FEDERAL COURT OF AUSTRALIA Official Trustee in Bankruptcy v Fodare [2000] FCA 300 BANKRUPTCY – applicationby trustee of bankrupt estate to avoid settlement of bankrupt's property – whether bankrupt was the beneficial owner of moneys used to purchase property – TRUSTS – resulting trusts – whether the bankrupt held the purchase moneys on trust – whether the respondent company held the property on trust for the bankrupt Bankruptcy Act 1966 (Cth), ss 5(1), 30, 81, 120, 120(2), 127(3), 139ZQ, 139ZR and 139ZS Bankruptcy Legislation Amendment Act 1996 (Cth), items 93 and 208 Evidence Act 1995 (Cth), section 69 Companies Code 1981 (NSW), section 81(2) Limitation Act 1969 (NSW) Jones v Dunkel [1959] 101 CLR 298, applied Cannane v J Cannane Pty Ltd (1998) 192 CLR 557, referred to Halse v Norton (1997) 76 FCR 389, applied Re Lehrain; Official Receiver v Frankston Timber Pty Ltd (1975) 24 FLR 407, referred to The Official Trustee v Marchiori (1983) 69 FLR 290, referred to Sharrment v Official Trustee (1988) 82 ALR 530, applied PT Garuda Indonesia Ltd v Grellman (1992) 107 ALR 199, referred to Cox v IATA (1999) 161 ALR 105 at 115, referred to Michael v Thompson (1894) 20 VLR 548, applied Pattison (As Trustee of the Estate of Robert Graham Ansett) v Crosswall (Federal Court of Australia, Northrop J, unreported, 25 March 1998), referred to Ramirez v Sandor's Trustee (Supreme Court of New South Wales, Young J, unreported, 23 April 1997), referred to THE OFFICIAL TRUSTEE IN BANKRUPTCY v FODARE PTY LTD & ORS NG 8446 OF 1997 FODARE PTY LTD v THE OFFICIAL RECEIVER NG 7005 OF 1998 EINFELD J 17 MARCH 2000 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 8446 OF 1997 BETWEEN: THE OFFICIAL TRUSTEE IN BANKRUPTCY AS TRUSTEE OF THE BANKRUPT ESTATE OF DORIS EMILY ELIZABETH MILLER Applicant AND: FODARE PTY LTD First Respondent DORIS EMILY ELIZABETH MILLER Second Respondent KATHLEEN ANNE HIRTZELL Third Respondent KEVIN TUBB Fourth Respondent AND NG 7005 OF 1998 BETWEEN: FODARE PTY LTD Applicant AND: THE OFFICIAL RECEIVER Respondent JUDGE: EINFELD J DATE OF ORDER: 17 MARCH 2000 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. the application in proceedings NG 7005 of 1998 be dismissed with costs 2. the application in proceedings NG 8446 of 1997 and the cross claim in proceedings NG 7005 of 1998 be allowed in so far as the application and cross claim sought a declaration that the purchase of the property of 92 Racecourse Avenue, Menangle Park by or for Fodare Pty Ltd represented a settlement void against the Official Trustee in Bankruptcy 3. the respondents in proceedings NG 8446 of 1997 pay the applicant's costs 4. the proceedings be listed for a day on or before 31 March 2000 for the making of final orders Note: Settlement and entry of orders are dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 8446 OF 1997 BETWEEN: THE OFFICIAL TRUSTEE IN BANKRUPTCY AS TRUSTEE OF THE BANKRUPT ESTATE OF DORIS EMILY ELIZABETH MILLER Applicant AND: FODARE PTY LTD First Respondent DORIS EMILY ELIZABETH MILLER Second Respondent KATHLEEN ANNE HIRTZELL Third Respondent KEVIN TUBB Fourth Respondent AND NG 7005 OF 1998 BETWEEN: FODARE PTY LTD Applicant AND: THE OFFICIAL RECEIVER Respondent JUDGE: EINFELD J DATE: 17 MARCH 2000 PLACE: SYDNEY REASONS FOR JUDGMENT INTRODUCTION 1 Doris Emily Elizabeth Miller, the second respondent, was made bankrupt on 23 March 1993 when a sequestration order was made against her estate on the petition of a judgment creditor, Bondi Securities Pty Ltd (Bondi Securities). The basis of that debt was a guarantee that the bankrupt had given to Bondi Securities in October 1988 over a debt owed to that company by Kinconne Pty Ltd (Kinconne), a company of which the bankrupt was a director, shareholder and employee: see Bondi Securities Pty Ltd v Doris Emily Elizabeth Miller (Supreme Court of New South Wales, Cole J, unreported, 19 April 1990). 2 The subject matter of these proceedings is the validity, as against the Official Trustee in Bankruptcy as trustee of the bankrupt estate (the trustee), of the apparent purchase on 2 March 1989 of a property at 92 Racecourse Avenue, Menangle Park (the property) by the first respondent, Fodare Pty Ltd (Fodare), for $195,000. If the purchase of the property is void as against the trustee, a further question to be determined is whether the trustee is entitled to an order for vacant possession of the property. THE PROCEEDINGS 3 On 26 May 1997 the trustee served a notice on Fodare under section 139ZQ of the Bankruptcy Act 1966 (the Act). By this notice the trustee claimed a debt from Fodare of the purchase price or the transfer of the property on the basis that Fodare had acquired the property by a settlement of the bankrupt's property that was void as against the trustee. 4 On 11 August 1997 the trustee served Notices to Vacate on the persons then in possession of the property, being the bankrupt, her son Kevin Tubb and his wife Kathleen Anne Hirtzell, who are the fourth and third respondents respectively. The s.139ZQ notice and the notices to vacate not having been complied with, the trustee filed an application in this Court on 15 December 1997 seeking vacant possession of the property (the trustee's proceedings). The trustee relied on sections 30 and 139ZR of the Act in support of the Court's power to make orders for vacant possession. The respondents in the trustee's proceedings, being Fodare, the bankrupt, and the third and fourth respondents, have not filed a defence to the trustee's application. 5 On 5 January 1998 Fodare filed an application in this Court, amended by leave on 26 November 1998, to set aside the trustee's s.139ZQ notice and obtain declarations of its legal and beneficial ownership of the property (Fodare's proceedings). 6 On 3 September 1998 the trustee filed a cross claim in Fodare's proceedings seeking declarations inter alia that the s.139ZQ notice was valid, that the property had vested in the trustee, and that the payment of $195,000 by the bankrupt for the purchase of the property was void as against the trustee by virtue of section 120. 7 Both sets of proceedings were heard together pursuant to an order made by Justice Lockhart on 24 February 1998, with the evidence in one ordered to be the evidence in the other. In the absence of a filed defence in the trustee's proceedings, I have assumed, in the respondents' favour, that the trustee's proceedings are defended on the grounds set out in the application in Fodare's proceedings and as stated by their counsel at the hearing. THE LEGISLATIVE SCENE 8 Section 139ZQ of the Act 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… 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 … ……… (7) If a person is required by a notice under this section to pay to the trustee the value of any property, the requirement is taken to be complied with if the property is transferred to the trustee. (8) An amount payable by a person to the trustee under this section is recoverable by the trustee as a debt by action against the person in a court of competent jurisdiction. 9 The provision of Division 3 of the Act on which the trustee relies as invalidating the purported purchase of the property by Fodare is section 120 as that provision stood prior to its amendment by item 208 of the Bankruptcy Legislation Amendment Act 1996. Section 120 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 bankruptcy. (2) A settlement of property, whether made before or after the commencement of this Act, not being a settlement referred to in paragraph (1)(a) or (b) or a settlement that is void as against the trustee by reason of the operation of that sub-section, is, if the settlor becomes a bankrupt and the settlement came into operation after, or within 5 years before, the commencement of the bankruptcy, void as against the trustee in the bankruptcy, unless the parties claiming under the settlement prove - (a) that the settlor was, at the time of making the settlement, able to pay all his debts without the aid of the property comprised in the settlement; and (b) that the settlor's interest in the property passed to the trustee of the settlement or to the donee under the settlement on its execution. ……… (9) In this section, "settlement of property" includes any disposition of property. 10 "Property" is defined in section 5(1) of the Act as: Real or personal property of every description, whether situate in Australia or elsewhere, and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real or personal property. 11 Section 139ZR of the Act, one of the two provisions on which the trustee relied in support of its right to make an application seeking vacant possession, relevantly provides: (1) If a notice under section 139ZQ is given to a person in respect of any property: (a) the property is charged with the liability of the person to make payments to the trustee as required by the notice; and (b) if the person makes the payments or transfers the property to the trustee, the property ceases to be subject to the charge. ……… (6) The trustee has power to sell any property over which a charge exists under subsection (1) and, if the property is so sold, then, subject to any charges that have priority over the first-mentioned charge, the proceeds of the sale are, to the extent of the charge, to be applied in or towards the discharge of the liability to make a payment or payments to the trustee of the person to whom the notice was given. 12 The other provision on which the trustee relied was section 30, as that provision stood prior to its amendment by item 93 of the Bankruptcy Legislation Amendment Act 1996, when it relevantly provided: (1) The Court: (b) has full power to decide all questions, whether of law or of fact, in any case of bankruptcy or any matter under Part X or Part XI coming within the cognizance of the Court; and (c) may make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter. ……… (5) Where: (a) a bankrupt, a debtor or any other person has failed to comply with … a direction or requirement of an Official Receiver or trustee, under this Act; ……… the Court may, on the application of the … Official Receiver,(or) trustee … : (d) order the person who has failed to comply with the order, direction, requirement or request, as the case may be, to comply with it; or (d) if it thinks fit, make an immediate order for the committal to prison of that person. (6) The power conferred on the Court by subsection (5) is in addition to, and not in substitution for, any other right or remedy in respect of the failure to comply with the order, direction, requirement or request, as the case may be. 13 The provision on which Fodare relies to invalidate the notice is section 139ZS(1) of the Act, which provides: If the Court, on application by a person to whom a notice has been given under section 139ZQ or by any other interested person, is satisfied that this Subdivision does not apply to the person on the basis of the alleged facts and circumstances set out in the notice, the Court may make an order setting aside the notice. THE CASE 14 The basis of the trustee's case in both its and Fodare's proceedings was that the money used to acquire the property, including all incidental costs of the purchase, was the bankrupt's and hence Fodare's acquisition of the property involved a disposition of the bankrupt's property that was void as against the trustee under section 120(2). According to the trustee, Fodare should and can only be characterised as a disguise to mask the bankrupt's beneficial ownership of the property. The case put by the respondents was that the purchase moneys were taken from a fund supplied or contributed to by Tubb, her brothers Noel and Ronald Shearn, her sister-in-law Lillian Shearn, her late mother, and a friend Noel Miller (not related). It followed, according to the respondents, that the bankrupt had only ever held that fund on trust for those persons. It was also part of the respondents' case that at the time of the purchase it was known and intended by the bankrupt and the suppliers of the purchase moneys that the property was to be transferred to the company which is now Fodare. That company was then intended to hold the property on trust for the suppliers of the purchase moneys until such time as the bankrupt's friend Noel Miller, one of the original contributors to the fund, repaid the other contributors an amount equal to their respective contributions. The respondents allegedly intended that Fodare would, on such repayment, hold the property on trust for the grandchildren of the bankrupt and of her friend Noel Miller. An undated Deed of Settlement bearing the common seal of Fodare and signed by the bankrupt and her adviser Noel Dennis by which the respondents alleged that Fodare became trustee of this trust was put before the Court in support of this aspect of the respondents' case (the trust deed). EVIDENTIARY ANALYSIS 15 The circumstances of the purchase of the property discernible from the evidence were quite extraordinary. There were three forms of the agreement for the purchase of the property in evidence, all with different purchaser details. The vendor details were unchanged between these three forms of agreement, being Reginald and Doreen McMillan, the then owner-occupiers of the property. The purchaser details on the first in apparent sequence of the three documents, although itself not dated, were in handwriting as follows: "Doris Emily Miller (for and on behalf of Kinconne Pty Ltd) of 183 Avoca Street Randwick", the bracketed phrase having been crossed out and replaced with the words "OR NOMINEE". Other handwriting on the document included the name, address and telephone number of the purchaser's solicitors (Lyons and Lyons) and the price and deposit details. Although the two sets of initials that appear alongside the correction and in the two other places where handwriting appears were not attributed in the evidence to anyone, they clearly belong to the two vendors of the property. There is no date on this document. I shall return to Kinconne later. 16 Because the handwritten initials in the second form of the agreement were clearly those of the bankrupt and were in the same position as the vendors' initials on the first form, the second form, which states that the agreement was made on 2 March 1989, appears to be the counterpart of the first form except that it further amends the purchaser details by crossing out everything in the first form (except the address) and replacing it with the name Fodare, so that the purchaser details read "Fodare Pty Ltd of 183 Avoca Street Randwick." Fodare, however, was not incorporated until 3 March 1989, the day after the agreement was apparently completed. There was no evidence of any authority given by Fodare to the bankrupt to act as its agent in respect of the purchase. Nor was any evidence presented of any resolution of Fodare approving or affirming the purchase of the property as could have been done by the company on incorporation: see s 81(2) Companies Code 1981 (NSW) as then in force. 17 The third form of agreement was quite different. It was fully typescripted with a different font, there were no initials, and the purchaser's solicitors were completely new (Dennis & Company). It recorded the purchaser details as "Fodare Pty Ltd", and also purported to have been made on 2 March 1989, the day before Fodare's incorporation. The bankrupt gave evidence that the change of solicitors was required because of Lyons and Lyons' inability to act in accordance with her instructions that the property was to be purchased on behalf of Fodare. This explanation was clearly contradicted by a memorandum from the file of Dennis & Company dated 31 March 1989, in which her instructions were recorded as follows: "She purchase the property with her moneys but the bank will hold the title for her future overdraft with the bank. Mr N Dennis arranging a shelf company for her." Mr Dennis was a friend and adviser to the bankrupt, and in close contact with the firm of solicitors then handling the conveyance. Notwithstanding the clear hearsay purpose for which this memorandum was tendered, it was admissible by virtue of section 69 of the Evidence Act 1995 (Cth). 18 In my view, the manifest intention of all this material was to hide the fact that the bankrupt was the true purchaser and that the other entities mentioned, especially Kinconne and Fodare, were her fronts or legal "toys". 19 The evidence that the property was held by Fodare as a trustee was also highly dubious, to say the least. Notwithstanding her evidence in her section 81 examination of knowing nothing of the dealings of Fodare, the bankrupt witnessed the affixing of the Fodare company seal on the trust deed in her then stated capacity as a director of the company and gave evidence in these proceedings that she executed the contract on behalf of Fodare. When confronted with this deed at the hearing, the bankrupt proffered the startling proposition that her signature on the deed must have been a forgery. Precisely who might have committed this crime and for what purpose were just left for speculation. Indeed the oral evidence of the bankrupt in the section 81 proceedings that she was unaware of how Fodare came to be the purchaser of the property was in this regard, as in others, bewildering, given the unambiguous documentary record of the trust deed and the agreement in its second and third incarnations. The respondents also failed to adduce any evidence that Fodare had knowingly authorised its being bound as trustee to the trust deed. 20 Also of interest was that the beneficiaries of the trust purportedly created by the deed included any spouse, child, grandchild or present or future relative of the bankrupt or any other person whom the trustees shall nominate. The person who had contributed the most significant proportion of the purchase moneys, Noel Miller, was not given an interest in the property by the trust deed, a fact clearly inconsistent with the respondents' case. No satisfactory explanation for this inconsistency was given by any of the respondents or their witnesses. All these matters created great suspicion about the manner in which Fodare supposedly acquired the property. 21 The evidence regarding the purchase moneys themselves also weighed heavily against the case put by the respondents. Common to all three forms of the agreement was the $195,000 purchase price of the property, $20,000 of which was to be paid as a deposit. This deposit was paid by the bankrupt to the vendor's solicitors by cheque drawn on the trading account of Kinconne, a company of which, as previously noted, the bankrupt was a director and shareholder. The incidental costs of the transaction, such as stamp duty and the legal fees on the conveyance, were also paid out of Kinconne's funds by cheques written on one of its accounts by the bankrupt. The bankrupt said that these funds were repaid with money acquired from her friend Noel Miller. In her affidavit of 1 July 1998 the bankrupt stated that: I think he [Miller] gave me the money on the same day. It was in cash. I got Noel Shearn to deposit that in a special trust account I operated for the patients in the [Kinconne] nursing home. The account was styled "Avoca Nursing Home Trust Account". The reason for doing that was that the account had a cheque book facility. 22 In her oral evidence in these proceedings, the bankrupt stated that this part of the affidavit was incorrect, and her memory of the circumstances surrounding the transaction had led her recently to amend her copy of the affidavit by replacing that passage with the following: I collected the money [from Miller] on the same day, it was a cheque and I got Noel Shearn to deposit it in a Kinconne account, the cheque was drawn on the account styled Avoca Trust Account. The reason that was the account had a cheque book facility and I was able to draw a cheque for 20,000 in favour of Kinconne. Mr Miller had funds in this account. 23 The recollection of the bankrupt of such details of the transaction nine years later is remarkable, given the evidence in her section 81 examination in December 1994 that "I'm not involved in Fodare whatsoever and I know nothing of their affairs." The bankrupt's evidence that Mr Miller had funds in the so-called "Avoca Trust Account" is also inconsistent with the account given in her affidavit of 1 July 1998 that all of Mr Miller's contributions eventually found their way into a joint deposit account in the name of "Miller DE and Tubb KR", some directly and others by way of other accounts. This inconsistency in the bankrupt's evidence and the evasive manner in which she delivered her evidence in all respects leads me to find that the bankrupt's explanation is more than remarkable – it is entirely lacking in truthfulness. The respondents' failure to adduce evidence from Noel Shearn on this matter did not assist the respondents' case in this respect, nor did the failure of the third respondent to give evidence in her capacity as a director of Fodare: Jones v Dunkel [1959] 101 CLR 298. 24 The remaining $175,000 of the purchase price was paid to the vendors' solicitors by way of a bank cheque drawn on 13 April 1989 from the bankrupt's joint account with Tubb. The two of them alleged that the funds in this account were held on trust for the various friends and relatives of the bankrupt who had contributed to it, yet there was no documentary corroboration for their sworn evidence that these moneys had been given to the bankrupt for deposit into this account, nor of the necessary prerequisite that the supposed contributors to the account ever held the moneys they claimed to have entrusted to the bankrupt. A SETTLEMENT UNDER SECTION 120? 25 Notwithstanding these serious defects and ambiguities in the evidence given by and on behalf of the bankrupt and the other respondents, a finding that their evidence is not to be believed or is otherwise inadequate does not by itself determine the case: Pattison (As Trustee of the Estate of Robert Graham Ansett) v Crosswall (Federal Court of Australia, Northrop J, unreported, 25 March 1998, at [68]). It appears to be a well settled principle of law that a party seeking to avoid a transaction by virtue of section 120 of the Act bears the onus of proof: Cannane v J Cannane Pty Ltd (1998) 192 CLR 557; PT Garuda Indonesia Ltd v Grellman (1992) 107 ALR 199 at 211; The Official Trustee v Marchiori (1983) 69 FLR 290 at 294. The trustee carries this burden in the present case. 26 However, it is also well settled that the degree of proof required to meet this burden will be very slight if all the facts concerning the settlement are within the knowledge of the settlor and settlee and are beyond the knowledge of the party seeking to avoid the settlement: Michael v Thompson (1894) 20 VLR 548, affirmed in Marchiori at 297 and Ramirez v Sandor's Trustee, (Supreme Court of New South Wales, Young J, unreported, 23 April 1997). In these proceedings it is obvious that the trustee could not have knowledge of the actual circumstances of the purchase of the property and that the only persons who could have this knowledge are the vendors, the respondents, Mr Dennis, the bankrupt's sometime adviser, the parties' conveyancers and perhaps their bankers. Accordingly, the degree of proof that the trustee's evidence must reach in this case is small. 27 It is my opinion that the trustee's evidence has met the burden of proof requirement. In particular, the first two forms of the agreement for sale and the contents of the conveyancing solicitors' files prove that the bankrupt was the primary actor in the negotiation and formation of the final agreement on the purchaser's side of the record. The documentary material, including the bank records, clearly establishes that the moneys used were those of the bankrupt, from whatever source they may originally have come. In my view, the attempt of the respondents to establish that the purchase moneys were held by the bankrupt on trust for family members and friends was coloured by the overall lack of credibility of the bankrupt and the absence of any credible objective corroborating evidence of the assertions made. The supposed trusts for the purchase and ownership of the property were in my view fictional, at least to the extent that they sought to put Fodare and the bankrupt on the one hand, and the funds in the Kinconne and joint bank accounts and the bankrupt on the other, at arm's length. 28 These facts evidence quite adequately that the purchase of the property involved a settlement of property by the bankrupt within 5 years of the commencement of her bankruptcy. There was no attempt by the respondents to establish the bankrupt's solvency at the time of the transaction. Prima facie therefore, section 120(2) is activated. THE TRUE ORIGIN OF THE PURCHASE MONEYS 29 The question for determination in these circumstances is whether the property was paid for and transferred to Fodare by the bankrupt. There can be no doubt on the evidence that the bankrupt managed and applied the funds of Kinconne to suit her own purposes. In fact, in her section 81 examination the bankrupt conveyed the unmistakable belief that this role was her entitlement. That the bankrupt used Kinconne as a vehicle to suit her purposes was also evidenced in a number of other ways, for example by her use of Kinconne's funds to meet costs associated with vehicles used by her and others otherwise than in connection with its business. Moreover, the willingness of the bankrupt to draw the deposit and the expenses of the conveyance of the property, such as stamp duty and the legal fees, from the funds of Kinconne without seeking the approval of the company's board, including Tubb, weighs heavily in support of this conclusion. So does the uncontested fact that the bankrupt utilised the funds in the joint account with her son to assist in the management of Kinconne's business activities, whether it be to meet small expenses or to provide security for Kinconne's overdraft. The respondents' failure to call Mr Ward, accountant for Kinconne, was also significant in this respect. 30 I find that the $20,000 deposit paid by the bankrupt for the property out of the funds of Kinconne was in fact her money. Notwithstanding the finding in Pattison at [71]-[73] that might lead to a conclusion for this case that such facts do not necessarily establish that the bankrupt had a beneficial interest in or was otherwise entitled to the funds of Kinconne used to purchase the property, given their separate legal personalities, the only possible conclusion reasonably available on the evidence in this case is that the bankrupt used Kinconne as a front and the funds of Kinconne were in fact, or were treated as, the bankrupt's moneys. 31 As to the joint account with her son from which the bankrupt drew the cheque for the balance of the purchase moneys, she had obvious prima facie beneficial ownership of at least half of the funds in this account, by virtue of her being the joint account holder: Sharrment v Official Trustee (1988) 82 ALR 530 at 555. The evidence led by the respondents to deny the operation of this presumption in this case was that this account was made up of contributions of other relatives and friends of the bankrupt. For his part Tubb, the joint account holder, only laid claim in evidence to about $60,000 of the funds in the account. 32 I found each of the witnesses called by the respondents, including Tubb, completely unreliable on the matter. The failure to produce even a single piece of documentary evidence to corroborate the bankrupt's claims of countless deposits into the account from various sources, or to confirm that the alleged contributors had in fact ever owned their supposed contributions or given such money to the bankrupt, did not assist the respondents in establishing their case. The fact is that the bankrupt exercised total discretion in respect of the management of this account, operating it and utilising it as her own. I find that all these funds were part of her estate. 33 Even if the entirety of the money for the purchase of the property were drawn from moneys given to the bankrupt by members of her family and friends, Fodare would not be entitled to protection from the claim of the trustee. In Cox v IATA (1999) 161 ALR 105 at 115, Justice O'Loughlin referred to the following passage from Jacob's Law of Trusts in Australia (6th ed, 1997) p13: The answer to the question whether a debt or trust was created in any particular case depends upon the intention of the parties. If the parties intended that the one receiving the money should hold that money for the benefit of a third party, then it will be a trust because there is actual trust property. If the payee was entitled to use the money as his own, being under an obligation merely to repay the same amount of money at a future time, then he is merely a debtor. 34 Justice O'Louglin continued: The relevant intention is to be inferred from the language employed by the parties; for that purpose the court is entitled to look into the nature of the transaction and the circumstances of the relevant parties and their relationship. 35 As disclosed by the evidence, the language used by the persons who allegedly gave money to her clearly was that of debt rather than trust. The evidence disclosed that the bankrupt was allowed by all of the so-called contributors to utilise their money at her leisure and with an unfettered discretion, provided repayment of the principal was available on request. The fact that there was no arrangement for the payment of the interest on the account by the bankrupt to the contributors or even an agreement as to what was to be done with the interest lends further support to this conclusion. THE VALIDITY OF THE SECTION 139ZQ NOTICE 36 In view of these findings, it is not necessary to deal separately with Fodare's proceedings. Just as with the establishment of a case under section 120, it falls upon the trustee to prove the validity of a contested s.139ZQ notice: Halse v Norton (1997) 76 FCR 389 at 393 and 398. One of the grounds on which such a notice may be found to be invalid is if the amount claimed in it is not "equal to the … value of the property received": see subs (1). In this case, therefore, the notice would have been invalid, and the trustee's proceedings would have failed, if the amount of $195,000 claimed was not the value of the property received by Fodare from the bankrupt's estate. For the reasons previously given I believe that it was. DELAY 37 Relying upon the Limitation Act 1969 (NSW), the respondents argued that the trustee's proceedings should fail because of delay in their institution until some 8 years after the transaction they sought to avoid. In this respect I share the concerns expressed by Justice Sweeney in Re Lehrain; Official Receiver v Frankston Timber Pty Ltd (1975) 24 FLR 407 that the application of State limitation laws might defeat the purpose of the Act to create a uniform bankruptcy regime throughout Australia. 38 Section 127(3) of the Act provides a 6 year limitation period for actions of this type. As the trustee commenced its proceedings less than 6 years from the date on which the bankrupt became a bankrupt, the requirements of the Act in this regard have been met. I reject the submission that the trustee's proceedings are statute barred. CONCLUSION 39 The property is currently registered in the name of Fodare and is in the physical possession of the other respondents, as it has been since it was purchased in 1989. In light of my finding regarding the true ownership of the purchase moneys and in the absence of any evidence of an intent on the part of the bankrupt to give her beneficial interest to Fodare, I find that the property is and has been held since 1989 by Fodare for and on behalf of the bankrupt and, since 1993, the trustee. Contrary to the argument put to the Court, it is not necessary for the resolution of these proceedings to pronounce a resulting trust in favour of the bankrupt. It is enough to find that the settlement by which Fodare became the registered proprietor of the property is void as against the trustee by virtue of the Act. 40 That being said, on my reading of section 139ZQ(7) which is, it seems, a true deeming provision, it is not necessary, and may not be possible, for the Court to order the transfer of the property notwithstanding section 23 of the Federal Court Act. Yet if I order the payment of the purchase price, it may require the property to be sold which may not be the best result for any party. I will therefore allow the parties a short period to discuss the final orders with a view to their reaching agreement. If agreement is not possible, the matter should be relisted by arrangement with the Associate. Either way the matter is to be concluded by not later than Friday 31 March 2000. Appropriate orders will be made on that date if the parties have not arranged a listing beforehand. 41 For the present it will suffice if I dismiss Fodare's proceedings with costs and declare that the purchase by or for Fodare of 92 Racecourse Avenue, Menangle Park on 2 March 1989 for the sum of $195,000 represented a settlement of property by the bankrupt within 5 years before her bankruptcy. There being no evidence of her solvency, such a settlement is, by section 120(2) of the Act, void as against the trustee in bankruptcy of the second respondent. The respondents will pay the trustee's costs. I certify that the preceding forty-one (41) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Marcus Einfeld. Associate: Dated: 17 March 2000 Counsel for the Applicant: Mr. A. Spencer Solicitor for the Applicant: Sally Nash & Co Counsel for the Respondents: Mr. R. Cameron Solicitor for the Respondents: Dennis & Co Dates of Hearing: 23-24 September 1998, 28-29 January 1999 Written Submissions completed: 27 April 1999 Date of Judgment: 17 March 2000