Daire v Haley

Issues

1. The plaintiffs' claim is primarily that Mr Haley intended, and did, gift the Property to them.
2. The plaintiffs seek declarations, including that Mr Haley has no interest in the Property, that his caveat ought to be removed, and that he ought to provide vacant possession to them. They also seek orders requiring the Registrar General to amend the register to record the plaintiffs' changed names. As noted, the Registrar General does not oppose such orders.
3. In his defence and cross-claim, Mr Haley asserts that he did not intend to gift the Property, that the plaintiffs hold the legal title for his benefit by reason of a resulting trust, because he paid the whole purchase price by way of the initial deposit and subsequent payments to discharge the mortgage. He also seeks an order that title be transferred back to him, but would be "happy to remain with the status quo".
4. The plaintiffs resist any resulting trust being found, because of any of the following reasons: 1. Mr Haley lacked the necessary intention to give rise to a trust, because he intended to make an immediate and absolute gift to the plaintiffs. 2. The so-called "presumption of advancement", as explained in Bosanac v Federal Commissioner of Taxation (2022) 275 CLR 37(Bosanac), would operate in the plaintiffs' favour. 3. The plaintiffs rely on the defence of statutory illegality because of Mr Haley's "fraud" in signing documents as the plaintiffs, and his failure to disclose the beneficial interest he claims to his trustee in bankruptcy. They submit Mr Haley should not obtain a benefit by his conduct, including because he lacks clean hands. 4. The plaintiffs submit that Mr Haley has disclaimed any interest in the Property.
5. The parties agree that the primary issue to be determined is Mr Haley's intention at and around the time of the purchase of the Property. Identifying that intention will determine whether it was gifted to the plaintiffs, or whether the resulting trust issues are determinative of the dispute between the parties.
6. The questions to be determined are: 1. Have the plaintiffs delayed in seeking declaratory relief, such that it ought to be refused? 2. Did Mr Haley intend to gift the Property to the plaintiffs? 3. If not, ought the presumption of advancement operate in relation to the resulting trust Mr Haley claims? 4. If the plaintiffs ought to be found to hold the Property on trust for Mr Haley: 1. Did he engage in disentitling conduct by way of "statutory illegality", or does he lack clean hands, so that equity would not grant any relief to him? 2. Did he "disclaim" any proprietary interest in the Property?
7. In the days after the hearing, the parties provided further submissions in relation to the defence of illegality.
8. Each issue is considered in turn below.

Plaintiffs' delay

1. While no detailed submissions were made, Mr Haley submitted that the Court ought not grant the plaintiffs any equitable relief in the form of declarations, because of their unexplained and lengthy delay in prosecuting the proceedings.
2. The three elements of the defence of laches are knowledge of the wrong, delay and unconscionable prejudice to the opponent caused by the delay: Sze Tu v Lowe (2014) 89 NSWLR 317 at 391 (Gleeson JA, Meagher and Barrett JJA agreeing); see also Twigg v Twigg (2022) 402 ALR 119; [2022] NSWCA 68 at [86] (Brereton JA, Bell CJ and Payne JA agreeing).
3. Even if there was delay on the part of the plaintiffs, no submission was made as to the "unconscionable prejudice" to Mr Haley, other than a bald assertion that it was more difficult to obtain evidence about his bankruptcy and matters around the time of the purchase. However, there was no evidence of difficulty in obtaining evidence caused by the delay.
4. It might be thought that had Mr Haley always intended to assert a resulting trust, then it could be expected that he would have retained all the relevant information to support that assertion at any time necessary. Further, Mr Haley obtained a benefit from the plaintiffs' delay as he continued in possession of the Property.
5. However, as submitted by the plaintiffs, while styled as declarations, the plaintiffs seek to enforce their legal, rather than equitable, title in the Property and regularise the register to take account of their changed legal names. It would be sufficient for their purposes that orders were made removing Mr Haley's caveat and amending the register.
6. Further, I do not accept that there was a relevantly long delay. Nikki Daire was first provided with the address and title to the Property in about 2013. However, the evidence suggests there was no dispute as to ownership as recently as 21 August 2020. In evidence is an email from that date, from Mr Haley to Kimberley Daire, in which Mr Haley refers to the plaintiffs' "right to sell" the Property and "pocket the money". The dispute as to ownership appears not to have arisen until around 15 June 2021. On that date, the plaintiffs' solicitors sent a letter to Mr Haley's then-solicitors, noting the plaintiffs' intention to arrange for the sale of the Property. On 28 July 2021, Mr Haley lodged his caveat. On the same day, Mr Haley's then-solicitor sent an email to the plaintiffs' solicitors claiming ownership of the Property, apparently for the first time. On 29 November 2021, the notice to quit was issued to Mr Haley. Proceedings were commenced in early 2022.
7. In these circumstances, I do not accept that the plaintiffs are prevented from bringing their claim by reason of any unreasonable delay.

Mr Haley's intention

1. In Bosanac, the High Court explained the operation of the presumption of a resulting trust and the presumption of advancement. Briefly, when a person purchases property, but directs the vendor to transfer the title to another person, a presumption arises that the transferee holds the legal title to the property on resulting trust for the purchaser: see eg Calverley v Green (1984) 155 CLR 242 at 246 (Gibbs CJ) (Calverley); Bosanac at [12] (Kiefel CJ and Gleeson J) and [104] (Gordon and Edelman JJ).
2. A counter presumption of advancement will arise where, inter alia, the purchaser is a father who places the property in the name of his children. In such cases, the purchase will be presumed to have been made for the benefit of the legal owner: Calverley at 247 (Gibbs CJ); Bosanac at [8] (Kiefel CJ and Gleeson J) and [52] (Gageler J).
3. In Bosanac, the High Court made clear that both presumptions are of diminished significance where it is possible to determine the actual intention of the transferor from the evidence. At [21]-[22] Kiefel CJ and Gleeson J observed (citations omitted): It is the concern of the courts to determine what was intended when property was purchased or transferred. It may once have been the case that evidence capable of rebutting the presumptions was not available. That is unlikely to be so today … This evidence may take many forms, but it has always been understood that the strength of the presumptions will vary from case to case depending on the evidence. The presumption of advancement, understandably, is especially weak today. In Pettitt, Lord Hodson considered that when evidence is given it will not often happen that the presumption will have any decisive effect. In the same matter, Lord Upjohn considered that given both presumptions are but a mere circumstance of evidence, they may readily be rebutted by comparatively slight evidence.
4. Similar observations were made at [67] by Gageler J (as his Honour then was): Where evidence relevant to intention is adduced, the presumption [of resulting trust] and the counter-presumption [of advancement] are therefore of practical significance only in rare cases where the totality of the evidence is incapable of supporting the drawing of an inference, one way or the other, on the balance of probabilities about what contributors and purchasers actually intended when they participated in the purchase transaction.
5. See also the discussion of the presumption of resulting trust at [105]-[106] by Gordon and Edelman JJ.
6. Accordingly, in determining whether a resulting trust ought to be found, the focus is on evidence as to the actual intention of Mr Haley in registering the Property in the name of the plaintiffs. This intention is to be ascertained as at the date of purchase, or immediately thereafter: Calverley at 251 (Gibbs CJ) and 262 (Mason and Brennan JJ). However, evidence of later acts and declarations is admissible as admissions against interest, and evidence of facts of subsequent dealings and surrounding circumstances of the transaction may be considered: Cummins (A Bankrupt) v Cummins (2006) 227 CLR 278 at [65]-[67] (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ); see also Koprivnjak v Koprivnjak [2023] NSWCA 2 at [19], [85] and [92] (Griffiths AJA, Leeming and Mitchelmore JJA agreeing).
7. Therefore, the focus here is on Mr Haley's intention in early 2002, to be determined from all the available evidence, including later admissions.
8. Mr Crispin, counsel for Mr Haley, submitted that Mr Haley never intended to gift the Property to his daughters, when he placed it in their birth names, because, briefly: 1. From 1999, he knew they had changed their legal names and did not use those legal names on the transfer or other documents. 2. He only told the plaintiffs about the Property many years after its purchase. 3. He needed vendor finance to complete the purchase, and he understood he could only obtain such finance if the Property was not in his own name. This is considered further below in the context of statutory illegality.
9. For the reasons below, and considering each of Mr Haley's submissions, I do not accept that Mr Haley intended his daughters to hold the Property on trust for him, rather than gifting it to them.
10. Because of that conclusion, it is unnecessary to consider the operation of any presumption of advancement.

Use of birth names

1. Mr Haley stated in cross-examination that he knew from about 1999, before the purchase of the Property, that his daughters had legally changed their surnames. His evidence was that he used their birth names on the Property documentation, rather than their legal names, for various reasons, which included: 1. as "aliases" for himself, 2. intending to refer to other relatives with the same initials, or 3. because his daughters held the Property on trust.
2. However, inconsistent with the assertion of an intentional use of an "alias", in almost all of his written communications with his daughters, or relating to them, Mr Haley referred to them by their birth surname.
3. In evidence are various emails that Mr Haley sent to Nikki Daire. For example, on 4 February 2009, Mr Haley sent an email including: If you want to be nikki daire who destroys things and burns all bridges behind you , … fearing your father then go get your restraining order. "You will make your mother happy ." … I love you nicole ann haley unconditionally, but I do have a wish list.
4. On 14 January 2010, Mr Haley sent another email, including: …like to see you , any where any time , Sydney ,the ROCKS , a couple of days notice ? I love you nicole ann haley.
5. On 29 April 2013, Mr Haley signed a document in connection with the Property entitled "LOAN AGREEMENT/CONTRACT". In it, he referred to his daughters as "NICOLE ANN HALEY" and "KIMBERLEY JANE HALEY".
6. Further, Mr Haley gave oral evidence that even if he had wanted to give his daughters anything, including, it can be inferred, the Property, he would have used their birthnames: A. In real life, I would never, ever use Daire on any document gifting anything. Q. I see. So, even if you wanted to gift something, you'd still use Haley? A. Yes, but I haven't-- Q. Thank you. Can I now-- A. And I haven't gifted them anything since 1987.
7. I do not accept that Mr Haley intentionally used the plaintiffs' birth names as aliases, rather than intending to refer to them personally. This is consistent with his attitude demonstrated in his emails and the documentation he prepared. I also do not accept that he was signing the relevant documents using the initials of other relatives and not the plaintiffs; that is inconsistent with the names that were included in the documents.

No disclosure to plaintiffs

1. I do not accept that Mr Haley's decision not to inform the plaintiffs about the Property supports the conclusion that he did not intend to gift it to them.
2. It might be accepted that it is not possible to have title to real property transferred to another without the transferee's knowledge, absent fraud, because a transfer, must be signed by a transferee or their authorised agent.
3. However, the circumstances surrounding the relationship of the parties at the time Mr Haley signed ostensibly as his daughters, provides another reason to conclude that Mr Haley did intend to gift the Property to the plaintiffs.
4. As noted above, at the time of the purchase, Mr Haley's contact with his daughters was severely restricted, by reason of court orders, after the deterioration of his relationship with his former wife.
5. Mr Haley's various written emails and documents demonstrate that he "blamed" his former wife for his lack of contact with the plaintiffs. For example, he variously complained that: 1. He was "denied any axcess [sic] to the children of the marriage"; and 2. Nikki Daire has "been taught to believe that your father is a threat to your person and your well being".
6. Therefore, his failure to immediately disclose the purchase of the Property or seek the plaintiffs' authority to sign the documents is explicable, other than demonstrating an intention to create a trust.

Purpose of obtaining a mortgage

1. It is not in dispute that Mr Haley purchased the Property by paying a deposit of $8,400 and with the benefit of vendor finance of $19,600, which was secured by a mortgage.
2. Mr Haley's affidavit evidence includes: In or around July 2001, I began discussions with the Murray Shire Council regarding the possible purchase of the [Property] to accommodate [his business]. I remember having discussions with Mr Barlow of the Murray Shire Council and Ms Terri Wilson of [the Council's law firm] … In or around July 2001 I discussed my bankruptcy and credit situation with Mr Barlow. I remember that the idea came up of registering the title to the Property in the name of the Plaintiffs. I do not remember whether I first suggested the idea or if it was suggested by Mr Barlow. I remember Mr Barlow and I discussing that taking this step might help me obtain a mortgage to pay for the Property. On or around 26 July 2001, the … Council offered to sell me the Property for the sum of $28,000.00.… A copy of the letter of [the Council's law firm] dated 26 July 2001 expressing this offer is annexed… By a Contract of Sale made on 7 August 2001 with … Council I purchased the Property in accordance with the arrangements I had discussed with the Council. I described the Purchasers as Nicole Ann Haley and Kimberley Jane Haley the former names of the Plaintiffs. I had no intention of giving the Property to the Plaintiffs and did not attempt to inform them of the purchase. …
3. On 26 July 2001, the Council's solicitor wrote a letter to Mr Haley about the sale. The letter refers to the terms of the sale and vendor finance, consistently with Mr Haley's evidence. However, the letter does not indicate that the Property would be purchased in the plaintiffs' names and makes no reference to the specific terms of the vendor finance proposed.
4. No further documentation was in evidence concerning the purchase. Mr Barlow did not give evidence, nor did the vendor's solicitor. Mr Haley was not directly challenged in cross-examination that his affidavit evidence about discussing his bankruptcy situation was inaccurate.
5. However, Mr Haley was challenged about his evidence that the reason for placing the Property in the names of the plaintiffs was to enable him to obtain vendor finance and a loan from the Council. The submission was put by Mr Goodyear for the plaintiffs: … the evidence about the mortgage, wherever it appears, should be rejected to the extent that it's relied on as saying that was the sole purpose for putting the property in the plaintiff's name. …
6. I take the use of "sole purpose" to indicate that the plaintiffs accept that one possible purpose for Mr Haley using his daughters' former names was to obtain a mortgage.
7. This is consistent with Mr Haley's own document entitled "ORDERS CASE NO 2022/00017459", in which he stated: THOMAS M HALEY SIGNED HIMSELF IN TRUST / ALIAS AS NA & KJ HALEY TO DEFEAT THE FALSE CLAIM HE WAS BANKRUPY [sic] ON 7/7/2001 AND GAIN A MORTGAGE TO THE SAID LAND.
8. However, Mr Goodyear's submission, relevant to the "statutory illegality" defence to any finding of a resulting trust, was that Mr Haley intended to avoid the Property being sold by his trustee in bankruptcy, and for that reason placed the Property into his daughters' names. That is considered further below.

Admissions

1. There are various documents that appear to be admissions against Mr Haley's assertion in the litigation that he purchased the Property with the intention that his daughters hold the Property on trust for him. The plaintiffs submit that these documents also demonstrate a "disclaimer" by Mr Haley of any proprietary interest, which is considered below.
2. The relevant parts of these documents relied on are set out below.
3. On 25 April 2013, Michael Haley sent a text message to Nikki Daire including: Hi Nikki [Mr Haley] has asked me to tell you that you and Kim are the owners of a property in country NSW .the property title is in the name of you two girls and has no mortgage ,so clear title. … he wants to lend to me against it but need you n kim's permission to do it . Now you know you have this property its up to you what you do with it but [Mr Haley] is not well … and actually lives there so I hope you will not throw him on the street .…
4. On 30 April 2013, Michael Haley sent another text message to Nikki Daire including: … [Mr Haley] will send you a copy of the title you and Kim are the only ones on the title …
5. While not authored by Mr Haley, these communication are followed with other documents, which demonstrate Mr Haley was aware of the message and its contents.
6. On 6 May 2013, apparently as the foreshadowed sequel to Michael Haley's text message, Mr Haley sent an email to Nikki Daire including: As you requested from michael I am sending you a copy of your and kims title and mortage [sic] discontinous [sic]. I has given the mortgage as security for a loan to Mark a Haley ,loaning money $40,000 to Michael I Haley , your land as security.
7. That refence to a loan of $40,000 and mortgage appears to relate to the document in evidence entitled "LOAN AGREEMENT/CONTRACT" dated 29 April 2013 (referred to above).
8. Mr Haley sent Nikki Daire a further email an hour later on 6 May 2013 attaching a certificate of title for the Property dated 15 January 2022 and a discharge of mortgage dated 21 June 2006.
9. On 1 August 2013, Mr Haley emailed Nikki Daire including "Murray shire wants $18140 in rate from your property". On the same day, Nikki Daire responded including "If you don't want to keep the land, we are happy to sell it".
10. On 21 August 2018, Mr Haley's solicitor, Hugh MeIville, then a director solicitor in the firm Dawes & Vary Riordan Lawyers, sent an email to Nikki Daire including: Thank you for your time on the telephone yesterday. I would be grateful if you could on-send this email to your sister, Kimberly, [sic] for her information as I do not have her contact details. I confirm that Thomas Haley has sought my advice about the [Property] which is registered in yours and your sister's names and was purchased in 2001. Mr Haley instructs us that he acquired the land in your names as a means of leaving something for you both if he was to pass away prematurely so as to avoid any adverse claim being made against his estate for that asset by other parties. Mr Haley has repaid the loan owing against the property and has been paying the shire rates and other property outgoings since it was acquired. He has also had the sole use and occupancy of the land since it was acquired. Mr Haley has also instructed us that his relationship with your mother and consequently yourselves has been less than ideal to say the least … Mr Haley believes the [Property] may be worth between $200,000 and $250,000 when sold. It was acquired for $28,000 from the local council in 2001. We have advised Mr Haley that there are likely to be capital gains tax (CGT) implications for you and Kimberley if the property was sold for more than what it was purchased for… As a starting point it would be useful to know if you and Kimberley had any inclination to assist Mr Haley achieve the above outgoing in finding an alternate form of accommodation to provide for his later years using the sale proceeds of the [Property] …
11. There is no suggestion that the letter was sent, other than with Mr Haley's instructions. A letter dated 8 June 2021, indicates that Mr Melville still held instructions from Mr Haley concerning the Property.
12. On 20 September 2018 and 24 October 2018, Mr Haley's solicitors sought a response from Nikki Daire. No written response is included in the evidence, but Nikki Daire's evidence was she received a telephone call from Mr Melville and she orally indicated to him that she and her sister had not made a decision concerning the Property.
13. In 2020, Nikki Daire investigated the situation concerning extant rates over the Property. On 17 August 2020, she received an email with a rates notice for the Property, indicating the total amount payable was $12,644.94, of which $10,814.18 was overdue.
14. On 21 August 2020, Mr Haley sent Kimberley Daire an email including: … you and your sister own a property … which is inundated with gaseous trade waste … It s time you stopped being afraid of me and speak to me about your land. You and Nikki have the legal right to sell the [Property] and pocket the money about $350,000 , after paying the Capital gains taxes./ or sub dividing the land …
15. In each of these documents, Mr Haley unambiguously states that the plaintiffs are the legal owners of the Property. He does not identify any entitlement he has to retain possession or a proprietary interest, including in the letter sent by his solicitor in 2018.
16. I consider that these documents are admissions against interest, and support the conclusion that at the time of registration of the transfer, Mr Haley intended to gift the Property to the plaintiffs, and did not intend that the plaintiffs would hold the Property on trust for him.
17. As a result of that conclusion, the defences of the plaintiffs are unnecessary. However, on the contingency that my conclusion that Mr Haley intended to gift the Property to the plaintiffs is incorrect, I consider each defence below.

Statutory illegality

1. As one alternative, the plaintiffs submitted that Mr Haley should be denied the benefit of a resulting trust, should one be found, because the trust was created in furtherance of an illegal purpose, and in breach of the Bankruptcy Act 1996 (Cth) and/or Real Property Act 1900 (NSW). On that basis, the plaintiffs advanced two arguments: 1. First, allowing Mr Haley to retain the benefit of the resulting trust would frustrate the policy of the Bankruptcy Act and/or Real Property Act. 2. Secondly, equitable relief depends on Mr Haley being stripped of the benefit of his wrongdoing, which is impossible, either, because the benefit cannot be: 1. returned to the Official Trustee in Bankruptcy, because of the period of time that has elapsed between the discharge of Mr Haley's bankruptcy and the litigation; and/or 2. properly quantified, such that no relief ought to be granted to Mr Haley.
2. Both arguments were said to be supported by the majority judgments of Deane and Gummow JJ, and McHugh J in Nelson v Nelson (1995) 184 CLR 538 (Nelson). Before considering the plaintiffs' submissions, it is therefore useful to set out the majority reasoning in Nelson.
3. Mrs Nelson placed a property in the name of her children, and later sought to assert that there was no gift, and instead her children held the property on trust for her. To defeat a suggestion that the presumption of advancement ought to apply and benefit her children, Mrs Nelson gave evidence that she transferred the property in order to take advantage of interest subsidies that would have been available to her under the Defence Service Homes Act 1918 (Cth), if she did not own other property. This contravened the policy of the Defence Service Homes Act, which was to provide "public moneys to facilitate the purchase of housing by eligible persons, but on the footing that the eligible person does not own another dwelling": at 570 (Deane and Gummow JJ).
4. As Mrs Nelson admitted her illegal purpose in transferring the property to her children, the focus of the High Court was on whether Mrs Nelson's conduct was a reason to deprive her of the whole of the benefit of her property, or whether she ought to be entitled to retain the benefit of her property, either entirely or on terms.
5. The majority made clear that a finding of statutory illegality would not automatically lead to a refusal of equitable relief. Instead, the policy of the statute, as reflected in its provisions, had to be examined to determine whether allowing the person to enjoy equitable rights, wholly or partially, would defeat or frustrate the policy of the statue: at 564-567 (Deane and Gummow JJ) and 612-613 (McHugh J). McHugh J also stressed at 612 that the sanction imposed by a court "should be proportionate to the seriousness of the illegality involved".
6. The majority emphasised that the Defence Service Homes Act contained provisions, which allowed wrongfully obtained benefits to be recovered: at 568-569 (Deane and Gummow JJ) and 615 (McHugh J). Their Honours also highlighted provisions of the Crimes Act 1914 (Cth) which made it an offence, inter alia, to defraud the Commonwealth: at 570 (Deane and Gummow JJ) and 616 (McHugh J). These criminal provisions captured conduct of the sort, in which Mrs Nelson had engaged, though it was unnecessary to determine whether Mrs Nelson had in fact committed any crime.
7. Further, the majority accepted that the policy of the Defence Service Homes Act was sufficiently served by those provisions, so that the denial of a resulting trust would prejudice Mrs Nelson without furthering the objects of the statue: at 570-571 (Deane and Gummow JJ) and 616-617 (McHugh J). Deane and Gummow JJ considered that an additional sanction, in the form of denying Mrs Nelson her property, "would not be an appropriate adjunct to the scheme for which the Act provides": at 570. Similarly, McHugh J considered that "the federal Parliament saw the legislative sanctions and remedies as being sufficient to deal with unlawful conduct similar to that which has occurred": at 617.
8. However, the majority did not consider that Mrs Nelson was entitled to unqualified relief. Deane and Gummow JJ emphasised that "good conscience calls for the taking by Mrs Nelson of steps sufficient to satisfy the demands of the underlying policy of the Act": at 571. Similarly, McHugh J held that "the policy of the Act is not frustrated so long as there is recovery of the benefit given": at 616. On this basis, the majority concluded that Mrs Nelson should be allowed retain her property, but on terms that the illegal benefit she had received was returned to the Commonwealth: at 571-572 (Deane and Gummow JJ) and 617-618 (McHugh J).
9. If Mrs Nelson did not return the benefit to the Commonwealth, the majority considered that her equitable interest in the property ought to be retained by the innocent party holding the legal title, namely Mrs Nelson's daughter: at 573 (Deane and Gummow JJ) and 618 (McHugh J). As Deane and Gummow JJ observed, this outcome "reflect[ed] the unavailability of equity to obtain for [Mrs Nelson] the actual fruits of her unlawful conduct": at 573.
10. Below, I consider whether the resulting trust asserted by Mr Haley would be tainted by illegality of the sort alleged by the plaintiffs.

Is the trust tainted by illegality?

1. In circumstances where the plaintiffs positively assert and rely on a defence of illegality, it is the plaintiffs' onus to prove that the trust asserted by Mr Halley is tainted by illegality: see eg Hire Purchase Furnishing Co Ltd v Richens (1887) 20 QBD 387 at 389 (Bowen LJ). Mr Goodyear submitted that the plaintiffs must satisfy the Court of this on the balance of probabilities, applying the Bringinshaw standard: Briginshaw v Briginshaw (1938) 60 CLR 336.
2. The plaintiffs submitted that any resulting trust found would be tainted by illegality for the following reasons: 1. It was created by Mr Haley for the illegal purpose of defrauding his creditors and avoiding the effects of his bankruptcy. 2. It gave rise to an equitable interest which Mr Haley failed to disclose, in breach of ss 77(1)(f) Bankruptcy Act, which required Mr Haley to disclose any property acquired by him, or which devolved on him, before the discharge of his bankruptcy, and 77(1)(g), which required Mr Haley to aid to the utmost in the administration of his estate. 3. It was created in breach of s 265(1)(a) Bankruptcy Act, which made it an offence not to fully and truly disclose to the trustee in bankruptcy all property of the bankrupt, and its value. Mr Goodyear accepted that, having regard to the Criminal Code Act 1996 (Cth), establishing this required proof that Mr Haley actually intended not to disclose property to the trustee in bankruptcy. 4. It was created by the registration of documents on which Mr Haley had forged the plaintiffs' signatures, in breach of ss 141(1)(a)(iii) Real Property Act, which makes it an offence to fraudulently procure, or assist in fraudulently procuring, a recording in the Torrens Register, and 141(1)(b), which makes it an offence to fraudulently use, assist in fraudulently using, or be privy to the fraudulent using of any form purporting to be issued or sanctioned by the Registrar-General.
3. The above submissions were made with reference to the versions of the Bankruptcy Act and Real Property Act in force at the time Mr Haley forged the plaintiffs' signatures, and of registration of the transfer and mortgage documents.
4. It does not appear in dispute that Mr Haley forged his daughters' signatures on the contract for sale, transfer form and mortgage, to have title to the Property registered in their birth names. In doing so, I consider that Mr Haley breached s 141(1)(a)(iii) Real Property Act, and that the trust asserted would be tainted by illegality on this basis. In this respect, I also note the possible application of s 253 Crimes Act 1900 (NSW), as to which no submissions were made. It is therefore unnecessary to decide whether the transfer and mortgage were forms purporting to be issued or sanctioned by the Registrar-General which were fraudulently used for the purposes of s 141(1)(b) Real Property Act.
5. It also does not appear in dispute that Mr Haley failed to disclose his asserted equitable interest to his trustee in bankruptcy. In so failing, I accept that Mr Haley breached s 77(1)(f) Bankruptcy Act. The asserted trust would also be tainted be illegality on this basis.
6. However, finding that Mr Haley created the trust for the illegal purpose of defrauding his creditors, or that he breached ss 77(1)(g) and/or 265(1)(a) Bankruptcy Act, is more complicated, because there was no evidence about the details of his bankruptcy, including, whether and when all his creditors were paid, noting that his bankruptcy concluded shortly after the Property was registered in the plaintiffs' names.
7. In various documents referred to above, Mr Haley did assert that he intended to "defeat a false claim he was bankrupt". However, the meaning of that was not explored in any evidence.
8. As noted above, Mr Haley's evidence was that before the purchase, he discussed his understanding of his bankruptcy situation with Mr Barlow of the Murray Shire Council, and he formed the view that a loan and mortgage would only be possible if he used a name other than his own. There was no evidence of the qualifications of Mr Barlow. Mr Barlow did not give evidence, however, the plaintiffs did not suggest any inference should be drawn as a result.
9. Mr Haley did not give any evidence that he discussed anything to do with his bankruptcy with the Council's lawyer or any other lawyer. In cross-examination, Mr Haley repeatedly referred to a "first bankruptcy" he said commenced in 1996. However, there was no documentary evidence to support a sequestration order in fact having been made around that time, and therefore I only accept Mr Haley intended in 1996 to become voluntarily bankrupt, but that did not occur. It is unnecessary to determine why that was the case.
10. Counsel for Mr Haley submitted: Mr Haley's understanding of the bankruptcy regime was and remains somewhat unsophisticated. He knows enough to raise some issues, but it's clear that he didn't have a firm understanding of what the situation was at the time he was entering into the acquisition of the property. He has put forward that it was his intention to do so because it was necessary to obtain a mortgage from the council who were also the vendor.
11. I accept that submission. I do not consider that Mr Haley knew whether he was a bankrupt or not at the time of the purchase of the Property. He considered he was obliged to inform a lender of his credit situation and potential bankruptcy; his unchallenged evidence was that he informed the vendor/lender of that. It was not established in cross-examination that Mr Haley understood that he was obliged to inform his trustee in bankruptcy of the purchase. His evidence was that he had no communications with his trustee in bankruptcy. There is also no evidence of what, if anything, Mr Haley's trustee in bankruptcy told him.
12. In these circumstances, I am not persuaded that Mr Haley intended to defraud his creditors or that he breached s 77(1)(g) Bankruptcy Act. I am also not persuaded that Mr Haley breached s 265(1)(a) Bankruptcy Act.
13. Below, I consider whether it would frustrate the policy of the Bankruptcy Act and/or Real Property Act to allow Mr Haley to obtain equitable relief in light of the illegality canvassed above.

Is relief contrary to the policy of the Bankruptcy Act or Real Property Act?

1. The plaintiffs provided the following submissions as to the relevant policies of the Bankruptcy Act and Real Property Act: … a central policy of the Bankruptcy Act is that it provides for (and encourages compliance with) a regime that enables a bankruptcy trustee to get in assets available to satisfy debts owed to creditors, in a manner that benefits creditors and allows for efficient administration of the bankruptcy. The effectiveness of the regime depends on the forthrightness and cooperation of the bankrupt, and non-disclosure of assets in a timely way is a serious matter. … a central policy of the Real Property Act is to provide for a system of title by registration that depends for its efficacy upon the integrity of the Register; that abhors forged and fraudulent dealings … and that denies parties to a fraud from benefiting from that fraud …
2. In relation to the Bankruptcy Act, the submission was then made: If this Court grants Mr Haley relief on terms that, for example, he be stripped only of his deposit of $8,400 (or of his deposit plus a portion of capital growth referrable to that deposit), then this Court's judgment will create a precedent that disincentivises a future bankrupt from complying with his obligation to disclose after-acquired property.
3. In relation to the Real Property Act, the submission was made: …granting Mr Haley the relief he seeks will see him benefit from his conduct that included a range of fraudulent offences under the Real Property Act, and such relief will undermine a central policy of the Real Property Act.
4. When considering whether a contract was void for illegality, the High Court in Australian Competition and Consumer Commission v Baxter Healthcare Pty Ltd (2007) 232 CLR 1 at [46] (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ) observed that the question depends upon statutory construction and identifying the mischief which the statute is designed to prevent, its language, scope and purpose, the consequences for the innocent party, and any other relevant consideration.
5. See also Fitzgerald v FJ Leonhardt Pty Ltd (1997) 189 CLR 215 at 229-231 (McHugh and Gummow JJ).
6. I do not accept the plaintiffs' submission that it is a policy of the Real Property Act that parties who have engaged in fraud must never be allowed to enjoy proprietary interests connected with their fraud.
7. Section 141(2) Real Property Act, which voids registrations procured by fraud as between the parties or privies to the fraud, was cited to support this submission. However, this section says nothing about the enforceability of equitable interests associated with fraud. Additionally, the plaintiffs' submission is not supported by the fraud exception to indefeasibility of title, which requires fraud to have been committed by the registered proprietor: see eg Registrar of Titles (WA) v Franzon (1975) 132 CLR 611 at 618 (Mason J, Barwick CJ and Jacobs J agreeing); Gerard Cassegrain & Co Pty Ltd v Cassegrain (2013) 87 NSWLR 284 at [14], [97] (Beazley P) and [155] (Macfarlan JA). The fraud exception also generally requires fraud to have been practised against the person seeking to set aside the registered interest: see eg Munro v Stuart (1924) 41 SR (NSW) 203n at 206n. Here, Mr Haley's fraud was not practiced by or against the plaintiffs. It is therefore questionable whether the policy of the Real Property Act is directed at punishing all fraud perpetrated in connection with proprietary interests (including fraud of the sort committed by Mr Haley) by way of deprivation of all proprietary interests that would otherwise be declared to arise.
8. I accept the plaintiffs' other submissions as to the policies of the Bankruptcy Act and Real Property Act. However, the question is whether these policies require Mr Haley to lose the entire benefit of his equitable title in the Property under the asserted resulting trust, in circumstances where the legislation provides various mechanisms for unwinding wrongdoings and sanctions for failures to comply with the provisions.
9. For example, in the Bankruptcy Act: 1. Section 265 lists various offences associated with the failure of a bankrupt to disclose information to the trustee, for example, information concerning after-acquired property or prior transfers of property, which offences are punishable by imprisonment. 2. Section 78(1)(d) allows the Court to commit a bankrupt to gaol who has concealed property from the trustee, or removed property without the permission of the trustee. 3. Section 58(1)(b) provides that after acquired property of the bankrupt vests, as soon as it is acquired by or devolves on the bankrupt, in the Official Trustee or a registered trustee. 4. Section 127(1) creates a limitation period of 20 years from the date of bankruptcy in which the trustee in bankruptcy can bring claims against property of the bankrupt. After that period, property against which a claim could potentially be made by the trustee in bankruptcy is deemed to vest in the bankrupt, or a person claiming through or under the bankrupt.
10. In the Real Property Act: 1. Sections 42 and 43 provide that fraud is an exception to indefeasibility of title. 2. Section 141(1) deems certain fraudulent registrations to be indictable offences. 3. Section 141(2) voids registration procured by fraud as between the parties or privies to the fraud. 4. Section 120 provides that a person who suffers loss by reason of fraud may have an entitlement to claim from the Torrens Assurance Fund.
11. I am satisfied that the purposes of the Bankruptcy Act and Real Property Act are sufficiently served by their own provisions, such that their policies will not be defeated by allowing Mr Haley to enjoy the benefits of a resulting trust, providing that Mr Haley is stripped of the benefit of his wrongdoing. This conclusion is bolstered by the existence of provisions like s 253 Crimes Act 1900 (NSW), which imposes criminal liability on persons who use false documents to obtain property belonging to another, or to obtain any financial advantage or cause any financial disadvantage.
12. While it may be accepted that it is not possible for Mr Haley to pass the fruits of his wrongdoing in respect of the Bankruptcy Act to the appropriate person, being the Official Trustee in Bankruptcy (for either distribution to unpaid creditors or to be returned to Mr Haley), providing Mr Haley does not retain the fruits himself, then there is no policy reason why Mr Haley ought not enjoy the benefit of a resulting trust. As in Nelson, I consider Mr Haley is entitled to enjoy the resulting trust on terms that the fruits of his wrongdoing are retained by the plaintiffs. I consider these terms below.

Can the benefit of Mr Haley's wrongdoing be quantified?

1. The plaintiffs also submit that it is not possible to quantify the benefit that Mr Haley ought to disgorge. The following submissions were made: There is no evidence about the value of the Property as of today (and thus no evidence about the total capital growth obtained, and thus no evidence about the capital growth referrable to Mr Haley's deposit); no evidence of a fair market rent for the Property over the last 23 years, and thus no way to calculate the benefit Mr Haley has received from occupying the Property over that time; no evidence about the benefit Mr Haley has received from having the Property to accommodate his "Business" (recalling that he indicated the only reason the Business survived was because he had the Property); no evidence about the benefit Mr Haley received from keeping his job in respect of that Business; and no evidence about any other benefits Mr Haley received by having the Property "for use and for industrial purposes" for the past 23 years.
2. I do not accept it is impossible to conceptually quantify the benefit Mr Haley has received.
3. In Nelson, the majority only required Mrs Nelson to surrender funds equal to the present-day value of the savings she enjoyed by way of the unlawfully obtained interest rate. The Court did not require her to surrender any benefits which the loan had helped to generate; for example, there was no reference to the property's capital growth. Further, there was no reference to the benefit Mrs Nelson obtained residing in the property. The majority appears to have conceptualised Mrs Nelson's benefit by reference to what would have been recoverable under and in accordance with the Defence Service Homes Act.
4. Deane and Gummow JJ observed (at 571) that: … the interest of the Corporation or the Commonwealth in the dwelling or proceeds of sale thereof is co-extensive with the funds provided by it; if they be restored then effect may be given to a trust in respect of the balance of the equitable interest in the dwelling or the proceeds of sale thereof.
5. Therefore, their Honours considered that Mrs Nelson would be required to return "the same amount as that which the Commonwealth might properly specify in a notice given to Mrs Nelson under s 29 of the Act": at 572.
6. Similarly, McHugh J also considered the "benefit" was only the subsidized interest rate: at 618.
7. Adopting the same approach here, Mr Haley's improperly obtained benefit that ought to be disgorged is the present-day vale of the amount which the Trustee in Bankruptcy was entitled to, but deprived of, because of Mr Haley's failure to disclose the purchase. At most, that would be the $8,400.00 deposit Mr Haley paid during his bankruptcy. This would also equate with the amount which the Trustee would have been able to realise from the Property, upon it vesting in the Trustee (pursuant to s 58 Bankruptcy Act), and had the Trustee sold it.
8. I do not consider a different outcome ought to follow by reason of the policy of the Real Property Act. Here, no person has been deprived of a proprietary interest by reason of Mr Haley's conduct. This is in contrast to the situation under the Bankruptcy Act and the situation in Nelson. Further, the Real Property Act's policy against condoning fraud operates to invalidate fraudulent transactions, not to enforce them, as the plaintiffs seek to do. The Real Property Act also does not expressly deal with the situation here, where fraud has been used not to deprive anyone of an interest in land, but to grant an interest in land. Because it is possible to frame orders concerning the title of the Property on terms as set out above, I consider the policy of the Real Property Act is not frustrated.

Unclean Hands / Discretionary Factors

1. As a further alternative, the plaintiffs raise as a defence the maxim that someone who comes to equity must come with clean hands.
2. For this defence to succeed, Mr Haley's improper conduct must have an immediate and necessary relation to the equity sued for: Black Uhlans Inc v New South Wales Crime Commission (2002) 12 BPR 22,241; [2002] NSWSC 1060 at [81] (Campbell J) (Black Uhlans); Kation Pty Ltd v Lamru (2009) 257 ALR 336; [2009] NSWCA 145 at [28] (Hodgson JA, Allsop P agreeing) (Kation). It is sometimes said the conduct must also involve depravity in a legal as well as moral sense: Meyers v Casey (1913) 17 CLR 90 at 123-124 (Isaacs J); Black Uhlans at [81] (Campbell J).
3. However, these principles are "not a rule of law but merely an aspect of principles guiding the exercise of discretion" of whether to grant equitable relief, with the result that they should not be "given a narrow or technical construction": Kation at [28] (Hodgson JA, Allsop P agreeing).
4. The plaintiffs describe the conduct said to give Mr Haley unclean hands as follows: … Mr Haley's forgeries of the Sale Contract, Transfer, and Mortgage Form; the lodgment of forged documents with the Registrar; and various violations of the Real Property Act and Bankruptcy Act ie his improper conduct that collectively constituted his scheme to avoid the effects of his bankruptcy.
5. As noted above, I do not accept that Mr Haley created the asserted resulting trust with the illegal purpose of defrauding his creditors or avoiding the effects of his bankruptcy, or that he breached s 265(1)(a) Bankruptcy Act. The question, therefore, is whether Mr Haley's failure to disclose his asserted equitable interest to the trustee in bankruptcy and/or his forgery of the plaintiffs' signatures on the relevant documentation, constitutes improper conduct of the sort which justifies application of the unclean hands maxim.
6. It is unclear whether Mr Haley's failure to disclose his asserted equitable interest to the trustee in bankruptcy is conduct which would have an immediate and necessary relation to the equity sued, being a declaration of resulting trust. The difficulty is caused by the fact that, for this conduct to be characterised as improper, the resulting trust would necessarily have had to already come into existence. If the resulting trust asserted did not exist, Mr Haley would have had nothing to disclose, assuming the purchase money was his to spend. The difficulty is compounded by the fact that I consider that Mr Haley was not sure that he was bankrupt, and that there is no evidence as to whether Mr Haley's creditors were or were not paid out in full.
7. By contrast, I consider that Mr Haley's forgery of the plaintiffs' signatures would have an immediate and necessary connection to the equity sued for, because Mr Haley is unable to explain how the asserted resulting trust was created without also explaining that he forged the signatures of the plaintiffs on the relevant documentation. Thus, Mr Haley's forgery would be an essential ingredient in the creation of the asserted resulting trust. This conduct would also clearly involve depravity in a legal as well as moral sense, since it involves forgery and breach of the Real Property Act.
8. This would be sufficient in my opinion to deny Mr Haley unconditional equitable relief. However, I do not consider it would be sufficient to deny Mr Haley equitable relief to altogether. This is because terms can be imposed which strip Mr Haley of the fruits of his wrongdoing.
9. For the reasons explained in relation to illegality, I consider that an appropriate set of terms would require Mr Haley to disgorge the present-day value of the $8,400 deposit he initially paid towards the purchase of the Property. I do not consider that it would be appropriate to impose more onerous terms than this, having regard to the unfairness of leaving the plaintiffs with the benefit of money provided by Mr Haley, and the absence of any proven detriment suffered by the plaintiffs or third parties.

Disclaimer

1. The plaintiffs submit that if Mr Haley ever held any equitable interest in the Property arising pursuant to a resulting trust, he has since "disclaimed" it. In developing this argument during the hearing, Mr Goodyear placed emphasis on the comments made by Mr Haley on 21 August 2020 in the email referred to at [80] above, not only for the purposes of the evidence supporting the conclusion about a gift, but also to support a submission based on "disclaimer". Mr Goodyear orally submitted: If there was ever a way that a layman could explain to someone that they are the legal owner and also the beneficial owner, in my submission, this is it. He's saying you have the legal right to sell 10 Graham Street. Now if he'd stopped there, we might have questions about well hang on, who's the equitable owner? But he goes on to say, "Pocket the money about $350,000." So this is really, in my respectful submission, a short way home. Your Honour can say, "Well do I really need to decide whether he had an interest prior to this point, because irrespective of whether he did or not, he disclaimed it."
2. In written submissions, Mr Goodyear relied on two decisions to support the disclaimer argument. I do not consider that either decision provides a principle relevant to this case.
3. In J W Broomhead (Vic) Pty Ltd (in liq.) v J W Broomhead Ltd [1985] VR 891, the defendants were beneficiaries under a unit trust deed. McGarvie J found that in such a situation, a beneficiary may disclaim the beneficial interest until the point of acceptance. In reaching this conclusion, his Honour applied the principles relating to the making and acceptance of gifts as in those circumstances "the gift is of a beneficial interest made by declaration of trust" (at 930). In the case of resulting trusts, which arise by way of presumed intention, no such explicit declaration arises.
4. In Napoli v Napoli [2023] NSWSC 606, I considered the principles of disclaimer in the context of a purported vendor-purchaser constructive trust, which arose pursuant to a clause of a will. The relevant clause "acknowledge[d] that the home standing in my name…has been held in trust by me for my mother…[who] purchased the property from me". In the proceedings, the deceased's mother had sworn an affidavit denying she ever purchased the property, which amounted to a disclaimer of her interest in the purported trust. In reaching this conclusion, the Court referred to the decision of Commissioner of Taxation v Ramsden [2005] FCAFC 39 where Lee, Merkel and Hely JJ, found at [30] that "a beneficiary may disclaim an entitlement on its coming to his or her knowledge…". Once the relevant clause of the will had come to the mother's knowledge, she denied its accuracy and therefore disclaimed any beneficial entitlement to the property, had the Court found that a trust existed. The facts here are not similar.
5. Here, the plaintiffs' submission is that Mr Haley "disclaimed" his interest under the resulting trust he seeks to have declared in the litigation. But, until a resulting trust is declared, Mr Haley does not have any enforceable interest in the Property that he could disclaim, if that was possible.
6. It may be that in an appropriate case, a party could assert detrimental reliance on a representation by another party that they did not intend to pursue any equitable interest in a property, that prima facie appeared to be the subject of a resulting trust. Such a representation might also disclose an intention to gift an equitable interest under a pre-existing resulting trust. However, no pleading or submissions to that effect were made.

Conclusion

1. For the reasons above, the plaintiffs are entitled to the relief they seek and there is no reason why costs ought not follow the event.
2. Therefore, the appropriate orders are: 1. Pursuant to s 138(3)(b) Real Property Act, Registrar-General to amend the First Schedule of Folio Identifier Number 96/849197 by changing the names: 1. "Kimberley Jane Haley" to "Kimberley Jane Daire"; and 2. "Nicole Ann Haley" to "Nikki Ann Daire". 1. Pursuant to s 138(5) Real Property Act, Defendant to deliver the discharge executed by Murray Shire Council in respect of mortgage 8272598 to the Registrar-General within 7 days. 2. Pursuant to s 74MA Real Property Act, Defendant to withdraw caveat AR284250 within 7 days. 3. Judgment entered for possession of Folio Identifier Number 96/849197 in favour of the Plaintiffs against the First Defendant. 4. Liberty is granted to the Plaintiffs to approach the possession list judge to obtain writ of possession no sooner than 28 days from the date of these orders. 5. Cross-claim dismissed. 6. Defendant to pay plaintiffs' costs, as agreed or assessed.

Amendments 05 March 2024 - In accordance with the "slip rule", rule 36.17 of the Uniform Civil Procedure Rules 2005, amends paragraph [143] to insert (4) and (5). DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 05 March 2024