Prentice v Cummins

Case [2003] FCA 1002

FEDERAL COURT OF AUSTRALIA

Prentice v Cummins (No 6) [2003] FCA 1002

PRACTICE AND PROCEDURE – motion to separate causes of action the subject of earlier no case submissions from remaining causes of action – respondents had elected to call no evidence in relation to the causes of action subject to the no case submissions – applicants entitled to cross examine respondent on all issues relevant to proceedings, including the causes of action the subject of no case submissions

BANKRUPTCY – application pursuant to s 121 of the Bankruptcy Act 1966 (Cth) – quantum of Bankrupt’s beneficial interest in matrimonial home registered in joint names – Bankrupt’s wife contributed nearly two-thirds of purchase price - presumption of resulting trust rebutted – common intention to acquire property as joint beneficial owners –Trustees entitled to 50 per cent of net proceeds of sale

BANKRUPTCY – whether Bankrupt was beneficially entitled to share held in his name – company acquired by the Bankrupt’s wife to act as trustee of her family trust – wife paid for share and acquisition costs – presumption of resulting trust applies – Trustees’ claim to share dismissed

Bankruptcy Act 1966 (Cth), ss 120, 121
Evidence Act 1995 (Cth), ss 11, 27, 26(a), 135(a), (b), 144
Family Law Act 1979 (Cth), s 79
Property (Relationships) Act 1984 (NSW), s 8
Family Provision Act 1982 (NSW)

Prentice v Cummins (No 4) [2002] FCA 1215 cited
Prentice v Cummins (No 5) (2002) 51 ATR 400 cited
Brady v Stapleton (1952) 88 CLR 322 cited
Jones v Dunkel (1959) 101 CLR 298 applied
Mayor and Corporation of Berwick-Upon-Tweed v Murray (1850) 19 LJ Ch 281 followed
Morgan v Brydges (1818) 2 Stark 314; 171 ER 657 cited
R v Chin (1985) 157 CLR 671 cited
GPI Leisure Corp Ltd v Herdsman Investments Pty Ltd (No 3) (1990) 20 NSWLR 15 cited
Re Woodfine; Thompson v Woodfine (1878) 47 LJ Ch 832 cited
Calverley v Green (1984) 155 CLR 242 cited
Bryson v Bryant (1992) 29 NSWLR 188 cited
Muschinski v Dodds (1985) 160 CLR 583 cited
Baumgartner v Baumgartner (1987) 164 CLR 137 cited
Brown v Brown (1993) 31 NSWLR 582 cited
Nelson v Nelson (1995) 184 CLR 538 cited
Official Trustee in Bankruptcy v Lopantinsky [2003] FCAFC 109 cited
Pettitt v Pettitt [1970] AC 777 cited
Shephard v Cartwright [1955] AC 431 cited
Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 cited
Doohan v Nelson [1973] 2 NSWLR 320 cited
Vedejs v Public Trustee [1985] VR 569 cited
Cattanach v Melchior (2003) 77 ALJR 1312 cited
Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 cited

JD Heydon, Cross on Evidence (6th Aust ed, 2000)
RM Stonham, The Law of Vendor and Purchaser (1964)

MAXWELL WILLIAM PRENTICE & ANOR (together the Trustees of the property of John Daniel Cummins, a Bankrupt) v MARY ELIZABETH CUMMINS & ORS
N 7481 of 2001

SACKVILLE J
SYDNEY
24 SEPTEMBER 2003


IN THE FEDERAL COURT…

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AGLC
Prentice v Cummins [2003] FCA 1002
Case
[2003] FCA 1002
Decision Date

CaseChat Overview and Summary

The case of Prentice v Cummins involved Trustees seeking to recover assets on behalf of a bankrupt from his former spouse, Mrs Cummins. The legal issues centred on the Trustees' claims to the Bankrupt's beneficial interest in a property, his share in a company, and a loan provided by the Bankrupt to Mrs Cummins. The court had to determine whether the Trustees were entitled to these assets under the Bankruptcy Act, particularly under section 121 which allows for the recovery of property held by a bankrupt within a certain period before bankruptcy.

The court found that the Trustees were entitled to the Bankrupt's beneficial joint interest in the Hunters Hill Property, but not to his share in Hospitality Hire, as the Bankrupt did not hold that share beneficially. Regarding the shares, the Trustees were entitled to the proceeds of sale, except for a specified sum distributed to a trust beneficiary. However, the claim for the loan provided by the Bankrupt to Mrs Cummins failed because she had repaid the debt. The court directed the Trustees to file short minutes of order and any application to amend the pleadings within seven days, and the respondents to file their responses within another seven days. The court also sought submissions on the form of the order, any claims for interest, and the issue of costs.

Orders

Orders of the court

1. The motion filed on 7 March 2003 be dismissed.

2. The applicants file and serve within 7 days:

(a) short minutes of order to give effect to these reasons for judgment;

(b) any application to amend the pleadings to seek additional or alternative relief; and

(c) written submissions in relation to the form of the short minutes, and any claims for interest and costs.

3. The respondents file and serve within a further 7 days, any alternative short minutes of order proposed and any submissions in response to those of the applicants.

Background

Background to the litigation

The Trustees adduced only documentary evidence in support of their claim to be entitled to the Bankrupt’s interest as beneficial joint owner of the Hunters Hill Property. As I have noted, the respondents elected to call no evidence in relation to this claim. It follows that I am obliged to determine the extent of the Bankrupt’s interest at the date of the 1987 transaction by reference to the documentary evidence, without the assistance of evidence from the Bankrupt or Mrs Cummins, the persons who acquired the Hunters Hill Property in 1970. Since the documentary evidence is incomplete, each party resorted to presumptions and inferences to support their respective positions. Before recounting the submissions, I shall first set out the facts that were not in contest.Facts Not in Contest The Bankrupt and Mrs Cummins entered into a contract of sale on 14 April 1970 to purchase the Hunters Hill Property. The contract of sale itself was not in evidence, but a notice to complete issued by the vendor’s solicitors on 10 July 1970 shows that a deposit was paid, although the amount of the deposit is not recorded. Settlement took place on 27 July 1970. The vendor executed a transfer in favour of the Bankrupt and Mrs Cummins as joint tenants. The transfer was expressed to be “in consideration of $31,000 (the receipt whereof is hereby acknowledged) paid to [the vendor] by John Daniel Cummins and Mary Elizabeth Cummins”.On 10 August 1970 the purchasers became registered as joint tenants of the Hunters Hill Property. The purchase of the Hunters Hill Property was financed in part by a loan of $15,000 from the Commonwealth Trading Bank, secured by a mortgage executed by both the Bankrupt and Mrs Cummins as mortgagors. For some reason, the mortgage appears not to have been registered until 1974, although nothing turns on this. It was common ground that the mortgage was to be treated as a joint contribution by the Bankrupt and Mrs Cummins of $15,000 to the purchase price: Calverley v Green (1984) 155 CLR 242, at 257-258, per Mason and Brennan JJ. On 27 July 1970, the date of settlement, the vendor’s solicitors issued a receipt in the following form:J.P. GROGAN & COSolicitors2a Florence Street, HornsbyNo 11134 Phone 47-3642 27th July 1970Received from M. E. Cumminsby cheque the sum of Thirteen thousand & fifty three dollars 27 centsbeing advance re purchase.J.P. Grogan & Co.$13053:27 Stamp Duty per: D. Head. RS0444 Trust Account On 26 August 1987, the Bankrupt entered into a contract with Mrs Cummins to sell to her his interest as joint tenant of the Hunters Hill Property. The price was said to be $205,250, being half the value attributed to the Property by a registered valuer. The contract required the payment of the purchase price on completion. On the same date, the Bankrupt executed a transfer of the Hunters Hill Property in favour of Mrs Cummins as transferee. The transfer was signed by Mr Harris, the solicitor who prepared the documentation, as “solicitor for” the transferee. The transfer included an acknowledgement by the Bankrupt that he had received the consideration of $205,250. It is, however, common ground that Mrs Cummins did not pay the purchase price or any part of it. Nonetheless, she paid the stamp duty on the contract and transfer and the valuer’s fees. The transfer was subsequently registered and Mrs Cummins became registered as proprietor of the fee simple estate in the Hunters Hill Property.The Contributions to the Purchase Price

Evidence

Evidence Before The Court

It should be noted that, in determining the form of any relief that may be appropriate, the parties had agreed prior to the original hearing on a regime for the sale of the remaining 4,000 Shares by Aymcopic and of the Bankrupt’s joint interest in the Hunters Hill Property. The proceeds of sale were held by the respondents’ solicitors on trust pending the outcome of the proceedings. I was informed that the proceeds of sale of the half share in the Hunters Hill Property amounted to $1,077,397. I was not told the amount yielded by the sale of the 4,000 Shares.EVIDENCE At the adjourned hearing, Mr Brereton read three affidavits by Mrs Cummins, an affidavit by Mr Moore, who was Mrs Cummins’ accountant until the early 1980s, and an affidavit by Mr Russell, the respondents’ solicitor. Mrs Cummins and Mr Moore were cross-examined. In view of the respondents’ election to call no evidence on the Trustees’ claims relating to the Hunters Hill Property and the Shares, it was common ground that the respondents’ evidence in chief was admitted only on the causes of action relating to the share in Hospitality Hire and the loan allegedly due by Mrs Cummins to the Bankrupt. (It may be that the evidence in chief adduced by the respondents on the remaining causes of action could have been relied on by the Trustees to the extent that it supported their case on the causes of action subject to the respondents’ election. However, Mr Coles QC, who appeared with Mr Newlinds for the Trustees, did not invite me to take into account any of Mrs Cummins’ evidence in the causes of action relating to the Hunters Hill Property or the Shares.) Mr Moore’s evidence primarily related to the instructions he had received from Mrs Cummins in 1980, when the M Cummins Family Trust was established. There was no significant challenge to the accuracy of his evidence. Not surprisingly, however, Mr Moore’s recollection of events which occurred 23 years ago was somewhat vague and he could add little to such contemporary documentation as was in evidence. Mrs Cummins was not seriously shaken in her cross-examination. While she was imprecise on some matters and perhaps unconsciously understated her contemporary understanding of commercial concepts, I think that she was a truthful witness. I would accept her evidence unless there is a particular reason for thinking that she was mistaken in her recollection of events. I should note that Mrs Cummins gave evidence that she and the Bankrupt separated in February 2002, largely in consequence of the events leading up to her husband’s bankruptcy. This evidence was adduced by the respondents in order to rebut any suggestion that an adverse inference should be drawn against them on the Hospitality Hire issue by reason of their failure to call evidence from the Bankrupt as to whether he held his share in Hospitality Hire on trust for Mrs Cummins. In Prentice v Cummins (No 5), I concluded that the respondents’ no case submissions had to fail even if it was not open to me to draw adverse inferences against them by reason of their failure to adduce evidence from the Bankrupt as to his purpose in making the transfers. However, I held that the absence of the Bankrupt from the witness box enabled me, on the principle of Jones v Dunkel (1959) 101 CLR 298, to accept more readily inferences I would otherwise draw from the evidence. I took that view because I regarded the Bankrupt as within the respondents’ camp. That conclusion, in turn, was founded on an admission in the pleadings that Mrs Cummins had lived with the Bankrupt as his wife since 1964. There was no evidence, at that stage of the proceedings, inconsistent with the admission contained in the pleadings.

Decision

Reasons for decision

SACKVILLE J
Mrs Cummins acknowledged that she had borrowed the sum of $138,546.80 from the Bankrupt in about August 1991, in order to finance the balance of the purchase price of an investment property. She gave uncontradicted evidence, however, that she repaid the money in 1993 and 1994. Mr Coles conceded that if I accepted Mrs Cummins’ evidence on that question, the Trustees’ claim to recover the loan could not succeed. Since I accept Mrs Cummins’ evidence, it follows that the Trustees’ claim to recover the loss of $138,546.80 must fail.CONCLUSION I have reached the following conclusions:(i)The Trustees are entitled to relief under s 121 of the Bankruptcy Act in respect of the Bankrupt’s beneficial joint interest in the Hunters Hill Property.(ii)The Trustees’ claim to the Bankrupt’s share in Hospitality Hire fails, since the Bankrupt did not hold that share beneficially.(iii)The Trustees are entitled to recover, pursuant to s 121 of the Bankruptcy Act, the proceeds of sale of the Shares, other than the sum of $57,144 distributed to a beneficiary of the Cummins Family Trust. (This is subject to the Trustees’ right to make further submissions if I have misunderstood their position in relation to the sum of $57,144.)(iv)The Trustees’ claim to recover the sum of $138,546.80 advanced by the Bankrupt to Mrs Cummins fails, as she has repaid that debt. In the course of argument, I understood Mr Coles to accept that the relief now sought by the Trustees may require some amendment to the pleadings. I further understood Mr Brereton to indicate that the respondents did not object to the amendments foreshadowed (but which were not the subject of an application). In these circumstances I propose to direct the Trustees within seven days to bring in short minutes of order to give effect to these reasons for judgment, and to serve and file within the same period any application to amend the pleadings to seek additional or alternative relief. If the Trustees claim any interest, they should provide at the same time brief written submissions in support of that claim. If I have misunderstood the Trustees’ position in relation to the sum of $57,144, their written submissions should address that issue. The submissions should also address the question of costs. I direct the respondents to file and serve within a further seven days any submissions in relation to the short minutes of order proposed or any submissions made by the Trustees. Depending on the respondents’ response, I shall determine whether the Trustees should be given an opportunity to reply.

Ratio Decidendi

Legal Principle Established

Established by: SACKVILLE J

Full text does not contain this section.