Mayne v The Public Trustee - [1945] HCA 38

THE PUBLIC TRUSTEE

RESPONDENT. RESPONDENT, Bankruplcy-Statement of affairs-Disclosure by bankrupt of interest under a will

Income therefrom subsequently received by bankrupt-Application to own use- Death of bankrupt-Motion by official assignee against administrator to recover income so received and applied-Impressment of income with express or construc- tive trusts-Nature of proceedings-Stutute of Limitations-Applicability

In 1922 L. voluntarily sequestrated his estate under the provisions of the Bankruptcy Act.1898 (N.S.W.) and in 1928 obtained his certificate of discharge. In his statement of affairs L. showed that he was entitled under a will to a life estate in certain government stocks producing an income of approximately £53 per annum. The trustees of the will were, apparently, unaware that the sequestration order had been made, and neither the official assignee originally appointed nor his successor appeared to have endeavoured to collect the income or sell the asset. The trustees continued to pay the income to L. until he died in 1942. Between the date of the sequestration order and the date of his death L. received the sum of £942 and did not account for any part of it to either official assignee.

Upon a motion in the Court of Bankruptcy, the official assignee sought Held that in the absence of evidence that L. ever accepted payments as affected by a trust or that his possession of the moneys was ever otherwise than adverse to the claim of the official assignee, the administrator was entitled to rely upon the Statute of Limitations and the official assignee could therefore only recover payments of income made to L. within six years before the service of the notice of motion.

Cohen v. Cohen, (1929) 42 C.L.R. 91, and Soar v. Ashwell, (1893) 2 Q.B. 390, referred to.

Decision of the Federal Court of Bankruptcy, affirmed.

70 CLR 396

APPEAL from the Federal Court of Bankruptcy, District of New South Wales and the Australian Capital Territory.

Herbert Bruxton Ludlow, of Annandale, Sydney, medical prac- titioner, on 12th June 1922, voluntarily sequestrated his estate under the Bankruptcy Act 1898 (N.S.W.) and Charles Fairfax Waterloo Lloyd was appointed the official assignee thereof. The value of the assets in the estate was estimated to be £3,227 and the liabilities were estimated to amount to £10,659. The statement of his affairs, duly lodged with the official assignee by the bankrupt on 11th July 1922, disclosed, inter alia, a life interest under his mother's will in the following terms "Life interest under the will of Mrs. Jane Ludlow (per annum) £53 4s. 4d."

The bankrupt obtained a certificate of discharge on 11th October 1928.

The bankrupt's mother, Mrs. Jane Ludlow, died on 10th June 1892, leaving a will by which she gave a share of her estate to the bankrupt in the following words " And as to the last remaining share I direct

my said Trustees to hold the same in trust for my son Herbert during his life and to collect and get in the rents and income thereof And…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Mayne v The Public Trustee

Details

AGLC: Mayne v The Public Trustee [1945] HCA 38
Case: [1945] HCA 38
Decision Date: 13 December 1945

CaseChat Overview and Summary

The appellant, the official assignee of a bankrupt's estate, appealed to the High Court of Australia against a decision of the Federal Court of Bankruptcy. The dispute concerned the recovery of income derived from a life estate under a will, which the bankrupt had received and applied to his own use between the date of his bankruptcy and his death. The official assignee sought to recover the full amount of income received, £942 13s. 3d., while the respondent, the administrator of the bankrupt's estate, argued that the claim was limited by the Statute of Limitations.

The primary legal issue before the High Court was whether the Statute of Limitations applied to the official assignee's claim for the income received by the bankrupt. Specifically, the court had to determine if the bankrupt, by receiving and retaining the income after his bankruptcy and discharge, had become an express or constructive trustee of those funds for the benefit of his creditors, thereby preventing the operation of the statute. The appellant contended that the bankrupt's receipt of the income, knowing it belonged to his estate, made him a constructive trustee, and thus the Statute of Limitations should not bar the claim for any period.

The High Court, affirming the decision of the Federal Court of Bankruptcy, held that the Statute of Limitations was applicable. The court reasoned that while the bankrupt's interest in the life estate vested in the official assignee upon sequestration, the income paid to the bankrupt by the trustees of the will was received by him as his own money, not as trust property held for another. There was no evidence that the bankrupt accepted these payments as being affected by a trust, nor that his possession of the moneys was anything other than adverse to the official assignee's claim. Consequently, the bankrupt was not considered an express or direct trustee in relation to these moneys, and his personal representative was entitled to rely on the Statute of Limitations.

The court dismissed the appeal, upholding the order that the official assignee could only recover income paid to the bankrupt within six years prior to the commencement of proceedings. This meant the official assignee was entitled to recover £150 9s. 7d., representing the income received during that period, plus a further sum of £3 7s. 6d. that was payable at the date of the bankrupt's death. The appellant was ordered to pay the respondent's costs, with liberty to recoup them from the bankrupt's estate.

Orders