Donnelly v Johnson

[1999] FCA 1662

FEDERAL COURT OF AUSTRALIA

Donnelly v Johnson [1999] FCA 1662

BANKRUPTCY – transfer by bankrupt of real property – transferee former de facto spouse of bankrupt – whether transfer void as against trustee of bankrupt estate – contracts – whether contract for sale of property for full value entered into – trusts – whether resulting trust of property arose – whether constructive trust of property should be declared or imposed – liens – whether transferee held vendor’s lien over property until transfer of property by bankrupt – whether finding of vendor’s lien available on pleadings – whether transferee to be regarded as having given consideration not less than market value of property – consequences of settlement and transfer

Bankruptcy Act 1966 (Cth) ss 120, 121, 122
De Facto Relationships Act 1984 (NSW)
Real Property Act 1900 (NSW) s 36(11)
Conveyancing Act 1919 (NSW) s 54A

Calverley v Green (1984) 155 CLR 242 cited
Muschinski v Dodds (1985) 160 CLR 583 cited
Baumgartner v Baumgartner (1987) 164 CLR 137 cited
Hewett v Court (1983) 149 CLR 639 referred to

MAX CHRISTOPHER DONNELLY v MARK ANTHONY JOHNSON

N 7524 OF 1999

LEHANE J

29 NOVEMBER 1999

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 7524 OF 1999

BETWEEN:	MAX CHRISTOPHER DONNELLY Applicant
AND:	MARK ANTHONY JOHNSON Respondent
JUDGE:	LEHANE J
DATE OF ORDER:	29 NOVEMBER 1999
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1.The applicant file and serve, not later than 6 December 1999, short minutes of the orders which he submits should be made in the light of the reasons for judgment published on 29 November 1999.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 7524 OF 1999

BETWEEN:	MAX CHRISTOPHER DONNELLY Applicant
AND:	MARK ANTHONY JOHNSON Respondent

JUDGE:	LEHANE J
DATE:	29 NOVEMBER 1999
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. The applicant is the trustee of the bankrupt estate of Shirley Alwyn Dawson. The orders which he seeks relate to a transfer by Ms Dawson to the respondent, Mr Johnson, of a property on Comerong Island, near Nowra. The applicant claims that the transfer is void as against him under both s 120 and s 121 of the Bankruptcy Act 1966 (Cth) or, alternatively, under s 122. He seeks a declaration that the transfer is void as against him, judgment for possession of the property and leave to issue a writ of possession of the property. Alternatively, he seeks, on a ground which I shall describe later, an order for payment of the sum of $52,792.81.

   Facts and evidence

2. Ms Dawson was made bankrupt on 4 August 1997.  On that day a sequestration order was made against her and the applicant was appointed trustee of her bankrupt estate.  The petition on which the sequestration order was made was presented on 12 June 1997 and served on 17 June 1997; it was based on an act of bankruptcy committed on 12 May 1997; the act of bankruptcy was failure to comply with a bankruptcy notice served on 18 April 1997.  Those matters, while not admitted on the pleadings, are not in dispute between the parties.  Ms Dawson and Mr Johnson bought the Comerong Island property as joint tenants.  Mr Johnson’s evidence, which in this respect there is no reason to doubt, is that they did so in December 1986 and that the purchase price was $82,000, of which about $8,000 was provided in cash by Mr Johnson and $64,000 by a loan secured by a mortgage of the property: immediately before 16 October 1992 Ms Dawson and Mr Johnson were the registered proprietors of the property, as joint tenants.  National Australia Bank had a registered mortgage, Ms Dawson and Mr Johnson being mortgagors and covenantors under the personal covenants in the mortgage.  On 16 October 1992 Mr Johnson transferred his interest in the property to Ms Dawson for an expressed consideration of $90,000.  By the transfer, which in due course was registered, Mr Johnson acknowledged receipt of that consideration.  On the same day, the mortgage in favour of National Australia Bank Ltd was discharged and Ms Dawson mortgaged the property to Advance Bank Australia Ltd.  On (or about – the date is not entirely easy to read) 8 May 1997 contracts were exchanged under which Ms Dawson agreed to sell the property to Mr Johnson.  The contract, prepared by Southland Conveyancing Services apparently acting for both parties, was in the standard printed form and had what may be described as the usual attachments.  The price was stated as $165,000 of which, according to the front page of the contract, $16,500 was a deposit.  A special condition provided for settlement within five weeks of the date of the contract.  There was also a special condition purporting to be an acknowledgment by Ms Dawson that she had received part of the purchase price before the date of the contract.  It read:

   “8.The Vendor acknowledges having received the sum of $50,000.00 from the Purchaser prior to the exchange of contracts and that this sum forms part of the Purchasers payment for the property.  The Vendor further acknowledges that the Purchaser will be handing over the sum of $115,000.00 dollars as payment in full for the property.”

   There is an issue to which I shall return, concerning sums paid by Mr Johnson to Ms Dawson before contracts were exchanged and the basis on which any such payments were made.  What is clear, however, is that no deposit was paid on exchange and that the sum paid on completion was $115,000.  Most of that sum was applied to discharge Ms Dawson’s mortgage to the Advance Bank.  On 18 July 1997 that mortgage was discharged, a transfer was executed (in which Ms Dawson acknowledged receipt of the full consideration of $165,000) and Mr Johnson mortgaged the property to the Advance Bank.

3. Two valuations of the property, at the date of the contract of sale, were in evidence. Mr Bruce Roland Nimmo valued the property on instructions from the applicant. He valued it at $175,000. Mr John Warwick Austin provided a valuation on Mr Johnson’s instructions. He valued the property at $165,000. It is plain that both valuers regarded the task as a somewhat difficult one, the property being unusual and there being no directly comparable sales. The difference between the valuations, in the circumstances, is not significant. The appropriate finding, which I make, is that the price of $165,000 was not less than the market value of the property. If in fact Mr Johnson gave consideration for the transfer of at least $165,000, it follows that the transfer is not void under s 120. Nor would it be avoided by s 122. A question might, nevertheless, arise under s 121 (see s 121(4)) but there might also be a question whether, having regard to his obligation under s 121(5), the applicant would wish, in those circumstances, to pursue the matter.

4. Mr Johnson’s evidence was that he and Ms Dawson lived together in a de facto relationship from a time shortly before they purchased the property until 1992.  In that year, he said, the relationship broke down and he moved from the property.  He returned, however, about eighteen months later and since then has lived there.  The exact nature of the relationship from that time is not clear on the evidence and, I think, for present purposes does not greatly matter.  There is no controversy about it: the applicant’s pleading asserts that:

   “As at 5 May 1997 or alternatively 18 July 1997, the Respondent was the defacto spouse, alternatively the former defacto spouse, of the Bankrupt.”

5. Mr Johnson gave evidence that throughout at least most of the time during which he and Ms Dawson lived in the property he made a great number of payments to her or for her benefit, or for their joint benefit.  He contributed, initially, $8,000 to the purchase of the property.  He made many mortgage payments, including all of those made after he returned to the property in 1993 or 1994, either directly or by payment to Ms Dawson so that she could then pay the amounts due.  He also, he said, regularly made payments to Ms Dawson to enable her to meet other expenses, both business and personal.  Many of the payments were made by depositing his wages cheques directly to Ms Dawson’s accounts.  Others were the product of gifts or loans from his family.  I accept that both before he left in 1992 and after he returned in 1993 or 1994 Mr Johnson made numerous payments of those kinds amounting in all to a substantial sum.  Precisely what the total sum was – or how much of it was directed, during each of the periods, to the payment of amounts due under the mortgages – it is impossible on the evidence to say.  I accept, however, that after he returned to the property his total payments amounted to at least $50,000.  Additionally, according to Mr Johnson (and it was not suggested that I should disbelieve him as to this), he made improvements to the property: these included the addition of what was described as a self‑contained studio.  He has made further improvements since the date of the May 1997 contract for sale.

   The applicant’s claims

6. In those circumstances, the applicant claims that the only consideration given for the transfer was the sum of $112,207.19 used to discharge Ms Dawson’s mortgage to the Advance Bank (the evidence is, however, and I find, that a total of $115,000 was paid on settlement). That consideration was less than the market value of the property and the transfer occurred within five years before the commencement of Ms Dawson’s bankruptcy. Accordingly, the applicant says, the transfer to Mr Johnson is void under s 120. Equally, the applicant says, the property would probably have become part of Ms Dawson’s estate or been available to creditors if it had not been transferred; and Ms Dawson’s main purpose, in transferring the property, was one of those specified in s 121(1)(b); for that reason also the transfer is void. Alternatively, if in the situation disclosed by the evidence Mr Johnson was Ms Dawson’s creditor, then the transfer gave him a preference, priority or advantage and accordingly was avoided by s 122. In any event, if the transfer is not void, then, the applicant claims, Mr Johnson must pay the applicant the balance owing under the contract: that is, $50,000.00.

   Mr Johnson’s defence

7. The position taken by Mr Johnson, as it emerges from his amended defence and from his evidence, is not as clear as it might be.  The amended defence includes the following:

   “3.The Respondent denies [that there was a sale and purchase for a price of $165,000] and says that the price of $165,000 on the Contract of Sale was for the purposes of paying stamp duty.  The agreement was not for the sale of the property but for the transfer of the property.  And the Respondent further says that the Respondent had an equitable charge on the property by the nature of the relationship between the Bankrupt and the Respondent, the Respondent alone had contributed to the purchase of the property initially and continued to contribute to the repayments required under the mortgage on the property albeit in the name of the Bankrupt.  The Respondent further says that the property was held in trust for him by the Bankrupt.  The agreement was not for the sale of property but for the transfer of the property.

   …

   5.The Respondent denies [that the consideration paid for the transfer was $112,207.19] and says that the consideration did not only consist of $112,207.19 being the discharge of the Bankrupt’s mortgage to the Advance Bank Australia Limited, but it also included contributions to repayment of the property and improvements to the property and the waiver of an outstanding debt to the Respondent by the Bankrupt.

   Particulars

   (a)In 1992 the Respondent [transferred] the property to the Bankrupt for the promise that the Bankrupt would pay $90,000 for it – the Bankrupt never paid that sum of money.  The Respondent did not expect to be paid back.  Due to the relationship between the Respondent and the Bankrupt, it was understood that the Bankrupt held at least half of the property in trust for the Respondent.

   [Paragraphs (b) to (e) contain allegations concerning improvements and maintenance of the property].

   (f)Since 1992 the Respondent contributed $58,000 towards the repayments of the property.

   …

   8.The Respondent admits [that the transfer took place within five years before the commencement of Ms Dawson’s bankruptcy] but says that the transaction did not take place so as to give preference or defeat the claim of creditors.  The Respondent further says that the transfer was part of the property division between the Respondent and Bankrupt following the end of their defacto relationship.

   …

   11.The Respondent denies [that the property would probably have become part of Ms Dawson’s estate] and says that the property could not have become part of the Bankrupt’s estate because the Respondent had an equitable charge over the property and the Bankrupt held the property in trust for the Respondent as a result of the defacto relationship and the Respondent’s contributions to the relationship.”

   Mr Johnson also, in response to the claim under s 122, in terms denies that he was a creditor of Ms Dawson and says that:

   “… the Bankrupt held at least half of the property, if not all, in trust for the Respondent as a result of the relationship between the Bankrupt and the Respondent and the contributions made by the Respondent.  The transfer was a way of effecting property division between the Bankrupt and the Respondent at the end of their defacto relationship.”

8. In general terms, what is asserted seems to be this: despite the contract for sale and the special conditions to which I have referred, the transfer to Mr Johnson did not satisfy any claim that he had as a creditor but gave effect to his entitlement as the beneficiary of a trust (presumably a constructive trust) arising from the contributions which he had made to his joint endeavours with Ms Dawson or as the holder of an equitable charge.  Any beneficial interest of Ms Dawson in the property (equal to no more than half its value) was more than satisfied by the payment in discharge of the mortgage.  Consequently, none of the three provisions relied on by the applicant applies and Mr Johnson owes no money to Ms Dawson or her estate.

9. Mr Johnson’s affidavit evidence is largely consistent with those propositions; but what he says in his affidavit about the transfer of his half‑interest to Ms Dawson, and the conversation leading to the agreement for Ms Dawson to sell or transfer the property to Mr Johnson, is significant:

   “9.The Bankrupt did not pay me the $90,000.00 when I transferred the property to her in 1992.  The Bankrupt at that time owned a block of six units at the corner of Jervis and Wallace Streets in Nowra.  The Bankrupt had agreed to pay me the $90,000.00 when she sold the units.

   10.The Bankrupt did not sell the units straight away but instead mortgaged them further and when she did sell them there was not enough money left to pay me after she had paid off the mortgages and paid shop creditors.

   …

   15The property was valued at $165,000.00 in 1997 when the transfer took place.  All renovations were not completed then.

   16.The Bankrupt had not paid me the $90,000 she had promised to pay me for the transfer of property in 1992.  Further she made no contribution to the renovations and repayments of the property.

   17.In 1996 and early 1997, the Bankrupt would say to me words to the effect: ‘You and I are finished.  We don’t have a relationship, I don’t want a relationship’.  I said: ‘If the relationship is all over, I want my house back, you haven’t paid me for it and you don’t [intend] to do so’.  She said: ‘You can have it back.  I don’t owe you anything anymore.  You can have the mortgage with it too’.”

10. Two aspects of that are important.  One is that it is clear evidence that Ms Dawson had assumed an obligation, in 1992, to pay Mr Johnson $90,000 for the interest in the property which he then transferred to her and that that obligation remained undischarged in 1996 and early 1997.  Secondly, Ms Dawson’s agreement to let him have the property back was intended to relieve her of any (particularly, that) debt obligation.

11. Matters were complicated, however, by Mr Johnson’s oral evidence.  He gave evidence of a number of the payments he had made, and of their source.  He confirmed his evidence that the $90,000 was to be paid from the proceeds of sale of units but had not been paid.  But he also gave evidence, both in chief and in cross‑examination, to the effect that at the beginning of 1996 he “started to pay the house, buy the house off her, pay the $50,000 she wanted”.  A conversation, he said, took place between them in early 1996 in which they agreed that he would pay, by instalments, $50,000 and would pay off the mortgage, in return for which she would transfer the property to him.  That arrangement was reflected in the contract exchanged, ultimately, in May 1997 by which time, Mr Johnson said, the $50,000 had been paid in full, as reflected in special condition 8.  When Mr Johnson was asked why he agreed to pay a further $50,000 when Ms Dawson had not paid the $90,000 which she already owed, he replied: “She didn’t have 90 to pay me and I just wanted the house, my home.  I’ve worked for it and I want it”.  He paid a further $50,000 because “that is what she wanted, get her out”.  That evidence was the basis of what became Mr Johnson’s primary case at trial, that there was indeed a contract, entered into orally early in 1996 and reduced to writing in May 1997, for the sale of the property to him for $165,000, the full market value.  Accordingly, his counsel submitted, the transfer was not void as against him.

    Discussion

    (a)       Contract

12. The case to which I have just referred has obvious difficulties.  It is hardly consistent with Mr Johnson’s pleading, in his amended defence, that the price of $165,000 was “for the purposes of paying stamp duty” and that the agreement was “not for the sale of the property”.  Equally, it is hardly consistent with par 17 of Mr Johnson’s affidavit, which I have quoted, in which he recounts significantly different conversations leading to the contract and transfer.  Mr Johnson gave evidence in cross‑examination that the conversation recounted in par 17 occurred more than once during 1996 and early 1997.  The cross‑examination continued:

    “You see there she says: ‘You can have it back’.  Meaning the house.  ‘I don’t owe you anything any more, you can have the mortgage with it too?’ – Yes.

    There’s no mention there of any payment of a further $50,000 is there? – No, I should have put it in and I forgot.”

    Mr Johnson gave evidence that he and Ms Dawson continue to associate and that when he is away “the Bankrupt will come to my place and look after my horses”.  Ms Dawson did not give evidence.  In circumstances where the oral evidence given by Mr Johnson is so different from both his pleading and his affidavit evidence, and is itself sketchy and lacking in detail, it is proper, I think, to take it that Ms Dawson’s evidence would not have helped Mr Johnson in this respect.  In those circumstances I do not accept his evidence that there was a conversation in which an oral contract was made.  Rather, I think it is appropriate to accept the submission of counsel for the applicant that special condition 8 is to be taken as a recharacterisation of payments which (I have no reason to doubt) Mr Johnson had made.

    (b)       Trust

13. The suggestion that Mr Johnson was the beneficiary of a trust of the property has difficulties also.  There is no suggestion of an express trust.  A resulting trust, of the kind discussed by the High Court in Calverley v Green (1984) 155 CLR 242, if such a trust arose when the property was initially acquired (the parties being jointly liable under the mortgage but Mr Johnson having contributed cash to the purchase), could not, I think, have survived the 1992 transaction, the effect of which was that (subject to her obligation to pay the consideration of $90,000) Ms Dawson was to become the sole legal and beneficial owner of the property; and the payments following Mr Johnson’s return to the property could not have revived such a trust or themselves given rise to one (because such a trust arises when property is acquired, having regard to contributions made to the price of its acquisition). There are also, in my view, difficulties with a suggestion that Mr Johnson is the beneficiary of a constructive trust of the kind discussed in Muschinski v Dodds (1985) 160 CLR 583 and Baumgartner v Baumgartner (1987) 164 CLR 137. Again, I think, the starting point must be the time when Mr Johnson returned to the property. The previous relationship was consensually terminated and the parties’ joint ownership wound up in 1992. The nature of the relationship between Mr Johnson and Ms Dawson after he returned to the property in late 1993 or early 1994 is by no means clear on the evidence. Certainly it is not established that it was a relationship of the kind contemplated in Muschinski or Baumgartner.  Nor, of course, was the property acquired during that period though it was improved and mortgage payments were made, largely if not exclusively, with Mr Johnson’s money.

1. But, assuming that the relationship were of such a kind as to make the inquiry relevant, I could not, on the evidence, assess with precision the respective capital contributions to be taken into account upon the termination of the relationship.  Nor, on the evidence, is it possible to form a clear view of precisely when it was that the relevant relationship came to an end.  I cannot be satisfied, therefore, that a constructive trust should be declared or imposed; and if I were, a question would remain whether it should be regarded as operating retrospectively.  Plainly – the possibility was mentioned in argument – it is not open to the Court to make, on this application, an order under the De Facto Relationships Act 1984 (NSW).

   (c)       Vendor’s lien

2. It occurred to me after the hearing that there might be a third basis on which Mr Johnson could resist the applicant’s claims; that is that he had, up to the time the property was transferred to him, a vendor’s lien over it securing the sum of $90,000 which, he said, became due to him in 1992 but remained unpaid.  Nothing had been said during the trial about the possibility that there might be a vendor’s lien.  I invited written submission, and both parties have made submissions.

3. There is an initial question, whether it was open to Mr Johnson on the pleadings to raise the issue of a vendor’s lien. The applicant submits that it was not. I have mentioned that the amended defence is by no means entirely clear or, I think, free from internal inconsistency. It alleges in clause 3, among other things, that Mr Johnson has an equitable charge on the property but claims to have such a charge “by the nature of the relationship between the bankrupt and the Respondent” and because of contributions made by Mr Johnson to the initial purchase and to payments falling due under successive mortgages. Then, however, in par 5, Mr Johnson pleads that the consideration for the 1997 contract included “the waiver of an outstanding debt to the Respondent by the Bankrupt”. The particulars make it reasonably clear, I think, that the debt referred to is the $90,000. Matters are complicated by the statement “the Respondent did not expect to be paid back”: but sense is to be made of that part of the pleading, I think, only by reading “expect” literally: that is, as saying that although there was an obligation, Mr Johnson did not expect it to be fulfilled, rather than that Mr Johnson did not expect to be paid in the sense that he had already waived or released his entitlement. A further element of obscurity, however, is added by Mr Johnson’s pleading, in response to the claim under s 122, that he was not a creditor.

4. In the circumstances, I think it is fair to have regard, for present purposes, to that portion of the pleading which is directed to the particular facts of the 1992 transaction: what is there alleged is that in 1992 Mr Johnson transferred his half interest in the property to Ms Dawson in return (perhaps among other things) for a promise that she would pay him $90,000.  She had not paid him that sum.  He did not expect that she would do so.  The obligation, which remained outstanding, was “waived” as part of the 1997 transaction.  That is, no doubt, a somewhat beneficial reading of the pleading.  It is, however, one which is undoubtedly consistent with Mr Johnson’s affidavit evidence.  I think it was open to him, within that pleading, to argue that a vendor’s lien arose in his favour in 1992 and remained in existence until the property was transferred to him in 1997.

5. Mr Johnson’s difficulties do not, however, end with the pleading, as counsel for the applicant, in helpful submissions, has pointed out.  Mr Johnson signed a transfer in which he acknowledged receipt of $90,000.  And the transfer did not stand alone: the mortgage to the National Bank, under which Ms Dawson and Mr Johnson were jointly and severally liable, was discharged and a mortgage in favour of the Advance Bank, under which Ms Dawson was solely liable, was registered.  The documentation does not reveal how much was paid to the National Bank or how much was lent by the Advance Bank and there is no other evidence about it.  Additionally, Ms Dawson did not give evidence.  Finally, Mr Johnson did not tender any document in which there was any acknowledgment of the alleged indebtedness of Ms Dawson.  In those circumstances, it was said, it would not be proper to accept and act upon Mr Johnson’s mere assertion.  Additionally, it was argued, there was no evidence that anything was said about a vendor’s lien or otherwise indicating any consensual arrangement to provide the basis of an equitable security interest in the property.  For those reasons, particularly, (it was said) and because it was an entirely new point not even hinted at during the trial, I should not find that Mr Johnson had, in 1997, the benefit of a vendor’s lien.  Counsel for the applicant had already submitted, during the trial, that this was a case in which, whatever one might think of the fairness of a particular result, parties had to live by the legal consequences of what they had done and the way in which they had organised their affairs.  And it is true, of course, that in a case such as the present creditors have a substantial interest in the provisions of the Bankruptcy Act being given their full and proper operation.

6. The circumstance that there is no evidence of a consensual arrangement that Mr Johnson should have security for $90,000 is not, I think, significant.  An equitable lien does not rely upon a special agreement: it arises “automatically by implication of equity” (Hewett v Court (1983) 149 CLR 639 at 663 per Deane J, though as his Honour points out, later in the same passage, its implication can be precluded or qualified by express or implied agreement of the parties: but there is no evidence here of an agreement which might preclude or qualify a lien in this case). Otherwise, however, the applicant’s submissions raise powerful considerations against yielding too readily to an impression, to which the evidence might give rise, that if the applicant succeeds the law has treated Mr Johnson rather harshly.

7. On this aspect of the matter, I do not think I should draw any particular inference from the fact that Ms Dawson did not give evidence.  I say that, because a fact which is in evidence is that Ms Dawson, at her public examination, gave evidence consistent with Mr Johnson’s of the facts on which he must rely in order to establish a vendor’s lien.  I should perhaps, in the circumstances, record how that comes about.  Ms Dawson and Mr Johnson were examined by Ms Dawson’s trustee in bankruptcy on the same day.  Some of the evidence given by Mr Johnson was put to him in cross‑examination before me.  Counsel for the applicant did not, however, tender any part of the transcript of the examination.  Later, counsel for Mr Johnson tendered the entire transcript.  The following exchange (which I have edited slightly) took place.  Counsel for the applicant said:

   “My friend has, at length, cross examined the respondent in respect of a transcript, being the transcript of the examination  … .  In that transcript is also the evidence given by the bankrupt.  Now, that is true, the question of that transcript and I should have tendered that, I seek to tender it now … ”

   Counsel proceeded to refer to matters in the transcript at which point I intervened:

   “I’m sorry, just so that I understand what the position is, you are tendering the whole transcript and [counsel for the applicant] is offering no objection to that?

   Counsel for the applicant responded: “That’s right your Honour”.  In those circumstances, I think, I can use the evidence which Ms Dawson gave about the obligation to pay $90,000 and its non‑payment for the purpose, and perhaps only for the purpose, of excluding in relation to that subject matter any adverse inference arising from her failure to give evidence in this proceeding (as I have already pointed out, there was at least one other topic on which she might have given evidence – the conversation in early 1990 – on which no reason appears for thinking that she would have supported Mr Johnson’s evidence).

8. The acknowledgment of receipt, in the transfer, is, plainly, an admission that the stated consideration was received.  But it is no more than that.  It may be taken to have the same effect as an acknowledgment in a deed of conveyance (Real Property Act1900 (NSW) s 36(11): it is not conclusive (see R J A Morrison and H J Goolden, Norton on Deeds 2^nd ed, 1928, p 226).  The question in the present case is whether it is appropriate to conclude, on the basis of Mr Johnson's evidence, that despite the acknowledgment the consideration (or $90,000 of it, payable in cash) was not received.

9. A similar question, in my view, arises in relation to the mortgages. Plainly – because it is what happened – part of the 1992 arrangement was that the joint mortgage would be discharged and a new mortgage entered into by Ms Dawson as sole owner. Nothing was said in Mr Johnson’s affidavit about that aspect of the transaction and (though his assertion that he had not been paid the $90,000 was the subject of cross‑examination and a submission was made that it should be found that he had received it) no cross‑examination was directed to it. But, again, the clear effect of Mr Johnson’s evidence was that he (not the bank) was to be paid $90,000 in cash on completion; he was not then paid because Ms Dawson could not pay him; an arrangement was reached that he would be paid when Ms Dawson sold certain other property; but when that other property was sold there was no money left over, so that $90,000 remained unpaid. In other words, part of the agreement between Ms Dawson and Mr Johnson, whatever other components it may have had, was that she would pay him $90,000 and he would transfer to her his interest in the property. It may be observed, in passing, that no question appears to arise under s 54A of the Conveyancing Act 1919 (NSW): there is no claim in this proceeding to enforce an oral contract. In any event, if there were, it might well be that the transfer is a sufficient memorandum.

10. The question, therefore, is whether Mr Johnson’s evidence should be accepted.  Of course, given the documents and his obvious interest, it is to be treated with caution (although, perhaps, his interest is not as important as it might otherwise be, as plainly he had no idea of the possible significance of the non‑payment of the $90,000).  It is appropriate to take into account also that I have not accepted Mr Johnson’s evidence about the conversations he claimed to have had with Ms Dawson some months before the 1997 contract was entered into.  But my impression is that, despite confusion as to some aspects of his evidence, Mr Johnson was, generally, telling the truth.  I accept his evidence that $90,000 was payable to him upon transfer of his half interest in the property; once that is accepted, it seems to me entirely in accordance with the probabilities, given the state of Ms Dawson’s finances as they appear in the evidence, that it was not paid either on completion of the transfer or when the other property was sold.  I do not think that any further analysis is likely to be helpful: in short, I accept Mr Johnson’s evidence that he was owed $90,000 in consideration of the transfer of his half interest in the property and that that sum was not paid to him.  That is sufficient, applying the principles expounded in Hewett v Court, to support the conclusion that Mr Johnson had a vendor’s lien.

11. The applicant made two other submissions.  One was that the 1992 transaction should be regarded not as a sale but as a part of the winding up of the joint affairs of Mr Johnson and Ms Dawson on termination of their relationship.  That may be a proper characterisation of it.  But if it is, the fact remains that part of the winding up was an agreement for transfer in consideration of a cash payment, that is, a sale.  It was also suggested that if Mr Johnson might otherwise be entitled to a vendor’s lien, he had disentitled himself by laches to rely on the lien.  Mr Johnson is not seeking equitable relief in this proceeding; and in any event there is nothing in the circumstances disclosed by the evidence to suggest that it is in any sense inequitable for Mr Johnson to rely on his lien.

12. Once it is accepted that Mr Johnson had a lien, the matter becomes straightforward. Mr Johnson’s lien secured the obligation of Ms Dawson to pay him $90,000. That sum significantly exceeded the difference between the amount owing to the Advance Bank and the market value of the property. The substantial effect of the contract, completed by the transfer and payment of $115,000, was that Mr Johnson surrendered his lien and paid out the mortgagee in exchange for an unencumbered title to the property. He is thus, in my view, to be regarded as having given consideration at least equal to the market value of the property. That being so, the transfer is not avoided by s 120 or by s 122 of the Bankruptcy Act. As for s 121, there is no doubt that it can reasonably be inferred from all the circumstances that, at the time of the transfer, Ms Dawson was insolvent. She is therefore (s 121(2)) taken to have had as her main purpose one of the purposes described in s 121(1)(b). Equally, Mr Johnson’s own evidence leaves me in no doubt that, at the time of the transfer, the condition referred to in s 121(4)(c) was not met (“the transferee could not reasonably have inferred that, at the time of the transfer, the transferor was, or was about to become, insolvent”). But what would “probably have become part of the transferor’s estate” or “would probably have been available to creditors” if the property had not been transferred (s 121(1)(a))? The answer, on the evidence, must be only a bare legal title of no value. There are, perhaps, two possibilities: either the circumstances cannot be described in the terms of s 121(1)(a) or, if they can, the applicant is, the transfer being declared void, obliged to pay to Mr Johnson an amount equal to the value of the consideration given: that is, in effect, the value of the property to the extent that it does not exceed $90,000 plus the amount paid to the Advance Bank. As I understand the position taken by counsel for the applicant, it is accepted that in those circumstances the declaration sought, and the consequential orders, should not be made.

13. Finally, there is in my view no basis upon which the Court should make an order requiring Mr Johnson to pay to the applicant what is said to be the balance of the contract price.  That is so simply because on no view did Mr Johnson accept a contractual obligation to pay Ms Dawson any more than he has in fact paid.

    Conclusion

14. In the circumstances, I think the appropriate order is that the application be dismissed; but the parties should have an opportunity to make submissions about the form of the orders to be made and about costs.  My tentative view is that as I have decided the case entirely on a basis not raised by Mr Johnson, there should be no order as to costs.  It is convenient, I think, to direct the applicant to file and serve short minutes of the orders which he submits should be made in the light of these reasons.  I direct that he do so not later than 6 December 1999.

I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lehane.

Associate:

Dated:             29 November 1999

Counsel for the Applicant:	Mr M W Hadley
Solicitor for the Applicant:	Church & Grace
Counsel for the Respondent:	Ms A Sullivan
Solicitor for the Respondent:	Jan Kelly Solicitor & Attorney
Date of Hearing:	6 October 1999
Date of Judgment:	29 November 1999