AMBROSE as trustee of the Bankrupt Estate of Peter Athanasas v Athanasas - [2016] SASC 63

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
AMBROSE AS TRUSTEE OF THE BANKRUPT ESTATE OF PETER ATHANASAS v ATHANASAS & ANOR
[2016] SASC 63
Judgment of Judge Dart a Master of the Supreme Court
20 May 2016
BANKRUPTCY - ADMINISTRATION OF PROPERTY - REALISATION OF PROPERTY - POWERS OF TRUSTEE TO DEAL WITH PROPERTY
EQUITY - TRUSTS AND TRUSTEES - IMPLIED TRUSTS - RESULTING TRUSTS - REBUTTAL OF IMPLICATION - PRESUMPTION OF ADVANCEMENT
REAL PROPERTY - PARTITION OF LAND - PARTITION OR SALE IN PARTITION ACTION OR SUIT
Application by the plaintiff for sale of land - the plaintiff is the trustee in bankruptcy of one of the registered proprietors - the application is made pursuant to s 70 of the Law of Property Act 1936 - the defendants are the other registered proprietors of the land - the defendants say that the interest of the bankrupt was held on trust for them - whether a resulting trust arises - whether the presumption of advancement is rebutted.
Held:
1. The bankrupt did not hold his interest in the land on trust for the defendants.
2. The presumption of advancement is not rebutted.
3. The plaintiff is entitled to an order for the sale of the land.
Law of Property Act 1936 s 29, s 69, s 70, s 71; Bankruptcy Act 1966 (Cth) s 58(1), s 81, referred to.
Adamson & Ors v Hayes & Ors (1973) 130 CLR 276; Jones v Dunkel (1959) 101 CLR 298, applied.
Callahan v O’Neill [2002] NSWSC 877; Charles Marshall Pty Ltd & Ors v Grimsley & Anor (1956) 95 CLR 353; Napier v Public Trustee (WA) (1980) 32 ALR 153; Re Permanent Trustee Nominees (Canberra) Ltd [1989] 1 Qd R 314; Shepherd & Anor v Cartwright & Ors (1955) AC 431; Woodson (Sales) Pty Ltd v Woodson (Australia) Pty Ltd (1996) 7 BPR 14,687, considered.

AMBROSE AS TRUSTEE OF THE BANKRUPT ESTATE OF PETER ATHANASAS v ATHANASAS & ANOR
[2016] SASC 63

The plaintiff is trustee of the bankrupt estate of Peter Athanasas (“the bankrupt”). The defendants are the parents of the bankrupt.
In 2001 the bankrupt became one of the registered proprietors of land at Port Vincent (“the land”), being the land comprised and described in Certificate of Title Register Book Volume 5364 Folio 52. He held a 50 per cent interest in the land and his parents held the other 50 per cent interest. The interests were held as tenants in common. The plaintiff seeks an order pursuant to the Law of Property Act 1936 (“the LPA”) for the sale of the land.
The defendants oppose the making of the orders sought on the basis that, whilst their son was the registered proprietor of the relevant interest in the land, he was not the beneficial owner. They say he held his interest in the land on trust for them.
For the reasons that follow, the plaintiff is entitled to the order sought in these proceedings.
The plaintiff’s case
Mr Athanasas became a bankrupt upon the making of a sequestration order in the Federal Magistrates Court on 14 August 2006, at which time the plaintiff became his Trustee in Bankruptcy.
As mentioned, at the commencement of his bankruptcy, Mr Athanasas was the registered proprietor of one undivided second part of the land.
The consequence of the making of a sequestration order is set out in s 58(1) of the Bankruptcy Act 1966 (Cth), which provides as follows:
58 Vesting of property upon bankruptcy—general rule
(1)     Subject to this Act, where a debtor becomes a bankrupt:
(a)the property of the bankrupt, not being after‑acquired property, vests forthwith in the Official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of section 156A, in that registered trustee; and
(b)after‑acquired property of the bankrupt vests, as soon as it is acquired by, or devolves on, the bankrupt, in the Official Trustee or, if a registered trustee is the trustee of the estate of the bankrupt, in that registered trustee.
Note 1:This subsection has a limited application if there are orders in force under the proceeds of crime law: see section 58A.
Note 2:Even if property has vested under this section, it may, under the Proceeds of Crime Act 2002:
(a)    become subject to a restraining order; and
(b)    be taken into account in making a pecuniary penalty order; and
(c)become subject to a charge to secure the payment of an amount under a pecuniary penalty order, if it is subject to a restraining order; and
(d)be dealt with by the Official Trustee, if it is subject to a restraining order and a court has directed the Official Trustee to pay the Commonwealth an amount under a pecuniary penalty order out of property subject to the restraining order.
Following the vesting of Mr Athanasas’ interest in the land in him, the plaintiff, on 5 September 2006, made application to the Registrar-General to become the registered proprietor in respect of the bankrupt’s interest in the land. That occurred. As a result, the plaintiff is in the same position as any other registered proprietor of land.
The plaintiff’s claim is for an order for sale of the Port Vincent land pursuant to the relevant provisions of the LPA, being ss 69, 70 and 71, which provide as follows:
69—Power to order partition or sale instead of partition
(1) On any application for partition the court may order a partition of the said land or other property, and may give all necessary or proper consequential directions.
(2) On any such application if it appears to the court that, by reason of the nature of the property, or of the number of the parties interested or presumptively interested therein, or of the absence or disability of some of those parties, or of any other circumstance, a sale of the property and a distribution of the proceeds would be more beneficial for the parties interested than a division of the property between or among them, the court may, if it thinks fit, on the request of any of the parties interested, and notwithstanding the absence, dissent or disability of any others of them, direct a sale of the property accordingly, and may give all necessary or proper consequential directions.
70—Sale on application of certain proportion of parties interested
On any application for partition, if the party or parties interested individually or collectively, to the extent of one moiety or upwards in the property, request the court to direct a sale of the property and a distribution of the proceeds, instead of a division of the property between or among the parties interested, the court shall, unless it sees good reason to the contrary, direct a sale of the property accordingly, and shall give all necessary or proper consequential directions.
71—As to purchase of share of party desiring sale
On any application for partition, if any party interested in the property requests the court to direct a sale of the property and a distribution of the proceeds instead of a division of the property between or among the parties interested, the court may, if it thinks fit, unless the other parties interested in the property, or some of them, undertake to purchase the share of the party requesting a sale, direct a sale of the property, and give all necessary or proper consequential directions, and in case of such undertaking being given the court may order a valuation of the share of the party requesting a sale in such manner as the court thinks fit, and may give all necessary or proper consequential directions.
The plaintiff is clearly entitled to make the application. He is a person interested in one moiety in the land and therefore entitled to make application under s 70 of the LPA. It is that section that the Court is primarily dealing with. The text of s 70 is clear. The Court is to direct a sale of the property unless it sees good reason to the contrary.
An applicant for an order for sale is entitled to such an order almost as of right.[1] The onus is on a defendant to satisfy the Court that good reasons to the contrary exist, so as to convince the Court not to make an order.[2] The Court’s discretion in respect of s 70 is limited.[3]
[1]    Callahan v O’Neill [2002] NSWSC 877 at [8].
[2]    Woodson (Sales) Pty Ltd v Woodson (Australia) Pty Ltd (1996) 7 BPR 14,687 at 14,701.
[3]    Re Permanent Trustee Nominees (Canberra) Ltd [1989] 1 Qd R 314 at 317.
Subject to the merits of the defence put forward by the defendants, the plaintiff is entitled to the order sought. The defendants would establish good reason to the contrary if they satisfied the Court that the bankrupt was not the beneficial owner of his interest in the land, but merely held it on trust for them.
That issue apart, the only other question that the Court needs to consider is whether the Court should direct such a sale or whether the defendants wish to exercise the entitlement, pursuant to s 71, to purchase the plaintiff’s share.
The position of the defendants
The land at Port Vincent was acquired by the defendants and the bankrupt in October 2001. The ownership of the land did not change from that date until the making of the sequestration order. There is no dispute that the defendants paid the full purchase price.
The defendants say that since the acquisition of the land, the bankrupt has held his interest in the land on trust for them. There is no written deed of trust, nor is there any document setting out the alleged arrangements.
The first hurdle for the defendants arises because the agreement with the bankrupt that he was to hold his interest on trust was oral. The evidence-in-chief in this matter was by way of affidavit. The evidence was to the effect that the first defendant and the bankrupt had an understanding that the bankrupt held the interest on trust for his parents and that he had no right to deal with his interest in the land. The defendants’ position is that the understanding arose as a result of discussions between them at the time the land was acquired.
The provisions of s 29 of the LPA provide as follows:
29—Instruments required to be in writing
(1) Subject to the provisions hereinafter contained with respect to the creation of interests in land by parol—
(a)no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by his agent thereunto lawfully authorised in writing, or by will, or by operation of law;
(b)a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will;
(c)a disposition of an equitable interest or trust subsisting at the time of the disposition must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorised in writing or by will.
(2) This section shall not affect the creation or operation of resulting, implied, or constructive trusts.
The effect of s 29 is that no express trust can arise in respect of land or any interest in land unless it is proved by writing. The parties accept there is no such writing here. An oral agreement to create an interest in land or a trust in respect of land is simply ineffective.[4]
[4] Adamson & Ors v Hayes & Ors (1973) 130 CLR 276.
The submission of the defendants is that, in the circumstances of this matter, there is a resulting trust. It is possible for a resulting trust to arise in the facts of this matter, the defendants having paid all of the purchase price.
In Napier v Public Trustee (WA) Aickin J said: [5]
The law with respect to resulting trusts is not in doubt. Where property is transferred by one person into the name of another without consideration, and where a purchaser pays the vendor and directs him to transfer the property into the name of another person without consideration passing from that person, there is a presumption that the transferee holds the property upon trust for the transferor or the purchaser as the case may be. This proposition is subject to the exception that in the case of transfers to a wife or a child (including someone with respect to whom the transferor or purchaser stands in loco parentis) there is a presumption of advancement so that the beneficial as well as the legal interest will pass. Each of the presumptions may be rebutted by evidence.
[5] (1980) 32 ALR 153 at 155.
The difficulty for the defendants, then, is defeating the presumption of advancement, the bankrupt being their son.
The presumption of advancement
The parents paid all of the costs of the acquisition of the land, but directed their solicitor at settlement to have the bankrupt recorded as one of the registered proprietors.
In Shepherd & Anor v Cartwright & Ors Viscount Simonds said: [6]
I think that the law is clear that on the one hand where a man purchases shares and they are registered in the name of a stranger there is a resulting trust in favour of the purchaser; on the other hand, if they are registered in the name of a child or one to whom the purchaser then stood in loco parentis, there is no such resulting trust but a presumption of advancement. Equally it is clear that the presumption may be rebutted but should not, as Lord Eldon said, give way to slight circumstances.
[6] (1955) AC 431 at 445.
That judgment was considered by the High Court in Charles Marshall Pty Ltd & Ors v Grimsley & Anor where it was said in a judgment by the whole of the court: [7]
As Viscount Simonds said, there is no distinction between the purchase of shares and the acquisition of shares upon allotment. Exactly the same presumption arises. The plaintiffs are the daughters of the donor and the initial presumption is that he intended to give the shares to them or, in other words, to make them the absolute beneficial as well as the legal owners of the shares. The plaintiffs start with this advantage. The presumption can be rebutted or qualified by evidence which manifests an intention to the contrary. Apart from admissions the only evidence that is relevant and admissible comprises the acts and declarations of the parties before or at the time of the purchase (in this case before or at the time of the acquisition of the shares by allotment) or so immediately thereafter as to constitute a part of the transaction. If that evidence is insufficient to rebut the presumption the beneficial gift, absolute or subject only to qualifications imposed upon it at the time, is complete and no subsequent changes of mind or dealings with the property inconsistent with the trust by the donor can as between himself and the donees alter the beneficial interest.
[7] (1956) 95 CLR 353 at 365.
The inquiry here is in respect of the position in 2001 at the time of the acquisition of the land. Evidence as to whether there was an understanding at the time of purchase that the bankrupt was to hold his interest on trust for the defendants feeds into two issues. First, whether there was ever such an understanding and, secondly, whether the understanding is such as to rebut the presumption of advancement.
It is necessary to look at the conduct of the defendants and the bankrupt over a number of years when assessing the credibility of their claim that their son held his interest in the land on trust for them from the outset.
Soon after he transmitted the land into his own name in 2006 the plaintiff commenced writing to the defendants seeking their cooperation to sell the land. That continued over a number of years. There was limited response from the defendants. At no time did the defendants tell the plaintiff that the interest held by their son was held only as trustee. The first time the issue of a trust arose was after the commencement of these proceedings in 2015.
After settlement on the land in 2001 there were a number of occasions when the bankrupt could have disclosed the fact that he held his interest in the land on trust. They include:
1Months after the purchase of the land he made application to St George Bank for a loan. He included the land as one of his assets in the application form. The application form stated that he jointly owned 50 per cent of the land with his parents. There was no mention of a trust.
2Shortly after his bankruptcy he and his former wife made application for orders in the Family Court of Australia. In the application form he listed as an asset his 50 per cent interest in the land. There was no mention of a trust. He swore an affidavit confirming that the matters stated in the application were true.
3At his s 81[8] examination[9] he stated that he held a 50 per cent interest in the land and denied that he had any involvement with any form of family trust.
4His Statement of Affairs (four years late) disclosed his joint interest in the land as an asset of his.
[8] Section 81, Bankruptcy Act 1966 (Cth).
[9] The bankruptcy examination was conducted in the Federal Court of Australia on 27 November 2007.
The first defendant was also the subject of a s 81 examination. On his examination he said:
1He, together with his wife and son, were the owners of the land.
2When asked whether his son held any property on behalf of himself or his wife the first defendant answered no.
3That he understood when someone went on a Certificate of Title, the person is a part-owner.
The second defendant was also the subject of a s 81 examination.
1She was asked whether her son held any property on trust for her and she answered no.
2She was asked why her son was recorded as one of the three owners of the land and she stated she did not know.
The complete absence of any mention of the bankrupt holding his interest in the land on trust prior to the commencement of these proceedings is stark and unexplained. It leads to only one conclusion.
A further issue arises. The solicitor who acts for the defendants in these proceedings is the same solicitor who attended to the conveyance of the land in 2001 on their behalf. On 27 September 2001 he wrote to the bankrupt and his parents advising that arrangements for settlement of the purchase of the land were in place. He noted that his instructions were that the bankrupt was to hold a 50 per cent interest in the land with the defendants to hold the other 50 per cent.
The solicitor did not give evidence in these proceedings. That is surprising. The evidence of the first defendant is that, at or about the time the purchase of the land was contemplated, he received advice that it was best for taxation and estate planning purposes for him to put his son’s name on the title. His evidence before the Court was that, notwithstanding that, it was understood that the bankrupt would hold his interest in the land on trust for the defendants.
The rule in Jones v Dunkel[10] is to the effect that an unexplained failure by a party to call a witness who may have been able to provide relevant evidence leads to an inference that the calling of such evidence would not have assisted the party’s case.
[10] (1959) 101 CLR 298.
The solicitor here took instructions as to the conveyance and as to how the land was to be held. He was a material witness on the question of whether or not at that time it was the intention of the bankrupt and the defendants that he was to hold his interest in the land on trust. In the circumstances, I am prepared to draw the inference that the evidence of the solicitor would not have assisted the defendants.
I am not able to accept the evidence of the defendants and the bankrupt that it was intended at the time of the acquisition of the land in 2001 that the bankrupt would hold his interest on trust for the defendants. It may simply be that the defendants have unconsciously reconstructed the events of 2001 and are now convinced that was always the intention. I find that there was no intention or understanding in 2001 that the bankrupt’s interest in the land was to be held on trust. The effect of that finding is that the presumption of advancement is not rebutted and, accordingly, the bankrupt was the beneficial owner of his interest in the land. That interest vested in the plaintiff and he is entitled to realise it.

There will be judgment for the plaintiff. I will hear the parties on the form of the orders and consequential matters. In particular I will hear from the defendants in respect of their entitlement to purchase the plaintiff’s interest in the land.