JUDGMENT No. D2. LBL IN THE FEDERAL COURT OF AUSTRALTA ) GENERAL DIVISTON ) No. 533 of 1986 ) ) BANKRUPICY DISTRICT OF THE STATE OF VICTORIA RE: BARRY JAMES RUMPF THE OFFICIAL TRUSTEE IN BANKRUPTCY (as trustee of the bankrupt estate of Barry James Rumpf ) Applicant BARRY JAMES RUMPF , VIRGINIO GROLLO PLANT HIRE PTY. LTD., JOSEPH BARHAM, ANTHONY SMITH, VITTORIA GROLLO (personally and as administratrix of the estate of the late Virginio Grollo deceased) Respondents CORAM: Jenkinson J. DATE: 10 February, 1988 REASONS FOR JUDGMENT Application by the Official Trustee in Bankruptcy as trustee of the estate of the bankrupt Barry James Rumpf for declarations that the issued shares in the respondent Virginio Grollo Plant Hire Pty. 1td. and certain parcels of land were beneficially owned by the bankrupt at the commencement of the bankruptcy and are property divisible amongst the bankrupt's creditors. Z. Me. Rumpf became bankrupt on 14 July 1986 on his own petition. At the time when this application was heard he had been in gaol since 25 July 1986. On that date he was committed for contempt of the Supreme Court of Victoria. Subsequently he was ordered to be imprisoned for contempt of this Court in relation to his bankruptcy and he was also sentenced to a term of imprisonment upon conviction of an indictable offence. Mr. Rumpf i5 an accountant. For some years before his bankruptcy he practised his profession from his home. Among his clients were four brothers named Grollo, who were builders in a substantial way of business. Mr. Rumpf was a trusted adviser, the evidence suggested, in relation to the financial affairs of the brothers and of the companies which they controlled. One of the four Grollo brothers, Virginio, died intestate in 1984 and his widow, who is a respondent to the application, has at material times been the administratrix of his estate, according to the admission of her counsel on the hearing of the application. At his death Virginio Grollo controlled the respondent Virginio Grollo Plant Hire Pty. Ltd. ("Plant Hire"). He was the holder and beneficial owner of one of the two issued shares in-Plant Hire and his wife was the holder and beneficial owner of the other share. Subsequently she became registered as the holder of her deceased husband's share in her representative capacity, it was asserted by counsel for the Official Trustee, although the only evidence which might be thought to support the assertion was the statement in a return lodged on behalf of Plant Hire with the National Companies and Securities Commission that 3. the name of the person holding one of the two shares in Plant Hire was "Estate of Virginia Grollo Deceased". While Virginio Grollo lived Plant Hire had been involved in the business activities carried on by the Grollo brothers, but upon his death Plant Hire ceased to carry on business. Until 17 October 1985 the directors of Plant Hire after Virginio's death were his widow and his brother Luigi. The widow gave evidence on the hearing of this application. She did not profess ta have exercised directorial power over Plant Hire and everything about her evidence and demeanour suggested that she would have acquiesced in MUuigi Grollo's exercise of control over Plant Hire. Luigi Grollo had consultations with Mr. Rumpf about the financial affairs of the Grollo brothers and the companies they controlled. In or about September 1985 Mr. Rumpf told Luigi Grollo, according to the latter's evidence, that he, Rumpf, wished to buy land at Kerang and asked Luigi Grollo if he might use Plant Hire for that purpose. Luigi Grollo replied in the affirmative. On 17 October 1985 Luigi Grollo retired as a director of Plant Hire. Mr. Rumpf thereafter exercised control over Plant Hire until he became bankrupt in July 1986. According toa return lodged by Mr. Rumpf with the National Companies and Securities Commission in November 1985, Mr. Rumpf was appointed a director and the secretary of Plant Hire on 30 September 1985. He described himself in that return as "Birrini Grollo" and as "Barrini Grollo", and he signed the return, and other documents in which he represented the signature to be that of a director of Plant Hire, thus : "B. Grollo". His explanation of his assumption of that name in relation to his involvement in the direction and 4, control of Plant Hire was that his own name on documents which came to the notice of officers of the Taxation Department prompted those officers to subject him, and those dealing with him in relation to the transactions disclosed by the documents, to unreasonable harassment. On 2 October 1985 Mr. Rumpf caused the common seal of Plant Hire to be affixed to a written agreement for the purchase ef about 790 acres of farm land at Kerang in Victoria and several chattels and fixtures, by Plant Hire from Paul James Cook, for the price of $200,000. He signed "B. Grollo" beside the seal. He paid the deposit of $70,000 at the office of the solicitor acting for vendor and purchaser in bank notes. At settlement of the purchase the balance of the price was paid by Mr. Rumpf, again in bank notes. In December 1985 Mr. Rumpf sealed with the Plant Hire common seal and signed in the samé way a written agreement for the purchase of about 320 acres of farm land at Kerang and several chattels and fixtures, by Plant Hire from Phillip Edward Lomas and Rosalie Margaret Lomas, for the price of $100,000. The price was paid by a cheque. In January 1986 Mr. Rumpf sealed with the Plant Hire common seal a sale note which recorded the sale to that company by Raymond Richard Hampton of about 61 acres of farm land at Kerang for the price of $7,500. Beside the seal Mr. Rumpf wrote these words and figures: 5. "The common seal of Virginio Grollo Plant Hire Pty. Ltd. is hereunto affixed with the authority of the Directors in the presence of B. Grollo director 8/1/86." Payment of the price was by cheque. Plant Hire became by transfers from the vendors yegistered under the Transfer of Land Act 1958 (Vic.) the proprietor of an estate in fee simple in each of those parcels of land. In the three transactions of purchase only Mr. Rumpf and aman resident in Kerang who acted for him in preliminary negotiations dealt with the vendors and their agents. Mrs. Vittoria Grollo, the other director of Plant Hire, knew nothing of what was being done. Mr. Rumpf's account of the circumstances which led to the purchase of the three parcels of land should be now summarily narrated. In March 1980 transfer of the two issued shares in a company named Third Ubuka Pty. Ltd. from the holders to Mr. Rumpf, as to one share, and to Fifth Minrip Pty. Ltd., as to the other, was approved by resolution of the directors of Third Ubuka Pty. Ltd.. Those two directors were solicitors, by whose firm, Herbert Geer and Rundle, the company had been incorporated in February 1980 and they thereupon retired as directors in favour of Mr. Rumpf and Fifth Minrip Pty. Ltd.. The issued shares in Fifth Minrip Pty. Ltd. were held by Mr. Rumpf and another company controlled by him. He thought, although he was not sure, that the 6. other company was called "Walwa Mining Company". The issued shares in the latter company were held by Mr. Rumpf and yet another company, the name of which Mr. Rumpf swore that he did not yecall. He did however, assert on oath that nobody but he had an interest in Third Ubuka Pty. Ltd.. That company was, as he alsa swore, "the corporate trustee of a trust of which the named beneficiary (? beneficiaries) were various branches of the Salvation Army." Earlier in his evidence Mr. Rumpf had given evidence that in 1985 and 1986 Third Ubuka Pty. Ltd. "was the trustee of a charitable trust with qualifying classes of which there had been no appointment beyond the nominated beneficiary". I then said to Mr. Rumpf : "I am sorry, but I did not understand any of that". Mr. Rumpf said : "Well, I was the beneficiary of 1t." He continued : "Third Ubuka was the trustee of a trust which was a charitable trust with provision for the addition of further beneficiaries once they qualified .... and then subject to appointment. Hut there had been no qualification or appointment made embracing me or any member of my family." After Third Ubuka Pty. Ltd. had come under Mr. Rumpf's control it was credited by him during the next two or three years with amounts aggregating about $300,000. Those amounts were in part remurferation for services rendered by Mr. Rumpf to clients in relation to tax planning. He did not say how he had come by the rest. There was no book of account kept of Third Ubuka Pty. Ltd.'s Financial dealings. Its only activity under Mr. Rumpf's control was to receive those amounts and to yield control of them to Mr. Rumpf. At one time there was a bank account in Third Ubuka Pty. Ltd.'s name, but most of the amounts received by that company 7. were held for it in the trust account of Herbert Geer and Rundle until they were placed in an account with a merchant bank to which Mr. Rumpf referred - and to which I shall refer - as Hambros. The funds of Third Ubuka Pty. Ltd. were placed, together with other moneys, in an account with Hambros in the name of a company to which Mr. Rumpf referred as Janalli (?Genelia) Afforestation. The directors of the latter company, to which I shall refer as "Janalli", were several of the Grollo brothers, but at times material to this application Mr. Rumpf controlled the account with Hambros, as I infer at the request or at least with the consent of the directors of Janalli. The money paid in respect of the purchases of the three parcels of land at Kerang was withdrawn by Mr. Rumpf from Janalli's account with Hambros. It was money which had heen lent by Third Ubuka Pty. Ltd. to Janalli at a time when it was anticipated by Mr. Rumpf that some unspecified business transaction by the Grollo brothers would require the loan to them of that amount for its implementation. The evidence given on the hearing of the application by the three surviving Grollo brothers and by Virginio Grollio's widow was not inconsistent with Mr. Rumpf's evidence that the price of each parcel of Kerang land was provided by Third Ubuka Pty. Ltd... But their'evidence was quite inconsistent with his evidence as toa the terms on which the money was provided. It will be recalled that Luigi Grollo, who until he became a bankrupt generally controlled the financial administration of his family's affairs, swore that he had agreed to Mr. Rumpf's request, inor about September 1985, that Mr. Rumpf use Plant Hire in purchasing land at Kerang. His evidence was - and the evidence of the members of 8. his family accorded with his evidence - that the purchase of the Kerang land was not in any way an affair in which a Grollo was involved. He and the other Grollo witnesses swore not only that neither a Grollo nor a company in which a Grollo was interested contributed to the purchase of the land, but also that no Grollo, nor any company in which a Grollo was interested, claimed any interest in the Kerang land or in either of the two issued shares in Plant Hire. And Mr. Maxwell of counsel for Plant Hire and for Vittoria Grollo, who is a respondent to the application in both her personal and her representative capacities, expressed his respondent clients' consents to the orders which the Official Trustee seeks. Mr. Rumpf, on the other hand, swore that neither he nor Third Ubuka Pty. Utd. had any proprietary interest in either of the two issued shares in Plant Hire or in the Kerang land. The money withdrawn from Janalli Afforestation's account with Hambros and applied in payment for the Kerang land was' lent by Third Ubuka Pty. Ltd. to Plant Hire to enable Plant Hire to acquire that land, of the fee simple in which Plant Hire became the beneficial owner, according to Mr. Rumpf's testimony. Mr. Rumpf swore that he had advised Luigi Grollo that Plant Hire should acquire the Kerang land because its acquisition and exploitation would be, in his opinion, ultimately profitable, and because Plant Hire had accumulated losses of about §15,000 against which its profits could he set off for income tax purposes. It had been Mr. Rumpf's intention, he swore, to arrange, after the income tax year ending on 30 June 1986 had passed, to cause Plant Hire's indebtedness to Third Ubuka Pty. Ltd. in respect of the Moneys advanced for the purchase of the Kerang land to he discharged by the issue to Third Ubuka Pty. Ltd. of preference 3. shares in Plant Hire. But his imprisonment had prevented hin, according to his testimony, from undertaking that step, as it had also prevented him from causing records of the transactions he described to be made in the books of account of Third Ubuka Pty. Ltd. and Plant Hire. Asked whether she had ever given the shares in Plant Hire to Mr. Rumpf, Mrs. Vittoria Grollo replied on oath : "No". She also swore that she made no claim to the shares or to any interest in the Kerang land. I am not persuaded that Luigi Grollo was clothed with any authority to speak for her in relation to the shares. If he were assumed to have her authority to speak for her on the occasion in or ahout September 1985 when he assented to Mr. Rumpf''s proposal that Rumpf, in Luigi Grollo's term, "use" Plant Hire, I am not persuaded that the conversation between Luigi Grollo and Mr. Rumpf imported a gift of the shares in that company. Luigi Grollo's testimony about the conversation leaves me unpersuaded that any words signifying gift were used, and unpersuaded that any gift of shares was intended. If words of gift were used, the evidence discloses no consideration for a gift of the shares, nor any act towards perfection of the gift by transfer. Therefore the postulated gift would fail, in my opinion : see Meagher Gummow & Lehane : Equity - Doctrines & Remedies, pp. 138-146. I turn to consider the Official Trustee's claim that the parcels of land to which it is convenient to refer as "the Kerang land" were beneficially owned by Mr. Rumpf at the commencement of his bankruptcy. I find that the moneys paid for the Kerang land 10. were Mr. Rumpf's moneys. It may be that until he applied those moneys in payment of the price of the Kerang land he had it in mind, during the whole or a part of the period which elapsed from the time a particular sum forming part of those moneys was acquired by him until he so applied those moneys, to represent to the world, or to some persons, that that sum was the property of Third Ubuka Pty. Ltd., and perhaps to represent that that sum was held by that company subject to some trust. But I am persuaded that all of those moneys were acquired by Mr. Rumpf and that from the time each particular sum was acquired by him he intended to retain it for himself alone and to use it for himself alone. Any plan he may have had to represent all or some of the moneys as beneficially owned by Third Ubuka Pty. Ltd. or as held by that company in trust for persons or purposes would have been, as I infer, contingent upon the plan's serving his own purposes as the owner, 1n his own conception, of those moneys. At all material times Mr. Rumpf controlled Third Ubuka Pty. Ltd. and controlled the operation in Janalli's mame of the account which Janalli had with Hambros. I conclude that the property in the moneys applied in payment for the Kerang land was in Mr. Rumpf at the time each sum was so applied. "I find that none of the moneys 50 applied was lent by Mr. Rumpf to Plant Hire. It may be that Mr. Rumpf had it in mind, when he applied the moneys in payment for the Kerang land, that it might in the future prove convenient to represent to the world, or to some persons, that the moneys had been advanced to that company by way of loan and that the company had applied the moneys lent to it in performance of the contracts for the purchase of the Kerang li. land. But the directors of Plant Hire, Mrs. Vittoria Grollo and Mr. Rumpf, at no time resolved that the company accept such a loan. If Mr. Rumpf were assumed to have lawful authority himself to hind the company to such an acceptance, yet I find that he did not so resolve, albeit that he may have contemplated that the company might in the future represent that it had borrowed those moneys. What is disclosed is, therefore, that om a purchase the legal title to the Kerang land is vested in Plant Hire and the purchase money is provided by Mr. Rumpf. Those circumstances yaise the presumption of a resulting trust in favour of Mr. Rumpf. And I find no circumstance displacing that presumption. (See Jacobs' Law of Trusts in Australia (4th ed.) para. 1210.) My conclusion is that Plant Hire took and thereafter held the legal estates in the Kerang land in trust for Mr. Rumpf and that the equitable estates are property divisible amongst his creditors. Iwill hear the parties concerning the terms of the orders to be made which will give effect to my conclusions. The written application contains a claim for a declaration that chattels and crops on the Kerang land are property divisible amongst My. Rumpf's creditors, but I am not sure whether it is intended to proceed with that claim. 12. The order which I will pronounce today is that further consideration of the application dated 10 October 1986 Be adjourned to a date to he fixed. Counsel for the Applicant First-named Respondent Counsel for the Second, Third, Fourth and Fifth- * named Respondents Dates of Hearing I certify that this and the lI preceding pages are a true copy of the Reasons for Judgment herein of the Honourable Mr. Justice Jenkinson. ( Associate Dated: 10 February, 1988 Mr. D.R. Meagher, 0.C., and Mr. R.A. Brett In person Mr. C.M. Maxwell 7 May, 1987 and 6 August, 1987