IN THE FEDERAL COURT OF AUSTRALIA ) GENERAL DIVISION ) No. E178 of 1994 BANKRUPTCY DISTRICT OF THE ) STATE OF QUEENSLAND ) RE: Nigel COIS Bankrupt BETWEEN: Ivor WORRELL Applicant AND: Julie DEVERY First Respondent AND: Patrick Edward NEHEMIA (aka Patrick RAHARANA) Second Respondent MINUTES OF ORDER JUDGE MAKING ORDER: Spender J DATE OF ORDER: 7 July 1995 WHERE MADE: Brisbane THE COURT ORDERS THAT: 1. the second respondent pay to the applicant trustee the sum of $10,000.00 within six weeks of today's date; 2. there be no order as to costs. THE COURT GRANTS liberty to apply. NOTE: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules. IN THE FEDERAL COURT OF AUSTRALIA ) GENERAL DIVISION ) No. E178 of 1995 BANKRUPTCY DISTRICT OF THE ) STATE OF QUEENSLAND ) RE: Nigel COIS Bankrupt BETWEEN: Ivor WORRELL Applicant AND: Julie DEVERY First Respondent AND: Patrick Edward NEHEMIA (aka Patrick RAHARANA) Second Respondent CORAM: Spender J DATE: 7 July 1995 PLACE: Brisbane REASONS FOR JUDGMENT This is an amended application by the trustee of the bankrupt estate of Nigel Cois and an application by one of the respondents to the application by the trustee. Both applications concern the entitlement to a Landrover Discovery four-wheel drive vehicle registration No. 797-BOU. On 28 September 1994, Ivor Worrell, the trustee of the estate of Nigel Cois, sought orders that the property the subject of a notice pursuant to s. 139ZQ of the Bankruptcy Act 1966 ('the Act') be delivered up to the trustee by the bankrupt and/or the respondent. The respondent referred to was Julie Devery. The application also sought that pursuant to s. 77(g) of the Act the bankrupt and the respondent advise the trustee of the location of the property and assist the trustee to recover the property. It sought directions from the court with respect to the refusal or failure to comply with that notice, and costs. Mr Ivor Worrell is the registered trustee of the estate of Nigel Cois, who was made bankrupt pursuant to creditor's petition No. 2742 of 1993. A sequestration order was made against his estate on 1 February 1994 in respect of an act of bankruptcy committed on 13 December 1993. The vehicle the subject of the present applications was sold by Southside Land Rover on 30 September 1993 for the sum of $49,548.90. It is the circumstances of that transaction which are the subject of both applications. There is no doubt that the purchase of the vehicle was financed by the trade-in of a Toyota Forerunner registration No. 693-BGO at a figure of $36,000.00 with the balance, after various adjustments and allowances, having been paid by cheque and cash. The evidence establishes that on 29 September 1993 Mr Cois made a cheque withdrawal from his Suncorp account No. 20 02-468655-1 for $10,000.00, that cheque being made payable to Southside Land Rover. The vehicle the subject of the trade-in was registered in the name of Patrick Nehemia, who is also the same person as Patrick Raharana. The documentation surrounding that purchase is the subject of further reference later in these reasons. The vehicle was registered in the name of Julie Devery of 26 Dandar Drive, Southport on 30 September 1993. Miss Devery is listed in the bankrupt's statement of affairs as the bankrupt's solicitor. The trustee wrote to Ms Devery on 15 July 1994 claiming the vehicle as an asset of Mr Cois' estate. In response, Ms Devery stated that the vehicle belonged to Patrick Nehemia, because the purchase was funded by the trade-in of Mr Nehemia's Toyota Forerunner, with the balance being funded from an amount of $12,000.00 which Mr Nehemia won playing lotto. An affidavit by Ms Devery says that her statement concerning the funding from Gold Lotto proceeds was in error and in fact Mr Nehemia had used the proceeds of a Golden Casket win in the acquisition of the vehicle used as a trade-in for the purchase of the vehicle the subject of the present applications. The trustee, in his application, relies on s. 120 of the Bankruptcy Act, which relevantly provides: " (1) A settlement of property, whether made 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. " The trustee asserts that with respect to the transaction for the purchase of the vehicle there was a settlement of property which was not made in favour of a purchaser or encumbrancer in good faith or valuable consideration and the settlement came into operation "after, or within 2 years before, the commencement of the bankruptcy". On or about 8 September 1994, the Deputy Official Receiver in the Bankruptcy District of the State of Queensland, executed a notice under s. 139ZQ of the Bankruptcy Act addressed to Julie Devery by certified mail. Section 139ZQ in the context of the present applications, relevantly provides: " (1) If a person has received any money or property as a result of a transaction that is void against the trustee of a bankrupt under Division 3, the Official Receiver: (a) if the Official Trustee is the trustee - on the initiative of the Official Receiver; or (b) if a registered trustee is the trustee - on application by the trustee; may require the person, by written notice given to the person, to pay to the trustee an amount equal to the money or the value of the property received. (2) The notice must set out the facts and circumstances because of which the Official Receiver considers that the transaction is void against the trustee. (3) The notice may: (a) require the amount to be paid at a time or within a period set out in the notice; or (b) require the amount to be paid at such times, and in such instalments, as are set out in the notice. ..." A complaint by Ms Devery that the notice is invalid because of any uncompleted details in paragraph 4 of the notice is without substance. The notice required the payment of $37,000.00, being the alleged value of the property of the bankrupt, which had been received by Ms Devery. The amended application of the trustee is against Julie Devery as first respondent and Patrick Edward Nehemia (aka Patrick Raharana) as second respondent. That amended application seeks: 1. A declaration that the transfer of a Land Rover Discovery 4 wheel drive, bearing Queensland registration no. 797-BOU ("the property") to the First Respondent on the 30th September, 1993 is void as against the trustee. 2. That the property be delivered up or transferred to the trustee by the First Respondent and/or the Second Respondent. 3. Alternatively, that the First Respondent and/or Second Respondent make payment to the trustee equivalent to the value of the property. 4. Alternatively, a declaration that the whole of the purchase price for the property, or such other sum as this Honourable Court seems meet, is void as against the trustee. 5. That this Honourable Court provide directions with respect to the First Respondent's refusal or failure to comply with the notice served on her on the 9th September, 1994 pursuant to Section 139ZQ of the Bankruptcy Act 1966. 6. Such further and other orders as this Honourable Court seems meet. 7. Costs of and incidental to this application to be paid by the First Respondent and/or Second Respondent. The principal question in this case is whether the car belongs to the second respondent. The respondents contend that the vehicle in question was paid for by the trade-in valued at $36,000.00 of the vehicle owned by the second respondent; that in addition, the invoice for the purchase of the vehicle was issued to Mr Nehemia; that part payments of the purchase price in cash were paid for on behalf of Mr Nehemia, as the invoices on their face evidence; and that the bank cheque payable to Southside Land Rover for $10.000.00 drawn on the Suncorp account of the bankrupt by the bankrupt was paid in respect of the purchase of the vehicle on account of wages owing to the second respondent and to his order. It might be said with some justification that the arrangements between Mr Cois, Mr Raharana and Ms Devery do not reflect an ordered financial environment nor typical human relationships. Counsel for the trustee accepted that the trustee's case was that the settlement sought to be voided was the transaction "comprised of a purchase of the Land Rover by way of trade-in, by way of cheque, by way of the cash payments". It was said this was a disposition of the property of Cois by Cois for the benefit of the second respondent. At the hearing of these applications it was not disputed by the trustee that the trade-in of the Toyota Fore-runner was the property of the second respondent. The evidence establishes that at the time of the acquisition of the Land Rover the subject of the present applications, Mr Raharana and the bankrupt were living in a domestic homosexual relationship. This, in my opinion, is a significant factor affecting the characterisation of the payments made in cash by the bankrupt but evidenced by the issuing of receipts in the name of the second respondent for those payments. Moreover, it does not seem to be disputed on the evidence that the second respondent worked for the bankrupt in the bankrupt's business of kitchen furniture installation, and the payment of the second respondent for that labour was not dealt with in the way that ordinary relationships between an employer and an employee would be dealt with. As I said in the course of the submissions of counsel, in my view, the second respondent was not a sophisticated person but was a decent and honest witness, a conclusion which I then indicated and which I maintain is to be contrasted with that of the bankrupt, who in my view was not only much more sophisticated but his evidence in my opinion was quite unsatisfactory and unconvincing. On the evidence I find that on 6 September 1993, the second respondent paid a deposit of $100.00 in respect of the vehicle the subject of these applications. A receipt numbered 5180 in the name of the second respondent evidences that fact and in my view the fact that the sum for the deposit may have been paid for by Mr Cois does not require a contrary con- clusion. The same conclusion I reach in respect of receipt No. 5182 on 9 September 1993 for $500.00; the receipt No. 5186 on 14 September 1993 for $1,000.00; and the receipt No. 5191 of 17 September 1993, again for $1,000.00; a receipt No. 5204 on 29 September 1993 for $150.00. There is another receipt No. 5203 of 29 September 1993 for the cheque of $10,000.00 and for a cash payment of $723.00. There is a further receipt, this time indicating a receipt from N. Cois (unlike the earlier ones) numbered 5208 and dated 2 October 1993 for $75.00. As the submissions before me indicate, it was not ultimately asserted by the trustee that the trustee was entitled to the Discovery vehicle. The claim seemed to be narrowed to the sum payable on the final transaction leading to the registration of the Discovery vehicle in the name of Ms Devery. The question ultimately is one of fact. Notwithstanding the affidavit of Mr Condor, I am satisfied that the payments made prior to 30 September 1993, apart from the final payments, were payments made on behalf of the second respondent for the acquisition by him of that vehicle. I am further satisfied that but for the amount of $10,000.00 paid for as part of the final payment, the funds advanced were by or on behalf of the second respondent. In my opinion, the sum of $10,000.00 paid for from the bankrupt's Suncorp account to Southside Toyota was not paid on behalf of the second respondent being an amount owing by the bankrupt to the second respondent for wages. That claim is a subsequent invention explicable no doubt by the feelings of affection springing from the relationship between the parties. At the time of the payment, however, there was an unstructured financial relationship and the payment was not made in fact in discharge of any obligation owed by Mr Cois to the second respondent. That claim is a subsequent claim in purported justification for the payment. The payment in fact at the time was not made for that reason or for that consideration. To that extent, in my opinion, the payment of $10,000.00 by Mr Cois to Southside Land Rover was a settlement of property within s. 120. I direct the second respondent pay to the trustee of Mr Cois the sum of $10,000.00. At the final hearing of the applications no order was sought against the first respondent. Having regard to the curial history of the matter and to the conclusions I have reached, in all the circumstances I propose to order the second respondent pay to the applicant trustee the sum of $10,000.00 and that otherwise as between the parties there be no order as to costs. I certify that this and the preceding nine (9) pages are a true copy of the reasons for judgment herein of Associate Date: 7 July 1995 Counsel for the applicant trustee: Mr P. Lane instructed by: Jones Raj King Counsel for the respondents: Mr K. Howe instructed by: Robert Lehn & Co. Date of Hearing: 12 December 1994