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Judgment handed down in Colbart Pty Ltd v Gerraty and Ors

11 May 2017

Kevin Frank Gerraty (Frank) conducted a successful nursery business in Victoria and Queensland building up a large fortune of several million dollars in the business and real property.  Frank and his wife Marie held these assets, and their family home, through Chambeyron Pty Ltd.  Frank held three shares and Marie two.  Frank and Marie had seven children: John, Paul, Phillip, Kevin, David, Francine and Kate. 

In 2001, Frank was experiencing financial pressures and he proposed establishing a family trust to hold these assets.  Under Frank’s proposal, Colbart Pty Ltd ( a company controlled by Frank) was to act as the trustee of a unit trust.  Frank and Marie were to transfer their shares in Chambeyron to Colbart as trustee of the unit trust.  The seven children and Frank were to each to hold a share in Colbart.  Each child and Frank was to hold 250 units in the trust.  Frank proposed that the restructuring would secure his and Marie’s retirement.

There is a dispute as to what Frank’s accountant and Chambeyron company secretary, Mr Clyne, did to effect the proposed.  In any event, Frank, John, Paul, Philip and Kevin acted on the basis the share and unit transfer had been validly carried out.  Colbart was recorded with ASIC as the sole shareholder of Chambeyron.

Frank and Marie are now in their 80s, both have extensive health concerns.  They are both on the pension and have had no practical access to the assets held by Chambeyron but rely on hand outs from some members of the family.

In 2014, Frank and Marie, with the assistance of Francine, persuaded ASIC to record Frank and Marie as the sole shareholders in Chambeyron in lieu of Colbart.

Colbart (by John, Paul, Philip and Kevin) seek a declaration that it is the sole shareholder of Chambeyron.  Frank and Marie, with the support of Francine, Kate and David, oppose the actions of John, Paul, Philip and Kevin.  Colbart was represented by counsel. Frank and Marie were unable to retain counsel.

The transfer of Frank and Marie’s shares in Chambeyron to Colbart was treated as a gift by John, Paul, Philip and Kevin  Colbart seeks to rely on equity to enforce the gift.  Equity will not enforce a gift unless the donors have done all that they legally must do to enable the gift to be completed.  In this case, the issue is whether Frank and Marie executed signed transfers of their shares in Chambeyron to Colbart to enable Colbart to be validly entered in the register of members of Chambeyron as the sole shareholder.

Signed transfers were not produced nor did any witness give evidence of seeing such transfers.  The evidence from Mr Clyne did not establish, to the Court’s satisfaction, that transfers by Frank and Marie were signed.  No register of members of Chambeyron was produced or proved to the Court’s satisfaction to have recorded any transfer of shares by Frank and Marie to Colbart.

The Court was not satisfied that Marie agreed with the proposal or intended to transfer her shares in Chambeyron, and therefore all her material assets, to Colbart.

Colbart failed to satisfy the Court that Frank and Marie signed transfers of their shares in Chambeyron to Colbart.  Colbart did not rely on any equitable grounds to seek to prevent Frank and Marie denying the gift was completed.

Colbart’s claim is dismissed.  Declarations as to Frank and Marie’s shareholding in Chambeyron will be made.

Read Justice Robson's full judgment on Austlii (External link)

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