 Counsel for the respondent submitted that the evidence of contributions to the mortgage was quite unsatisfactory and that there was no way objectively to identify whether cash withdrawn from the appellant's account was actually paid towards the mortgage. It was clear that moneys were being withdrawn from the appellant's account by Jabbour. One of the accounts from which moneys were being withdrawn was an account held in trust for one of her sons. There were discrepancies between some of the payments alleged to have been paid to the mortgage account and the dates upon which payments were made into that account. A cash withdrawal at Burswood Casino, it was conceded, bore no relationship to the alleged use of the withdrawn moneys to repay the mortgage. Counsel for the respondents submitted that the evidence was insufficient to discharge the onus of proof upon the appellant to identify financial contributions made by her towards the property. 75 The question of the existence of an equitable interest deriving from a constructive trust was before the learned magistrate. He made no finding on it and in this respect it seems to me he erred. It may be, that having regard to the vagueness of some aspects of the appellant's evidence in relation to the contributions she made to mortgage repayments, her claim to be entitled to an equitable interest and the extent of that interest will not be without difficulty. In my opinion, however, she was entitled to the benefit of clear factual findings by the learned magistrate in this respect and to the benefit of his findings, having regard to all the evidence, as to the existence and extent of her interest if any. 76 The proposition that a claim to an equitable interest, based upon a common intention constructive trust, may be good against the trustee in bankruptcy is established by the judgment of the Full Court in Parsons v McBain (2001) 109 FCR 120 which overruled the contrary view previously expressed in Re Osborn (1989) 25 FCR 547. Parsons v McBain concerned a transfer of land by a husband, who later became bankrupt, to his wife. The trustee in bankruptcy had obtained an order at first instance avoiding the transfer pursuant to ss 120 and 121 of the Bankruptcy Act. The Full Court held, contrary to the reasoning in Re Osborn, that a constructive trust does not arise when the Court declares it to exist. It is a pre-existing equity. The transfer of the legal estate of the moiety beneficially owned by the wife in that case was not void against the trustee. Their Honours said, after reviewing relevant case law including Giumelli v Giumelli (1999) 196 CLR 101: "…the notion that a "common intention constructive trust" first comes into existence when so declared by the Court must be rejected. In virtue of the fact that such a view informed the decision in Re Osborn, the case should not be followed.' (at 125) 77 In light of the schedule of payments the maximum amount of the appellant's monetary contribution to mortgage repayments would not have exceeded about $15,000. The claim that she had an equity in the house seems to have relied upon those payments and those alone. On the conceded value of the property, which was $110,000 even assuming a proportional interest in excess of $15,000, her equity still fell well below the market value of the house. On that basis the magistrate's conclusions in relation to the application of ss 120 and 121 need not be disturbed. However his finding as to the amount which she is liable to repay may require reconsideration depending upon the existence and extent of any equity in the house. That reconsideration would also affect the conclusions as to the validity of the notice under s 139ZQ to the extent that, in the amount which it demanded, it did not recognise any equity. In the circumstances I propose to allow the appeal and remit it to the magistrate to give proper consideration to the question of any equitable interest and, if there be such an interest, to provide for an appropriate reduction in the amount payable by the appellant. 78 It will of course be open to the parties before the matter goes back for hearing in the Federal Magistrates Court to negotiate a reduction in the recoverable amount should they wish to do so. Ground 4 79 In this ground it was said the learned magistrate erred in fact in finding the property was worth $120,000 at the time of transfer when it was conceded that it was worth $110,000. This ground was conceded by the respondents shortly after it was raised by the appellant. Ground 5 - Whether the Amount of $40,000 was Forgiven 80 Under this ground it was asserted that the learned magistrate erred in finding that the $40,000 owing by the appellant to Jabbour in respect of the purchase price of the business was forgiven. The evidence was said to have been that the appellant paid that amount and more to or for Jabbour. Argument on this point was brief. There was said to be clear evidence that, after the debt had been forgiven, the appellant paid more than $40,000 on behalf of the bankrupt for his legal bills. The learned magistrate, it was said, did not deal with this issue although he noted the submission that there was no accord and satisfaction. 81 It was submitted for the appellant that there was evidence that following Jabbour's forgiving of the $40,000 owed to him by his wife she paid amounts in excess of that for his legal bills. Reference was made to her affidavit evidence in which she said that at Jabbour's request she paid legal fees and provisional tax in the sum of approximately $40,084.40 from December 1998 to September 2000. She exhibited accounts from legal practitioners and a letter from a firm of accountants setting out her husband's provisional tax liability. She said that in total she would have spent approximately $50,684.40 to fund her husband's legal proceedings and to pay his provisional tax. These sums were obtained by her through the business and borrowed and/or given to her by her parents and family. It was submitted that the learned magistrate did not deal with this issue although he noted the submission that there was no accord and satisfaction. 82 In my opinion the learned magistrate did not err in failing to find that the payment of moneys by the appellant in favour of Jabbour subsequently somehow changed the legal character of the forgiveness of the debt. There was no evidence that these payments were in any sense a consideration for the release from the obligation to pay $40,000 to Jabbour or that they were made pursuant to any promise to do so. 83 It was also submitted that, in any event, the forgiveness of the debt was legally ineffective as being made orally and not by way of deed or other writing. This was not an issue properly raised on the grounds of appeal. If there were no effective forgiveness then the debt would have remained owing by the appellant to Jabbour and would be recoverable from her by the trustees in any event. It has been the appellant's position at all material times prior to the commencement of these proceedings that the debt was forgiven. Indeed in her affidavit before the learned magistrate she said: 'The remainder of the sum, namely $40,000 due to him, was forgiven by my husband because he wanted me to use this sum to provide for our children.' 84 Jabbour himself in his affidavit of 16 July 2001 said that he forgave the remaining $40,000 so that she could use this sum to provide for their children. He had informed his trustees in a fax dated 9 November 2000 that in March 1998 he told his wife at a social gathering at Ballajura that the balance of the purchase price was not required by him and that she should consider it as a gift to her and their children so she could look after them in case anything happened to him. At all material times up to the commencement of these proceedings it seems that all parties have acted upon the common understanding that the forgiveness was effective. Indeed the trustees acted upon that basis in issuing their notice under s 139ZQ. I do not consider that the appellant can now be heard to claim that the forgiveness of the debt was not effective. Ground 5 therefore fails. Ground 6 85 In ground 6 it was contended that the learned magistrate erred in law in holding that the forgiveness of debt was a transfer of property. The learned magistrate held that: 'Section 5 of the Bankruptcy Act in the definition of "property" includes personal property such as a chose in action and I find that by forgiving the debt of $40,000 the bankrupt as a creditor against the applicant has by way of forgiveness of that debt transferred in the ordinary meaning of the word that chose in action to the applicant. Hence that conduct falls within the concept of a transfer of property for the purposes of section 120 and 121 of the Act.' 86 Counsel for the appellant accepted that the debt was a chose in action and fell within the definition of property but said that to forgive the debt was not to transfer it. He contended that there is no extended definition of transfer in the Bankruptcy Act and that while a transfer of property, includes a payment of money by virtue of s 120(7)(a) Jabbour had paid the appellant no money. Moreover s 120(7)(b) did not apply because the appellant did not become the owner of any property as a result of the release.