Official Trustee in Bankruptcy v Theo, Sol & Anor [1996] FCA 744

IN THE FEDERAL COURT OF AUSTRALIA) ) GENERAL DIVISION ) No. QB 1422 of 1990 ) BANKRUPTCY DISTRICT OF THE ) ) STATE OF QUEENSLAND )

B E T W E E N: OFFICIAL TRUSTEE IN BANKRUPTCY Applicant - and - SOL THEO First Respondent - and - ATHINA THEO Second Respondent

JUDGE: Heerey J DATE: 1 August 1996 PLACE: Brisbane

REASONS FOR JUDGMENT

This is an application by the Official Trustee in Bankruptcy for a declaration that two transfers dated 27 December 1984 from the first respondent Mr Sol Theo to the second respondent Mrs Athina Theo of Mr Theo's interest in certain properties are void as against the applicant by reason of s 121(1) of the Bankruptcy Act 1966 (Cth) (the Act). That section provides: Subject to this section, a disposition of property whether made before or after the commencement of this Act with intent to defraud creditors, not being a disposition for valuable consideration in favour of a person who acted in good faith, is, if the person making the disposition subsequently becomes a bankrupt, void as against the trustee in the bankruptcy. The properties in question are, first, Lots 190 and 191 on registered plan number 14005 in the County of Canning Parish of Canning, and secondly, Lots 55 and 56 on registered plan number 30538 in the County of Stanley Parish of Redcliffe.

The Acting Official Receiver on 27 May 1993 issued notices under s 139ZQ of the Act directed to Mrs Theo seeking payment of the sums of $60,000 and $40,171, these being the amounts stated in the transfers as the consideration. Mr Theo applied to set aside those notices. A substantial hearing took place before Cooper J. On 24 August 1995 his Honour delivered judgment upholding the application. However it is important for the purposes of the present application to note the grounds on which his Honour so held. His Honour found that the requisite elements of s 121, that is to say disposition with intent to defraud creditors, and lack of valuable consideration and good faith, were made out. However, the notices were set aside because there was no evidence to support the alleged value of the property received by Mrs Theo as a result of the transactions; see especially page 41 of the judgment. That being so, the findings as to the elements of s 121(1) create an issue estoppel between the parties. Both the Official Trustee and Mr Theo are bound by the findings of fact and law of his Honour on those issues, arising as they did after a contested hearing. The procedure introduced into the Act by s 139ZQ does not exclude any other procedural rights which may be available to a trustee in bankruptcy to enforce the substantive rights conferred by s 121. The procedure under s 139ZQ has been the subject of some judicial criticism: see Re Pearson; ex parte Wansley v Pearson (1993) 46 FCR 55 at 59 - 60, Re Lucera; ex party Official Trustee in Bankruptcy v Lucera (1994) 53 FCR 329 at 336. The practice has now developed that when an application is made to set aside such a notice there is usually a cross application by the trustee seeking appropriate declarations and other relief under s 121. This practice proceeds on what is in my view the correct assumption that the specific statutory remedy under s 139ZQ does not exclude other remedies. That being so the applicant is, in my view, entitled to the relief sought. There was some mention by Mr Theo, who appeared in person, that the titles to the property have been "hijacked". The background to this seems to be that there was some issue of a duplicate title, or its modern equivalent, by the Titles Office. On 8 January 1996 Ms Bishop of the Australian Government Solicitor's office wrote to Mr Theo advising that she had spoken to a Mr Cornelius at the Titles Office. The letter continues: