Shaw as trustee of the Bankrupt Estate of Nguyen v Vu
[2019] FCCA 1451
•31 May 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| SHAW AS TRUSTEE OF THE BANKRUPT ESTATE OF NGUYEN v VU & ANOR | [2019] FCCA 1451 |
| Catchwords: BANKRUPTCY – Application by trustee in bankruptcy for a declaration that bankrupt holds a beneficial interest in property under resulting trust – declaration made – application by trustee in bankruptcy for an order under s.66G of the Conveyancing Act 1919 (NSW) as applied by s.79 of the Judiciary Act 1903 (Cth) for the appointment of trustees for sale of the property in which bankrupt as beneficial interest – orders made. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.58, 116, 120, 121A Conveyancing Act 1919 (NSW), ss.66F, 66G Judiciary Act 1903 (Cth), s.79 |
| Cases cited: Calverley v Green (1984) 155 CLR 242 |
| Applicant: | JAMES ALEXANDER SHAW AS TRUSTEE OF THE BANKUPT ESTATE OF VU ANH TUAN NGUYEN |
| First Respondent: | MEN THI VU |
| Second Respondent: | VU ANH TUAN NGUYEN |
| File Number: | SYG 3435 of 2018 |
| Judgment of: | Judge Manousaridis |
| Hearing date: | 27 May 2019 |
| Date of Last Submission: | 27 May 2019 |
| Delivered at: | Sydney |
| Delivered on: | 31 May 2019 |
REPRESENTATION
| Counsel for the Applicant: | Mr J T Johnson |
| Solicitors for the Applicant: | O’Neill Partners Commercial Lawyers |
| Solicitors for the First Respondent: | Mr D Yakenian of Legal Edge Australia |
| No appearance by or on behalf of the second respondent |
DECLARATIONS
Immediately before the sequestration order was made on 26 April 2018 against his estate, the second respondent, Mr Vu Anh Tuan Nguyen (the Bankrupt), held a 61.75% beneficial interest in the property situated at 11 Fitzroy Close, St Johns Park NSW 2176, and identified in folio identifier 193/259935 (Property).
On the making of the sequestration order referred to in paragraph 1, the Bankrupt’s beneficial interest in the Property is vested in the Official Trustee pursuant to s.58 and s.116 of the Bankruptcy Act (Cth) 1966 (Act).
ORDERS
Pursuant to s.66G(1) of the Conveyancing Act 1999 (NSW), as picked up by s.79 of the Judiciary Act 1903 (Cth), the applicant, together with Paul William Gidley of Shaw Gidley, 1/160 Pacific Hwy, Charlestown NSW 2290, be appointed as trustees for sale of the Property (Trustees for Sale).
The Property is vested in the Trustees for Sale subject to any encumbrances affecting the entirety of the Property but free from encumbrances (if any) affecting any undivided share or shares in the Property, to be held by the Trustees for Sale on statutory trust for sale under Division 6 of Part 4 of the Conveyancing Act 1999 (NSW) as applied by s.79 of the Judiciary Act 1903 (Cth).
The Trustees for Sale are empowered to offer the Property for sale and to sell the Property at public auction with power to fix the reserve price or, alternatively, to sell the Property by private treaty at the best available price, including to the first respondent.
To the extent the Bankrupt resides in the Property and is under an existing obligation to pay rent, the Bankrupt continue to pay rent to the Trustees for Sale who will first apply such rent to insurance, rates, and mortgage payments and hold any balance in trust to be distributed in accordance with the further orders of the Court.
After the sale of the Property the Trustees for Sale are empowered to deduct from the proceeds of sale:
(a)commission and other expenses of any real estate agent employed by the Trustees for Sale;
(b)insurance and any other reasonable expenses for the protection and maintenance of the Property;
(c)all necessary adjustments of rates and taxes on settlement of the sale;
(d)any taxes and rates including but not limited to land tax, goods and services tax and any applicable capital gains tax;
(e)the legal expenses of transferring the Property to the purchaser;
(f)the mortgagee’s debts secured over the Property under registered mortgage AK219276J or any other valid mortgage;
(g)the reasonable remuneration and expenses of the Trustees for Sale in relation to the sale of the Property, including valuation expenses and costs; and
(h)an amount that represents a reasonable estimate of the costs to which the applicant is entitled under order 14 of these orders.
The Trustees for Sale pay the balance of the net proceeds of sale of the Property in accordance with the further orders of the Court.
The Trustees for Sale are authorised to obtain a valuation of the Property by employing a registered valuer to assess a fair and reasonable price for the purposes of the performance of their duties as Trustees for Sale.
The Trustees for Sale be reimbursed their costs and be paid remuneration in connection with the discharge of their duties as Trustees for Sale on the basis of their remuneration as bankruptcy trustees, and not to charge more than their remuneration as bankruptcy trustees, such remuneration and expenses to be paid as set out in order 7(g).
The Trustees for Sale have liberty to seek the advice of the Court on any matter arising in connection with their appointment of Trustees for Sale.
The Bankrupt and the first respondent each give vacant possession of the Property 21 days after the date they receive notice of these Orders.
A writ of possession be issued immediately in favour of the Trustees for Sale in relation to the Property, such writ of possession not to be executed until 21 days after the date on which the Bankrupt and the first respondent receive notice of these Orders.
The applicant’s costs of the application be paid on a party and party basis as agreed or as assessed, such costs to be paid out of the proceeds of sale of the Property.
The Trustees for Sale are relieved from any obligation they may have after they have discharged their duties as trustees for sale to apply to the Court for an order permitting them to retire from their position as trustees for sale.
The parties have liberty to apply in relation to the implementation or construction of these orders or in relation to the execution of their office as trustees for sale on such notice as the circumstances warrant.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 3435 of 2018
| JAMES ALEXANDER SHAW AS TRUSTEE OF THE BANKUPT ESTATE OF VU ANH TUAN NGUYEN |
Applicant
And
| MEN THI VU |
First Respondent
| VU ANH TUAN NGUYEN |
Second Respondent
REASONS FOR JUDGMENT
Introduction
Before the Court is an application brought by Mr Shaw (Trustee) as trustee in bankruptcy of the estate of the second respondent (Mr Nguyen) seeking declaratory and other relief in relation to a property situated at St John’s Park in New South Wales (Property) and payments made in relation to the acquisition of the Property. The Trustee claims Mr Nguyen holds a 61.75% interest in the Property even though the certificate of title records Mr Nguyen as being the registered proprietor as tenant in common “in 1/100 share” with his mother, the first respondent (Ms Vu), who is recorded as being the registered proprietor as tenant in common “in 99/100 share”.
The basis of the Trustee’s claim is that Mr Nguyen contributed a total of $540,710.08 towards the purchase price of the Property and the servicing of a mortgage Mr Nguyen and Ms Vu granted to finance the purchase of the Property; these payments gave rise to a resulting trust under which Ms Vu came to hold 61.75% of her legal interest in the Property as trustee for Mr Nguyen; and Mr Nguyen’s interest as a beneficiary under the resulting trust vested in the Official Trustee pursuant to s.58 of the Bankruptcy Act 1966 (Cth) (Act) when a sequestration order was made against Mr Nguyen’s estate on 26 April 2018.[1] In the alternative, the Trustee claims that the amounts totalling $540,710.08 constituted transfers of property from Mr Nguyen to Ms Vu which are void under s.120 of the Act, and that the Trustee is entitled to a charging order over the Property to secure the repayment of the $540,710.08. The principal relief the Trustee seeks is an order under s.66G of the Conveyancing Act 1919 (NSW) (Conveyancing Act) for the appointment of trustees for the sale of the Property.
[1] Mr Shaw replaced the Official Trustee as trustee in bankruptcy on 16 August 2018.
Ms Vu appointed a lawyer, Mr Yakenian, to represent her in the proceeding. Ms Vu, however, filed no material in answer to the Trustee’s claims; and at the hearing Mr Yakenian informed me that Ms Vu accepted that Mr Nguyen held a 61.75% interest in the Property, and that she did not otherwise intend to participate in the hearing. After he informed me of these matters, Mr Yakenian was excused from further participating in the hearing. Mr Nguyen, however, did not participate or appear at the hearing. That is so even though he has been served with the proceeding and has been given notice of the hearing.[2] Counsel for the Trustee, however, submitted that even though Ms Vu does not oppose the Trustee’s application, as a matter of prudence, if not necessity, the Trustee should prove his entitlement to the orders which he seeks. Counsel then tendered evidence and made submissions in support of the orders the Trustee seeks in the application.
[2] See affidavit of service of J R Kelly made on 18 December 2018; affidavit J Mounter made on 8 May 2019
In these reasons for judgment, therefore, I set out the relevant facts, and consider whether the Trustee is entitled to the orders he seeks.
Background
The starting point is 16 August 2014. On that day Mr Nguyen signed a contract to purchase the Property. I infer that he did so as the sole purchaser.[3] That inference is based on three matters. First, there is a letter dated 18 August 2014 from Century 21 to “Selective Lawyers” attaching a sales advice issued by it.[4] The letter is headed “Nguyen Purchase From . . .”. In the sales advice, under the heading “Purchasers Details”, there is printed “Mr Anh Tuan Nguyen”, after which there is handwritten the name of Ms Vu. Second, there is in evidence two file notes prepared by the lawyer who acted on the purchase of the Property which records the following:[5]
[3] Exhibit A, page 57
[4] Exhibit A, pages 48-49
[5] J A Shaw affidavit 29.11.2018, annexure “K”, page 76
19/8/14
Fees: $950.00
Deposit: $200 .00 19/8/14
Balance: $750.00
T.A o/c -
- Vu Anh Tuan Nguyen as to 1%
- Men Thi Vu as to 99%
as tenants in common
T.A. Andrew
o/s agrees to amend their contract for the share of the purchaser
Third, there is the contract for sale. In that part of the contract in which the purchaser’s name must be inserted Mr Nguyen’s name is handwritten and in what clearly appears to be different handwriting there has been added by hand “as to 1% & Mrs Men Thi Vu as to 99%”.
The purchase price stated in the contract for sale was $840,000, and it provided for the payment of a 10% deposit. There is no direct evidence of who paid the $84,000 deposit. There is evidence to which I will shortly refer, however, that shows that Mr Nguyen made a number of payments in relation to the purchase of the Property and the servicing of the loan that was taken out to fund the purchase of the Property; and on the basis of that evidence I find that Mr Nguyen also paid the deposit of $84,000. Further, Ms Vu has not claimed she made any payment towards the purchase price of the Property or towards repaying or servicing the loan that was taken to fund the acquisition of the Property.
By letter dated 22 August 2014 St.George Bank informed Mr Nguyen and Ms Vu that it approved a loan of $670,000.[6] Mr Nguyen’s name is printed on the letter while Ms Vu’s name has been added by hand. The letter also refers to a loan application made on 18 August 2014. I infer from this, and from the date of the file note to which I have already referred, that Mr Nguyen alone applied for the loan and St.George Bank was later informed that Mr Nguyen and Ms Vu were both applying for the loan. That is confirmed by the finance application which records Mr Nguyen as the only applicant for finance.[7] There is also in evidence a document apparently signed by Mr Nguyen nominating a bank account he held with St.George Bank (4572 account) as the account to which surplus funds may be credited and to which any shortfall may be debited.[8]
[6] J A Shaw affidavit 29.11.2018, annexure “D”, page 81
[7] Exhibit B, page 31
[8] J A Shaw affidavit 29.11.2018, annexure “D”, page 82
A statement for the 4572 account records the debiting of $33,310 on 26 August 2018 for a bank cheque. I find that is the sum of the $33,290 stamp duty recorded on the contract of sale and the $10 stamp duty charged on each of the duplicate contract for sale and transfer referred to in the “Duties Statement” issued by the Office of State Revenue.[9]
[9] Exhibit A, page 51
The purchase of the Property was completed on 13 October 2014.[10] According to the “Settlement Adjustment Sheet” prepared by the solicitors for Mr Nguyen and Ms Vu, on that day $756,832.28 was paid on behalf of the purchasers. Of that amount, $667,447.29 was paid by St.George Bank pursuant to the loan it agreed to grant to Mr Nguyen and Ms Vu, and $87,425.08 was paid with “[f]unds from client”.[11] The “Settlement Adjustment Sheet” also records under the heading “Funds from client” a payment of $750 to “Selective Lawyers”, being the lawyers who acted on the purchase for Mr Nguyen and Ms Vu. The 4572 account statement also records a “cash withdrawal” of $88,185.08 on 13 October 2014. I infer that this was the source of the $87,425.08 and the $750 that appear in the “Settlement Adjustment Sheet” under the heading “Funds from client”. In other words, I find that Mr Nguyen provided the $87,425.08 from the 4572 account.
[10] J A Shaw affidavit 29.11.2018, annexure “H”, page 71
[11] J A Shaw affidavit 29.11.2018, annexure “H”, page 75
On settlement of the purchase, St.George Bank created a loan account in the names of Mr Nguyen and Ms Vu to which, on 13 October 2014, there was debited a total of $670,000.[12] Up to January 2016 there was credited every month amounts that often exceeded the required minimum monthly payment.[13] Further, the loan account records payments in addition to the minimum monthly requirements. The loan account statements record the following:[14]
[12] Exhibit B, page 90
[13] At the outset the minimum monthly payment was $3,593 (exhibit B, page 24), but it appears later to have been reduced to $3,412.
[14] Exhibit B, pages 79-90
Period
Interest
Credits
Closing balance
19.10.14 – 13.04.15
$16,360.02 (+$3)
$31,458
$654,905.02
14.04.15 – 30.06.15
$5,055.39 (+$6)
$36,986
$622,980.41
01.07.15 – 13.10.15
$9,336.95 (+$18)
$76,593
$555,742.36
14.10.15 – 30.01.16
$9,174.14 (+$390)
$565,306.50 (refinancing – see below)
0
There is in evidence a form apparently signed by Mr Nguyen titled “Direct Debit Request/Authority for Automatic Transfer – Standard Home Loans”.[15] By that document Mr Nguyen authorised St.George Bank to debit amounts from a particular account (5867 account). Given that Mr Nguyen is the only person who signed this document I infer that Mr Nguyen was the sole holder of the 5867 account, and that to the extent payments were made from that account, the payments were made by Mr Nguyen.
[15] Exhibit B, page 76
Sometime before 11 January 2016 Mr Nguyen and Ms Vu applied to National Australia Bank Ltd (NAB) to refinance the St.George Bank loan. By letter dated 6 January 2016 NAB offered to provide to Mr Nguyen and Ms Vu a loan of $640,000; and by 25 January 2016 they had accepted the offer. On that day, Mr Nguyen and Ms Vu drew down $639.764.70.[16] The statements issued in relation to the loan account NAB opened in the names of Mr Nguyen and Ms Vu record the following:[17]
[16] Exhibit C, page 9
[17] Exhibit C
Period
Debits
Credits
Closing balance
05.01.16 – 11.07.16
$671,000.99 (drawdown of loan)
$110,533.49
$560,467.50
12.07.2016 - 18.07.16
$0
$1,000
$559,467.50
19.07.16 - 18.01.17
$87,222.37
$26,000
$620,689.87
19.01.17 – 18.07.17
$12,295.83
$26,000
$606,985.70
19.07.17 – 18.01.18
$12,118.12
$26,000
$593,103.82
19.01.18 – 18.07.18
$11,836.88
$26,000
$578,940.70
19.07.18 – 22.08.18
$2,051.22
$5,000
$575,991.92
23.08.18 - 18.01.19
$10,494.83
$19,600
$566,886.75
25.01.19 – 23.04.19
$7,224.45
$11,200
$562,911.20
The statements for the NAB loan account record regular credits of $1,000. Up to around 12 August 2016 the amounts were transferred from an account (account 2701). From around 12 August 2016 up to around 13 April 2018 the amounts are transferred from a different account (account 5020), and after around 13 April 2018 the transfers are made from yet another account (account 6870). The bank statements, however, record the name “Nguyen” next to each transfer. I infer from this that each of the payments were transferred from a bank account held by Mr Nguyen.
The Trustee’s claims
The principal relief the Trustee seeks is a declaration to the following effect (emphasis in original):
5.…Vu Anh Tuan Nguyen, the Second Respondent, had an interest in the Property as to an amount in excess of 1% being his registered interest in the Property and that interest is 61.75%.
6.A declaration that the interest of the Second Respondent in the Property is 61.75% vested in the Applicant as Trustee in Bankruptcy pursuant to the Act.
…
10.An Order that the Applicant, together with Paul William Gidley of Shaw Gidley, 1/160 Pacific Hwy, Charlestown NSW 2290 be appointed as Trustees for Sale of the Property, alternatively an Order that the Applicant be appointed as Trustee for Sale of the share of the Property owned by the First Respondent (Trustees for Sale).
In the alternative, the Trustee claims the following relief:
7.Alternatively, that the sum of $529,895.88 is a void transfer of the Property of the Second Respondent to the First Respondent pursuant to s.120 and/or s.121 of the Act and make such adjustments as may be necessary under s.120(4) and s.121(5) of the Act.
8.An Order for judgment in favour of the Applicant against the First Respondent in the sum of $529,895.88.
9.That the First Respondent’s registered interest in the Property is charged with payment of the sum of $529,895.88.
The Trustee calculates the amount of $529,895.88 he claims was paid to Ms Vu, and the 61.75% interest in the Property he claims Mr Nguyen holds, as follows (emphasis in original):[18]
[18] J A Shaw affidavit 29.11.2018, page 4
16.As a result of my enquiries into the examinable affairs of the Bankrupt and calculations as to the purchase price and use of funds of the bankrupt for the acquisition of the property I have made the following calculations.
Description
Amount
Amounts paid by the Bankrupt for the benefit of the First Respondent and himself
Borrowing St George mortgage $670,000 (50% by the Bankrupt joint and several liability)
$335,000.00
Additional funds required on settlement – paid from Bankrupt’s account
$87,425.08
10% deposit paid by Bankrupt
$84,000.00
Stamp duty (presumed to be paid by Bankrupt)
$33,310.00
Legal Costs paid by the Bankrupt
$950.00
Stamping fee paid by the Bankrupt
$25.00
Total amounts contributed by the Bankrupt
$540,710.08
Assume 1% Bankrupt’s Interest
$10,814.20
49% First Respondents [sic] benefit
$529,895.88
17.My alternative claim is calculated in accordance with the authority in Calverley v Green (1984) 155 CLR 242 and principles of resulting trust in which I calculate the Bankrupt’s interest in the Property by way of contribution to be 61.75% in the ownership of the Property calculated as follows:
Description
Amount
Purchase price of property
$840,000.00
Adjustments on settlement
$832.28
Legal costs on purchase (estimate)
$950.00
Stamp duty on purchase
$33,310
Cash payment OSR stamping fee
$25.00
Bank cheque fee
$40.00
Mortgage fee
$40.00
Total acquisition costs on purchase of Property
$875,710.08
Amounts paid by the Bankrupt
Borrowing St George mortgage $670,000 (50% by the Bankrupt joint and several liability)
$335,000.00
Additional funds required on settlement – paid from Bankrupt’s account
$87,425.08
10% deposit paid by Bankrupt
$84,000.00
Stamp duty (presumed to be paid by Bankrupt)
$33,310.00
Legal Costs paid by the Bankrupt
$950.00
Stamping fee paid by the Bankrupt
$25.00
Total amount contributed by the Bankrupt
$540,710.08
Amounts paid by the First Respondent
Borrowing St George mortgage $670,000 (50% by the First Respondent joint and several liability)
$335,000.00
Total amount contributed by the First respondent
$335,000.00
The Bankrupt’s interest on a resulting trust and Calverley v Green principles based on actual amounts paid:
$540,710.08
$875,710.08 = 61.75%
The First Respondent’s interest on a resulting trust and Calverley v Green based on the actual amounts paid:
$335,000.00
$875,710.08 = 38.25% (her share of the bank borrowing on acquisition)
Claim based on resulting trust
The Trustee relies on the well-established principle that a person who purchases property in the name of another acquires the beneficial interest in the property unless the relationship between the purchaser and the person for whom the property is purchased is one in which the law presumes the purchaser intended to confer the beneficial interest in the property to the other person, or the evidence otherwise suggests the purchaser intended to confer the beneficial interest in the property to the other person. Gibbs CJ stated the relevant principles in Calverley v Green as follows:[19]
Where a person purchases property in the name of another, or in the name of himself and another jointly, the question whether the other person, who provided none of the purchase money, acquires a beneficial interest in the property depends on the intention of the purchaser. However, in such a case, unless there is such a relationship between the purchaser and the other person as gives rise to a presumption of advancement, i.e., a presumption that the purchaser intended to give the other a beneficial interest, it is presumed that the purchaser did not intend the other person to take beneficially. In the absence of evidence to rebut that presumption, there arises a resulting trust in favour of the purchaser. Similarly, if the purchase money is provided by two or more persons jointly, and the property is put into the name of one only, there is, in the absence of any such relationship, presumed to be a resulting trust in favour of the other or others. For the presumption to apply the money must have been provided by the purchaser in his character as such - not, for example, as a loan. Consistently with these principles it has been held that if two persons have contributed the purchase money in unequal shares, and the property is purchased in their joint names, there is, again in the absence of a relationship that gives rise to a presumption of advancement, a presumption that the property is held by the purchasers in trust for themselves as tenants in common in the proportions in which they contributed the purchase money . . . .
[19] (1984) 155 CLR 242, at page 246
In relying on these principles the Trustee appears to have assumed that money paid in discharging a mortgage that has been granted to secure a loan with which to acquire a property is equivalent to paying the purchase price for the property. The Trustee goes further and assumes that any payment made in connection with the purchase of property, such as the payment of stamp duty and legal fees, and any monetary liability incurred to fund the purchase of a property, are to be treated as payments of the purchase price. These assumptions, however, are incorrect, as was made clear in the judgments in Calverley v Green itself. Mason and Brennan JJ, for example, said:[20]
It is understandable but erroneous to regard the payment of mortgage instalments as payment of the purchase price of a home. The purchase price is what is paid in order to acquire the property; the mortgage instalments are paid to the lender from whom the money to pay some or all of the purchase price is borrowed.
[20] (1984) 155 CLR 242, at page 257
It follows, therefore, that the payments Mr Nguyen made on account of the mortgage loans he and Ms Vu had taken out, or the payments Mr Nguyen made for stamp duty and other costs associated with the acquisition of the Property, cannot be regarded as payment of the purchase price for the Property; and in the absence of evidence to the contrary those payments cannot by themselves support the creation of any resulting trust. The only payments that can have that result are money Mr Nguyen provided in his character as a purchaser. On the findings I have made, there are two amounts Mr Nguyen paid that are capable of being so characterised; and these are Mr Nguyen’s payment of the deposit of $84,000, and his payment of $87,425.08 towards the payment of the balance of the purchase price on 13 October 2014.
The consequence of my findings is that Mr Nguyen alone provided the purchase price for the Property. The presumption that arises from that conclusion is that Mr Nguyen did not intend to confer on Ms Vu a beneficial interest in the Property, and there is no evidence before me that is reasonably capable of rebutting that presumption. That, in turn, means that Mr Nguyen and Ms Vu hold their legal interests in the Property under a resulting trust, the sole beneficiary of which is Mr Nguyen.
The Trustee, however, claims Mr Nguyen holds only a 61.75% beneficial interest in the Property; and, as I have already observed, Ms Vu has admitted that is the case, and on the basis of that admission chose not to take any active role in the hearing before me. In those circumstances I do not consider it is open to me to grant relief beyond that which the Trustee has claimed, and I propose to make two declarations that reflect the substance of the declarations sought in paragraphs 4, 5, and 6 of the application.
Claim based on s.120 of the Act
Given I propose to grant relief to the effect of the principal relied relief the Trustee has claimed, it is not necessary that I also consider the Trustee’s claims based on s.120 of the Act. I propose, however to do so, first, out of deference to the submissions counsel for the Trustee has made in support of that claim and, secondly, because, as I will shortly show, I am of the opinion the claim has a number of difficulties.
Subsection 120(1) of the Act provides:
A transfer of property by a person who later becomes a bankrupt (the transferor) to another person (the transferee) is void against the trustee in the transferor's bankruptcy if:
(a)the transfer took place in the period beginning 5 years before the commencement of the bankruptcy and ending on the date of the bankruptcy; and
(b)the transferee gave no consideration for the transfer or gave consideration of less value than the market value of the property.
Paragraphs (a) and (b) of s.120(9) of the Act are relevant:
For the purposes of this section:
(a) transfer of property includes a payment of money; and
(b)a person who does something that results in another person becoming the owner of property that did not previously exist is taken to have transferred the property to the other person . . .
Also relevant is s.121A of the Act:
(1)This section applies if:
(a)a person who later becomes a bankrupt (the transferor) transfers property to another person (the transferee); and
(b)the transferee gives some or all of the consideration for the transfer to a person (a third party) other than the transferor.
(2)Sections 120 and 121 apply as if the giving of the consideration to the third party were a transfer by the transferor of the property constituting the consideration.
(3)If the giving of the consideration to the third party is void against the trustee in the transferor's bankruptcy under section 120 or 121, the trustee has the same rights to recover the property constituting the consideration as the trustee would have if the giving of the consideration had actually been a transfer by the transferor of the property constituting the consideration.
In the Trustee’s written submissions it is assumed that the property Mr Nguyen transferred and, thus, is subject to s.120 of the Act, is the payments Mr Nguyen made in connection with the acquisition of the Property and the loan taken out to find the purchase of the Property. The Trustee also assumes that 50% of the $670,000 loan St.George Bank made to Mr Nguyen and Ms Vu, and which Mr Nguyen and Ms Vu directed be applied towards the purchase price of the Property, constitutes a transfer of property by Mr Nguyen. It may be accepted that all these amounts constitute transfers of money by Mr Nguyen.
Next, the Trustee assumes that none of the payments was made for any consideration, or they were made for a consideration that was less than the amount of the payments. The Trustee, however, does not explain how that is so. Mr Nguyen made the payments, not to Ms Vu, but to third party transferees, namely, the vendor of the Property, the Office of State Revenue, the lawyer acting for Mr Nguyen and Ms Vu on the purchase, St.George Bank, and NAB. There is nothing to suggest that the payments to the third party transferees exceeded the consideration for which each of the payments was made. The Trustee’s claims under s.120 of the Act, therefore, must rely on s.121A of the Act. That is, the Trustee must be taken to submit that Mr Nguyen made payments to the third party transferees for a consideration each of the third party transferees gave to Ms Vu, but Ms Vu gave no consideration to Mr Nguyen for the payments he made to the third party transferees, or gave to Ms Vu a consideration that had a value that was less than the amounts Mr Nguyen paid to the third party transferees.
It may be accepted that by paying the third party transferees Ms Vu received consideration. The nature of that consideration was the discharge pro tanto of liabilities Ms Vu, together with Mr Nguyen, assumed to pay the purchase price for the Property, stamp duty, and the loans St.George Bank and NAB made to Ms Vu and Mr Nguyen. It cannot be said, however, that Ms Vu gave no consideration to Mr Nguyen for these benefits.
On the evidence before me Ms Vu was a co-obligor in equal shares with Mr Nguyen in relation to the liabilities she and Mr Nguyen assumed by entering into the contract to purchase the Property and for taking the loans from St.George Bank and NAB. That means that to the extent Mr Nguyen paid an amount that exceeded his share of the liabilities he and Ms Vu had or have under the contract to purchase the Property or the loans from St.George and NAB, he has a right of contribution against Ms Vu to recover an amount representing the disproportionate share of the payments he made.[21] Viewed from Ms Vu’s perspective, she is liable to pay to Mr Nguyen an amount representing the disproportionate share of the payments he made. There is nothing in the evidence before me that suggests Mr Nguyen released any rights of contribution he has or may have to recover from Ms Vu an amount representing the disproportionate share of the payments he made to third party transferees on account of liabilities he and Ms Vu had to the third party transferees.
[21] See, generally Lavin v Toppi [2015] HCA 4
For these reasons, the Trustee has no right to relief based on s.120 of the Act.
Relief based on resulting trust
The Trustee seeks an order under s.66G(1) of the Conveyancing Act which provides:
Where any property (other than chattels) is held in co-ownership the court may, on the application of any one or more of the co-owners, appoint trustees of the property and vest the same in such trustees, subject to incumbrances affecting the entirety, but free from incumbrances affecting any undivided shares, to be held by them on the statutory trust for sale or on the statutory trust for partition.
The expression “co-ownership” is defined in s.66F(1) of the Conveyancing Act to mean “ownership whether at law or in equity in possession by two or more persons as joint tenants or as tenants in common”; and the expression “held on statutory trust” in relation to property is defined in s.66F(2) to mean a “trust to sell the same and to stand possessed of the net proceeds of sale, after payment of costs and expenses, and of the net income until sale after payment of costs, expenses, and outgoings, and in the case of land of rates, taxes, costs of insurance, repairs properly payable out of income, and other outgoings upon such trusts, and subject to such powers and provisions as may be requisite for giving effect to the rights of the co-owners”. Also relevant is s.66G(3) of the Conveyancing Act which, in effect, provides that unless the trustee that is to be appointed is a “trustee corporation”, at least two individuals must be appointed as trustees.[22]
[22] Coshott v Prentice [2014] FCAFC 88, at [20]: “[W]e consider that the appellants correctly contended that s 66G requires that, where a corporation is not appointed trustee for sale, there must be at least two trustees. It follows that the appeal against the orders for sale must be allowed in part.”
The Conveyancing Act is, of course, a statute of the Parliament of New South Wales. It has been held,[23] however, that s.66G of the Conveyancing Act is a law that is capable of being “picked up” by s.79 of the Judiciary Act 1903 (Cth) (Judiciary Act), which provides:
The laws of each State or Territory, including the laws relating to procedure, evidence, and the competency of witnesses, shall, except as otherwise provided by the Constitution or the laws of the Commonwealth, be binding on all Courts exercising federal jurisdiction in that State or Territory in all cases to which they are applicable.
[23] Coshott v Prentice [2014] FCAFC 88
I therefore have power under s.79 of the Judiciary Act to treat as a law of the Commonwealth s.66G of the Conveyancing Act.
The next question I consider are the principles that govern the exercise of the power conferred by s.66G(1); and these have been conveniently stated by Black J in Pascoe v Dyason:[24]
[24] [2011] NSWSC 1217
[5] The purpose of this section is ‘to provide a mechanism for terminating the co-ownership [of property] where the co-owners themselves cannot agree on how the co-ownership should be determined’ . . . . In Callahan v O'Neill [2002] NSWSC 877, Young CJ in Eq observed:
‘It is fairly clear that, as a general rule, any co-owner holding at least 50% of a parcel of real property is entitled almost as of right to an order for partition or sale under s 66G of the Conveyancing Act. It is only in situations where it would, under settled principles, be inequitable to permit such an application, including cases where there has been a contract not to make an application that the order may be refused. This appears from cases such as Ngatoa v Ford (1990) 19 NSWLR 72 and Williams v Legg (1993) 29 NSWLR 687.’
[6] Although the Court has a discretion whether or not to make an order under this section, the grounds on which the Court will ordinarily refuse to make it are limited. For example, if it is inconsistent with a proprietary right or a contractual or fiduciary obligation, and there is no general jurisdiction to refuse to grant such an order on the basis of hardship or unfairness . . . . In Hogan v Baseden (1997) 8 BPR 15,723 at 15,723, Mason P observed that it 'would not be a proper exercise of discretion of the power to decline relief under s 66G ... to refuse an application on grounds of hardship or general unfairness.' His Honour also noted that:
'[I]n the unhappy event that the parties are unable to settle their differences then the making of an order appointing trustees for sale seems inevitable unless the respondent could establish a legally binding agreement not to put her out of occupation of her home, or circumstances that would ground some estoppel to similar effect.' (at [59]).
[7] In Chalhoub v Chalhoub [2005] NSWSC 572 at [17]-[18], McLaughlin AsJ observed that, where a plaintiff and defendant are registered as tenants in common in equal shares, then prima facie the plaintiff is entitled to relief by way of an order under s 66G of the Conveyancing Act for sale of the relevant property and for the division of the net proceeds of such sale between the plaintiff and the defendant in equal shares. It was for the defendant, who denied the plaintiff's entitlement to such relief, to establish that the legal rights of the parties consequent upon their status as registered proprietors as tenants in common in equal shares were in some way altered by the invocation of equitable rights recognised by a Court of Equity or that there was some other reason why the Court should, in the exercise of the limited discretion reposed in it by s 66G of the Conveyancing Act, decline to make an appointment of statutory trustees or sale of the subject property.
[8] In Cain v Cain [2007] NSWSC 623 at [9]-[10], Young CJ in Eq noted that the Court will usually consider it appropriate to make an order under s 66G of the Conveyancing Act unless persuaded by cogent arguments from those who oppose. His Honour then noted Counsel's summary of the categories of cases in which the Court has declined to grant such an order as including: where the legal title is held by trustees and the trust instrument contains its own procedure for sale; where the plaintiff's conduct rates as an estoppel against the sale; and where an order would be incompatible with a contractual or equitable duty binding the applicant. In Tory v Tory [2007] NSWSC 1078 at [42], White J noted that an order under s 66G of the Conveyancing Act 'is almost as of right unless on settled principles it would be inequitable to allow the application', and observed that an application would be refused if making the order would be inconsistent with a proprietary right or contractual or fiduciary obligation or on the basis of conventional estoppel or equitable estoppel. In Spathis v Nanos [2008] NSWSC 418 at [19]-[20], Jagot AJ observed that the discretion was not at large and is not to be exercised by reference to personal views about hardship or unfairness. The Court of Appeal also noted that the discretion to refuse relief under s 66G of the Conveyancing Act was a 'limited one' in Ross v Ross [2010] NSWCA 301 at [36]; see also National Australia Bank Ltd v Pasupati [2011] NSWSC 540 at [20].
Ms Vu has not submitted there is any reason for my not making an order under s.66G of the Conveyancing Act, and there is nothing on the evidence before me to suggest any reason why I should not make any such order. I propose, therefore, to make orders under s.66G(1) of the Act substantially in terms of the orders sought in paragraphs 11 and 12 of the application.[25]
[25] Paragraph 12 will be modified by substituting “Part 4 of the Conveyancing Act 1991” for “Part IV of the Real Property Act (NSW) 1900”.
There is the question of the identity of the persons who should be appointed as trustees. The Trustee applies that he and Mr Gidley be appointed as trustees. The Trustee and Mr Gidley are both registered trustees and both work in the same practice.[26] Before the Full Federal Court in Coshott v Prentice the appellant submitted that a conflict or potential conflict might arise if a trustee in bankruptcy of the estate of one of the co-owners is also appointed one of the trustees for sale. The Full Court did not decide whether the trustee in bankruptcy in that case would have a conflict if appointed; but the Full Court observed that “[n]o conflict of interest was identified by the appellants with any specificity”.[27] That suggests the Full Court was of the view that a trustee in bankruptcy of the estate of one of the co-owners is not to be presumed to have any conflict or potential conflict of interest only because he is the co-owner’s trustee in bankruptcy. There is nothing before me that could reasonably suggest that the Trustee would have any conflict between his duties to administer Mr Nguyen’s estate and the duties he would have if appointed one of the trustees for the sale of the Property. I propose, therefore to appoint the Trustee and Mr Gidley trustees for sale.
[26] Consent for Two Trustees to be Appointed
[27] Coshott v Prentice [2014] FCAFC 88
Conclusion and disposition
The Trustee has established his case that Mr Nguyen has no less than a 61.75% interest in the Property, and that his interest in the Property vested in the Official Receiver on the making of the sequestration order and subsequently was vested in the Trustee after he was appointed Mr Nguyen’s trustee in bankruptcy. I propose, therefore, to make declarations that reflect the substance of the declarations claimed in paragraphs 4, 5, and 6 of the application. I also propose to make orders under s.66G of the Conveyancing Act substantially in the terms of the orders sought in paragraphs 11 and 12 of the application.[28]
[28] Paragraph 12 will be modified by substituting “Part 4 of the Conveyancnig Act 1991” for “Part IV of the Real Property Act (NSW) 1900”.
The application seeks a number of orders ancillary to the making of orders under s.66G of the Conveyancing Act. It is appropriate, and I propose to make, orders substantially in terms of the orders claimed in paragraphs 13, 15, 16, 18, and 20 of the application. I propose to make an order in terms of paragraph 14 of the application but modified to apply only to the extent that there is in place an agreement under which Mr Nguyen is obliged to pay rent in relation to his occupation of the Property. I do not propose to make an order in terms of paragraph 17 of the application because that appears to me to be inconsistent with the statutory trust for sale. I also propose to make an order that achieves the apparent purpose of the order claimed in paragraph 24 of the orders, namely, that the Trustees for Sale be relieved from any obligation they may have after they discharge their duties as Trustees for Sale to apply to the Court for an order permitting them to retire from their position as trustees for sale.
Given that the Trustee made his claim under s.120 of the Act in the alternative to his claim based on resulting trust, I do not propose to make the orders the Trustee claims in relation to that claim. That means I will not make orders in terms of those claimed in paragraphs 7, 8, 9, 10, 25, 26, and 28 of the application.
Finally, there is the question of costs. The usual order as to costs in an application under s.66G of the Conveyancing Act is that the costs of each party on a party and party basis be paid out of the proceeds of sale of the jointly owned property.[29] Given that Ms Vu has agreed to pay the applicant’s costs I propose to make an order to the effect that it should be only the Trustee’s costs that are to be paid out of the proceeds of sale of the Property. I will also make an order substantially to the effect of the order claimed in paragraph 15(h) of the application. I do not propose to make an order for indemnity costs as claimed in paragraph 19 of the application.
[29] Goldberg v Goldberg [2000] NSWSC 399, at [9]: “[T]he court takes the view that when parties have entered into a co-venture, even an involuntary co-venture such as being joint beneficiaries under a will, the costs of winding up the co-venture should be borne equally. Accordingly . . . the costs of both parties should come out of the proceeds of sale of the property.”
I certify that the preceding forty-two (42) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis
Date: 31 May 2019
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