Leroy (as trustee of the Estate of John Edward Nichols) v Nichols

[2014] FCCA 2418

FEDERAL CIRCUIT COURT OF AUSTRALIA

LEROY (AS TRUSTEE OF THE ESTATE OF JOHN EDWARD NICHOLS) v NICHOLS & ANOR [2014] FCCA 2418

Catchwords:
BANKRUPTCY – Application by trustee of bankrupt for sale of property- first respondent’s half share of property vested in the trustee – sale resisted by respondents – no constructive trust alleged but respondents not legally represented – respondents’ materials wholly insufficient to prove constructive trust in any event – orders made as sought by trustee.

Legislation:  

Bankruptcy Act 1966, ss.58, 58(2), 116
Sale of Land Act 1962, s.32
Duties Act 2000

Coshott v Prentice [2014] FCAFC 88
Tracy v Bilfield (1988) 23 Fam LR 260

Applicant: PAUL LEROY (AS TRUSTEE OF THE ESTATE OF JOHN EDWARD NICHOLS)

First Respondent: JOHN EDWARD NICHOLS

Second Respondent: LISA JULIE VINCENT

File Number: MLG 1251 of 2014

Judgment of: Judge Burchardt

Hearing date: 4 September 2014

Date of Last Submission: 4 September 2014

Delivered at: Melbourne

Delivered on: 31 October 2014

REPRESENTATION

Counsel for the Applicant: Mr M. Galvin

Solicitors for the Applicant: Hall & Wilcox

First Respondent: In Person

Second Respondent: In Person

ORDERS

THE COURT DECLARES THAT:

1. All the right, title and interest of the bankrupt in the property more particularly described in Certificate of Title Volume 09875 Folio 290 (“the Property”) is vested in the applicant by operation of ss.58 and 116 of the Bankruptcy Act 1966.

THE COURT ORDERS THAT:

1. There be an order for possession of the Property in favour of the applicant and the respondents vacate the property before

   
   

   30 November 2014.

2. The applicant be appointed as the trustee for sale of the share owned by the second respondent in the Property.

3. The applicant do everything necessary or expedient to execute all documents on behalf of the second respondent to give effect to this order as necessary, including the following documents:

   (i)any statement under s.32 of the Sale of Land Act 1962;

   (ii)any contract of sale;

   (iii)any nomination form or similar document;

   (iv)any transfer of land;

   (v)any document required under the Duties Act 2000;

   (vi)any notice to be issued under a contract of sale; and

   (vii)any other document contemplated or envisaged by, ancillary or otherwise related to, any of the above documents.

4. The Property be sold and upon completion of the sale the proceeds of sale be applied as follows:

   (a)to pay the costs, commissions and expenses of the transfer and sale;

   (b)to discharge the mortgage in favour of Westpac Bank secured by the Property; and

   (c)half the net proceeds of sale be paid to the applicant and the other half be paid to the second respondent.

5. The first respondent and second respondent pay the applicant’s costs.

FEDERAL CIRCUIT COURT OF AUSTRALIA

AT MELBOURNE

MLG 1251 of 2014

PAUL LEROY (AS TRUSTEE OF THE ESTATE OF JOHN EDWARD NICHOLS)

Applicant

And

JOHN EDWARD NICHOLS

First Respondent

LISA JULIE VINCENT

Second Respondent

REASONS FOR JUDGMENT

1. By an application filed on 24 June 2014, the applicant seeks, in essence, orders for the sale of a property situated and known as 5 Jordan Way, Mirboo North, in Victoria (“the Property”), and a division of the net proceeds of sale equally between the trustee and the second respondent.

2. That application is resisted by the respondents, who have filed three Form 5 Notices of Objection, the first filed on 19 August 2014 and the second and third both filed on 22 August 2014.  The grounds of objection refer the reader to the affidavits filed by the respondents.  Put shortly – and unfortunately, it can be put shortly because of the nature of the materials disclosed – those affidavits seek to assert that the second respondent is in equity the sole owner of the Property.  For the reasons that follow, that case is not made out and it is quite apparent that the applicant must succeed.

3. The applicant has tendered and read an affidavit of the trustee, Paul Leroy, filed on 24 June 2014.  Although in part it contains hearsay assertions, in almost every instance the hearsay assertions are supported by admissible business records.  Those show that the first respondent was the subject of a Sequestration Order on 18 April 2011.  They also, I regret to say, show a long history of non-cooperation on the part of the bankrupt, the first respondent, in such matters as either failing to respond to correspondence or not providing his Statement of Affairs and the like. 

4. The affidavit and the annexed materials of the trustee show the extensive efforts made by the trustee and those acting on his behalf.  It should be noted that the trustee’s identity has changed from time to time, but nothing turns on that.  It shows the impossibility of obtaining consent by way of a purchase out of the trustee’s interests in the property, and explains why this application has been brought. 

5. The second affidavit relied upon by the applicant, that of David John Markham, solicitor, was filed on 1 August 2014, and as counsel rightly says largely deposes to the acquiescence of the mortgagee of the property.  It does also exhibit the applicant’s Statement of Affairs, provided only in July 2014 by the first respondent.  I note, as counsel correctly pointed out during submissions, that at pages 13-25 of that Statement of Affairs, the first respondent details his co-ownership of the property.  It is clear from title extracts that the property is indeed owned as tenants in common in equal shares by the two respondents.

6. The applicant’s outline of written submissions sets out a timetable of relevant events which in my view cannot be challenged, given the materials filed together with the applicant’s affidavits.  The written submissions also extrapolate the endeavours of the trustee to obtain cooperation from the bankrupt and, once again, that recitation is plainly made out on the materials. 

7. The applicant’s counsel submitted before the Court, correctly enough, that the respondents are tenants in common and that the trustee had taken transmission of the first respondent’s share of the property pursuant to law. He now seeks a sale or partition. Quite clearly, pursuant to s.58 of the Bankruptcy Act 1966 (“the Bankruptcy Act”), the first respondent’s interest in the property has vested in the trustee and, pursuant to s.58(2), I accept that that beneficial interest vests in the trustee as a matter of law upon registration, as has occurred. The trustee conceded in oral submissions that he took subject to any equities, but he submitted that the respondents’ evidence in this regard did not displace that position.

8. As a matter of belt and braces, counsel took the Court to the decision of the Full Federal Court in Coshott v Prentice [2014] FCAFC 88, which relevantly confirms the power of this Court to make the orders now sought. Given that the respondents were self-represented, counsel quite properly alerted the Court to the possibility that the respondents, if properly represented, rather than, as they were, being self-represented, might have pointed to the existence of a constructive or resulting trust, such that it might be asserted that Ms Vincent, the second respondent, is the sole owner of the property. It was correctly submitted that no submission to that precise effect has been advanced, and it was further submitted that the facts asserted by Ms Vincent and Mr Nichols do not achieve that result in any event.

9. I gave the respondents an opportunity to consider whether they wished to cross-examine either of the applicant’s deponents, because this had been foreshadowed at the previous mention of the matter, but they both expressly declined to do so. 

10. The first exhibit tendered by Mr Nichols is a letter to Hall & Wilcox dated 28 August 2014.  Essentially, it asserts that he had only two creditors, being the Dulux Group and Westpac, for whom Charter Mercantile Agency was acting, and that these had been paid in full.  I accept that that certainly seems to be the case. 

11. In his affidavit filed 19 August 2014 (Exhibit R2), Mr Nichols relevantly deposed that his bankruptcy was obtained by McDonald Phillips Lawyers Pty Ltd by an abuse of process.  The affidavit confirms that the dispute arose out of a commercial dispute with Dulux as to provision of goods in excess of a credit limit and guarantee of $5000.  The affidavit goes on to assert why it was – if I understand the terms of paragraph 2 correctly – that he did not attend the proceeding at which the Sequestration Order was made against him.  It goes on to depose that he ultimately settled with Dulux for $5000, and asserts that this was the credit limit of the account and the amount of his personal guarantee.

12. The only other creditor asserted was Westpac, for whom Charter Mercantile Agency was acting, and once again this matter was asserted to be in the process of being resolved.  Mr Nichols confirmed that, other than those debts, he had no creditors save the trustee.  Relevantly for these purposes, he deposed at paragraphs 11-13 as follows:

    “11.  Concerning 5 Jordan Way, Mirboo North, this is the property of Lisa Julie Vincent, who purchased it partly from the proceeds of her earlier property, 28 Stirling Road, Croydon, Victoria, and partly by mortgage.  She has undertaken all mortgage payments, rates land tax, etc..  I have no claim on the property at all. 

    12       You should be also aware that since my arrival in Australia, in 2002, and being prohibited from working due to Visa restrictions, I have not been employed at all.  I do not have a tax file number nor do I file income tax returns nor have I ever claimed any benefits from any Australian agency. 

    13.  Finally, since 10^th January, 2012 my sole income is two small pensions currently giving me just under $400 per month.”

13. In his second affidavit filed 22 August 2014 (Exhibit R3), Mr Nichols continues, and confirms that he in fact does have a tax file number.  He goes on to deal with his address for service, but that is not now relevant.  He then goes on to say at paragraphs 17-19:

    “17.  Intellectual input by all parties has been nil.  All correspondence has consisted of standard letters, downloaded from a data base.  No attempt was made to arrange a meeting to discuss my concerns, other than one option, (PL 16) dated 15^thJune, by email, viewed 16^th with an option to meet the following day 17^th at 10.30 am.. ( No recognition being given to the fact that Mirboo North is two hours approx. from Melbourne by private transport. 

    18.  I wish to confirm Ms Lisa Vincent’s comment in her letter (PL 27) that there was no correspondence to either her or myself between August, 2011 and December 2012.  Furthermore, that this has served only to add to the problem and increase ongoing costs.  

    19.  Lastly I request that as my only creditors, as evidenced by my Statement of Affairs page 18 (Annexure 4) have been satisfied, (evidence of this will be provided at the hearing on 29^th August,) that the application by Mr Leroy for the sale of 5, Jordan Way should be denied or at least adjourned pending details of his expenses.”

14. The affidavit of Ms Vincent (Exhibit R4) asserts that in 2009 Mr Nichols was “conned” by a father and son, Stephen and Brendan McLean, and that in addition to Mr Nichols investing and losing $10,000 to set up a business, he was left with outstanding debts as the company’s sole director. It asserts that Mr Nichols had paid all but the Dulux account and the Westpac credit card for various reasons.  It should be noted that these assertions do not, in fact, entirely sit easily with Mr Nichols’ assertion that he has not worked at any time since he has been in Australia.  Ms Vincent (at paragraph 5) having deposed to settlement of the debt with Westpac, deposes at paragraph 6:

    “6.    I gather that this case is now regarding the proposal to sell the house, rather than the purchase John’s half of the equity in it as I thought was what was agreed.” 

15. The affidavit goes on to assert difficulties that would obtain in the sale of the property, in any event.  In paragraph 14, the last paragraph, it is asserted that the applicant has not been employed since 2002 in Australia and has not been required to lodge tax returns, due to his low income levels.

16. As the outline of submissions filed by the applicant (at paragraph 9) asserts:

    “The making of unequal contributions to the acquisition (or improvement) of the property does not, of itself and without more, give rise to a constructive trust in favour of one owner as against another: (Tracy v Bilfield (1988) 23 Fam LR 260 at 263 (Templeman J)).” 

17. The reality is that while theoretically it might be possible to erect a case to the effect that the sole equitable interest in the property should lie with Ms Vincent the respondents have gone nowhere near making out such a case.  If, as the affidavit of Mr Nichols asserts, the property was bought by Ms Vincent through funds of her own and a mortgage for which she has only ever been liable, there is no explanation as to why it was that he was included on title as a tenant in common in an equal share. 

18. No evidence has been put forward save the bare assertion that it was Ms Vincent alone who contributed to the mortgage payments.  Furthermore, there is no evidence as to where the funds that have now discharged the Dulux and Westpac debts came from.  If Mr Nichols has not had an income beyond a very small pension since 2002 it is difficult to see how he got the credit that apparently he did get, and furthermore how he has discharged the obligations arising from that credit. 

19. Mr Nichols has been living, it would seem, with Ms Vincent for quite some time and it would seem as a matter of practical reality very probable, or at least more probable than otherwise, that his affairs would have been co-mingled with those of Ms Vincent.  It is not possible, of course, to arrive at any conclusions about these matters because the respondents have simply not put on any material to this effect, so it is not necessary to make any final conclusions about it.  What is plain is that the first respondent has not displaced the prima facie position that he was at all relevant times the registered owner of half the property and I am compelled to accept the submission of the applicant (at paragraph 9 of the written submissions) that:

    “No basis for the imposition of constructive trust, or a resulting trust, is apparent from the evidence.”

20. I also note and accept the submission in the applicant’s written submissions that even were an application for an annulment to have been made, and it clearly has not, the bankrupt’s debts include the trustee’s remuneration and expenses.  There is no indication that the bankrupt is in any way able to meet the trustees remuneration and expenses.  Indeed, on his own assertions as to his income it would seem that he has been insolvent at all material times since he ran up the credit of about $9,000 in 2009.

21. Finally, I note that the respondent’s materials seek that the sale of the property be postponed pending quantification of the trustee’s costs and expenses. 

22. This Court has no power to regulate the remuneration of the trustee’s costs and expenses.  Those matters can be addressed by an appropriate application made under the regulations should the respondents so desire.  For these reasons, and albeit not without a residual sympathy for the respondents who have clearly acted over quite some time in a fashion inconsistent with their best interests, on the materials before the Court the applicant is entitled to the orders that he seeks.  I have prepared draft orders and will hear further from the parties.

I certify that the preceding twenty-two (22) paragraphs are a true copy of the reasons for judgment of Judge Burchardt.

Associate: 

Date:  31 October 2014