KIEFEL CJ, BELL, GAGELER, KEANE, NETTLE, GORDON AND EDELMAN JJ
FRANZ BOENSCH AS TRUSTEE OF THE BOENSCH TRUST APPELLANT
AND
SCOTT DARREN PASCOE RESPONDENT
Boensch v Pascoe
[2019] HCA 49
Date of Hearing: 11 October 2019 Date of Judgment: 13 December 2019
S216/2019
ORDER
Appeal dismissed with costs.
On appeal from the Federal Court of Australia
Representation
C J Bevan with M J Wells for the appellant (instructed by John D Bingham Solicitor)
D A Priestley SC with M F Newton for the respondent (instructed by Gilchrist Connell)
Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.
CATCHWORDS
Boensch v Pascoe
Bankruptcy – Bankrupt estate – Where "the property of the bankrupt" vested in trustee in bankruptcy pursuant to s 58 of Bankruptcy Act 1966 (Cth) – Where bankrupt held estate in land under Torrens system on trust – Whether property held by bankrupt on trust capable of vesting in trustee in bankruptcy – Whether bankrupt had a valid beneficial interest – Whether estate vested in trustee in bankruptcy in equity.
Real property – Torrens system – Caveats – Where trustee in bankruptcy lodged caveat claiming "Legal Interest pursuant to the Bankruptcy Act 1966" and refused or failed to withdraw caveat after request – Whether caveator liable to pay compensation under s 74P(1) of Real Property Act 1900 (NSW) for lodging and maintaining caveat "without reasonable cause" – Whether existence of caveatable interest or honest belief on reasonable grounds in such interest sufficient for "reasonable cause" – Whether claimant established that caveator had neither caveatable interest in property nor honest belief on reasonable grounds in having such interest – Whether possibility of trust being set aside under s 120 or s 121 of Bankruptcy Act conferred caveatable interest – Whether caveat adequately described equitable estate in fee simple – Whether deficiency in statement of interest demonstrated absence of "reasonable cause".
Trusts – Trustees – Right of indemnity – Where trustee incurred significant expenses in his capacity as trustee ordinarily entitling him to be indemnified out of trust property – Where trustee asserted "mutually beneficial arrangement" with "the trust" – Whether asserted arrangement prejudiced trustee's right of indemnity wholly or in part – Whether value of benefits to trustee under asserted arrangement equal to or exceeded total of trust expenses incurred.
Words and phrases – "beneficial interest", "caveatable interest", "caveat against dealings", "circuity of action", "contingent beneficial interest", "determination of non-dispositive issues in appeals", "honest belief on reasonable grounds", "judicial economy", "most remote possibility of interest", "property held by the bankrupt in trust for another person", "right of indemnity", "subject to the equities", "the property divisible among the bankrupt's creditors", "the property of the bankrupt", "without reasonable cause".
KIEFEL CJ, GAGELER AND KEANE JJ. Upon a person becoming bankrupt, s 58(1) of the Bankruptcy Act
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Boensch v Pascoe [2019] HCA 49
Case
[2019] HCA 49
Decision Date
CaseChat Overview and Summary
The case of *Boensch v Pascoe* concerned a dispute over a property held by Mr Boensch, who was later declared bankrupt. Mr Boensch claimed to hold the property on trust for his children, established through a Memorandum of Trust and later a Deed of Trust. The trustee in bankruptcy, Mr Pascoe, lodged a caveat over the property, asserting a legal interest. Mr Boensch sought compensation from Mr Pascoe under s 74P(1) of the *Real Property Act 1900* (NSW), alleging the caveat was lodged and maintained without reasonable cause.
The High Court of Australia was required to determine whether the property held by Mr Boensch on trust was capable of vesting in the trustee in bankruptcy. Specifically, the Court had to consider whether Mr Boensch possessed a valid beneficial interest in the property that would pass to the trustee, or if the trustee acquired an equitable interest through Mr Boensch's right of indemnity as trustee. Furthermore, the Court had to assess whether Mr Pascoe had reasonable cause for lodging and maintaining the caveat, considering the existence of a caveatable interest or an honest belief on reasonable grounds in such an interest.
The High Court reasoned that upon Mr Boensch's bankruptcy, his right of indemnity as trustee vested in the trustee in bankruptcy, Mr Pascoe. This right of indemnity conferred an equitable interest in the Rydalmere property, thereby establishing a caveatable interest. The Court found that Mr Pascoe honestly believed on reasonable grounds that such an interest existed, either on the basis that the trust was void or due to Mr Boensch's right of indemnity. Consequently, Mr Pascoe did not lodge or refuse to withdraw the caveat without reasonable cause.
The appeal was dismissed with costs.
Orders
Orders of the court
Appeal dismissed with costs.
Background
Background to the litigation
Section 74P(1) of the Real Property Act provides, in substance and so far as is relevant, that any person who, "without reasonable cause", lodges a caveat with the Registrar-General under s 74F, or refuses or fails to withdraw such a caveat after being requested to do so, is liable to pay compensation to any person who sustains pecuniary loss attributable to the lodging of the caveat, or the refusal or failure to withdraw it.The facts At all relevant times, Mr Boensch and his former wife, Sabine Boensch, were registered as joint proprietors in fee simple of the Rydalmere property. Mr Boensch claimed that, in May 1999, he and Ms Boensch reached a matrimonial property settlement under which Ms Boensch agreed to transfer her interest in the Rydalmere property to him for a consideration of $50,000. Mr Boensch also claimed that, on 23 August 1999, he and Ms Boensch executed a memorandum of trust ("the Memorandum of Trust") in the following terms:"This is a memorandum of trust created for the benefit of Boensch family with the most important purpose to provide secure means of support to the children of the marriage ... after the divorce of their parents.The trust property is the land and buildings at [the Rydalmere property].Sabine Boensch will cause her share of ownership of that land to be transferred to Franz Boensch for him to hold the whole of land in trust as described above.In due course Franz Boensch will arrange with a solicitor or accountant to prepare a detailed trust document, professionally drafted to give best protection to the children and to ensure favourable tax treatment of income earned by the trust."The Memorandum of Trust was not stamped until 29 March 2004. In the meantime, in October 2003, Mr Boensch was served with a bankruptcy notice demanding payment of a judgment debt due to one Michael Costin. Mr Boensch claimed that, on 18 March 2004, he and Ms Boensch, as settlors, executed a deed of trust prepared by solicitors ("the Deed of Trust"). The recitals to the Deed of Trust stated that the settlors wished to confirm the settlement upon Mr Boensch as trustee in the Memorandum of Trust, constituting "the Boensch trust" (hereafter, "the Boensch Trust"). The First Group Beneficiaries of the Boensch Trust were defined as the children of Mr and Ms Boensch. Mr Boensch was nominated as the appointor. On 21 March 2004, Mr and Ms Boensch executed a transfer of their estate in fee simple in the Rydalmere property to Mr Boensch. The first mortgagee of the property at the time would not, however, consent to registration of the transfer, and it was not registered. On 12 July 2005, Mr Boensch lodged the Deed of Trust (with the Memorandum of Trust attached) with the Registrar-General and requested that the Registrar-General record a caveat over the Rydalmere property forbidding registration of any instrument not in accordance with the Boensch Trust[17]. A caveat to that effect was recorded on the title on 17 August 2005. [17]See Real Property Act, ss 12(1)(f), 82(1).
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
KIEFEL CJ, GAGELER AND KEANE JJ
BELL, NETTLE, GORDON AND EDELMAN JJ
Finally, contrary to Mr Boensch's suggestion, Mr Pascoe did not "claim" any "inconsistent interests" by justifying his lodgement and maintenance of the caveat on the basis of his alternative beliefs that the Boensch Trust was void and that, were it not, Mr Boensch would enjoy a right of indemnity[140].[140]See also New South Wales v Taylor (2001) 204 CLR 461 at 467 [14] per Gleeson CJ, McHugh and Hayne JJ.Conclusion and orders For the reasons earlier stated, there is no reason to doubt that, upon the making of the sequestration order, the Rydalmere property vested in equity in Mr Pascoe by reason of Mr Boensch's right of indemnity and, therefore, that Mr Pascoe had a caveatable interest in the property. Nor is there any reason to doubt that Mr Pascoe honestly believed on reasonable grounds that the property so vested, either on the basis that the trust was void or on the basis of Mr Boensch's right of indemnity. On the facts as found, Mr Pascoe did not lodge or refuse to withdraw the caveat without reasonable cause. It follows that the appeal should be dismissed with costs.
Ratio Decidendi
Legal Principle Established
Established by:
KIEFEL CJ, GAGELER AND KEANE JJ,
BELL, NETTLE, GORDON AND EDELMAN JJ