Verge v Devere Holdings Pty Ltd

Federal Court of Australia|2010-12-22|Before: McKerracher J

INTRODUCTION 1 Following publication of written reasons in Verge v Devere Holdings Pty Ltd (No 4) [2010] FCA 653 (Verge No 4), the parties were invited to make written submissions concerning final relief. The parties also sought and applied to make oral submissions which were duly heard on two hearings. I then also permitted Investec (as defined in Verge No 4) to make written submissions if it so chose. 2 Investec filed written submissions in response to the invitation to do so. Those submissions understandably went to opposing any transfer of the one-third interest in the Dongara Land if it were unencumbered. No objection was expressed to the relief as sought by the applicants. Investec also sought its costs for filing submissions. As the invitation for it to express any relevant concerns was extended as an abundance of caution by the Court rather than by the parties and as the relief sought by the applicants did not contemplate an unencumbered transfer, it does not seem to me appropriate to require any of the parties to bear those costs. On the other hand, none of the concerns as expressed by Investec will arise. 3 It is convenient to work from the applicants' minute which is in the following terms: 1. The third respondent do by its sole director and secretary Alfred John Naude within 7 days of the date of this order execute and deliver to the applicants in their capacities as the trustees in bankruptcy of Joan Elizabeth Andony a transfer of an undivided one sixth interest in the land comprised in Certificate of Title Volume 1773 Folio 315 ("the Land"). 2. The third respondent do by its sole director and secretary Alfred John Naude within 7 days of the date of this order execute and deliver to the applicants in their capacities as the trustees in bankruptcy of Arthur John Andony a transfer of an undivided one sixth interest in the Land. 3. In the event of non compliance with order 1 or order 2 above, a Registrar or Deputy Registrar of the Court be authorised to execute and deliver such transfer and affix the seal of the Court thereto pursuant to Order 37 rule 3. 4. The third respondent do indemnify the applicants in respect of any amount payable to any mortgagee of the Land. 5. The first and second respondents do account to the applicants for and pay to the applicants $532,593.56 representing the proceeds received by them from the purported sale of a one third interest in the Land by the second respondent to the third respondent together with interest on that sum from 3 July 2007 until judgment at a rate or rates to be fixed by the Court. 6. The second respondent do account for and pay to the applicants the sum of $1,065,187.10, representing the balance of the sum of $1,597,780.70 received by it as a result of its shareholding in the first respondent on or about 3 July 2007 together with interest on that sum from 3 July 2007 until judgment at a rate or rates to be fixed by the Court. 7. Subject to order 11 below, pursuant to s.120(1) of the Bankruptcy Act 1966, it is declared that the issue of 1,111,113 shares in the first respondent to the second respondent on or about 3 November 2001 is void as against the applicants and, the applicants must pay to the second respondent $172,229.50 pursuant to s. 120(4) of the Bankruptcy Act 1966. 8. Subject to order 11 below, pursuant to s.120(1) of the Bankruptcy Act 1966 it is declared that the transfer of 1,111,111 shares in the first respondent from Joan Elizabeth Andony and Arthur John Andony jointly to the second respondent in or about June 2003 is void as against the applicants and, the applicants must pay to the second respondent $265,979 pursuant to s.120(4) of the Bankruptcy Act 1966. 9. It is declared that the transfer of one share in the first respondent by each of Joan Elizabeth Andony and Arthur John Andony to the second respondent in or about June 2004 is void. 10. Pursuant to orders 7 to 9 above, the first respondent's register of members kept pursuant to s.168(1) and s.169 of the Corporations Act 2001 be corrected pursuant to s.175 of the Corporations Act 2001 to show that: (a) the shares referred to in order 7 above were not issued; (b) the shares referred to in order 8 above are held by the applicants jointly as trustees of the bankrupt estates of Joan Elizabeth Andony and Arthur John Andony jointly; and (c) the shares referred to in order 9 above are held by the applicants jointly as trustees of the bankrupt estate of Joan Elizabeth Andony as to 1 share and jointly as trustees of the bankrupt estate of Arthur John Andony as to the other share. 11. The sums of $172,229.50 and $265,979 payable pursuant to orders 7 and 8 above by the applicants to the second respondent be paid by being set off against the sum of $1,065,187.10 payable by the second respondent to the applicants pursuant to order 6 above and the second respondent do pay the applicants the balance of $626,978.60 together with interest thereon from 3 July 2007 until judgment at a rate or rates to be fixed by the Court. 12. The second respondent do pay the applicants' costs of the action to be taxed: (a) on a party and party basis up to and including 28 April 2009; and (b) on an indemnity basis thereafter. 13. The first and third respondents do pay the applicants' costs of the action to be taxed on a party and party basis. 14. There be liberty to apply for ancillary orders to effect or implement any of the above orders. 4 On the hearing of the application, senior counsel for the applicants advised that the relief sought in para 5, as a result of the applicants exercising an election, was abandoned. That information had been conveyed in advance to the solicitors for the first and second respondents (Devere and Packham) but apparently not to the new solicitors representing the third respondent (Castleworld). Accordingly, argument proceeded in relation to the relief between the applicants and Devere and Packham but was adjourned concerning Castleworld. At a further hearing, argument continued concerning the relief between Castleworld and the applicants. 5 The argument concerning the appropriate relief followed the conclusions summarised in [414] to [430] inclusive in Verge No 4. As a result of those conclusions, most of the paragraphs of the applicants' minute were not in dispute, specifically, paras 1-3 inclusive and paras 6-11 inclusive. (The numbering changed due to the deletion of para 5 and para 6 arising from the election). 6 There were three issues remaining. There was substantial disputation between the applicants and Castleworld concerning the indemnity paragraph, (para 4 above). The issue of costs was also the subject of dispute. 7 In addition, over and above the debated orders, Devere and Packham sought a stay of execution of any judgment. I will deal with these topics in the order in which they were argued with the exception of the interest rate which I will address immediately.

INTEREST RATE 8 For the payments under the orders, the parties have left it to me to fix the rate of interest at the rate I consider to be appropriate. In that regard, s 51A of the Federal Court of Australia Act 1976 (Cth) (FCA) relevantly provides: 51A Interest up to judgment (1) In any proceedings, for the recovery of any money (including any debt or damages or the value of any goods) in respect of a cause of action that arises after the commencement of this section, the Court or a Judge shall, upon application, unless good cause is shown to the contrary, either: (a) order that there be included in the sum for which judgment is given interest at such rate as the Court or the Judge, as the case may be, thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date as of which judgment is entered; or (b) without proceeding to calculate interest in accordance with paragraph (a), order that there be included in the sum for which judgment is given a lump sum in lieu of any such interest. 9 No specific interest rate is prescribed under the FCA. Section 52(2) FCA provides in relation to post-judgment: 52 Interest on Judgment ... (2) Interest is payable: (a) at such rate as is fixed by the Rules of the Court; or (b) if the Court, in a particular case, thinks that justice so requires - at such lower rate as the Court determines. 10 Order 35 r 8 FCR for post judgment interest by provides: 8 Interest on judgment The prescribed rate at which interest is payable under paragraph 52(2)(a) of the Act is: (a) in respect of the period from 1 January to 30 June in any year - the rate that is 6% above the cash rate last published by the Reserve Bank of Australia before that period commenced; and (b) in respect of the period from 1 July to 31 December in any year - the rate that is 6% above the cash rate last published by the Reserve Bank of Australia before that period commenced. 11 Different considerations may on some occasions govern the rate of interest in post judgment and pre-judgment situations under these provisions. In some cases a higher rate post judgment operates as an incentive for satisfying the judgment. Prior to judgment there may be many variables including delay, for which the judgment debtor may not be totally responsible. Although it was in a different context, in Whitaker v Federal Commissioner of Taxation (1998) 82 FCR 261 the Full Court, in considering the assessability of interest on damages awarded for personal injury, observed that the primary purpose of pre-judgment interest was to compensate the plaintiff for being deprived of the use of the money. It was not compensation for a foregone investment opportunity and did not replace any actual or notional lost income. 12 Interest under s 51A FCA is part of the loss or damage suffered which represents compensation for being out of pocket to the extent of the principal amount: Smallacombe v Lockyer Investment Co Pty Ltd (1993) 42 FCR 97 (at 103). The Court will ordinarily apply the same rate of interest as would be applied in litigation in the same state in which the case is being heard: McCormick v Riverwood International (Australia) Pty Ltd [2000] FCA 32 (at [13]). If those rates are penal or not commercial there will be a departure: GEC Marconi Systems Pty Ltd (t/as Easams Aust) v BHP Information Technology Pty Ltd (2003) 201 ALR 55 (at 58). Where jurisdiction is shared a consideration is that doing so ensures some consistency in an award regardless of whether a matter is litigated in the Federal Court or in the relevant State or Territory Supreme Court: Namol Pty Ltd v AW Baulderstone Pty Ltd (No 2) (1993) 47 FCR 388 (at 389 per Davies J). 13 The relevant pre-judgment rate of interest as prescribed by s 32 of the Supreme Court Act 1935 (WA) and O 36 r 20 of the Rules of the Supreme Court of Western Australia during the period from 3 July 2007 to the date of judgment of the Court was 6%. 14 For the purposes of this proceeding that rate is adopted.

Indemnity Costs 15 In support of the applicants' claim for an order for indemnity costs, senior counsel produced a written offer bearing a date of 28 April 2009 signed by the solicitors for the applicants. The offer (the Costs Offer) was in the following terms: The applicants hereby offer to the first respondent to compromise all of their claims against the first and second respondents in these proceedings by accepting payment either from the first respondent solely, or from the first respondent jointly with the second respondent, of the following sums: (a) $1,000,000; and (b) interest of $183,050,12 being interest on $1,000,000 calculated from 2 July 2007 until 24 April 2009 at the rate prescribed by order 35 rule 7A (a) of the Federal Court Rules ; and (c) payment of the applicants' costs of the proceedings, including the Federal Magistrates Court proceedings, to be fixed by a Judge pursuant to order 62 rule 4(2)(c) of the Federal Court Rules. This offer is made pursuant to Order 23 of the Federal Court Rules and is open for acceptance for 21 days from the date of the offer. And the applicants also hereby offer to the second respondent to compromise all of their claims against the first and second respondents in these proceedings by accepting payment either from the second respondent solely, or from the second respondent jointly with the first respondent, of the following sums: (d) $1,000,000; and (e) interest of $183,050.12 being interest on $1,000,000 calculated from 2 July 2007 until 24 April 2009 at the rate prescribed by order 35 rule 7A (a) of the Federal Court Rules; and (f) payment of the applicants' costs of the proceedings, including the Federal Magistrates Court proceedings, to be fixed by a Judge pursuant to order 62 rule 4(2)(c) of the Federal Court Rules. This offer is made pursuant to Order 23 of the Federal Court Rules and is open for acceptance for 21 days from the date of the offer. 16 Relevantly, O 23 r 11 of the Federal Court Rules (FCR) provides as follows: 11 Costs … (4) If: (a) an offer is made by an applicant and not accepted by the respondent; and (b) the applicant obtains judgment on the claim to which the offer relates not less favourable than the terms of the offer; then, unless the Court otherwise orders, the applicant is entitled to an order against the respondent for costs incurred in respect of the claim: (c) up to and including the day the offer was made - taxed on a party and party basis; and (d) after that day - taxed on an indemnity basis. … 17 The applicants argue that the judgment they will secure, having regard to [371], [373] and [424] of the reasons in Verge No 4, must be a judgment not less favourable to them than the terms of the offer to Packham. 18 In those paragraphs of Verge No 4, I said: 371 The evidence from Mr Naude and from Mr Fazio's affidavit is that $1,597,780.70 of the total proceeds of sale of $1.6 million was actually ultimately received by Packham at the direction of Devere. Packham was the owner of all of the shares in Devere. The only reasonable inference is that Packham received those monies or the benefit of them by virtue of its position as Devere's sole shareholder. Mr Fazio who was not called to give evidence and could have rebutted that inference, did not do so. Packham has received those sums with the knowledge of Mr Fazio (its controlling mind and will) of the applicants' interest in the Dongara Land. It follows that Packham is obliged to account to the applicants to the same extent as Devere. … 373 The receipt of the proceeds of the sale of the whole of the Dongara Land by Packham in its capacity as a shareholder represents money had and received by Packham for the use of the applicants' shares for which Packham is obliged to account to the applicants. … 424 Both Devere and Packham are liable to account to the applicants for the proceeds of the sale of the one-third interest in the Dongara Land to Castleworld as monies had and received for the use of the applicants. 19 At [374]-[377] of the reasons in Verge No 4, I said: 374 The applicants contend that the claims they have against Devere and Packham to account are in addition to, not in substitution of the applicants' right to a one-third interest in the Dongara Land. I accept these claims are additional or separate subject only to the proviso that the applicants should not be permitted to be compensated more than once in the sense of 'double dipping': Deckers Outdoor Corporation Inc v Farley (No 5) (2009) 262 ALR 53 (at [76]) per Tracey J. 375 As will be evident from the analysis of the evidence, the Dongara Land has now been encumbered by Castleworld with a mortgage in favour of Investec from which the monies received by Devere and Packham were procured. The accounting of those monies to the applicants will permit the applicants to eliminate or reduce the liability under the mortgage. Devere in its capacity as trustee of the applicants' one-third interest in the Dongara Land, by virtue of the effect of the Bankruptcy Act, owed the applicants from the commencement of the bankruptcy duties of a fiduciary nature to act in the best interests of the applicants with respect to that interest. Those duties include duties to exercise any sale with respect to the applicants' interest in the Dongara Land reasonably and in good faith and to account to the applicants for the proceeds of the sale of the interest. 376 The power of sale exercised by Devere in relation to the one-third interest, however, was not exercised reasonably and, I find, was not exercised in good faith. The Dongara Land was sold at an undervalue. Devere at the time was well aware of the claim by the applicants in respect of the land, proceedings having been commenced, yet it did not give them the opportunity to intervene and it did not notify them of the intended transfer. Devere's sale of the Dongara Land to Castleworld could only have been calculated to, at least in part, frustrate or defeat the claims of the applicants to interest in the land. 377 Devere has not accounted to the applicants for the proceeds of the sale. The applicants are entitled to equitable compensation for Devere's breach of duty. Precisely how that should be formulated is a matter for further submission but it would take into account the market value of the applicants' one-third interest in the Dongara Land as at the date of the transfer to Castleworld. It would also take in to account any amounts actually received by the applicants from Devere and/or Packham for their restitutionary claims and amounts required to eliminate the Investec mortgage on the Dongara Land. 20 As indicated in [4] above, the applicants elected at the time of judgment to abandon an entitlement that Devere and Packham do account to it and rather elected to pursue the relief requiring Castleworld to effect to the applicants a conveyance of an undivided one-third interest in the Dongara Land, obliging Castleworld to indemnify the applicants in respect of any amount payable to any mortgagee of the Dongara Land. 21 Paragraph 5 and para 6 of the original minute were not pursued by the applicants as it was necessary to elect at judgment as to which form of relief would be pursued. 22 Having elected to have the one-third interest in the Dongara Land transferred back, there is a question of whether the judgment will be more or less favourable than the Costs Offer as the conclusion I reached at judgment was that the value of the Dongara Land was $1.9 million. It follows that an undivided one-third interest in the Dongara Land would be worth $633,333.33. While that figure may be more or less now, there is no evidence as to the current value. 23 It was for that reason and on that basis that Devere and Packham contended that the effect of the judgment in favour of the applicants was less favourable than the amount in respect of which the applicants had indicated they would settle. (The applicants contended the Dongara Land was worth approximately $6 million at the time of Castleworld's acquisition of the Dongara Land). 24 It may be accepted that if the applicants had succeeded in satisfying me as to the value of the Dongara Land in accordance with the expert evidence they adduced, that the offer made might be one which was for a sum less than that for which judgment (in the terms elected) was given. 25 However, in my view as one third of the value of the Dongara Land (as a result of assessing all expert evidence) was as found, worth less than the amount of the Costs Offer, I do not believe that the conclusion favourable to the applicants is capable of being reached. Therefore I would not make any order for indemnity costs.

Apportionment of costs 26 Devere and Packham also contended that the claim made by the applicants against Castleworld generated a number of discrete issues relevant only to that claim. Devere and Packham argue that the costs payable by them ought not to include the applicants' costs relating to their claim against Castleworld. This submission is correct and obviously the applicants are only entitled to their costs once. It should suffice for taxation purposes if I record that Devere and Packham are only liable for that portion of the applicants' costs referable to the claims made against them. It is not a situation where three respondents are jointly and severally liable for the same costs. 27 Section 43(3)(c) FCA empowers the Court to make provision for the parties to pay costs in specified proportions. The submissions of the parties, mainly the respondents, approach the matter on this basis. 28 Castleworld contends that it should be liable for only one-sixth of the costs of the applicants. Broadly speaking, this submission is put on the basis that there were many matters of historical dealing which occurred before the involvement of Castleworld and which were also the subject of the claim, the evidence and the determination at trial. Castleworld also points to aspects of the applicants' claim that did not succeed. In this regard, the only serious aspect of the claim by the applicants which did not succeed was the claim in respect of fraud for the purposes of the Transfer of Land Act 1893 (WA) argument. 29 I accept the submission of senior counsel for the applicants that this amendment to the pleading was introduced at a very late date prior to the trial as a result only of the very late introduction by Castleworld of a contention that for various reasons the principles of indefeasibility under the Transfer of Land Act would preclude the relief sought by the applicants, namely, the transfer back of a one-third interest in the Dongara Land. Although the claim in fraud, which would have defeated the indefeasibility argument failed, all other elements of Castleworld's defence failed except the argument as to the value of the Dongara Land. 30 I consider that the value of the Dongara Land was a very important feature of this litigation and certainly the expert evidence given by valuers for all parties occupied a significant part of the trial. I also accept the argument for Castleworld that the dealings with Devere and Packham which substantially predated any involvement of Castleworld were not shown to be connected in any sense with Castleworld and in respect of those aspects of the trial I note that counsel for Castleworld with my leave absented himself for part and in other parts, did not cross-examine the applicants' witnesses. 31 It is also relevant that the litigation between the applicants and Devere and Packham was running for a longer period (by approximately 9 months) than the litigation against Castleworld. 32 Taking those matters into account, in my assessment, a reasonable determination of the costs which should be recoverable by the applicants against Devere and Packham and Castleworld on a party and party basis on taxation are that Devere and Packham do pay two-thirds of the applicants' taxed or agreed costs and Castleworld pay one-third.

A STAY OF THE JUDGMENT 33 There is no motion filed by Devere and Packham pursuant to O 52 r 17 FCR. No appeal has been lodged and no affidavits filed in support of the appeal. In consideration of an application for a stay pending appeal, it is necessary to exercise a discretion to determine, amongst other things, the prospects of success of the appeal. As there is no notice of appeal it is impossible to form a view on that topic at this stage. It may be for that reason that it was premature to file a motion for a stay. 34 In any event, it seems to me that the concerns of Devere and Packham can be accommodated by giving them sufficient time to properly seek a stay, if they intend to do so; I have provided in the orders (order 8) that the adjustment to the Share Register of Devere is to be effected not before 28 days from today. Should Devere and Packham wish to file a motion for stay of any orders, it can be accompanied by suitable materials which can be considered on the question of whether a stay is appropriate.

THE INDEMNITY ISSUE 35 The applicants press for an order requiring Castleworld to indemnify the applicants in respect of any encumbrance over the Dongara Land as a result of the following matters. (a) my conclusion (at [416]) that the transfer of the Andonys' original one-third interest in the Dongara Land from Devere to Castleworld was void against the applicants; (b) my conclusions (at [350] and [417]) to the effect that Castleworld had notice of the applicants' claim to an interest in the Dongara Land at the time of its acquisition and, therefore, did not acquire the one-third interest in the Dongara Land in good faith; (c) my finding (at [209]) that Investec advanced $1,606,699.75 to Castleworld on 2 July 2007; and (d) my finding (at [375]) that the Dongara Land has now been encumbered with a mortgage in favour of Investec to secure that advance. 36 The way the applicants put the matter is that in those circumstances any amounts paid by them pursuant to the mortgage (whether by way of a deduction from the proceeds of a mortgagee sale or otherwise) are: (a) amounts for which Castleworld is responsible (under the mortgage to Investec) and unless Castleworld indemnifies the applicants in respect of those amounts, will result in the unjust enrichment of Castleworld; and (b) therefore are amounts which the applicants are entitled to recoup from Castleworld in accordance with principles of contribution and recoupment. These principles were discussed by the Court of Appeal of the Supreme Court of New South Wales in Cockburn v GIO Finance Ltd (No 2) (2001) 51 NSWLR 624 (at [23]-[30]). 37 The applicants point to the fact they do not know at present to what extent, if any, the Dongara Land may have been encumbered further beyond the existing purchase price at the date of transfer to Castleworld. They do not know whether there may have been any further advances between Investec and Castleworld. They do not know whether and, if so, to what extent Castleworld has continued to incur interest by failing to meet the repayments due to Investec on which evidence was given at trial. For those reasons, the applicants say it is neither fair nor equitable that the applicants ought bear the responsibility and burden of additional charges due to Investec as a result of default by Castleworld in meeting its obligations under the Investec mortgage. I accept these arguments. 38 Castleworld made the argument that the Dongara Land was mortgaged in any event at the time of its acquisition but to that argument that applicants correctly respond that those mortgages were not mortgages or advances given in favour of the applicants. 39 The applicants' position in relation to Investec is that it is ultimately Castleworld alone that should be responsible for the discharge of all of the monies payable to Investec pursuant to the mortgage. That contention appears to be based on an argument of unjust enrichment. 40 Castleworld argues that consistently with the findings, the applicants had initially sought orders that Devere and Packham account to the applicants for monies received from Castleworld in respect of the purchase of the Dongara Land. That was consistent with the applicants' one-third interest in the Dongara Land remaining subject to the mortgage. Castleworld submits that the reasons (at [416]) do not support a conclusion that Castleworld must return to the applicants an unencumbered third interest in the Dongara Land. 41 Castleworld contends that the indemnity sought would permit the applicants, not only to receive the one-third interest in the Dongara Land, an entitlement of the judgment, undisputed by Castleworld but would also entitle the applicants to have their third of the Land freed at the sole expense of Castleworld of any encumbrance to a mortgage. Castleworld argues that an indemnity in favour of the applicants would be inconsistent with the policy underlying s 120 of enabling the trustee in bankruptcy to recapture the amount of shortfall in consideration. In relation to the one-third interest in the Dongara Land, the shortfall, Castleworld says, equated to $100,000. The approach advocated by the applicants would see a result consistent with no consideration having been paid by Castleworld. 42 Castleworld contends that absent the Court concluding that the indemnity order is necessary to create a just result, there is no proper reason for making it.

Conclusion on indemnity 43 In Official Trustee in Bankruptcy v Alvaro and Others (1996) 66 FCR 372 (at 390-391) Wilcox and Cooper JJ held that a court of equity will assist a trustee in bankruptcy to obtain an effective remedy following the avoidance of a disposition. That case dealt with the former s 121 and the former language of disposition rather than transfer. There had been a disposition and the property had not been retained but had been transferred into other identifiable property or mixed with property of a third party. The Court held that the Court will allow a remedy against the identified specific property in order to give the trustee in bankruptcy an effective remedy upon the avoidance of the property. 44 There is no provision in the Act nor any logical reason according with policy under the Act that would justify a diminution of the bankrupts' estate to the prejudice of the creditors to advantage the ultimate transferee (here Castleworld) when the only reason that the transfer has been avoided is because it occurred because of a want of good faith with notice of claim or the preference. 45 Nor is there any reason or basis for removal of the Investec mortgage over that portion. Nor do the applicants seek that relief. Castleworld must indemnify the applicants for any liability under the Investec mortgage. The beneficiary of the mortgage was Castleworld, not the applicants. This is not a transaction in which the applicants are purchasing the one-third interest in the land. It is a judgment by which their proper interest in the land is to be restored to them without obligation to make any payment to Castleworld. If the value of the applicants' onethird interest in the Dongara Land, to which they are entitled by reason of the judgment, is reduced by the applicants being required to meet, as they will be, obligations to Investec under the Investec mortgage but without being indemnified by Castleworld, then Castleworld would be unjustly enriched. Without the applicants being indemnified in respect of liability under the Investec mortgage, the unjust enrichment to Castleworld would defeat the purpose of the relief granted to the applicants. It would produce an unjust result.

ORDERS MADE 46 From the preceding reasoning, it follows that these orders will be made: 1. The third respondent by its sole director and secretary, Alfred John Naude within 28 days of the date of this order execute and deliver to the applicants in their capacities as the trustees in bankruptcy of Joan Elizabeth Andony a transfer of an undivided one-sixth interest in the land comprised in Certificate of Title Volume 1773 Folio 315 ('the Land'). 2. The third respondent do by its sole director and secretary, Alfred John Naude within 28 days of the date of this order execute and deliver to the applicants in their capacities as the trustees in bankruptcy of Arthur John Andony a transfer of an undivided one-sixth interest in the Land. 3. In the event of non compliance with order 1 or order 2 above, a Registrar or Deputy District Registrar of the Court be authorised to execute and deliver such transfer and affix the seal of the Court thereto pursuant to O 37 r 3 of the Federal Court Rules. 4. The third respondent do indemnify the applicants in respect of any amount payable to any mortgagee of the Land. 5. Subject to order 9 below, pursuant to s 120(1) of the Bankruptcy Act 1966 (Cth), it is declared that the issue of 1,111,113 shares in the first respondent to the second respondent on or about 3 November 2001 is void as against the applicants and, the applicants must within 28 days pay to the second respondent $172,229.50 pursuant to s 120(4) of the Bankruptcy Act 1966 (Cth). 6. Subject to order 9 below, pursuant to s 120(1) of the Bankruptcy Act 1966 (Cth) it is declared that the transfer of 1,111,111 shares in the first respondent from Joan Elizabeth Andony and Arthur John Andony jointly to the second respondent in or about June 2003 is void as against the applicants and, the applicants must within 28 days pay to the second respondent $265,979 pursuant to s 120(4) of the Bankruptcy Act 1966 (Cth). 7. It is declared that the transfer of one share in the first respondent by each of Joan Elizabeth Andony and Arthur John Andony to the second respondent in or about June 2004 is void. 8. Pursuant to orders 5 to 7 above, not sooner than 28 days from today, the first respondent's register of members kept pursuant to s 168(1) and s 169 of the Corporations Act 2001 (Cth) be corrected pursuant to s 175 of the Corporations Act 2001 (Cth) to show that: (a) the shares referred to in order 5 above were not issued; (b) the shares referred to in order 6 above are held by the applicants jointly as trustees of the bankrupt estates of Joan Elizabeth Andony and Arthur John Andony jointly; and (c) the shares referred to in order 7 above are held by the applicants jointly as trustees of the bankrupt estate of Joan Elizabeth Andony as to 1 share and jointly as trustees of the bankrupt estate of Arthur John Andony as to the other share. 9. The sums of $172,229.50 and $265,979 payable pursuant to orders 5 and 6 above by the applicants to the second respondent be paid by being set off against the sum of $1,065,187.10 payable by the second respondent to the applicants pursuant to order 5 above and the second respondent do within 28 days pay the applicants the balance of $626,978.60 together with interest thereon from 3 July 2007 until judgment at a rate of 6 per cent per annum. 10. The first and second respondents do pay two-thirds of the applicants' costs of the action to be taxed on a party and party basis. 11. The third respondent do pay one-third of the applicants' costs of the action to be taxed on a party and party basis. 12. There be liberty to apply for ancillary orders to effect or implement any of the above orders. I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher.

Transfer of Land Act 1893(WA)

Bankruptcy Act 1966(Cth)ss 120(1), 120(4)

Corporations Act 2001(Cth)ss 168(1), 169, 175

Federal Court of Australia Act 1976(Cth)ss 43(3)(c), 51A, 52(2)

Verge v Devere Holdings Pty Ltd (No 5) [2010] FCA 1452

At a glance

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Judgment (8 paragraphs)

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Legislation Cited (5)

Cases Cited (11)

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