Vrsecky v Reaper & Anor
[2015] FCCA 32
•10 February 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| VRSECKY v REAPER & ANOR | [2015] FCCA 32 |
| Catchwords: BANKRUPTCY – Trustee seeking orders for partition sale of a property jointly owned by bankrupt and his wife – respondents asserting property wholly or substantially wholly bought with protected funds within meaning on s.116(3) of the Bankruptcy Act 1966 – property bought in 2002 – bankrupt’s protected payments commencing in 2007 – all mortgage payments thereafter made from protected funds – half payments credited to wife – necessity for valuations in 2007 and 2014 in order to value bankrupt’s contribution pursuant to s.116(4) of the Bankruptcy Act 1966. |
| Legislation: Bankruptcy Act 1966, ss.114, 116(3), 116(4), 153B, 178, 179 |
| Reaper v Baycorp Collections PDL (Australia) Pty Ltd [2014] FCA 13 Turner v Official Trustee in Bankruptcy [1996] FCA 1074 Re Manivilovski; Ex parte Official Trustee in Bankruptcy (1993) 117 ALR 537 Stankovic v Van Der Velde [2012] FCA 1436 |
| Applicant: | PETR VRSECKY (AS TRUSTEE OF THE BANKRUPT ESTATE OF BRETT VINCENT REAPER) |
| First Respondent: | BRETT VINCENT REAPER |
| Second Respondent: | SHARON FISHER |
| File Number: | MLG 931 of 2013 |
| Judgment of: | Judge Burchardt |
| Hearing date: | 13 November 2014 |
| Date of Last Submission: | 13 November 2014 |
| Delivered at: | Melbourne |
| Delivered on: | 10 February 2015 |
REPRESENTATION
| Counsel for the Applicant: | Ms Ballantyne |
| Solicitors for the Applicant: | Madgwicks |
| First Respondent: | In Person |
| Second Respondent: | In Person |
ORDERS
The parties do all such things as may be required to obtain a valuation of the property situated at and known as 12 The Esplanade, Narre Warren South, Victoria (“the property”):
(a)As at May 2007; and
(b)Currently.
The parties appoint a valuer by agreement, and failing agreement appointed by the President of the Real Estate Institute of Victoria, to value the property.
The Respondents to provide access to the property upon reasonable notice by the appointed valuer.
The parties confer and produce an agreed estimate of the mortgage on the property as at:
(a)May 2007; and
(b)Currently
The matter be listed for directions as soon as orders 1 to 4 have been complied with.
All extant applications be listed for trial before Judge Burchardt at 10.00am on 18 March 2015.
The Respondents file and serve any further Affidavits on or before 24 February 2015.
The Applicant file and serve any further Affidavits on or before 9 March 2015.
Any Affidavits in Reply be filed and served on or before 16 March 2015.
Costs be reserved.
There be liberty to apply.
| FEDERAL CIRCUIT COURT AT MELBOURNE |
MLG 931 of 2013
| PETR VRSECKY (AS TRUSTEE OF THE BANKRUPT ESTATE OF BRETT VINCENT REAPER) |
Applicant
And
| BRETT VINCENT REAPER |
First Respondent
| SHARON FISHER |
Second Respondent
REASONS FOR JUDGMENT
Introduction
By an amended application, which has been the subject of some confusion from time to time, but ultimately filed in court on 13 November 2014, the applicant trustee of the bankrupt estate of the first respondent seeks orders for the partition and sale of the home of the respondents. The trustee seeks ancillary orders including an order that the respondents vacate the property situated at and known as 12 The Esplanade, Narre Warren South (“the property”).
The respondents resist the application substantially on the footing that the whole or substantially the whole of the property has been purchased with protected money within the meaning of s.116 of the Bankruptcy Act 1966 (“the Act”). Both parties agree, explicitly (the applicant) or implicitly (the respondents) that in the event that s.116(3) does not apply then the court will need to determine the proportion of the proceeds received from realising the property as can be fairly attributed to that protected money (s.116(4) of the Act).
For the reasons that follow I do not accept that the property was bought wholly or substantially wholly with protected money within the operation of s.116(3) of the Act and I will make the ancillary orders necessary to enable the exercise contemplated by s.116(4) to be effected. It should be noted in this regard that the trustee expressly conceded that it would be appropriate to seek to quantify the amount that the respondents might need to pay the trustee to purchase out the trustee’s interests in the property rather than proceeding forthwith to sale even if the applicant is successful.
The Applicant’s Interim Applications
This matter has had an unfortunately lengthy history in the court. The original application was filed on 27 June 2013. While it is clear that there is some dispute as to the matter, it is equally clear that there were significant difficulties as to service and then in the ultimate orders for substituted service were made and effected.
The first respondent sought an annulment of his bankruptcy which led to further delays. On 28 January 2014 Pagone J of the Federal Court dismissed the application made by the bankrupt for an annulment of his bankruptcy.
Thereafter the matter was set down for trial in July 2014. Before that hearing the applicant filed as an annexure to the affidavit of Ms Ballantyne filed 27 March 2014 a copy of the amended application which was ultimately filed in court on 13 November 2014. Accordingly the respondents have been on notice of it for some considerable time.
Most unfortunately Judge Riley who was due to hear the matter in July 2014 was severely injured in an accident and the matter had to be relisted which led to further delay before the matter was heard in November 2014. The matter was listed for trial on 13 November 2014 as long ago as 15 July 2014.
This is not without significance because on 12 November 2014 the respondents filed an interlocutory application and a separate notice of cross-claim supported by two affidavits of Mr Reaper.
In part the interlocutory application seeks to revisit matters dealt with comprehensively by the judgment of Pagone J going to the original judgment upon which the Petition was based. In part the interlocutory application raises the prospects of an inquiry pursuant to s.179 of the Act. It also includes an application pursuant to s.178 of the Act to seek compensation for loss and damage allegedly suffered by the respondents as a result of the orders sought in the application.
The cross-claim is essentially concerned with claims for damages arising out of damage to the property. This matter has been raised in earlier affidavit and application material by the respondents. It goes to an alleged failure on the part of the trustee applicant to properly participate in seeking to recoup insurance monies arising from alleged storm damage to the property and other matters related thereto.
I explained to the respondents at the commencement of the proceeding, that it is simply not proper to seek to file material like this so late. From what I understand of the matter it appears that the interlocutory application and notice of cross-claim may have been sought to be filed several days before the date actually bearing the stamp of the Court, but on any view these documents were filed at the last moment following the matter having been set down for trial some four months previously. It was self-evident it would be wholly unfair to the applicant to have these matters heard instanter and for that reason I directed that they be heard as a separate issue on a date to be fixed.
Agreed or Uncontroversial Facts
The judgment of Pagone J in the applicant’s application for annulment of his bankruptcy pursuant to s.153B of the Act (Reaper v Baycorp Collections PDL (Australia) Pty Ltd [2014] FCA 13) sets out how it was that the first respondent became bankrupt. His Honour recorded at [1] that judgment was entered against Mr Reaper on 27 October 2011 in contested proceedings in the Magistrates’ Court of Victoria for $22,552.40. On 15 May 2012 the Magistrates’ Court dismissed with costs Mr Reaper’s contested application for a rehearing. A creditor’s petition against Mr Reaper was issued on 25 July 2012.
His Honour dismissed comprehensively Mr Reaper’s assertion that the credit card that had given rise to this debt was not his but that of a company effectively controlled by him.
These matters have been the subject of decision by a judge of the Superior Court of Record and in my view are no longer now capable of being agitated. It may be noted in passing that the interlocutory application to which I have earlier referred appears to revisit some of these matters.
It is apparent that in 2007 Mr Reaper was the subject of a significant and severe workplace injury which he has asserted gave rise to multiple spinal injuries. He also has the very grave misfortune to suffer from Crohn’s disease. He has not been able to work thereafter. He has been in receipt of accident compensation payments and/or disability pension ever since. He has ongoing proceedings in relation to his compensation payments and a common law injury claim in respect of which he has been successful in obtaining a serious injury certificate. Those matters have been under way for some years in the County Court of Victoria and do not appear from what Mr Reaper told me to be anywhere near finalisation.
Both of the respondents worked until 2007 when the injuries to Mr Reaper took place. I will return to the extent of the second respondent, Ms Fisher’s employment since then in due course, as while ultimately in my view it is not difficult to determine, it is not agreed.
Given the controversy about the extent to which the property was paid for solely from protected monies it is now appropriate to approach the evidence about that issue.
A brief note – the evidence of Ms Ballantyne and Mr Vrsecky
Both Ms Ballantyne and Mr Vrsecky were cross-examined by Mr Reaper. Ms Ballantyne confirmed that the respondents are joint proprietors, in other words joint tenants of the property. She was unable to say whether the title search exhibited as PV3 to Mr Vrsecky’s affidavit referred to the land only (as it was put by Mr Reaper) before the property was fully developed. Likewise she was not able to comment as to whether exhibit PV4 referred to a loan for the building of the house itself.
Mr Vrsecky in chief confirmed that he had never met Mr Reaper although he had asked him to come and see him. He confirmed that it had only been possible to obtain a kerbside valuation of the property because access was refused.
Under cross-examination it was put that the only creditors were the Australian Taxation Office and Baycorp Collections PDL (Australia) Pty Ltd (“Baycorp”) (the petitioning creditor) and Mr Vrsecky confirmed this. He further confirmed that the land had been bought on 22 April 2002 but he could not say whether the PV3 referred to the land in some developed state. He was likewise unable to say whether mortgage payments only commenced on 8 July 2005.
The evidence of Mr Reaper
Unsurprisingly, and indeed perfectly properly given Mr Reaper’s tragic injury, the affidavit material filed by him has tended to concentrate on buttressing the position now contended for, namely that the property was bought with protected funds.
In his first affidavit filed on 17 March 2014 Mr Reaper referred to two outstanding applications with which it was asserted Pagone J had not dealt. I will interpolate and say that during the currency of the trial before this court Mr Reaper confirmed that several endeavours by him to file such applications had been unsuccessful. He asserted that he had so to speak finally got the matter right and that these applications might now be under way.
The affidavit asserted that he had lodged an appeal against Pagone J’s decision and that proceedings for damages were under way in the Victorian Civil and Administrative Tribunal (“VCAT”) as well. It should be noted that it is quite clear from subsequent material filed by Ms Ballantyne that Mr Reaper’s endeavour to appeal out of time against the decision of Pagone J was rejected by Tracey J.
Mr Reaper asserted that the mortgage on the property was $335,000 originally. He deposed to his injury on 4 May 2007 and the fact that he had been on compensation payments since 18 May 2007.
He further deposed from 29 October 2004 to 18 May 2007, these being the dates respectively of the commencement of payments on the mortgage and the commencement of his payments on compensation, he had paid his share of the mortgage payments from his ordinary wages. He deposed that the mortgage had been reduced during this period of time from $335,000 to $317,649.
He exhibited as exhibit BR3 a City of Casey rates notice valuing the property at $654,000 and deposed that as of 28 February 2014 the outstanding mortgage was $287,326. He asserted a valuation of the property of $795,000. He further deposed to damage caused to the property by a storm and asserted a refusal on the part of the trustee to enable an insurance assessment. He further asserted, irrelevant though it may be now, that he was solvent.
Mr Reaper filed a further affidavit on 22 May 2014. This was essentially facultative and set out very extensive extracts from his bank records showing the compensation received by him from time to time since 2007 and the schedule of mortgage payments made from 2003 to 2014. It should be noted however that those payments, which varied from $931 per month at the start through to figures slightly in excess of $1,000 (indeed at one stage in excess of $1,100), do not in my view convincingly say who paid exactly how much as between the two respondents, in the period up to 2007.
The affidavit also annexes schedules showing the payments of compensation made to the applicant from time to time and bank records showing payments of compensation into his account. These amounts may not be entirely commensurate with the payments of compensation from QBE Insurance, but as I pointed out to counsel for the applicant during the running of the case, the payments for compensation appear to have been made to a company controlled by Mr Reaper and they may well have been mixed with other funds before being transferred into the respondents’ bank account.
The Affidavit material of Ms Fisher – the Second Respondent
Ms Fisher’s first affidavit filed on 17 March 2014 in my view merely supports Mr Reaper’s other affidavit confirming his injury in 2007, his compensation payments and the assertion that his share of the mortgage payments thereafter were made from protected money. Her second affidavit filed on 8 April 2014 is more material. She deposed that between 18 May 2007 and 9 April 2014 $188,462 was “paid off the Property using only Mr Reaper’s compensation.” It is clear that what Ms Fisher meant was that mortgage payments in that total were paid. There has not been a reduction of the mortgage in that amount overall.
The Affidavit of Ashleigh Reaper
Ms Reaper’s affidavit, filed together with two other affidavits from siblings on 7 July 2014 deposes that in January 2013 she was informed by her parents that Mr Reaper’s compensation has been terminated and that in February 2014 her parents put a proposal to her to invest in the property. She decided to do so and on 13 February 2013 gave the respondents $1,900 in cash as her initial investment, this sum being applied to the mortgage from 12 April 2013. She further deposed that on 8 July 2013 she gave the respondents $4,663 in cash as a further investment and in November 2013 diverted payment of her youth allowance to the respondent’s bank account as an investment in the home.
At paragraphs nine and ten she deposed:
“9. It is expected that I will receive back my investment, and a return on that investment, when the Claim is settled or when Mr Reaper’s compensation is reinstated.
10. If I may dare choose at this time I will continue to invest in the Home until a lifestyle change prompts otherwise. It was agreed that should the Claim fail a written contract would express the intention of the parties. It is agreed, and subject to the agreement, that I otherwise hold a 10% share in the home.”
The Affidavit of Emily Reaper
Emily Reaper swore an affidavit in very similar terms to Ashleigh Reaper. She likewise deposed to being approached for assistance by her parents and agreeing to do so. She deposed that as of 7 March 2013 her youth allowance had been paid directly into the respondents’ bank account as an investment in the home. The last paragraph is in relevantly identical terms to that of her sister Ashleigh.
The Affidavit of Tamara Reaper
Tamara Reaper deposed that certain references in her mother’s affidavit to salary TJR were references to her employment by McDonald’s Australia Limited from 20 December 2011 until 22 October 2013. She further deposed to a similar history of investment in the family home. She deposed that as of 7 March 2013 her Youth Allowance was paid to her parents’ bank account and the final paragraph of her affidavit was in indistinguishable terms from those of her sisters. It should be noted that cumulatively the three sisters were asserting a 30 per cent ownership of the home.
It is readily apparent that that is a very good rate of return.
The evidence given at court – Mr Reaper
Mr Reaper was cross-examined and confirmed that the land alone was originally bought for $120,000. He said it was a deposit and that the balance was paid with proceeds of the sale of another home. He deposed that a mortgage was taken out effectively only in 2005 but was unable to say for how much. He confirmed that both he and Ms Fisher were earning income at that time. He was taken by counsel to exhibit SF4 to the affidavit of Ms Fisher which purported to be a schedule of mortgage payments. This confirmed that there were no payments until 2005. The schedule does not show any payments by Mr Reaper until 2007.
In response Mr Reaper, who clearly struggled in a general way to express himself, said that he could not prove that he had made payments. He said words to the effect that he had never made a payment on the house in his life. This assertion it is in my view clearly untrue because of evidence he went on to give.
What did emerge was that Mr Reaper was unable to say how much of his ordinary wages in the period up until May 2007 were attributed to the mortgage.
He was taken to exhibit A1 which is the application for mortgage loan. It is date stamped 25 November 2004 with Victorian Mortgage Management Group Pty Ltd. That document shows a valuation of the property of $550,000, and a mortgage of $285,000, and attests the signatures of the respondents on 23 November 2004.
I further note that in a related loan application dated 22 October 2003 the property is valued at $270,000 and the incomes of the respondents are given as to $45,000 (Mr Reaper) and $35,000 (Ms Fisher).
Mr Reaper confirmed that compensation payments were paid to his company and these were the only payments made to it. He disavowed his Statement of Affairs stating that it did not look accurate and was filled out on the fly when he was in a serious condition with multiple spinal injuries and Crohn’s condition. I would say that I accept that proposition.
Mr Reaper said that he was offered $865,000 for the property in 2005 and it was this that gave rise to his now rough estimate of $765,000.
He said that compensation had paid the mortgage from May 2007 until payments were cancelled approximately 12 months ago at which time he was placed on a disability pension. He said no-one else contributed during this period. He confirmed that he started his claim in the County Court four years ago and had received a serious injury certificate from the County Court. He was seeking to remain on weekly payments.
The evidence of Ms Fisher
In evidence-in-chief Ms Fisher relevantly confirmed that she was a full-time carer. She further confirmed that compensation payments had been cut off rather earlier than Mr Reaper recalled, this occurring in February 2013. This is actually slightly contradictory to the affidavit material of the three children whose affidavits suggest it took place in January 2013.
Under cross-examination Ms Fisher confirmed that the land was bought at a cost of $120,000 in 2002. She said that a cash deposit was paid and the parties sold a home and paid off the loan. She confirmed, as I think is apparent from the exhibited material, that a loan was taken out for the building and drawn down on progressively. She said that the total was about $335,000 and I should make it clear that I accept that. Ms Fisher confirmed that she was employed through until Mr Reaper was injured in 2007.
She was sure that Mr Reaper made some contributions to the mortgage but could not say how much. She said both of them contributed.
Ms Fisher confirmed that she had undertaken part-time work from time to time after 2007 simply to pay off her credit card. This was for personal use and for the children. Her income had been paid into the Bendigo bank account. The reference to $400 a week salary on her part in Mr Reaper’s Statement of was in 2013. She confirmed that she received carer’s allowance and payments. She said she received about $100 per week in earnings and $300 in benefits.
She confirmed that all the mortgage payments made between May 2007 and February 2013 were paid from compensation payments.
She confirmed that she has three daughters and had separate conversations with them and that they all agreed to put their youth allowances towards the mortgage. There was no discussion as to the amount of share they would get in the property. There was nothing in writing to document the agreement.
Mr Reaper in submissions asserted that he would repay his daughters when weekly payments were restored or he received a lump sum payment. It was likely he said he would then work out what to do about the property.
The Submissions of the Parties – the Applicant Trustee
Ms Ballantyne first submitted that the trustee was entitled to bring this proceeding pursuant to the Act. Despite some objection in the respondents’ materials it is quite clear that the trustee is entitled to seek the orders now sought and it is not necessary to say more than that.
The first critical issue was submitted to be section 116(3) of the Act. Counsel referred me to the case of Turner v Official Trustee in Bankruptcy [1996] FCA 1074.
In that case a full court of the Federal Court was relevantly concerned with the meaning of the phrase in s.116(3) “the whole, or substantially the whole, of the money paid.”
It is appropriate to set out the terms of ss.116(3) and (4) of the Bankruptcy Act 1966.
“116(3) – Where, at any time, the whole, or substantially the whole, of the money paid for the purchase, or used in the acquisition, of particular property is protected money, paragraph (2)(n) applies to the property.
116(4) – Where, as at the time when the trustee realises particular property to which paragraph (2)(n) does not apply, the outlay in relation to the property is in part protected money and in part other money, the trustee shall pay to the bankrupt so much of the proceeds of realising the property as can fairly be attributed to that protected money.”
It is sufficient for these purposes to say that it is common cause that the payments received in compensation payments by Mr Reaper are protected money for these purposes.
In Turnerv Official Trustee in Bankruptcy the Full Court said relevantly (at page 5 of 6):
“In Re Iskenderian; Ex parte Iskenderian Bros Pty Ltd (1989) 21 FCR 363, 372 Neaves J, whilst dealing with other difficulties created by s116(3) in its then form, considered that the question posed by the section was “whether the property, in truth, represents such damages or compensation”. This decision was followed in Re Manivilovski Ex parte Official Trustee in Bankruptcy (1993) 45 FCR 358. Such an approach gives effect, correctly in our view, to the word “whole” and the phrase following “or substantially the whole”. The section requires, in the first instance, a consideration of the question whether the property is entirely accounted for by the application of protected monies. If that is not the case, but nevertheless those monies account for nearly all of what has been used in paying for or in the acquisition of the property, then this too will suffice to keep the property from being divided amongst creditors. But the sub-section does not contemplate that property will be withheld from creditors wherever the protected monies can account for a significant part of the purchase price, or the means by which it is acquired. Even if, as here, the contribution of protected monies could be described, in general terms, as “substantial” this would not satisfy the requirement that those monies represent “substantially the whole” of that price or of the means of acquisition. Whilst “substantial”, when it appears alone, might refer to a contribution of significance, here it derives its meaning from “the whole”, the expression which it qualifies. The importance of the context supplied for the word “substantially” was emphasised by Hill J in Secretary, Department of Social Security v Wetter [1993] FCA 17; (1993) 112 ALR 151, 158-9, in relation to other statutory provisions. In our view, s.116(3) provides that a bankrupt may retain property that can be seen to represent the protected monies, subject to only a minor qualification of input from other sources.”
Counsel submitted that in the light of this authority it could not be said in this instance that the whole of the property had been purchased with protected monies. From 2003 until 2007 both applicants contributed. This was submitted to be either in the proportion indicated by their incomes in the mortgage application or at the worst 50/50. It was submitted that s.116(3) did not apply.
The main issue, it was submitted, was s.116(4).
Counsel referred the court to two authorities in relation to the operation of s.116(4). In Re Manivilovski; Ex parte Official Trustee in Bankruptcy (1993) 117 ALR 537 at 542 Davies J, having referred to an approach to the exercise under s.114 not wholly dissimilar to that urged by the respondents in this case said:
“In my opinion, that is too simplistic an approach. Section 116(4) requires the trustee to pay to the bankrupt so much of the proceeds that realise in the property “as can fairly be attributed to that protected money”. The whole of the circumstances of the case must be taken into account. To ascertain what sum can fairly be attributed to the outlay of the protected money requires that a fair assessment be made of the part which the payment of the protected money played in the achievement of the final receipt. In this task, it may be necessary, in a particular case, to apportion or dissect expenditure or to make allowances or adjustments so as to achieve a sum which fairly reflects the significance of the protected expenditure in relation to the overall expenditure in the purchase or acquisition or improvement of the property.”
Counsel also referred the court to Stankovic v Van Der Velde [2012] FCA 1436 where Emmett J observed at [11]:
“Absent such evidence, I consider that the appropriate conclusion to be drawn is that the proceeds of realising 79 Terry Road can fairly be attributed to the funds that were provided to Iron Base by Mr Stankovic from the Compensation Monies. However, one half of the amount provided should be presumed to have been the subject of a gift by way of advancement to Mr Stankovic’s wife. The part of the proceeds of the sale of 79 Terry Road attributable to that half cannot be treated as attributable to the Compensation Monies.”
This extract is of some significance because, as I find, all the payments made in respect of the mortgage on the property from the time that Mr Reaper went on to payments and his wife ceased work and became his carer were made from his compensation funds.
I accept the evidence of Ms Fisher in particular. She was an excellent witness. I accept that the family benefits that she received from time to time were for and were applied to the benefit of the children. I also accept that her clearly variable and on any view of the matter very small earnings from time to time were applied solely to meet personal expenditure on her part. While in one sense this forms part of the overall financial circumstances of the family, the amounts involved are so small it is appropriate to give them no weight.
The observations of Emmett J are clearly therefore directly applicable here. Mr Reaper and Ms Fisher own the property jointly. Accepting as I do that all payments made in respect of the mortgage since 2007 were made from protected funds accruing to Mr Reaper it necessarily follows that half any accrual in the overall value of the property in that time must devolve to Ms Fisher.
Counsel submitted that following the appointment of the trustee on 7 March 2013 it followed as a matter of law that the interest of Mr Reaper vested in the trustee. It was therefore submitted that all payments thereafter should be credited to the wife. While this is probably correct as a matter of law, it ignores the fact that the funds remain those of Mr Reaper personally. I would take him to be applying them to his own interests. In any event the amounts by which these payments may have diminished the mortgage in the last 18 months would, on any view, be small. The mortgage has a very long time still to go. In all the circumstances, while acknowledging the force of the submission, I am not prepared to make an adjustment in that regard.
Finally counsel submitted that the children’s advances are all loans. Emily Reaper’s first payment was made on 7 March 2013, on the same day as the bankruptcy. Tamara’s position is the same. Any payments after 7 March 2013 must be assumed to be to Ms Fisher’s benefit.
Ashleigh Reaper paid $1,900 in cash prior to 7 March 2013 but all other payments were thereafter.
If one looks at the affidavits of the three children it is immediately apparent that what they did was to advance funds to assist their parents in paying the mortgage once the father’s work cover payments ceased in 2013. The language of these affidavits is imprecise and not supported by a written agreement. It is quite clear to me reading these affidavits that the monies at the very best were advanced as a loan to their mother, save for the payments which proceed 7 March 2013 in the case of Ashleigh in the amount of $1,900. (Tamara Reaper’s affidavit merely shows her earnings from McDonald’s in 2011 to 2013. It does not suggest any payments to the respondents’ mortgage.)
The vague assertions advanced by all three children that it is agreed that they own 10 per cent of the property each are clearly wrong. The trivial payments made by them in this regard would never fairly ground an outcome of that sort as an equitable claim. I leave to one side for these purposes the obvious difficulties with the Statute of Frauds.
In submissions Mr Reaper made it clear that he relied upon his affidavits and sought the dismissal of the application. He said his claim under s.153B is not concluded, that his compensation claim remains outstanding in the County Court of Victoria and will ultimately be finalised.
In final submissions Ms Fisher referred to the amended application. She referred to the trustee’s costs. She said that she is not bankrupt and should not have to pay the trustee’s costs.
Consideration
As I think I have already indicated it is not possible, at least at present, to sustain the respondents’ assertion that the entirety of the property can be attributed to the protected payments paid from time to time to Mr Reaper. There is no valuation beyond vague assertions by Mr Reaper as to the value of the property at the time he commenced compensation payments in May 2007. Clearly a retrospective valuation together with a current valuation are required.
The value of the property in net terms has increased since 2002 by two means. The first are the payments on the mortgage. The second, and far the greater at this stage, is the actual increase in the value of the property itself as a result of increased property values.
The methodology that it seems to me is eminently fair in the particular circumstances of this case is to ascertain the value of the property and the extent of the mortgage in 2007 thus isolating the then net equity. That net equity is plainly not referrable to any protected payments to Mr Reaper. It may however be the case that the actual increase in value is very small. That might then resuscitate the s.116(3) case upon which the respondents advance. It is eminently in their interests that these figures be ascertained.
The next step in the methodology is to ascertain the value of the property now and the value of the mortgage. Half of the increase from 2007 until 2014 (or early 2015 as I suspect will be the case) is plainly directly attributable to Mr Reaper’s protected payments. The other half, adopting the reasoning of Emmett J in Stankovic v Van Der Velde is clearly attributable to Ms Fisher.
Once these figures are ascertained it will be possible to determine whether the respondents are able to purchase out the trustee’s interest in the property.
Conclusion
The particular and most unfortunate circumstances of this case mean that it is not possible at this stage to bring the matter to a conclusion. The valuations to which I have referred and the mortgage figures will need to be made available.
I have noted the position of Ms Fisher in relation to costs and self-evidently no costs order can be made against Mr Reaper.
I would wish to see the results of the exercise that I am going to direct as to valuations before forming any view as to what the final disposition of any applications for costs should be.
I have formulated draft orders to give effect to these conclusions and will hear from the parties further.
I certify that the preceding seventy-eight (78) paragraphs are a true copy of the reasons for judgment of Judge Burchardt
Associate:
Date: 10 February 2015
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