Re Johnstone, Eileen Mary v Ex Parte Cole, Robert Molesworth Hobill & Ors [1984] FCA 243

Re Johnstone, Eileen Mary v Ex Parte Cole, Robert Molesworth Hobill & Ors [1984] FCA 243

Although there was no lack of good faith in the transfer, as the Sullivans were unaware of any impending creditor claim or financial difficulty and acted honestly, the transaction did not involve valuable consideration. The contract and the transfer were intended to effect a gift for the benefit of Mrs. Johnstone's children, with an understanding that the Sullivans would be released from liability to pay the purchase price. Therefore, the Sullivans were not purchasers for valuable consideration in the requisite commercial sense. The transfer is thus void as against the trustee under s.120 of the Bankruptcy Act 1966.

Parties
Bankrupt: Eileen Mary Johnstone; Trustee/applicant: Robert Molesworth Hobill Cole; Respondent: John Laurence Sullivan; Respondent: Dawn Sullivan
Jurisdiction
Australia
Judgment Date
17 August 1984
Procedural Posture
Bankruptcy Application / Judgment on Application by Trustee
Outcome
Application granted for trustee; transfer declared void under s.120 of the Bankruptcy Act 1966; costs awarded to trustee.
Legal Topics
Void Disposition of Property, Trusts, Good Faith, Valuable Consideration, Fraudulent Disposition
Insolvency Bankruptcy Void Disposition of Property Trusts Good Faith Valuable Consideration Fraudulent Disposition

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Parties

Eileen Mary Johnstone

Bankrupt

Robert Molesworth Hobill Cole

Trustee/applicant

John Laurence Sullivan

Respondent

Dawn Sullivan

Respondent

Procedural Posture

Bankruptcy Application / Judgment on Application by Trustee

Legal Issues

  1. 1 Whether the transfer of property by the bankrupt to the Sullivans was void under s.120 or s.121 of the Bankruptcy Act 1966; that is, whether it was made without good faith and valuable consideration, or with intent to defraud creditors.

Ratio Decidendi

Although there was no lack of good faith in the transfer, as the Sullivans were unaware of any impending creditor claim or financial difficulty and acted honestly, the transaction did not involve valuable consideration. The contract and the transfer were intended to effect a gift for the benefit of Mrs. Johnstone's children, with an understanding that the Sullivans would be released from liability to pay the purchase price. Therefore, the Sullivans were not purchasers for valuable consideration in the requisite commercial sense. The transfer is thus void as against the trustee under s.120 of the Bankruptcy Act 1966.

Court Disposition

Application granted for trustee; transfer declared void under s.120 of the Bankruptcy Act 1966; costs awarded to trustee.

Orders

  • The transfer dated 17 July 1980 by Mrs. Johnstone to the Sullivans is a disposition of property within two years before bankruptcy, not to a purchaser for valuable consideration, and is void as against the trustee.
  • The Sullivans pay the trustee's costs of and incidental to the application.