GRAEME CHARLES FISHER AND JOEL CHRISTOPHER FISHER (AS TRUSTEES OF THE G & A FISHER FAMILY TRUST) AND ANOR V THE OFFICIAL ASSIGNEE IN BANKRUPTCY OF THE PROPERTY OF GRAEME CHARLES FISHER HC BLE CIV-2003-406-214

GRAEME CHARLES FISHER AND JOEL CHRISTOPHER FISHER (AS TRUSTEES OF THE G & A FISHER FAMILY TRUST) AND ANOR V THE OFFICIAL ASSIGNEE IN BANKRUPTCY OF THE PROPERTY OF GRAEME CHARLES FISHER HC BLE CIV-2003-406-214 8 October 2007IN THE HIGH COURT OF NEW ZEALAND BLENHEIM REGISTRY CIV-2003-406-214IN THE MATTER OF ss 54 and 86 of the Insolvency Act 1967 BETWEEN GRAEME CHARLES FISHER AND JOEL CHRISTOPHER FISHER (AS TRUSTEES OF THE G & A FISHER FAMILY TRUST) Applicants AND DON ALAN ROBERTSON (AS TRUSTEE OF THE G & A FISHER FAMILY TRUST) Applicant AND THE OFFICIAL ASSIGNEE IN BANKRUPTCY OF THE PROPERTY OF GRAEME CHARLES FISHER Respondent Hearing: 19 September 2007 Appearances: Mr G C Fisher in person Mr G Caro for Official Assignee Mr A Darroch for D A Robertson Judgment: 8 October 2007JUDGMENT OF MACKENZIE JThis judgement was delivered by Justice MacKenzie on 8 October 2007 at 4.15 pm pursuant to r 540(4) of the High Court Rules 1985.Solicitors:Mr G Caro, Ministry of Economic Development, Auckland Duncan Cotterill, NelsonCopy to:Mr G Fisher, P O Box 5188, Springlands Mail Centre, BlenheimBackground[1] This is an application to set aside a notice issued by the Official Assignee under the Insolvency Act 1967 setting aside the following disposition:The transfer of $173,586.46 being the proceeds of sale of the bankrupt's shares in Blenheim Finance Limited, to Graeme Charles Fisher, Andrea May Fisher and Don Alan Robertson on or about 11 September 2002. This disposition is set aside because it comprises a voidable gift pursuant to s 54 of the Insolvency Act 1967.[2] Mr and Mrs Fisher and Mr Robertson were in September 2002 the trustees of the G & A Fisher Family Trust. Mr Fisher was the legal owner of 140,000 shares in Blenheim Finance Limited ("the company"). These shares were sold in September 2002, and the net sale proceeds were transferred to the trust's bank account. The question whether that transfer was a voidable gift depends upon whether the shares in the company were beneficially owned by the bankrupt, or by the trust. [3] The company was incorporated in April 2000 and 10,000 shares were then issued to Mr Fisher. The trust deed establishing the trust was signed on 1 December 2000. The minutes of a meeting of the trustees held on 1 December 2000, at which Mr and Mrs Fisher and Mr Robertson are recorded as being present, and signed by all of them, records the following resolutions as being passed:1. All assets owned jointly and severally by Graeme Charles Fisher and Andrea May Fisher be vested in the G & A Fisher Family Trust. 2. It is agreed that any company shares owned by Graeme Charles Fisher and Andrea May Fisher will remain in their names but be held in trust for G & A Fisher Family Trust. 3. It is agreed that Don Alan Robertson is appointed as a professional trustee and his liability is limited to professional trustee.[4] Following the initial allocation of 10,000 shares to Mr Fisher, several further share issues took place. The company's share register records the issue on 11 November 2000 of 40,000 shares to Mr Fisher. Those shares were apparently paid for on or about 12 January 2001 from the proceeds of a loan recorded in thesolicitor's settlement statement as being a loan raised by the trust. The form of approval for issue of shares filed with the Companies Office records the date of approval for the issue of shares as 17 January 2001. On 7 August 2001, 20,000 further shares are listed in the Companies Share Register as being issued to Mr Fisher. On 9 September 2002, a further issue of 70,000 shares to Mr Fisher is recorded (taking the total shares held in his name to 140,000). There is no evidence as to whether either of those last two share issues were for cash or by means of some form of bonus issue or other distribution. [5] By an agreement dated 6 September 2002 between Provincial Finance Limited as purchaser and Mr Fisher, it was recorded that:The parties have agreed that the shares owned by Fisher and parties associated with him will be purchased by the purchasers.[6] The receipt and disposition of the proceeds are recorded in a statement from Mr Gilbert, solicitor, addressed to Mr Fisher that records receipt from the solicitors for Provincial Finance Ltd of $189,001.18 in payment of shares. It also includes a record of a number of payments from that amount for various professional and other costs, and records, "To balance paid to G & A Fisher Family Trust", to a bank account number noted on the statement, of $173,586.46. It is that payment, which the Official Assignee contends was a payment of monies to which Mr Fisher was beneficially entitled, which is now in issue. [7] Subsequently, Mrs Fisher retired as a trustee and Mr and Mrs Fisher's son, Joel Fisher, was appointed in her place, pursuant to a deed of retirement and appointment of new trustee dated 28 March 2003. Mr Fisher was adjudged bankrupt on 16 July 2004. Mr Robertson, by what is described as a deed of resignation of trustee, dated 21 July 2004 and signed by him, purported to resign from the trusts of the trustee effectively immediately. That resignation, if effective, would have resulted in the number of trustees being less than the minimum of three required by the Trust Deed. The Official Assignee's notice was filed and served on 8 August 2006. Applications to set aside the notice were filed, on 28 August 2006 by Graeme Joel Fisher and on 6 September 2006 by Mrs Fisher and Mr Robertson. Joel Fisher purported to resign as trustee on 24 May 2007.Ownership of the shares[8] The essential issue is whether the payment of the proceeds of sale of the shares was a voidable gift. As I have noted, that depends upon whether all or any of the shares were beneficially owned by the trust. That involves three questions: a) Was the purported resolution of the trustees dated 1 December 2000 effective to transfer the beneficial interest in the shares then owned by Mr Fisher to the trustees? b) Did the payment by the trust for the 40,000 shares issued in either November 2000 or January 2001 have the effect of making the trust beneficially entitled to those shares? and c) Is the trust beneficially entitled to any or all of the subsequent issues of shares in August 2001 and September 2002?(a) Was the resolution effective to transfer the shares?[9] The resolution did not have the effect of transferring the beneficial interest in the shares to the trust. The resolution was a resolution of the trustees, not an action by Mr Fisher in his personal capacity. The trustees did not, in that capacity, have the power to transfer shares owned by Mr Fisher to themselves. That finding is sufficient to answer question a). However, I go on to consider whether, if a generous interpretation were placed upon the resolution, and it were treated as a statement of personal intention by Mr Fisher as well as a resolution by the trustees, it would be effective to achieve a transfer.To do so, it must amount to a completed gift. As the Privy Council confirmed in Choithram v Pagarani [2001] 2 All ER 492, a gift can be made in one of two ways: a) By a transfer of the gifted asset to the donee, accompanied by an intention in the donor to make a gift; or b) By the donor declaring himself to be a trustee of the gifted property for the done.[10] Clearly no gift was perfected by the first of those ways. No steps were taken to transfer the legal interest in the shares to the trust. That could have been done only by a formal transfer. As to the second, the general rule is that equity will not perfect an imperfect gift by construing it as a declaration of trust. However, where there is a declaration of trust, so that a trust is validly created, the declaration will be given effect, so as to contribute a perfected gift: McLeary v CIR [1963] NZLR 711. The declaration of trust need not be by the donor as sole trustee. In Choithram v Pagarani the Privy Council said (at p 502)There can in principle be no distinction between the case where the donor declares himself to be sole trustee for a donee or a purpose and the case where he declares himself to be one of the trustees for that donee or purpose. In both cases his conscience is affected and it would be unconscionable and contrary to the principles of equity to allow such a donor to resile from his gift.[11] The issue is whether Mr Fisher's participation in the resolution of the trustees was sufficient to constitute a completed gift by this second method. I find, on the evidence, that it was not. First, the trust was not constituted by Mr Fisher. The settlor was Caroline Teresa Vincent. Mr Fisher's participation in the resolution could at best take effect as a declaration of intention to make a gift to an existing trust, not as a declaration of trust creating a new trust. The fact that it is a resolution by the trustees and not by Mr Fisher personally, tells against the proposition that it was a declaration of trust by Mr Fisher sufficient to constitute a perfected gift. There are other considerations that suggest that that position was not reached. The making of a gift would have given rise to a liability to lodge the appropriate gift statement, and that was not done. Mr Fisher's actions subsequent to the resolution are not consistent with his having transferred ownership and control of the shares to the trustees. The agreement for sale of the shares was entered into by Mr Fisher personally, and there is no evidence of his having sought approval of his fellow trustees to that action. In email correspondence with the purchasers Mr Fisher described himself as a 50 percent shareholder and as being willing to sell his shares. Further, the accounts for the trust, for the year ended 31 March 2002, being the only accounts available in evidence, do not show the shares as an asset of the trust. I find that there was no sufficient declaration of trust by Mr Fisher to constitute a valid gift of the shares to the trust.(b) The payment for the 40,000 shares[12] The second question in paragraph 8 is whether the payment made by the trust in respect of the issue of the 40,000 shares in January 2001 means that the trust became the beneficial owner of those shares. The shares were issued by the company to Mr Fisher. He was the shareholder in the company, and would have been entitled under s 45 of the Companies Act 1993 to have those shares offered to him. There is no evidence that they were ever offered to the trustees, or that Mr Fisher did anything to assign his right to acquire the shares to the trust. Payment by the trust of the purchase price cannot override that. The evidence is that the affairs of the trust and Mr Fisher were intermingled. Furthermore, Mr Fisher was a beneficiary of the trust. There was also evidence that, at least at some points in time, there were debts owing by the trust to Mr Fisher. Any of those situations might have provided a basis on which a payment by the trust to meet an obligation of Mr Fisher could have been made. The payment of the purchase price by the trustees is accordingly consistent with the payment being made on behalf of Mr Fisher. [13] For these reasons I do not think that an inference could properly be drawn, on the evidence, that the payment by the trustees in January 2001 was a payment made in consideration of the acquisition by the trust of the beneficial interest in the shares issued in respect of that payment. I therefore find that those shares were beneficially owned by Mr Fisher.(c) The remaining shares[14] That conclusion makes it unnecessary for me to consider the third question which I have identified in paragraph 8. None of the 140,000 shares which were sold by Mr Fisher were the property of the trust. The shares, and therefore the proceeds of sale of the shares, belonged to Mr Fisher. The payment of the proceeds of sale to the trust constituted a gift of property in terms of s 54(6) of the Insolvency Act 1967 and is accordingly voidable under s 54(1).Consequences of setting aside[15] It is necessary to address the consequences of the upholding of the Official Assignee's notice setting aside the disposition. Mr Caro submits that certain consequential orders, determining the responsibility of the individual trustees, should be made, pursuant to s 58(2), against Mr Fisher, Mr Robertson and Mr Joel Fisher. No order is sought in respect of Mrs Fisher. In each case, Mr Caro submits that the liability of the individual under the order should not be limited to the assets of the trust. [16] There is no formal application before the Court for orders under s58(2). I have formed the view that it is not appropriate, in the absence of an application by the Official Assignee under s 58, to go beyond the only step which is before me, namely to determine the challenge to the s 58 notice. The effect of any order will be that the payment made into the trust's bank account on 11 September 2002 remains set aside by the Official Assignee's notice. The liability of the individual trustees for the consequences of that is not, however, straightforward, and is not a matter which I should decide on the present application. [17] Sections 38 and 73 of the Trustee Act 1956 have potential application. Those sections provide: 38 Implied indemnity of trustees(1) A trustee shall be chargeable only for money and securities actually received by him, notwithstanding his signing any receipt for the sake of conformity, and shall be answerable and accountable only for his own acts, receipts, neglects, or defaults, and not for those of any other trustee, nor for any bank, broker, or other person with whom any trust money or securities may be deposited, nor for the insufficiency or deficiency of any securities, nor for any other loss, unless the same happens through his own wilful default. 73 Power to relieve trustee from personal liability If it appears to the Court that a trustee, whether appointed by the Court or otherwise, is or may be personally liable for any breach of trust, whether the transaction alleged to be a breach of trust occurred before or after the commencement of this Act, but has acted honestly and reasonably, and oughtfairly to be excused for the breach of trust and for omitting to obtain the directions of the Court in the matter in which he committed the breach, then the Court may relieve him either wholly or partly from personal liability for the same.[18] The bank account into which the funds were paid has the following account name:G & A Fisher Family Trust Graeme Charles Fisher Andrea May FisherAlthough the bank account is recorded as being an account for the trust, Mr Robertson was not named as one of the persons in whose account the name was kept. There is no evidence that he had signing authority over the account. His evidence is that he was not aware of the transaction. There is accordingly no evidence that the funds arising from the transaction which has been set aside were actually received by Mr Robertson. In the case of Mr Joel Fisher, he did not become a trustee until March 2003, six months after the payment had been received. There is accordingly no evidence that the payment was actually received by him. [19] While submissions were made both by counsel for Mr Robertson and by counsel for the Official Assignee on the issue of personal liability, no submissions were addressed to me as to the potential application of s 38. Further, the trustees ought not to be deprived of the opportunity to seek relief under s 73, if the circumstances might seem to justify an application under the section. I should not, in keeping open that possibility, be taken as expressing any view on the merits of such an application: there is insufficient evidence before me to consider that question. I do not consider that it is appropriate, on the present application, to make any order other than in respect of the applications to set aside the Official Assignee's notice under s 86 of the Act. Any order under s 58(2) should, in the circumstances here, be the subject of a separate application by the Official Assignee. [20] I consider that the possible application of those sections should not be complicated by issues arising from the wording of the Official Assignee's notice,and that the decision of the Official Assignee to set aside the transaction should be modified to the extent that the disposition set aside should be described as follows:The transfer of $17,586.46, being the proceeds of sale of the bankrupt's shares in Blenheim Finance Limited, to the trustees of the G & A Fisher Family Trust on or about 11 September 2002.Result[21] There will be an order pursuant to s 86 of the Act modifying the decision of the Official Assignee accordingly. [22] Costs are reserved. The parties may submit memoranda. A D MacKenzie J