CATCHWORDS Bankruptcy - strata title unit transferred to bankrupt in discharae of professional fees and other expenses referrable to the unit incurred by him on behalf of another - whether unit is after-acquired property which vested in the Trustee for the benefit of the creditors. Bankruptcy Act 1966; ss. 69, 131. ZDENEK WEISS EX PARTE: THE OFFICIAL TRUSTEE IN BANKRUPTCY AND: BOHUMILA WEISSOVA No. 293 of 1978 LOCKHART J. SYDNEY 30 JULY 1985 IN_THE FEDERAL COURT OF AUSTRALIA BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY RE: ZDENEK WEISS A Bankrupt EX_PARTE: THE OFFICIAL TRUSTEE IN BANKRUPTCY AND: BOHUMILA WEISSOVA JUDGE MAKING ORDER: LOCKHART J. WHERE ORDER MADE: SYDNEY DATE OF ORDER: 30 JULY 1985 MINUTE OF ORDER THE COURT ORDERS THAT: 1. It be declared that the property comprised in Certificate -f Title Vol. 13749 Folio 38, and known as 8/157 Victoria Road, Bellevue Hill, is propertv divisible amonast the creditors of the bankrupt neina property that has been acquired bv the bankrupt after the commencement of his bankruptcv and before his discharae. 2. It be declared that the said property being after acquired property of fhe bankrupt has vested ain the Official Trustee in Bankruptcy. 3. The bankrupt, Zdenek Weiss. and Bohumelia Weissova be and each of them is herebv restrained from selling, assiaqninag, disposina of. mortaaqge, charaing, or encumbering the said propertv or anv interest therein except insofar as the same mav be necessary to qive effect to these orders. 4. Upon the request of the Official Trustee, Bohumela Welssova and the bankrupt, Zdenek Weiss, do all such things and execute all such documents as mav be necessarv to transfer their interests or the interests of either of them in the said property to the Official Trustee in Bankruptcy or as he mav direct. 5. Failing the bankrupt, Zdenek Weiss. or HBohumela Weissova complvina with order ¢, the Reqistrar or anv District PReqistrar or Derutv District Reaqistrar of this Court is herebv appointed to do all such things and execute all such documents as mav be necessarv to transfer the interests of the bankrupt. Zdenek Weiss. or of Bohumelia Weissova in the said property to the Official Trustee in Bankruptcy or as he mav direct. 8. The costs of the Official Trustee including anv reserved costs of this application be paid bv the respondents. Zdenek Weiss and Bohumila Weissova. 7. All parties are at libertv to applv as thev may be advised gqenerallv and un particular in relation to anv problems that mav arise from the working out cr executian of these orders. IN_THE FEDERAL COURT OF AUSTRALIA BANKRUPTCY DISTRICT OF THE STATE NO. 293 of 1978 QF NEW SOUTH WALES AND THE ee ee ee AUSTRALIAN CAPITAL TERRITORY RE: ZDENEK WEISS A Bankrupt EX PARTE: THE OFFICIAL TRUSTER IN BANKRUPTCY AND: BOHUMILA WEISSOVA 30 JULY 1985 REASONS FOR JUDGMENT LOCKHART J. IT propose to give judgment now as I have reached a firm view About the case. TI have been assisted in taking this course bv the careful arquments of counsel and of Mr. Weiss who 18 a solicitor and who has arqued his own case. Mr. Weiss hecame bankrupt, on the presentation of his own petition, on 28 April 1978. This is an application bv the Official Trustee in Bankruptcv for declarations:- (a) that a strata title unit known as No. 8. 157 Victoria Road. Bellevue Hill ("the unit"). us propertv divisible amonast the creditors of Mr. Weiss, beina propertv that was acquired bv him atter the commencement of his bankruptcv and before his discharqe: and (b) that the unit is after acquired propertv of Mr. Weiss and has vested in the Official Trustee. The Official Trustee also seeks an order providing for the execution of such documents as mav be necessarv to effect the transfer of the title to the unit into the name of the Official Trustee. There are two respondents to the application, Bohumila Weissova. who is the mother of Mr. Weiss. and Mr. Weiss himself. Mrs. Weissova was represented bv counsel. I find the facts are as follows: Mr. Weiss acted as solicitor for Mr. Peter Leopold Clvne from 1978 or 1979 in a larqe number of matters. He was paid his professional fees for some work but not for all of ut. Mr. Weiss lives and has lived in the unit for some vears. The unit was previouslv owned by Metropolitan Mortaaqge Investment Corporation Ptv. Limited, a companv of which Mr. Clvne was the managing director and principal shareholder. It was at relevant times "owned and controlled" by Mr. Clvne. An agreement was sianed in 1981 for the sale of the unit to i)cs) wT w Mrs. Weissova as purchaser. The details of the aqreement ar evidence: but T assume that it was in the usual form and that the 3. vendor was Metropolitan Mortaaqe Investment Corporation Ptv. Limited. The unit was transferred bv that companv to Mrs. Weissova bv memorandum of transfer dated 17 Julv 1981 which was reaqistered on 14 July 1982. There are no reqistered mortaaqes or encumbrances over the unit. Mrs. Weissova was born in Czechoslovakia and has lived there all her life. She is a widow. Mr. Weiss is her onlv child. Mr. Weiss at all relevant times held a power of attornev to act for his mother in Australia and he has in fact acted for her in that capacitv. Indeed, he acted for her as her attornev in matters relevant to the transfer of the unit from Metropolitan Mortaage Investment Corporation Ptv. Limited to her in 1981. The consideration for the transfer is expressed in the memorandum of transfer as $40,000. That fiqure was neqotiated between Mr. Weiss and Mr. Clvne. The evidence as to the terms of that arrangement is not verv precise and not entirelv consistent. The evidence 1s from Mr. Weiss himself in the witness box todav. He was called as a witness bv counsel for the Official Trustee. The transcript of Mr. Weiss's examination under s. 69 of the Bankruptcy Act 1966 ("the Act") was tendered un evidence against him by counsel for the Official Trustee, but the onlv passages upon which reliance was placed bv anv vartv were those specificallv identified bv eaunsel for the Official Trustee and by Mr. Weiss himself. 4. Where there 1s anv inconsistencv in the evidence cf Mr. Weiss. IT prefer to accept the evidence aiven bv him in chief and in his s. 69 examination: although ultimatelv nothing turns on this. There is no suaqqgestion in the evidence of anv neqotiations or dealings of anv kind having taken place between Mr. Clvne or Metropolitan Mortqaqge Investment Corporation Ptv. Limited on the one hand and Mrs. Weissova on the other except insofar as Mr. Weiss acted on her behalf. All relevant dealings relating to the contract for the sale of the unit and the transfer thereof to Mrs. Weissova were conducted bv Mr. Clyne and Mr. Weiss. The arrangement made between Mr. Clvne and Mr. Weiss was that the consideration for the transfer of the flat would be $40,000. That sum was not to be waid in cash. but represented their assessment of the sum to be paid and received in full discharge, extinguishment and release of all claims of Mr. Weiss aqainst Mr. Clvne (a) for professional fees and (b) for pavments made bv Mr. Weiss on behalf of or for the benefit of Mr. Clvne of certain of Mr. Clvne's expenses. includina council rates and home unit maintenance charaes, referable to the unit. The unit had previouslv been reaistered in the name of Mr. Clvne as owner of an estate in fee simple. The sum of $40.000 was not strictlv apportioned but, as far as I can alean from the evidence. Mr. Civne and Mr. Weiss attributed between half and three-quarters of that sum to the foraiveness of professional fees due to Mr. We1ss, the balarce representing monevs wl paid by Mr. Weiss on behalf of or for the benefit of Mr. Clyne. such as rates and home unit charaes. The sum of $11,300 was paid bv Mrs. We1issova to Mr. Weiss on one of his visits to her in Czechoslovakia which probably occurred at Christmas 1981 or Christmas 1982. Mr. Weiss visited his mother at least once a vear in Czechoslovakia. The payment of $11,300 by Mrs. Weissova to Mr. Weiss was not. in my opinion, a loan bv her to him. Insofar as it 1s capable of being characterised as anvthing in law, it seems to me that it is more correctlv characterised as a gift. Mr. Weiss used the monev from time to time to pav his own bills or accounts. especiallv when his practice was not particularlv liquid. Mrs. Weissova is 77 vears of aqe and I accept that it is Mr. Weiss's wish that, in the event that she is no lonaer able to care for herself in Czechoslovakia (where she lives alone in a flat) she would come and live with him in Australia where he could care for her. I accept also that Mr. Weiss had this possibilitv in mind when he neqotiated the arrangement with Mr. Clvne which led to the transfer of the unit to his mother. I. am satisfied that when Mrs. Weissova took title to the transfer of the unit she in no wav contributed anv part of the consideration of $40.000 expressed in the memorandum of transfer. The whole of the consideration for the transfer of the flat moved as 6. between Mr. Clyne and Mr. Weiss in the circumstances to which I have alreadv referred. Mr. Weiss received the beneficial entitlement to the unit which. so far as I can discern from the evidence. isa beneficial equitable estate in fee simple. He received it from a company with which he had no previous, or indeed anv. dealing but which was under the control of Mr. Civne. in return for Mr. Weiss''s releasing Mr. Clvne from pavment of all the then outstandindg fees and the other obligations incurred bv Mr. Weiss on Mr. Clivne's behalf. or for his benefit. on various accounts. Mr. Weiss arranged for the transfer of the unit into his mother's name after aqivinag consideration to the fact that he was an undischarqed bankrupt. That 1s plain from the evidence and 1t is not in dispute. Mrs. Weissova had no dealinas with Mr. Clyne or the company from whom she acquired the unit. She plaved no rart in the conduct of anv negotiations which led to the transfer. Anv necessarv documentation requiring her authoritv was executed bv Mr. Weiss as her attornev under power of attornev. I am not satisfied that Mrs. Weissova was aware of anvthing that occurred in relation to the transfer of the unit to her at anv relevant time. It was never intended that Mrs. Weissova should pav anvthing or assume anv obligations in relation to the proposed transfer of the unit. In mv opinion the role of Mrs. Weissova as transferee of the flat was an artifice to aive colourable authenticity to what otherwise would have been a questionable transaction. one that would have come to the attention of the Official Trustee and doubtless excited hoth his interest and intervention. Unless it can be said that Mr. Weiss. in relation to the impugned transaction, answers the description of a bankrupt who was in receipt of income within the meaning of sub-s. 131(1) of the Act, the Trustee must succeed in the application. That sub-section provides: "(1) Subject to this section a bankrupt who is in receipt of income is entitled to retain it for his own benefit." The word "income" is nat defined in the Act: but in the context of s. 131 and comparable provisions in other bankruptcv leqislation,. it has been held to be a word of large meaning. Sir George Jessel M.R., described it in ex parte Huggins (1882) Ch. D. 85 at p. 92, in the context of the Bankruptcy Act 1869 (32 and 33 Victoria Ch. 71) "As larqe a word as can be used". There are manv cases that have been decided involvina s. 121 Or 1ts equivalents in other bankruptcv Acts. both in this countrv. the United Kinadom and Canada; but in most of them consideration was civen to the expression "income" with reference to the particular facts of the case and qdéneraliv without anv exposition of principle except to the extent that it was necessarv to resolve the case in hand. In mv opinion nothing received bv Mr. Weiss or to which he became entitled relevantlv to this case constituted income for the purposes of s. 131. He was entitled to professional fees from Mr. Clwne for services rendered by him as his solicitor. ana in substantial sums. They came to the arrangement -'shich JT have alreadv ac 8. outlined for release or forgiveness of fees and of monevs due bv Mr. Clyne to Mr. Weiss in respect of monevs paid bv Mr. Weiss for the benefit or on behalf of Mr. Clyne on various accounts. What Mr. Weiss received was the beneficial entitlement in fee simple to the flat, the title to which was transferred. not bv Mr. Clyne. but by Mortaaqe Investment Corporation Ptv. Limited. a companv controlled by Mr. Clivne. to Mrs. Weissova. In mv opinion. in no sense can the riahts or interests derived by Mr. Weiss from this transaction be said to be income: nor did he answer the description for the purposes of s. 131 0f "a bankrupt who is in receipt of income". I resect the submission of counsel for Mrs. We1ssova that the sum of $11.300 was paid in circumstances that constituted Mr. Weiss as a trustee of a fund for his mother's benefit or which aave rise to both a mixed trust and loan. Finallv. I should sav that I have been careful to dissect the evidence into what 1s admissible aqainst Mrs. Weissova and what 15 admissible aqaint Mr. Weiss, the former beinad ina narrower catecoryvy than the latter. 9. The orders of the Court are that: It be declared that the propertv comprised in Certificate of Title Vol. 13749 Folio 38. and known as 8/157 Victoria Road. Bellevue Hill, is propertv divisible amonast the creditors of the bankrupt being property that has been acquired bv the bankrupt after the commencement of his bankruptcv and before his discharae; Tt be declared that the said propertv beina after acquired property of the bankrupt has vested in the Official Trustee in Bankruptcy: The bankrupt and Bohumelia Weissova be and each of them is hereby restrained from selling. assianinad, dispasinag of. mortaacge, charging, or encumbering the said property or anv interest therein except insofar as the same mav be necessarv to qive effect to these orders; Upon the request of the Official Trustee, Bohumela Weissova and the bankrupt do all such things and execute all such documents as mav be necessarv to transfer their interests or the interests of either of them 1n the said property ta the Official Trustee in Bankruptcv or as he mav direct: 10. Failing the bankrupt or Bohumela Weissova complving with order 4, the Reqistrar or anv District Reqistrar or Deputv District Reaqistrar of this Court is hereby appointed to do all such things and execute all such documents as mav be necessarv to transfer the interests of the bankrupt or of Bohumelia Weissova inthe said property to the Official Trustee in Bankruptcy or as he mav diréct; The costs of the Official Trustee including anv reserved costs of this application be paid bv the respondents; All parties are at libertv to applv as thev mav be advised qenerallv and in particular in relation to anv problems that mav arise from the working out or execution of these orders, | | certify that this and the </" { Preceding pages are a true copy of the Reasons for Judgment herein of his Honour1 Mr. Justice Lockhart. LE oN Associate pated Be Tul, PS