IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION ) ) ) ) BANKRUPTCY DISTRICT OF ) ) THE STATE OF NEW SOUTH WALES AND ) ) ) THE AUSTRALIAN CAPITAL TERRITORY RE: EX PARTE: AND: NOT FOR DISTRIBUTION No. W.1158 of 1985 THE ESTATE OF THE LATE JOHN WALKER WYNYARD THE OFFICIAL TRUSTEE IN BANKRUPTCY Applicant SHARRMENT PTY LIMITED First Respondent LEE WYNYARD Second Respondent MARK WYNYARD Third Respondent AUSTRALIAN BANK LIMITED Fourth Respondent LORREINE CLAIRE WYNYARD Fifth Respondent CORAM: PLACE: DATE: WILCOX J SYDNEY 6 AUGUST 1986 MINUTES OF ORDER THE COURT ORDERS THAT: The application for the dissolution of the orders made on 14 May 1986 and 30 May 1986 be refused. The costs of the application be costs of the applicant (the Official Trustee in Bankruptcy) in the principal proceedings. Macquarie Bank Limited and Eldercon Pty Limited be added as respondents to the proceedings as the sixth and seventh respondent respectively. Until further order of the Court the sixth respondent by itself or agents or otherwise howsoever be restrained from transferring, paying out to any person or otherwise dealing in any manner whatsoever with: 3. (a) the funds deposited in the name of the first respondent Sharrment Pty Limited or in the names of the partners of the firm of Sly & Russell, or in the name of S & R Nominees Pty Limited or in the name of Dare Reed Nominees Pty Limited in the amount of one hundred thousand dollars ($100,000.00) on or about 5 December 1985; fb) interest upon the funds referred to in paragraph (a) hereof. NOTE: Settlement and entry of orders is dealt with in Bankruptcy Rule 124. NOT FOR DISTRIBUTION IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION ) ) BANKRUPTCY DISTRICT OF ) No. W.1158 of 1985 ) THE STATE OF NEW SOUTH WALES AND ) ) ) THE AUSTRALIAN CAPITAL TERRITORY RE: THE ESTATE OF THE LATE JOHN WYNYARD WALKER EX PARTE: THE OFFICIAL TRUSTEE IN BANKRUPTCY Applicant AND: SHARRMENT PTY LIMITED First Respondent LEE WYNYARD Second Respondent MARK WYNYARD Third Respondent AUSTRALIAN BANK LIMITED Fourth Respondent LORREINE CLAIRE WYNYARD Fifth Respondent CORAM: WILCOX J PLACE: SYDNEY DATE: 6 AUGUST 1986 EXTEMPORE REASONS FOR JUDGMENT On 14 May 1986, I made orders the effect of which was to freeze operations in an interest bearing deposit held by Sharrment Pty Limited, the first respondent, with the Australian Bank Limited, the fourth respondent. The moneys, the subject of that order, were the proceeds of the payment in part of the principal owing under a mortgage of certain property at Moss Vale by a company called Eldercon Pty Limited. The terms of the order were varied on 30 May to provide for reinvestment of the deposit but otherwise the order was maintained. By Notice of Motion filed on 30 June 1986, Sharrment Pty Limited and three presons, who are beneficiaries under the Wynyard Family Trust, namely, Lee Wynyard, Mark Wynyard and Lorreine Claire Wynyard seek an order that the interim orders be dissolved. The basis of the application is that there is no serious question to be tried as to whether the late John Walker Wynyard settled moneys within the possible application of s.120 or s.121 of the Bankruptcy Act 1966. ere ry 3. I do not propose to set out details of the evidence which has been given, nor do I propose to indicate any concluded view as to whether a-claim under s.120 or s.121 is likely to succeed. I, in fact, have no concluded view on this matter; and I think that there may be evidence, not presently before the Court, which may become available and which may assist one way or the other in regard to that matter. Counsel agreed that the test to be applied is whether there is a serious guestion to be tried as to the existence of a good claim under either of those sections and that, if there is such a question, there is no reason relevant to convenience why I should rescind the existing order. The claim, which has been outlined on behalf of the Official Trustee, is that within a period of five years before the death of Mr Wynyard he made a payment of money to a company controlled by him and which was the trustee of Wynyard Family Trust No.6, namely Seyto Pty Limited; ostensibly in repayment of a loan owed by himself personally to that trust, but in reality by way of settlement. The basis of the case put by the Official Trustee is that certain transactions, which were undertaken in September 1979, were really shams designed to achieve an appearance of a genuine debt by Mr Wynyard to the trust when, in fact, there was none. It appears, that on 28 September 1979, there were 4. payments made between a number of different persons and companies; but with the result that at the end of the day the amount which had been paid and received by each of those persons and companies was identical. Counsel for the present applicants has argued that there was nothing remarkable or unusual about the transactions, and that they were all commercially explicable. I Pave to say that in my experience, at least, one of the transactions was highly unusual. But that is not to say that it is properly to be characterised as a sham. What I will say is that I think that the transactions are so remarkable as to create a serious question as to the reality of the transactions. Upon the basis of the material presently before the Court, I think that it is, at least, strongly arguable that what occurred in September 1979 amounted to a sham and that there was no genuine debt by Mr Wynyard -to the trust. I emphasise that I reach no finding on the matter and, as I say, it is quite possible that further evidence will show that this conclusion would be incorrect. But I certainly feel there is a serious question as to the genuineness of the debt. If that be so, then, I think, there can be no doubt that there is a serious question as to whether the payment made by Mr Wynyard in 1980, that is to say within the five 5. year period before his death, was a settlement. If, in fact, no moneys were owing, it is difficult to escape the conclusion that what he did was to make a settlement under the guise of repaying the moneys. On the other hand, of course, if moneys were genuinely owing, there is no question of a settlement; and this is conceded by counsel for the Official Receiver. Counsel for the applicants for discharge of the orders has put a number of detailed submissions to me regarding the operation of s.120, and referred to authority. He says that s.120 strikes only at a settlement made by the bankrupt. I accept this submission but there is no doubt that in fact the moneys paid in 1980 were paid by Mr Wynyard. The real question is the circumstances under which they were paid. Secondly, it is submitted that a settlement must answer the test of permanency, and again, I accept that submission. However, it is clear that the moneys which were, in fact, paid by Mr Wynyard were never repaid and so far as I can see that they were never intended to be repaid. Again, the real question is the basis upon which the payment was made. It is pointed out that a claim under s.120 will be defeated if valuable consideration was given. Counsel for the Official Trustee concedes that if there was, in fact, a debt owing, then there was valuable consideration. Again, the same question arises. Finally, reference is made to s.120(2)(a) of the Act, and it is submitted that there is evidence before the Court to indicate that the putative settlor, that is to say Mr Wynyard, was at the time of making the settlement, that is to say August through to December 1980, able to pay all his debts without the aid of the property comprised in the settlement. The only evidence which goes to Mr Wynyard's financial position is a document annexed to the affidavit of Jan Patricia Farrell, and which purports to be a copy of a letter written by Mr Wynyard to an officer of the Rural Bank of New South Wales on 6 August 1981. In that letter and the accompanying documents, Mr Wynyard sets out certain information regarding his assets and liabilities, and he shows a substantial surplus of assets over liabilities. In regard to that letter, I comment, firstly, that the statement shows the position as at a date later than the relevant date; although it must immediately be conceded that it is unlikely that he would have acquired that surplus in such a short interval of period as the interval between the two dates. However, secondly and more importantly, this statement of assets and liabilities is not verified. It is simply a self serving statement in a letter to a bank officer in support of an application for a loan. 7. Section 120(2)(a) throws the onus of showing solvency at the relevant time upon the parties claiming under the settlement. I do not think that the onus can be discharged simply by a letter along these lines. It may well be, of course, that at the final hearing the parties claiming under the settlement will be able to discharge the onus. But that would have to be upon the basis of proper evidence. I am of the opinion that there is a serious question to be tried in relation to s.120. I do not think that there is material to justify the view that there is a serious question arising under s.121, but it is not necessary for me to go to that matter since it would be enough that there is a serious question under s.120. For those reasons I refuse the relief sought in the Notice of Motion. The application for the dissolution of the orders made on 14 May 1986, and 30 May 1986 is refused. I order that the costs of this application be costs of the applicant in the principal proceedings, that is to say the Official Trustee, in these proceedings. _It appears that there are additional moneys to come from Eldercon Pty Limited in repayment of the balance of the principal sum. I think that it is appropriate that there be an order to ensure that these moneys are not paid to any person without an order of the Court. I therefore make orders adding as respondents to the proceedings Macquarie Bank Limited as the sixth respondent and Eldercon Pty Limited as the seventh respondent. I make orders in accordance with the handwritten minutes of orders initialled by me and dated today. I certify that this and the seven (7) preceding pages are a true copy of the Reasons for Judgment of his Honour Mr Justice Wilcox. Associate: Yuonne A. Hetferr Datezs Qo August 19eG Counsel for the Applicant: Mr T Simos QC with Mr N G Rein Solicitors for the Applicant: Australian Government Solicitor Counsel for thé First, Second, Third, Fourth and Fifth Respondents: Mr A S Martin Solicitors for the First, Second, Third, Fourth and Fifth Respondents: Messrs Sly & Russell Date(s) of hearing: 6 August 1986