Owens v Lofthouse

Case [2007] FCA 1968

FEDERAL COURT OF AUSTRALIA

Owens v Lofthouse [2007] FCA 1968

BANKRUPTCY — appeal from orders of Federal Magistrates Court transferring beneficial title of properties to trustee in bankruptcy — whether appellant beneficial owner of properties

TRUSTS — whether document titled “Declaration of Trust” effective — whether document manifested intention to declare a trust — document ambiguous in its terms — whether parol evidence rule applicable — appellant’s subsequent conduct inconsistent with declaration of trust

PRACTICE AND PROCEDURE — application to adduce “further evidence” pursuant to Federal Court Act 1976 (Cth) s 27 — further evidence relevant to creation of purported “Declaration of Trust” — principles relevant to reception of further evidence — whether evidence could have been led below — whether evidence sufficiently cogent to warrant its reception — whether evidence likely to have produced different result

Bankruptcy Act 1966 (Cth) ss 58 and 116
Federal Court Act 1976 (Cth) s 27
Property Law Act 1958 (Vic) s 53(1)(b)

Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588 cited
B & M Property Enterprises Pty Ltd (in liq) v Pettingill [2001] SASC 75 discussed
Baker v Official Trustee in Bankruptcy, Federal Court of Australia, unreported, 3 August 1995 per Burchett, Ryan and Carr JJ cited
Bank of Australasia v Palmer [1897] AC 540 cited
CDJ v VAJ (1998) 197 CLR 172 cited
Commissioner of Stamp Duties (Queensland) v Jolliffe (1920) 28 CLR 178 applied
Cottrell v Wilcox [2002] FCAFC 53 cited
Djalic v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 139 FCR 292 cited
Hyhonie Holdings Pty Ltd v Leroy [2003] NSWSC 624 followed
Hyhonie Holdings Pty Ltd v Leroy [2004] NSWCA 72 followed
Marchesi v Apostoulou [2006] FCA 1122 cited
Milroy v Lord [1861–1873] All ER Rep 783 discussed
Moore v Minister for Immigration and Citizenship (2007) 161 FCR 236 cited
Murdaca v Accounts Control Management Services Pty Ltd [2007] FCA 577 cited
Orr v Holmes (1948) 76 CLR 632 cited
Re Cozens [1913] 2 Ch 478 referred to
Sobey v Nicol and Davies [2007] FCAFC 136 cited
Starr v Starr [1935] SASR 263 discussed
Walsh Bay Developments Pty Ltd v Federal Commissioner of Taxation (1995) 130 ALR 415 cited
Williams v Grant [2004] FCAFC 178 cited
Williams v Official Trustee in Bankruptcy [2000] FCA 304 cited

SUZANN JANET OWENS v DAVID JAMES LOFTHOUSE (AS TRUSTEE OF THE PROPERTY OF SUZANN JANET OWENS, A BANKRUPT)
VID 847 OF 2007

WEINBERG J
12 DECEMBER 2007
MELBOURNE


IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

VID 847 OF 2007
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN:

SUZANN JANET OWENS
Appellant

AND:

DAVID JAMES LOFTHOUSE (AS TRUSTEE OF THE PROPERTY OF SUZANN JANET OWENS, A BANKRUPT)
Respondent

JUDGE:

WEINBERG J

DATE OF ORDER:

12 DECEMBER 2007

WHERE MADE:

MELBOURNE

THE COURT ORDERS THAT:

1.The appeal be dismissed.

2.The costs of the respondent be paid out of the bankrupt estate of the appellant, such costs to be part…

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Owens v Lofthouse [2007] FCA 1968
Case
[2007] FCA 1968
Decision Date

CaseChat Overview and Summary

The appeal in Owens v Lofthouse involved Suzanne Owens, the appellant, contesting the decision of the Federal Magistrate, McInnis FM, regarding her claim of beneficial ownership of certain properties and her alleged declaration of trust over those properties. The respondent, Mr Lofthouse, sought to enforce a bankruptcy order against the appellant. The dispute centred on whether the appellant had genuinely declared a trust over the properties in question and if she had validly transferred her interest in them to the Richardson Trust.

The legal issues before the court were whether the appellant had indeed executed a declaration of trust on 20 December 2000 and if this declaration was effective in transferring her interest in the properties to the Richardson Trust. The appellant argued that she had created the trust and had intended to transfer her properties into it, but she had not executed the necessary transfers. The respondent contended that the declaration of trust was not valid because the appellant had not completed the transfer process, and her prior statements in affidavits and other documents indicated that she remained the beneficial owner of the properties.

The court examined the evidence and found that the appellant's affidavits and other statements consistently asserted her beneficial ownership of the properties, and she had not executed the transfers necessary to perfect the trust. The court held that the declaration of trust was not effective as the appellant had not completed the transfer process, and her prior statements indicated that she continued to regard herself as the beneficial owner of the properties. Therefore, the court upheld the Federal Magistrate’s decision, rejecting the appellant’s claim.

The court dismissed the appeal and ordered that the costs of the respondent be paid out of the bankrupt estate of the appellant, forming part of the respondent’s costs and expenses as trustee of the bankrupt estate number 1587 of 2005.

Orders

Orders of the court

1. The appeal be dismissed.

2. The costs of the respondent be paid out of the bankrupt estate of the appellant, such costs to be part of the respondent’s costs and expenses as trustee of bankrupt estate number 1587 of 2005.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Aside from filing an affidavit in the proceeding before the Federal Magistrate, Ms Baxter sought to be, and was, excused from further attendance at the hearing. She is not a party to this appeal. THE EVIDENCE AND PROCEEDINGS BELOW Before McInnis FM, Mr Lofthouse relied upon a number of affidavits which had been filed in the earlier bankruptcy proceeding. They included affidavits sworn by Ms Owens on 29 March 2005, 19 May 2005, 27 May 2005, 31 May 2005 and 10 June 2005. The four latter affidavits related to Ms Owens’ application to have the sequestration order, made on 10 May 2005, annulled. It should be noted, however, that ultimately, and for reasons that are not entirely clear, Ms Owens discontinued her annulment application. In the hearing before McInnis FM, Mr Lofthouse swore four affidavits. One was dated 29 September 2006, two were sworn on 30 October 2006 and the last was sworn on 13 March 2007. He also relied upon an affidavit sworn by his partner, Richard Cauchi, on 3 June 2005. In addition, he tendered transcripts of the hearing before the Federal Magistrates Court in the bankruptcy proceeding. In order to understand the findings below, it is necessary to set out in detail some of the appellant’s earlier statements about the properties in question which were before his Honour. In her 29 March 2005 affidavit, Ms Owens asserted, unambiguously, that she was the beneficial owner of the properties. That affidavit made no reference to any alleged trust. In her 19 May 2005 affidavit, which was filed in support of her application to annul the sequestration order, Ms Owens again deposed that she was the beneficial owner of the properties. Importantly, she also stated that she had a drawdown facility from the ANZ Bank which was secured by a mortgage over one of those properties, and that the facility was available to pay her personal creditors. In her 27 May 2005 affidavit, Ms Owens contended that she had real estate assets valued at $2,380,000, and that these assets were “readily available” to make payments to her creditors within a short space of time. She repeated this assertion in her 31 May 2005 affidavit, and added that she had refinanced one of the properties by discharging mortgages to the Commonwealth Bank, and granting a new mortgage to Perpetual Trustees. There is nothing to suggest that she informed Perpetual Trustees of the alleged trust. Finally, in the 10 June 2005 affidavit, Ms Owens deposed to the existence of the Richardson Trust. She also, for the first time in that proceeding, deposed that: “… on 20 December 2000, I executed a document by which I intended to transfer all of my real estate to the family trust.”She stated, however, that she “never got around to executing transfers of the properties to the trust”, and added that she did not believe that this document was effective to transfer any interest in the properties. She explained that this was because she had not provided transfers to the trustee. Mr Cauchi’s 3 June 2005 affidavit exhibited the appellant’s statement of affairs dated 13 May 2005. In that statement of affairs, she said that her income from property was $58,760. In response to the question “Do you own, or are you buying, any land or buildings in Australia or overseas?”, she appended a document detailing valuations of the various properties. She made no reference to any trust. She was asked specifically “Have you transferred any assets to a trust in the last 5 years?”. Her response was “No”.

Decision

Reasons for decision

WEINBERG J

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Established by: WEINBERG J

The appellant’s case can be stated quite simply. She claims that she executed a declaration of trust over the properties on 20 December 2000. The Federal Magistrate rejected that claim on the basis of the evidence before him, and as a matter of law. The appellant submits that he was wrong to do so. THE “DECLARATION OF TRUST” The document upon which the appellant’s case rests is in the following terms:“THIS DECLARATION OF TRUST is made the 20 day of December 2000.PARTIES1. SUZANN MACDOUGALL [Sue Owens] of 78 Wattle Road Hawthorn [TRUSTEE]2. THE RICHARDSON TRUST [BENEFICIARY]3. The Trustee has at all relevant times agreed to act as trustee of this trust on the terms set out.4. The Trustee has agreed to transfer her interest in all property owned by her including the property situated at 78 Wattle Road Hawthorn inclusive of its contents to the Beneficiary.DECLARATION OF TRUST4. The Trustee declares that the Trustee holds the trust estate for the benefit of THE RICHARDSON TRUST and its beneficiaries the children of the Trustee.5. The Trustee must at the request and cost of the beneficiary transfer the trust estate to the Beneficiary or otherwise deal with the trust estate as the Beneficiary directs.SIGNED SEALED AND DELIVERED BY ] [signature of Ms Owens]THE SAID SUZANN MACDOUGALL IN ]THE PRESENCE OF[signature of witness]” The reference to the “Richardson Trust” requires some explanation. Pauline Baxter is a solicitor, and former friend of the appellant. She was the first respondent to the proceeding before the Federal Magistrate. On 12 August 1994 a “Deed of Settlement” was executed. That Deed of Settlement established the Richardson Trust as a discretionary trust and made Ms Baxter trustee. The amount settled was $25. Originally, the appellant’s children and grandchildren were the primary beneficiaries of the Richardson Trust. However, on 18 February 2000 the Deed of Settlement was varied so that the primary beneficiaries named were defined to include the appellant, as well as her children and grandchildren. Aside from filing an affidavit in the proceeding before the Federal Magistrate, Ms Baxter sought to be, and was, excused from further attendance at the hearing. She is not a party to this appeal. THE EVIDENCE AND PROCEEDINGS BELOW Before McInnis FM, Mr Lofthouse relied upon a number of affidavits which had been filed in the earlier bankruptcy proceeding. They included affidavits sworn by Ms Owens on 29 March 2005, 19 May 2005, 27 May 2005, 31 May 2005 and 10 June 2005. The four latter affidavits related to Ms Owens’ application to have the sequestration order, made on 10 May 2005, annulled. It should be noted, however, that ultimately, and for reasons that are not entirely clear, Ms Owens discontinued her annulment application. In the hearing before McInnis FM, Mr Lofthouse swore four affidavits. One was dated 29 September 2006, two were sworn on 30 October 2006 and the last was sworn on 13 March 2007. He also relied upon an affidavit sworn by his partner, Richard Cauchi, on 3 June 2005. In addition, he tendered transcripts of the hearing before the Federal Magistrates Court in the bankruptcy proceeding.