ex parte

CATCHWORDS

Bankruptcy- Administration of bankrupt's estate -

Application by Official Receiver that proceeds of

sale of land are held on trust for the bankrupt -

Intention to create a trust - Whether legally binding

relations created.

I N THE FEDERAL COURT OF AUSTRALIA

GENERAL

D I V I S I O N

BANKRUPTCY D I S T R I C T OF THE STATE	1 No.	1. 359 of	1978
OF NEW SOUTH VALES AND THE	1
AUSTRALIAN CAPITAL TERRITORY	I

RE:	RODNEY DtARCY WALL

B a n k r u p t

PARTE:

THE

O F F I C I A L RXCF,ITE?-

A p p l i c a l t

MICHAEL IAY! K3l+'lMIS

F i r s t

R e s p o n d e n t

S E R V I C E

CO.

Second

R e s p o n d e n t 2

JOHN	K E I T H TI"JILLIAT.Z LQi;D

T h i r d

R e s p o n d e n t

ORDER

JUDGE PZAICING ORDER :	LOCKHART J.
WHERE NADE:	SYDNEY
DATE OF ORDER :	13 AUGUST 1979
THE COURT ORD3RS THAT:

1 . At the commencement of his bankruptcy the bankrupt had a beneficial interest in the property being Lot 8

in deposited plan 26610 situate in Soldier's Point

Road, Salamander Bay, New South Wales;

2. AS at the date of the making of the sequestr3ation ord against the estate of the bankrupt he was the

beneficial owner of the sum of $18,628.06 held by the

second respondents and representing part of the proceeds of sale by the first respondei~t of the

property mentioned in 1 above;

3. That the applicant pay the costs of the second

respondents as submitting respondents. Otherwise

I make no order as to costs.

IN TKE FEDERAL COURT OF AUSTULIA

GENERAL DIVISION

BANKRUPTCY DISTRICT OF THE STATE

No. W 359 of 1978

OF N E W SOUTH WALES AND THE

AUSTRALIAN CAPITAL TERRITORY

RE:	RODNEY D'ARCY ??ALL

Bankrupt

EX PARTE: THE OFFICIAL RECEIVER

MICHAEL IAN KETJ~V~IS

First Responden'

ANTHOMY F, MOULTON and

BRUCE 3. CORBi3N' carrying

on business as C. DON

SERVICE & CO.

Second Responden.

JOHN KEITH WILLIATJl L@!v23

Third

Re sponden'

REASONS FOR JUDGMENT

LOCKHART J.

This is an application by the Official Receiver as

trustee of the estate of Rodney DrArcy Wall for a

declaration that the sum of $18,628.06 ("the moneysn) lodged

on deposit with a building society and representing part of

the proceeds of sale by the first respondent of land being

Lot 81, in deposited plan No. 26610 in Soldier's Point Road,

at Salamander Bay, New South Wales ("the propertyt1)

is held

-2-

upon trust for the bankrupt's estate.

The first and third respondents claim to be

entitled to $14,000.00 of the moneys, the third respondent to the balance of the moneys. The second respondents, a firm of solicitors, Messrs. C. Don Service & Co., have placed the moneys on deposit pending the determination of these

as to $9,000.00 and the first respondent as to $5,000.00.

proceedings.

Interest is accruing on the moneys from

day to day and it is agreed by the parties that whoever is

entitled to the moneys should be entitled pro rata to the

interest.

A sequestration order was made against the bankrupt

on 25 May 1978.

In about February 1973 the bankrupt and the first

respondent had a discussion which led to the first respondent

helping the bankrupt run his panel beating business known as

A.S.R. Services. The first respondent gave evidence of the

conversation as follows:-

the bankrupt:

I'I am having a lot of difficulty

in finding a suitable person to

help me run my panel beating

business A. S. R. Services. Woul

you be interested?"

the first respondent:

"Yes, how can we arrange it?I1

the bankrupt :

"The business is so run down it cannot afford to pay you a wage for the time being. Would you

be prepared to come in on a

profit sharing basis, and when

business is getting on its feet ?

could then'draw a wage as well".

the first respondent:

"All right. "

The first respondent then worked six or seven days

during most weeks up to twelve hours a day in the business.

By mid June 1973 the business had improved and the

bankrupt and the first respondent agreed to purckase a

property jointly for the purpose of obtaining capital

appreciation on resale, each to contribute one half of the

puzchase moneys and to divide the net profits after resale

equally between them.

The bankrupt and the first respondent agreed with

the owner of the property to purchase it for $33,000.00. The bankrupt drew a cheque in favour of the owner, a lb . Roland, in the sum of $500.00 once agreement had been

reached between the parties for the purchase of the prop2rty,

The cheque was drawn on the banking account of A.S.R.

Servicf

The purchase moneys were raised as to the bankrupt's share by a loan to him by a Mr. Groth in the sum of

$15,000.00 for a term of twelve months at 10% fixed interest.

The loan was secured by a registered. first mortgage grated by the bankrupt's mother over certain land owned by her.

The first respondent's contribution towards the

purchase price was raised by a loan to him from Associated

Securities Finance Limited ic the sum of $18,000.00. It was

a term of the proposed advance by that company to the first

respondent that a first registered mortgage be granted over

the property to secure the loan. The first respordent

told the bankrupt that Associated Securities Finance Limited

would not advance the money if t h ~ b~kruptls name was on tht

title. He asked the bankrupt why this was. The bankrupt

saiC that it was due to some ~nfortu~ate business dealing

. /4

of h i s some

years e a r l i e r .

On	29 November 1973 cont rac t s were exchavlged f o r

the s a l e of t he property t o the first respondent. Payments were made f r o m time t o time i n connection with the purchase

and maintenance of the property over the period July 197%

t o October 1975,

Certain of those payments were made by t he

bankrupt, but general ly out of the banking account of

A.S.R.	Services.
In September 1973 the t h i r d respondent conrnenced

t o occupy p a r t of the premises used by A.S.R,

Services a t

19-21

Park Road, Rydalmere t o do mechanical work t h a t w a s

sub-contracted

t o h i m by A.S.R.

Services.

He was

a t that

time employed i n the Naval Police and did t h i s work i n h i s

o f f duty periods. He was paid a t a reduced labour r a t e t o

o f f s e t the

cos t

r e n t a l .

In December 1973 the bankrupt approached the t h i r d

respondent and requested him t o 0pe.n a banking account i n t he name of A.S.R. Mechmical Services. This account w z s opened and all income and expenditure of the sub-contracting

work performed by the t h i r d respondent w a s channelled

through it,

The bavikrupt and the t h i r d respondent were

CO-signator ies t o the

account.

In l a t e December 1973 the t h i r d respondent went

annual leave from the Naval Police t o South Austral ia .

Nhen

he l e f t , t h e r e

w a s about $1,700.00

i n the A.S.R.

Mecllanical

Services t bank account,

h i s r e t u a four weeks l a t e r

t h ~ r e

w a s very l i t t l e money i n the account.

asked the

bankrupt what had happened t o the funds i n the account

t o which the bankrupt said:

"1 have used them t o buy a boat t r a i l e r and

a burnt out Mercruiser engine and s t e r n drive."

The	t h i r d respondent complained about t h i s t o the

bankrupt t o which he said:

" W i l l you

the Holden U t i l i t - ( r e g i s t r a t i o n

No. AAM-41

4) f o r the boat t r a i l e r ? j

w i i l t r a n s f e r

the rego t o you on rznewal i n l a t e Bovernberen

The	t h i r d respondent asked:

What about the balance?".

And	the bankrupt repl ied:

ttI'll replace i t with a piece of equipment

a t some

l a t e r date."

The

t h i r d

respod en t then

s a i d :

*Well it sourlds a reasonable deal .	1'11
accept.

I n November

1974 the

r e g i s t r a t i o n of

the u t i l i t y was

t rans fe r red

i n t o the name

the t h i r d respondent as agreed.

The

f i r s t respondent

agrees t h a t i t w a s the

o r ig ina l

i n t e n t i o n of

himself

and

the bankrupt

t h a t the property be

acquired jo in t ly .

However, he says t h a t i n February 1974

sa id t o the bankrupt

"we

a r e no t sharing cos t s equally.

I a m pu t t i ng i n $18,000.00

and you $15,000.00~.

A s a r e s u l t

o f t h a t conversation,

the b d r i l p t and

the f i r s t respondent

agreed t h a t the bankrupt would have a 5 / l l t h s

share i n the

property and

the f i r s t respondent would have a 6 / l l t h s share

The bankrupt made and continued t o make a l l payments i n

respec t of h i s loan of $15,000.00 by cheques drawn

A.S.R.

Services'

bank account.

The f i r s t respondent spsk.

to the bankrupt about this and the bankrupt replied:

"You are drawing a wage."

In about March 1974 the first respondent was able

to commence drawing wages of about $65.00 gross per week

from A.S.R. Services. He had received no money before

this and it was used to pay his instal-ments

under the

mortgage to Associated Securities Finance Limited.

In addition to receiving wages, the first respondent

was given rent free occupation of a house at Ken-thurst.

The property was leased by A.S.R.

Services for storage of

damaged vehicles and spare parts. The first respondent

paid no rental in return for looking after the vehicles

and spare parts.

In March 1974 the bankrupt spoke to the third respondent at A.S.R. Services. He said words to the effect:

'John, would you like to be production manager

of the w~rkshop.~

The third respondent said he was interested and

the bankrupt said:

"There isfnt enough money for you to draw m y

wages, but you can have 33 1/3rd per cent share

of the profits from A.S.R,lt

The third respandent agreed. At that time he was

still receiving his income from the Naval Police. Towards the end of 1974, the third respondent began

to have matrimonial difficulties over the amout of time he

spent away from his wife working for A.S.R.

Services with no

remuneration. He approached the ba.rilcrupt who said:

"Doilt.t

worry, on your discharge from the :Javal

Police I will provide you through A.S.R.

with a house and a wage in addition to your

share of the profits."

When the third respondent was discharged from the

Naval Police in March 1975, he went to work full-time at A.S.R. Services but there was no wage forthcoming.

In about mid April 1975, the third respondent

received his furlough cheque of about $3,600.00. He tanked

this as he was using his personal savings to pay for rent

and general living expenses. About this time he was given

a notice to vacate his service home at Ermington.

He found a house in Castle Hill. He required a

bond of $200.00 and advance rent of $200.00 He spoke

to the bankrupt who gave him a cheque for $400.00. The

third respondent then signed a six months lease of the house.

The bankrupt made some payments of rental for the

house by cheque. As several of those cheques were dis-

honoured owing to lack of funds, the third respondent

used his own savings for rental and daily living expenses.

Whilst at A.S.R.

Services premises, in mid June 197

the third respondent received his Defence Forces Retirement

and Death Benefits cheque for $4,036.66. The bankrupt saw

him with the cheque and said:

"John, the business is in dire straits as you

know from what has happened to some of the

rent cheques. Could you lend me that money

and I will repay it as soon as the outstanding

accounts have been paid."

The third respondent agreed saying:

nYou must f i l l i n the reverse s ide and I w i l l

s ign it."

A t t h e bankrupt 's

request

the money w a s l e n t t o

General Marine Services, which w a s a separa te business

run by the bankrupt.

During the next few months,

%he t h i r d respondent

w a s

d i rec ted

the

b a n k r u ~ t

t o work on boats on the water

i n var ious loca t ions around

Sydney and

then t o pa in t elevato

doors.

remuneration w a s paid t o him.

I n t h i s period

he noticed t h a t cheques nade payable t o A.S.R.

Sernices

were being "signed across11 by the banlcruyt t o General Marine

Services and banked i n t o i t s	account a t the Czrlingford
branch of t he Rural Bank.

e a r l y 1975 the r e l a t i onsh ip of

the bankrupt

and

f i r s t respondent w a s becoming s t ra ined .

Tne

f i r s t responden

not iced t h a t cheques payable t o A.S.R.

Services were being

endorsed and paid i n t o the banking account of General Marine

Services

a t the Rural B&,

Carlingford branch.

I n o r about August 1975 the first respondent asked

the bankrupt t o have a wr i t t en document drawn up t o

e s t a b l i s h the first respondent's

share of

the p r o f i t s of

A.S .R. Services.

The bankrupt refused saying:

"The property a t Salamander i s i n your game

and

I don' t have any wr i t ing t o prove othsrwiseaW

The f i r s t respondent then asked the bankrupt what

w a s h i s

( the f i r s t respondent 's)

pos i t ion

i n r e l a t i o n t o

General Marine Services, t o which the baikrupt repl ied:

ttThe two business sre, i n e f f e c t ,

one

and

the

sarne.It

The type of work carried on by A.S.R.

Services

and General Marine Services was of a similar nature as

both involved mechanical repairs and spray painting,

although General Plarine Services related essentially to

boats.

By September 1975 the third respondent's savings

were almost exhausted. He had not received any wagka,

share of profits or repayment of his loan. Often he had

to deal with the creditors of the business who were

demanding payment. He told the bankrupt that he was concernc

about this and the bankrupt said:

"Don't worry, General TJlarine Services is

going to fire and make big money. You

will be looked after hand~omely.~

The first respondent gave evidence that in October

1975 the third respondent and the first respondent met

the bankrupt and told him that they did not like the way

the business was being run. They said they were not happy with the non payment of accounts and the bankrupt spending

money unwanted equipment . Either the third respondent or the first respondent said words to the effect:

"General Marine Services has been started with

the profits of A.S.R. Services and we are

entitled to a 33 1/3rd percent share each in

that bu.sine

ss. v

The bankrupt said:

"You have no claim on General Marine Services."

He then told the first respandent:

"If you pay me $18,000.00 pexsonally, I will

give you a 2 4 3 share.

The bmkrupt said to the third respord ent:

"We	can work something out , but I w i l l r e t a i n
51$".

The

first respondent. r ep l ied :

llThat means you value General Marine Services a t

about $73,000.00.

It only has equipment bought

with A.S.R.

Services moneyf1.

The bankrupt made no reply ,

the

same

conversation the f i r s t and

t h i r d

respondents Cold the bankrupt t h a t they would no t work f o r

him any longer.

The bankrupt sa id:

"1 don't want you claiming anything from me

a t some l a t e r date.

I w i l l pay you (meaning

both the f i r s t and

t h i r d respondents)

so YOU

w i l l no t have any claim on me

a t a l a t e r date.

I w i l l pay you t o ge t you off my back.

w i l l pay you $5,000.00 each.

John, (meaning

the t h i r d respondent) I w i l l give you the tune

scope t o cover th.e t r a i l e r and I w i l l . repay

your loan of $4,000.00".

The

t h i r d

respondent

rep l ied :

llThat su i t S me, how about you (meaning the

f i r s t respondent) U.

And	the f i r s t respondent rep l ied :

nThat

s u i t s me

f i ne

t o o l f .

The t h i r d respondent gave evidence as t o the October

1975 discuss ion as follows:-

nThe bankrupt sz id:

'!You

must think I 1 m mad.

I f I give you p a i r an

equal share par tnership you would immediately

out-vote me and run the business your way.

You

wouldnlt have enough bra ins between you t o run

a	brothei . I t

The

t h i r d respondent

rep l ied :

"1 a m no t i n t e r e s t ed i n running a brothel ;

what

Michael

and

a re i n t e r e s t ed i n i s rwxning

t h i s

business as a panel shop and recouping w h a t we

have pa t i n t o i t , then making a p r o f i t .

Vle

a r e

!I'e

not

i n t e r e s t ed

i n doing you

out

o f any-thing.

want

con t ro l of

the spending s o t h a t the rnocey i

channel-led

i n t o the

r i g h t p laces ,

l i k e the

outstanding c red i to r s f o r a

start,1t

The third respondent went on to say:

"We feel that the panel shop has all the potential in the world if m correctly. We have worked damn hard these past couple

of years and seen nothing - my mistake, Michael has been getting a wage for our

labour.

Our 33 l / 3 r d percent of the profits

each that is, have been going into General

Marine Services. We feel that we are entitled

to our share. We certainly aren't going to

go on working under these condi-i;ior,~.~~

After the third respondent said this, the bankrupt replied:

"This is my business and I an not going to

have anybody else involved whatsoever, unless

you (to the first respondent) wish to buy

in and that will cost you $1 8,000.00 which will

give you a 24S per cent share and you (to the

third respondent) we will sort out soinething

about your share but I will retain 51 per cent.

The first respondent said:

"You've got to be joking. You consider General has nothing except the equipment and that would not be here if A.S.R. hadn't supplied the cash to set it up."

'Phe bankrupt replied:

UThat is my offer and that is that."

The third respondent said:

Vhil Arnold is moving out of Harryls half

of the shop next door soon.

I think I will

open up a mechanical shop there as I can't

see any future here."

The first respondent said:

"Well, I will be leaving also."

The bankrupt then said:

"If you are going to leave, which suits me down

to the ground, there are a couple of t!~ings we

had better get straig5tened out right now, as I

don't want you pair coming back at some later

date laying claim to my.business. I will give

you (directed to the third respondent) the tune

scope which covers the boat trailer Mercruiser

episode.

I will repay your loan in full and

1 pay you a

additional $5,000.00 for your

. '

work over the past years and partially

compensate you for not having dram sny

wages. And to you Tvlj.chael (to the first

respondent) $5,000.00 also. This will

release me from any claim that you may make

against myself or my business A . S . R .

General Marine Services. l1

To which the third respondent replied:

"That suits me fine, how about you Michael?"

The first respondent said:

nSuits me fine."

The bankrupt said:

nl?ow that's all set-bled,

when are you going to

leave?I1

The third respondent replied:

ltPhilfs

moving out in about a month.

I will

have a talk with Harry and see what he has

to say.

In the meantime, I will remain and

help you clean up some of the back log of

panel work."

The total received by the first respondent as wages up to October 1975 was about $9,000.00. Those drawings commenced in March 1974,although he started working in February 1973.

In October 1975 the first and third respnndents

opened up business as "Park Road Motorsn in premises next

door to those occupied by A.S.R. Services.

In early January 1976 the first a d third respoadents

went to the front of AeS.Ro Services premises and spoke to

the bankrupt. The first respondent gave evidence that

the bankrupt was asked when the two respondents could expect

payment of their moneys t o which the bar!crupt said:

' "1 do not have the money, why don't we

sell Salamander and take the $14,000.00

from my share?".

Both respondents agreed to this.

The third respondent gave evidence of the January

1976 conversation. He said that the first and third

respondents asked the bankrupt for their money, to which

the bankrupt said:

I1I	do not have any money, things are a bit

tight at this particular time. Why not sell

the property at Salamander Bay? The $14,000.00

can be taken out of my share".

The first and third respondents agreed.

The two respondents spent time and money in

finding a buyer for the property. They finally found one.

In mid 1976 the bankrupt came to the first respondent at 23 Park Road Rydalmere and asked:

Itwill you sign a second mortgage on the property to cover my debt to Volvo Penta of $30,000.00~~.

The first respondent said:

"I can't see any wisdom in doing that, the

property is in the process of being sold".

The bankrupt then left saying:

"You'll hear more about this".

In about November 1976 the first respondent was informed by his solicitor that the bankrupt had

lodged a caveat on the title of the property.

The sale of the property was settled in April

1977. The sale price as $43,000.00 which was applied as

follows:

$19,954.00

to discharge the first mortgage over the

property'held by Associated Securities

Finance Limited.

432.11 for conveyancing fees and rate adjustments

1,576.04 paid to the first respondent as re-

imbursement of rates and electricity

accounts in. respect of the property

which he had paid previously.

2,409.79

paid to 1~f.r. Joseph Romer, a creditor of the bankrupt in reduction of a District Court judgment debt.

18,628.06 balance held by the second respondents

as solicitors for the first res2ondent.

On 7 October 1977, the bankrupt commenced

proceedings in the Supreme Court of New South Wales

in its Equity Division seeking a declaration that he

was the beneficial owner of the moneys held by the

L second respondents and an order that they pay them to

him.

The first respondent filed a cross claim in

those proceedings seeking a declaration that he was

the beneficial owner of $5,421.77 of the moneys held

by the second respondents, being a capital adjustment

claimed to be due to him from the joint venture with

the bankrupt in relation to the property together

with a claim that the bankrupt owed him $5,000.00 for

work perfcrmed by him for the bankrupt. The third

respondent also lodged a cross claim alleging that

the bankrupt owed him $9,782.33 being $5,000.00 for

work pe-fonned by him T o r the bankrupt, $4,076.66 for

/ l F;

-15-

money

/ lent to the bankrupt plus $745.67 said to be the

recoupment of one-third of procuration fees and costs

in respect of the purchase of the property.

On 24 November 1978 the second respondents

applied to the Supreme Court to be released from an

undertaking previously given by them to the court

that they would not release moneys until the beneficial

entitlement thereto had been determined.

On '7 December 1978 the application now before

me was filed in this court by the Official Receiver for

a declaration as to the beneficial ownership of the moneys.

On 8 December 1978 the Supreme Court declined

the application by the second respondents to release the funds to the first and third respondents pending determination of the ownership of the moneys by this

court.

The bankrupt disputes that he owes $5,000.00 to

each of the first and third respondents upon the

grounds that they did ~ o t

carry out the work claimed

to be done by them. He disputes that the first

respondent is entitled to any further funds from the

joint venture between.thern in relation to the property

on the grounds that the bankrupt paid various recouped. He also claims that the loan of $4,036.66

expenses associated with the raising of his capital

contribution of $15,000.00 and that he paid various

-16-

was satisfied by a transfer of assets in 1976.

The claim of the first and third respondents of

$5,000.00 and $9,000.00 respectively from the moneys is

based on the October 1975 and January 1976 conversations

only. No other basis was relied on.

The facts, as I have found them, are based mainly

on the evidence of the first and third respondents.

Where the evidence of the first respondent or the third respondent conflicts with the evidence of the bankrupt, I prefer the evidence of the respondents. Each of those respondents and the bankrupt was cross-examined. I accept the first and third respondents as truthful and reliable witnesses. Their evidence is inherently more

probable than the evidence of the bankrupt.

I observed all i

witnesses in the witness box.

The first and third respondent

impressed me as witnesses of truth. Also certain material

evidence of the first and third respondents, which lends

support to their version of the facts, was not denied by the

bankrupt .

The critical evidence in this case relates to the

October 1975 and January 1976 conversations.

In my opinion, it is clear from the October 1975

conversation that the relationship of debtor and

creditor was created between the bankrupt on the one hand

and the first and third respondents on the other hand.

The bankrupt agreed to pay the first respondent and the .

third respondent the sum of $5,000.00 each for the

w.ork done over the years by each of them for the bankrupt

and for not having drawn wages and to release the bankrupt

-1 7-

from any claim that either of them may have against thc

bankrupt or the business A.S.R.

Services or General

Narine Services. The bankrupt agreed to pay the third respondent $4,000.00 in respect of the loan that had been made by the third respondent to the

barup	t .
I turn to the January 1976 discussion. The

first and third respondents rely on that discussion

as establishing a trust, express or implied, or a

charge, express or implied, with respect to the proper1

or the b&ruptts share of the proceeds of sale thereoj

They do not rely upon a constructive trust. l!&.

Eel1

who appeared for the first and third respondents

contended that the evidence of his clients, assuming I

accept it, which I do, was consistent with the bankrugt

declaring or acknowledging himself as trustee of the

property or the b&ruptls share of the proceeds of

sale thereof as to $5,000.00 in favour of the first

respondent and as to $9,000.00 in favour of the third

respondent.

He submitted in the alternative that an

agreement for valuable consideration was established

by the January 1976 discussion to constitute the trust

mentioned above and that upon the property being sold

the trust became fully constituted.

It was submitted by I*

Urquhart who appeared fc

the Official Receiver, as trustee of the estate of the

bankrupt, that the January 1976 discussion was not

intended to create legally binding relations between

the parties and was merely a voluntary concurrence by

the bankrupt to the sale of the property and the

deduction from the proceeds of sale of the $14,000.00

which he had earlier (~ctober

1975) acknowledged was

the extent of his indebtedness to the first and third

respondents.

In Commissioner of Stam~

Duties (~ueenslmd)

v. Jolliffe (1920) 28 C.L.R. 178, Knox C. 3. and G2.772.n-

Duffy JJ. said at p. 181:

"In our opinion the law is accurately stated

in Lewin on Trusts 11th Edition at p. 85:

'It is obviously essential to the creation of

a trust, that there should be the intention of

creating a trust, and therefore if upon a

consideration of all the circwnstances the

court is of opinion that the settlor did not

mean to create a trust, the court will not

impute a trust where none in fact was

contemplated.

See also Field v. Lonsdale 13 Beav. 78 and -

Cook v.

Fountain (1672) 3 Swans. 585 or 36 E.R. 984.

There are nany reported cases where parties have reached an agreement but have not intended to crea.te legally binding relations : See Salmond Pc Williamc

The Law of Contract p. 21 ; -dyatt v. Kreglinger & Pernau 1933 1 K.B. 793 especial-ly per Scrutton L. J. at p. 8C6; Burns v. Manchester & Salford Weslegm Plission (1908)

99 L.T.

579; K e m ~

v. Lewis 1914 3 K.R. 543; Rogers v.

Booth 1937 2 All E.H. 751; Liscoe v. Henry (1926) 19

A conversation along the lines of the January

1976 conversation would, I expect, be of not infrequent occurrence between a debtor and his creditors where the debtor is in financial difficulties, It would be going

a long way indeed to hold that the result of the

conversation is a trust or charge or an agreement to

create one. If this were the result the2 so be it; but

I do not think it is.

In my opinion there was no intention by any of th parties to the January 1976 discussion to create a trust or a charge in respect of the property or the proceeds

of sale thereof,

It would be unreal. to say that such conversation

created a legally bilzding agreement between the debtor

and the creditor,

In the result the first and third respondents

have failed to establish any beneficial entitlement tc

the moneys; but they have established that they are

unsecured creditors of the bankrupt.

As to costs, although the res~ondents

have failed

to establish their entitlement to the moneys as

beneficiaries or chargees, they have established,

contrary to the bankrupt's case, that they are unsecured

creditors. Thus the case has facilitated the trustee's

administration of the bankruptls estate.

Also, the first

third respondents have not

deni.ed that the bankrupt had a beneficial interest in

the property and therefore in the proceeds of sale; y e t

. ' the first declaration sought in the application

by the trustee assumes that there is an issue

as to this.

I am satisfied that there has not beerr

at any material time, so far as these proceedings are

concerned, a denial on the part of the first and third

respondents of the beneficial entitlement of the bankrup'

to some part of the proceeds of the sum of $18,628.06.

In the circumstances in my opinion. the proper

order for costs is that each party pay his own costs

except the second respondents who submitted to such orde:

as the court may see fit to make.

It is right that

their costs be paid by the applicant but as submitting

respondents.

I make the following declarations and orders:-

1. That at the commencement of his bankruptcy the bankrupt had a beneficial interest in the property being Lot 81 in deposited

plan 26610 situate in Soldier's loict

Road, Salamander Bay, New South Wales;

sequestration order against the estate of

the bankrupt he was the beneficial owner

of the sum of $18,628.06 held by the

That as at the date of the making of the of the proceeds of sale by the first respcnde;

of the property mentioned in 1 above;

3.' That the applicant pay the costs of the second

respondents as submitting respondents. Otherwise

I make no order as to costs.

[1979] FCA 183

13 Aug 1979