Re Clarke, E.C. v. Ex parte Taylor, A.R. [1988] FCA 87

Federal Court of Australia|1988-03-04

BANKRUPTCY DISTRICT OF THE SOUTHERN DISTRICT OF THE STATE OF QUEENSLAND

EX PARTE: ALAN RICHARD TAYLOR as Trustee of the property of the abovenamed bankrupt

he conveyarce or transfer by Mr. Clarke of B A ow rh

the Bankruptcy Act 1966, with the same consequence.

The present registered proprietors of that house property are Allan John Clarke and Wendy Pauline Clarke as tenants-1in-common in equal shares. They became registered by transfer which was produced to the Registrar of Titles on 30 May 1983 and registered on 11 June 1983. A bill of mortgage granted

by them to National Commercial Banking Corporation of Australia

Limited ("National Bank") was also produced on 30 May 1983 and registered on 11 July 1983. Allan John Clarke is a son of the

As is apparent, 1t was a family transaction. At no time was any formal contract entered into. On any view of the matter, there has been considerable delay before any relevant documents were stamped. Subsequent to the transfer, Mr. Clarke, the bankrupt, continued in possession. The memorandum of transfer on 1ts face indicates an ordinary contract of sala for a consiéeration of $46,009 O94, However, what 15 asserted by the

respondents to be the consideration for the transfer ais the

and its associated aunterest, azwell as the discharge of a liability of Ernest Charles Clarke by wav of mertgage to the National Bank of Australasia Limited in respect of the propertr, effected by an assumption of 3 similar mortgage hy Allan John Clarke and Wendy Pauline Clarke. Ae to the arount of $48,900.90, the evidence suggests that the consideration for the transfer 1s slightly under $40,000.00. The s:iqnificance of the figure of

$48,000.00 is a matter to which reference will later be made.

"(1) Subject to this section, a disposition of property, whether made before or after the commencement of this Act, with intent to defraud creditors, not being a disposition for valuable

consideration in favour of a person who acted in good faith, is, if the person making the disposition subsequently becomes a bankrupt, void as against the trustee in the bankruptcy.

(2) Nothing ain this section shall be taken to affect or prejudice the title or interest of a person who has, in good faith and for valuable consideration, purchased or acquired the property the subject of the disposition or any interest in that property.

(3) In this section, 'disposition of property' includes a mortgage of property or a charge on or in respect of property."

Section 122 deals with the avoidance of preferences,

"A conveyance or transfer of property, a charge on property, of aA payment made, or an obligation incurred by a person whe 1s unable to pay his debts as they become due from his own money (in this section referred to as 'the cdebtor'), in favour of a creditor, having the effect of giving that creditor a preference, priority or advantage aver other creditors, being a convevance, transfer, charge, payment or obligation executed, made or incurred -

(a) within 6 months before the mresentation of a petition on which, or by virtue of the presentation of which, the debtor becomes a bankrupt; or

(b} on or after the day on which the petition on which, or by virtue of presentation of which, the debtor becomes a bankrupt 1s presented and before the day on which the debtor becomes a bankrupt,

Section 122(2) provides, inter alia, that the section does not affect the rights of a purchaser, payee or encumbrancer in good

faith and for valuable consideration and in the ordinary course

The submissions advanced on behalf of the respondents to the application by the bankrupt's trustee may be stated shortly. It was submitted on behalf of the son and daughter of the bankrupt that, in relation to the operation of 5.122, the relevant date was the date when Mr. Clarke executed the transfer and delivered it to the solicitor acting for his son and daughter, thereby placing them in such a position that they were able to negotiate their loan and ultimately have themselves registered. This date was said to be 1 December 1982 and therefore prior to the six months before the presentation on the petition on which the debtor became a bankrupt, which was 8 August 1983. As to s.121, 1t was submitted that on the evidence 1t was impossible to fiz either the bankrupt or his children with

The central issue in this case is when the conveyance or

transfer of property from the bankruot to his children occurred.

The respondents assert ctnat the squitable estate passed fo them prior to 3 February 1983. and ain particular, the equitable estate passed on 1 December 1982. The trustee submits

that anv legal or equitable interest did not pass earlier than 9

In Re Weiss; Ex parte White v. John Vicars & Co.Ltd.

(1970) A.L.R. 654, (being the Australian Argus Law Reports), Gibbs J. as he then was, sitting in the Federal Court of Bankruptcy, referred to the decision of the High Court in Burns

v. Stapleton (1959) 102 C.L.R. 97, and said, at p.662:-

"The decision 1s clear authority for the proposition that the execution of a formal mortgage document giving security over property which is already subject to an equitable mortgage in favour of the mortgagee in respect of the same debt is not a preference. The question, however, is whether in the present case there did come into being any equitable mortgage in favour of the respondent at any time before the execution of the bill of sale.

It has long been settled that a contract for valuable consideration and capable of specific performance by which it is agreed to mortgage property creates an equitable mortgage of that property - see Holroyd v. Marshall (1861), 10 H.L.C. 191, at p. 209; 11 E.R. 999, at p. 1006; Tebb v. Hodge (1869), L.R. 5 C.P. 73, at p.80, and Palmer v. Carey, C1926] A.C. 703, at pp. 706-7; £1926] All E.R. Rep. 650.

It is right to say in the present case that no contract containing all the terms and conditions embodied 1n the bill of sale was made before the bill of sale was signed, but 1t 1s not necessary tht the contract relied upon as the foundation of the equitable mortgage should contain all the terms supsesuently agreed. It 1s encugh that there was a contract to give a mortgage over the property in question."

In this case there vas no written contract, so 1t became necessary to have to determine when a bindirg agreetent came inte

existence in respect of the transfer of the property.

The bankrupt became the registered proprietor of the subject land on 16 September 1952. His wife, shortly before she died on 12 September 1978, received slightly more than $15,000.00

as the proceeds of sale of a house which she had owned. She died intestate, but the respondents have said that before her death, some $15,000.00 was given to them by her, which they then informally loaned to their father, to be used by him in

connection with the furniture business which he had operated for

many years. The loan was for an indefinite period, with an interest rate of 10%; no payments were made by the bankrupt to

his children by way of interest or repayment of principal.

Wendy Clarke is a qualified nurse and at relevant times was living in the house at 364 Old Cleveland Road, Coorparoo. Allan Clarke was a teacher living and teaching on the Sunshine

There is affidavit evidence, which I accept, that at all material times Mr. Clarke Senior was insolvent. This conclusion 1s also supported by oral evidence, and while not conceded by counsel for the respondents, was not the subject of submissions

On 2 Sentember 1982, the National Bank made available a loan to Mr. E.C. Clarke of $19,000.90 ona term loan account requiring a numpec of quarterly instaiments to be paid, the first instalment of $1,990.00 was to be made on the last day of November 19982. The banking documents show that that occurred but that no further oayments were made in respect of the balance of $18,000.00 of the principal of that loan, until the term loan account was discharged on 16 May 1983 by a credit of $18,000.00. The loan was secured by an existing bill of mortgage. At the

time of that advance, Mr. E.C. Clarke indicated to the National

Bank that he valued the house property at $65,000.00.

While I am primarily concerned with events in December

1982 and January and February 1983, other important events in the

chronology are that on 28 February 1983 Mr. Clarke Senior was served with a bankruptcy notice and an act of bankruptcy was

Mr. R.A. Symons, a solicitor, who in his evidence described himself as the Clarke's family solicitor, answered a subpoena and produced a bundle of documents as a file relating to the transfer of the property from Mr. E.C. Clarke to his son and daughter. There is no file number or file cover or folder. There 1s no indication of when instructions were received in relation fo the matter. In this bundle of documents, there 18 a copy of a "Notice of Sale or Purchase of Land" to the Commissioner of Land Taz, which is undated, as well as a copy Form V.G.1 to the Department of the Valuer-General, also undated. There is, however, a copy Form F which recites inter alia, "I, ERNEST CHARLES CLARKE, of 354 91d Cleveland Road, Coorparoo in the State oT QUEENSLAND, do solemnly and sincerely declare that an the (the date 1s blank} transfer to ALLAN JOHN CLARKE and WENDY FAULINE CLAPKE of Coorparoo certain ovoroperty;" and then describes the house ysroperty at Old Cleveland Foad. The consideration has a handwritten figure for the freehold of $12,000.00 and improvements of $36,000.00, although no evidence establishes in whose handwriting those figures were made nor at what time, and the figure for the total 1s left vacant. Paragraph 4 of that form says that the relationship between the transferror and ",..-the said ALLAN JOHN CLARKE & WENDY PAULINE CLARKE..." was "...Father and Son..." and at the foot one reads "And I make this solemn declaration conscientiously believing the same to be true,

and by virtue of the provisions of the Oaths Act 1867-1981", and

there appears in typing "Declared and signed before me at BRISBANE this lst day of December 1982", and then Mr. Clarke's Signature appears in blue biro. There is no signature on the copy Form F of the Justice of the Peace or other witness. The original of this document and any further information that might be helpful as to when it came into existence and when it was sent or received 1s not before me. The respondents rely on the typewritten date, the first of December 1982, on this document

Mr. Symons says that his dealings were with Mr. Peter Clarke, another son of the bankrust who is not party to this

particular transaction but -.was the spokesman for the

family...". He says that Peter Clarke approached him in mid-November 1982 to arrange the transfer of the house from his father to his sister and his brother Mr Symons arranged an appraisal from two agents inthe area to get a value of the property. He savs that he "got a orice which was around between $45,000.00 and $50,000.00", and that onl December 1982 he witnessed the signatures of Mr. Clarke on the memorandum of transfer and, further, that the signature at the bottom of the Form F declaration was in fact appended by Mr. Clarke in his presence on that day. These signings occurred in the toy shop at Coorparoo. He said in response to an assertion that the

memorandum of transfer was not executed on 1 December 1982 that:-

just prior to Christmas and that particular morning I collected some toys from Mr. Clarke for my children."

There is no evidence as to whether any person witnessed the

On 27 April 1983, a memorandum of transfer dated 1 December 1982 expressing a consideration of $48,000.00 was lodged for stamping. On 30 May 1983, that memorandum of transfer was produced at the Titles Office, as was the discharge of the bill of mortgage between the bankrupt and the National Bank and a bill of mortgage with the respondents as mortgagors to the

Natonal Bank. The transfer, discharge and bill of mortgage were registered on 11 June 1983. The petition for a sequestration order against Mr. E.C. Clarke was presented on 8 August 1982 and

There 18 a diary note dated 26 January 19282 by the bank manager of the branch of the National Bank at which Mr. E.C.

"Ernie enquired if the debt and security may be transferred over to his daughter Wencéy Pauline whe banks at Coorparoo and 1s a senior sister at the Poyal Brisbane Hospital and to his son Allan John Clarke who 15 Science Master at Maroochydore High School. (Wendy lives in the house with Ernie). Advised Ernie that we could probably so arrange but he would need to decide whether he is giving/selling 1t to them both or just Wendy & then we would need to know their financial positions to gauge their ability to repay."

The account contained in this note, relating to the position in late January 1983, is quite inconsistent with an existing

agreement to transfer the property to his son and daughter.

On 9 February 1983 there is a further diary note in

Wendy & Allan called requesting tfr of their fathers loan to them so that they may purchase his house. She is customer of Coorparoo Branch whr she has had Personal loans, he 1s Haigh School teacher at Maroochydore, both are obviously quite reliable and will not have any trouble servicing

the loan between them. Agreed to assist & tfrd his a/cs from Cwlth.""

In the bundle of documents produced by the solicitors there 1s a telephone message dated 16 February 1983 to Mr. Symons from Mr. Ellis of the National Bank asking Mr. Symons to call him "ce Clarke". The mortgage given by Wendy and Allan Clarke 15 dated 11 February 1983 and is witnessed by the bank manager of The National Bank who interviewed them on 9 Tebruary 1983. Mr. Allan Clarke says that he saw the bank manager on 9 February, that he was given several documents tc sign, he certainiy did not return to Brisbane two days later to sign further documents and, whilst he cannot yrecall the order, his sister signed

decuments with him in the same room at the bank together. Wendy

"...when was it agreed that the transaction would be completed? That 1s, when would you become the

A. We agreed that once the finance was completed with the bank, that that would be it.

A. That was the day we signed a mortgage at the bank.

Q. Right. So, that is when you first agreed as to when you would have the transfer take place, that is -- -?

transfer would take place, once we signed that money over from the bank."

"And you apparently signed it on 11 February? A. Yes.

Q. And is that the day upon which you first agreed as to when the property would become yours?

A. That was the day, yes. The day we signed the mortgage, the property became ours.

Q. ...and did you reach that agreement with your father...?

dascussions, but this was the transaction that put 1t unto effect?

A. That was the finalisation. 9. But you had previously had scme discussions?

",..we took ait to be finalised on that day we signed the mortgage."

Mr. E.C. Clarke gave evidence but was unable to remember

I am satisfied that the mortgage was signed no earlier than 9 February 1983, and was probably signed on that date, notwithstanding it bears date 11 February 1983. It was executed

within the six months prior to the presenttion of the petition

for a sequestration order against Mr. E. C. Clarke.

It was submitted on behalf of Allan and Wendy Clarke that the effective date of transfer was the date when the transfer was "executed and delivered" by their father, and "delivery" occurred in the sense that it was given to the solicitor acting on behalf of Wendy and Allan Clarke. It was said that "...there was nothing more that Mr. Clarke had to do to

put his son and daughter in possession of the relevant equity".

I do not accent that, 1f the sraning of the memorandum of transfer di* occur cn 1 Decamber 1997, there was an execution and delivery in the relevant sense fo the respondents simply in

he retention by Mr. S:mons of the memorandum of transfer signed

y M Symons was acting for all ¢arties and had no direct iunstructions from Wendy or Allan Clarne in any respect. In my Opinion, what 1s said to have occurred on 1 December 1982 does not constitute an execution and delivery by Mr E.C. Clarke to his son and daughter of the memorandum of transfer. It as equally open, and more acceptable in my view, that what 1s said to have occurred 1s properly to be characterised as the securing of a signature on a document by Mr. Symons of Mr. E.C. Clarke,

and the document being retained by Mr. Symons as solicitor for

In the bundle of documents produced by Mr. Symons 1s a photocopy of a letter dated 22 April 1983 addressed to the Commissioner, Stamp Duties Office, headed 'RE: E.C. CLARKE - 364 OLD CLEVELAND ROAD, COORPAROO' on the letterhead of Ray White,

Morningside, Real Estate Agents and Auctioneers. The body of

We wish to advise that in our opinion the current maket (sic) selling price of the ahove mentioned dwelling to be approximately $48,000-00."

The terms of that letter and its tense are to be noted, and in particular the value 1s expressed to be a value current as at 22

However, he later said that this was not right and that:-

"T said I got two appraisals and I said later I got this document for stamping purposes."

In clarification, he said that he got two verbal appraisals in November and that, "...when 1t was required to have it placed in

writing, I contacted one of those, and that was the result of

I do not accept that "two appraisals between $45,000.00 and $50,000.00" would necessarily lead to a value either as at 1

December 1982 or in early to middle of 1983 of $48,000.00.

On all the evidence before me, I am satisfied that, while there were negotiations and discussions not only between members of the family but with the Woolloongabba Branch manager of the National Bank prior to February 1983, there was no agreement between Mr. E.C. Clarke and his son and daughter in respect of that property that there would be a transfer of the property at any time before 9 February 1983. The evidence of Wendy Clarke was to the effect that, after family discussions,

she intended the transfer to occur, and 2t did occur when = she

signed che mortgage documents at the National Bank.

Notwithstanding the date on the memorandum of transfer, I am satisfied that the conveyance or transfer of the property at 364

Qld Cleveland Poad, Coorparoo, occurred no earlier than 9 February 199?, It might very well have been later and even much later, but there was no agreement to convey that property (which necessarily invelves agreement as ta xorice ard when 1t was to

occur), which came into existence earlier than that date.

Implicit in his conclusion 1s my inability to accept the reliability of the recollection of Mr. Symons as to the circumstances in which the memorandum of transfer came into existence. Further, I do not accept as reliable his recollection

that the memorandum of transfer was executed on the date that 1t

considertion of the whole of the evidence but, by way of emphasis, there are aspects that strike me as particularly telling. Some have already been referred to in detail, but it seems to me that as at 1 December 1983, the sum of $648,000.00 as consideration was a figure which did not in any sense apparent to me relate to any obligation owed by Mr. E.C. Clarke to his son or daughter, either then and/or to be assumed by them; nor did it, so far as the evidence discloses, have any necessary correspondence to any "appraisal" that was given, because the evidence simply speaks of two appraisals, and a price between

Further, the terms of the letter of 22 April 1983 by Ray White, Morningside, do rot lerd support to any suggestion that that figure was a figure which had earlier Deen verbally given before 1 December 19382 and then adhered ta in the written

1D ns wr iy agreement by E.C. Clarke and his son and daughter to transt house to them, seems to me inconsistent with the evidence,

particularly of Wendy Clarke, as to her understanding of the

transaction in which she entered with her father. It is quite inconsistent with the tenor of the conversations as reflected in the bank notes of the Woolloongabba Branch Manager of the National Bank of 28 January 1983 and of 9 February 19983. Considering the documentary evidence which 1s in evidence, 1t seems to me quite unlikely that there was an agreement, with the

necessary contractual requirement of certainty as to terms, in

existence between Mr. E.C. Clarke and his daughter and son as at

1 December 1982, the date the memorandum of transfer bears.

Pinally, and importantly, there is in this case the absence of supporting material and detail which one would ordinarily expect to be in existence if there had been such an

Iam satisfied that this conveyance or transfer was within the six months period, it cannot be suggested that 1t was in the ordinary course of business, and in my opinion 1s void as

against the trustee in bankruptcy pursuant to the provisions of

As te the applicability of $,.121 to this transaction, there are factors which I find disquieting, but 1b seems to me inappropriate in the light of ny opinion as to the factual circumstances of the coring into existence of the agreement ta transfer or convey the preverty, to consider, on some therefore necessarily hypothetical basis. whether there was a fraudulent

In the resuit, I propose to order that the respondents, Allan John Clarke and Wendy Pauline Clarke, transfer to Alkan

Richard Taylor as trustee of the property of Ernest Charles Clarke, the property being house and land at 364 Old Cleveland Road, Coorparoo, more properly described as subdivisions 47 and

48 of Section 10 of subdivision 1 of Portion 54 on Plan Catalogue

Number B15-595 being the whole of the land contained in

Certificate of Title Volume No. 1393 Folio 72, and further that

the respondents pay the applicant his taxed costs of and

| certify that this an t.9 /b preceding Pages are a true copy of the reasons for judgment herein of His Honour Mr. Justice Spender a ao . F_. P77. ¢ZevGrey Associate

At a glance

Court

Decision date

Source

Judgment (127 paragraphs)

Cited By (2)