CATCHWORDS. Bankruptcy - Application by trustee to have transfer of property by the bankrupt to his sons declared void - Whether the disposition of property made in good faith - Whether the disposition of property made for valuable consideration. Bankruptcy Act 1966 - s.120. RE: PETER HATZIMARCOS EX PARTE: THOMAS WILLIAM FREDERICK DIXON AND KOULA HATZIMARCOS, CON HATZIMARCOS AND NOEL HATZIMARCOS No. W.206 of 1982 FOX 3. 11 September 1984 Sydney. IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE No. W.206 of 1982 www wevrvrvrvrewr AUSTRALIAN CAPITAL TERRITORY RE: PETER HATZIMARCOS (also known as PETER HATZIMARKOU) Bankrupt EX PARTE: THOMAS WILLIAM FREDERICK DIXON Applicant KOULA HATZIMARCOS CON HATZIMARCOS NOEL HATZIMARCOS Respondents ORDER JUDGE: FOX J. DATE OF ORDER: 11 September 1984 WHERE MADE: Sydney. THE COURT ORDERS THAT: l. The application be dismissed. 2. The costs of the parties be paid out of the estate of the bankrupt. IN _THE FEDERAL COURT OF AUSTRALIA ) ) GENERAL DIVISION ) ) BANKRUPTCY DISTRICT OF THE ) No. W.206 of 1982 ) STATE OF NEW SOUTH WALES AND THE ) ) ) AUSTRALIAN CAPITAL TERRITORY RE: PETER HATZIMARCOS (also known as PETER HATZ IMARKOU) Bankrupt EX PARTE: THOMAS WILLIAM FREDERICK DIXON Applicant KOULA HATZIMARCOS CON HATZIMARCOS NOEL HATZIMARCOS Pespondents a [o) Bol > = FOX J. TE: 1l September 1984 REASONS FOR JUDGMENT FOX J. This is an application under s.120(2) of the Bankruptcy Act 1966 for a declaration that a disposition of property 1s void as against the trustee in bankruptcy, and for consequential orders. A sequestration order was made against the bankrupt on 6 April 1982, ona petition of M.J. Projects Pty. Limited, who 1s the sole creditor in the estate. The oriqinal debt, which was for $2,780.00, was for overpayment of workers' compensation to the bankrupt flowing from an injury in 1976 when he was in the creditor's employ. A letter explanatory of the claim was sent on 30 January 1980, after a District Court action for the amount had been commenced. The act of bankruptcy, which was non-compliance with a bankruptcy notice issued by M.J. Projects Pty. Limited, occurred on 12 August 1981. Proof was lodged for $3,309.15, being the amount of the judgment debt in the District Court, together with costs and interest. The bankrupt and his wife owned a home at Brighton-le-Sands as joint tenants. They were unemployed and in receipt of Social Security benefits. By transfer dated 1 August 1979 (settlement was in fact on 6 August), they transferred the property to their two sons, who are respondents to this application. The transfer was pursuant to a contract dated 27 June 1979 for the sale of the property for a consideration of $55,000. It 1s agreed that that amount was 1ts market value. A mortgage given by the vendors was discharged upon the sale, and fresh mortgages were effected by the two sons. The amount paid on settlement by the sons was $34,977.36, this being the amount necessary to discharge their parents' mortgage. No further payment under the contract has been made. The reason for the sale is plain enough; the parents could not meet the payments on the mortgage. Eviction and sale had been threatened. The sale to the sons was recommended by the solicitor who was acting for the parents, and then, or later, for the sons also. Proceedings for eviction were commenced on 26 May 1978 but what finally happened in that connection 1s not clear. Negotiations and arrangements for payment, and some payments, were made in the ensuing months. A default notice was given by the mortgagor under s.57(2)(b) of the Real Property Act 1900 on 30 May 1979. The family, including the sons, have continued to live on the property, and the latter have kept up mortadage payments on the fresh mortgages. The balance of purchase money apparently remains outstanding. The parents have paid rent reqularly to the sons. There 15 no suqgestion that the transaction was a sham, or intended to have any operation other than that appearing on its face. Counsel for the trustee accepts the onus of showing that the settlement is not one referred to in vara. (a) or (b) of s.120(1). There 183 no question of para. (b) applying, and this leaves para. (a), the relevant words of which are 'a settlement made ... in favour of a purchaser or encumbrancer in good faith and for valuable consideration". It 18 submitted that the solicitor for the respondents, who was also the solicitor for the bankrupt, had knowledge of the claim by the former employer at the time of the transfer, and either that he told them of the position so far as 1t affected bankruptcy, or that his knowledge of the bankruptcy position should be imputed to them. The solicitor, in his capacity as solicitor for the person who subsequently became bankrupt, had knowledge of the claim, but there 1s nothing to indicate that he adverted to 1t or indeed to the bankruptcy position at all, at the time of transfer. Even if he had privately considered the matter of bankruptcy, there is in my view no proper basis for treating the parties or any of them as if they had the same knowledge. The degree to which the claim was being pressed, and the qeneral position concerning it at the time of contract or transfer, was not dealt with in evidence. The District Court proceedings were not commenced until 14 December 1979. The evidence of the solicitor 1s that he was concerned about the mortgage, and, although he gave oral evidence. motivation based oan the debt allegedly due to the bankrupt's former employers was not put to him. It 1s true that everyone knew of the arrears under the mortaage, but these were secured, and there was no risk that they would not be paid. I am umable to tind that there was an absence of good faith. Paragraph (a) does not require full consideration, although something less may go to good faith. However, there was full consideration. The failure to pay the whole has not been put, and in my view cannot be put on the basis that the actual consideration agreed was a lesser sum. It ig true that one of the song (Con Hatzimarcos) when asked by an accountant for the estate, "What did your father do with the $55,000 paid for the units", 1s said to have replied "It was only a paper consideration as advised by our solicitors". This statement was not explored in cross-examination of Con Hatzimarcos or the solicitor. It seems reasonably clear from the solicitor's evidence that he was not recommending that a false consideration be inserted in the documents. It has not been suggested that there was any oral agreement, at the time or later, that payment would not be sought, or would be suspended. The solicitor believed (seemingly as a result of what he was told by the two sons), that the parents would not pay rent, and, in this way, the balance of purchase money would. in part at least, be paid off. It may be correct to infer that payment of the balance was but loosely considered, and that immediate payment was not contemplated. This 1s, however, far from saying that the stated figure did not represent the agreed sale price. 'The oral evidence 1s to the effect that no discussion about future payment of rent by the bankrupt or his wite took place prior to the transfer, The result is that para. (a) 18 satisfied, and the claim under sub-s. (2) must fail. I therefore dismiss the proceedings, and order that the costs ot the parties be paid out of the estate. —v t certify that trte-end the Five (5) i preceding pages are a true copy of the Reagons for Judgment herein of his Forxio._ Mr. Justice -ox t Associate sates [l~ 7- P4