IN T 'GENE => JUDGMENT No. sicsssssccotoal ssessnsone E FEDERAL COURT OF AUSTRALIA RAL DIVISION BANKRUPTCY DISTRICT OF THE STATE No. 330 of 1980 OF NEW SOUTH WALES AND TH! ro) AUSTRALIAN CAPITAL TERRITORY RE: ERIC DAVID WEBSTER A A Bankrupt - EX PARTE: ROY LESLIE PEGLER RECEIVED —[['"€I _EA J > 10 JUN 1999 Applicant FEDERAL COURT OF PENINSULA HOLDINGS PTY. LIMITED Respondent ORDER JUDGE MAKING ORDER: LOCKHART J. DATE OF ORDER: MONDAY 22 SEPTEMBER 1980 WHERE MADE: AT SYDNEY THE COURT ORDERS THAT: 1. It be declared that the trusts contained in deed of trust dated 26 November 1979 (which is Exhibit E in the proceedings before the Court) be void as against the trustee in the bankruptcy of the bankrupt; It be declared that the trusts contained in deed of settlement dated 26 November 1979 (which is Exhibit D in the proceedings before this Court) be void as against the trustee in the bankruptcy of the bankrupt; It be declared that all shares in the issued capital of Peninsula Holdings Pty. Limited allotted to the bankrupt or purporting to be held by him upon the trusts \ referred to in either of the said deeds be and are hereby vested in Roy Leslie Pegler as trustee of the bankrupt's estat The bankrupt, Brian Eric Cairns and Peninsula Holdings Pty. Limited by itself its servants and agents be restrained until further order from selling, offering for sale, conveying, transferring, encumbering, leasing or otherwise dealing with or disposing of the property known as lot 1414 Pittwater Road, Narabeen in the State of New South Wales; The costs of this application including all reserved costs w and the costs of all occasions when the application has been before the Court be the trustee's costs in the bankrupt's estate and be paid out of the assets of the estate; Liberty be granted to any party to apply in relation to any matter that may arise in the implementation of these orders and generally. IN THE FEDERAL COURT OF AUSTRALIA } GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE )No. 330 of 1980 OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY RE: ERIC DAVID WEBSTER A Bankrupt EX PARTE: ROY LESLIE PEGLER Applicant — PENINSULA HOLDINGS PTY. LIMITED Respondent REASONS FOR JUDGMENT 22. Aint 1980 LOCKHART J. This is an application for orders declaring that two settlements of property are void as against Roy Leslie Pegler ("the trustee") as trustee of the estate of Eric David Webster ("the bankrupt"). The application is made pursuant to s. 120 of the Bankruptcy Act 1966 ("the Act"). The trustee also seeks ancillary relief. A sequestration order was made against the estate of the pankrupt on 17 April 1980 upon the petition presented by The Commercial Banking Company of Sydney Limited on 8 October 1979. The act of bankruptcy was the failure of the bankrupt to comply on or before 26 September 1979 with the requirements of bankruptcy notices served on him on 12 September 1979 and issued in respect of a District Court judgment for $22,319.61 signed on 12 March 1976. ..f/2 On 19 December 1979 the bankrupt authorised Barry Norman Askew to call a meeting of his creditors and to take control of his property in accordance with the provisions of s. 188 of the Act. Mr. Askew gave evidence that there were no moneys brought to the credit of the bankrupt's estate during the period he was the controlling trustee. He said the bankrupt did not make full and frank disclosure of his affairs and did not co-operate with him in his endeavours to fulfil his role' as trustee. Mr. Askew subsequently supported the application" by the petitioning creditor for a sequestration order against the estate of the bankrupt. At the first meeting of creditors held in the bankrupt estate on 13 June 1980 the creditors resolved to appoint the trustee as trustee of the bankrupt estate. On 26 November 1979 the bankrupt caused a company known as Peninsula Holdings Pty. Limited ("Peninsula Holdings") to be incorporated of which he was a director and shareholder. On 4 December 1979 Peninsula Holdings purchased premiseugy known as No. 1414 Pittwater Road," rabeen, the purchase price being $235,000.00. The property is subject to a mortgage in favour of Wardley Australia Limited to secure an advance of $155,000.00. On 26 November 1979 the bankrupt executed two deeds. The first is called a deed of trust in which the bankrupt is described as "The Trustee" and the beneficiary is described as "the Trustee for the time being of the Eric Webster Family Discretionary Trust". I shall refer to this deed as "the first deed". It recites that there has been allotted or transferred to the bankrupt the whole of the issued share Jz -3- capital of Peninsula Holdings. It also recites that the allottments or transfers were made to the bankrupt as a nominee of the beneficiary. Under the first deed the bankrupt declares that he holds the shares and all dividends and interest relating thereto upon trust for the beneficiary and agrees to deal with them as the beneficiary may direct (clause 1). The bankrupt agrees to attend all meetings of shareholders at the request of the beneficiary and, in effect, to do whatever he may be told to do by the beneficiary (clause 2). The second recital says: ",,.and it is acknowledged that the Beneficiary provided the acquisition price thereof." i.e. the price paid for the acquisition of the said shares. The second deed is styled "Deed of Settlement" between a company, D.K.L.R. Holding Co. Pty. Limited, as Settlor and a company, D.K.L.R. Holding Co. (No. 2) Pty. Limited, as Trustee. I shall refer to this deed as "the second deed". It recites that the settlor wishes to make provision for the beneficiaries (i.e. the bankrupt, his wife, his step son, the wife of his step son and the children of his step son) and for that purpose has paid or is about to pay to the trustee the sum of $5.00 which is described as "the settled sum". The settlor declares that the trustee shall be entitled to the Trust Fund subject to the terms of the trust. The "Trust Fund" is defined as meaning the settled sum together with all moneys and property paid or transferred to and accepted by the trustee as additions to the trust fund together with certain other money and property. The second deed creates what is generally known as a discretionary trust. It empowers the trustee to appoint 7/4 any person other than certain excluded persons to be a beneficiary and to revoke any such appointment prior to the vesting day; and provides that such power of revocation shall extend to the persons named as beneficiaries in the schedule to the deed (Clause 3 (a)). The deed then contains elaborate provisions for appointment of beneficiaries and restrictions upon appointment. It is unnecessary to set out the further terms of the deed which are somewhat lengthy. The name of the trust constituted by the second deed is the "Eric Webster Family Discretionary Trust". Thus it is this trust which is the beneficiary under the first deed. All persons interested in this application have been joined as respondents. None have appeared except Mr. Cairns who was represented on the morning of the hearing by a solicitor and who submitted to such order as the Court may see fit to make. It is in these circumstances that this application is brought. Section 120 of the Act so far as relevant provides:- "120. (1) A settlement of property, whether made ww before or after the commencement of this Act, not being - (a) a settlement made before and in consideration of marriage, or made in favour of a purchaser or encumbrancer in good faith and for valuable consideration; or (b) a settlement made on or for the spouse or children of the settlor of property that has accrued to the settlor after marriage in right of the spouse of the settlor, is, if the settlor becomes a bankrupt and the settlement came into operation after, or within 2 years before the commencement of the bankruptcy, void as against the trustee in the bankruptcy. (5) (6) (7) (8) A payment of money or transfer of property made by the settlor in pursuance of such a covenant or contract, whether before or after the commencement of this Act, is void as against the trustee in the settlor's bankruptcy, unless the persons to whom the payment or transfer was made prove -— (a) that the payment or transfer was made more than two years before the commencement of the bankruptcy; (b) that at the date of the payment or transfer the settlor was able to pay all his debts without the aid of the money so paid or the property so transferred; or (c) that the payment or transfer was made in pursuance of a covenant or contract to pay or transfer money or property expected to come to the settlor from, or on the death of, a particular person named in the covenant or contract and was made within three months after the money or property came into the possession or under the control of the settior. Where any such payment of money or transfer of property is void as against the trustee in the settlor's bankruptcy by virtue of the last preceding sub-section, the persons to whom the payment was made or the property was transferred are entitled to claim for dividend under the covenant or contract as if it had not been executed at the commencement of the bankruptcy. Nothing in 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 from the persons entitled to the benefit of the settlement, covenant or contract or from the trustee of the settlement the money or property the subject of the settlement, covenant or contract or an interest in that money or property. In this section, 'settlement of property' includes any disposition of property." ../7 (2) (3) (4) A settlement of property, whether made before or after the commencement of this Act, not being a settlement referred to in paragraph (a) or (b) of the last preceding sub-section or a settlement that is void as against the trustee by reason of the operation of that sub-section, is, if the settlor becomes a bankrupt and the settlement came into operation after or within 5 years before the commencement of the bankruptcy, void as against the trustee in the bankruptcy, unless the parties claiming under the settlement prove - (a) that the settlor was, at the time of making the settlement, able to pay all his debts without the aid of the property ww comprised in the settlement; and (b) that the settlor's interest in the property passed to the trustee of the settlement or to the donee under the settlement on its execution, A covenant or contract made, whether before or after the commencement of this Act, in consideration of marriage either - (a) for the future payment of money to the settlor's spouse or children; or (b) for the future settlement of property on or for the settlor's spouse or children, being money or property in which the settlor did not, at the date of the marriage, have any estate ww or interest, whether vested or contingent, in possession or remainder, and not being money or property of, or in right of, the settlor's spouse, is, if the settlor becomes a bankrupt and the covenant or contract was executed after the date of the bankruptcy, void as against the trustee in the bankruptcy. The persons entitled under the covenant or contract may claim for dividend in the settlor's bankruptcy under the covenant or contract, but such a claim shall be postponed until all claims of the other creditors (including claims under section 111 of this Act, claims in respect of excess interest under section 112 and claims for interest on interest-bearing debts in respect of a period after the date of the bankruptcy) have been satisfied. ../6 -7- I need not refer to the evidence in support of the application except to say that it establishes all the elements required by s. 120 (1) and (2). Accordingly it is an appropriate case for the making of the declarations sought and ancillary orders. The order of the Court is as follows:- 1. Order that it be declared that the trusts contained in deed of trust dated 26 November 1979 (which is Exhibit E in the proceedings before the Court) be void as against the trustee in the bankruptcy of the bankrupt; Order that it be declared that the trusts contained in deed of settlement dated 26 November 1979 (which is Exhibit D in the proceedings before this Court) be void as against the trustee in the bankruptcy of the bankrupt; Order that it be declared that all shares in the issued capital of Peninsula Holdings Pty. Limited allotted to the bankrupt or purporting to be held by him upon the trusts referred to in either of the said deeds be and are hereby vested in Roy Leslie Pegler as trustee of the bankrupt's estate; Order that the bankrupt, Brian Eric Cairns and Peninsula Holdings Pty. Limited by itself its ../8 servants and agents be restrained until further order from selling, offering for sale, conveying, transferring, encumbering, leasing or otherwise dealing with or disposing of the property known as lot 1414 Pittwater Road, Narabeen in the State of New South Wales; Order that the costs of this application including all reserved costs and the costs of all occasions when the application has been before the Court be the trustee's costs in the bankrupt's estate and be paid out of the assets of the estate; Liberty to any party to apply in relation to any matter that may arise in the implementation of these orders and generally. Wated: 22 Apt KO