Nelson v Berhe
[2014] FCCA 1975
•29 August 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| NELSON v BERHE | [2014] FCCA 1975 |
| Catchwords: BANKRUPTCY – Application by Trustee for vacant possession of the property – property occupied by the Bankrupt’s Wife – Bankrupt died on 29 November 2009 – whether the Respondent entitled to benefit of a constructive trust – mortgage payments made by Respondent after death of Bankrupt – whether Applicant entitled to imputed rent – orders made. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.30, 58 |
| Baumgartner v Baumgartner (1987) 164 CLR 137 Forgeard v Shanahan (1994) 35 NSWLR 206 Hardman v Hobman [2003] QCA 467 |
| Applicant: | SIMON PATRICK NELSON (IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF ABRAHA MAMO GEBREMARIAM) |
| Respondent: | MULU BERHE |
| File Number: | MLG 1673 of 2013 |
| Judgment of: | Judge Whelan |
| Hearing date: | 21 August 2014 |
| Date of Last Submission: | 21 August 2014 |
| Delivered at: | Melbourne |
| Delivered on: | 29 August 2014 |
REPRESENTATION
| Counsel for the Applicant: | Mr Brown |
| Solicitors for the Applicant: | Baker Jones Lawyers |
| Counsel for the Respondent: | Respondent in person |
ORDERS
That the Respondent and any other occupant(s) vacate the property located at 6 Grandview Avenue, Point Cook, Victoria 3030, being that parcel of land more particularly described in Certificate of Title Volume 10753 Folio 798 (“the Property”) within 30 days of this order.
That in the event that the Respondent and/or any other occupant(s) of the Property fail to give vacant possession of the Property in accordance with Order (1) above, a writ of possession be issued.
That the Respondent do all things reasonably necessary to cooperate with the Trustee in the sale of the Property, including but not limited to:
(a)Leaving the Property in a neat and tidy condition;
(b)Delivering the keys to the Property to the Solicitors for the Applicant on the date of departure; and
(c)Providing a Withdrawal of Caveat AG043912N at the settlement of the sale of the Property.
That the Applicant do all things necessary to advertise and market the Property for sale.
That the proceeds of any sale of the Property be distributed as follows:
(a)First, to the Trustee’s reasonable costs and expenses of the sale including but not limited to:
(i)Advertising and marketing costs;
(ii)Estate agent’s commission;
(iii)Any monies expended by the Applicant to bring the Property up to a saleable condition prior to the sale;
(iv)Legal and/conveyancing costs; and
(v)The Trustee’s remuneration in an amount not exceeding the sum of $5,000.00.
(b)Second, to the mortgagee all amounts which are due and owing under the loan secured by the mortgage over the Property;
(c)Third, to the Respondent in respect of an equitable accounting for monies paid by the Respondent to reduce the amount owing on the mortgage; and
(d)Fourth, the net proceeds remaining to be divided equally and paid to the Respondent and the Trustee in equal shares.
The Respondent, from her share of the proceeds, is to pay the Trustee an amount equal to 50% of the imputed rent for the Property for the period commencing 14 May 2013 until the date on which the Respondent vacates the Property.
That there be a stay of 14 days on Orders (1) to (6) above.
That there be liberty to apply.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 1673 of 2013
| SIMON PATRICK NELSON (IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF ABRAHA MAMO GEBREMARIAM) |
Applicant
And
| MULU BERHE |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an application by the Trustee SIMON PATRICK NELSON
(IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF ABRAHA MAMO GEBREMARIAM) (“the Trustee”) in which the Trustee seeks orders pursuant to ss.30 and 58 of the
Bankruptcy Act 1966(Cth) (“the Act”) that the Respondent,
MS MULE BERHE (“the Respondent”) and any other occupant(s) vacate the property located at 6 Grandview Avenue, Point Cook, Victoria 3030 (“the Grandview Property”) in order that the
Grandview Property be sold.[1]
[1] Application filed 7 October 2013 at p.2.
The matter was originally listed for hearing on 21 November 2013. On that date, procedural orders were made for the Respondent to file and serve material in response by 20 December 2013 and the matter was referred for mediation.[2] On 20 December 2013, the date for filing a response was extended to 23 December 2013.[3] The Respondent was initially represented by MR THOMAS EGAN, SOLICITOR
(“Mr Egan”) who filed an affidavit on behalf of the Respondent on
23 December 2013.[4] On 7 April 2014, the matter not having resolved in mediation, orders were made for the filing of a counter-claim by
21 April 2014 and the matter was set down for final hearing on
3 July 2014.[5]
[2] Orders of Judge Whelan dated 21 November 2013.
[3] Orders of Judge Whelan dated 20 December 2013.
[4] Affidavit of Mulu Atsbaha Berhe filed 23 December 2013.
[5] Orders of Judge Whelan dated 7 April 2014.
On 25 June 2014, no counter-claim having at that time been lodged, new solicitors acting for the Respondent,
BLEYER LAWYERS PTY LTD (“Bleyer Lawyers”), filed an Application in a Case[6] seeking an extension of time to file a
counter-claim until 28 July 2014. That application was heard on
30 June 2014. The Respondent was given until 14 July 2014 to serve a counter-claim and further affidavit material and the hearing was adjourned until 21 August 2014.[7] A counter-claim and affidavit of the Respondent was lodged by Bleyer Lawyers in accordance with the orders made, following which Bleyer Lawyers gave notice that they no longer acted for the Respondent.[8]
[6] Application in a Case filed 25 June 2014.
[7] Orders of Judge Whelan dated 30 June 2014.
[8] Notice of Withdrawal as Lawyer filed by Bleyer Lawyers Pty Ltd on 23 July 2014.
At the hearing on 21 August 2014, a third firm of solicitors,
STARNET LEGAL PTY LTD filed a Notice of Address for Service and sought an adjournment of the proceedings in order to file a new counter-claim. The application for adjournment was refused and the Respondent appeared on her own behalf.
The Respondent told the Court that she revoked both the affidavit filed on her behalf on 23 December 2013 and the one filed on 14 July 2014 and that she no longer pressed the counter-claim lodged on
14 July 2014. In an affidavit filed by the Respondent on
21 August 2014, she claimed that “the property at 6 Grandview Avenue, Point Cook belongs to me and that my former husband did not have an interest in the property other than being the registered proprietor on title”.[9]
[9] Affidavit of Mule Berhe filed in Court on 21 August 2014, p.2 at para.3.
The Respondent’s former husband was MR ABRAHA MAMO GEBREMARIAM (“the Bankrupt”). He became bankrupt pursuant to a Sequestration Order made on 21 August 2008. On 25 August 2008, the Respondent lodged a caveat against the title to the Grandview Property claiming an interest pursuant to a constructive trust arising out of contributions made by her to the purchase of the property. The Bankrupt died on 29 November 2009 without the bankruptcy having been discharged.
The Trustee in these proceedings was appointed on 7 January 2013. On 27 August 2013, the Trustee was registered in place of the Bankrupt as the sole proprietor of the property located at 6 Grandview Avenue, Point Cook. On 14 May 2013, the Trustee caused a letter to be sent to the Respondent enclosing a “Notice by Trustee to Bankrupt’s Spouse” requesting the Respondent and any other occupants of the Grandview Property to vacate within 30 days.[10]
[10] Affidavit of Simon Patrick Nelson filed 7 October 2013 at Attachment “SPN-3”.
Background
The Respondent and the Bankrupt entered into a contract of engagement on 23 January 2002.[11] On 10 May 2003, the Bankrupt entered into a contract to purchase the Grandview Property as sole proprietor.[12] The Respondent claims that she paid the deposit for the purchase but no documentary evidence has been produced to support this. On 21 May 2003, the Respondent signed a contract to purchase a property at 111 The Strand, Point Cook (“the Strand Property”) with the Respondent as sole purchaser. The Respondent states that she paid the deposit of $12,700.00 for this property. On 3 September 2003, the Respondent was registered on the title as sole owner of the Strand Property and on 17 November 2003, the Bankrupt was registered as the sole owner of the Grandview Property.
[11] Affidavit of Mulu Atsbaha Berhe filed 23 December 2013 at “MAB-1”.
[12] Ibid at “MAB-3”.
The bank records for the loan account with respect to the
Strand Property show that the only payments made into that loan account, apart from an initial cash deposit of $6,689.00 were direct deposits made by the Bankrupt’s employer from his wages.[13] On
20 March 2004 the Strand Property was sold. The balance after payment of the loan, some $31,000.00, was paid into the mortgage account for the Grandview Property. From March 2004, the bank records show that the direct deposits from the Bankrupt’s salary were paid in the Grandview Property mortgage account. In addition to these deposits, there were varying amounts paid by cash.[14]
[13] Affidavit of Simon Patrick Nelson filed 3 April 2014 at Annexure “SPN-13”
[14] Ibid at Annexures “SPN-9” and “SPN-13”.
A document was produced by the Respondent which has two columns headed “Mulu’s contributions” and “Abraha’s contributions”.[15] The document contains dates from “02/12/2003” to “20/8/2008”.[16] The column headed ‘Mulu’s contributions’ comes to a total of $63,710.00 and the column ‘Abraha’s contributions’ comes to a total of $89,875.30.[17] The Respondent, in her oral evidence, resiled from this document stating that all cash payments into the mortgage were made by her. The Trustee produced a document which traced all of the cash payments made into the mortgage accounts by comparison with the cash withdrawals from the Respondent’s bank account and the Bankrupt’s bank account.[18] Between 2 December 2003 and
28 October 2009, payments totalling $241,180.00 were made into the loan accounts. During the same period, the Bankrupt withdrew in cash from his account $263,155.00 and the Respondent withdrew $197,360.00.[19]
[15] Affidavit of Mulu Atsbaha Berhe filed 23 December 2013 at Annexure “MAB-11”.
[16] Ibid.
[17] Ibid at p.7.
[18] Affidavit of Simon Patrick Nelson filed 3 April 2014 at Annexure “SPN-17”.
[19] Ibid.
The Respondent made two draw-downs from the mortgage of $50,000.00 and $15,000.00. She stated that the first was to sponsor her family with their visa applications, and the second, was to pay for a holiday to Ethiopia in March 2008.
It is not contested that the Respondent has made all mortgage payments since the death of the Bankrupt.
In her oral evidence, the Respondent claimed that she paid for the house and that every year she paid a maximum of $20,000.00 in cash payments while her husband was alive. Over 17 years she worked two jobs and that, apart from the payments made by his employer, the Bankrupt made no cash contributions to the mortgage. She identified a payment of $12,000.00 made by the Bankrupt in November 2004 as the First Home Owner’s Grant received by the Bankrupt from the government.
The Respondent stated that she and her husband commenced living in the Grandview Property in August 2005. She always considered the house to be his and hers jointly. The whole time they lived together there, up until his death, she considered the house to be jointly owned by them.
The Respondent claimed that she never knew of the bankruptcy and only became aware of the Trustee’s interest when she received the letter from the Trustee in May 2013.
Consideration
The Trustee agreed that there was evidence to support the contention that both the Bankrupt and the Respondent had made contributions to the payment for the Grandview Property. If the Court was to accept the document representing those contributions,[20] there is probably evidence to support a finding that the Bankrupt and the Respondent made equal contributions to the purchase prior to the death of the Bankrupt. The evidence does not support a finding that the Respondent made all payments in cash and the bank statements also show the amounts that were paid directly by the Bankrupt’s employer.
[20] Affidavit of Mulu Atsbaha Berhe filed 23 December 2013 at Annexure “MAB-11”.
The Trustee submitted that there was no resulting trust. This was pleaded in the counter-claim abandoned by the Respondent[21] and appeared to rely on the marriage contract. The contract[22] was entered into in Ethiopia. The only relevant part of the contract would appear to be “The properties that the parties hereto may secure as of January 23, 2002 shall be common to both”.[23]
[21] Counter Claim filed on 14 July 2014.
[22] Affidavit of Mulu Atsbaha Berhe filed 23 December 2013 at Annexure “MAB-2”.
[23] Affidavit of Mulu Atsbaha Berhe filed 23 December 2013, Annexure “MAB-2” at p.2.
The document is a translation of the original contract. It only refers to properties as of “January 23, 2002”[24] and it is questionable that it would have any enforceability under Australian law. There is nothing in the material before the Court to suggest that the Bankrupt held the property subject to a resulting trust in favour of the Respondent.
[24] Ibid.
The issue therefore is whether the Bankrupt held the property on trust for both himself and the Respondent. The sole legal owner of the properly was the Bankrupt and it therefore, by virtue of s.58 of the Act, vested in the Trustee upon the making of the sequestration order. There is no dispute that the Respondent made some contribution to the purchase of the property which would give rise to a constructive trust.
The Court was faced with the difficulty in this matter that:
·The Bankrupt was deceased;
·The evidence concerning contributions was difficult to assess given the preponderance of payments being made in cash; and
·The fact that, the Respondent abandoned the affidavits made by her in December 2013 and July 2014 at the hearing.
The parties operated separate bank accounts and while it is possible to align some of the Respondent’s cash withdrawals with cash deposits into the mortgage account, it is also possible to align some cash withdrawals from the Bankrupt’s account with such cash payments.
As Williams JA noted in Hardman v Hobman [2003] QCA 467 at paragraph 3:
Parties to a de facto relationship (indeed as with parties to a lawful marriage) usually do not conduct their financial affairs on the basis that one day, following a parting of the ways, each would be in a position to give accurate evidence as to the financial contribution made by each to the relationship, in particular to the acquisition of property, and as to the value of that contribution when the relationship ended. For that reason courts called upon to adjudicate on issues such as raised by this appeal will, of necessity, have to adopt a broad brush approach. The trial judge cannot ignore positive evidence in order to achieve what is perceived to be a just outcome, but more often than not the sparsity of evidence will call for the application of what has often been referred to as “palm tree justice”. Even then there are constraints on what a court can do.[25]
[25] [2003] QCA 467, p.2 at para.3.
On the basis that the Respondent is entitled to the benefit of the constructive trust, it becomes necessary to determine the terms of that trust. It was clearly the view of the Respondent that she and the Bankrupt held the property as joint owners. There is evidence to support the fact that they used their respective earnings to purchase the property and enjoy its use. I am satisfied that the evidence is enough to support an equality of beneficial ownership. As was stated in the joint judgment of Mason CJ, Wilson and Deane JJ in Baumgartner v Baumgartner (1987) 164 CLR 137 at pages 149-150:
Equity favours equality and, in circumstances where the parties have lived together for years and have pooled their resources and their efforts to create a joint home, there is much to be said for the view that they should share the beneficial ownership equally as tenants in common, subject to adjustment to avoid any injustice which would result if account were not taken of the disparity between the worth of their individual contributions either financially or in kind.
The joint judgment went on to say:
The court should, where possible, strive to give effect to the notion of practical equality, rather than pursue complicated factual inquiries which will result in relatively insignificant differences in contributions and consequential beneficial interest.[26]
[26] (1987) 164 CLR 137 at p.150.
The evidence in this case is such that I am unable to ascertain if there was any disparity between the worth of the individual contributions made by the Bankrupt and the Respondent. In all the circumstances I consider it to be consistent with the general principles referred to above to find that the constructive trust created a beneficial ownership in the Respondent as to 50% of the tenancy-in-common.
The Trustee conceded that the Respondent should be credited for the payments made by her to the mortgage since the death of the Bankrupt. This should be off-set to a certain extent by the fact that the Trustee was excluded from occupancy of the property and therefore, as an owner, had the right to receive rent.
The Trustee submitted that while there may not have been a partition between the Respondent and the Bankrupt, there was as between the Trustee and the Respondent. The Trustee submitted that, based on statistics from the Department of Human Services (“DHS”) for average rental prices in a comparable area, the property could be rented for an amount of $360.00 per week and the Trustee claimed half of that from the time since the bankruptcy.
The Trustee relied on the judgment of the New South Wales Court of Appeal in Forgeard v Shanahan (1994) 35 NSWLR 206 in support of that contention. In that case, the parties had purchased a home together in which they were registered as joint tenants. Following a separation, Ms Shanahan continued to live in the property and paid all mortgage payments and other outgoings. Mr Forgeard commenced proceedings for the sale of the property. Orders were made for a sale of the property and division of the proceeds subject to certain payments made by
Ms Shanahan towards the mortgage and other outgoings. On appeal, Mr Forgeard claimed an entitlement to half of the imputed rent to be off-set against the mortgage payments. At pages 221 to 223 of the judgment Meagher JA stated:
The position may, I think, be summarised as follows:
1. Since both joint tenants and tenants in common have joint possession of the land in which they have the estate, it was a settled rule of law that the possession of any one of them was the possession of the other ...
...
8. So much for rents actually received. Turning to the liability of a co-owner in occupation to pay an occupation fee, the position at law is fairly clear. He was not liable unless he excluded his
co-owner, in which case he rendered himself liable in ejectment and for mesne profits, or if he constituted himself a bailiff, in which event he would be liable in an action of account, like any other bailiff ... As far as equity is concerned, an occupation fee will be exacted in at least two circumstances: first, in a partition suit (or related litigation): if there has been an exclusion, the tenant in occupation will be charged with an occupation fee …”.[27][27] Forgeard v Shanahan (1994) 35 NSWLR 206, p.221 at para.F and p.223 at para.G.
The Respondent, in her evidence, claimed that she was unaware of the bankruptcy until she received the “Notice by Trustee to Bankrupt’s Spouse” on 14 May 2013.[28] This would appear to be inconsistent with the fact that she lodged a caveat over the property some four days after the date of bankruptcy.
[28] Affidavit of Simon Patrick Nelson filed 7 October 2013 at Annexure “SPN-3”.
Conclusions
I am satisfied on the basis of the above that the Bankrupt held the property referred to as the Grandview Property on trust for himself and the Respondent in equal shares. As a result of his bankruptcy, the share held by the Bankrupt vested in the Trustee in Bankruptcy. On
7 January 2013, the Applicant in these proceedings became the Trustee in Bankruptcy of the Estate of the Bankrupt. Between February and May 2013, the Trustee corresponded with the Respondent’s then solicitor in an attempt to establish the Respondent’s interest and, if possible, settle the estate.
On 14 May 2013, the Trustee issued the Respondent with a Notice to Vacate.[29] On 27 August 2013, the Trustee was registered in place of the Bankrupt on the title to the property[30] and on 7 October 2013, these proceedings were commenced.
[29] Ibid.
[30] Ibid at Annexure “SPN-2”.
I am further satisfied that the Trustee has established that an order to vacate the property should issue and that the property should be put on the market for sale. On the sale of the property, after payment of the reasonable costs and expenses of the sale and the discharge of the mortgage, the Respondent should be entitled to payment of monies paid by her to reduce the amount owing on the mortgage since the death of the Bankrupt. The proceeds should then be divided between the Trustee and the Respondent in equal shares save that, from her share, the Respondent is to pay to the Trustee 50% of the imputed rent for the property from 14 May 2013 until the Property is vacated.
For the purpose of determining the imputed rent, the Trustee may rely on the Department of Human Services survey figures for median rent prices in a comparable area over the period concerned.
I certify that the preceding thirty-two (32) paragraphs are a true copy of the reasons for judgment of Judge Whelan
Associate:
Date: 29 August 2014
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