Official Receiver v Huen
[2007] FMCA 304
•16 March 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| OFFICIAL RECEIVER v HUEN | [2007] FMCA 304 |
| BANKRUPTCY – Transfer of property by bankrupt – whether agreement transferring property valid – if valid whether void against Trustee – Cummins principle – traditional matrimonial relationship and joint tenancy – whether Cummins principle a rebuttable presumption – resulting trust – constructive trust – gift in equity – contributions. |
| Bankruptcy Act 1966, (Cth), ss.58,120 Evidence Act 1995, (Cth), ss.55, 56 Real Property Act, 1900 (NSW) |
| Anning v Anning (1907) 4 CLR 1049 Heffey, et al, Principles of Contract Law (Sydney: Law Book Company 2002) |
| Applicant: | OFFICIAL RECEIVER |
| Respondent: | CHRISTINA SUI MEI HUEN |
| File Number: | PEG 43 of 2006 |
| Judgment of: | Lucev FM |
| Hearing date: | 7 December 2006 |
| Date of Last Submission: | 7 December 2006 |
| Delivered at: | Perth |
| Delivered on: | 16 March 2007 |
REPRESENTATION
| Counsel for the Applicant: | Mr A F Carles |
| Solicitors for the Applicant: | Carles Solicitors |
| Counsel for the Respondent: | Ms C H Thompson |
| Solicitors for the Respondent: | Carr & Co |
DECLARATIONS AND ORDERS
The Court orders that:
the Amended Application dated 6 December 2006 stand as the Application in this matter.
there be no order as to costs.
and declares that:
the Agreement signed by Yue Kwong Huen (“the Bankrupt”) and dated 1 September 2003 purporting to agree that the Respondent was the sole beneficial owner of the land comprised in Certificate of Title Volume 1239 Folio 294 and known as 105 Rome Road, Melville, Western Australia (“the Melville Land”):
(a)is invalid at law;
(b)if valid at law, is void against the Applicant as trustee of the bankrupt estate of the Bankrupt under s.120 of the Bankruptcy Act, 1966 (Cth).
the Applicant and the Respondent are the beneficial owners of the Melville Land as tenants in common in proportions:
(a)to be agreed between the Applicant and the Bankrupt having regard to the Court’s Reasons for Judgment and subject to further order of the Court;
(b)failing agreement between the Applicant and the Respondent, as further determined and ordered by the Court;
and further orders that:
the matter be adjourned to a directions hearing at 9.00am on 2 April 2007 for such further directions, orders or declarations as may be required.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
PEG 43 of 2006
| OFFICIAL RECEIVER |
Applicant
And
| CHRISTINA SUI MEI HUEN |
Respondent
REASONS FOR JUDGMENT
The amended application
The Applicant sought, and was granted leave, to amend the application, at the hearing on 7 December 2006 (“Amended Application”).
Relevantly, the Application seeks orders under s.30 of the Bankruptcy Act 1966 (Cth)(“Bankruptcy Act”) as follows:
a)Order 1:
(i)A declaration that the Applicant and the Respondent are the beneficial owners of the land comprised in Certificate of Title Volume 1239 Folio 294 and known as 105 Rome Road, Melville, Western Australia (“the Land”) as tenants in common the proportions 36.55 per cent to the Applicant and 63.45 per cent to the Respondent after the mortgage secured over the property is discharged;
(ii)Further or alternatively, an order or alternatively a declaration that the transaction whereby Yue Kwong Huen (“the Bankrupt”) transferred or purported to transfer his interest in the Land to the Respondent by way of the agreement document dated 1 September 2003 or otherwise is void against the Applicant as trustee of the Bankrupt estate of the Bankrupt pursuant to s.120 of the Bankruptcy Act 1966 (Cth).
b)There follows a series of not unusual proposed orders relating to the sale, and conditions of sale, of the subject land, the disposition of the net proceeds, service and costs.
The facts
The agreed facts
There is a Statement of Agreed Facts (Exhibit 6) as follows:
1. The Applicant is the trustee in Bankruptcy of Yue Kwong Huen (“the Bankrupt”) who became Bankrupt on 22 August 2005.
2. The Respondent Christina Sui Mei Huen is the former wife of the Bankrupt. The Bankrupt and Respondent signed and filed a joint application for divorce on 6 October 2005. The divorce order was made on 30 December 2005 and took effect on 31 January 2006.
3. The Respondent and the Bankrupt are the registered proprietors as joint tenants of the land comprised in the Certificate of Title Volume 1239 Folio 294 and known as 105 Rome Road, Melville, Western Australia (“the Melville property”).
4. The Bankrupt’s interest in the Melville property vested in the Applicant as at the date of Bankruptcy pursuant to Section 58 of the Bankruptcy Act 1966. The Respondent first received advice of the Bankruptcy of the Bankrupt by way of letter from the Applicant posted on 1 September 2005.
5. The Respondent has separated from the Bankrupt and now resides at the Melville property with her three children who are children of her marriage with the Bankrupt.
6. The Melville property is valued at $385,000 and there is currently $190,000 owing under the mortgage which is secured against the Melville property.
7. The Bankrupt and the Respondent were previously the joint registered proprietors of a property at 18 St Claire Gardens, Atwell, Western Australia (“the Atwell property”) which was their previous matrimonial home.
8. The Respondent claims that in the period between February 2002 and May 2003 sums totalling $59,578 were drawn against the mortgage on the Atwell property by or for the benefit of the Bankrupt. The Applicant is prepared to accept that claim if the Respondent files an affidavit annexing the relevant cheque butts and bank statements showing the drawings made.
9. The Atwell property was sold in or about August 2003 and the net proceeds of sale realised after discharging the mortgage and paying selling fees and any outstanding rates and taxes adjustments was approximately $57,000.
10. The Bankrupt and Respondent purchased the Melville property in or about August 2003 for $230,000.
11. A deposit of $5,000 was paid towards the purchase of the Melville property. The source of the deposit was a $5,000 cheque drawn on 2 July 2003 from the Respondent’s Westpac classic bank account.
12. Settlement of the sale of the Atwell property had not yet occurred when settlement of the purchase of the Melville property took place. Accordingly, it was necessary for bridging finance to be obtained from the National Australia Band secured against both properties. As at 12 August 2003 the Respondent and Bankrupt owed a total of $417,570.89 to the National Australia Bank secured against both properties. A deposit of $234,575 was made into the mortgage account on 22 August 2003 from the proceeds of sale of the Atwell property. This reduced the remaining mortgage secured against the Melville property to $185,072.89 as at 22 August 2003.
13. The equity in the Melville property after settlement of the sale of the Atwell property stood at approximately $45,000 being the purchase price of $230,000 less approximately $185,000 owing under the mortgage.
14. The Bankrupt, Respondent and their three children moved into the Melville property on or about 25 August 2003. There had been matrimonial difficulties for some time and the Bankrupt moved out of the Melville property in early September 2003.
15. The Bankrupt signed a document headed “Agreement” dated 1 September 2003 stating “I Yue Kwong Huen agree that 100% of the house (105 Rome Road, Melville, WA 6156) shares belong to Christina Sui Mei Huen”. This document is annexed as D at page 17 of the Respondent’s affidavit sworn 15 June 2006.
16. The extent of the liabilities of the Bankrupt under his Bankruptcy are not known as he has failed to file his statement of affairs with the Official Receiver. The known liabilities of the Bankrupt at this stage are $26,944 owing to BWH Holdings Pty Ltd, $4,285 owing to the petitioning creditor Susilo Suhaili plus his petitioning creditor costs of $3,713, $10,166 owing to the Australian Taxation Office, and the mortgage liability to the National Australia Bank.
17. In the period between approximately September 2003 and January 2004 amounts totalling $29,800 were drawn against the mortgage secured on the Melville property by or for the benefit of the Bankrupt with those amounts being applied primarily to a company operated by the Bankrupt.
18. Mortgage repayments totalling $51,784 have been made in respect of the Melville property up to June 2006. This is comprised of $26,784 paid by the Respondent plus the $25,000 referred to in the next paragraph.
19. The $51,784 paid into the mortgage for the Melville property includes a deposit of $25,000 on 15 October 2003. This came from a personal loan in the names of the Respondent and Bankrupt with the National Australia Bank. The monthly repayments on the personal loan have at all times been and continue to be made with a balance of approximately $14,000 (as at April 2006) still owing under the personal loan. The Respondent claims that all of the personal loan repayments have been made by her parents who live in China. The Applicant will accept this claim if bank records are produced showing the source of the deposits.
20. The Bankrupt and the Applicant have not made any mortgage repayments for the Melville property.
21. Since the Bankrupt moved out of the Melville property in early September 2003 the property has been occupied by the Respondent and her children. The Applicant has not had any use or occupation of the Melville property.
22. The market rental value for the Melville property if it were rented on the open market at arm’s length is $250 per week for the period since the property was purchased being $13,000 per annum and $43,333 in the three and one third years from mid August 2003 to mid December 2006.
23. The Respondent has paid insurance premiums for the Melville property of $410.97, $379.52 and $392.34 for the 2003/2004, 2004/2005 and 2005/2006 years being a total of $1,182.83.
24. The Respondent has paid shire rates to the City of Melville for the Melville property being $693.71, $522.40 and $697.35 for the 2004/2005, 2005/2006 and 2006/2007 years being a total of $1,913.46.
25. The Respondent has paid water rates for the Melville property of $432.85, $421.05 and $433.25 for the 2004/2005, 2005/2006 and 2006/2007 years being a total of $1,287.15.
26. The amounts in the three previous paragraphs total $4,383.44.
27. In November 2004 the Respondent paid $1,357 to purchase air conditioners for the Melville property.
28. The Respondent has spent $1,300 cash to have the air conditioners installed plus further cash amounts totalling $2,950 for various repairs and maintenance to the Melville property in the period from August 2003 to February 2006 making a total of $4,250.
29. On 6 October 2005 the Bankrupt and Respondent signed a Form 11 application for consent orders in the Family Court. The proposed division of property was that the Respondent would receive the entire Melville property. However, this application was rejected by the Family Court and the proposed consent orders were never made.
30. The Bankrupt has not contributed in any way to the living expenses of the Respondent and the children, other than by way of the statutory child support payments (previously $5.00 per week, and now $6.00 per week) since September 2004.
The Court need not accept all that is contained in the Statement of Agreed Facts, particularly where a consideration of other evidence, or the totality of the evidence, requires factual findings contrary to, or requiring some modification of, the agreed facts: Kowalski v Domestic Violence Crisis Service Inc (No.1) [2003] FMCA 99.
Other facts
A number of affidavits were tendered in the proceedings as follows:
a)Renee Faulkner sworn 21 February 2006 (Exhibit 1)(“Faulkner’s Affidavit”);
b)Christina Sui Mei Huen (the Respondent) affirmed:
(i)29 May 2006 (Exhibit 2) (“First Huen Affidavit”);
(ii)15 June 2006 (Exhibit 3) (“Second Huen Affidavit”); and
(iii)13 November 2006 (Exhibit 4)(“Third Huen Affidavit”); and
c)Shuzi Lei sworn 28 November 2006 (Exhibit 5)(“Lei’s Affidavit”).
The Applicant also sought to tender an affidavit of Alan Francois Carles sworn 6 December 2006 (MFI 1) (“Carles’ Affidavit”). The tender was opposed by the Respondent.
The deponents of the above affidavits were not cross examined, and subject to:
a)admissibility in the case of Carles’ Affidavit;
b)consistency with the Statement of Agreed Facts; and
c)determination of any conflicting issues of fact arising from the various affidavits,
the Court accepts the facts deposed to in those affidavits.
8.Section 55 of the Evidence Act1995 (Cth) (“the Evidence Act”) deals with relevant evidence, and provides as follows:
“(1) The evidence that is relevant in a proceeding is evidence that, if it were accepted, could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding.
(2) In particular, evidence is not taken to be irrelevant only because it relates only to:
(a) the credibility of a witness; or
(b) the admissibility of other evidence; or
(c) a failure to adduce evidence.”
If evidence is not relevant, it is not admissible in a proceeding: Evidence Act s.56(2). Relevant evidence is admissible, except as otherwise provided by the Evidence Act: Evidence Act, s.56(1).
It has been said that, “one fact is relevant to another if it bears on the probability that another fact, the one to be proved, does or does not exist”: Roberts, Evidence. Proof and Practice (Sydney: Law Book Company, 1998) p.57. A broad interpretation of relevance is dictated by the words used in s.55(1) of the Evidence Act. It includes evidence which “could … indirectly” affect an assessment of probability, provided that there is a rational connection between the evidence and facts in issue: Odgers, Uniform Evidence Law (7th ed) (Sydney: Law Book Company, 2006) pp 168-170. Whether a rational connection exists requires an objective assessment, having regard to basic human experience: Harrington-Smith on behalf of theWongatha People v State of Western Australia(No.7) [2003] FCA 893 at para.11 per Lindgren J, or “the common course of events” or “common course of human affairs” as it was put respectively by Stephen and Dixon J: see Stephen, Digest to the Law of Evidence (4th ed) (MacMillan & Co: London, 1893) p.2 and Martin v Osborne (1936) 55 CLR 367 at 375 per Dixon J.
The evidence in Carles’ Affidavit relates to:
a)the form of joint proprietorship in relation to the Atwell Property, namely joint tenancy; and
b)the date on which the mortgage was entered into for the Melville Property, and the liability of the Bankrupt and Respondent in relation to that mortgage.
The fact of the joint tenancy of the Atwell Property, and the date and nature of liability under the mortgage in relation to the Melville Property are not otherwise in evidence. They are not inconsistent with facts contained in the Statement of Agreed Facts, but:
a)in the case of joint tenancy of the Atwell Property, specifically defines the nature of the joint proprietorship referred to in the Statement of Agreed Facts; and
b)in relation to the mortgage, establishes the date and nature of liability, which are not otherwise established.
In the Court’s view, Carles’ Affidavit is relevant in that it contains specific evidence, not inconsistent with the Statement of Agreed Facts, which will assist the Court in determining issues concerning joint tenancy and the nature of the relevant transaction. Carles’ Affidavit is admissible.
A matter not raised by the Court at the hearing but which would have given rise to difficulty if there had been any cross examination of Carles, or cross-examination of the Respondent’s witnesses on the basis of the content of Carles’ Affidavit was Carles appearance as Counsel, and as a witness (that is a deponent of an affidavit). Counsel ought not be both Counsel and witness in proceedings: Sheahan & Le Poidevin Industries Pty Ltd v Northern Australian Land and Agency Co. Ltd & Ors (unreported, Supreme Court of South Australia, Perry J, 4 February 1993) at paras.3-8; Pittorino v Meyers & Ors [2001] WASC 245 at paras 7-10 per Bredmeyer M; Richardson v Leonard Cohen & Co [2007] FMCA 78 at footnote19 per Lucev FM; Ipp J “Lawyers Duties to the Court” (1998) 114 LQR 63 at 92.
Relevant facts not agreed but deposed to in the affidavits are set out where necessary in the course of the judgment.
The Applicant’s case
The Applicant says that under s.58 of the Bankruptcy Act the Bankruptcy of the Bankrupt severed the joint tenancy of the Bankrupt and the Respondent and that the Respondent has become a tenant in common with the Bankruptcy Trustee (“the Trustee”): Applicant’s Outline of Submissions, para.6 (“Applicant’s Submissions”), relying on Re Francis: Ex parte Official Trustee Bankruptcy (1988) 19 FCR 149; (1988) 82 ALR 335 (“Francis”).
The Applicant further says that it should be inferred that the Bankrupt and Respondent each had a one-half interest in the Atwell Property and the Melville Property regardless of their respective contributions. By reason of the joint tenancy the Applicant says that “equity should not impose a trust obligation representing differently proportional interests as tenants in common”: Applicant’s Submissions, para.11, see also paras.8-11 citing Trustees of the Property of Cummins (A Bankrupt) v Cummins (2006) 3 ABC (NS) 814 at 832-833 per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ; [2006] HCA 6 at paras.71-72 per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ (“Cummins”).
The Applicant says that the September 2003 agreement: Statement of Agreed Facts, para.15 (“September 2003 Agreement”), is no agreement as there is no consideration provided: Applicant’s submissions, para.14, and that it is not a contemporaneous statement of the parties intentions at the time of acquisition of the Melville Property, it being two months after the acquisition of the Melville Property: Applicant’s Submissions, para.15, relying on Calverly v Green (1984) 155 CLR 242 at 262 per Mason and Brennan JJ (“Calverly”).
Relying on Cummins the Applicant says that “the Bankrupt and Respondent were the beneficial owners of the Melville Property in equal shares at the date of separation”: Applicant’s Submissions para.16. The Applicant further submits (again relying on Cummins) that the Atwell Property was also a joint tenancy, and that the “net proceeds of sale of the Atwell Property … applied to the purchase of the Melville Property should be regarded as a joint financial contribution by the Bankrupt and the Respondent”: Applicant’s Submissions, para.17, and that the Bankrupt and Respondent held the Atwell Property in equal shares “notwithstanding the Bankrupt’s drawings against the Atwell [Property] mortgage”: Applicant’s Submissions, para.20.
The Applicant says that the application of Cummins overrides any equitable doctrine of exoneration: Parsons & Parsons v McBain (2001) 109 FCR 120; [2001] FCA 376, in favour of the wives of bankrupts and that the net proceeds of the Atwell Property sale are not a contribution solely by the Respondent towards the purchase of the Melville Property: Applicant’s Submissions, para.21.
The Applicant also says that the Respondent’s payment of the $5,000 deposit on the Melville Property does not entitle her to a greater equitable interest (again citing Cummins) as it occurred at the time of purchase and prior to separation: Applicant’s Submissions, para.22.
The Applicant denies that the September 2003 Agreement was an agreement, but in any event says that it was not effective in equity to transfer the Bankrupt’s interest in the Melville Property to the Respondent because the Bankrupt did not do everything required to be done to pass title. In particular, there is no evidence of:
a)a signed transfer of land;
b)a signed mortgage discharge authority, or discharge of the mortgage; and
c)no registered transfer of land: Applicant’s Supplementary Outline of Submissions (“Applicant’s Supplementary Submissions”) para.2.
Whilst the Applicant denies the September 2003 Agreement was an agreement, it says that any agreement would be void under s.120 of the Bankruptcy Act as there was no consideration at market value for the transfer. Further, the Applicant says that an “informal matrimonial separation agreement has no commercial value as consideration” under s.120 of the Bankruptcy Act: Applicant’s Supplementary Submissions, paras.3 & 5 citing Official Trustee in Bankruptcy v Lopatinsky (2003) 129 FCR 234 at 250-251 per Whitlam and Jacobson JJ; [2003] FCA FC 109 at paras.103-109 per Whitlam and Jacobson JJ (“Lopatinsky”).
The Applicant also argues the Melville Property would not have been purchased as a joint tenancy if the intention had been for the Respondent to be the sole owner of the Melville Property, on the basis of consideration for the Bankrupt having drawn funds from the Atwell Property mortgage: Applicant’s Supplementary Submissions, para.4.
The Respondent’s case
The Respondent argues that there is a pre-bankruptcy resulting trust or constructive trust or gift in equity, in favour of the Respondent, and that the Trustee takes its share of the Melville Property as a tenant in common, subject to equity: Respondent’s Submissions paras.8-9 & 13, citing Peldan v Anderson (2006) 80 ALJR 1588 at 1597 per Gummow ACJ, Kirby, Hayne, Callinan & Crennan JJ; [2006] HCA 48 at para.48 per Gummow ACJ, Kirby, Hayne, Callinan & Crennan JJ (“Peldan”); Sonenco (No.77) v Silvia (1989) 24 FCR 105; Cummins ABC (NS) at 829 per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ; HCA at para.59 per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ; Re Vandervell’s Trust [No.2] [1974] 1 Ch 269; Re Densham (a Bankrupt) [1975] 2 WLR 1519; [1975] 3 All ER 726.
The Respondent acknowledges that there is a presumption, rebuttable, that spouses holding the matrimonial home, hold it as joint tenants in equal shares, irrespective of each spouses contribution to the purchase price: Respondent’s Submissions, para.10, citing Cummins ABC (NS) at 832 per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ; HCA at paras.70-71 per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ. The Respondent argues that regard should be had to the whole course of subsequent dealings and the circumstances surrounding the September 2003 Agreement, consistent with a lack of rigidity said to be one of equity’s hallmarks: Respondent’s Submissions, paras.10-12; relying on Cummins ABC (NS) at 830 and 831 per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ; HCA at paras.65 and 67 per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ; Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 365 per Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ (“Charles Marshall”); Midland Bank PLC v Cooke [1995] 4 All ER 562 at 574 per Waite J (“Midland Bank”); Baumgartner v Baumgartner (1988) 164 CLR 137 at 156 per Gaudron J (“Baumgartner”); Parianos v Melluish (Trustee)(2003) 1 ABC (NS) 333; [2003] FCA 190 (“Parianos”).
The Respondent also argues that equity recognises a gift to enable assignment of property unprotected at law, giving rise to a trust, in this case, in the Respondent’s favour by reason of the September 2003 Agreement: Respondent’s Submissions, para.14; relying on Milroy v Lord (1862) 4 De GF & J 264; 45 ER 1185; Re Rose; Rose v IRC [1952] Ch 499.
The Respondent also argues that it would be unconscionable for the Trustee to deny her equitable interest, and a constructive trust in the Respondent’s favour ought to be found, without the need to have regard to actual or presumed intentions of the Respondent or the Bankrupt, but having regard to conduct after the acquisition of the Melville Property so as to determine what, in equity and good conscience, should be done: Respondents Supplementary Submissions, paras.1-5, relying on Lopatinsky FCR at 253 per Whitlam & Jacobson JJ; FCA FC at para.130 per Whitlam & Jacobson JJ; Baumgartner at 147 per Deane J; Muschinski v Dodds (1985) 160 CLR 583 at 614 per Deane J (“Muschinski”); Green v Green [1989] 17 NSWLR 343 at 355-356 per Gleeson CJ (“Green”).
The Respondent seeks to rebut the Cummins presumption. It argues as follows:
“In the present case, the respondent is able to rebut the presumption that the respondent and her former husband intended that they hold the property in equal shares. The relevant transaction in this case must include the following:
a)the purchase of the Property on or about 7 August 2003: [Second Huen Affidavit para.9];
b)the sale of the previous property at Atwell on or about 22 August 2003:[Second Huen Affidavit para.9];
c)the moving into the Property by the Respondent, her former husband and the children on or about 25 August 2003: [Second Huen Affidavit para.10];
d)the former husband permanently leaving the Property on or about 1 September 2003: [Second Huen Affidavit paras 12 & 16]; and
e)the former husband signing the agreement to assign his entire interest in the Property to the respondent on 1 September 2003: [Second Huen Affidavit para.12 and Annexure D at page 17].
These Transaction Events are acts and declarations at the time of the purchase or so immediately thereafter as to constitute part of the relevant transaction. The court should find that the relevant transaction constituted all of these Transaction Events.
Further, the subsequent events give weight to the intention of the respondent and her former husband to create a resulting trust, as manifest by the Transaction Events. These relevant events are:
a)the signing of the joint application for divorce: [Second Huen Affidavit para.21];
b)the signing of the application for consent orders which included the transfer of the Property to the respondent: [Second Huen Affidavit paras 22,23 & 24 and Annexure E at pages 18-39];
c)the respondent taking full responsibility for the payment of all expenses associated with the Property since its purchase and her former husband making no contribution to those expenses: [Second Huen Affidavit paras 32-36];
d)the failure of the former husband to inform the respondent of his financial difficulties and in particular of the sequestration orders: [First Huen Affidavit para.5; Second Huen Affidavit para.27];
e)the respondent taking full responsibility for the domestic care of the children and the household, with her former husband making no contributions as homemaker or parent: [Second Huen Affidavit para.37]; and
f)the payment by the respondent’s parents of the respondent’s personal loan as a gift to the respondent : [Lei Affidavit paras 4-10; Third Huen Affidavit paras.11,13 & 14.]”: Respondent Submissions, paras.16-18.
The Respondent also says that sufficient consideration can be found for the September 2003 Transaction in the agreement to repay funds owed by the Bankrupt for the money taken out of the mortgage for the Atwell Property: Respondent’s Submissions para.19(a), referring to Second Huen Affidavit para.13, Third Huen Affidavit paras.3, 4 & 5; and Annexure CSMH 1. at p.5 at Annexure CSMH 2 at pp.6-18.
Consideration of issues
The September 2003 Agreement
No consideration was provided for the September 2003 Agreement. Therefore, there is no contract for the transfer of Melville Property from the Bankrupt to the Respondent, because an “essential element” in the formation of the contract is absent: Heffey, et al, Principles of Contract Law (Sydney: Law Book Company 2002), p.81. An informal matrimonial separation agreement is no consideration and in particular is not consideration for the purposes of s.120 of the Bankruptcy Act: Lopatinsky FCR at 250-251 per Whitlam and Jacobsen JJ; FCA at paras.103-109 per Whitlam and Jacobson JJ. In any event, to the extent that reliance is placed on funds allegedly drawn by the Bankrupt against the Atwell Property mortgage (as to which see paras 83-84 below) as consideration for the Respondent’s alleged interest in the Melville Property, that is past consideration, and of no effect: Roscorla v Thomas (1842) QB 234;114 ER 496.
If there was an agreement, such agreement was void as against the Trustee, either because:
a)no consideration was provided; or
b)if there was consideration provided (contrary to the Court’s finding above), it was not for market value,
and the transfer took place within the five year restriction period: Bankruptcy Act, s.120 (1).
The Cummins principle
33.In Cummins the Court said:
“The present case concerns the traditional matrimonial relationship. Here, the following view expressed in the present edition of Professor Scott’s work respecting beneficial ownership of the matrimonial home should be accepted:
It is often a purely accidental circumstance whether the money or the husband or of the wife is actually used to pay the purchase price to the vendor, where both are contributing by money or labour to the various expenses of the household. It is often a matter of chance whether the family expenses are incurred and discharged or services are rendered in the maintenance of the home before or after the purchase.
To that may be added the statement in the same work:
Where a husband and wife purchase a matrimonial home, each contributing to the purchase price and title is taken in the name of one of them, it may be inferred that it was intended that each of the spouses should have a one half interest in the property, regardless of the amounts contributed by them.
That reasoning applies with added force in the present case where the title was taken in the joint names of the spouses. There is no occasion for equity to fasten upon the registered interest held by the joint tenants a trust obligation representing differently proportionate interests as tenants in common. The subsistence of the matrimonial relationship, as Mason and Brennan JJ emphasised in Calverley v Green, supports the choice of joint tenancy with the prospect of survivorship. That answers one of the two concerns of equity, indicated by Deane J in Corrin v Patton, which founds a presumed intention in favour of tenancy in common. The range of financial considerations and accidental circumstances in the matrimonial relationship referred to by Professor Scott answers the second concern of equity, namely the disproportion between quantum of beneficial ownership and contribution to the acquisition of the matrimonial home.”: Cummins ABC (NS) at 832 per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ; HCA at paras.71-72 per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ.
The principle in Cummins can be summarised thus: in a traditional matrimonial relationship each spouse has a beneficial one half interest in the matrimonial home irrespective of the amounts contributed by them to the purchase price, and where the title is in the joint names of the spouses that principle is reinforced, such that there is no occasion for equity to attach to the registered interest of the joint tenants a trust obligation representing differently proportionate interests as tenants in common.
There is nothing express in the principle in Cummins to indicate that it applies only to resulting trusts and not to constructive trusts. On its face the principle applies to all types of trusts.
Applying that principle to the circumstances of this case means only one result can ensue, that is, that up to the time the joint tenancy was severed by Bankruptcy the Bankrupt and the Respondent each had a one-half share in the Melville Property, both legally and equitably. On Bankruptcy the Bankrupt’s one-half share in the Melville Property transferred to the Trustee as a tenant in common, the Trustee and the Respondent then each having a one half share in the Melville Property as tenants in common: Cummins ABC (NS) at 819 per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ: HCA at para.14 per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ; Francis FCR at 153-154 per Forster, Woodward and Spender JJ; ALR at 339 per Forster, Woodward and Spender JJ.
Cummins – a rebuttable presumption?
The parties in this case (particularly the Respondent) dealt with the principle in Cummins as if it were a rebuttable presumption. The Court is not persuaded that the principle in Cummins is a rebuttable presumption, but lest it be so (and in deference to the careful cases put by both Counsel) the Court will examine the case on that basis. In order to determine whether the assumed presumption has been rebutted it is necessary to look at whether a contrary intention has been manifested. This determination must be based on evidence available at the time of the purchase or so immediately thereafter as to constitute part of the transaction: Charles Marshall at 365 per Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ; referred to in Cummins ABC (NS) at 830 per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ; HCA at para.65 per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ.
Subsequent events may however be considered. In Cummins the High Court observed that:
“Whilst evidence of subsequent statements of intention, not being admissions against interest, are inadmissible, evidence of facts as to subsequent dealings and of surrounding circumstances of the transaction may be received.”: Cummins ABC (NS) at 830 per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ; HCA at para.65 per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ.
The relevant facts in Cummins were as follows. In 1970 the Bankrupt and his wife purchased vacant land at Hunter’s Hill. They were registered as joint proprietors. The Bankrupt’s wife contributed the majority of the purchase price of the land. Subsequently, a dwelling was constructed on the land. A mortgage over the Hunter’s Hill property, executed by the Bankrupt and his wife, secured an advance to them jointly. In August 1987, the Bankrupt transferred to his wife his legal and beneficial interest as joint tenant in a property at Hunter’s Hill. The price stated in the contract and the transfer was one half of the valuation of the property. The transfer included acknowledgment by the Bankrupt that he had received the consideration. However, it was common ground that the purchase price, or part thereof, had not been paid. The Bankrupt’s wife contributed 76.3% of the purchase price of the vacant land in Hunter’s Hill. The funding of the building of the matrimonial home on the Hunter’s Hill land was, most likely, joint borrowings on a mortgage, supplemented by the joint proceeds of sale of another Hunter’s Hill property, which the Bankrupt and his wife held as joint tenants: Cummins ABC (NS) at 818-819 and 833 per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ; HCA at paras.14-18 and 74 per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ.
In Cummins the High Court said:
“The “transaction” to which attention must be directed, in the sense given in Charles Marshall respecting the principles of resulting trusts, is a composite of the purchase of the Hunter’s Hill Property followed by construction of a dwelling house occupied as the matrimonial home for many years preceding the August transaction. The relevant facts bearing upon, and helping to explain, the nature of the joint title taken on registration on 10 August 1970 includes the other elements in that composite. To fix merely upon the unequal proportions in which the purchase of monies were provided for the calculation of the beneficial interests in the improved property which was dealt with subsequently in August 1987 would produce a distorted and artificial result, at odds with practical and economic realities.”: Cummins ABC (NS) at 831 per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ; HCA at para.67 per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ.
41.What then is the transaction which in this case determines whether the registered title to the Melville Property was not at variance with an equitable title, subsequent admissions or conventional assumptions or arrangements apart? (Adopting the form of question posed in Cummins: ABC (NS) at 830 per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ; HCA at para.66 per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ.)
In the Court’s view the transaction consists of:
a)the purchase of the Melville Property, comprising:
(i)an offer to purchase the Melville Property made by the Bankrupt and Respondent jointly: “we had made an offer”: Second Huen Affidavit, para.6;
(ii)the payment of a deposit of $5,000 by the Respondent from Respondent’s bank account on 2 July 2003: Statement of Agreed Facts, para.11;
(iii)settlement of the Melville Property purchased on 7 August 2003: Second Huen Affidavit para.9, resulting in the registration of the title of the Bankrupt and Respondent as joint tenants on 8 August 2003: Faulkner Affidavit para.4 and Annexure B;
(iv)the obtaining of a bridging finance mortgage in the sum of $417,570.89 (as at 12 August 2003) from the National Australia Bank (“NAB Mortgage Account”) secured by a mortgage signed on 1 August 2003 against both the Atwell Property (the sale of which had not yet settled) and the Melville Property, taken out in the names of the Bankrupt and the Respondent, and for which they were both liable: Second Huen Affidavit para.8 and Annexure B; Statement of Agreed Facts, para.12; Carles Affidavit, para.3 and Annexure B; and
(v)a deposit of $234,575 made into the NAB Mortgage Account from the proceeds of the Atwell Property on 22 August 2003, thereby reducing the remaining mortgage secured against the Melville Property to $185,072.89: Statement of Agreed Facts, para.12;
b)the movement into the Melville Property by the Bankrupt, the Respondent and their three children on 25 August 2003: Statement of Agreed Facts, para.14; Second Huen Affidavit, para.10; and
c)the sale of the Atwell Property comprising:
(i)the sale of a property of which the Bankrupt and the Respondent were joint tenants: Carles Affidavit para 2 and Annexure A, and Second Huen Affidavit, para.13 (“we owned the Atwell [P]roperty”);
(ii)the depositing of the proceeds of the Atwell Property sale ($234,575) into the NAB Mortgage Account in the names of the Bankrupt and the Respondent, thereby reducing the remaining mortgage secured against the Melville Property to $185,072.89; see Statement off Agreed Facts, para 12; and
(iii)the settlement of the Atwell Property sale on 22 August 2003: Statement of Agreed Facts, para.12.
Thus the Court finds that the transaction consisted of the events set out at para 42. above, and was complete by 25 August 2003, at the latest.
The Respondent argued that the Bankrupt:
a)leaving the Melville Property in or about early September 2003;
and
b)signing the September 2003Agreement,
constituted part of the Transaction.
The Court does not consider these two matters to be part of the transaction.
The Bankrupt leaving the Melville Property, and thereby leaving the matrimonial home, his wife (the Respondent) and three children, is not, in the Court’s view, connected to the transaction. That it has deeper and different origins is manifest by the Respondent’s own evidence:
“the marriage had been unhappy for sometime because of domestic violence perpetrated against me by the Bankrupt and the arguments we had in relation to the spending habits of the Bankrupt and of the lifestyle that he wanted, which did not fit in with a wife and 3 children.”: Second Huen Affidavit, para.11.
The domestic violence and arguments over spending habits and lifestyle, whilst obviously not incidents of a happy and stable marriage, are sadly, not necessarily abnormal incidents of modern marriages. And, despite the fact that the “marriage had been unhappy for sometime”: Second Huen Affidavit para.11, that did not prevent the Bankrupt and the Respondent, from a date on or about 2 July 2003 through to 25 August 2003:
a)selling the Atwell Property and purchasing the Melville Property as matrimonial homes as joint tenants;
b)having a mortgage in joint names to fund the sale and purchase of the matrimonial homes;
c)moving themselves and their children from one jointly tenanted matrimonial home to another jointly tenanted matrimonial home.
And, further, as Counsel for the Respondent submitted:
“the marriage was unhappy, there was domestic violence, there was spending problems. One cannot really view the fact that he moves into the house and then moves out a week later as surprising. Indeed, … it would not be uncommon in my submission for that sort of event to take place, moving houses is stressful and it may have well been the straw that broke the camel’s back.”: Transcript, p.22.
A breakdown in the marital relationship and domestic stress arising from moving does not correlate with a manifest intention to alter equitable interests in the title to the matrimonial home, or at least is not sufficient to rebut any presumption arising from the Cummins principle. This is particularly so where there have been recent significant dealings on a joint basis. Alternatively, it may just be that in the 3 to 4 weeks after the Melville Property settled on 7 August 2003, or even just in the one week after the Bankrupt, the Respondent and their three children moved into the Melville Property on 25 August 2003, that an already stressed and unhappy marital relationship worsened to such a degree that cohabitation became unbearable. Again that does not necessarily correlate with a manifest intention to alter equitable interests in the title to the matrimonial home and is not sufficient to rebut any presumption arising from the Cummins principle.
The Respondent’s evidence in relation to the September 2003 Agreement is as follows:
“The Bankrupt moved out of the Melville Property in early September 2003. He prepared and signed an “Agreement” at this time declaring that he did not have any entitlement to the Melville Property and that I owned it 100%.”: Second Huen Affidavit, para.12.
The Respondent then says:
“The reason the Bankrupt did this was because of substantial funds taken by him, both from the mortgage when we owned the Atwell Property and then the Melville Property. These were allegedly for his business “Ahuens Pty Ltd”. He then took further funds after separation, and said to me words to the effect that this meant that I now owned all of the Melville Property.”: Second Huen Affidavit, para.13.
The September 2003 Agreement provides as follows:
“Agreement
I Yue-Kwong Huen agree that 100% of the house (105 Rome Road Melville, WA 6156) shares belong to Christina Sui Mei Huen.”
The document is then signed by the Bankrupt and bears the date 1 September 2003: Second Huen Affidavit, Annexure D; Statement of Agreed Facts, para.15.
The Court did not have the benefit of cross-examination of the:
a)Bankrupt, whose whereabouts are seemingly unknown: Transcript, p.25; and
b)Respondent, in relation to her evidence set out above at paras 50-51,
on a document that is:
(i) not independently witnessed
(ii) is not mentioned in any relevant document prior to the affirming of the Second Huen Affidavit on 15 June 2006.
The Court must accept the evidence of the existence of the September 2003 Agreement, but its true meaning and effect must be subject to consideration of its content in the context of other available evidence.
The September 2003 Agreement does not indicate that the transfer is in consideration of any agreement or arrangement with, or concession or forbearance from, the Respondent. In particular, it does not say it is (nor even indirectly or obliquely refer to it being) as a result of the Bankrupt’s drawings against the mortgages of the Atwell Property and the Melville Property.
The Respondent’s evidence contained an otherwise unsupported assertion about “[t]he reason the Bankrupt” signed the September 2003 Agreement : Second Huen Affidavit, para.13. There was not even any hearsay evidence of a conversation between the Bankrupt the Respondent to support the assertion. The assertion firstly related to “substantial funds taken by him … allegedly for his business “Ahuens Pty Ltd”: Second Huen Affidavit, para.13. What is meant by “allegedly” is not given any substance in the evidence. Nor is the meaning of “his business” explained. There is no evidence as to corporate structure and holding of “Ahuens Pty Ltd”. The evidence relied on to show money allegedly taken from mortgage funds for the Atwell Property and the Melville Property simply demonstrates that money was drawn from the joint account of the Bankrupt and Respondent, and paid, not to the Bankrupt, but to a company, Aheuns Pty Ltd. The assertion that it was “his [the Bankrupt’s] business”, might mean anything. It might mean a sole director/secretary and shareholder company. Equally it might mean a multi-director, multi-shareholder company, where day to day control is vested in one person such as to give to the outside world the appearance that it is that person’s (his or her) business. Other arrangements can also be envisaged. But in the absence of evidence as to corporate structure and holding, the Court is left with evidence of payment to a company, and not to the Bankrupt, from the Bankrupt and the Respondent’s joint account. Although the Statement of Agreed Facts indicates that such payment “was drawn … by or for the benefit of the Bankrupt”: Statement of Agreed Facts, para.8, and see also para.17; any such benefit must have been indirectly received via the company, and there is no evidence as to what, if any, such benefit was actually received by the Bankrupt.
An examination of the evidence, particularly the evidence of the cheque butts, from the Bankrupt and Respondent’s joint account: Annexure CSMH2, Third Huen Affidavit, does little but reinforce the fact that the payments were made for the benefit of the company, Ahuens Pty Ltd. Payments were made to ASIC, to a stock supplier, for travel and on two occasions annotated as “personal borrow money to company”: Cheques 313, 3 December 2002 and 315, 7 January 2003; and on one occasion as “company ask personal borrow money”: Cheque 316, 10 January 2003. The evidence indicates that the money is being borrowed by the company, not the Bankrupt. Effectively, it would appear that the Bankrupt and the Respondent were joint creditors of the company, Ahuens Pty Ltd.
The substantial funds taken, allegedly being the reason the Bankrupt signed the September 2003 Agreement, were said to be taken “both from the mortgage when we owned the Atwell Property and then the Melville Property”: Second Huen Affidavit, para.13 (emphasis added). There is no doubt that the funds were taken out at the time the Bankrupt and the Respondent owned the Atwell Property. However, there is no evidence in the bank documents tendered that funds were taken between the time of the purchase of the Melville Property on
7 August 2003 and 1 September 2003, the latter being the date of the September 2003 Agreement: Third Huen Affidavit, Annexure CFMH 1-4. Thus, this can never have been a “reason” for the Bankrupt signing the September 2003 Agreement. In this respect, the Respondent’s evidence is plainly wrong (or, at best, inconsistent), on a material issue.
The Second Huen Affidavit was filed by the Respondent’s solicitors, and prepared with their “substantial assistance”: Transcript, p.26, line 45. It distinguishes between the time in which the Bankrupt “moved out” of the Melville Property “in early September 2003”: Statement of Agreed Facts, para.14, Second Huen Affidavit, para.12, and the “separation” of the Bankrupt and the Respondent on 20 February 2004: Second Huen Affidavit, paras.13 & 17 and Annexure E, Part B, question 11. The evidence discloses an amount paid by the Respondent to the Bankrupt post-separation, namely an amount of $2,500 deposited into the Bankrupt’s business cheque account (for Ahuens Pty Ltd) on 17 May 2004: Third Huen Affidavit, para.10, but these were not “further funds” which the Bankrupt “took … after separation”: Second Huen Affidavit, para.13 (emphasis added), but rather an amount “loaned by me [the Respondent] to the Bankrupt”: Third Huen Affidavit, para.11. The Respondent’s evidence is again plainly wrong (or, at best, inconsistent), on a material issue.
The final phrase of para.13 of the Second Huen Affidavit is perhaps however the most curious. Having said, erroneously, that the Bankrupt “took further funds after separation” (as opposed to the funds being a loan) the Respondent proceeds to say the Bankrupt then “said to me words to the effect that this meant that I now owned all of the Melville Property”: Second Huen Affidavit, para.13 (emphasis added). On the evidence this statement could have only been made on or after 17 May 2004, more than eight months after the September 2003 Agreement. The Respondent’s own evidence casts doubt on the effect of the September 2003 Agreement as it implies that prior to a date on or after 17 May 2004 the Respondent did not own all of the Melville Property. That begs the question how much the Respondent did own at that time – to which the answer otherwise open on the evidence is that she owned a one half share as a joint tenant with the bankrupt, both legally and equitably. Further, such as statement was completely unnecessary if the Melville Property had already been transferred to the Respondent, and the fact that the statement was allegedly made casts significant doubt on the September 2003 Agreement.
Para.13 of the Second Huen Affidavit does not support a rebuttal of any presumption in the Cummins principle, because:
a)it contradicts the September 2003 Agreement; and
b)it is wrong in material respects relied upon by the Respondent.
The September 2003 Agreement is equally consistent with the Bankrupt, in the context of a marriage failure, simply wanting to transfer his interest to ensure that his wife (the Respondent) and his children, have somewhere to live.
It is agreed that in the period between September 2003 and January 2004 amounts totalling $29,800 were withdrawn against the mortgage secured by the Melville Property “by or for the benefit of the Bankrupt with those amounts being applied primarily to a company operated by the Bankrupt”: Statement of Agreed Facts, para.17.
As with the pre-September 2003 payments it appears that these payments were to a company, probably Ahuens Pty Ltd: Third Huen Affidavit, para.7. A payment (of $700) was also made during this period “for the Bankrupt’s travel”: Third Huen Affidavit, para.8. It is not apparent from the evidence, or from the Statement of Agreed Facts, as to whether that sum of $700 is part of the $29,800.
In circumstances where these payments have again been made to a company, albeit one with a seemingly close business relationship with the Bankrupt, the payment cannot properly be said to have been made to the Bankrupt. There is nothing in the evidence to suggest that these payments were made as a consequence of any agreement or arrangement with, or concession or forbearance from, the Respondent. And, again, although the Statement of Agreed Facts indicates that such payment was drawn by or for the benefit of the Bankrupt: Statement of Agreed Facts, paras.8 and 17, any such benefit must have been indirectly received via the company, and there is no evidence as to what, if any, such benefit was actually received by the Bankrupt.
The Respondent’s evidence also leaves open the inference that payments to the Bankrupt by the Respondent from September 2003 to January 2004 may have been made for the purpose of, or at least partly for the purpose of, an attempt “to repair my [the Respondent’s] relationship with the Bankrupt”, which is what the Respondent says she “unsuccessfully attempted” to do “between September 2003 and January 2004”: Second Huen Affidavit, p.16.
There is nothing in the events of September 2003 to January 2004, either directly or inferentially, to indicate that the Bankrupt received the monies concerned as part of any trust arrangement.
On 20 February 2004 the Bankrupt and Respondent separated. The Respondent deposes that:
“At that time, I attempted to settle property matters, in particular in relation to the Melville Property, with Bankrupt. I attended at the Family Court to seek information about property settlement.”: Second Huen Affidavit, para.18.
Given that the only property which appears to have been jointly owned by the Bankrupt and Respondent was the Melville Property, there would be no necessity to attempt “in particular” to settle property matters concerning the Melville Property if the September 2003 Agreement was operative. Strangely, no mention is made of the September 2003 Agreement in connection with the events of February 2004, and there is no evidence that the “Staff member at the Family Court”: Second Huen Affidavit, para.16, with whom the matter was discussed was ever apprised of the September 2003 Agreement.
If anything, the evidence of the Respondent’s activities between September 2003 and January 2004 supports the Cummins principle, rather than rebutting any alleged presumption which might arise from that principle, and does not support an argument that the September 2003 Agreement dealt with the settlement, or disposition of, the Bankrupt’s interest in the Melville Property.
A joint application for divorce was made by the Bankrupt and the Respondent on 6 October 2005, including a Form 11 – Application for Consent Orders (“Form 11”): Second Huen Affidavit, Annexure E, in the Family Court. The proposed division of property was that the Respondent would receive the entire Melville Property. The application was rejected by the Family Court and the proposed consent orders were never made: Statement of Agreed Facts, para.29. This application came more than two years after the September 2003 Agreement. The Respondent relies upon the divorce application and application for consent orders as a subsequent event giving weight to the alleged intention of the Bankrupt and the Respondent to create a resulting trust: Respondents Submission, paras 18(a) and (b). In the Court’s view these applications do not assist with determining whether there was a resulting trust because they are so removed in time as to not be part of the Melville Property purchase transaction, or relevant to it. In the Court’s view a mere application for divorce orders, including the consent orders here sought, can not be part of a transaction for the purposes of assessing the parties interests in the Melville Property, especially so long after the transaction was complete (that is by
25 August 2003). In view of the time lapse it cannot be a subsequent event suggesting an earlier intention to create a resulting trust.
An examination of the application for consent orders in the Family Court also reveals further reasons why the September 2003 Agreement is not, or ought not be regarded as, part of the transaction, and cannot be relied upon to rebut any presumption arising out of the Cummins principle.
The Form 11: Second Huen Affidavit, Annexure E, is signed by both the Bankrupt and Respondent. Their signatures appear at Parts K and I respectively as the affidavit of the respondent and applicant as part of the Form 11. The affidavit signed by both the Bankrupt and Respondent as part of the Form 11 contains a provision that:
“The matters stated in this application that are within my personal knowledge are true and all other facts are true to the best of my knowledge, information and belief and the orders sought are supported by evidence.”
Both the Bankrupt and Respondent acknowledged by marking the appropriate box with an “X” that the above mentioned part of the affidavit “applies”: see Form 11 Parts I and K.
The Bankrupt became bankrupt on 22 August 2005: Statement of Agreed Facts, para.1. In Part E, Question 20 of the Form 11 the question is asked whether:
“Is any party currently bankrupt or currently a debtor in bankruptcy proceedings started by either a creditor’s petition or a debtor’s petition?”
The boxes for the answers “No” and “Yes” have been left blank. The abbreviation of “N/A” (presumably meaning “not applicable”) has been written next to the question. The page on which this question appears, as with all of the other pages of the affidavit, is signed by the Bankrupt. The Bankrupt’s response to this question might be characterised in various ways, ranging from a deliberate omission to deliberately misleading or simply false.
Part G of the Form 11 deals with property orders. Question 31 is prefaced by the following words:
“How to list shared property
If you own any property jointly with the other party to this application or any other person, then show the market value of your individual share in that property.”
At Question 31, the Bankrupt and the Respondent each respond to say that they have a 50% share in the Melville Property. At Question 40, the outstanding mortgage amount is said to be shared between them in an equal amount $98,000.
The proposed division of property is deal with at Question 56 of Form 11. At Question 56, the proposed percentage division of the property is set out as being 100% to the Respondent and 0% to the Bankrupt. The Bankrupt agreed with that proposed division. In response to Question 57, as to whether the financial contributions of the parties were the same the Bankrupt and Respondent agree that they were not and it is said that the Respondent paid for the mortgage, house maintenance fees and all expenses. In relation to Question 59 as to whether the contribution from each of the parties as homemaker and parent are the same, the answer is again no, and it is said that the Respondent cared for the home, the children and paid for the mortgage, maintenance, fees and expenses. No mention is made of the September 2003 Agreement in response to any of the above questions. In an exchange with Counsel for the Respondent the Court queried the responses to Questions 57 and 59, and Counsel indicated that all that was required to be disclosed, and all that was disclosed, was the legal interest in the Melville Property, and that what the consent orders attached to the Form 11 sought was “to effect the agreement that they’d made”: Transcript, p.23. That is very curious given that the September 2003 Agreement is not referred to at all, particularly when Question 60 asks:
“Are there any other relevant matters or facts in relation to the division of the property (eg health, financial resources, income earning ability)”. (emphasis added)
The Respondent’s answer to this question is “No” with which the Bankrupt agreed. Thus, in relation to a question which directly raises “other relevant matters” including “financial resources” there is simply no mention of:
a)the September 2003 Agreement; or
b)the borrowing of funds against the Atwell Property and Melville Property mortgages.
The above facts in relation to the Form 11 do not do anything to support the suggestion that the facts rebut any presumption arising from the Cummins principle. Again, if anything, they support an argument that any presumption is not rebutted, for the September 2003 Agreement and the borrowing of funds against the mortgage are simply not, or not considered important enough, to be considered relevant matters worthy of mention when applying for the consent orders.
The Atwell property
The Atwell Property was purchased by the Bankrupt and Respondent in January 1996 as joint tenants: Carles Affidavit, para 2 and Annexure A. It would appear that they remained as joint tenants until the property was sold on or about 22 August 2003: Second Huen Affidavit paras 5 and 13. There is no evidence of the actual value of the Atwell Property at the time of the 1996 purchase, or of the respective contributions of the Bankrupt and Respondent prior to late 2002. At that time the mortgage over the Atwell Property was about $100,000, but was increased to $180,000 to provide money for the running of the business with which the Bankrupt was associated: Second Huen Affidavit, para 14. The Bankrupt drew $59,578 against the Atwell Property mortgaged in the period from February 2002 to May 2003. When the Atwell Property was sold in August 2003 the total proceeds of $234,575 was paid off the bridging finance mortgage, that sum being inclusive of the net proceeds of $57,000 which was applied against, and, to reduce the Melville Property mortgage: Statement of Agreed Facts, paras 8-12.
There is nothing in these circumstances which indicate anything other than that the Cummins principle should be applied to the Atwell Property. There is nothing in the facts and circumstances that indicate that the joint tenancy of the Atwell Property, together with the proceeds, which were then used to purchase another jointly tenanted matrimonial property, were being held in trust by the Bankrupt, as to his share for the Respondent. The fact that funds taken from the mortgage were used to assist in the running of t he business does not assist the Respondent merely because gain failed to apparently materialise: Re Popescu v Official Trustee in Bankruptcy (1995) 55 FCR 583 at 589-590 per Einfeld J.
Resulting trust
The Court finds that it was not the intention of the parties to enter into or establish a resulting trust at or about the time of the purchase of the Melville Property. There is nothing in the facts analysed above which displaces the Cummins principle, or rebuts any presumption arising out of it.
Constructive trust
Once again, the Cummins principle precludes a constructive trust being found in this matter, at least up until the time of the Bankrupt leaving the Melville Property on 1 September 2003. In the period between September 2003 and final separation on 20 February 2004 the Bankrupt did not live at the Melville Property but did visit his children, and the Respondent made payments to the Bankrupt, not to affect the respective beneficial interest in the Melville Property, but rather, it appears, in an endeavour, ultimately unsuccessful, to repair the matrimonial relationship with the Bankrupt: Second Huen Affidavit, para 16. Furthermore, the lack of any reference in the Form 11 consent orders application in the Family Court to the September 2003 Agreement, and to other factors now raised but not raised at that time (for example, the domestic violence and spending habits issues: Second Huen Affidavit, para 11) lead the Court to the view that it would not be equitable or in good conscience to impose a constructive trust.
Muschinski was a case where there was a joint venture between de facto partners in which the male partner sought to assert a legal entitlement without recognising the female partner’s entitlement. The male partner had not fulfilled the conditions on which the joint venture was embarked upon, namely renovation of an existing cottage and payment for a prefabricated house to be erected on the land, which had been purchased by the female partner with her money. By comparison in circumstances where:
a)the Bankrupt and Respondent had been joint tenants of the Melville Property, to which the Cummins principle applies, or in relation to which any presumption was not rebutted;
b)the Bankrupt and Respondent have sought consent orders from the Family Court without disclosing the circumstances now said to give rise to a constructive trust as a matter of equity and good conscience; and
c)where, least on one view of the facts, the circumstances give rise to an inference that all that has occurred is that the Bankrupt has walked away from the matrimonial relationship
it is not appropriate for the Court as a matter of equity or good conscience to impose a constructive trust.
Grene, like Muschinski, is also distinguishable. In Green during the entire period of a relationship a de facto wife had been told that it was the de facto husband’s intention that she should have a proprietary interest in the relevant property, which interest she had been told would be hers over a period of many years. In that case the de facto husband had instructed solicitors to set about transferring title to the property to his de facto wife before his death. In this case:
a)no steps had been taken to transfer the Melville Property in any formal way;
b)there has not been any on-going evincing of an intention on the part of the Bankrupt to transfer the Melville Property to the Respondent: and
c)the joint acts of the parties in relation to the Form 11 consent orders for the Family Court do not indicate any basis on which a constructive trust might be imposed.
Having regard for the foregoing issues, and considering all of the circumstances of this case, the Court has come to the view that it is not a proper case in which to impose a constructive trust.
Gift in equity
For Australia what is required for a gift in equity appears from the High Court decision in Corin v Patton (1990) 169 CLR 540. In that case a sister had, prior to death, signed a transfer and handed it to her solicitor. The transfer was in favour of her brother (as trustee for her). The solicitor was to take all necessary steps to complete the transaction. The sister had however taken no steps to obtain production of the certificate of title from the bank which she held it as mortgagee under an unregistered mortgage. The High Court held that because the sister (the transferor) had not sought, or taken steps to compel, production of the certificate of title she had not done all that was necessary on her part to complete the transfer, therefore, on any view, the transferee had acquired no title to the land in equity. The land in question was subject to the Real Property Act 1900 (NSW).
Similarly, in Cope v Keene (1968) 118 CLR 1 failure to deliver a transfer (even if it was in registrable form) meant that the deceased (in that case a father intending to transfer to daughters) had not done all that was necessary to be done by him in order to complete the gift. The law in this form can trace its Australian genesis to the judgment of Griffith CJ in Anning v Anning (1907) 4 CLR 1049 where the Chief Justice held that a gift of shares in equity would only be complete once a transfer in a form prescribed by the articles of association of a company had been signed by the transferor and the transfer had been delivered, with the share certificates, to the transferee.
This case falls hopelessly short of the requirements for transfer of the property as a gift in equity. There is nothing more than a signed piece of paper (the September 2003 Agreement) in which the Bankrupt purports to agree that “100% belong to” the Respondent. The September 2003 Agreement is not effective to effect a transfer of the Melville Property as a gift in equity to the Respondent.
Contributions by the Respondent
In Calverley at 263 Mason and Brennan JJ said:
“If it is right to regard the payment of the mortgage instalments as having been made by the defendant out of his own funds and on his own account – that is, if he made those payments not intending the plaintiff to ultimately have the benefit of those payments – the defendant may be entitled to contributions from the plaintiff and to an equitable charge to secure the making of her contributions.”
In this matter the Applicant is prepared to accept that as from the date of separation financial contributions made by the Respondent towards the Melville Property were made not intending the either the Bankrupt or the Applicant to benefit from such contributions.
The Court agrees with the submissions put by the Applicant in this respect at paras 24-36 of the Applicant’s Submissions, save for the three matters referred to hereunder.
Firstly, it is not apparent from the Applicant’s Submissions whether the “date of separation” referred to is 1 September 2003 when the Bankrupt left the Melville Property, or 20 February 2004. The Court is not satisfied that contributions made by the Respondent between September 2003 and 20 February 2004 were made not intending the Bankrupt to ultimately have the benefit of those payments. It was at this time that the Respondent said that she was endeavouring to repair the relationship with the Bankrupt. In those circumstances, the Respondents contributions should be measured from 20 February 2004, that is, the date of formal separation.
The second matter is the application of the doctrine of exoneration prescribed in Parsons. In the Court’s view, the application of the Cummins can not co-exist with the doctrine of exoneration. Furthermore, and in any event, the doctrine of exoneration requires an identification of “Who got the money?”: Parsons FCR 128 per Black CJ, Kiefel and Finklestein JJ; FCA at para 23 per Black CJ, Kiefel and Finklestein JJ. In this case, for reasons set out at 57 and 65-66 the Court is not satisfied that the Bankrupt, rather than the company which it appears he may have operated, received the money. Thus, the Court is not satisfied that the doctrine of exoneration applies. The Respondent’s “contribution” in this respect ought not be counted in her favour.
The third matter is the rent for the Melville Property. The Court has difficulty in accepting that the rent remains the same from 2003 to 2006: Statement of Agreed Facts, para 22; Applicant’s Submissions, para 32.
The effect of the three matters referred to above is that the calculations set out at paras 37 and 38 of the Applicant’s Submissions will need to be revised. In view of the Court’s findings, the Court considers that is a matter upon which the parties ought first have discussions with a view to agreement being reached, and only if agreement is not reached, will the Court need to determine the matter.
Declarations
The Court will make declarations that the September 2003 Agreement is invalid, and void against the Trustee under s.120 of the Bankruptcy Act. There will also be a declaration that the Applicant and Respondent are the beneficial owners of the Melville Property as tenants in common in proportions to be agreed having regard to the Reasons for Judgment in this matter, particularly paragraphs 96-99 above, and failing agreement, to be determined by the Court. To facilitate discussions between the parties with a view to agreement on the proportion issue, the matter will be adjourned to 2 April 2007.
Costs
The parties have agreed that there should be no order as to costs.
I certify that the preceding one hundred and one (101) paragraphs are a true copy of the reasons for judgment of Lucev FM
Associate: M Hewitt
Date: 16 March 2007
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