Draper v Official Trustee in Bankruptcy

Draper v Official Trustee in Bankruptcy [2006] FCAFC 157

BANKRUPTCY - joint mortgagors - where one mortgagor became bankrupt and other mortgagor continued to make mortgage repayments - where bankrupt mortgagor provided general financial support to other mortgagor whilst bankrupt - disclaimer - whether trustee in bankruptcy disclaimed interest in property - estoppel - where trustee in bankruptcy inactive with respect to real property for 16 years - whether trustee in bankruptcy estopped from asserting interest in property - after-acquired income - whether after-acquired income of bankrupt vests in trustee in bankruptcy - whether bankruptcy should be annulled pursuant to s 153B of the Bankruptcy Act 1966 (Cth).

EQUITY - express trusts - whether husband's interest in real property held on trust for wife - whether clear intention to create express trust - whether requirements of s 29 of the Law of Property Act 1936 (SA) that creation of interest be evidenced in writing satisfied - whether Magistrate overlooked material evidence in finding no express trust - constructive trusts - circumstances in which constructive trust imposed - equitable accounting - relevant principles - trustees - claim for damages against trustee in respect of administration of estate.

EVIDENCE - negative inference drawn by magistrate following applicant's failure to call witness - where witness co-operating with both parties.

PROCEDURE - appeal by jury - where party seeks appeal to be determined by jury - circumstances in which Court may order trial by jury.

Held: material evidence overlooked by Magistrate in finding that no express trust arose - Magistrate failed to review material which might satisfy s 29 of the Law of Property Act 1936 (SA) - Magistrate erred in drawing negative inference against applicant on the basis of failure to call witness where witness available to both parties - question of whether bankrupt contributed to mortgage repayments is question of fact - no conduct on the part of trustee in bankruptcy capable of creating an estoppel - no disclaimer of interest in property by trustee in bankruptcy - bankrupt potentially entitled to an account in equity for payments made improving property or repaying mortgage after discharge of bankruptcy - trustee in bankruptcy entitled to proper rent on equitable accounting - no power for Court to direct that matter in its appellate jurisdiction be heard by jury - no basis for annulment of bankruptcy under s 153B of Bankruptcy Act 1966 (Cth) - no basis for claim for damages against trustee in respect of administration of estate - appeal allowed in part - matter remitted for rehearing of claims in respect of proceeds of sale of property.

Bankruptcy Act 1966 (Cth) Federal Court of Australia Act 1976 (Cth) Law of Property Act 1936 (SA) Allesch v Maunz (2000) 203 CLR 172 referred to Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd [2006] FCAFC 22 referred to Austin v Keele (1987) 10 NSWLR 283 referred to Barkworth v Young (1856) 26 LJ Ch 153 referred to Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566 referred to Baumgartner v Baumgartner (1987) 164 CLR 137 referred to Biviano v Natoli (1998) 43 NSWLR 695 referred to Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001)117 FCR 424 referred to Calverley v Green (1984) 155 CLR 242 referred to Chatterton v Chatterton (1989) 52 SASR 337 referred to CSR Ltd v Della Maddalena (2006) 224 ALR 1 referred to Dinnison v The Commonwealth (2000) 106 FCR 418 referred to Draper v Tragauer [2004] FCA 1710 referred to Ebner v Official Trustee in Bankruptcy (2001) 205 CLR 337 referred to Equuscorp Pty Ltd v Jimenez (2002) 220 LSJS 252 referred to Ex parte James; In re Condon (1874) LR 9 Ch App 609 referred to Forgeard v Shanahan (1994) 35 NSWLR 206 referred to Fox v Percy (2003) 214 CLR 118 at 125-129 referred to Giumelli v Giumelli (1999) 196 CLR 101 referred to Grant v Edwards [1986] Ch 638 referred to Hagan v Waterhouse (No 2) (1991) 34 NSWLR 308 referred to Halloran v Minister Administering the National Parks and Wildlife Act 1974 (2006) 224 ALR 79 referred to In re Pavlou (a Bankrupt) [1993] 3 All ER 955 referred to Johnson v Johnson (2000) 201 CLR 488 referred to Leigh v Dickeson (1884) 15 QBD 60 referred to Lucas v Dixon (1889) 22 QBD 357 referred to McDermott v Collien (1953) 87 CLR 154 referred to Minister for Immigration and Multicultural Affairs v Jia Legeng (2001) 205 CLR 507 referred to O'Brien v Sheahan [2002] FCA 1292 referred to Official Trustee in Bankruptcy v Alvaro (1996) 66 FCR 372 referred to Official Trustee in Bankruptcy v Lopatinsky (2003) 129 FCR 234 referred to Payne v Parker [1976] 1 NSWLR 191 referred to Re Gillies; Ex parte Official Trustee in Bankruptcy v Gillies (1993) 42 FCR 571 referred to Re Cook's Mortgage; Lawledge v Tyndall [1896] 1 Ch 923 referred to R v Watson; Ex parte Armstrong (1976) 136 CLR 248 referred to Re Wakim; Ex parte McNally (1999) 198 CLR 511 referred to Re Prestia; Australia and New Zealand Banking Group Ltd v Prestia [2001] FCA 792 referred to Ryan v Dries [2002] NSWCA 3 referred to Scapinello v Scapinello [1968] SASR 316 referred to Secretary, Department of Social Security v James (1990) 95 ALR 615 referred to Silvester v Sands [2004] WASC 266 referred to Sistrom v Urh (1992) 40 FCR 550 referred to Smith v Matthews (1861) 45 ER 831 referred to South Coast Oils (Q & NSW) Pty Ltd v Look Enterprises Pty Ltd [1988] 1 Qd R 680 referred to SZDCJ v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 212 ALR 581 referred to Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 referred to Trustees of the Property of Cummins (a bankrupt) v Cummins (2006) 224 ALR 280 referred to Windt v Carabelas (2002) 224 LSJS 124 referred to Wirth v Wirth (1956) 98 CLR 228 referred to

Meagher, Heydon and Leeming, Meagher, Gummow and Lehane's Equity: Doctrines and Remedies (4th ed, 2002) J D Heydon, Cross on Evidence (7th Australian ed) James Williams, Statute of Frauds: (Cambridge University Press 1932)

KEITH LAWRENCE DRAPER AND BARBARA OLIVE DRAPER v OFFICIAL TRUSTEE IN BANKRUPTCY AND BRUCE JAMES CARTER AS TRUSTEE OF THE BANKRUPT ESTATE OF KEITH LAWRENCE DRAPER SAD 268 OF 2005

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN: KEITH LAWRENCE DRAPER AND BARBARA OLIVE DRAPER

AND: OFFICIAL TRUSTEE IN BANKRUPTCY AND BRUCE JAMES CARTER AS TRUSTEE OF THE BANKRUPT ESTATE OF KEITH LAWRENCE DRAPER

JUDGES: MANSFIELD, RARES & BESANKO JJ DATE OF ORDER: 10 NOVEMBER 2006

1. The appeal be allowed in part.
2. The orders made by the Federal Magistrates Court on 23 September 2005 and 14 October 2005 respectively be set aside.
3. There be a new trial in the Federal Magistrates Court, differently constituted, limited to the appellants' claims concerning the property at Lot 202 Heaslip Road, MacDonald Park, or the application of its proceeds of sale, but not including their claims based on disclaimer or estoppel.
4. The appeal be otherwise dismissed.
5. Each party has leave to make written submissions as to the costs of the appeal and of the hearing before the Federal Magistrates Court in accordance with the following timetable: (i) The appellants may file and serve written submissions on the costs orders (if any) which they seek within 10 days of the date hereof.

(ii) The respondents may file and serve written submissions in response within 17 days of the date hereof. (iii) The appellants may file and serve written submissions in reply within 20 days of the date hereof.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN: KEITH LAWRENCE DRAPER AND BARBARA OLIVE DRAPER

AND: OFFICIAL TRUSTEE IN BANKRUPTCY AND BRUCE JAMES CARTER AS TRUSTEE OF THE BANKRUPT ESTATE OF KEITH LAWRENCE DRAPER

The Issue 1 Appeal from a decision of a Federal Magistrate given on 23 September 2005. 2 Mr Draper became bankrupt on 12 July 1989. The day before, he and Mrs Draper had become jointly registered as the owners of a property at Lot 202 Heaslip Road, MacDonald Park. His bankruptcy severed the joint tenancy, so that he and his wife became tenants in common: s 58, Bankruptcy Act 1966 (Cth) (the Act); Sistrom v Urh (1992) 40 FCR 550; Re Prestia; Australia and New Zealand Banking Group Ltd v Prestia [2001] FCA 792. 3 On 16 November 1989, the Official Trustee as the trustee of the bankrupt estate of Mr Draper became registered as the holder of Mr Draper's half interest in the McDonald Park property. Mr Carter became trustee in place of the Official Trustee from 18 March 2003. In this judgment, unless it is necessary to distinguish between them, I shall call the trustee for the time being 'the trustee'. Now, some 16 years later, the trustee remains registered as the holder of Mr Draper's half interest in the MacDonald Park property, even though Mr Draper was discharged from bankruptcy by operation of law on 25 July 1992. 4 The issue before the Federal Magistrate was, in essence, whether the trustee was, and remained, entitled to a one-half interest in the MacDonald Park property, that is the beneficial as distinct from the purely legal interest. On the appeal, the Court was informed that the MacDonald Park property had been sold in late 2005 for $205,000. After selling expenses, it netted $196,634 (based on information in the trustee's submission). Hence, the practical issue now is about who, as between Mrs Draper and the trustee, is entitled to half of the proceeds of sale. Mrs Draper is clearly entitled to the other half of the proceeds of sale in her own right.

The Contentions 5 The Drapers claimed that, at all times, the beneficial interest in the MacDonald Park property was held by Mrs Draper, and that Mr Draper became a joint registered owner only at the insistence of the principal lending institution, which took a first mortgage over the property. They said they had intended the property to be only in Mrs Draper's name, so Mr Draper held his half interest on an express or constructive trust for Mrs Draper. They also claimed, alternatively, that Mrs Draper had paid all capital repayments and interest on the first mortgage to the lending institution, as well as all recurrent outgoings and all improvements so that there should be some form of equitable accounting for those payments from the proceeds of sale. They further claimed that the trustee, by conduct, had disclaimed any interest of Mr Draper (and his estate) in the MacDonald Park property, and that it would be unconscionable for the trustee now to have any claim to the MacDonald Park property or to its proceeds of sale. 6 Independent claims were made by the Mr Draper for orders that the bankruptcy of Mr Draper should be annulled under s 153B of the Act, and by the Drapers for damages against the trustee by reason of the administration of Mr Draper's estate including particularly the dealings with another property (the Marleston property). Those claims had been summarily dismissed on 22 July 2004. An appeal against the summary dismissal was dismissed: see Draper v Tragauer [2004] FCA 1710. The Magistrate nevertheless allowed those claims to be re-expressed in the amended application, but again dismissed them. In the Draper's written submissions, it is apparent that the basis for those claims is that the debt upon which Mr Draper was made bankrupt was wrongly procured, or could not support the making of the sequestration order because the petitioning creditor, the Australian Society of Accountants (ASA) was a secured creditor as it had procured a 'Mareva injunction' over the Drapers' assets. The Drapers, from those premises, allege there has been a conspiracy between ASA, various solicitors and judges of this Court who have previously decided that the sequestration order was validly made notwithstanding Mr Draper having raised those (and other) points. The debt to ASA represents costs ordered to be paid by Mr Draper in an action he unsuccessfully defended: Australian Society of Accountants v Federation of Australian Accountants v Federal of Australian Accountants Inc (1987) ATPR 40-796. An appeal from that decision was dismissed: Federation of Australian Accountants Inc v Australian Society of Accountants (1988) ATPR (Digests) 46-044. An application for special leave to appeal to the High Court was refused in March 1989. An application to set aside two bankruptcy notices was refused: Re Draper; Ex parte Australian Society of Accountants (unreported, von Doussa J, 3 February 1989). An application to have the sequestration order set aside as ASA was a secured creditor was also dismissed: Re Draper; Ex parte Australian Society of Accountants (unreported, von Doussa J, 12 July 1989). The written submissions are wide-reaching but they involve going behind those judgments. They also involve some allegations (including the conspiracy allegations) which were not raised in the amended application before the Federal Magistrate, and which were not therefore addressed by his Honour. They also involve allegations of fraudulent conduct and the forgery of documents made against persons or entities who were not parties to those proceedings and have had no opportunity to address them. In my view, there is no merit in those parts of the Drapers' submissions. It is not necessary to refer to them in detail. 7 The trustee at the hearing before the Federal Magistrate asserted that Mrs Draper had no entitlement to that half of the MacDonald Park property which he held as trustee of Mr Draper's bankrupt estate. The trustee said there was no trust, express or constructive, by Mr Draper in favour of Mrs Draper. The trustee had asserted at an early stage an entitlement to a one-half beneficial interest in the MacDonald Park property, which would be maintained as the equity in that property increased, and as the value increased with the passage of time. The trustee also disputed that the trustee's interest in the MacDonald Park property had been disclaimed, or that the trustee had done anything to make it unconscionable to maintain a claim to one half of the property. The trustee disputed that Mrs Draper alone had made the payments of capital and interest on the mortgage and the recurrent expenses and for the improvements to that property. The trustee's case was that they had been made jointly by the Drapers. 8 On appeal, initially the trustee maintained that position. The trustee said that the appeal should be dismissed, and that the question of whether there should be any accounting in equity in respect of payments made by the Drapers or by Mrs Draper in respect of the MacDonald Park Property was not raised before the Federal Magistrate, and in any event was beyond the jurisdiction of the Federal Magistrates Court or this Court to address. 9 The latter submission is plainly wrong. It is even surprising that the trustee should have made it. Both the Federal Magistrates Court at first instance, and this Court on appeal, were properly seized of the 'matter' concerning the proper disposition of the bankrupt estate of Mr Draper. The 'matter' clearly included the issues raised at first instance by Mr and Mrs Draper: see Re Wakim; Ex parte McNally (1999) 198 CLR 511. 10 The submission is also plainly wrong in asserting that the Federal Magistrate did not consider any accounting in equity for the payments made in respect of the property. His reasons indicate that he did so. In my view, he did so erroneously. Indeed, the trustee now accepts that the appeal should be allowed at least for the purpose of an equitable accounting for those payments. 11 The position taken by the trustee is not an obviously attractive one. Following Mr Draper's bankruptcy, the trustee took no action to realise the half share of the MacDonald Park property for some 16 years. The trustee's inactivity is consistent with the view of the trustee at material times, at least up to about 1996, that there was no equity in the property. During that time, Mrs Draper or the Drapers paid interest on the mortgage, paid off the mortgages, paid the recurrent outgoings and paid for the improvements to the property. The trustee made no approach to the principal (and in essence the only) creditor in Mr Draper's bankrupt estate for funds to proceed with any action against them or in relation to the property. The trustee's early suggestion that the value of the Drapers' continued occupation of the property could offset those payments must be seen in the light of the property being declared unfit for habitation and the relevant local authority having declared that the property could not be leased for more than $30 per week.

The Decision 12 The Federal Magistrate at first instance dismissed the Drapers' claims. His Honour found: (1) there was no agreement at or prior to the settlement of the MacDonald Park property that Mr Draper's registered interest as a joint tenant would be held for the benefit of Mrs Draper, nor any circumstances giving rise to the constructive trust asserted by the Drapers; (2) Mrs Draper did not meet the outgoings in respect of the MacDonald Park property from her own resources, but Mr and Mrs Draper pooled their incomes and that the mortgage capital and interest payments, and their other living expenses, and any recurrent ongoings or expenditure for improvements of the property were met from their joint incomes, to which Mr Draper was the major contributor; (3) consequently, there was no factual basis for any form of equitable accounting as between the trustee and Mrs Draper in respect of the mortgage capital or interest payments or the contributions to the improvements; (4) there was no representation, either express or by implication or by omission, by the trustee upon which any estoppel could arise preventing the trustee from being entitled to participate in one half of the MacDonald Park property. 13 His Honour also dismissed the claims that the bankruptcy of Mr Draper should be annulled, and that damages should be awarded against the trustee for the trustee's administration of the bankrupt estate of Mr Draper, in particular concerning the Marleston property.

The Nature of the Appeal 14 The appeal is by way of rehearing: see Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001)117 FCR 424; Minister for Immigration and Multicultural Affairs v Jia Legeng (2001) 205 CLR 507 at 533 [75] per Gleeson CJ and Gummow J, 547 [128] per Kirby J, 561 [176] per Hayne J and see too Fox v Percy (2003) 214 CLR 118 at 125-129 [22]-[31] per Gleeson CJ, Gummow and Kirby JJ. A re-hearing, as Kirby J explained in CSR Ltd v Della Maddalena (2006) 224 ALR 1 at [16] involves the following: 'The relevant "requirements" are that the appellate court is obliged to conduct a thorough examination of the record and a real rehearing. It is not confined to reconsideration of the record in order to correct errors of law, although that will certainly be encompassed in such an appeal. It is required to consider suggested errors of fact finding. Experience teaches that many errors of this kind arise at first instance, more perhaps than errors of law. Having conducted a re-hearing as so described, the appellate court is obliged to "give the judgment which in its opinion ought to have been given in the first instance". This involves, where, as here, there is no jury, conducting a thorough review of the primary judge's reasons and engaging in the tasks of "weighing conflicting evidence and drawing… inferences and conclusions"'. (footnotes omitted) That passage was adopted and followed by the Full Court in this Court in Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd [2006] FCAFC 22. 15 However, it is necessary for the Drapers to demonstrate that the judgment under appeal is a consequence of some legal, factual or discretionary error: see SZDCJ v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 212 ALR 581; Allesch v Maunz (2000) 203 CLR 172 at 180 [23] per Gaudron, McHugh, Gummow and Hayne JJ.

(a) The beneficial interest in the MacDonald Park property 16 The Federal Magistrate found that there was no express or constructive trust in favour of Mrs Draper over Mr Draper's interest in the MacDonald Park property for the following reasons: (1) the claim by Mr Draper that he appeared as a joint tenant only on the insistence of the first mortgagee, the lending institution, was not supported, except by a letter which 'was one insisting only that he be a joint borrower' and his presence on the title as a joint registered party was therefore 'left unexplained'; (2) initially the contract for the purchase of the MacDonald Park property was in the name of Kebar Sporting Goods Pty Ltd, and no explanation was given as to why the contract was assigned to Mr and Mrs Draper; (3) no officer of the relevant lending institution was called to give evidence, and no reason advanced as to why such evidence was not called, so that his Honour drew an inference that the evidence of the relevant officer from the lending institution would not have assisted the Drapers (see Jones v Dunkel (1959) 101 CLR 298); (4) there was no reference to any such arrangement in any of the documents completed by Mr Draper at or about the time of his bankruptcy, and there was no reference to that arrangement in his affidavit filed on 9 March 2004 in support of his original application, but the first claim that such an arrangement existed was made in Mr Draper's affidavit of 5 August 2004; and (5) Mrs Draper in her evidence was unable to provide any detail about the arrangement, including whether it related to the MacDonald Park property, or to it and the Marleston property, or only to the Marleston property. His Honour concluded: 'Her evidence persuaded me beyond reasonable doubt when taken in conjunction with the matters referred to in paras 1-55 above [sic] that no such agreement existed.' [This quote appears in [17] of the judgment. I take the reference to paras 1-55 above to be a reference to sub-pars (1)-(5) of [17] in which the quote appears, as the quoted section appears as (6) of [17]. 17 A review of the material before the learned Magistrate, including that presented by the trustee, indicates that in significant respects his Honour's reasons are plainly wrong. The evidentiary material produced by the trustee containing details of the administration of Mr Draper's estate is sufficient by itself to demonstrate those errors. It is not necessary to refer to the Drapers' evidence to make the point. 18 Mr Draper provided a Statement of Affairs of 17 July 1989. He declared his estate to have assets of some $750 only, and liabilities of some $74,500. The two principal creditors were the ASA for $33,000, and Mrs Draper who was said to be a creditor for $40,000. The trustee appears to have accepted the debt of ASA, and not to have accepted the debt of Mrs Draper (although it is not clear that proofs of debt were called for). There were no other significant creditors. In a questionnaire of the same day, Mr Draper said that he was registered as a joint owner of the MacDonald Park property. In an interview with an officer of the trustee on the same day, 17 July 1989, Mr Draper said that he and his wife had recently become the registered joint owners of the MacDonald Park property, but that he did not have any interest in the property and his name was only put on the title at the insistence of the lending institution from whom Mrs Draper obtained the finance to purchase the property. 19 Consequently, at the very first opportunity, Mr Draper asserted that he had no equitable interest in the McDonald Park Property. The trustee's records dryly observe at one point that it would be surprising if Mr Draper, an accountant, did take a beneficial half interest in the MacDonald Park property the day before his bankruptcy, knowing of the consequences of doing so! 20 Mr Draper was then examined pursuant to s 69 of the Act on 19 September 1989. He was asked about the MacDonald Park property. The transcript was in evidence. He said that originally Kebar Sporting Goods Pty Ltd had agreed to purchase the property, but that the contract was assigned because the lending institution would not grant the loan unless his name was on it. He said that the purchase price was $48,000, all borrowed, and $1000 was paid by Mrs Draper for the acquisition expenses. He also said that the repayments on the mortgage were being made by Mrs Draper from her wages. 21 On 20 April 1990, Mrs Draper was also examined by the trustee pursuant to s 81 of the Act. She too was asked about the acquisition of the MacDonald Park property. She said that the property was first to be in the name of Kebar Sporting Goods Pty Ltd, and that she applied for a loan through the lending institution. They would not advance the funds to Kebar Sporting Goods Pty Ltd because it was a company, and 'the only reason that they would give me the loan was that my husband's name was on the document'. She then said that, despite his name being on the title, it was solely her property. She had procured the loan. She paid the stamp duty and conveyancing costs. Mr Draper had made no financial contribution to the acquisition of the property, and it came out of her wages. She paid the recurrent expenses of the mortgage capital and interest. Mr Draper had made no other payments in respect of it. By that time there had been a small improvement to the property by laying down a water pipe for which she had paid. 22 Earlier, on 21 July 1989, the trustee had sought information from the lending institution, then called Public Service Savings and Loans Society Ltd, about the circumstances in which the loan came to be made. The trustee was asked whether the lending institution had insisted upon a joint title being held by the Drapers. The lending institution then provided the relevant documents. 23 The loan application of 31 May 1989 was in the name of Mrs Draper only and made by her as the member of the lending institution. It contains a 'security offered' section which apparently proposed a mortgage to be granted by Kebar Sporting Goods Pty Ltd. The company's name has been crossed through. The Marleston property in the name of Mrs Draper was proposed as collateral security. On 16 June 1989 the lending institution wrote to Mrs Draper. It told her that her loan application for $40,000 had been approved, subject to the following conditions: '1. Fortnightly repayments of $319-00 by salary deduction over a term of 10 years. 2. A Registered First Mortgage … 3. The loan be in joint names with yourself and your husband. 4. …' 24 The reference to 'salary deduction' is clearly a reference to Mrs Draper's salary as a teacher's aide being the principal source of repayment of the loan. The letter said the lending institution would prepare the security documents. It is customary for the loan agreement then to be prepared by the lender. What is obviously only part of the pro forma formal loan agreement is dated 25 June 1989. It contains the schedule into which the details of the particular transaction are inserted. It was obviously completed by the lending institution. It is signed by both the Drapers. It records them as joint borrowers and the security as a first mortgage over the property. 25 The lending institution then prepared the first mortgage documents. That is the usual course. The lending institution provided for the borrowing to be in joint names and the first mortgage also to be in joint names. The 'borrower' was required to give the security of the first mortgage over the MacDonald Park property under the terms of the lending agreement. 26 In my view, contrary to the conclusion of the Federal Magistrate, it is clear that Mr Draper became a joint borrower and consequently a joint registered owner of the MacDonald Park property upon the request of the lending institution. The application for the loan was made by Mrs Draper only, and she was notified of the grant of the loan. The lending institution required Mr Draper's involvement as a joint borrower (and, it may safely be inferred that it also wanted him as a joint borrower, to be a joint mortgagor) was required by the lending institution. That evidence also explains that the lending institution was not prepared to advance the money required in the name of the company. It is likely that the lending institution was unaware of Mr Draper's impending bankruptcy. 27 Subsequently, on 23 August 1996, the trustee made inquiries of the lending institution as to the status of the loan. It was informed by the lending institution that payments were maintained until the mortgage was discharged and that payments were made by payroll deductions from the Education Department from Mrs Draper's salary. It informed the trustee that $319 per fortnight was paid into the loan account on account of the mortgage capital and interest repayments, and $150 per fortnight was paid into a savings account in Mrs Draper's name. By June 1996, a balance of about $5500 had accrued to the savings account and Mrs Draper paid off the remaining balance of the mortgage. At about that time, inquiries were also made of the vendor/second mortgagee who confirmed that the second mortgage had been paid out by 17 November 1990, but was unable to indicate who had paid that money. 28 It is clear from that material that the trustee had as good access to the lending institution as the Drapers. The trustee, in fact, had obtained information from the lending institution to find out whether it had insisted upon joint proprietorship and joint borrowing, and had been given documents which amounted, in my view, to an affirmative response. In those circumstances, in my view, it was inappropriate to draw an inference, as the learned Magistrate did, that the evidence of officers of the lending institution would not have assisted the Drapers. Even if oral evidence from the relevant lending officer (if still available after some 15 or 16 years) were to address the topic, the trustee had access to the officer. The contemporaneous records of the lending institution were in evidence. On analysis, they support the evidence of the Drapers. 29 The Federal Magistrate also said there was no reference to the arrangement in the initial joint affidavit of the Drapers of 9 March 2004 filed in the proceeding. That affidavit is largely argumentative, and quasi-legal, in its content. However, it describes Mr Draper as a 'joint tenant' (sic) and says that he held the property 'in trust'. It refers to Mrs Draper having paid in full the cost of the property out of her salary. Especially in the light of Mr Draper's communications with the trustee as far back as 17 July 1989, that affidavit does not support any suggestion of recent invention (that is, of a claim first having been made in the affidavit of 5 August 2004) that Mr Draper at no time held the beneficial interest in the MacDonald Park property. 30 In my view, the material before the Federal Magistrate demonstrates that the first four of his Honour's reasons for rejecting the Drapers' claim that Mr Draper became a joint owner of the MacDonald Park property at the request of the lending institution, and that he held his half interest in trust for Mrs Draper were erroneous. They overlook material evidence. The fact that Mrs Draper directly made all subsequent payments to the lending institution from her salary deductions in respect of the property is consistent with, and capable of being evidence of, that arrangement. As his Honour pointed out, however, the making of those payments after the date the property was acquired cannot by the mere fact of those payments create an equitable interest in the property in favour of Mrs Draper; that interest must have existed at the time of settlement. See Calverley v Green (1984) 155 CLR 242 at 252 and 257; Official Trustee in Bankruptcy v Alvaro (1996) 66 FCR 372 at 391. 31 In my opinion, that is sufficient to allow the appeal and to set aside the judgment of the Federal Magistrate. It is desirable, however, to also address the fifth reason for his Honour's rejection of the claim, and to address a further contention of the trustee. 32 As noted, the Federal Magistrate tied his assessment of Mrs Draper's credibility to the other four reasons for his conclusion. It was not an independent reason for his conclusion. It is also obvious that his Honour was not impressed by Mr Draper's evidence. 33 The Draper's several affidavits in support of their claims are obviously argumentative. They are expressed in aggressive terms. In his submissions, Mr Draper was abrasive and confrontational. He clearly thinks he has reason to be. The cross-examination transcripts also indicate that Mr Draper was, on occasions, unnecessarily curt and sometime unpleasant in the way he responded. Nevertheless, I think Mr Draper's cross-examination in at least two respects proceeded upon a factual misunderstanding (which he himself did not identify at the time) which may have coloured the way he then responded to further questions and the way the Federal Magistrate assessed his reliability. 34 The first is that the cross-examination appears to have assumed that that part of the pro-forma loan agreement prepared by the lending institution and dated 25 June 1989 was not prepared by the lending institution but was part of the loan proposal. The cross-examination focuses on the application for the loan, and its conditional acceptance by the letter of 16 June 1989, without recognising that subsequent document existed and was prepared by the lending institution, as apparently was the mortgage itself and it reflected the conditions which the lender had imposed, including that Mr Draper be a borrower and a mortgagor. 35 The cross-examination of Mr Draper appears to have overlooked that sequence. The misunderstanding appears to have led to some questions of, and answers by, Mr Draper which were based upon that error. 36 Mr Draper also was also asked about the apparent inconsistency in his Statement of Affairs, and the questionnaire form, both signed on 17 July 1989, about whether he had an interest in the MacDonald Park property and then why in the questionnaire where he disclosed that interest he had not then stated it was a purely legal interest only. Neither the Federal Magistrate's, nor the Drapers', attention was drawn to the record of interview with the trustee of the same day when he explained the circumstances in the way referred to above. There was also some cross-examination suggesting Mr Draper had wrongly claimed that Mrs Draper had paid for the purchase of the MacDonald Park property. In strict fact, she did not do so. It was paid for by jointly borrowed funds. If, as the Drapers claimed, she had repaid the lenders, her payments were not strictly for the purchase price but to repay the loans. 37 Mrs Draper's evidence at the hearing was confusing. She referred to an agreement to receive a property in lieu of wages owing by Mr Draper. The whole of the evidence makes it clear that was the Marleston property. She did not recall any other agreement, but she was not directly challenged about her affidavits of 5 August, 20 August 2004 and 5 August 2004 where she positively asserted the arrangement about the acquisition of the MacDonald Park property referred to above. She also explained the arrangement at her examination on 20 April 1990. Nor was she asked to comment upon her loan application, the lending authorities' letter of offer to her of 16 June 1989 or the terms of the security document. She confirmed in her oral evidence the fact she had paid the repayments of capital and interest on the MacDonald Park property to the lender from her salary. She said she had limited surplus funds after those payments, but was better able to pay over time with salary increases and when she went from part-time to full-time work. When she could not support herself, she was helped by family and friends. She denied having financial support from Mr Draper. 38 As has been said, Mrs Draper's evidence was not the only, or an independent, reason for the conclusion that in reality the MacDonald Park property was intended to be, and was, jointly acquired in law and in equity. 39 The other contention of the trustee is that s 29 of the Law of Property Act 1936 (SA) must result in no express trust being recognised, even if one were found to exist. Section 29(1)(b) relevantly proved that a declaration of trust respecting any interest in any land 'must be manifested and provided' by some writing signed by a person who is able to declare the trust. It does not require the creation or disposition of an interest in land itself be in writing. The writing sufficient to satisfy the terms of s 29(1)(b) may be created after the declaration of the trust and may be in an affidavit: Barkworth v Young (1856) 26 LJ Ch 153; Equuscorp Pty Ltd v Jimenez (2002) 220 LSJS 252 at [118] (Jimenez). The trustee relied on the decision in Jimenez, but I do not think it assists as the ruling was based upon the inadequacy of the writing relied upon, which did not show what the terms of the trust were: see at [122]-[123], and Smith v Matthews (1861) 45 ER 831. Windt v Carabelas (2002) 224 LSJS 124, the other case relied upon by the trustee, is also of no particular assistance as, in that case, there was simply no writing which was relied upon to manifest the claimed trust. In my view, there has been no review of the various documents produced by Mr Draper, including his affidavits, to determine if s 29(1)(b) has been satisfied: see too Halloran v Minister Administering the National Parks and Wildlife Act 1974 (2006) 224 ALR 79 at 96-97 [72]-[75], 98 [81] per Gleeson CJ, Gummow, Kirby and Hayne JJ. His Honour has addressed only the existence of a writing creating the trust in favour of Mrs Draper at the time of the acquisition or settlement of the MacDonald Park property. Section 29(2) in any event provides that the requirements of s 29(1) do not affect the creation of a constructive or implied trust. The significance, if any, of s 29 of the Law of Property Act 1936 should be revisited on the rehearing.

(b) The payment of outgoings on the MacDonald Park property 40 That material shows that the payments to the lending institution for capital and interest on the first mortgage, including the substantial payment of some $5500 to finally pay off the mortgage, were made directly by Mrs Draper. It does not demonstrate who paid off the second mortgage (although there is a suggestion that it came from the proceeds of the sale of the Marleston property, which was in the name of Mrs Draper). It does not demonstrate who paid the initial acquisition expenses of the MacDonald Park property, or the recurrent outgoings such as rates and taxes, or the cost of improvements. The Drapers said that Mrs Draper made all those payments. 41 In reaching the conclusion that, despite that clear and independent evidence, the payments were made from the pooled income of the Drapers, the Federal Magistrate addressed the extent of Mrs Draper's net income at the time of the sequestration order against the commitments to the first mortgage. There was not much left over. Mrs Draper acknowledged that. His Honour also had regard to Mr Draper's declared income at that time of $34,000. 42 However, the Federal Magistrate appears to have assumed that Mr Draper's income as an accountant continued at that level, when there was no evidence that it did so and despite the uncontradicted evidence that Mr Draper was unemployed from 10 October 1991. His Honour did not remark upon Mrs Draper's evidence that she was better able to make those payments and maintain herself over time due to salary increments and when she moved from part-time to full-time work (her salary not only supported those outgoings but allowed her to save the $5500 final mortgage repayment), and he did not reject her evidence that she had some financial assistance from friends and family. Finally, the Federal Magistrate did not have regard to the proceeds of realisation of the Marleston property which was in Mrs Draper's name, and which (on the evidence) may have at least funded the payment of the second mortgage over the MacDonald Park property. 43 In Silvester v Sands [2004] WASC 266, a property acquired in the name of Ms Sands, had been financed partly by her and partly by a joint borrowing, in essence, by Mr Silvester and Ms Sands. The Court found there was no agreement about how the equity was to be held, so it was held in proportion to the respective contribution to the purchase price. The payment of interest on the mortgage was made for some time by instalments from an account of Ms Sands, but the evidence was clear that she and Mr Silvester lived together and pooled their incomes to meet all their expenses, so the particular account from which the interest payments were made was part of their collective resources. The Court also found that the equity in the property changed, as was intended by Ms Sands and Mr Silvester, with the payment of capital and in particular by a particular lump sum payment made by (or by his parents on behalf of) Mr Silvester after the property was acquired. 44 I do not think that case throws much light on how the present matter should be determined. It was a decision on its particular facts and, unlike this case, did not involve husband and wife (Trustees of the Property of Cummins v Cummins (2006) 224 ALR 280 at 297 [72]. The finding as to whether the mortgage principal and interest payments were made by Mrs Draper or by the Drapers jointly is also a question of fact, not resolved necessarily by looking only at the account from which those payments were actually made. I have indicated some concerns about how the Federal Magistrate made his findings of fact on that question in this matter. It is not necessary finally to determine whether there was error in his Honour's conclusion as I propose to allow the appeal on other grounds, and to remit the matter for rehearing. 45 It is also not necessary to determine the alternative contention of the trustee that, even if Mrs Draper made all the payments of capital and interest on the first mortgage (and on the second mortgage granted to the vendor), there was no agreement to vary the equitable interest in the MacDonald Park property had not varied in her favour. A different conclusion, in somewhat similar circumstances was reached in Silvester v Sands, based upon an agreement of the parties to that effect. See also Baumgartner v Baumgartner (1987) 164 CLR 137 per Gaudron J at 156 where her Honour referred to equity accumulating over time. The trustee said there was no such agreement shown on the evidence. He argued that such an outcome could only reflect an agreement between the Drapers that Mrs Draper's equitable interest would increase over time. At present no finding on that question has been made.

(c) The estoppel/unconscionable conduct claim against the trustee 46 Early in the administration an issue arose concerning whether Mr Draper had disposed of an interest in the Marleston property prior to his bankruptcy in circumstances where that transaction could be set aside. A caveat was placed upon the Marleston property by the trustee. The trustee wished to explore whether any claim could be maintained against either Mr Draper or Mrs Draper in respect of the Marleston property. The trustee sought ASA funding for an examination of the relevant bank officer who had approved the grant of security and for the examination of Mrs Draper. ASA agreed to fund an examination of the bank officer and Mrs Draper, and the obtaining of a legal opinion as to the prospects of setting aside the transaction. If the caveat had been warned, the trustee would have needed to have brought such an action. The examinations occurred. By April 1990 advice had been given as to the prospect of success of such proceedings. By 23 July 1990, ASA had indicated that it would not provide further funds in support of any such action, and proposed simply to prove its debt (of $33,000) in the bankrupt estate of Mr Draper, and then to await payment in the event that funds became available to the estate. After that point, the creditor ASA appears to have had no interest in the administration of the estate. 47 There was extensive communication between the trustee and Mrs Draper in the period from 1990 to 1992 as to what should happen in respect of the trustee's registered interest in the MacDonald Park property. It was desultory thereafter. Throughout the trustee asserted an entitlement to receive 50% of the proceeds of sale of the MacDonald Park property and invited Mrs Draper to make an offer to acquire that interest. Mrs Draper persistently responded that the property was not able to be sold at any value, as there was no equity in it and invited the trustee to disclaim the property as an onerous property. There was a stalemate. There is nothing upon which the trustee could have believed that in that period of time there was any equity in the MacDonald Park property. The trustee knew the purchase price. It was, as the trustee knew, acquired with borrowed funds. The trustee was aware that the property had been declared unfit for habitation. It might rhetorically be asked: what did the trustee expect Mrs Draper to offer to pay for a half-interest in a property in which there was negative or no equity? The trustee was also aware from information provided to it by the lending institution that interest payments were being maintained, as well as rates, taxes and other outgoings by Mrs Draper or by the Drapers. Indeed, the trustee initially asserted that if Mrs Draper made all those payments he would permit her full use of his half of the property. Mrs Draper in her letter of 27 January 1992, asserted that she had by then paid some $17,000 by way of interest on the mortgage herself and requested the Trustee to disclaim the property. She repeatedly asserted that she was paying all the outgoings in respect of the property. 48 The internal assessment of officers of the Public Trustee was that 'she refused to purchase and so should be ignored or at least no action should be taken'. Again, one might rhetorically ask, what was she expected to purchase if there was no equity in the MacDonald Park property? 49 By internal memorandum of 16 August 1996, the Official Receiver as agent for the Official Trustee reviewed the file. It appears to have been managed by the trustee's officers to that time. Her internal memorandum indicated that, in respect of the MacDonald Park property, the appropriate decision would be to invite ASA as the principal, and in essence the only, creditor to support an action for partition, or to indicate to Mrs Draper that the trustee disclaimed an interest in the MacDonald Park property and to retransfer it to Mrs Draper. I daresay that, had the issue been addressed by the Official Receiver earlier, that course of action would have been even more obvious. The immediate cause of that internal memorandum appears to have been Mrs Draper's correspondence of 27 July 1996 (which on the evidence was the first correspondence for some two and a half years between the parties) in which she again asserted that there was no equity in the MacDonald Park property and threatened to bring action. 50 The Official Receiver's memorandum of 16 August 1996 prompted the acquisition of the information from the lending institution, and from the vendor second mortgagee, referred to above. It did not lead to immediate action until Mrs Draper again inquired, by letter of 11 October 1996, what the trustee was proposing to do. By that time the trustee had also ascertained that the Valuer-General's valuation of the MacDonald Park property was $64,000. The trustee's officers in response to that letter, and despite the advice of the Official Receiver, decided not to seek any financial support from the ASA for any action, but again to invite Mrs Draper to make an offer. Nothing subsequently developed until the present proceedings. 51 The trustee's affidavit asserts that Mrs Draper was 'unco-operative' in her dealings with the trustee. In my view, that is a misdescription. She may have been assertive. She may have been frustrated. She persistently asserted that there was, at material times, no equity in the MacDonald Park property and therefore she would not pay to acquire it. She persistently asserted that there were substantial outgoings in respect of the MacDonald Park property (as there were). The trustee was not contributing to them. The trustee was nevertheless not prepared to decide whether to disclaim the interest in the property, to seek a partition order, to seek funding from the ASA for a partition order, or to take any other action apart from maintaining its position. It was an unsatisfactory attitude. 52 Despite those observations, in my view, there is no conduct of the trustee upon which the trustee should be estopped from asserting any interest in the MacDonald Park property which was acquired upon the Draper's bankruptcy. Nor is there any unconscionable conduct on the part of the trustee which should prevent the trustee from asserting any such interest. 53 The extent of any such interest is a matter of dispute. The rehearing of this matter should resolve the nature and extent of any such interest. In addition, whether any such interest (if found to exist) should only be given effect subject to an accounting in equity in respect of the payments made in relation to the MacDonald Park property is also a matter which can be addressed upon the rehearing.

(d) Equitable accounting 54 The trustee, by submissions filed after the hearing, accepts that in any event the appeal should be allowed for the purpose of determining the extent of any accounting which the trustee should give to Mrs Draper or the Drapers for monies paid in respect of the MacDonald Park property. 55 The starting point for such an accounting in equity is the contributions made to the payment of capital and interest on the two mortgages. As noted, there is evidence Mrs Draper paid off the vendor-mortgage; and it is unlikely that Mr Draper could have done so during bankruptcy. The direct evidence also is that Mrs Draper paid all the capital and interest payments on the first mortgage, including a lump sum of $5,500 in 1996 to finally discharge it; whether that resulted from the pooling of income is a matter which, in my view, should, if relevant, be determined upon the rehearing. However, again any significant payments by or with the support of Mr Draper during his bankruptcy should be known to the trustee. After his discharge from bankruptcy, any payments made by Mr Draper should be taken into account in equity for the purposes of the accounting in any event. For example, if after his discharge Mr Draper paid to discharge the mortgage or for improvements, there would appear to be no reason why the trustee should not have to account to him for those payments. The rehearing can also address the amount of payment for recurrent outgoings and for improvements by Mrs Draper, and by Mr Draper or the Drapers jointly after Mr Draper's bankruptcy came to an end. The payments by Mrs Draper, and the payments by Mr Draper or by the Drapers jointly after 25 July 1992, should be brought to account. 56 Any benefit to Mrs Draper through the use and occupation of the MacDonald Park property should also be taken into account: Baumgartner v Baumgartner (1987) 164 CLR 137 at 151 per Mason CJ, Wilson and Deane JJ. The trustee should be entitled to a proper rental, but on the evidence that could not exceed half of $30 per week. 57 Re Pavlou (a bankrupt) [1993] 1 WLR 1046 suggests that the accounting should reflect the extent to which the value of the MacDonald Park property increased by reason of the improvements. That would be significant only in respect of improvements Mrs Draper paid for, or those made after 25 July 1992. In the light of the amount in issue, it may not be necessary to take that step. My rough estimates, assuming most of the capital repayment of the first mortgage was 'back ended', i.e. effected towards the end of the loan period, is that the amount to be brought to account (assuming that the payments in respect of the first mortgage were from joint resources) will include the capital and interest on the vendor mortgage, part of the interest and most of the capital on the first mortgage, and depending when the improvements were made (assuming they were jointly funded), some of the improvements. If Mrs Draper is accepted to have made all the repayments, the amount to be brought to account increases. I have assumed in those estimates the recurrent outgoings for rates and taxes approximates the allowance the other way for occupation rental, but so far as I can see there is no evidence of the amount of the outgoings; that would have to be addressed at any further hearing.

Conclusion 58 For those reasons, the order of the Federal Magistrate of 23 September 2005 dismissing the Drapers' application should be set aside, as well as the order for costs made on 14 October 2005. I have given consideration to what further orders should be made. The independent documentary evidence in favour of the Draper's claims is quite strong, but in part the acceptance or otherwise of their claims may depend upon the acceptance of their evidence. For that reason, I think the appropriate order is to remit the application to the Federal Magistrates Court for rehearing. In view of the learned Federal Magistrate's views about the credibility of the Drapers, that rehearing should be conducted by another Federal Magistrate. 59 On any view, Mrs Draper is entitled to one-half of the net proceeds of the sale of the MacDonald Park property, namely $98,317.20. The other half may be found to be held in trust for her; that is a matter to be retried. In any event, either Mrs Draper or the Drapers have a substantial claim for an equitable accounting from the proceeds of sale of the property. 60 The trustee has at no time sought the financial support of ASA to defend the present application, or otherwise to bring proceedings to have determined the extent of the trustee's entitlement, if any, to participate in the proceeds of sale of the MacDonald Park property. In addition, as I understand the position, the trustee has not yet called for proofs of debt in Mr Draper's bankrupt estate and so has not yet formally adjudicated upon Mrs Draper's claim to be a creditor for $40,000 in that estate. 61 It is a matter for the trustee, in the circumstances, whether to continue to resist the application.

Two Further Matters 62 At the commencement of the hearing, Mr Draper (who appeared by leave also on behalf of his wife) raised two matters. 63 Firstly, he sought an order that the appeal be heard by a jury. The Court indicated at the time that his application was rejected. His ground for the application was that he had no confidence in the judiciary generally, having regard to the outcome of previous litigation in which he had been involved. He did not refer to any statutory provisions, or to any authority, in support of his application. 64 Section 39 of the Federal Court of Australia Act 1976 (Cth) (the FCA Act) provides that, in every 'suit' in the court, unless the Court or a judge otherwise orders, the trial shall be by a judge without a jury. Section 40 then empowers the Court or a judge, in any suit, to direct the trial of the suit or of an issue of fact in the suit by a jury if 'the ends of justice appear to render it expedient to do so'. Section 3 defines a 'suit' as any action or original proceeding between parties. 65 The jurisdiction of the Court is addressed in Pt III of the FCA Act. Section 20 provides that, except as otherwise provided by the Act, the original jurisdiction of the Court shall be exercised by a single judge. Sections 39 and 40 provide one circumstance in which a judge might direct that jurisdiction to be exercised in a different manner. The appellate jurisdiction of the Court, including certain appeals from judgments of the Federal Magistrates Court (s 24(1)(d)) is to be exercised by a Full Court (as in the case of the present appeal) unless the Chief Justice considers it is appropriate to be exercised by a single judge (s 25(1A)). (This appeal is not 'from a migration judgment' of the Federal Magistrates Court so that s 25(1)(AA) does not apply.) 66 In my judgment, it is clear that this matter, being one in the appellate jurisdiction of the Court and to be heard by a Full Court is not one to which s 39 of the FCA Act applies. Section 25 directs how the appellate jurisdiction of the Court is to be exercised. It follows that there is no power of the Court under the FCA Act to hear an appeal with a jury. 67 In any event, even if there were a discretion under s 40 to order a hearing of this appeal by jury, I would not exercise that power. Trial without jury is the normal mode of trial of actions in this Court and no special reason has been shown for departure from that mode: cf: McDermott v Collien (1953) 87 CLR 154 at 157 per Fullagar J; Dinnison v The Commonwealth (2000) 106 FCR 418 at 419-420 [2]-[6] per Whitlam J. It would be inexpedient in the interests of justice to do so. 68 In this matter, there is no apparent reason why a jury could or should in the interests of the administration of justice be given the task of determining the appeal. It involves a complex analysis of the course of events and the evidence before the Federal Magistrate at first instance, including a review of that evidence, the submissions and the transcript. Moreover, the appeal involves the application of principles of equity. It was for these reasons that I joined in refusing the application for a jury. 69 The second matter raised by Mr Draper was an application that I should disqualify myself from sitting on the appeal because of perceived bias. 70 In Ebner v Official Trustee in Bankruptcy (2001) 205 CLR 337, [6] Gleeson CJ, McHugh, Gummow and Hayne JJ said that: '[A] judge is disqualified if a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial mind to the resolution of the question the judge is required to decide.' That proposition is derived from a series of decisions of the High Court going back to R v Watson; Ex parte Armstrong (1976) 136 CLR 248. It was also applied in Johnson v Johnson (2000) 201 CLR 488 in the context of a statement by the trial judge in the course of the hearing. See per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ at [11]. 71 Mr Draper relied upon two earlier decisions which I have given in which he had been a party. In Draper v Official Receiver for the Bankrupt Estate of Keith Lawrence Draper [2004] FCA 1379 I refused an application that an appeal from a decision of the Federal Magistrate given on 22 July 2004 could be heard by a jury. The reasons for that ruling were similar to the reasons for reaching the view expressed above. Subsequently, in Draper v Tragauer [2004] FCA 1710, I determined that appeal adversely to him. Those two decisions also concerned the same action which was before the Federal Magistrates Court and which gives rise to the present appeal. The earlier decision of the Federal Magistrate summarily was to dismiss certain claims in the proceeding. His Honour nevertheless permitted Mr Draper to amend his application so that there remained alive a number of issues. Those issues included whether the beneficial interest in the MacDonald Park property at material times vested only in Mrs Draper. Those matters subsequently came to hearing before the Federal Magistrates Court, and have given rise to the judgment which is presently under appeal. Consequently, in that matter, whilst dismissing the appeal, it was not necessary to make any findings of fact on contentious issues affecting the present appeal. Nor was it necessary to make any adjudication as to the reliability or otherwise of the Drapers' claims in those proceedings. It was an interlocutory application based upon the pleadings. In fact, at the conclusion of that judgment, I made some remarks in an endeavour to focus the Drapers' attention on the further hearing in a way which might enable it to proceed expeditiously. I identified the question whether, despite Mr Draper being registered as a joint tenant in the MacDonald Park property immediately before his bankruptcy, the equitable interest nevertheless rested solely in Mrs Draper at the time of the sequestration order. I also identified the question whether, in any event, the trustee should account in equity to Mrs Draper or to the Drapers for moneys paid towards improvement of the MacDonald Park property and towards the payment of outgoings, including mortgage, interest and capital payments, before quantifying any entitlement of the trustee to participate in one-half share of the MacDonald Park property, and also whether, on some basis, the conduct of the trustee entitled the Drapers to an order that the trustee should be estopped from asserting any entitlement to any part of those proceeds of sale. Those matters were not then decided, but identified as issues to be decided. 72 In my judgment, there was no basis upon which a fair-minded lay observer in the circumstances might reasonably apprehend from those previous judgments that I might not bring an impartial and unprejudiced mind to the resolution of the present appeal. I indicated at the time Mr Draper made his application that I proposed to sit on the appeal notwithstanding his objection.

Orders 73 I would allow the appeal and set aside the orders of the Federal Magistrate of 23 September 2005 and 14 October 2005 only to the extent that they concern the claims concerning the MacDonald Park property or the application of its proceeds of sale. As I do not consider that the Magistrate erred in rejecting the claims that the trustee disclaimed any interest in that property, or that the trustee should be estopped from asserting any interest in that property, the remittal of the matter should also not encompass those issues. I would therefore remit the application to the Federal Magistrates Court, differently constituted, for rehearing of any of the remaining claims. That is, the rehearing should be limited to the issues as to whether at any material time Mr Draper held a beneficial interest in the MacDonald Park property, and if so whether in the events which have happened the trustee is entitled to participate in one half of the net proceeds of the sale of the MacDonald Park property and the extent of any such entitlement. It should not encompass issues of disclaimer or estoppel. That is also intended to ensure that Mr Draper's claim for an order that his bankruptcy should be annulled, and the Drapers' claims against the trustee for damages by reason of the trustee's administration of Mr Draper's bankrupt estate, are not remitted for re-hearing. 74 As appears from the preceding paragraph, the Drapers have succeeded in part upon this appeal. The material before the learned Magistrate and on this appeal was very extensive. It was discursive and argumentative. It was not readily identifiable as relevant to the several particular claims of Mr Draper or the Drapers. It is not therefore easy to determine the extent to which, if at all, an order for costs of the appeal or the hearing at first instance should be made. Mr Draper appeared in person for himself and Mrs Draper on the appeal. It may be that, if they have any entitlement to costs, it should be limited to their proper disbursements. 75 I would therefore give the parties the opportunity to make written submissions as to the costs orders which should be made. I would allow the Drapers 10 days within which to file and serve written submissions on the costs orders (if any) which they seek, and the trustee a further seven days within which to respond. The Drapers should be given three days to file and serve any reply. The primary submissions of the Drapers on costs should include detail of the basis upon which any orders for costs and/or disbursements they seek would be quantified, so that the trustee has an opportunity to make submissions on that topic. I certify that the preceding seventy-five (75) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN: KEITH LAWRENCE DRAPER AND BARBARA OLIVE DRAPER

AND: OFFICIAL TRUSTEE IN BANKRUPTCY AND BRUCE JAMES CARTER AS TRUSTEE OF THE BANKRUPT ESTATE OF KEITH LAWRENCE DRAPER

REASONS FOR JUDGMENT RARES J 76 I have had the advantage of reading the reasons of Mansfield J and Besanko J. I agree with Mansfield J that the appeal should be allowed and the orders that he has proposed should be made. I also agree, subject to the following observations, with his reasons but also wish to add some further matters. 77 The reasons which Mansfield J gives for refusing the application for a jury are the reasons which I also had for determining that the appeal should be conducted without a jury.

THE BENEFICIAL INTEREST IN THE MACDONALD PARK PROPERTY 78 In addition to what Mansfield J has said on this, and contrary to Besanko J's view, I am of opinion that the mere fact that Mr Draper was a joint borrower does not necessarily preclude a conclusion that there could have been a resulting trust at the time of the purchase. Nothing said in Calverley v Green (1984) 155 CLR 242 requires a conclusion to that effect. Rather, in the passages to which Besanko J makes reference (Gibbs CJ at 155 CLR at 251-252 and Mason and Brennan JJ at 257-258) their Honours made clear that the question whether entry into a mortgage for the borrowing of the purchase price rebuts a resulting trust is a factual one, although such conduct is, without some explanation, strongly probative of a rebuttal of a resulting trust because each mortgagor contributed to the purchase price by his and her entry into the obligations in the mortgage. 79 In the realm of presumptions regarding interests in property, it is important to recognize that the presumptions can be rebutted. The presumptions evolved from a recognition by the Courts that, in the particular situations in which they operate, human beings, over the centuries, have behaved in relation to property transactions in a way which the ordinary application of the presumption is intended to reflect. The flexibility of equity is not to be gainsaid by placing the presumptions into the straight jacket of irrebutability. Indeed, as Gibbs CJ noted in Calverley v Green (1984) 155 CLR at 252, if a bystander had asked Ms Green whether she intended that Mr Calverley should own the land beneficially even if he paid nothing under the mortgage and she were obliged to pay the whole mortgage debt with interest '… it is most unlikely that she would have replied in the affirmative'. As this passage indicates, his Honour was deciding the matter on the evidence, not on the basis of the operation of an irrebutable presumption. 80 Mason and Brennan JJ said in Calverley v Green (1984) 155 CLR at 262 that acts and declarations of the parties before and at the time of the purchase, or so immediately after it as to constitute a part of the transaction, are admissible evidence for the purpose of drawing an inference as to the intention of the parties relating to the beneficial interest which each of them has in the asset purchased. Evidence of acts and declarations of that kind are admissible both for and against the party who did the act or made the declaration, but any subsequent declarations would only be admissible as admissions against interest. Their Honours continued: 'In some cases it is possible to treat the concurrence of one party with the other's payment of the mortgage instalments as an admission of the former's exclusive interest, but the circumstance attending the payment of mortgage instalments is no more than one of the relevant facts. Another relevant fact is the relationship between the parties at the time.' 81 However, evidence of facts as to subsequent dealings and of surrounding circumstances of the transaction is relevant and admissible: Trustees of the Property of Cummins v Cummins (2006) 224 ALR 280 at 295 [65]-[67] per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ. 82 It appears that it was always the intention of Mr and Mrs Draper and the lending institution that the primary source of repayment of the institution would be by salary deduction from Mrs Draper's salary which was paid into her account at the institution. She was the only account holder. Given that Mr Draper was about to have his estate sequestrated, or was at considerable risk that was about to happen, in my view, it is unlikely that he would have intended either to take a beneficial interest in the property or to put the possibility of his wife obtaining the loan in question. Far from wanting to provide an asset, being a 50% interest in the property to be purchased, which would then be available to benefit the creditor who was seeking the sequestration of his estate, Mr Draper's attitude appears to have been to assist his wife to acquire an asset, which would be hers, not his. There was no apparent intent, here, to defraud creditors of some asset of his own, since nothing was given by Mr Draper as part of the consideration to purchase the property prior to the making of the sequestration order (apart from the obligations he momentarily assumed under the mortgages, which he knew would be worthless on his estate being sequestrated). These factors tend to negate any presumption of equal beneficial ownership. Such a presumption ordinarily applies in a case where the parties to a marriage acquire the matrimonial home in joint names: Trustees of the Property of Cummins v Cummins (2006) 224 ALR 280 at 296-297 [71]-[72] per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ and it may equally be capable of being applied in the present case. 83 There is no contemporaneous or other evidence that Mr Draper, did provide, or was to provide, any purchase money. Again, the fact that Mrs Draper paid for all the mortgage instalments to the lending institution from her salary, and that this was intended from the time the transaction was first proposed (that is, before the sequestration order) is an indication that it was the intention of Mr and Mrs Draper at the time the purchase transaction was entered into and completed, that he would have no beneficial interest in the property. Moreover, the fact that Mrs Draper in effect, was, required by the lending institution to permit Mr Draper's name to be added to the title, so that he would be jointly and severally liable to the lending institution for the repayment of the borrowings, can invoke the presumption of resulting trust from dealings between wife and husband: (cf Wirth v Wirth (1956) 98 CLR 228 at 238 per Dixon CJ; Calverley v Green (1984) 155 CLR at 251 per Gibbs CJ, 258, 262 per Mason and Brennan JJ, 266-267 per Deane J; The Trustees of the Property of Cummins v Cummins (2006) 224 ALR at 295 [65]-[67] per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ). 84 Against this is the evidence which was before the trial judge that originally the purchase was proposed to be made by Kebar Sporting Goods Pty Ltd in which Mr Draper held at least one share. However, that transaction did not proceed. Ultimately it will be for the Federal Magistrate conducting the new trial to determine the application of these principles to the facts to be found.

THE LACK OF WRITING FOR AN EXPRESS TRUST 85 Both Mansfield J and Besanko J refer to s 29 of the Law of Property Act 1936 (SA) and to the fact that there has been no review of the various documents produced by Mr Draper, including his affidavits in proceedings, to determine whether those affidavits constitute a sufficient declaration in writing of any trust. However, some caution must be applied to the use of Mr Draper's affidavits and other documents which were made after the time he became bankrupt. At that moment he ceased to be a person with any interest in the property. Whatever interest he held, even if it were a bare legal title, had passed to the trustee by force of s 58 of the Bankruptcy Act 1966 (Cth) (although it may have taken some time for the mechanics of the legal title to be passed under s 58(2)). 86 At the time Mr Draper swore his affidavits, he was no longer a person who had any relevant interest in the MacDonald Park property. Prima facie, consideration must be given to whether, once the trustee in bankruptcy became entitled to be, or became, registered as proprietor, only writing signed by the trustee or on his behalf could amount to a relevant declaration against interest or evidence of a trust. An affidavit of Mr Draper may be probative of the truth of the facts which it contains, even if it does not provide the writing required by s 29(1)(b) or the old s 4 of the Statute of Frauds. 87 Prior to the introduction of provisions such as O 13 r 2(7) (which permits an amendment to be made even if the effect of the amendment is to add a new claim for relief which arises in whole or in part on facts or matters that have occurred since the commencement of the proceeding), the common law prohibited reliance on an affidavit in proceedings for enforcement of a trust made by the party sought to be charged as trustee. This was on the basis that the cause of action would not have been complete at the time the proceedings were commenced and that it was not a proper use of the proceedings to achieve such a result: see South Coast Oils (Q & NSW) Pty Ltd v Look Enterprises Pty Ltd [1988] 1 Qd R 680 at 691 per Macrossan J; Lucas v Dixon (1889) 22 QBD 357 see eg at 362 per Bowen LJ. However, the explanation of the existence of this rule may be based on the fact that the Statute of Frauds provided that "no action shall be brought … unless the agreement upon which such action shall be brought or some memorandum or note thereof shall be in writing and signed by the party to be charged …"; see also James Williams, Statute of Frauds: (Cambridge University Press 1932 at 77). Obviously, the wording of s 29 of the Law of Property Act 1936 (SA)and its analogues in Australia is distinct, but Macrossan J appears to have applied the old form of the Statute of Frauds by analogy. 88 I am not sure that Mr Draper could be said to be making any kind of admission against interest, he having none by reason of the trustee's succeeding to whatever interest he had on his bankruptcy. I think that the parties should have an opportunity to research this matter and address it at the new trial.

THE PAYMENT OF OUTGOINGS ON THE MACDONALD PARK PROPERTY/CONSTRUCTIVE TRUST 89 I am of opinion that on the retrial, it would be open to the trial judge to find, provided that the facts were proved, that Mr Draper held his interest in the MacDonald Park property at the time of the sequestration order on constructive trust for Mrs Draper. Once again, some consideration will need to be given to the legal question as to whether things which were done after the making of the sequestration order which might be regarded as admissions against interest by Mr Draper can be given that legal effect having regard to his supervening bankruptcy and the vesting of his interests in his property in the trustee. 90 Nonetheless, it seems to me arguable on the new trial that the principles to which I refer below may have application, notwithstanding the intervention of the bankruptcy of Mr Draper, in the context that they provide the foundation of the presumptions upon which a constructive trust may be imposed. The principles have developed by ascribing to persons in a particular relationship an intention as to ownership of property. Given that these presumptions arise out of perceptions as to human relationships, it may or may not be open, to the trial judge on a retrial, to view the conduct of Mr and Mrs Draper after the sequestration order in the same light and to apply the same principles notwithstanding the interposition of the trustee in Mr Draper's shoes. 91 After the sequestration order had been made, whether Mr Draper may have made some contribution by way of 'pooling' to enable his wife's salary to be devoted to repayment of the mortgage monies, by relieving Mrs Draper of the need to use her salary (which was being taken by the lending institution to repay the mortgage) for household expenses, may neither be here nor there. The effect of the evidence, which the trial judge appears to have ignored, was that Mrs Draper's salary was being used directly to pay the lending institution, and that the whole of the repayments came from her account. Her salary enabled that to occur. The lending institution's statements showed that Mrs Draper's salary went into her account and it sourced the repayments. The fact that other sources may have been needed to provide income for the household of Mr and Mrs Draper does not change the objective fact that the money to pay the first mortgage came at all times from her salary which had been paid into her account. The position is not as clear with the second mortgage, although the evidence is that it was repaid in full by one or both of Mr and Mrs Draper. 92 Even if Mr Draper during his bankruptcy could have been a source of repayments or the supplementation of the pool of income available to Mr and Mrs Draper at this time, his contribution appears only to have come from his after acquired property. So, whatever he used may or may not have become part of the assets of Mr Draper available for distribution among his creditors depending on, inter alia, whether what he earned exceeded the amount he was allowed to retain under s 116(2)(c) of the Bankruptcy Act 1966 (Cth). Even if following his bankruptcy, Mr and Mrs Draper had agreed or arranged that the repayments of the mortgages would be financed in part by him, the trustee's case is not necessarily assisted. Of course payments by Mr Draper or through pooling after his discharge from bankruptcy cannot be used to augment any interest in the MacDonald Park property now claimed by the trustee. 93 The payments made by the Drapers, including the outgoings for rates and taxes on the property, preserved the property. They received no contributions from the trustee at all, for over 13 years. Whatever payments Mr Draper might be speculated to have made, might not have increased any equitable interest in the property which had passed to the trustee on Mr Draper's bankruptcy. It would be unreal and artificial to say that Mr Draper (if he in fact did make a contribution to the reduction of the mortgages, despite being unemployed for a period from late 1991) or the Drapers together by pooling their resources, intended to make a gift to the trustee of the value of his or their repayments of principal, interest and other outgoings on the property: Baumgartner v Baumgartner (1987) 164 CLR 137 at 149 per Mason CJ, Wilson and Deane JJ. And, for the reasons given by their Honours, it may be unconscientious for the trustee to assert the accrual of such an interest by virtue of Mr Draper's contributions, if he made any by such pooling unless it exceeded what he could retain under s 116(2)(c) or any other available exception, if there be any (cf: Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at 324-325 [20]-[22] per Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ). 94 But in either case, the payments were not made in order to benefit the trustee. The relationship, inter se, of Mr and Mrs Draper was one of their mutual interest as against any separate and distinct interest of the trustee in relation to the MacDonald Park property. Neither Mr nor Mrs Draper made any payment to benefit the trustee. The mere fact that he may have been a, or part of the, source of payments of the mortgages was, in my opinion, insufficient to justify the trustee's claim that the trust estate would benefit if Mr Draper made any payment from his after acquired property, absent some consideration of the operation of s 116(2)(c). How Mr and Mrs Draper chose, between themselves, to organize payments could not be taken into account in the way his Honour did (i.e. without examining whether any money provided by him, while a bankrupt, was divisible among his creditors) to defeat Mrs Draper's claim. 95 As Gleeson CJ, Gummow, Hayne Heydon and Crennan JJ noted in Trustees of the Property of Cummins v Cummins (2006) 224 ALR at 295 [65], evidence is admissible of facts as to subsequent dealings and of surrounding circumstances of the transaction the subject of the claim for a resulting trust. It may be that this also applies to a transaction such as that between the Drapers, and, if appropriate between them and the trustee so as to determine whether, and if so, on what terms equity would declare Mr Draper's original interest in the MacDonald Park property to be held on a constructive trust.

IMPLIED TRUST 96 An implied trust can arise where, notwithstanding there is no written or express oral declaration of trust, a common intention of the parties can be discerned as to the basis on which proprietary interests will be held. Moreover, although it may be more difficult to prove the requisite intention for an implied trust in relation to property already held beneficially by the trustee, the Privy Council (on appeal from the Supreme Court of New South Wales) saw no reason in principle why the doctrine should be limited to an intention formed at the time of the first acquisition of the property: Austin v Keele (1987) 10 NSWLR 283 at 290E-F per Lord Oliver of Alymerton; applied by Gleeson CJ, Priestley JA concurring, in Green v Green (1989) 17 NSWLR 343 at 354E-F; 355G-356A. Their Lordships saw this as a instance of the law of proprietary estoppel in which the Court employs the estoppel by giving effect to the common intention, so far as may fairly be done between the parties (see 17 NSWLR at 355F-356A). They applied Grant v Edwards [1986] Ch 638 at 657 per Browne-Wilkinson VC. This was, in turn, applied by Whitlam and Jacobson JJ in Official Trustee in Bankruptcy v Lopatinsky (2003) 129 FCR at 253 [130] to a case of a constructive trust. 97 Of course, where an equitable estoppel is relied on to establish some proprietary interest, the Court must consider all the circumstances of the case and decide in what way equity can be satisfied: Giumelli v Giumelli (1999) 196 CLR 101 at 113 [10] per Gleeson CJ and McHugh, Gummow and Callinan JJ. They said (196 CLR 113 [10]): 'Before a constructive trust is imposed, the Court should first decide whether, having regard to the issues in the litigation, there is an appropriate equitable remedy which falls short of the imposition of a trust.' 98 It is difficult here to see how, in conscience, the Official Trustee can claim that it is entitled to a one half, or even a lesser, proprietary interest in the MacDonald Park property. No contributions to the acquisition of the property prior to the making of the sequestration order were made by Mr Draper. Whether or not Mrs Draper made the whole of the contributions to the repayment of the mortgages including interest, it is clear that none of that equity was acquired through any efforts or conduct of the trustee. The trustee declined to take any interest in the property at all except to write letters telling Mrs Draper that she should make an offer and informing her that she could stay on the property if she paid all of the outgoings. In that context, to allow the bankrupt estate of Mr Draper to acquire a substantive proprietary interest in the property having made no contribution whatever to that acquisition while standing by and letting Mrs Draper and, possibly Mr Draper with property not divisible among his creditors, to do so seems unconscientious and such as may require the imposition of a constructive trust.

EQUITABLE ACCOUNTING 99 As Besanko J has pointed out, mere repayment of the mortgage debt does not give rise to a constructive trust and, by reference to Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566 at 585 [42], before the Court imposes a constructive trust as a remedy, it should first decide whether, having regard to the issues in the litigation, there are other means available to quell the controversy. There, Gaudron, McHugh, Gummow Hayne and Callinan JJ went on to say: 'An equitable remedy which falls short of the imposition of a trust may assist in avoiding a result whereby the plaintiff gains a beneficial proprietary interest which gives an unfair priority over other equally deserving creditors of the defendant (cf Re Polly Peck International Plc [No2] [1998] 3 All ER 812 at 826-827; Fortex Group Ltd v MacIntosh [1998] 3 NZLR 171; Dobbs Law of Remedies, 2nd ed (1993), vol 1,s5.18(3); Goode, "Proprietary Restitutionary Claims" in Cornish et al (eds), Restitution: Past, Present and Future (1998) 63, at pp 65-67). This appears to have been the cause of division between Gibbs CJ on the one hand and Mason J and Deane J on the other hand in Muschinski v Dodds ((1985) 160 CLR 583). The Chief Justice saw as an adequate equitable remedy an entitlement of the appellant to a contribution from the respondent to the extent to which she had paid more than one-half of the purchase moneys, coupled with an equitable charge for that amount upon the half interest of the respondent in the land (Muschinski (1985) 160 CLR 583 at 598).' 100 Here, it is difficult to see how, having regard to the conduct of the trustee and the Drapers, inter se, some unfair priority over other equally deserving creditors of Mr Draper's estate would be given by the imposition of a constructive trust in favour of his wife over Mr Draper's interest, but that is a matter for the trial judge on the new trial. 101 At the time of the sequestration order no payments had been made by Mr Draper in respect of the equity in the property and thereafter all payments were made either by Mrs Draper or with Mr Draper's property which may or may not have been divisible among his creditors having regard to s 116(2)(c). The trustee did nothing to create or augment the completely unencumbered interest which had come to exist at the time that this litigation was commenced. Apart from writing a number of letters and remaining on the title to the property, the trustee basically left the Drapers in possession of the property and allowed them to conduct themselves as though they had the full ownership of it. There is no evidence of any attempt by the Drapers to exclude the trustee from occupying the property at any time. 102 Of course, it has long been the law that where one co-owner of real property has been in occupation of the property while the other has not, there is no entitlement to the non-occupier to an occupation fee or rent unless: (a) the other co-owner has been excluded from occupation (Biviano v Natoli (1998) 43 NSWLR 695); or (b) the owner in occupation claims an allowance in respect of improvements in which case equity imposes a term on that owner to account for the benefit of his or her occupation: Forgeard v Shanahan (1994) 35 NSWLR 206 at 223. As Meagher JA there explained, this is an instance of he who comes to equity must do equity. 103 In addition to the allowances to which Mansfield J has said regard should be had, namely that the trustee should be entitled to a proper rental, on the evidence that rental could not exceed half of $30 per week, which I take is a figure arrived at once the property was fit for occupation. Against that should be set off a sum representing interest, perhaps, compound interest, on the trustee's half share of the amount of principal sums which Mrs Draper, or she and Mr Draper (if he did it with money not divisible among his creditors), had paid off the mortgages from time to time. It would be inequitable for the trustee to claim the whole benefit of any interest he has in the property without allowing for a reasonable return on funds expended in preserving the equity in the property. The trustee caused those funds to be tied up and it now seeks to benefit from those payments: cf: Hagan v Waterhouse (No 2) (1991) 34 NSWLR 308 at 391F-393E per Kearney J applied by Whitlam and Jacobson JJ in Official Trustee v Lopatinsky (2003) 129 FCR 234 at 255 [144]. 104 In In re Pavlou (A Bankrupt) [1993] 1 WLR 1046 at 1049B-D Millett J held that: 'The repayment of the capital element in each instalment increases the value of the equity of redemption which inures to the benefit of both joint tenants' 105 He held that a wife who remained in a matrimonial home after a husband left and became a bankrupt, was entitled to credit for one half of the increase in the value of the equity of redemption which resulted from the capital element of the mortgage payments since the date on which the husband left the property, and not merely since the date of any bankruptcy order. The wife, in that case, was, of course, entitled to the other half of the increase in the equity of redemption attributable to her own share. 106 Mrs Draper appears to have paid the capital instalments on the mortgage and thereby increased the overall equity of redemption. Those payments benefited the trustee in its own right, and, in respect of her pre-bankruptcy payments, increased the value of the property. These payments have to be taken into account on the basis that the wife's contributions had increased the estate. 107 Here, the payments by the Drapers were completely responsible for the increase in the value of the equity of redemption, since the trustee never made any payment. In that circumstance, it seems to me, that, subject to hearing from the parties, this may well be a case where it would be practicable to apply the solution suggested by Millett J ([1993] 1 WLR at 1051C-D) where he said that if the trustee in bankruptcy insisted on strict accounts being taken, then he is entitled to do so unless it could be seen in advance that the amounts were likely to be so similar that the taking of accounts would be a waste of time and the costs would outweigh any possible advantage to be gained thereby. He continued: 'In such a case the Court might well impose its own solution of directing the interest element in the mortgage instalments to be set off against the use and occupation without any further enquiry. In some cases the Court may be able to infer an agreement between the parties that that procedure should be adopted …' 108 The trustee's attitude was that Mrs Draper could remain in occupation of the property provided she paid the mortgage and the outgoings. If she paid the value of the whole of the equity of redemption through that means, maintained the upkeep of the property, and the payment of rates, taxes and other outgoings, it would be, prima facie, unconscientious of the trustee now to insist upon some strict accounting or to assert some beneficial entitlement in the equity of redemption to the extent to which was gained wholly or in part by the exertions and efforts of Mrs Draper. And the trustee cannot get any benefit from payments or pooling by Mr Draper after his discharge from bankruptcy. The trustee engaged in years of unco-operative and unhelpful inaction. The trustee had the full armoury of the Bankruptcy Act 1966 (Cth) with which to conduct public examinations of Mr and Mrs Draper (which he did) and any other persons who might be involved in relation to the acquisition of the property. 109 As between itself and Mr and Mrs Draper, the trustee had made no contribution to the equity of redemption. Mrs Draper paid the $1,000 for the initial equity in the MacDonald Park property. It has not been shown that there was any equity acquired by Mr Draper at the time of the sequestration order other than a half share (if there be no resulting trust) for which he had not paid and which, apart from the $1,000 equity, was fully encumbered by the two mortgages. Thereafter either Mrs Draper paid in full or Mr Draper's income was used to assist in paying for the amounts due under the mortgages and for the other outgoings referable of ownership of the MacDonald Park property. The trustee must give credit, in respect of his half share, to Mr and Mrs Draper for those payments, their exertions (except any during his bankruptcy which exceeded what he could have retained under s 116(2)(c) or any other statutory exception), the interest that they paid at the time the mortgages were current and the value of their investment during the remaining period. 110 In Ex parte James; In re Condon (1874) LR 9 Ch App 609 at 614 James LJ famously said: 'I am of opinion that a trustee in bankruptcy is an officer of the Court. He has inquisitorial powers given him by the Court, and the Court regards him as its officer, and he is to hold money in his hands upon trust for its equitable distribution among the creditors. The Court, then, finding that he has in his hands money which in equity belongs to someone else, ought to set an example to the world by paying it to the person really entitled to it. In my opinion the Court of Bankruptcy ought to be as honest as other people.' 111 In my opinion, no different result should flow when the trustee has held an asset in his name for years and, effectively, deprived the person entitled to it from using or enjoying the asset to the full extent of the person's right, title and interest. 112 It seems to me that unless the trustee were made to account for the value of the principal payments which Mrs Draper made and, to the extent that the source was not property divisible among his creditors which Mr Draper made, so as to acquire 100% of the equity of redemption, thereby improving the estate, the trustee would gain a windfall at the expense of Mr and Mrs Draper. As James LJ said: 'The Court of bankrupty ought to be as honest as other people.' 113 If an accounting is to be ordered, then regard will need to be had to the value of the principal contributions and interest payments made by Mrs Draper and, Mr Draper, (with his own property not divisible among his creditors) any benefit enjoyed by Mrs Draper, and after his discharge, Mr Draper through the use and occupation of the property during the period prior to its sale, the value of any improvements made by Mr and Mrs Draper to the property of a capital nature and any outgoings paid by them for the purposes of retaining the use and occupation of the property. Except for any property Mr Draper used which was divisible among his creditors, the trustee must give credit for the interest on the capital payments which Mrs Draper and her husband had made, thereby discharging the trustee from its obligation to contribute one-half of the principal and interest payments for the whole of the period during which the property was in their ownership. Unless the trustee gives credit for those principal repayments which exonerated its half-share of the estate, it will have the windfall of the benefit of those payments, namely the increase in the value of the equity of redemption and the relief of the property from the imposition of the mortgage together with the obligation to repay principal and interest, while giving no credit to the co-owners who had spent the money and were entitled to enjoy some of the fruits of that expenditure. 114 It would be inequitable to require Mr and Mrs Draper to pay an occupation rent for the trustee's half share of the property without the trustee accounting for the value of the payments which had been made to exonerate that half share from interest and principal charges under the mortgages and other outgoings like rates and taxes. And, to the extent that Mr and Mrs Draper effected improvements on the property, again the trustee must account for the value of those improvements: Baumgartner v Baumgartner (1987) 164 CLR at 150-151 per Mason CJ, Wilson and Deane JJ. 115 As Mason and Brennan JJ pointed out in Calverley v Green (1984) 155 CLR at 263 (Deane J concurring 155 CLR at 271): 'If it is right to regard the payment of the mortgage instalments as having been made by the defendant out of his own funds and on his own account - that is, if he made those payments not intending the plaintiff ultimately to have the benefit of those payments - the defendant may be entitled to contribution from the plaintiff for her share of the payments and to an equitable charge to secure the making of her contribution: see Ingram v. Ingram [1941] VLR 95 at p. 102.' 116 In Official Trustee in Bankruptcy v Lopatinsky (2003) 129 FCR 234 Whitlam and Jacobson JJ applied this reasoning (129 FCR at 252 [116]-[117]). They found that a wife had made a disproportionate share of the payments due under a mortgage which she and her husband had jointly given over property (129 FCR at 253 [128]) and they held that where the husband and wife 'pooled' their incomes so as to enable mortgage instalments to be paid, a constructive trust should be imposed to reflect the proportions to which each of the parties had contributed in excess of or below his or her 50% liability to discharge the mortgage debt (see 129 FCR at 253-254 [129]-[139]). Of course each of Baumgartner v Baumgartner (1987) 164 CLR 137, Calverley v Green (1984) 155 CLR 242 and Official Trustee in Bankruptcy v Lopatinsky (2003) 129 FCR 234 involved failed marital or de facto relationships in which a pooling had occurred for the purposes of a joint enterprise, namely the acquisition and retention of a matrimonial or common home. In the present case, Mr and Mrs Draper's marriage subsists and there is no issue of a matrimonial separation, although, a shed on the MacDonald Park property at some times was the matrimonial home.

I certify that the preceding forty-one (41) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN: KEITH LAWRENCE DRAPER AND BARBARA OLIVE DRAPER

AND: OFFICIAL TRUSTEE IN BANKRUPTCY AND BRUCE JAMES CARTER AS TRUSTEE OF THE BANKRUPT ESTATE OF KEITH LAWRENCE DRAPER

REASONS FOR JUDGMENT BESANKO J 117 This is an appeal by Mr and Mrs Draper against orders made by a Federal Magistrate. The facts are set out in the reasons for judgment of Mansfield J. I respectfully adopt his Honour's statement of the facts and I will refer to the facts only insofar as it is necessary to do so in order to explain my reasons. I agree that the appeal should be allowed, but my reasons for reaching that conclusion differ in some respects from those of Mansfield J. 118 The orders sought by Mr and Mrs Draper in their application fall into two categories, namely those which relate to the property at Heaslip Road, MacDonald Park, in the State of South Australia ('the property') and those which do not. 119 For the reasons given by Mansfield J (at [6]), the claims by Mr and Mrs Draper for an order annulling the bankruptcy of Mr Draper pursuant to s 153B of the Bankruptcy Act 1966 (Cth) ('the Act') and for damages, both general and punitive, in relation to the property at 6 George Street, Marleston, in the State of South Australia, must be rejected. 120 Furthermore, for the reasons given by Mansfield J (at [63]-[68]), the application by Mr and Mrs Draper for this appeal to be heard by a jury must be rejected. 121 That leaves for consideration the claims made by Mr and Mrs Draper in relation to the property. 122 The property was purchased in 1989 and Mr and Mrs Draper were registered on the title as joint tenants on 12 July 1989. On the same day, Mr Draper became bankrupt. He was discharged from bankruptcy by operation of the law on 25 July 1992. 123 It is clear on the authorities that on the making of a sequestration order a joint tenancy is severed in equity and becomes a tenancy in common in equal shares: s 58 of the Act; Sistrom v Urh (1992) 40 FCR 550. Leaving aside any question of a trust, Mr Draper's interest in the property vested in the Official Trustee in Bankruptcy who had become the trustee of his estate and who is the first respondent. Mr Bruce Carter was substituted as the trustee of Mr Draper's bankrupt estate on 18 August 2003 and he is the second respondent. Except where it is necessary to distinguish between the two respondents, it is convenient for me to refer to them simply as the 'trustee'. 124 The orders sought by the appellants in relation to the property were as follows:

1. A declaration that at all relevant times the beneficial interest in the whole of the property was held by the applicant, Keith Lawrence Draper, in trust for the applicant, Barbara Olive Draper, the other joint tenant, and that, pursuant to s 116(2)(a) of the Bankruptcy Act, the property did not vest to the respondents.

It is quite clear, in my opinion, that the Official Receiver (and later, to a lesser extent, the respondent) by the conduct to which I have referred above induced the appellants to adopt the assumption or expectation that neither of them was interested in selling the property and they had abandoned it to the appellants.

It is also quite clear that the appellants acted in reliance on that assumption or expectation by making the payments of principal, interest, rates and taxes, and that the Official Receiver and the respondent knew that they were doing so.' 142 Although there are some similar features in this case, the trustee, in its correspondence to Mrs Draper, made it clear that it was not abandoning an interest in the property and this is sufficient to distinguish this case from O'Brien v Sheahan (supra). The communications are referred to in the reasons for judgment of Mansfield J (at [47]). I would uphold the Magistrate's finding that there was no representation by the trustee sufficient to give rise to an equitable estoppel. 143 The effect of the above summary is that two claims must be considered in detail, namely, the claim for an express trust and the alternative claim for an equitable accounting.

Express Trust 144 In relation to the claim that there was an express trust, the Magistrate was required to consider two questions. The first question was whether prior to the making of the sequestration order against the estate of Mr Draper on 12 July 1989 Mr Draper, by language or conduct, expressed a sufficiently clear intention to create a trust over his interest in the property in favour of Mrs Draper. The second question, assuming that the first question is answered in the affirmative, was whether the requirements of s 29 of the Law of Property Act 1936 (SA) were satisfied. The Magistrate answered both questions in the negative and his conclusions are challenged by the appellants.

An intention to create a trust 145 It is important to note how the appellants put their case. The basis of their case was that there was an agreement between them that Mr Draper would hold his interest in the property on trust for Mrs Draper. The precise date of the agreement and the words used (or the substance of the words used) were not the subject of clear evidence. The alleged agreement between Mr and Mrs Draper was not recorded in a document prepared at the time. 146 The surrounding circumstances contained features which, on the one hand, support the claim for an express trust and, on the other, throw doubt on the claim. On the one hand, Mr Draper must have known at the time of the alleged agreement that his bankruptcy might be imminent and this may suggest that there was such an agreement. Furthermore, there is clear evidence that the repayments of the loan by the Society were taken directly from Mrs Draper's salary and this conduct after the agreement tends to support the existence (as distinct from bearing upon the terms) of such an agreement. On the other hand, in the contract of purchase Kebar Sporting Goods Pty Ltd was named as the purchaser and, unless explained, this might throw doubt upon the suggestion that it was never the intention of Mr Draper to hold (directly or indirectly) a beneficial interest in the property bearing in mind that he both controlled the company and had a substantial interest in it. 147 Mr and Mrs Draper each swore affidavits attesting to the agreement and each was cross-examined by counsel for the trustee. 148 The Magistrate was not satisfied that there was such an agreement and in fact he went further and said that he was satisfied beyond reasonable doubt that no such agreement existed. His reasons for finding that there was no such agreement are as follows (I have altered an obvious typographical error in (6) below): '(1) Mr Draper asserted that the only reason he appears on the Title was the insistence of the first mortgagee, the Savings and Loans Credit Union, that he be a registered proprietor. He said that he had a letter from them to that effect. It turned out that the letter was one insisting only that he be a joint borrower. Confronted with the letter in cross-examination, Mr Draper could only suggest that it meant something other than it said. His presence on the Title as a joint registered proprietor was left unexplained. (2) Unexplained also is why, given their intention, the contract is first placed in the name of their company. (3) No officer of the relevant Credit Union was called to give evidence and no reason advanced as to why any such officer was unavailable to give evidence. In those circumstances it seems to me that it is open to me to draw an inference that the evidence of the relevant officer from the Credit Union would not have assisted the applicants (see Jones v Dunkel (1959) 101 CLR 298). (4) No reference to the agreement or the trust or the fact that his interest in the property was legal but not equitable is made in any of the documents completed by Mr Draper at or about the time of his bankruptcy. (5) There was no reference to the agreement in Mr Draper's affidavit filed on 9 March 2004 in support of the original amended application. Confronted with this in cross-examination, Mr Draper says that his claim is only as to a constructive trust and not an express trust. However, the claim to a trust arising from an express agreement between he and his wife is asserted in par 6 of his affidavit sworn on 5 August 2004. He is not able to account in cross-examination for these contradictory assertions. These matters appear at p 31-33 inclusive of the transcript of 14 February 2005. (6) Most telling of all on the issue of the agreement was Mrs Draper's complete inability to provide any detail whatsoever about the agreement. She could not say what property the agreement related to (the Drapers owned a property at Marleston at the time of the purchase of MacDonald Park). It may have related to one or other of those properties or both of them; apart from saying that the agreement provided that she was to be given an (unspecified) property "in lieu of wages", she knew no other term of the agreement. Her evidence persuaded me beyond reasonable doubt when taken in conjunction with the matters referred to in paras (1) - (5) above, that no such agreement existed (see transcript of 14 February 2005 at p 54 - 58 inclusive).' 149 I have read the evidence of Mr and Mrs Draper. It seems to me to be unsatisfactory in a number of respects and I am cautious about interfering with the Magistrate's findings. Furthermore, I would be slow to interfere if all that was shown was that the Magistrate had erred in the weight he had placed on one of a number of matters. The nature of the error and the significance of the particular matter would need to be carefully considered. However, for the reasons which follow I am satisfied that the Magistrate has erred in his finding that no agreement existed and that the issue of whether there was an agreement and an express trust must be remitted to the Federal Magistrates Court for rehearing. Bearing in mind the Magistrate's findings as to credit, the rehearing should be conducted by a different Magistrate. 150 I am not persuaded that the Magistrate erred in relying on the matters identified in paragraphs (2), (5) and (6) above. However, in the circumstances, he did err in relying on the matters identified in paragraphs (1), (3) and (4). 151 As to the matter in paragraph (1), the evidence clearly established that on 16 June 1989, the Society wrote to Mrs Draper advising her that the loan would be granted on certain conditions, including the following: '3. The loan be in joint names with yourself and your husband.' 152 The Magistrate did not err in taking into account how Mr Draper dealt with questions about this issue, but he seems to have gone further and, in my respectful opinion, erred in saying that Mr Draper's presence on the title as a registered proprietor was left unexplained. Once a requirement that the loan be in joint names is established, the natural inference is that the joint borrower would also be a joint registered proprietor and joint mortgagor. 153 As to the matter in paragraph (3), I do not think this was an appropriate case for such an inference. The Society had co-operated with the trustee and there is no or insufficient reason to conclude that an officer of the Society would be expected to be called by the appellants rather than the trustee: Payne v Parker [1976] 1 NSWLR 191 per Glass JA at 201-202; J D Heydon, Cross on Evidence (7th Australian ed) at 39-46 [1215]. 154 As to the matter in paragraph (4), the Magistrate was entitled to take into account the documents he relied on and Mr Draper's answers in relation to those documents, but he should also have taken into account the interview between a representative of the trustee and Mr and Mrs Draper on 17 July 1989. The trustee's note of that meeting contains the following passage: '3. The bankrupt and his wife recently became the registered joint owners of a two and a half acre block of land at Heaslip road, McDonnell Park [sic]. The bankrupt claims that he does not have any interest in the property and his name was only put on the title at the insistence of S.A.P.S.A.L. from whom Mrs Draper obtained the finance to purchase the property. The bankrupt further claimed that the deposit of $1000 was provided by Kebar Sporting Goods Pty Ltd and that it was actually the intention that the land belong to the company. He said that they had copies of all the contracts at home and would provide them.' This should have been considered by the Magistrate when he considered what weight he placed on Mr Draper's answers in the Statement of Affairs and the Questionnaire, both of which were signed on 17 July 1989. 155 These errors are of sufficient significance that the finding of the Magistrate to the effect that there was no agreement must be set aside. 156 Clearly, there would be no need to send the question of an express trust back for rehearing if the second issue must be answered against the appellants, and it is to the second issue that I now turn.

The need for writing 157 Section 29 of the Law of Property Act 1936 (SA) provides as follows: '29. (1) Subject to the provisions hereinafter contained with respect to the creation of interests in land by parol - (a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by his agent thereunto lawfully authorised in writing, or by will, or by operation of law; (b) a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will; (c) a disposition of an equitable interest or trust subsisting at the time of the disposition must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorised in writing or by will. (2) This section shall not affect the creation or operation of resulting, implied, or constructive trusts.' 158 The Magistrate found that no such writing was produced. 159 The relevant paragraph of s 29(1) for present purposes is (b): Secretary, Department of Social Security v James (1990) 95 ALR 615; Equuscorp Pty Ltd v Jimenez and Ors (2002) 220 LSJS 252. In order to satisfy the requirements of the section the writing must clearly set out the beneficiaries, the trust property and the nature of the trust: Smith v Matthews (1861) 3 De GF & J 139 at 151; 45 ER 831 at 836 per Sir George Turner LJ; Equuscorp Pty Ltd v Jimenez (supra) at [122]. It is well-established that an affidavit executed after, and even well after, the alleged declaration or agreement may be sufficient to satisfy the requirements of s 29(1): Barkworth v Young (1856) 26 LJ Ch 153. It would seem that this principle applies even though, because of the supervening bankruptcy of the alleged trustee, the affidavit is sworn by the alleged trustee at a time when he appears to have an interest in a finding that there is a trust or, at least, is supporting a finding to that effect, although on the rehearing the respondent will not be precluded from submitting that because of the words used in s 29(1)(b) the writing is only effective if signed by the person able to declare the trust at a time when he or she was able to declare the trust. At all events, the short point is that the Magistrate appears not to have considered the possible operation of these principles and it is arguable - and for present purposes I need put it no higher than that because it is a matter to be determined on a rehearing - that statements in one or more of the affidavits sworn by Mr Draper satisfy the requirements of the section.

Equitable accounting 160 If Mrs Draper's claim of an express trust succeeds on a rehearing then there will be no need to consider the rights of the respective parties on an equitable accounting. If, on the other hand, it fails, then it will be necessary for the Magistrate to consider claims on an equitable accounting. The trustee concedes that this is so now that the property has been sold, although the present trustee submits that Mrs Draper is entitled to nothing more than what she has already received because she cannot establish that she paid more than one half of the expenses that are recoverable on an equitable accounting. 161 Before considering the Magistrate's findings it is appropriate to set out some general principles about the rights of parties on an equitable accounting. 162 A right of contribution may arise both at law and in equity where one of two or more joint debtors pays more than his or her proportionate share. As between the appellants or Mrs Draper alone on the one hand, and the trustee on the other, that right is not relevant in this case except perhaps as to the payment of rates, taxes and other outgoings in relation to the property. A right to recover moneys paid in excess of a person's proportionate share of a liability may also arise between the co-owners of a property. It would seem that that right does not arise or is not enforceable from time to time but arises in certain circumstances such as on an order being made for partition or sale of the property or in analogous circumstances. One analogous circumstance mentioned in the authorities is an action to determine the distribution of the proceeds of a co-owned property after a mortgagee's sale: Re Cook's Mortgage; Lawledge v Tyndall [1896] 1 Ch 923. It seems that the circumstances in which the right arises or is enforceable are limited: Forgeard v Shanahan (supra) per Meagher JA at 224. I mention these matters for two reasons. First, in this case the property was sold pursuant to an agreement between the parties. It was not argued by the trustee that the Court's power to order an equitable accounting between co-owners does not arise in these circumstances and I will proceed on the basis that it does, noting that the contrary was not suggested. Secondly, these observations may be relevant to whether Mr Draper has a claim on an equitable accounting should facts be established that otherwise give rise to such a claim. 163 In the circumstances of this case, the principles relevant on an equitable accounting are as follows:

Conclusions 174 For the above reasons, I would make the following orders:

1. The appeal be allowed and the orders made by the Magistrate on 23 September 2005 and 14 October 2005 respectively be set aside.
2. The appellants' application insofar as it involves a claim for an express trust and, in the alternative, claims on an equitable accounting, be remitted to the Federal Magistrates Court constituted of a different Magistrate for rehearing.
3. The appellants' application be otherwise dismissed.
4. The parties be heard as to the costs of the hearing and of the appeal. In this respect I agree with the proposal put forward by Mansfield J.

I certify that the preceding fifty-eight (58) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko.

The Appellants: The first appellant appeared in person and with leave on behalf of the second appellant.

Solicitors for the First Respondent: Gretsas & Associates

Counsel for the Second Respondent: P Britten-Jones

Solicitor for the Second Respondent: Cowell Clarke

Date of Judgment: 10 November 2006