Paul John Cook and Adam Lee Johnston (Joint Trustees of the Bankrupt Estate of Jerome King) v King
[2021] FedCFamC2G 388
Federal Circuit and Family Court of Australia
(DIVISION 2)
Paul John Cook and Adam Lee Johnston (Joint Trustees of the Bankrupt Estate of Jerome King) v King [2021] FedCFamC2G 388
File number(s): BRG 803 of 2019 Judgment of: JUDGE VASTA Date of judgment: 28 July 2022 Catchwords: BANKRUPTCY – beneficial interest – credibility – application of trustees granted Legislation: Bankruptcy Act 1966 (Cth) Cases cited: Browne v Dunn (1893) 6 R. 67 Division: Division 2 General Federal Law Number of paragraphs: 38 Date of last submission/s: 28 July 2022 Date of hearing: 28 July 2022 Place: Brisbane Counsel for the Applicant: Ms Long Solicitor for the Applicant: Bennett & Philp Solicitors Counsel for the Second Respondent: Mr Russell Solicitor for the Second Respondent: James Conomos Lawyers ORDERS
BRG 803 of 2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: PAUL JOHN COOK AND ADAM LEE JOHNSTON (JOINT TRUSTEES OF THE BANKRUPT ESTATE OF JEROME KING)
Applicant
AND: JEROME KING
First Respondent
LARISA IVANOVNA YUSHKOVA
Second Respondent
JEREMY DAVID ALLEN KING
Third Respondent
order made by:
JUDGE VASTA
DATE OF ORDER:
28 JULY 2022
THE COURT DECLARES THAT:
1.Immediately prior to the sequestration order dated 13 July, 2016 being made against the First Respondent:
(a)the name of Jeremy David Allen King, shown as a former registered proprietor of the land described as Lot 801 on Registered Plan 162672 with title reference 15771110 also known as 13 Bairnsdale Court, Helensvale in the State of Queensland (“the property”) was an alias of the First Respondent; and
(b)the First Respondent had a legal and beneficial interest in the property as a joint tenant with the Second Respondent.
2.Upon the making of the sequestration order, Jeremy David Allen King’s interest in the property vested in the Applicant pursuant to s 58 of the Bankruptcy Act 1966 (Cth).
THE COURT ORDERS THAT:
3.The stay of the appointment of statutory trustees pursuant to Order 2 of 26 August 2021 of His Honour Judge Jarrett be lifted.
4.The Applicant, Respondents, Trustees for Sale and the Mortgagee file and serve written submissions as to the form of orders by no later than 4pm on 15 August 2022.
5.The Applicant file and serve written submissions in relation to costs (both on a scale and indemnity basis) by no later than 4pm on 22 August 2022.
6.The Respondents file and serve written submissions in relation to costs (both on a scale and indemnity basis) by no later than 4pm on 29 August 2022.
THE COURT NOTES THAT:
A.Because the Trustees for Sale and Westpac Bank (who may have now exercised their rights and become mortgagees in possession) have not been heard, the Court having given its decision, will allow all parties to make submissions as to the form of orders the Court should make.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
(Ex Tempore)JUDGE VASTA
On 16 September 2019, the trustee of the bankrupt estate of Jerome King filed an application in this Court, seeking orders that the trustee be recognised as having the equitable interest in a property at Helensvale, that the trustee be given vacant possession of the property and that the property be sold and that the proceeds from the sale be divided in certain ways for the trustee to meet their statutory obligations to find and liquidate the estate of the bankrupt.
This Court ordered a sequestration order to issue against the estate of the bankrupt, Jerome King, back in 2016. The trustees identified that the property at Helensvale was a property that had joint title between Jeremy David Allen King and Larisa Ivanovna Yushkova.
This matter proceeded as normal in this jurisdiction, and an order was made by Registrar Belcher on 20 December 2019. That order was that personal service on the First Respondent of the application and supporting affidavits be dispensed with and, instead, that the service could be done by serving to three distinct email addresses, by mailing the documents, by sending text messages and such would constitute service.
On 6 May 2020, which was the next step in the proceeding after Registrar Belcher’s order, there was an interlocutory application filed under the name of Jerome King, though it would seem it was an application under the name of Jeremy David Allen King.
The interim orders sought were that the trustee forward all rents that have been received from the Helensvale property and which is held in a trust account, and for that to be transferred to a Westpac Bank mortgage account relevant to the property; that future rents from the subject property would not be taken by Brett Harrison, the trustee, to enable payment of the Westpac Bank mortgage plus rates and insurance; that the tenants of the subject property, who vacated the premises, be able to return; the tenants of the property vacated the property:
Due to intimidation by the trustee to forward half the rent to the trustee and to write an affidavit against Jerome King, the tenants complied with both requests, then vacated.
The application went on:
The bankrupt is Jerome King as stated in bankruptcy court order, not Jeremy David Allen King, who is the previous registered title holder to the property, now the registered trustee. The premises are now vacant and cannot be let due to bankruptcy memorial on the title and management companies not wishing to be involved. As such, I am seeking orders for the registered trustee to pay the rent for the subject premises until such time as the premises are let or until the illegal bankruptcy memorial is removed from the title (defamation damages have been filed in the Brisbane District Court due to this memorial).
Accompanying that application was a supporting affidavit by Mr King. Mr King, under the name Jeremy David Allen King, said in this affidavit that he was not Jerome King, the person against whom the sequestration order had been made in 2016. He was claiming that because the trustee had made an error in taking over the joint tenancy that was in the name of Jeremy David Allen King, the trustee should be liable for damages because the person, Jerome King, was not Jeremy David Allen King.
In that affidavit, the deponent, Mr Jeremy David Allen King, said this at paragraph 11:
Larisa Yushkova, the half owner of 13 Bairnsdale Court, is overseas and has signed a management agreement with McGrath Real Estate to manage the property. (my underlining)
The last paragraph of that affidavit was that:
Jerome King, as stated in the court judgment and the bankruptcy order, is not Jeremy David Allen King.
What this meant was that the Applicant trustees then were, in effect, forced to prove that Jerome King, the bankrupt, and Jeremy David Allen King were one and the same person.
That matter was litigated before Judge Jarrett as His Honour then was. On 4 February 2021, His Honour ruled that Jerome King and Jeremy David Allen King were, in fact, one and the same person and, therefore, the trustee was correct in doing what they had done in taking over the joint tenancy of the Helensvale property when they did that.
On 21 April 2021, the Second Respondent, Ms Yushkova, filed an affidavit. I should say that there had been an entry of appearance that had been entered for her earlier, though she swore that she did not make this entry of appearance and argued that the orders that His Honour had made regarding the property, certainly against her, should be vacated pursuant to what was then r 16.05(1)(a) because she was not present and she had not been served. His Honour ended up ruling that he could not be satisfied that she had, in fact, been served on the evidence that had been presented by her, as well as the trustee, and so set aside that order.
In that affidavit, the claim was made by her that the property was not, in any way, property that had ever been that of Mr King and, therefore, could not have been taken in the way that the trustee had done. What she said about Mr King was this:
In 2007, I worked for Jeremy, who is also a Respondent in this proceeding. On 12 February 2008, I gave birth to Valentino Yushkova. Jeremy is the biological parent of Valentino, but Jeremy and I have never had a formal relationship. We have never been married to each other, have not lived together for an extended period of time, remain friends, but do not share an intimate relationship. Jeremy and I have never engaged in any formal child support agreement.
Before the birth of Valentino, whilst I was pregnant, we orally made an agreement that:
(a)I would not pursue Jeremy to make a formal child support agreement for Valentino;
(b)in exchange for that, Jeremy agreed to contribute moneys from time to time for Valentino towards the general household expenses; and
(c)Jeremy would also assist in helping me from time to time with any matters when I requested.
In October 2009, I purchased a property in New Zealand.
She rented out that property and used the rent to assist the paying off of the debt. She, in effect, subdivided it and put two properties on that parcel of land. She said she moved to Australia in October 2012 with her son, and, in about 2014, when she was living in Australia, she was speaking to Jeremy and he suggested the subdivision. She said that, in June 2015, she commenced searching for another property in Australia, and she intended to use the equity in the two units at Rotorua to assist her, as well as a loan from the bank to assist with any purchase. She said:
On or about 15 December 2015, I then purchased a property at 13 Bairnsdale Court, Helensvale, for a purchase price of $710,000. I do not have a copy of the contract for purchase. But in order to do this, I obtained a loan in the sum of $530,000 from Westpac banking organisation. I organised the payment of stamp duty under the contract through my lawyers. Apart from the loan from Westpac, I also borrowed money from a bank in New Zealand. I obtained an interest-only loan from Nationwide Investments to assist with the purchase of Helensvale property. The loan was in my name and secured over my properties in Rotorua. I also sought finance from Westpac to assist me to purchase the Helensvale property.
Most importantly, at paragraphs 51 and following, Ms Yushkova said this:
51. At the time of seeking finance from Westpac to purchase the Helensvale property, the representative from Westpac said to me, given my income position, it would assist if another person with an income was on title as an owner, and this would greatly increase my chances of the loan application being approved.
52. I asked the representative from Westpac if I could ask another person could assist me without going on title. The representative from Westpac said to me that they preferred another person to be on title to expedite the loan application process.
53 At this time, I asked Jeremy if he would assist me by putting his name on the title, even though it would be my property. Jeremy agreed.
54. I agreed with Westpac’s request and proceeded to obtain finance for the Helensvale property, with Jeremy to be listed as registered owner with me.
55. I viewed Jeremy’s inclusion on the title as a formality only and not on the basis he had any interest as he was not making any contribution to the purchase of the Helensvale property.
She then spoke about how the settlement occurred. This meant that, for the first time, there had been an allegation that this property was 100 per cent the equitable property of Ms Yushkova and that Mr King had no legal claim to that property and, therefore, the trustee could never have a legal claim to that property.
On 20 May 2021, Ms Yushkova gave a second affidavit. It simply underscored what it is that she had said. The significant parts of that affidavit were that she made comment on the material that the trustee produced in this matter, and I will get to that very soon.
On 23 March 2022, the matter had come before me and I set the matter down for a hearing on whether the trustee had shown that they had an equitable interest in the property. After I had set that matter down, the Second Respondent, Ms Yushkova, filed an application in a proceeding seeking a declaration that the Applicants hold the property in trust for her or, as an alternative, that they hold the property on a constructive trust for her in whole or in such proportion as determined by the Court, and she sought an order vesting the property or her interest in the property as determined by this Court in her. I have, in effect, heard this application at the same time because they are really, in effect, one and the same application.
On 31 May 2021, the First Respondent, Mr King, and the Second Respondent, Ms Yushkova, both filed affidavits.
General credibility looms large in this matter. This is because there is absolutely no corroborating evidence that would allow this Court to accept what it is that Ms Yushkova is submitting to the Court. Because this is an agreement as to land, it needs to be in writing. The agreement was never in writing and so one then has “to look to equity” for a Court to accept that there was an oral agreement by the First and Second Respondents that this property would be 100 per cent the property of the Second Respondent. It is for this reason that the credibility of the two witnesses, that is, Mr King and Ms Yushkova, is paramount.
Without wanting to mince words, they were two of the worst witnesses that I have encountered in my judicial career. If Ms Yushkova told me that it was sunny outside, I would definitely bring my umbrella, such is the lack of credibility of this witness. I had earlier spoken of what it was that she had said in her affidavit, especially at paragraphs 51 and 52. For a Court to accept that this is what happened makes absolutely no sense. A Court would have to be bereft of any common sense to accept those two paragraphs as being fact.
Ms Yushkova wants the Court to accept that a representative from Westpac told her that another person with an income being on the title would increase her chances of the loan being approved. She then claimed that she did not want to do that and asked that representative from Westpac if she could ask another person to assist her without going on the title, and the representative from Westpac said, no, they preferred that other person to be on the title to expedite the loan application process. This is utter rubbish. This flies in the face of ordinary common experience.
It matters not to any loan institution who is on the title. What matters for them as to whether they are on the loan application and that the loan is secured and that those persons who are on the loan application are such that they would make the repayments. So one cannot accept the premise of what it is that the Second Respondent has said. But when one then looks at the loan application itself, immediately one can see that it is totally inconsistent with what Ms Yushkova is trying to tell this Court.
Firstly, if it were that this is the conversation that was had, it is apparent that Ms Yushkova was the primary applicant and whoever it was that she wanted to assist, even if it was to put their name on the title, was going to be the secondary applicant. But instead, the loan application shows that the first applicant, person 1, is Jeremy David King. The second applicant, person 2, is Larisa Yushkova.
Now, Ms Yushkova is making out that even though Mr King was the father of her child, they had no real relationship and that he simply paid money to her for some arrangement. They certainly were not a couple, as it were. Yet the loan application shows that they had exactly the same phone number, they lived at the same address, that Mr King’s income was $3030 a month from a private pension and Ms Yushkova’s income was a $20,000 gross annual income with a wage or salary every month of $1600. But their outgoings, that being that of rent, absolute basic expenses such as groceries, transport, petrol, utilities, rates, clothing, insurance, mobile phone and others, such as holidays, entertainment, etcetera, were combined expenses.
The application showed that the other property that was owned, that is, the real estate, was the house in Rotorua, which was put down as being that of Ms Yushkova solely, and another property in Taumarunui in New Zealand was also Ms Yushkova’s solely. But when it came to their motor vehicles, they were jointly owned. And the personal effects and household items were jointly owned.
The way in which the loan was done was that there was a loan account and there was another Westpac account that was set up so that the applicants could have money put into that account and take it out and make payments from that account into the loan account. That was a joint account. There was also other money that was going into the loan account. That was coming from accounts with the Bendigo Bank. That, too, was a joint account. When one looks at the expenses that have been paid for from this account, it seems clear that the accounts are being used by both Ms Yushkova and Mr King. There are no other bank accounts found in those two names. The pensions and other payments that were paid to Mr King and to Ms Yushkova have gone into joint accounts.
The affidavits that were then given to this Court on 31 May in preparation for this hearing are also quite telling. Mr King says that the Second Respondent purchased the Helensvale property in December 2010 and then says as follows:
11. At the time, Larisa informed me that to secure the loan with Westpac I needed to be a guarantor as her income was not sufficient to support the loan application.
12. I said to Larisa and it was my intention at the time, that I would lend my name to the purchase so that the bank would lend her money to buy the property but I wanted no part of the home or the repayments for the bank.
13. I never intended to have any interest in the Helensvale property.
14. Save for what I say in paragraph 16, I did not pay any money towards the purchase of the Helensvale property as all the money was paid or sourced from money belonging to Larisa.
15. At the time of purchasing the Helensvale property, Larisa informed me that she was still awaiting her personal funds to be transferred from her bank in New Zealand.
16. In accordance with the Agreement outlined in paragraph 7 above, Larisa requested, and I offered to lend $15,000 to Larisa on the basis she would repay the amount back to me as soon as funds became available to her.
17. Larisa and I agreed that I would lend her the sum of $15,000 to cover the costs needed to engage Affinity Lawyers to represent her as the purchaser of the Helensvale property.
18. As a result, I transferred $15,000 from my Altitude Mastercard on the basis that she would repay me within the month.
19. Larisa paid me back the $15,000 as we agreed. This can be observed from page 482 of the affidavit of Brett Richard Geoffrey Harrison sworn 25 October 2021.
20. After the loan was approved, Westpac set up accounts in the name of Larisa and me as registered owners of the Helensvale property but I never used these accounts as they were under the control of Larisa.
21. The purchase was looked after by lawyers paid for by Larisa, although I assisted Larisa whenever requested or required.
As I have said, having a look at those accounts, I do not accept the evidence of Mr King that he never used these accounts because he obviously did use the accounts. It is obvious as well that he has been paying quite a deal of money into the mortgage. He says that all of this can be explained as being the money that he gives Larisa to look after Valentino. He talks about paying for piano lessons, saxophone lessons, Gold Coast Youth Orchestra, Elite Dancing School, drama school, acrobatic lessons, Russian school, chess classes and competitions, school uniforms, athletic competitions and various presents for birthday, Easter and Christmas.
He said that he also received the family tax benefit A and B. If it were that he was not, as it were, living with the child and being the “hands on” father, one would think that there had been a fraud committed upon the Australian people. He claimed privilege when asked why it was that he was still receiving that family tax benefit if it were not that he were living with the mother and child as part of a family unit.
I obviously cannot draw any adverse inference, but I would not anyway because it seems to me very clear on the evidence that he is entitled to receive family tax benefit A and B because he and the mother are very much a family unit, even if they are not under the same roof every night. He is still part of that family because the two of them have entwined their finances together, and the payments that are being made to the home mortgage from that joint account are being made by him and her equally because that was always the intention of the arrangement for them to buy this property.
Mr King attempts to say that, by paying for these things for Valentino, this would have been cheaper than having to pay child support. Child support is assessed by the Child Support Agency. Having regard to the payments that Mr King has been making, I cannot accept his evidence that he entered into this arrangement because it would be cheaper than paying child support.
Mr King could not in any way satisfactorily explain why, if this had been the true circumstances from the start, that he
·firstly attempted to make out that he was not the person in the sequestration order, and
·why it was that it was he who brought an action for the payment of moneys that should have been rent moneys so that that would go into the Westpac mortgage account that obtained to this particular property. That inability was absolutely telling.
Then looking at the affidavit of the Second Respondent that was filed in this matter, the same criticisms that I have made about Mr King’s affidavit I can make about Ms Yushkova. In many respects, her affidavit is a carbon copy of his affidavit, even down to the particular paragraph numbers.
The credibility of the two witnesses is absolutely zero, and I could not accept a word that came out of their mouths.
There has been a submission that the rule in Browne v Dunn (1893) 6 R. 67 had not been observed in that the Counsel for the trustees had not put directly to either Mr King or Ms Yushkova that this tale that was being told now was something that they had contrived to try and defeat the claim of the trustee in bankruptcy; and, it was not put to the two of them that their intention at the time of purchasing the property was that they were to be truly joint tenants.
Given the credibility findings I have made, I am of the view that there was really no need for the rule in Browne v Dunn (Supra) to be observed because the credibility of both witnesses was so appalling. There was no unfairness at all in the failure to put those suggestions to the witnesses.
It seems to me, on the evidence before me, that I can safely conclude that, in December 2015, it was the intention of the two Respondents, that is, Mr King and Ms Yushkova, that they be joint tenants for the property at Helensvale, that they would both contribute, that they would both be receiving the rent from the property and that they would both be responsible for the payment of the mortgage. That is what has happened. That was why there was the application launched by Mr King back in May of 2020.
For these reasons, I accept that the trustee does have the equitable interest. There has been a concession by Ms Long, on behalf of the Applicants, that the equitable interest should be confined to the equitable interest of the loan amount, which was 75 per cent of the purchase price, and so, therefore, the equitable amount that the trustee holds is 37.32 per cent of the property, given certain other adjustments that ought to have been made.
I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Vasta. Dated: 5 October 2022
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