Cant v Piva
[2009] FMCA 1134
•20 November 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| CANT v PIVA & ANOR | [2009] FMCA 1134 |
| BANKRUPTCY – Trustee application asserting half interest in property – bankrupt and bankrupt’s wife asserting property subject to trust in favour of wife – document evidencing trust ambiguous. |
| Bankruptcy Act 1966, ss.120, 121 |
| Applicant: | ANTHONY ROBERT CANT |
| First Respondent: | SANDRA PIVA |
| Second Respondent: | REGISTRAR OF TITLES |
| File Number: | MLG 149 of 2007 |
| Judgment of: | Burchardt FM |
| Hearing date: | 11 September 2009 |
| Date of Last Submission: | 21 September 2009 |
| Delivered at: | Melbourne |
| Delivered on: | 20 November 2009 |
REPRESENTATION
| Counsel for the Applicant: | Mr Moller |
| Solicitors for the Applicant: | Lennon Mazzeo |
| Counsel for the Respondent: | Mr M Galvin |
| Solicitors for the Respondent: | O’Donnell Salzano Lawyers |
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 149 of 2007
| ANTHONY ROBERT CANT |
Applicant
And
| SANDRA PIVA |
First Respondent
| REGISTRAR OF TITLES |
Second Respondent
REASONS FOR JUDGMENT
The applicant, Mr Cant, is the trustee in bankruptcy of
Romano Anthony Piva. The relief he now seeks is a declaration that a transfer of land registered on 15 August 2005 from Mr Piva to his wife, the first respondent, is void as against the trustee. He further seeks a declaration that he is entitled to be vested as proprietor of a half share of the property described in the Certificate of Title, Volume 4798 Folio 522, prior to the interest of that transfer.
Less ambiguously, the property is in Bent Street Brighton.
Both Mrs Piva and her bankrupt husband assert that:
a)the property was at all times held on trust for Mrs Piva and;
b)Mr Piva was not insolvent at the time of the transfer.
For the reasons that follow, I think that the property was not held on trust for Mrs Piva and that Mr Piva was indeed insolvent at the time of the transfer.
It follows that the trustee, the applicant, should have the relief that he seeks.
It should be noted that notwithstanding this conclusion, there are a number of other matters still extant, most particularly the first respondent’s claim to relief under what is described as the equity of exoneration. I shall return to those matters later.
The Facts
It is common cause that on 23 November 1996 Mrs Piva entered into a contract of sale to purchase a property known as 18 Bent Street, Brighton, and a further contract to purchase 20 Bent Street, Brighton. The latter property has since been sold and is of no moment in these proceedings.
It has been asserted, although the matter has not yet been tested in evidence, that all the moneys used to purchase these properties emanated from Mrs Piva or her parents.
On 23 January 2003, Mrs Piva separated temporarily from her husband and went to live with a Mr Wallace Cameron.
On 26 March 2003, Mrs Piva entered into a contract to purchase from Andrea Ziegler a property in Orrong Road, Toorak, for in excess of
$7 million. She was assisted in this regard by a cheque from
Mr Cameron for 10 per cent of the purchase price but that cheque was dishonoured.
Mrs Ziegler caused a rescission notice dated 10 April 2003 to be served upon Mrs Piva. It is not quite clear from the evidence, but it seems that Mrs Piva reconciled with her husband and returned to him, as she put it, in about mid-April 2003 (P-39). Whether or not the rescission notice had been served at that time is perhaps in the ultimate immaterial.
On any view, it was immediately apparent to her husband, Mr Piva, that legal action was likely.
On 28 April 2003, Mrs Piva and her husband executed an agreement, a copy of which is exhibit 11 to Mrs Piva’s first affidavit filed on 23 May 2007.
Thereafter, legal proceedings were issued in June 2003 by
Mrs Ziegler. It seems relatively clear that in the lead up to this time it had at all times been apparent to Mr Piva, and in all probability through him to Mrs Piva, that Mrs Ziegler’s husband was a formidable opponent in legal matters and was likely to press his wife’s case.
It would appear that on the same day that legal proceedings were issued by the Zieglers in the Supreme Court, Mr Piva lodged a caveat in respect of the property (see exhibit SP9, the historical extract of title) in which he asserted that he was the owner in fee simple of the property.
A transfer in respect to the property was executed on 30 June 2003 but not lodged until 6 August 2003. Mr Piva gave evidence that this delay took place because of difficulties with the ANZ Bank.
Thereafter, as is shown by exhibits A6 to A11 inclusive, together with Mr Piva’s statement of affairs lodged in his subsequent bankruptcy,
Mr Piva dealt with the property on a number of occasions. On all those occasions he dealt with it as though he was the owner of the property in fee simple and so represented himself to various financing groups and in the ultimate, albeit perhaps unintentionally, to his trustee in bankruptcy.
Mr Piva purported to transfer his interest in the property back to
Mrs Piva on 15 August 2005. As was the case with the earlier transfer to him, the consideration for the transfer was stated to be natural love and affection.
It is clear from the materials lodged in the case that by 2005 Mr Piva had very substantial debts and was entering into borrowings at very significant rates of interest to service his various debts. This is a matter I shall return to when I consider the question of Mr Piva’s solvency.
On 18 September 2006, judgment was given against Mr Piva by Hargrave J in the Supreme Court of Victoria in a debt of about $337,000. Mr Piva says that newspaper articles which followed caused massive problems to him within 30 days of that judgment which led him to go bankrupt.
Mr Piva went bankrupt on 16 November 2006.
It should be noted that the agreement entered into in April 2003 (which in the ultimate is said by both parties to have been an agreement), and which Mrs Piva says gave rise in the ultimate to a trust in her favour in respect to the property, was not reflected in the caveat lodged by
Mr Piva in June 2003. In that caveat, Mr Piva asserted that he was the sole beneficial owner of the property and made no reference to the trust now said to protect Mrs Piva’s interests.
The Nature and Effect of the April 2003 Agreement
There was a lot of evidence and argument about this agreement during the course of the proceeding. Mrs Piva gave evidence that she had at all times understood that the net effect of the agreement was that her husband held the property on trust for her, although she also gave evidence that it was at all times her intention in executing this document to ensure that her property was protected from the Zieglers and/or any other at that time potential or unknown creditors.
Mr Piva is a solicitor of many years’ experience. His evidence was to the effect that he was seeking to protect the property from the Zieglers but that he proposed to hold the property on trust. It emerged in cross-examination that Mr Piva’s knowledge about law in relation to trusts is extremely rudimentary. He did not know what an express trust meant (P-71). This is the case even though he had himself experience in conveyancing and had indeed conducted the conveyance when the property itself was bought.
When one turns to the agreement of 28 April 2003, it is appropriate to note the following facets of it:
a)Mrs Piva was noted to be the registered proprietor of the property;
b)Mrs Piva was noted to have become involved in property litigation in respect of the Orrong Road, Toorak purchase;
c)recital C states:
The Parties acknowledge that notwithstanding matrimonial issues having arisen between themselves and without attending [this was meant to be affecting] the rights of the Wife in respect to the Purchase property, the Wife has asked that the Husband take the Brighton property and hold same in trust for her in consideration of the terms and conditions contained herein. The parties agree as follows:
(1) To secure the Wife’s interest in her freehold property “the Purchase Property” the Wife agrees to transfer the Purchased property to the Husband to hold the same on her behalf as Bare Trustee.
(2) The Husband agrees to take a Transfer of Land and become registered as the sole registered proprietor subject to any and all existing encumbrances as a Bare Trustee to safeguard the interest of the Wife.
(3) The Husband will, within seven (7) days of being registered transfer to the Wife the registered interest in the second property utilising the same method of transfer as by which the registered interest names “by love and attention”.
(4) The Parties acknowledge and declare to each other that the transaction herein between will have no affect whatsoever on any subsequent property settlement that may arise in respect of Family Law Proceedings that may arise at a later date or in the future.
(5) The Husband hereby declares his holding as a Bare Trustee in respect of the property and that the Wife holds the Property in her own name from 1996 onwards.
(6) The Wife agrees to bear all legal costs associated with the Transfer to the Husband from the Husband to the Wife.
It is clear from the evidence given before the Court (Mrs Piva, P-37,
P-43, Mr Piva, P-51, P-62, P-63) that it was the intention of Mr and Mrs Piva to effect a transfer of registered ownership of the Bent Street, Brighton property to Mr Piva to defeat Mrs Piva’s creditors in the event that she went bankrupt. It is quite clear that it was in the contemplation of both of them, particularly perhaps of Mr Piva, that this would occur as a result of legal action on the part of the Zieglers.
In fact, the Ziegler action (which started in June 2003) was compromised it would appear by Mr Cameron, who at all times had control over all aspects of the purchase of the Orrong Road property and the aftermath of its failure.
Notwithstanding the resolution of the Ziegler proceedings, which I infer took place in 2003, the property transfer continued. Mr Piva became the registered owner in August 2003.
Neither party contended that the April 2003 document actually constituted a declaration of trust. In my view that is correct. Mr Piva was not then the owner, either in law or in equity, of the property and it was not possible for him therefore to declare himself trustee in respect of it. Both parties agreed that the document constituted an agreement.
Mrs Piva contended that the document was an agreement whereby upon registration of the transfer Mr Piva would hold the property on trust for her. The trustee maintained that the agreement was, when properly analysed against the conduct and intentions of the parties, a simple transfer of the property to Mr Piva albeit, it might be inferred, with an improper intention to defraud Mrs Piva’s creditors.
In the face of the evidence in this case, it is clear that the trustee’s contention is correct.
The language of the agreement is by no means clear or simple to follow. In fact, recital C 1, which deals with the “purchased property” (i.e. the Orrong Road property) requires a transfer of that property to the husband for him to hold the same on Mrs Piva’s behalf as bare trustee.
Recital C 2 requires the husband to take a transfer of land and become registered as a sole proprietor subject to all existing encumbrances as a bare trustee to safeguard the interests of the wife.
C 3 requires the husband, upon being registered, to transfer the registered interest in the second property to the wife.
It is apparent therefore that recitals C 1 to C 3 have nothing to do with the property in Brighton at all. They are solely concerned with what would happen to the property in Orrong Road in the event, which never transpired, of its actually being purchased by Mrs Piva.
The only operative parts of recital C that refer to the Brighton property are, relevantly, that:
“The Wife has asked that the Husband take the Brighton property and hold same in Trust for her in consideration of the terms and conditions contained herein.”
It would appear from recital C 5 that “the Husband hereby declares his holding as a Bare Trustee in respect of the property and that the Wife holds the Property in her own name from 1996 onwards.”
One would reasonably infer, I think, that the introductory preamble in recital C and paragraph 5 dealt with the Brighton property and that the other paragraphs deal with the Orrong Road property.
What is one to make of an agreement in which the consideration in large part (namely, those matters to do with the Orrong Road property) never came to fulfilment?
I have no doubt that the Pivas intended to get the best of both worlds. They executed the agreement with the clear intention, as is plain from its terms and from the evidence given to the Court, to erect a barrier to the Zieglers and/or any others from realising a sale of the Brighton property by transferring it to Mr Piva.
That this was their clear intention is apparent from the caveat lodged in June 2003 by Mr Piva in which he asserted an interest in fee simple without reference to any trust. This was clearly done to avoid alerting any creditors to the existence of the trust and so much was admitted by Mr Piva in terms at P-121.
Thereafter, as I have already said, Mr Piva dealt with the property as though he was the sole owner of it in the numerous financial transactions, being exhibits A5 to A11 to which I have referred.
I accept the submissions from the applicant trustee that while evidence of the intention of the parties is irrelevant to a construction of a contract that is devoid of ambiguity, it is relevant to whether or not an agreement was indeed formed. I would further say that in the context of the extraordinary drafting of the original agreement, it is absolutely pregnant with ambiguity and the conduct of the parties would plainly be admissible to construe it (see Pascoe v Boensch [2008] FCAFC 147 at [28] and, generally, Owens v Lofthouse [2007] FCA (968).
I have no doubt in my mind whatsoever that the primary and indeed sole intention of Mr and Mrs Piva in 2003 was to transfer the Brighton property to Mr Piva to defeat any claim by Mrs Piva’s creditors. The fact that they had it in the back of their minds that they might transfer it back again later on (this being the extent to which I find the trust aspects of the matter entered into play) is neither here nor there.
It is ironic that Mr and Mrs Piva did not get around to transferring the Brighton property back to Mrs Piva. Once the threat of litigation by Mr and/or Mrs Ziegler had disappeared, there was no reason it would appear why that should not have occurred but the fact is that it did not. One might reasonably infer they simply overlooked the matter in the ordinary course of the events.
What did occur, however, was that Mr Piva’s affairs went badly. I will return to this matter under the question of solvency.
It suffices to say that by the latter part of 2005 Mr Piva’s affairs were such that he felt it appropriate to transfer the property back. Once again for love and affection, he executed a transfer on 15 August 2005 whereby the property was transferred back to Mrs Piva.
I reject the proposition that Mrs Piva at all times retained equitable title to the property pursuant to the alleged trust. In my opinion it is clear beyond doubt that the legal title passed to Mr Piva as the parties intended. It was never intended that Mrs Piva would retain a beneficial interest as to do so would plainly have defeated the purpose of the transfer itself. While it is true that there was an element of muddled thinking and a clear desire to have the best of both worlds in Mr Piva’s mind when he tried to draw the document which has given rise to all the argument, there can be no question in my view, in the light of the evidence given, as to what in fact occurred (see paragraph 44 above).
On this basis alone it seems clear to me that the trustee should have the relief that he seeks.
It should be noted that the trustee has not sought the transfer to him of the entirety of the registered ownership of the property formerly owned by Mrs Piva. It was put that this was a pragmatic decision bearing in mind matrimonial law considerations, and I accept that this is so. The trustee deserves credit in my view rather than criticism for this concession.
Solvency
By 2005, Mr Piva’s financial affairs were in difficulty. An examination of the transcript at P-100 - 102 shows that he was repaying enormous amounts in excess of $25,000 per month in respect of home loan repayments and facilities in relation to very expensive cars that he had purchased.
Although Mr Piva was adamant that at that time he had an income of $26,000 a month from a management agreement with Mayne Nickless, in the ultimate it seems clear that that income was included in his tax return for the year 2005-2006.
Accepting that those tax figures are correct, it is clear that Mr Piva was not solvent at that time.
What he was doing, however, was “robbing Peter to pay Paul”.
Mr Piva was driven to take out loans from Joscelyn Langdon towards the end of 2005 and in March 2006 involving 15% interest (exhibit A13) and was further required to take out an agreement with Mablock Pty Ltd, which is at exhibit RAP13 to Mr Piva’s affidavit, with interest at 18% to repay a significant debt to the Australian Taxation Office.
Although it was Mr Piva’s position that he was keeping his head above water until the judgment by Hargrave J earlier referred to and several very damaging articles in the press which followed thereafter, I find on the evidence that those were merely the final end to an impossible situation.
I said during the running of the case and I repeat that while it is clear that the press articles had a disastrous and immediate effect, this did no more in my view than foreshorten an outcome which was inevitable. A man with net debts to discharge in excess of $26,000 per month will not be able to discharge those debts even where, in addition to his relatively modest income as a solicitor, he had an income of $26,000 per month from Mayne Nickless. That income plainly was required in the ultimate to be the subject of tax.
Conclusions
From these factual matters it is apparent that the transfer to Mr Piva of the interest in the Bent Street property was an absolute one and not subject to trust. Mrs Piva did not retain the beneficial ownership of the property. The parties never intended that she should. They intended to transfer the property to Mr Piva and they did.
That this is so is only confirmed by the way in which Mr Piva dealt with the property in lodging his caveat and the various loans that he obtained on the property in 2005-6.
Once that is established, it is clear that the transfer back to Mrs Piva, being for love and affection alone, was ineffective.
It was plainly a transfer designed to defeat creditors and the cumulative operation of s.120 and s.121 of the Bankruptcy Act 1966 (“the Act”) is such to bring it squarely within the ambit of the orders that the trustee seeks.
Furthermore, even if this were not the case, it is equally clear that
Mr Piva was not solvent at the time the transfer took place. Accordingly, once again, the operation of s.121 is such as to grant the orders that the trustee seeks.
Ancillary Matters
Mrs Piva has submitted that in the event that I am otherwise against her she is still entitled to what counsel referred to as the equity of exoneration. I have made no final findings of credit about Mrs Piva in this proceeding as it has not been necessary for me to do so. It may become necessary for me to do so in order to determine such an issue. The question to which credit will be an issue is by no means clear at this stage.
In the circumstances I will hear the parties as to whether it is appropriate to make any orders now or whether, bearing in mind that an appeal can not be ruled out, it is better to simply issue these reasons for judgment, and then list the matter for further hearing in relation to outstanding matters arising out of the asserted equity of exoneration.
I certify that the preceding sixty-three (63) paragraphs are a true copy of the reasons for judgment of Burchardt FM
Associate: Ms B Evans
Date: 20 November 2009
0