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Fletcher v George & Ors (No.6) [2009] FMCA 69 (9 February 2009)

Last Updated: 20 February 2009

FEDERAL MAGISTRATES COURT OF AUSTRALIA

FLETCHER v GEORGE & ORS (NO.6)

BANKRUPTCY – Summary dismissal – determination of various trusts alleged by the bankrupt in respect of certain property – will trusts – resulting and/or constructive trusts – indefeasibility of title by the mortgagee.


Bahr v Nicolay (No 2) [1988] HCA 16; (1988) 164 CLR 604
Barnes v Addy (1874) LR 9 ChApp 244
Cope v Keene [1968] HCA 53; (1968) 118 CLR 1
Danish Bacon Co Ltd Staff Pension Fund Trusts, In re [1971] WLR 248
Esso Australia Resources Ltd v Commissioner of Taxation [1999] HCA 67; (1999) 201 CLR 49
Farah Constructions Pty Ltd v Say-Dee Pty Ltd ( 2007) 230 CLR 89; [2007] HCA 22
Friedman v Barrett; Exe parte Friedman [1962] Qd R 498
George [2005] FAMCA 309
George v Fletcher [2008] FCA 1848
Macquarie Bank Limited v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133
Pridmore & Ors v Magenta Nominees Pty ltd & Ors [1997] FCA 152
Tara Shire Council v Garner [2003] 1 Qd R 566
Wakim v HIH Casualty & General Insurance Ltd [2001] FCA 103; (2001) 111 FCR 58
White Industries Australia Limited v Commissioner of Taxation [2007] FCA 511; (2007)160 FCR 298

HAJ Ford & WA Lee, Principles of the Law of Trusts, Thompson Law Book Co, North Ryde, 2006
M Cope, Constructive Trusts, Law Book Co, Sydney, 1992

Applicant:
WILLIAM JOHN FLETCHER AS TRUSTEE FOR THE BANKRUPT ESTATE OF LAUREN KAY GEORGE

First Respondent:
LAUREN KAY GEORGE

Second Respondent:
DR PETER IRONSIDE PTY LTD ACN 008 126 387

Third Respondent:
DR PETER DOUGLAS IRONSIDE

Fourth Respondent:
NATIONAL AUSTRALIA BANK

Fifth Respondent:
SUSAN WILSON

Sixth Respondent:
RICHARD SIEBERT

File Number:
BRG 709 of 2008

Judgment of:
Burnett FM

Hearing dates:
8, 9 & 10 December 2008

Delivered at:
Brisbane

Delivered on:
9 February 2009

REPRESENTATION

Counsel for the Applicant:
Mr Coulsen

Solicitors for the Applicant:
Holman Webb Lawyers

The First Respondent appears on her own behalf

Counsel for the Second Respondent:
Mr Galloway

Solicitors for the Second Respondent:
Bell Dixon Butler

Counsel for the Third Respondent:
Mr Galloway

Solicitors for the Third Respondent:
Bell Dixon Butler

Counsel for the Fourth Respondent:
Mr Morgan

Solicitors for the Fourth Respondent:
Thynne & Macartney

Solicitors for the Fifth Respondent:
Lewis & McNamara

ORDERS

(1) Declare that the Heads of Agreement dated 19 February 2008 and exhibited at WJF-8 to the Affidavit of William John Fletcher sworn
29 October 2008 remains valid and enforceable.
(2) Declare that as at 24 February 2006 the legal and beneficial ownership of Lot 13 on SP145714, County of Stanley, Parish of Moggill, Title reference 50440445 vests in Applicant as trustee of the bankrupt estate.
(3) Declare that as at 24 February 2006 the legal and beneficial ownership of the Toyota landcruiser with the licence plate 590FXR, VIN Number: JT11UJA509019411 (V), Engine Number: 1FZ0444996 vests in Applicant as trustee of the bankrupt estate.
(4) Declare that as at 24 February 2006 the legal and beneficial ownership of the Hanoverian mare known as Stellamarra with the microchip number 939000001109809 vests in the Applicant as trustee of the bankrupt estate.
(5) Declare that Deed of Settlement between the Applicant and Susan Jane Wilson dated 28 October 2008 remains valid and enforceable and that it be performed.
(6) Adjourn for trial issues arising from relief sought in paragraphs 3, 4 and 10 of the amended application.
FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
BRISBANE

BRG 709 of 2008

WILLIAM JOHN FLETCHER AS TRUSTEE OF THE BANKRUPT ESTATE OF LAUREN KAY GEORGE

Applicant


And


LAUREN KAY GEORGE

First Respondent


DR PETER IRONSIDE PTY LTD ACN 008 126 387

Second Respondent


DR PETER IRONSIDE

Third Respondent


NATIONAL AUSTRALIA BANK

Fourth Respondent


SUSAN WILSON

Fifth Respondent


RICHARD SIEBERT

Sixth Respondent


REASONS FOR JUDGMENT

Introduction

  1. The applicant Trustee in Bankruptcy for the Bankrupt Estate of Lauren Kay George (the Trustee) seeks declarations in respect of certain property alleged by the first respondent, the bankrupt, to have been disposed of by her by settlement upon various trusts. The remaining respondents are the persons to whom the bankrupt says assets have been transferred. She claims they are held in trust by those respondents in the various trusts for her son.
  2. The Trustee denies that the bankrupt’s purported settlement of assets upon the claimed trusts constituted any disposition by her and seeks declarations of entitlement and orders for the recovery of those assets.

Summary Dismissal

  1. Concurrent with the applicant’s proceedings in this Court there are related proceedings on foot in the Supreme Court of Queensland. In the Supreme Court proceedings the bankrupt person claims in her capacity as trustee for her son Alexander William George (an infant). She has delivered a statement of claim to which various defendants have filed defences.[1] She seeks declarations, inter alia, in respect of the same property concerning which the Trustee makes a claim. The Defendants to those proceedings are respondents to the present proceedings.
  2. Following application to this Court by the Trustee it was determined that this Court should proceed to determine the Trustee’s amended application despite the concurrent Supreme Court proceedings. That decision was affirmed by the Full Court upon appeal following application for leave to appeal and appeal by the bankrupt.[2]
  3. The Supreme Court proceedings are in abeyance. His Honour Justice Martin determined not to proceed further with them until this proceeding was resolved.[3] Although more recently they too have been listed for hearing on dates following the resumption of this application.
  4. At the time this Court determined to proceed to hear this matter it was directed that the pleadings and other relevant material filed in the Supreme Court proceeding be adopted into this proceeding.
  5. The Trustee’s original evidence in this proceeding demonstrated a strong prima facie claim to title in assets the subject of the amended application. The bankrupt denies the Trustee’s claim and asserts a series of trusts have been created and the assets settled upon trusts for the benefit of her son. The remaining respondents (except the National Australia Bank (the Bank) and Mr Siebert) repudiated any such claims concerning title and have acknowledged that assets transferred to them were indeed transferred for them to hold on trust for the bankrupt. They do not accept that they hold assets in their own right or on trust for any third party alleged by the bankrupt but only on trust for herself. They join with the Trustee in seeking the declarations sought.
  6. The Bank claims in respect of its interest as mortgagee, being security for a loan made by it to the second and third respondents. It too supports the Trustee’s claim. In particular it denies it holds its interest in the Moggill land subject to any constructive trust in favour of the bankrupt’s child. It wishes to enforce its rights against the Trustee. So far as the second respondent Mr Siebert is concerned all parties accept that property claimed by him is his.
  7. In the circumstances the Trustee and each of the second, third, fourth and fifth respondents each agree with the facts as alleged by the Trustee. The bankrupt was the only party in disagreement by asserting the existence of various trusts. The remaining parties deny the trusts. They do not assert any positive case in respect of the alleged trusts. If the property is in fact subject to trust then the Trustee’s claim will fail. Likewise the position of each of the respondents (apart from the bankrupt) will be clarified. A determination on that point would resolve whether they are trustees for the bankrupt’s son as alleged by the bankrupt or as trustees for the bankrupt, as alleged by the Trustee.
  8. The Trustee contends that given the bankrupt’s evidence, at its best, her claims concerning the trusts must fail as a matter of law. The second, third and fourth respondents share this contention. If that is so then the bankrupt’s claim will fail. The consequences of such a finding will be that the Trustee is entitled to the orders sought in the amended application.
  9. The bankrupt also seeks relief in respect of alleged unconscionable conduct by the Bank. The Trustee and the Bank say those proceedings are personal to the bankrupt and they vest in the Trustee pursuant to section 58 of the Bankruptcy Act 1975 (Cth) (“the Bankruptcy Act”). Accordingly they cannot be enforced by the bankrupt but must be pursued, if they are to be pursued, by the Trustee if such claims are not exempt property under section 116(1)(g) of the Bankruptcy Act. If that submission is accepted the entire application may be resolved summarily. It is best that this matter be considered now at the outset of the trial as its outcome may bear significantly on the ambit of evidence to be heard and the length of the trial.
  10. Accordingly the Trustee and the other respondents have applied to have the substantial matters of the application resolved on a summary basis pursuant to section 17A of the Federal Magistrates Act 1999 (Cth) (“the Federal Magistrates Act”). That section provides:
  11. In White Industries Australia Limited v Commissioner of Taxation (2007) FCA 511 Lindgren J noted at [50]: “Section 31A of the FCA Act, like 0 20 of the Rules, is concerned with the bringing and defending of proceedings, not just with pleadings; with substance, not just with form...” His Honour continued:
  12. His Honour noted at [55] that section 31A was identically worded in section 17A of the Federal Magistrates Act and accordingly it follows that those principles should apply to that section.
  13. It follows that if in this case the Trustee can demonstrate that there are no reasonable prospects of success for the bankrupt, even accepting her case at its best, then such application ought be entertained and, if appropriate, orders made summarily dismissing those parts of the bankrupt’s response to the Trustee’s claim in respect of which she has no reasonable prospects.
  14. In this case many of the arguments are essentially legal and plainly lend themselves to this process. To facilitate this approach the applicant and each of the other respondents agree the application should be approached on the basis of the bankrupt’s case being accepted at its best.

Background Facts

  1. The bankrupt’s difficulties commenced following a very acrimonious matrimonial proceeding. Following the trial she received a costs assessment in respect of legal costs incurred in the sum of approximately $111,000. She either could not or refused to pay her solicitor those assessed costs. The solicitor delivered a bankruptcy notice. In the meantime the bankrupt filed a debtor’s petition on
    21 February 2006 and by operation of that petition her estate was sequestrated. There are only limited material factual issues in contest between the parties. Unquestionably where factual issues arise they are significant. However for reasons which follow and are relevant to the application made by the Trustee and other respondents for summary relief I am asked to accept the bankrupt’s case at its best. The following summary of facts adopt that approach.

Real Estate Holdings

  1. For many years prior to the relevant marriage the bankrupt worked in the banking industry. She lived in South Australia and had acquired property in her own right. It was said that at the time of her marriage she had at various times owned four pieces of real estate in South Australia.[4] Although not strictly material to this application I note that in her matrimonial proceedings before Barry J in 2005 her evidence (which was accepted on that point) was that at that time she owned a property at Karsbrook with her first husband. There does not appear to have been evidence of the other three properties although I note there was reference in evidence by her to a unit. Evidence of the other holdings was not in dispute.
  2. The realisation of her real estate holdings was said to have provided the source of funds which were eventually available to her and her second husband to purchase the former matrimonial home at Pullenvale. That property was purchased in 1998 and registered in her name. It was accepted by Barry J that the property was purchased solely in her name for appropriate reasons. Despite it being purchased solely in her name His Honour accepted and treated it as matrimonial property for the purpose of the property proceedings between the bankrupt and her former spouse although he did accept “a large proportion of the funds used as equity for the Pullenvale property came from the [bankrupt]”[5]; although “to the extent of $200,000 as claimed, I am unable to (find)”.[6]
  3. After the bankrupt and her husband separated in 2001 the bankrupt unilaterally liquidated the Pullenvale property realising a sum of approximately $743,000. She used part of the funds to acquire the Moggill property which was then vacant land.[7] The historical search reveals the registration of transfer occurred on 23 December 2003 and a certificate of title then issued.[8] A mortgage with the National Australia Bank was registered on 14 July 2004. This approximates with the date of contract for the construction of a house on the Moggill property. Although the bankrupt referred to the construction agreement as being executed in about June 2005 (T page 191 line 5) it seems likely that the reference to 2005 is in error as I note from the contract of sale executed on 18 June 2005 that the “present use” of the property was noted as “residential” and it purported to provide for a long term lease-back arrangement. It is unlikely that such an agreement would have been concluded in the absence of the construction of the dwelling upon the property.[9]
  4. From the chronology provided in the Family Court proceedings it is apparent the property was acquired prior to the resolution of that dispute and accordingly remained matrimonial property as defined.
  5. As contended by the Trustee it is plain the bankrupt could not have had title of the Moggill property to convey to any third party interest in that property as trustee or otherwise at least until after the orders of Barry J made on 29 April 2005.
  6. It follows the Moggill property, which by that time appears to have included the completed residence, was from that time capable of disposition by the bankrupt but not before.
  7. In June 2005 the bankrupt in her own right entered into a contract to sell the Moggill property to the second respondent Dr Peter Ironside Pty Ltd (DPIPL) for a sum of $400,000. The contract was not subject to any encumbrances but did include provision for a 30 year tenancy agreement in her favour at a set rental.[10] The bankrupt contends that at the same time a collateral agreement to transfer the property back to her by DPIPL was also concluded.
  8. On 14 September 2005 a memorandum of transfer giving effect to a contract of sale dated 18 June 2005 was executed by the bankrupt as a vendor. Shortly before this time on 27 August 2005 the hand written memorandum of transfer providing for a transfer of the Moggill property by DPIPL to the bankrupt in trust for Alexander George of a “fee simple life estate” (sic) was executed by DPIPL. It is to be noted that there was no formal contract in writing prepared in support of that transfer. The consideration was noted on the transfer to be “$400,000 (four hundred thousand dollars) on or before death”.[11] There was some debate about the nature of the interest transferred i.e. whether it was fee simple or merely a life interest but for present purposes that matter is not material.[12]
  9. Only the transfer from the bankrupt to DPIPL was ever registered. The evidence does not suggest that any third party ever had notice of the unregistered transfer executed by DPIPL on 27 August 2005.
  10. In the meantime relations between Dr Peter Ironside and the bankrupt’s sister, Susan Jane Wilson (formerly Ironside), soured. They separated and commenced property proceedings in the Family Court. The Moggill property formed part of the matrimonial estate in that proceeding. The bankrupt sought to intervene in those proceedings to protect her claimed interest. The interest claimed by the bankrupt was in respect of the Moggill property itself. The terms of the heads of agreement made the subject of orders of 26 February 2008 in the Federal Magistrates Court in the Ironside proceeding relevantly provided:
  11. Otherwise the bankrupt as intervenor abandoned any claims “whether on her own account or as trustee with respect to the (Moggill) property.”[14]
  12. In the meantime the Trustee had become aware of the Ironside proceeding and the bankrupt’s intervention in it. The Trustee in turn intervened as the bankrupt’s trustee. As the Ironside proceeding was settled without need for judicial intervention the Trustee was able to negotiate a suitable outcome which involved the transfer of the Moggill property to him.[15]
  13. The bankrupt was also party to the Heads of Agreement and appears to have agreed its terms.
  14. By reason of the Heads of Agreement the Moggill property was transferred to the Trustee pursuant to a memorandum of transfer executed on 2 April 2008.[16]
  15. However shortly after that time it appears the bankrupt recanted on her earlier position agreed by the Heads of Agreement and sought to lodge a caveat to prevent registration of the transfer.[17]
  16. In a letter written in support of the caveat[18] the bankrupt claimed the Moggill property ought to have been registered in the name of the bankrupt as trustee for Alexander George.[19]

Chattels

  1. Throughout this period the bankrupt also acquired various chattels. These included livestock, in particular a horse named Stellamarra, a Toyota Landcruiser motor vehicle, a horse float, jewellery[20], furnishings and personal effects.[21] Some of the furnishings and personal effects were the product of a bequest by the bankrupt’s late mother.
  2. As at the date of the decision of Barry J in the matrimonial proceedings the chattels in the possession of the bankrupt and their value was as follows:

Landcruiser $25,000

Horse float $850

Horses $51,906

Furniture $520

Jewellery $10,000

  1. The bankrupt received the chattels following trial.[22] It was also directed that she was to stand possessed of any chattels then in her possession.
  2. Save for the issue of the provenance of the horse Stellamarra and the Toyota Landcruiser no other substantial issues have arisen in this proceeding concerning the other chattels. The bankrupt alleges that those other chattels are vested in various trusts which are the subject of examination below.

Stellamarra

  1. A significant issue arises concerning the horse Stellamarra. In her explanation to the Court in evidence given on 3 November 2008 the bankrupt swore that the horse was imported from the United States.[23] She stated that in 2002 the horse was transferred to her sister.[24] Clearly this evidence was in error given that the horse was foaled on 4 February 2003.[25] I proceed on the premise that any arrangement and transfer was concluded some time after that date. A transfer of ownership form was executed on 11 September 2005. It purported to effect a transfer to Susan Jane Ironside.[26]
  2. In the judgment of Barry J of 25 April 2005 reference was made to “horses (sold by wife)”. The horses were not further particularised.[27] However given the timing, I assume the horses referred to in His Honour’s decision did not include Stellamarra for reasons which follow. However His Honour’s orders proceeded to make allowance to the bankrupt for title to the horses (or at least their money’s worth). It follows that save for the evidence of timing of the differences between His Honour’s finding and the fact of sale such differences are inconsequential in the present context.
  3. Further it is not in contest that the bankrupt says she was to enjoy a right “to use the horse (Stellamarra) to ride the horse, to compete the horse”.[28]
  4. Following execution of the search warrant various documents were removed from the bankrupt’s property. They included documents relevant to the horse Stellamarra.[29] In particular they included a certificate of registration dated 20 April 2006 issued by the Equestrian Federation of Australia.[30] It identified that the horse named Stellamarra foaled on 4 February 2003 was then registered in the name of Susan Jane Ironside. Although the form included a “transfer of ownership” section it was unmarked. Additionally a policy of insurance issued on 10 November 2005 noted the insured as Susan Jane Ironside.[31] Finally there was also included an undated and incomplete “Equestrian Queensland application for transfer of horse registration”. That document had been signed by Ms Ironside but was otherwise incomplete.[32]
  5. Other documents recovered also included a will dated 21 March 2006 which included a disposition expressed in these terms:
  6. On 14 October 2008 the Trustee issued a section 77A notice to Susan Jane Wilson (formerly Ironside) the bankrupt’s sister. It requested she provide information regarding her dealings with the bankrupt’s affairs.
  7. On or about 15 October 2008 Ms Wilson called Ashley Mulhall, an accountant employed by the Trustee. During the course of that conversation Ms Wilson advised Mr Mulhall:
  8. On 16 October 2008 Mr Mulhall received a facsimile from Susan Jane Wilson formally responding to the section 77A notice. She confirmed in writing that she had been approached by the bankrupt to register the horse known as Stellamarra into her name as well as the Toyota Landcruiser referred to in the section 77A notice. She stated that at the time she was asked to do this the bankrupt did not disclose that she was an undischarged bankrupt.[34] In particular by way of explanation Ms Wilson noted in her letter:
  9. Subsequently on 28 October 2008 Ms Wilson entered into a deed with the trustee in respect of those assets.[36] In the recitals concerning the horse Stellamarra she particularly noted that the bankrupt had asked
    Ms Wilson to become the registered owner of Stellamarra to “prevent her ex-husband claiming an interest in it” as a result of her divorce proceedings and agreed to transfer those assets back to the Trustee.
  10. It is unclear from the judgment of Barry J whether in fact any argument of trust was advanced in the matrimonial proceedings because His Honour’s judgment proceeds on the premise that the horses formed part of the matrimonial estate. It is however interesting to note that there was clearly evidence of a transfer before His Honour as His Honour noted the value of the horses as they had been sold.[37]
  11. On 30 October 2008 Ms Wilson subsequently executed a letter in these terms:
  12. Clearly Ms Wilson initially sought to recant from the position expressed in the deed of 28 October 2008. Her position was best articulated in a letter from her solicitors Lewis & McNamara to the trustee’s solicitors dated 17 November 2008 (Exhibit 13) where in broad terms her solicitor noted in the conclusion:
  13. It is not unreasonable to infer from the circumstances, particularly having regard to the sibling relationship between the applicant and Ms Wilson, that she was subject to considerable pressure from that quarter as well as from the Trustee.
  14. Despite the history documented above the bankrupt contends that in fact she never owned the horse. In material filed in support of her appeal concerning earlier orders made by this Court she enclosed documents which in the absence of explanation support her contention that the horse was never registered in her name but was always the property of her sister, Susan Jane Wilson (formerly Ironside). Annexure E to the bankrupt’s affidavit sworn on 1 December 2008 and filed in the Federal Court includes a copy of an overseas telegraphic transfer document issued by the Westpac Bank. It notes that the purchaser details were “SJ Ironside 130 Landing Place Moggill” and that that transfer occurred on 8 November 2005. The beneficiary account details were “Denise Higgins” reference “Stellamarra”. The amount transferred was USD$25350 which together with fees approximated AUD$35,038.98.
  15. A document issued by the American Hanovian Society on about
    19 February 2006 noted the breeder and owner of the horse as Denise Higgins. It also noted that a transfer of title of that horse occurred on 11 September 2005 in favour of Susan Jane Ironside. Notwithstanding any slight temporal discrepancy the documents support the bankrupt’s contention that the horse, Stellamarra, was never registered her name.
  16. In her submissions dated 8 December 2008 the bankrupt said that in January 2002[39] she gifted various horses held by her at that time to her sister. She said that those horses were in turn sold and the proceeds were used by her sister (and one infers for the purpose), in part, for the purchase of Stellamarra. She continued:
  17. Her explanation for the disposition was not to distance the horses from the property settlement but because her ex-husband was threatening to euthanise them. She continued:
  18. The ultimate result is that on any version the bankrupt is not the registered owner of Stellamarra. There are good grounds to believe that the horse is held by Ms Wilson in trust for the bankrupt. The bankrupt denies this despite Ms Wilson’s evidence to the contrary. However at worst her interest in the horse is her personal entitlement to use the horse.
  19. So much is indeed consistent with Ms Ironside’s statements to the Trustee and in particular her remarks in her letter of 15 October 2008 that:
  20. It follows that the only uncontested interest the bankrupt maintains in the horse is the alleged life interest to use the horse. Irrespective, the property is Ms Wilson’s to dispose of as she sees fit subject to the bankrupt’s personal claim. Ms Wilson has determined to transfer the chattel to the Trustee. The effect of the transfer is to deny the bankrupt enjoyment of her life estate. She has a remedy against Ms Wilson in respect of that breach. However it is a personal remedy and subject to s58 of the Bankruptcy Act.
  21. The life interest entitlement is a chose in action enforceable in equity. However upon her sequestration all her assets, including her chose in action concerning that claim vested in the Trustee and cannot be enforced by her. Pridmore & Ors v Magenta Nominees Pty Ltd & Ors[42] .
  22. In summary the bankrupt admits the horse belongs to her sister. Likewise given her only interest claimed is the chose in action in respect of an alleged life interest. This has now vested in the Trustee. The bankrupt has no reasonable prospects of successfully defending the Trustee’s claim to title of the horse Stellamarra and the issue should be determined summarily in favour of the Trustee.

Toyota Landcruiser motor vehicle

  1. The Trustee claims an interest in a Toyota Landcruiser motor vehicle. It was valued on 27 November 2008 at approximately $10,000 (forced sale) to $15,000 (going concern) following a valuation requested by the Trustee.[43]
  2. The vehicle was the subject of the matrimonial proceedings and was accounted for in the calculation of the matrimonial property pool. It was by inference the subject of orders made on 29 April 2005. By reason of those orders the vehicle ended up in the possession of the bankrupt.
  3. A search of Queensland Transport records revealed the vehicle was owned by the bankrupt but was subsequently transferred by the bankrupt to her sister Susan Jane Wilson on 31 May 2005.[44] So much was admitted in broad terms by the bankrupt in the course of the proceedings.[45] That position continues as documents recovered at the bankrupt’s premises reveal.[46]
  4. It is also worthy of note that among the bankrupt’s papers there also existed an incomplete vehicle registration transfer application executed by Ms Wilson but otherwise undated.[47]
  5. In her telephone conversation with Mr Mulhall of the Trustee’s office Ms Wilson informed him the vehicle was transferred into her name to prevent the bankrupt’s former husband from taking it during the divorce proceedings.[48] Ms Wilson’s subsequent letter of 15 October 2008 explained that she became the registered owner of the Toyota Landcruiser at the bankrupt’s request. She stated the reason she accepted the transfer was, as with the horse Stellamarra, to assist her sister through the messy matrimonial proceedings. She noted she did not maintain the car and that she believed it was located at Moggill. It was not in her possession at Hervey Bay.[49]
  6. There was other evidence to suggest the vehicle was held by Ms Wilson for the bankrupt. That included the bankrupt’s expression in her will of 21 March 2006 purporting to bequest the vehicle to her trustees to be realised for the benefit of her son.
  7. In any event Ms Wilson seeks to transfer title in the vehicle to the Trustee. She holds both legal and equitable title as contended for by the bankrupt. It follows Ms Wilson is within her rights to transfer the vehicle to the Trustee. Alternatively if she holds the vehicle beneficially for the bankrupt as is contended for by the Trustee it is within her power to convey legal title to the Trustee with the bankrupt’s beneficial title following by operation of section 58 of the Bankruptcy Act. It follows that irrespective of the resolution of that factual contest Ms Wilson is able to convey the vehicle to the Trustee as she agreed to do by the deed of 28 October 2008.
  8. When pressed, the bankrupt’s claim in respect of the vehicle was in fact premised upon a concession by her that the vehicle was hers.
    She contended however that pursuant to section 116(2)(ca) of the Bankruptcy Act the Toyota Landcruiser was exempt property as it was her primary means of transport and its aggregate value did not exceed the amount prescribed by regulation.[50]
  9. The only evidence of valuation was that provided by the Trustee. The valuation was well in excess of the prescribed amount. It follows that placing the bankrupt’s claim at its highest, she has no legal or beneficial interest in the vehicle. No factual issue arises for determination concerning the transfer of that vehicle to the trustee. If she was in fact beneficially entitled to the vehicle, its value is in excess of the regulated amount. Accordingly it is an asset prima facie available to the Trustee and the bankrupt does not have any reasonable prospects of defending the Trustee’s claim for it.

Horse Cabernet and horse float

  1. At the time of execution of the warrant the bankrupt also had in her possession a horse float and horse named Cabernet together with a small quantity of riding equipment in respect of which she claimed she was not the proprietor. The bankrupt claimed that the sixth respondent, Richard Siebert was the owner of those chattels.
  2. On 5 December 2008 the parties furnished to the Court terms of consent orders in respect of those chattels. In broad terms the orders acknowledged the title of those chattels vested with Mr Sierbert. Orders and declarations are made in those terms.

Remaining Chattels

  1. In her statement of claim the bankrupt claims an interest in an unregistered horse float, household effects and jewellery. Reference is made to a “deed of trust dated 28/4/2000”. However the bankrupt also contends that trusts were orally created. The Trustee denies such trusts were created and wishes to put the bankrupt to proof on this issue.
  2. These assets were recovered by the Trustee upon execution of warrants in October and November 2008 and they are presently held by him.
  3. Personalty may be the subject of oral declarations but the parties do not agree on the evidence concerning this issue. It follows that the Trustee’s claims for declarations in respect of these chattels cannot be resolved summarily and will have to be determined following trial.

Trusts

  1. In her further amended statement of claim (statement of claim) Ms George alleges trusts in respect of the subject property. They were summarised by the Trustee in his submissions as being:
    1. The 1997 trust;
    2. The May 2002 trust;
    1. The December 2003 trust;
    1. The June 2005 agreement;
    2. Paragraph 11(2) trust; and
    3. The resulting and constructive trust.
  2. In addition to those trusts she also alleges a trust was established by operation of a will prepared by her in August 2005.

Will Trusts

  1. Although not pleaded in her statement of claim Ms George alleges an express trust was created by various wills prepared by her.[51] Those wills include a will executed on 28 April 2000[52]; a will executed on
    27 August 2005[53]; and finally a will executed on 21 March 2006.[54]
  2. Each of the wills had a common provision providing that upon her death her real property was to be transferred to a trust for the benefit of her son, Alexander George. Each will varied in the expression of the terms of the testamentary trust but in principle that intention remained intact. That is to say a trust was to be created to hold her real property for the benefit of her son Alexander George.
  3. In addition the various wills also made provision for the bequest of chattels to the bankrupt’s son. These chattels variously included motor vehicles, livestock and jewellery.
  4. First, a will by which a testamentary trust could be established does not have any operation until the will maker is dead. For a trust to be created two essential characteristics must exist. First there must be an intention to settle property upon trust. Secondly the intention must be manifest by a disposition of the property beyond the recall of the settler. While the expression of the will may indicate an intention to dispose it does not of itself, without more, effect any disposition beyond the recall of the settler, at least while she is alive. Indeed, as was submitted by Mr Morgan for the Bank, until the bankrupt is dead her property is hers beneficially to deal with by her will. Arguably her various wills reflect this matter and constitute an admission by her of her entitlement and capacity to deal with such real estate and chattel holdings.
  5. The bankrupt’s assertion of a trust premised upon the provisions of her various wills do not establish any trust in respect of that property. Respectfully, her submissions fail to appreciate the significance of irrevocable disposition. It follows in my view that as a matter of law no trust was effected by any disposition manifest in any will and the bankrupt has no reasonable prospects of success in respect of that claim.
  6. In respect of the will claims it is to be noted that the bankrupt claims at least one of the wills was unlawfully seized by the Trustee pursuant to the warrant executed. She claims privilege in respect of that document. The will is not a privileged document. It cannot be said that the dominant purpose for the preparation of any of the wills was in connection with the giving or obtaining of legal advice or the provision of legal services, including representation in proceedings in a court. See Esso Australia Resources Ltd v Commissioner of Taxation[55].
  7. The subject will was a document procured pursuant to a warrant ordered on 29 November 2008. The document was within the class of documents permitted to be seized pursuant to the warrant and in my view it was not unlawfully seized.
  8. In any event the matters raised by the bankrupt on this point do not address the substantive issues submitted by the Trustee and it follows I reject her submissions on this point.

The 1997 trust

  1. At paragraph 2 of the amended statement of claim filed 15 July 2008 the bankrupt pleads that “a clear effectual resulting trust in fee simple” was established by way of deed of transfer for the benefit of Alexander (the 1997 trust). This matter was reflected in the amended statement of claim filed 19 December 2008 at paragraph (2)(e)(xviii) as follows:
  2. Despite numerous requests made of the bankrupt no trust deed dated 1997 has ever been produced by her. She has been afforded numerous opportunities to present such a deed which (prior to her most recent pleading) she maintains exists. However despite the presentation of such opportunities no deed has been submitted by her. In the absence of documentary evidence, at its best, her case must be that the trust was one purported to have been created orally. If so it must fail, at least in respect of real property settlements. Section 11(1)(b) Property Law Act 1974 (Qld) (“the Property Law Act”) requires that with respect to the creation of interests in land by parole a declaration of trust respecting land must be manifested and proved by some writing signed by the person able to declare the trust. The evidence demonstrates a total failure of form in respect of this alleged declaration.
  3. In any event the bankrupt claims that this declaration trust is also by way of her will. If so, for reasons I have earlier addressed, I do not consider the will does in fact give rise to a trust in these circumstances and she has no reasonable prospects of success in an action on this point.

May 2002 Trust

  1. On 1 May 2002 the bankrupt endorsed a copy of the then current reprint of the Trusts Act 1973 (Qld) (“the Trusts Act”) (Reprint 4A) with the following words:
  2. There are no other markings upon the balance of the reprint of the Trusts Act.
  3. At the outset the Trustee contends the purported trust fails because of the uncertainty of its objects and particularly because it states the trustee holds the property, not on trust for the beneficiary, but rather the beneficiary holds a life interest in the property. I agree with that submission. The difficulty identified is highlighted by the words employed which on their face seem to provide for the granting of a life interest to the bankrupt’s son over property held by the bankrupt in some capacity as trustee.
  4. Moreover there is no vesting date: that may give rise to issues concerning the perpetuity period. Further what is to happen with the child’s interest received under the trust? No consideration appears to have been given to what happens when his interest ceases. There is no remainder or gift over. Land must always be the subject of ownership. The settlement fails to address that consideration. Finally it seeks to transfer the fee simple and life estate to the same person.
  5. In any event there is real doubt that the expression satisfies the requirements of section 11 of the Property Law Act irrespective of the purported granting of any life interest.
  6. However I consider the trust also fails for other reasons which follow.
  7. As noted earlier in the background facts this property was acquired during the course of the bankrupt’s marriage solely in her name.[58] It was accepted by Barry J that she had made a significant financial contribution to it. Importantly however it did form part of the matrimonial estate prior to its sale by the bankrupt. To that extent the bankrupt’s former spouse also held an interest in the property. Accordingly it was not solely hers to dispose of.
  8. It is plain that the bankrupt’s husband asserted his interest for in September 2003 he lodged a caveat to prevent the bankrupt from transferring the property following her unilateral determination to sell it. His grounds of claim noted in the caveat were:
  9. As further noted in the background facts the sale ultimately was permitted to proceed. Consequently on 7 November 2003 the transfer of the bankrupt’s estate in the Pullenvale property was recorded in favour of an unrelated third party Felicity Ann Hill on that date. For that to have occurred all encumbrances including the former husband’s caveat were necessarily released.
  10. However importantly for present purposes the bankrupt effected an unencumbered transfer of the estate alleged to have been the subject of the trust purportedly created on 1 May 2002. That is to say, despite any arguments concerning her entitlement to create any trust because of questions of her own entitlement.
  11. The Trustee denies that any such trust was ever created because no complete and perfect gift was made. As was submitted by the Trustee and supported by the other respondents the bankrupt’s attempt to create a trust without the conveyance of the legal estate into the trust was fatal to the claim. That is despite any purported conveyance of the equitable estate to the trust.
  12. In this case in May 2002 the bankrupt attempted to dispose of the Pullenvale land by purporting to create a trust in favour of her son. Putting aside her capacity to do so because of the interest claimed in the estate by the bankrupt’s former husband the purported gift was never perfected because the bankrupt transferred her interest to a third party. As a rule equity will not perfect an imperfect gift. An examination of the relevant provisions of the Land Title Act 1994 (Qld) (“the Land Title Act”) inform of the requirements for perfection of such a gift. First, the trustee of an interest may only have that interest registered by registration of an instrument of transfer of the interest to the person or trustee: s.109(a). From that it follows the registered Trustee of the interest would enjoy the vesting of the estate: s.182, and the consequent benefits of indefeasibility: ss.184 and 185. Additionally for present purposes such a person could rely upon the fact of registration as conclusive evidence of that matter: s179.
  13. Irrespective of any interest claimed by the bankrupt as trustee for her son she cannot enjoy the benefit of those provisions as she has never satisfied them.[60]
  14. In Principles of the Law of Trusts[61] the learned authors stated at [3120]:
  15. In this case it is clear that there was a failure to undertake all the necessary steps required at law to effect a transfer and registration of the bankrupt’s interest to the purported trust as are required pursuant to the provisions of the Lands Title Act.
  16. The bankrupt says however that it was her intention to effect such a conveyance. It follows that it is arguable on her case that in equity, at least, rights were sought to be and were created in favour of her son in respect of the Pullenvale property. She says such a transfer was to have immediate effect.
  17. In those circumstances there only can be an effective gratuitous transfer once the donor has done all those things prescribed by statue or the common law for the transfer of the legal title that have to be done by the donor and cannot be done by anyone else; see section 200 of the Property Law Act. Again the learned authors of Principles of the Law of Trusts summarised the principle as follows:
  18. Insofar as the purported 2002 trust is concerned it is uncontroversial that no steps were ever taken to satisfy the legal requirements for transfer to the intended trustee. In fact the bankrupt transferred the property for consideration to a third party, Felicity Ann Hill. If that conduct alone was not sufficient to demonstrate there was no intention in equity to effect a conveyance in favour of a trust for Alexander George then that conduct clearly achieved that outcome in law.
  19. There was no trust created by the 2002 document as asserted.
  20. If it was the bankrupt’s intention to simply gift the Pullenvale property to her son outright that outcome was not achieved. For the gift to have been effective there would have to be registration prior to transfer to a third party: Cope v Keene.[63] That did not occur in this case.
  21. No issues of “accessorial” involvement of the third party arise in this instance. It follows no gift was made.
  22. For completeness the bankrupt’s submissions on this point were not helpful. Although she noted the gift rule she did not address the Trustee’s submission that her transfer of the estate to the third party extinguished any claim that could have been advanced on behalf of any trust.
  23. In my view she has no reasonable prospects of successfully demonstrating a claim for declaration of trust of the Pullenvale property in favour of her son.

December 2003 Trust

  1. In December 2003 part of the proceeds of the Pullenvale property were applied by the bankrupt to the acquisition of the Moggill property. The bankrupt entered into a contract to purchase the Moggill property on
    5 December 2003. There was no suggestion of any third party having an interest in that property together with her at that time.
  2. On the same date as the contract to purchase that property the bankrupt endorsed a copy of the then current reprint of the Trusts Act (Reprint 4B) with the following words:
  3. The bankrupt contends that this effected a variation of the May 2002 trust in particular by the substitution of the Moggill property for the Pullenvale property as the relevant trust property.
  4. As I have earlier found the declaration of trust alleged to have occurred on 1 May 2002 was ineffective. No trust came into being for reasons I have outlined above. It follows no “rollover” occurred in the manner purported by the bankrupt.[64]
  5. The Trustee however concedes in his submission that concerning the Moggill property the bankrupt’s efforts at declaration of trust in that instance were clearer. It was submitted for the Trustee:
  6. Notwithstanding the Trustee’s concession on this matter many of the defects noted with the May 2002 Trust also exist with this instrument. There are real doubts that the necessary requirements are satisfied for the purported trust at first instance. Mr Morgan for the Bank submitted the terms of the alleged trust are uncertain and cannot be given effect to. He noted for instance that there was no vesting period as well as there being no ultimate disposition of the property. This he contended would cause the purported trust to fail because it contravened the rule against perpetuities.
  7. Despite this effort the declaration still failed to comply with the requirements of section 11 of the Property Law Act as it still appears to constitute no more than a mere nomination of the bankrupt’s child as a recipient of benefits. It does not constitute a disposition.[66] At best the declaration acknowledges the existence of a trust without more.
  8. It also suffers the same defect as the May 2002 trust in that it seeks to transfer the fee simple and a life estate to the same person.
  9. Even accepting this effort by the bankrupt prima facie succeeded in the creation of a trust ultimately the question remains as to whether it ultimately failed for want of form, particularly its failure to satisfy the requirements of section 200 of the Property Law Act.
  10. If it is accepted that an effective trust was created on 5 December 2003 the question remains as to whether or not there remains an interest in equity in favour of the bankrupt as trustee. No such interest exists at law because the property was registered in the name of the bankrupt without reference to the trust.
  11. In short, if there was an equitable interest then that equity was extinguished by the bankrupt’s subsequent conduct in transferring the property to DPIPL which in turn had its title registered free of the equity now claimed by the bankrupt (in any capacity): Farah Construction Pty Ltd v Say-Dee Pty Limited; Cope v Keene.[67] Clearly the bankrupt as trustee failed to do everything necessary to transfer the property to the trust, indeed she transferred it to a third party, DPIPL without any reference to the trust and DPIPL became registered proprietor simpliciter.[68] It is not to the point that DPIPL was also to hold the land as trustee because the registration of its interest without reference to any trust means that arrangement suffered the same fate as the bankrupt’s attempt in preserving the trust because of section 200 of the Property Law Act. This matter is more closely examined below.
  12. Likewise, for reasons discussed concerning the May 2002 Trust, if the bankrupt’s intention was to gift the Moggill property to her son it failed upon the transfer of the title to DPIPL without reference to any purported trust.[69]
  13. It follows I consider the bankrupt has no reasonable prospect of establishing her purported 2003 trust in respect of the Moggill property.

The June 2005 Agreement

  1. The evidence demonstrates that a transfer of title was lodged with the Queensland Land Registry on 24 December 2003.[70] The bankrupt’s interest was duly registered. No instrument was ever created to register the interest of the bankrupt as trustee, notwithstanding her declaration of 5 December 2005: s.109(a) Land Title Act. Then on 18 June 2005 the bankrupt entered into a contract to sell the property to DPIPL, a company associated with her former brother-in-law. The sale was not noted to be subject to any encumbrances but it did grant a tenancy to the bankrupt for 30 years. Concurrent with this contract there was a collateral agreement that the bankrupt could repurchase the property from DPIPL at an agreed consideration of $400,000.
  2. The memorandum of transfer in respect of that contract was duly executed by the bankrupt and lodged with the Queensland Land Registry on 20 October 2005.[71] The transferee noted was DPIPL and the title was duly registered in the name of DPIPL.
  3. In support of the collateral agreement a concurrent transfer was executed on 27 August 2005, DPIPL to transfer the Moggill property back to “Lauren Kay Cordes in trust for Alexander George” subject to a life interest to the bankrupt. That transfer was duly completed by all parties and to all intents and purposes in form appears capable of immediate registration.[72]
  4. There was a factual dispute concerning this matter. The Trustee and DPIPL and Dr Ironside allege the words “life interest” and “in trust for Alexander George” have been added later. That is to say that the transfer merely purported to effect a transfer by DPIPL back to the bankrupt, simpliciter upon payment by her to it of “$400,000 on or before (her) death”. A debate arises concerning the original transfer; the bankrupt alleging her holding in the capacity of trustee with DPIPL and Dr Ironside denying that matter.
  5. Irrespective of that debate, and even if the bankrupt were a voluntary assignee of that interest[73], the evidence is that this form 1 transfer was provided by the bankrupt to the Trustee.[74] Clearly it is to be inferred that the transfer was in the bankrupt’s possession prior to that time. However, was that enough to preserve her alleged equity (in either capacity)?
  6. Section 200 of the Property Law Act provides:
  7. Registration of the transfer could not be effected by the bankrupt (in any capacity) until the mortgage was released. The mortgage has not been released[75]. Accordingly DPIPL as assignor has not done everything to be done by it that is necessary in order to transfer the property to the bankrupt (in whatever capacity) as assignee. The release of the mortgage is not a thing that could afterwards be done without intervention of or assistance from the assignor.
  8. It follows that even if accepting every point along the way were to be determined in the bankrupt’s favour, ultimately because of section 200 of the Property Law Act, no effective assignment of equity was effected in this instance and DPIPL as registered proprietor holds title to the Moggill property free of any equitable claim.
  9. If the position was as asserted by the Trustee then the bankrupt holds an executed transfer entitling a re-conveyance in the Moggill property subject to terms. They had not been fulfilled prior to her sequestration.
  10. Given that at that time her interest pursuant to the executed transfer was not registered that fact is fatal to her claim: Cope v Keene (supra).
  11. In Cope v Keene (supra) Kitto CJ observed at [7]-[8]:
  12. The circumstances of sequestration are analogous to those involving death. In the event of sequestration the rights of the bankrupt vested in the trustee: not unlike the vesting of rights in an executor in the event of the death of a testator.
  13. Accepting the observation of Kitto CJ as applicable in this case the failure to lodge the transfer for registration prior to sequestration was fatal. Even if the bankrupt did create a trust she did not perfect the gift to that trust.
  14. It follows from either analysis, that being the case asserted by the Trustee or the bankrupt’s case at its highest, no trust now exists in respect of the June 2005 agreement and the bankrupt’s claim on this point must fail. The interest remains DPIPL’s to dispose of subject to the bankrupt’s claim in personam to enforce the terms of the collateral agreement. However for reasons explained in Farah Constructions Ltd v Say-Dee pty ltd (Supra)[76] that right is an entirely distinct claim from one that permits an equity to impeach an indefeasible title.
  15. As an aside the bankrupt claims a life interest in the Moggill property.
  16. In the contract for the sale of the land by her to DPIPL no encumbrances were noted in the contract schedule. It did provide however for a 30 year tenancy in favour of the bankrupt at a fixed rent of $269 per week. A formal tenancy agreement was entered into on
    27 August 2005 also purporting to declare a life interest.[77] That tenancy has not been registered.
  17. In the Bank’s submission it was noted that some uncertainty attends the bankrupt’s claims for a “life tenancy”. It is unclear whether that claim has its basis in the tenancy agreement of 18 June 2005 or the notations upon the transfer executed on 27 August 2005.
  18. If her claim is premised upon the former then the tenancy agreement is a contract falling within the control of the Trustee: s.58 Bankruptcy Act it not being exempt property pursuant to s.116 of the Bankruptcy Act.
  19. If in fact the claim is one premised upon the claim in equity concerning the purported trust it fails with the failure of the trust.[78]
  20. It follows that I do not consider the bankrupt has any reasonable prospects of successfully demonstrating any equitable interest as trustee in respect of the Moggill property premised upon the executed memorandum of transfer.

Resulting and/or Constructive Trusts

  1. The bankrupt alternatively makes allegations that the subject properties are the subject of resulting and/or constructive trusts.
  2. At best the bankrupt’s case in support of her allegation of the existence of a resulting trust could be premised upon her personally contributing $421,000 to the cost of the house constructed upon the Moggill property. She contends for an interest in respect of that sum as trustee for her son.
  3. The fundamental difficulty with that submission is that given she personally made the contribution any resulting trust would have to be in her favour.[79] Given her interests now vest in the Trustee the interest in the property would be held on resulting trust for the Trustee.
  4. Generally it is difficult to understand from her pleadings or evidence the basis for the bankrupt’s claim to the benefit of a resulting trust. The bankrupt’s use of terms “resulting rust” in her pleading was inconsistent and contextually inappropriate.[80] In my view no resulting trust arises in any manner alleged by the bankrupt.
  5. The bankrupt also pleads that a constructive trust arose in or about 1997. Declarations of constructive trusts as a remedy generally arise from unconscionable dealings whether by a fiduciary or otherwise.[81]
  6. In this instance there is no unconscionable dealing identified by the bankrupt as giving rise to a constructive trust. This is particularly so in circumstances where, to be efficacious for the bankrupt, any unconscionable dealing would have to have been by the bankrupt herself giving rise to a constructive trust in favour of herself as trustee for her child Alexander George.
  7. In his submission the Trustee says that at its highest the bankrupt’s case may be that a constructive trust is imposed upon DPIPL in respect of its alleged unconscionable dealing in failing to reconvey the Moggill property. However, as it was submitted, it should first be said that even if a constructive trust was imposed it does not follow that the Trustee holds some benefit or gain also on constructive trust for the bankrupt (in any capacity). That is to say, there is no evidence or pleading to suggest that the Trustee has knowingly assisted or is knowingly concerned in the failure to reconvey.[82]
  8. The Trustee submitted that it is a failure to reconvey and not the entering into the Heads of Agreement which might be the basis for the relevant unconscionable dealing for the creation of any constructive trust in this instance. Accordingly, where DPIPL has in effect been a bona fide purchaser for value without notice or absent unconscionable conduct then the bankrupt cannot succeed in asserting the existence of a constructive trust against it. Indeed it is difficult to see how there has been any unconscionable dealing by DPIPL when the bankrupt has not tendered the consideration pleaded at paragraph 8(f) of the amended statement of claim filed 19 December 2008.
  9. It was also suggested resulting trusts might arise from the failed attempts by the bankrupt in creating the May 2002 trust and/or the December 2003 trust. In that event he submitted the putative trustee would hold the property on a resulting trust. However for reasons I have already addressed I am satisfied that neither the May 2002 Trust or the December 2003 Trust came into being and it follows no resulting trust arises.
  10. I accept the Trustee’s submissions that the evidence does not demonstrate any basis for the holding of the property by way of any constructive or implied trust on behalf of Alexander George and the bankrupt has no reasonable prospects in her case on this point.

Proceedings against National Australia Bank

  1. The bankrupt also challenges the claim by the Bank for indefeasibility in respect of the mortgage security it has over the Moggill property. If successful this would significantly impact on the Trustee’s capacity to deal with that estate.
  2. In her statement of claim the bankrupt alleges certain duties were owed by the Bank to her. The source of those duties was not particularised. In any event the bankrupt’s allegations must be considered against the background that:
    1. The bankrupt was not a customer of the Bank in that instance. She previously had had another mortgage with the Bank to finance the construction of the Moggill house but that loan was discharged and mortgage released when DPIPL acquired the Moggill property;
    2. DPIPL obtained a good title to the Moggill property and the Bank only dealt with DPIPL as the registered proprietor.
  3. Following the transfer of the Moggill property she had no interest noted in the land title register.
  4. Furthermore there evidence to suggests:
    1. The bankrupt had not told the Bank of her alleged interest until well after the transactions occurred;
    2. The bankrupt does not advance any accessorial liability case or other applications for judgment under either limb of the rule Barnes v Addy (supra);
    1. That in the context of the bankrupt’s allegations against DPIPL and Dr Ironside personally the evidence only indicates the Bank was a bona fide third party for value (having paid DPIPL funds secured by the mortgage) without notice of the bankrupt’s alleged interest.
  5. Insofar as it affects the Bank the relief sought by the bankrupt is for an order that the Bank’s mortgage presently encumbering the Moggill property be declared invalid and that it be removed from the title.
  6. In his submissions Counsel for the Bank noted that in the absence of actual fraud or another exception to indefeasibility under the Land Title Act in the process of registering the mortgage the bankrupt’s claim is misconceived. He submitted that the complaint, if there were to be one, was one that could only properly be advanced by the registered proprietor, not the bankrupt.
  7. Specifically he submitted that to attack the Bank, in general terms the bankrupt must establish that the bank was an accessory to DPIPL’s alleged breach of trust. In support of his submission he referred to the High Court’s decision in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (supra) where the High Court discussed with approval the longstanding principle familiarly described as the two limbs of Barnes v Addy (supra). The Court noted at [111]:
  8. As the majority noted:
  9. The first limb imposes liability upon persons who receive trust property if it is established that they receive it with notice of the trust.[84] Actual notice is required and the complainant bears onus of proof. As the majority noted at [128]:
  10. Relying upon the authority of Farah Constructions Pty Ltd v Say-Dee Pty Ltd (supra) the Bank submitted that with respect to the second limb the bankrupt needs to establish that the Bank assisted DPIPL in its alleged breach of trust at a time when the Bank had knowledge “in a dishonest and fraudulent design on the part of the trustee”.[85] In explaining this phrase the majority proceeded:
  11. The High Court pointed out that the second limb makes liable a defendant if that defendant assists a trustee or fiduciary with knowledge of a dishonest and fraudulent design on the part of the trustee of fiduciary.[87]
  12. In her statement of claim at paragraph 12(g)eiv and 12(g)f respectively the bankrupt pleaded:
  13. Those allegations appear to relate to allegations made at paragraph 12(i)(j) and (k) which allege:
  14. Those allegations were re-cast in the Amended Statement of claim filed 19 December 2008. By that pleading the bankrupt now alleges that:
  15. The significant point in the bankrupt’s pleading is that she does not allege any knowledge by the Bank of any intention by DPIPL or
    Dr Ironside to defeat or encumber the Moggill property contrary to the wishes of the bankrupt (in any capacity). The worst that can be drawn from the allegation is that DPIPL and/or Dr Ironside intentionally misled the bank into advancing funds on the promise of security over the Moggill land. The allegation that DPIPL and Dr Ironside sought to structure the loans to avoid the need for formal valuations by the Bank is conduct which by reference to the standard of ordinary reasonable people is insufficient to demonstrate fraud.
  16. The real question in this case is whether the Bank before or after registration acted in such a way as to give rise to a personal equity in the bankrupt (in any capacity) enforceable against the Bank.
  17. In Bahr v Nicolay (No 2)[89] Brennan J stated,[90]
  18. By analogy to the present context it is necessary to consider whether the Bank took its interest by way of security expressly subject to any unregistered interest. As the bankrupt’s case is pleaded the answer to that inquiry must be in the negative. While a consequence of the conduct alleged against DPIPL may be that the bankrupt’s equity was lost it is also clear that she makes no allegation against the Bank that would suggest it knew of her opposition to any advance or had any reasonable basis to know of her opposition. At best the case the bankrupt advances is the Bank knew of the bankrupt’s equity. Knowledge of a prior equitable interest alone is not sufficient.[91] The equitable interest acknowledged has to be more such as of the kind demonstrated in the facts in Bahr v Nicolay (No 2) (Supra). Such is not the case here.
  19. Concerning the first limb the bankrupt alleges the Bank sought to register its interest knowing of the trust. The Bank denies this and the loan application material largely supports this position. The bankrupt however maintains the Bank did have knowledge through its various officers and she wishes to cross examine them to demonstrate that matter. Alternatively she says the Bank knowingly was a party to DPIPL’s conduct in extinguishing the trusts interest.
  20. As observed above the bankrupt bears the onus of proving these allegations and demonstrating knowledge as required by the first or second limb in Barnes v Addy (supra).
  21. However as noted above knowledge of an equitable interest is not enough. To succeed the bankrupt must demonstrate that the Bank assisted DPIPL to effect a fraud upon her. Accepting the Bank had knowledge of the collateral agreement (which it does not) and accepting the Bank also knew that the bankrupt held her equitable interest in trust for her son (which it does not), it is still difficult to see how the Bank’s conduct in advancing more funds to DPIPL on commercial terms could constitute a fraud, in the sense that such conduct would be judged as such by the standards of ordinary, decent people.[92]
  22. In any event as the Bank submits, the fact remains that the Bank has obtained a registered indefeasible mortgage on the property.
  23. The position concerning indefeasibility was restated by the High Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (supra) when it cited with approval the observations of Tadgell JA in Macquarie Bank Limited v Sixty-Fourth Throne Pty Ltd[93] where His Honour said at 280:
  24. The bankrupt’s allegations against the Bank are that it knew of
    her interest as trustee as evidenced by the duly executed transfer of
    27 August 2005. The Bank denies any knowledge. However even if it had that knowledge it is difficult to see how in the circumstances its registration was obtained by fraud in the sense of “actual fraud” or “moral turpitude”.
  25. Complaint is made in the amended statement of claim that subsequent advances were made by the Bank in circumstances that constitute a fraud upon the bankrupt as trustee.
  26. Even if that were the case that matter would not bear upon the Bank’s claim to indefeasibility, particularly in respect of a registered “all money” security in circumstances where the banks mortgage was already registered.
  27. It follows that in this case the Bank’s interest has been registered and in the absence of fraud in the sense of “actual fraud, moral turpitude”[95] the Bank is entitled to maintain its indefeasible interest. The Bank’s interest is not affected by any “in personam exception” which on the bankrupt’s case is pursued in the Supreme Court proceedings.
  28. In any event for present purposes the land is registered in the name of DPIPL. It is subject to a registered mortgage in favour of the Bank. For reasons that I have earlier outlined the interests are not subject to any trust in favour of the bankrupt as trustee for Alexander William George. It follows in my view that the bankrupt has no reasonable prospects of successfully prosecuting this claim and accordingly there is no need for a trial on this point.

Summary

  1. The Trustee seeks declarations that various property claimed by the bankrupt to be held by her in trust beneficially for her son is in fact beneficially by others on trust for her. The remaining respondents presently hold property in respect of which the Trustee seeks declarations. The Bank is the registered mortgagee in respect of land the subject of the application.
  2. The Trustee and all respondents save for the bankrupt join in seeking the declarations sought.
  3. In addition they also seek for the application to be disposed of summarily. They contend that accepting the bankrupt’s case at its best she has no real prospect of successfully defending the application and/or prosecuting her claim.
  4. Except in respect of the issues between these parties concerning the alleged declaration of trusts relating to personalty I am satisfied the bankrupt has no real prospect of successfully defending the Trustee’s claims for declarations because the bankrupt’s claims are untenable at law.
  5. Dealing with each of the bankrupt’s claims I find:
    1. No enforceable disposition by the bankrupt in favour of any trust has been effected by the incorporation of any provision in any will.
    2. The Trust purported to have been created on 1 May 2002 purporting to settle the Pullenvale property upon trust for the bankrupt’s son failed for want of certainty and form and in any event any equitable claim (if one ever arose) was extinguished by the bankrupt’s transfer of that property to a third party.
    1. The Trust purported to have been created on 5 December 2003 purporting to settle the Moggill property upon trust for the bankrupt’s son failed for want of certainty and form and in any event any equitable claim (if one ever arose) was extinguished by the bankrupt’s transfer of that property to a third party, DPIPL.
    1. The Trust purported to have been created by the agreement entered into between the bankrupt and DPIPL in June 2005, if it ever existed, failed because the Trust was never registered and DPIPL became the registered proprietor without notation concerning any trust. There is no evidence of fraud in the sense provided by s.184 Land Title Act to defeat DPIPL’s claim to indefeasible title.
    2. The circumstances of the proceeding do not support any basis for finding a resulting, constructive or implied trust in respect of the Moggill land or any other real property.
  6. In her amended statement of claim the bankrupt pursues other actions in her capacity as Trustee. I make no rulings in respect of those matters.
  7. The facts do not support any basis to find any accessorial liability on the part of the Bank and the indefeasibility of its registered security is not affected by the circumstances surrounding these transactions.
  8. Concerning personalty the bankrupt has no reasonable prospects in respect of the horse Stellamarra and the Toyota Motor Vehicle. Matters concerning the horse Cabernet and some chattels were disposed of by consent orders. However there is a factual case to be resolved concerning the furnishings and jewellery and any other remaining personalty alleged to be subject to a trust.
  9. In terms of the Trustee’s amended application it follows from my findings that the Trustee is entitled to the benefit of the compromise agreement concluded between all parties to these proceedings (except the Bank and Mr Siebert). Given the bankrupt’s only challenge to that agreement was that the Moggill property was held by her on trust. The agreement remains valid and enforceable and the Trustee, Ms Wilson, DPIPl and Dr Ironside are entitled to the declarations they seek.
  10. There are issues to be addressed by trial concerning the remaining chattels. It follows declarations and orders cannot be made in respect of paragraphs 3 and 7 of the amended application.
  11. The relief sought at paragraphs 4a and 4b was not pursued at this hearing and may require hearing. It will be adjourned.

Orders

  1. Declare that the Heads of Agreement dated 19 February 2008 and exhibited at WJF-8 to the Affidavit of William John Fletcher sworn
    29 October 2008 remains valid and enforceable;
  2. Declare that as at 24 February 2006 the legal and beneficial ownership of Lot 13 on SP145714, County of Stanley, Parish of Moggill, Title reference 50440445 vests in Applicant as trustee of the bankrupt estate;
  3. Declare that as at 24 February 2006 the legal and beneficial ownership of the Toyota landcruiser with the licence plate 590FXR, VIN Number: JT11UJA509019411 (V), Engine Number: 1FZ0444996 vests in Applicant as trustee of the bankrupt estate;
  4. Declare that as at 24 February 2006 the legal and beneficial ownership of the Hanoverian mare known as Stellamarra with the microchip number 939000001109809 vests in the Applicant as trustee of the bankrupt estate;
  5. Declare that Deed of Settlement between the Applicant and Susan Jane Wilson dated 28 October 2008 remains valid and enforceable and that it be performed;
  6. Adjourn for trial issues arising from relief sought in paragraphs 3, 4 and 10 of the amended application.

I certify that the preceding 197197one hundred197197ninety-sevenone hundredone hundred and ninety-seven (197) paragraphs are a true copy of the reasons for judgment of Burnett FM


Associate: Beverley Schmidt


Date: 9 February 2009

[1] Since the hearing of this application commenced the bankrupt has filed a Further Amended Statement of Claim in the Supreme Court proceeding. That pleading has not been pleaded to by the various defendants. Although this latest pleading significantly recasts the claim as originally pleaded it also pleads new matters. The bankrupt as trustee alleges various breaches of duty by the Trustee. She does not plead that she as trustee is a creditor. That defect can be remedied. The claim is one that can be pursued at a later time and need not be restored in the context of the Trustee’s application: Wakim v HIH Casualty & General Insurance Ltd (2001) 111 FCR 58.
[2] George v Fletcher [2008] FCA 1848
[3] See transcript of evidence Supreme Court Queensland 11November 2008 p 22.
[4] Transcript dated 9 December 2008 page 85 line 24.
[5] George [2005] FamCA 309 at [20].
[6] George [2005] FamCA 309 at [52].
[7] Affidavit William John Fletcher filed 29 Oct 2008 Exhibit WJF7 – pages 6 to 17 contract of sale dated 5 December 2003.
[8] Affidavit William John Fletcher filed 29 Oct 2008 Exhibit WJF7 – pages 1 to 3.
[9] Affidavit William John Fletcher filed 29 Oct 2008 Exhibit WJF7 – page 19.
[10] The Trustee challenges this transaction as he assets it was effected at a significant undervalue.
[11] Affidavit William John Fletcher filed 29 Oct 2008 Exhibit WJF6 – page 198.
[12] It is interesting to note that the transfer is hand drafted. It proceeds on the premise that DPIPL is the transferor and that the transferee is the bankrupt as trustee. However DPIPL and Dr Ironside dispute this. They allege the words “Life interest” and “in trust for Alexander George” were added later. They say the intention was to convey beneficial interest to the bankrupt. The transfer predates the transfer by the bankrupt to DPIPL which transfer was executed on 9 September 2005. That transfer was made pursuant to a contract of sale dated 18 June 2005 (See Affidavit William John Fletcher filed 29 October 2008 Exhibit WJF7 pages 18 to 20). Given the relevant dates it appears these transactions were intended to be contemporaneous as the bankrupt alleges. The only transfer registered was that from the bankrupt to DPIPL which was registered on 20 October 2005. (See Exhibit WJF-7 page 1).
[13] Affidavit William John Fletcher filed 29 October 2008 Exhibit WJF8 – page 1.
[14] Affidavit of William John Fletcher filed 29 October 2008 Exhibit WJF8 – page 1 and 3 Heads of Agreement.
[15] Affidavit William John Fletcher filed 29 October 2008 Exhibit WJF8 – page 2 and 4(d) Heads of Agreement
[16] Affidavit William John Fletcher filed 29 October 2008 Exhibit WJF9 page 1.
[17] Affidavit William John Fletcher filed 29 October 2008 Exhibit WJF11 page 1.
[18] Affidavit William John Fletcher filed 29 October 2008 Exhibit WJF11 page 2.
[19] The allegation contained in the bankrupt’s letter is difficult to reconcile with the facts expressed in the memorandum of transfer. A contract of sale was executed on 18 June 2005 whereby it was agreed that the bankrupt would sell the Moggill property to DPIPL for $400,000 subject to terms. The contract made no reference to DPIPL holding the Moggill property as trustee or to the creation of any life interest. At best the contract between DPIPL and the bankrupt provided for the creation of a 30 year tenancy at a set rental of $269 per month.
[20] During the course of execution of a warrant a significant quantity of jewellery was removed. It was listed in an inventory prepared by the trustee and marked Exhibit 2.
[21] See George [2005] FamCA at para [79].
[22] George (supra) at para [79].
[23] Transcript page 21 line 45.
[24] Transcript line 18 to 33.
[25] Affidavit Kathryn Mary Whalan filed 17 November 2008 Annexure KMW2 page 18.
[26] Affidavit Kathryn Mary Whalan filed 17 November 2008 Annexure KMW2 page 183.
[27] George (supra) at paras [4] and [73].
[28] Transcript 3 December 2008 page 21 line 27.
[29] Affidavit Kathryn Mary Whalan filed 17 November 2008 paras 6 and 7.
[30] Affidavit Kathryn Mary Whalan filed 17 November 2008 Annexure KMW2 page 18.
[31] Affidavit Kathryn Mary Whalan filed 17 November 2008 Annexure KMW2 page 175.
[32] Affidavit Kathryn Mary Whalan filed 17 November 2008 Annexure KMW2 page 221.
[33] Affidavit Kathryn Mary Whalan filed 17 November 2008 Annexure KMW2 page 231.
[34] Affidavit William John Fletcher filed 29 October 2008 paras 40 and 41 together with Annexure WJF
[35] Affidavit of William John Fletcher filed 29 October 2008 Annexure WJF 30.
[36] Affidavit of William John Fletcher filed 29 October 2008 Annexure WJF 31.
[37] George (supra) [4] The reference in the table at [4] noted “Horses (sold by wife) $51,906”. The matter is however clarified by the bankrupt’s amended statement of claim filed 19 December 2008 where she details the chronology concerning the horses.
[38] Affidavit Nicholas Humzy-Hancock filed 2 December 2008 Annexure NHH5 at page 19.
[39] In a Further Amended Statement of Claim filed 19 December 2008 similar allegations are made from paragraph 32. The circumstances are not clear as the pleading alleges both an “agreement” and a “gift”. In either event it would seem that distinction bears upon the outcome for that issue in this proceeding as it seems the bankrupt intended for Ms Wilson to enjoy beneficial title to the horses.
[40] Transcript 8 December 2008 page 9 lines 37 to 41. This passage of evidence probably explains Barry J’s notation that the horses had been sold.
[41] Transcript 8 December 2008 page 10 lines 12 to 18.
[42] [1999] FCA 152 at [58].
[43] Affidavit of Nicholas Humzy-Hancock filed 3 December 2008 Annexure NHH-11
[44] Affidavit William John Fletcher filed 29 October 2008, paragraph 38
[45] Transcript 8 December 2008 page 25 line 5 to 10.
[46] Affidavit of Kathryn Mary Whalan filed 17 November 2008 Annexure KMW-2 page 55 (vehicle registration renewal notice) and page 57 (Suncorp Insurance Notice).
[47] Affidavit of Kathryn Mary Whalan filed 17 November 2008 Annexure KMW-2 page 238-245.
[48] Affidavit Ashley Jade Mulhall sworn 8 December 2008 – Annexure AJM-1.
[49] Affidavit Ashley Jade Mulhall sworn 8 December 2008 – Annexure AJM-2.
[50] Regulation 6.04(3) and 6.04(4) provide for a capital sum of $5,000 subject to CPI since 1997. The Regulation sum is now about $6,500.
[51] Affidavit of Lauren George sworn 5 November 2008 at paragraph 1 the applicant deposed that “on 5 December 2003 I purchased a property and built a home and trust for my son Alexander George. The name on the title was Lauren Kay Cordes. Refer annexure (a) [which is not included in the exhibit]. The trust arrangement was declared in my will.”
[52] Affidavit Lauren Kay George sworn 3 November 2008 – Annexure A; Will executed on 27 August 2005
[53] Transcript 9 December 2008 page135 line 5 – although not strictly proven reference is made in submissions to the will alleged to have been executed on that date and is referred to in these reasons for completeness and in the absence of any denial made by the bankrupt;
[54] Affidavit Kathryn Mary Whalan filed 17 November 2008 – Annexure KMW2 page 229.
[55] [1999] HCA 67; (1999) 201 CLR 49.
[56] The documents referred to in the pleading are various land transfer forms.
[57] Affidavit William John Fletcher filed 28 October 2008 WJF6 at page 1. It is possible that part of the full text has not been copied into the exhibit.
[58] Affidavit William John Fletcher filed 28 October 2008 WJF24 at page 6 – Transfer registered 11 March 1998.
[59]Affidavit William John Fletcher filed 28 October 2008 WJF 24 at page 21.
[60] Affidavit William John Fletcher filed 29 October 2008 Exhibit WJF 24 page 22 – Historical Title Search. In particular an examination of the Land Title Register demonstrates the absence of registration of any trustee’s interest.
[61] HAJ Ford & WA Lee, Principles of the Law of Trusts, Thompson Law Book Co, North Ryde, 2006.
[62] Ford & Lee (supra) at [3140].
[63] (1968) 118 CLR 1
[64] Bankrupt’s submission filed 19 December 2008 page 9.
[65] Exhibit 7 para 60.
[66] Danish Bacon Co Ltd Staff Pension Fund Trusts, In re [1971] 1 WLR 248
[67] (2007) 230 CLR 89. (1968) 118 CLR 1.
[68] In her Amended Statement of Claim the bankrupt claims negligence on the part of the solicitors in failing to register any trust. However the contract on its face does not disclose or assert the bankrupt’s holding as trustee.
[69] Afifdavit of William John Fletcher filed 29 October 2008 Exhibit WJF 8 – page 1 Historical Title Search. The search demonstrates no trust was ever registered in respect of the Moggill property pursuant to s.109 of the Land Title Act.
[70] Affidavit William John Fletcher filed 28 October 2003 Exhibit WJF7 – page 4.
[71] Affidavit William John Fletcher filed 28 October 2003 Exhibit WJF7 – page 18.
[72] Affidavit William John Fletcher filed 28 October 2003 Exhibit WJF6– page 198.
[73] It is difficult to conceive how the bankrupt could be a voluntary assignee given the noted consideration on the transfer.
[74] Affidavit William John Fletcher filed 28 October 2003 – paragraph 7.
[75] Affidavit Kathryn Mary Whalan filed 17 November 2008 – Annexure KMW2 page 107.
[76] at [193] – [197].
[77] Kathryn Mary Whalan filed 17 November 2008 – Annexure KMW2 page 122.
[78] That is to say the life tenancy was being granted by the bankrupt in her capacity as trustee for her son.
[79] Ford & Lee (Supra) at [21,000].
[80] See for instance its appearance in paragraph 2. Its employment appeared to indicate a total failure of the bankrupt to approach the manner in which such a trust arises. For instance she pleads it in the context of an express trust I circumstances where there was no suggestion of failure of any alleged express trust giving rise to a resulting trust.
[81] See M Cope, Constructive Trusts, Law Book Co, Sydney, 1992 page 19.
[82] Barnes v Addy (1874) LR 9 ChApp 244; Cope (Supra), pages 362 to 370.
[83] At [112].
[84] At [112].
[85] at [172].
[86] at [174].
[87] at [160].
[88] Although the pleading refers to Dr Ironside personally I think the bankrupt intends the pleading to refer to DPIPL.
[89] [1988] HCA 16; (1988) 164 CLR 604 – followed in Tara Shire Council v Garner [2003] 1 Qd R 566.
[90] at 654.
[91] Friedman v Barrett; Exe parte Friedman [1962] Qd R 498 at 512.
[92] Farah Constructions Pty Ltd v Say-Dee Pty Ltd (supra) at [178].
[93] [1998] 3 VR 133.
[94] Section 184 Land Title Act.
[95] Farah Constructions Pty Ltd v Say-Dee Pty Ltd (supra) at [192].

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