Klewer v Official Trustee in Bankruptcy - [2008] FCA 1788 - FCA 2008 case summary — Zoe

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Klewer v Official Trustee in Bankruptcy

[2008] FCA 1788

Federal Court of Australia|2008-12-01|Before: Bennett J

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Source facts

Court

Federal Court of Australia

Decision date

2008-12-01

Before

Bennett J

Source

Original judgment source is linked above.

Judgment (22 paragraphs)

[1]

REASONS FOR JUDGMENT 1 The first appellant (Ms Klewer) was declared bankrupt on 20 September 2005. The second appellant (Robert Klewer or Robert) is Ms Klewer's son. At the time the sequestration order was made, Ms Klewer resided in and was the registered proprietor of 30 Coachmans Close, Korora, New South Wales ('the Korora property'). The respondent, the Official Trustee, is the trustee of Ms Klewer's estate and currently the registered proprietor of the Korora property by virtue of the operation of s 58(1)(a) of the Bankruptcy Act 1966 (Cth) ('the Act'). Both appellants presently reside in the Korora property, with Ms Klewer continuing to make mortgage repayments to the Commonwealth Bank of Australia. 2 The appellants appeal from a decision of Raphael FM dismissing their application for a declaration that the Korora property is non-divisible among Ms Klewer's creditors (Klewer v Official Trustee in Bankruptcy [2008] FMCA 274). Ms Klewer argued before Raphael FM that the Korora property is not divisible amongst her creditors for two reasons: that the moneys used to purchase the property constituted "protected money" within the meaning of s 116(2D) of the Act and that the Korora property was held in trust by Ms Klewer for Robert Klewer and was therefore not property divisible amongst Ms Klewer's creditors by virtue of the operation of s 116(2)(a) of the Act.

[2]

Grounds of appeal 3 On 11 March 2008, the appellants filed a notice of appeal 'from part of the judgment of the Federal Magistrates Court'. The ground of appeal was: 'That the evidence supports the existence of a trust'. On 18 June 2008, an amended notice of appeal was filed from the whole of the judgment of Raphael FM. The sole ground of appeal is: 'Procedural unfairness'. No particulars are provided. 4 At the hearing of this appeal, Ms Klewer says that her grounds of appeal are: · Procedural unfairness, because: - She appeared by telephone before the Federal Magistrate; - She was unable to hear everything that was said during the hearing before the Federal Magistrate; - The Federal Magistrate did not cross-examine her other children who had filed affidavits; - The Federal Magistrate "assumed" what the other children had meant from their statements and drew the wrong conclusions from those statements; - She and her son did not have legal representation. · That the evidence established an express trust in favour of Robert Klewer, or, in the alternative, an implied or constructive trust. 5 The issue of "protected money" did not form part of the stated grounds of appeal. However, Ms Klewer did advert to this issue in her written and oral submissions.

[3]

Procedural history 6 At the first directions hearing for the appeal, on 22 April 2008, Ms Klewer indicated that she had made applications for legal aid and for pro bono assistance but that she had not heard whether her applications had been successful. The matter was stood over for further directions on 6 May 2008. 7 At the directions hearing on 6 May 2008, Ms Klewer made submissions to the effect that she needed time, in the order of at least three months, to prepare her written submissions. I made orders requiring the appellants to file and serve written submissions (including further particulars of the ground of appeal) by 26 August 2008, the respondents to file and serve written submissions by 9 September 2008 and the appellants to file and serve any written submissions in reply by 12 September 2008. The appeal was listed for hearing on 16 September 2008, the parties having indicated that half a day would be sufficient for the hearing. 8 The appellants did not file any written submissions by 26 August 2008. The respondent filed its written submissions on 9 September 2008. 9 On 5 September 2008, the appellants filed a notice of motion seeking an adjournment of the hearing pending the fitness of Ms Klewer to attend Court. In affidavits in support of the motion, Ms Klewer stated that she is unable to deal properly with the hearing of the appeal due to her poor health. In particular, Ms Klewer stated that when she participates in legal proceedings, she suffers chest pains and tightness similar to the symptoms experienced during a cardiac event. She indicated that, when this occurs, she suffers shortness of breath. She also stated that Robert Klewer is disabled and unable to participate in the proceedings. Ms Klewer provided letters from medical practitioners in support of the notice of motion. Ms Klewer also advised at this time that she and Robert had been refused legal aid and pro bono assistance in respect of these proceedings. 10 The notice of motion for an adjournment was heard on 11 September 2008. Ms Klewer said that she was unable to appear in person. She initially declined to take the telephone call that had been arranged to effect her appearance for the hearing of the notice of motion. After Ms Klewer agreed to take the call, I asked her whether she felt that she could make her submissions in writing rather than in person, thereby making it unnecessary for her to travel to Sydney or to appear in Court in person. Ms Klewer did not provide a clear answer to that question and hung up the telephone. 11 In summary, the various medical reports confirmed Ms Klewer's repeated complaints of chest pains and tightness. Investigations were said to be continuing but no structural damage had been found. The medical reports suggested that Ms Klewer's symptoms may be stress-related or a result of "reflux". The medical reports also highlighted a number of other medical problems from which Ms Klewer suffers, although these were not described in Ms Klewer's supporting affidavits as the reason for her request for an adjournment. 12 The medical reports referred to Ms Klewer's difficulties in participating in any lengthy court hearings. However, the matter had been fixed for hearing for half a day. The medical reports did not suggest that Ms Klewer's stated problems were other than ongoing. That is, there was no indication that her stated inability to deal with problems was for a closed period. Ms Klewer was seeking, in effect, an indefinite adjournment of the appeal. 13 There was no indication that Ms Klewer was unable to prepare written material. I declined to adjourn the hearing for an indefinite period but ordered that the hearing listed for 16 September 2008 be vacated and relisted on 30 September 2008 in order to give the appellants some further time to provide written submissions. The time for the appellants to file and serve their written submissions was extended to 25 September 2008. The appellants also had the benefit of the respondent's submissions. I ordered that the appeal proceed by way of written submissions on behalf of the appellants, thereby removing the requirement for the appellants to attend Court either in person or by telephone. 14 The appellants did not file any written submissions pursuant to this extension of time. 15 On 25 September 2008, the appellants filed a second notice of motion seeking orders that I '[m]ake a referral for legal assistance' in respect of both appellants under O 80 of the Federal Court Rules and that I appoint a tutor for Robert Klewer under O 43 of the Federal Court Rules. The Court advised Ms Klewer by letter that I was not prepared to make a referral under O 80 and that the application regarding O 43 should be supported by medical evidence (to be filed and served by 29 September 2008) and should comply with the Federal Court Rules. 16 At the hearing on 30 September 2008, Mr Philippe Doyle Gray of Counsel appeared as amicus curiae following contact made by the Court with the NSW Bar Association. Mr Doyle Gray informed the Court that he was unable to identify any error in the Federal Magistrate's decision based on the evidence that was before his Honour. However, Mr Doyle Gray sought to have the hearing adjourned to allow a line of enquiry to be pursued regarding the appeal. Mr Doyle Gray identified, in Ms Klewer's affidavit in the Federal Magistrates Court, a reference to a request made by Ms Klewer to the Commonwealth Bank of Australia ('the CBA') in 2001 to transfer the Korora property to Robert Klewer. I granted leave to the appellants to issue a subpoena to the CBA in relation to its file regarding the Korora property for the year 2001, the subpoena to be returnable before me on 8 October 2008. 17 The respondent opposed any adjournment of the appeal. Ms Klewer was telephoned to effect her appearance at the hearing. Ms Klewer remained on the telephone for several minutes before she terminated the call. I proceeded to hear the respondent's submissions. The respondent relied on his written submissions with some short elaboration of those submissions. 18 As a result of the termination of the phone call, Ms Klewer was not able to hear the respondent's oral submissions or to make any oral submissions on behalf of herself or Robert Klewer. 19 By letter dated 1 October 2008, the Court advised Ms Klewer that the respondent's oral submissions had not added substantively to his written submissions filed on 9 September 2008. In a second letter dated 1 October 2008, the Court advised Ms Klewer that I had again extended the time for the appellants to file and serve any written submissions in support of their appeal, this time to 7 October 2008. 20 While I accept that Ms Klewer has a number of health problems which may make it difficult for her to participate in lengthy court proceedings, at no time has Ms Klewer provided a sufficient explanation regarding any inability to provide written submissions regarding the appeal. As noted above, on 11 September 2008, I indicated that the appeal could proceed by way of written submissions on behalf of both appellants, thereby removing the need for either appellant to appear in Court in person or by telephone. 21 Ms Klewer has sent over 20 separate items of correspondence to the Court since filing the notice of appeal. The majority of this correspondence relates to Ms Klewer's medical problems which, she says, prevent her from dealing with this appeal. Ms Klewer's correspondence also describes the difficulties which she and her son have had in obtaining legal assistance through Legal Aid or on a pro bono basis. 22 In an affidavit filed on 25 September 2008, Ms Klewer stated that her health had worsened over recent weeks and that she was unable to provide written submissions regarding her appeal as directed by the Court. However, I note that, immediately prior to and after that date, Ms Klewer was able to make a number of extensive submissions, by way of correspondence sent to the Court, as to why her hearing should be adjourned. 23 On 1 October 2008, Ms Klewer sent a facsimile to my chambers indicating that, unless the Court advised otherwise, she would file affidavits adducing further evidence on the appeal. By letter dated 2 October 2008, the Court advised Ms Klewer that she would need leave to adduce further evidence. On the same date, I made an order that '[a]ny notice of motion seeking leave to adduce further evidence is to be made returnable, for hearing, on Wednesday 8 October 2008 at 9.45am'. Ms Klewer filed a notice of motion seeking leave to adduce further evidence on 3 October 2008. Ms Klewer filed four affidavits in support of the motion. Two of these affidavits were sworn by Lisa Klewer and Andrew Klewer and represent the additional evidence which Ms Klewer wishes to adduce on appeal. The respondent does not object to that additional evidence. 24 Ms Klewer filed written submissions on 7 October 2008. 25 On 8 October 2008, Ms Klewer and Robert Klewer appeared in Court in person for the return of the subpoena issued to the CBA and for the hearing of the notice of motion for leave to adduce further evidence. From my observation, Ms Klewer had no difficulties hearing what took place in Court. Her hearing problems, to which she referred in correspondence, were not manifest. 26 The CBA produced a number of documents regarding the Korora property. I ordered that the parties have access to the documents, which were then tendered. The documents did not mention or confirm that Ms Klewer had approached the CBA in 2001 seeking to transfer the Korora property to Robert Klewer. 27 When Ms Klewer was informed on 8 October 2008 that the appointment of a tutor for Robert Klewer did not automatically entail free legal advice, she did not press for such appointment. In any event, I note that Robert Klewer had filed an affidavit in the Federal Magistrates Court in which he refers to 'some disabilities and health problems' but said that he has registered for employment. He says that he has difficulties communicating with people and is very shy. I accept that Robert has disabilities, described in a report by Dr Duguid, but there is insufficient evidence to support the application of a tutor. 28 I proceeded on 8 October 2008 to hear Ms Klewer's submissions regarding the appeal and some further short submissions from the respondent.

[4]

The Relevant Statutory Framework 29 Section 58(1)(a) of the Act provides that, where a debtor becomes a bankrupt, the property of the bankrupt vests forthwith in the Official Trustee. The expression "the property of the bankrupt" is defined in s 5 of the Act to mean the property divisible among the bankrupt's creditors and any rights and powers in relation to that property that would have been exercisable by the bankrupt if he or she had not become a bankrupt. 30 Section 116(1) of the Act prescribes what property is divisible amongst the bankrupt's creditors as follows: Subject to this Act: (a) all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy … is property divisible amongst the creditors of the bankrupt. 31 Section 116(2) creates various exceptions to the general prescription contained in subs (1). Relevantly, s 116(2)(a) provides that subs (1) does not extend to property held by the bankrupt in trust for another person. One issue before Raphael FM was whether such a trust existed. 32 Sections 116(2), (2D), (3) and (4) of the Act are also relevant to the issue of Ms Klewer's protected money claims. These sections provide, relevantly, as follows: (2) Subsection (1) does not extend to the following property: … (d) subject to sections 128B, 128C and 139ZU: (i) policies of life assurance or endowment assurance in respect of the life of the bankrupt or the spouse of the bankrupt; (ii) the proceeds of such policies received on or after the date of the bankruptcy; (iii) the interest of the bankrupt in: (A) a regulated superannuation fund (within the meaning of the Superannuation Industry (Supervision) Act 1993); or (B) an approved deposit fund (within the meaning of that Act); or (C) an exempt public sector superannuation scheme (within the meaning of that Act); (iv) a payment to the bankrupt from such a fund received on or after the date of the bankruptcy, if the payment is not a pension within the meaning of the Superannuation Industry (Supervision) Act 1993; (iva) a payment to the bankrupt under a payment split under Part VIIIB of the Family Law Act 1975 where: (A) the eligible superannuation plan involved is a fund or scheme covered by subparagraph (iii); and (B) the splittable payment involved is not a pension within the meaning of the Superannuation Industry (Supervision) Act 1993; … (vii) a payment to the bankrupt under a payment split under Part VIIIB of the Family Law Act 1975 where: (A) the eligible superannuation plan involved is an RSA; and (B) the splittable payment involved is not a pension or annuity within the meaning of the Retirement Savings Accounts Act 1997; (g) any right of the bankrupt to recover damages or compensation: (i) for personal injury or wrong done to the bankrupt, the spouse of the bankrupt or a member of the family of the bankrupt; or … and any damages or compensation recovered by the bankrupt (whether before or after he or she became a bankrupt) in respect of such an injury or wrong … . … (n) property to which, by virtue of subsection (3), this paragraph applies; … … (2D) In subsections (3) and (4): exempt loan money, in relation to a particular time, means so much of the principal sum of a loan to the bankrupt, or to the bankrupt and another person or other persons, as was repaid, before that time, out of exempt money. exempt money means money of any of the following kinds: (a) an amount to which subsection (1) does not extend because of subparagraph (2)(d)(ii) or (iv); (b) damages or compensation of a kind referred to in paragraph (2)(g); … outlay, in relation to property, in relation to a particular time, means all of the following: (a) the money paid for the purchase, or used in the acquisition, of the property; (b) the money paid before that time in respect of the extensions, alterations and improvements, if any, of the property constructed or made since that purchase or acquisition. protected money, in relation to a particular time, means: (a) exempt money; or (b) exempt loan money in relation to that time. … (3) Where, at any time, the whole, or substantially the whole, of the money paid for the purchase, or used in the acquisition, of particular property is protected money, paragraph (2)(n) applies to the property. (4) Where, as at the time when the trustee realises particular property to which paragraph (2)(n) does not apply, the outlay in relation to the property is in part protected money and in part other money, the trustee shall pay to the bankrupt so much of the proceeds of realising the property as can fairly be attributed to that protected money. 33 Section 23C(1) of the Conveyancing Act 1919 (NSW) ('the Conveyancing Act') relevantly provides that: (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 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 the person's 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 the person's will … . 34 Section 23C(2) of the Conveyancing Act provides that s 23C does not affect the creation or operation of resulting, implied or constructive trusts.

[7]

· In June 1998, Justice Chisholm of the Family Court of Australia ('the Family Court') ordered Ms Klewer's former husband, Mr Klewer, to transfer the first matrimonial home ('the Boambee Gardens property') to Ms Klewer free from encumbrances. Mr Klewer was subsequently ordered to apply to the Insurance and Superannuation Commission to release funds to discharge the mortgage over the Boambee Gardens property. These orders were not "splitting orders" under Part VIIIB of the Family Law Act 1975 (Cth) ('the Family Law Act') for the purposes of s 116(2)(d)(iva) or s 116(2)(d)(vii) of the Act, as at that time, no such orders existed. The Boambee Gardens property was transferred to Ms Klewer on 26 June 1999. · Ms Klewer entered into an agreement to purchase the land at Korora for $90,000 and to build a house on the land at the cost of approximately $171,000. This was funded by two mortgages with Poinciania Housing Co-operative Society Ltd ('the Society') for $150,000, secured over both the Korora property and the Boambee Gardens property. At the time, the house on the Korora property had not been built. · On 26 June 2000, the mortgage over the Boambee Gardens property in favour of the Society was discharged and the property was re-mortgaged to the CBA for the same amount, $150,000. · On the same day, the mortgage over the Korora property in favour of the Society was discharged and the property became the subject of a mortgage to the CBA to secure $231,000. · The house on the Korora land was built and the builder was paid. Apart from CBA funds, two monetary payments were made: the first payment of $50,000 was described as "client funds (Lucy Klewer)" and the second payment of $44,202 as "solicitor payments". · His Honour seemed to accept that at least one of these payments was from moneys due to Ms Klewer following a personal injury claim that she had made. As his Honour noted, whether the first or second of these payments represented the personal injury payment to Ms Klewer is not relevant for present purposes, although it may be relevant for the purposes of a claim for payment by Ms Klewer on realisation of the Korora property under s 116(4) of the Act. · The Boambee Gardens property was sold in November 2002 for the sum of $146,000. · Ms Klewer arranged for a number of improvements to be made to the Korora property. To the extent that this work was carried out in 2003, it seems to have been paid for by the sale of the Boambee Gardens property. · On 11 October 2004, the orders made by Justice Chisholm of the Family Court in 1998 were varied to include a splitting order under s 90MT (in Part VIIIB) of the Family Law Act. · Ms Klewer stated that she has used moneys released to her from Mr Klewer's superannuation funds pursuant to the 2004 orders of the Family Court either to pay the mortgage or to effect improvements on the Korora property. · Ms Klewer also says that she utilised the proceeds of a workers compensation commutation in the sum of $20,000 and another payment of $6,000 for injury to her ankle by a dog to pay the mortgage or to effect improvements on the Korora property. · Further, Ms Klewer says that she applied a payment from a property damages claim, in the sum of $7,410 plus $654 interest, in the same way. · Moneys are owed to the CBA under the mortgage over the Korora property. As at the date of judgment of Raphael FM, the amount outstanding on that mortgage was approximately $211,000.

[8]

· Ms Klewer's evidence was that, shortly after the Korora property was purchased, she told all her children that she proposed to leave the property to Robert Klewer and that they would not get any benefit from it. This was because of Robert's disabilities. She told her eldest son that he would be the executor of her estate and that the estate would be left to Robert. · Ms Klewer maintained that it was her intention to declare a trust over the property immediately and not upon death. · There was no written evidence of the declaration of the trust. · There was no admissible evidence of the conversations between Ms Klewer and her children, other than from Ms Klewer. · In her statement of affairs, Ms Klewer said that she was buying the Korora property. · In response to the question: 'Do you own or are you buying any land or buildings in Australia or overseas?', Ms Klewer answered 'Yes'. · In response to the question: 'Are there any other owners?', Ms Klewer answered 'No'. · In correspondence with solicitors in October 2005, under the heading: "Re: Whether my residential property is divisible under s 116 of the Bankrupcty Act 1966", Ms Klewer made no mention of a trust and referred only to payments made out of what she claimed to be non-divisible funds. His Honour concluded that the letter indicated a sophisticated knowledge of the workings and effect of s 116 of the Act. In other correspondence in October 2005, with the Deputy Official Receiver, Ms Klewer debated legal distinctions and again made reference to s 116 of the Act but made no reference whatsoever to a trust. · In Walton v Klewer [2005] FMCA 878, Ms Klewer had refused to pay a debt to Mr Walton. She said that she was a solvent but recalcitrant debtor. Federal Magistrate Driver made reference to unchallenged evidence presented by Ms Klewer that she owns a house and land in which she has equity and that she was taking steps to refinance the property to pay her debts, if she were willing to pay them. She planned to rent out the property to increase her income. There was reference to Robert Klewer and the fact that he would be 'disadvantaged by the loss of his home' but there was no suggestion that he had an interest in that home, being the Korora property.

[11]

The Federal Magistrate's findings in relation to the protected money claims 38 Ms Klewer claimed that she has an interest in a regulated superannuation fund under a payment split under Part VIIIB of the Family Law Act (s 116(2)(d)(iva) or s 116(2)(d)(vii)). Federal Magistrate Raphael said at [16] that s 116(2)(d) clearly relates to the original payments and not to the asset which the payment is used to purchase, except under s 116(3) and s 116(4). His Honour concluded that ss 116(3) and 116(4) are the provisions by which an indirectly acquired asset can be held to be non-divisible. 39 Federal Magistrate Raphael noted the difficulty for Ms Klewer to satisfy the Court that the whole or substantially the whole of the money paid for the purchase of the Korora property was protected money (s 116(3)) so that s 116(2)(n) applies to remove that property from division amongst her creditors. "Protected money" is defined to include "exempt money". That in turn is described as, inter alia, an amount to which s 116(1) does not extend because of s 116(2)(d)(ii) or s 116(2)(d)(iv). Section 116(2)(d)(ii) refers to the proceeds of a life assurance policy. Section 116(2)(d)(iv) refers to a payment to the bankrupt from a superannuation fund received on or after the date of bankruptcy. The money used to pay off the mortgage over the Boambee Gardens property was neither of these (at [16]). The proceeds of sale of the Boambee Gardens property was not exempt money (at [18]). 40 Federal Magistrate Raphael also considered the use made by Ms Klewer of payments for personal injury, workers compensation and other settlement moneys which are not divisible amongst her creditors by reason of s 116(2)(g) and which are exempt money and protected money within s 116(2D). His Honour was not able to find that, for the purposes of s 116(3), these moneys constituted the whole or substantially the whole of the moneys paid for the purchase or used in the acquisition of the Korora property. However, his Honour observed that, subject to proof, Ms Klewer would have a right to make a claim to part of the proceeds of sale of the Korora property by the trustee pursuant to s 116(4) if she can establish that the payments were used either in the original purchase of the Korora property, in making mortgage repayments or in effecting improvements to the property.

[15]

The additional evidence and Ms Klewer's submissions 45 In her oral submissions on 8 October 2008, Ms Klewer asserts the existence of a trust, express, implied or constructive. She also asserts that there is a written will, which accords with a testamentary disposition of the Korora property. 46 Ms Klewer maintains that she made a 'living will' and intended to and did transfer the Korora property to Robert Klewer, so that she held the property in trust for him. However, apart from an assertion that a written version must exist somewhere on a computer disk which she has not been able to locate, there is nothing in writing evidencing such a trust. 47 In further evidence adduced in the appeal, to which the respondent did not object, two of Ms Klewer's children address the statements that were before Raphael FM regarding the issue of the trust. They state that they each understood that, from 2000, Ms Klewer declared a trust over the Korora property in favour of Robert Klewer. An affidavit sworn by Robert Klewer and filed in Court on 8 October 2008 states that, from 2000, Robert understood that the Korora property was his. However, this does not avoid the problem that there was no writing evidencing such a trust. 48 The respondent points to the following evidence before Raphael FM: · In [13] of Ms Klewer's affidavit sworn 18 February 2008: By mid 2000 the family moved into the current Korora residence. It was at such time that I informed the older children that the home was Robert's by way of trust due to his condition and his bleak future. I made eldest son Andrew the executor of the estate to ensure that those were my wishes. · At [22] of Ms Klewer's affidavit sworn 18 February 2008: … When I created such trust it was akin to a living will. ... I created such trust at such time because I have been a suicide risk since 1994 after a truamatic [sic] event ... Their [sic] ought to be no doubt about such trust especially when one takes into account the life long incapacity regarding Robert, the sibling rivalry with regards to their liklyhood [sic] of contesting a will. I was prevented from creating a documented trust on the basis that the Commonwealth Bank held title, refused to transfer title to Robert, albeit that the Bank was maybe in error in that regard, the family accepted from the onset [sic] that a trust by way of an understanding that the Korora home was in safe keeping for Robert and even though they were not happy about it they honoured my wishes. · In a statement dated 18 February 2008, Ms Klewer's daughter stated that: I am aware that my brother Andrew is the executor of my mother's estate. ... It's highly probable that other reasons why she [the first appellant] wanted to ensure the Korora home was in trust for Robert was because she [the first appellant] may have felt that she could die from an overdose and wanted Robert to live in his own home ... . 49 In this evidence, Ms Klewer makes it clear that any trust she intended to create over the Korora property was a testamentary trust and not an inter vivos trust. She acknowledged that no express written trust has ever existed. Ms Klewer's daughter confirms the testamentary nature of the alleged trust. 50 As the respondent has pointed out, there is an inconsistency between Ms Klewer's continued assertion that she created a testamentary trust and her statements to the effect that she intended the trust over the Korora property to take effect while she was still alive. If Ms Klewer's intention was to create a testamentary trust, then even if the will were in writing, this would not give rise to any legal or equitable right on the part of Robert Klewer while Ms Klewer remains alive. A'beneficiary under [a] will derives, while the testator remains alive, no legal or equitable right or title from the will: all the beneficiary has is the prospect of acquiring a right or title if the testator dies in the lifetime of the prospective beneficiary without revoking or altering the will' (R Meagher, J Heydon and M Leeming, Meagher, Gummow and Lehane's Equity: Doctrines & Remedies (4th ed, LexisNexis Butterworths, 2002) at [6-190]). As was stated In re Parsons; Stockley v Parsons (1890) 45 Ch D 51 at 55 per Kay J (approved in Ogden Industries Pty Limited v Lucas (1968) 118 CLR 32 at 37): It is indisputable law that no one can have any estate or interest, at law or in equity, contingent or other, in the property of a living person to which he hopes to succeed as heir at law or next of kin of such living person. During the life of such person no one can have more than a spes successionis, an expectation or hope of succeeding to his property.

[16]

51 Even if his Honour's finding in relation to Ms Klewer's intention to create an inter vivos express trust were wrong, any express trust in favour of Robert Klewer would be unenforceable because of the operation of s 23C of the Conveyancing Act: If a trust of any legal interest in lands, freehold or leasehold, is to be created by assignment of that interest to trustees, to be valid it must be in writing: s 23C(1)(a). If the trust property is an equitable interest in land, and a trust is to be created by assignment, writing is essential to its validity both under s 23C(1)(a) and under s 23C(1)(c). Where the trust property is either a legal or an equitable interest in land, if it is proposed to make it the subject of a declaration of trust, it must also comply with the evidential requirements of s 23C(1)(b). J Heydon and M Leeming, Jacobs' Law of Trusts in Australia (7th ed, LexisNexis Butterworths, 2006) at [706]. 52 Ms Klewer admits a lack of documentary evidence creating an inter vivos express trust. No evidence was presented to support the existence of an implied trust. Raphael FM was correct in holding that there is no enforceable express or implied trust over the Korora property. 53 Ms Klewer asserts that she used Robert Klewer's money to pay for the mortgage over the Korora property. In particular, she cites the child support payments made by Robert's father. However, those payments are made to the parent, not to the child. They are not "Robert's money". The evidence before Raphael FM, in particular from Ms Klewer's statement of affairs, went into some detail regarding the payment for the Korora property and for improvements to the property from Ms Klewer's own funds. 54 The respondent draws attention to the fact that there was no suggestion before Raphael FM that Robert Klewer contributed any funds towards the purchase of any real property. He also points to an affidavit sworn by Ms Klewer on 7 October 2005 in proceeding number NSD 1907/2005 against Mr Walton, in which she deposed, (at [26] and [29]), relevantly: I placed my property on the market on the 16/09/05. I have an exclusive agreement with Ray White Real Estate Coffs Harbour ... I have great prospects of success in my appeal to the Full Federal Court and accordingly a Stay on the Sequestration order ought to be made and an additional staying the bankruptcy so that my property, that being the family home ceases to vest in the Trustee. I ask this so I can continue to have my propertymarketed without the huge costs incurred by a private trustee which the Official Trustee is currently seeking to appoint. (emphasis added) 55 Ms Klewer now says that she has, since Robert Klewer turned 18 years of age, continued to use money paid to Robert by reason of his disabilities to make mortgage repayments on the Korora property. Robert Klewer has filed an affidavit supporting this contention. Robert is presently 20 years of age. Even if part or all of his moneys were used to pay mortgage payments since his 18th birthday as alleged, any trust resulting from this would not represent a substantial interest in the Korora property. If Robert can satisfy the respondent that such payments were made, he may be entitled, upon sale of the Korora property, to a part of the proceeds of sale that reflects his proportional interest.

[17]

Protected money claims 56 Section 116(2) of the Act sets out the property of a bankrupt to which s 116(1) does not apply and which is therefore non-divisible amongst the creditors of the bankrupt. Broadly speaking, s 116(2)(d) relates, inter alia, to policies of assurance and to interests in and payments from superannuation funds. Section 116(2)(g) relates to damages or compensation recoverable or recovered by the bankrupt. 57 Section 116(3) (in conjunction with s 116(2)(n)) provides that where the whole or substantially the whole of the money paid for the purchase, or used in the acquisition, of particular property is protected money, the property is non-divisible amongst the bankrupt's creditors. Section 116(4) provides that where s 116(2)(n) does not apply but the outlay in relation to particular property is part protected money the trustee, upon realisation of the property, shall pay to the bankrupt so much of the proceeds of realising the property as can fairly be attributed to the protected money. "Protected money" is defined in s 116(2D) and includes "exempt money". "Exempt money" is also defined in s 116(2D) and includes money of a kind referred to in s 116(2)(d)(ii) and s 116(2)(d)(iv) as well as damages or compensation of a kind referred to in s 116(2)(g). 58 As Raphael FM concluded, save for the application of s 116(3) and s 116(4), s 116(2)(d) applies to remove payments from the divisible property of a bankrupt, not the asset to which the payment was applied. 59 If the whole or substantially the whole of the purchase price of the Korora property was protected money, the Korora property would be non-divisible amongst Ms Klewer's creditors (s 116(3) and s 116(2)(n)). 60 Ms Klewer relies on the payment of moneys from Mr Klewer's superannuation fund. Moneys were released from this source by order of the Family Court in 1998 and were used to free the Boambee Gardens property from encumbrances before it was transferred to Ms Klewer. These moneys did not constitute splittable payments for the purposes of s 116(2)(d)(iva) or s 116(2)(d)(vii) of the Act because at that time payment splits were not part of the law of Australia. Provisions dealing with payment splits were introduced by the Family Law Legislation Amendment (Superannuation) Act 2001 (Cth). 61 Ms Klewer also states that, following the splitting order made by the Family Court in 2004, she has received payments from Mr Klewer's superannuation fund. These payments have been used to make mortgage repayments in relation to the Korora property or to effect improvements to that property. 62 The money released from Mr Klewer's superannuation fund in 1998 to free the Boambee Gardens property from encumbrances before the transfer to Ms Klewer was not a payment made to Ms Klewer on or after the date of bankruptcy (s 116(2)(d)(iv)). It was not the proceeds of an assurance policy (s 116(2)(d)(ii)). It was not "exempt money" and not "protected money" for the purposes of s 116(2D); nor were the proceeds of sale of the Boambee Gardens property. These moneys could not be said to have been protected money used for the purchase or acquisition of the Korora property. 63 Ms Klewer has not provided evidence regarding the date of any payments from Mr Klewer's superannuation fund following the splitting order made by the Family Court in 2004. However, even if the payments received by Ms Klewer as a result of the splitting order and the various moneys received by Ms Klewer as damages or compensation for personal injury or wrong were to be considered as "protected money" (see ss 116(2)(d)(iv), 116(2)(g) and 116(2D) of the Act), Ms Klewer has not established that they formed the whole or substantially the whole of the moneys paid for the purchase or used in the acquisition of the Korora property in order to make the property not divisible (s 116(3) and s 116(2)(n)). 64 It is s 116(4) that applies where "outlay" in relation to property, defined in s 116(2D) of the Act, is claimed. "Outlay" includes money paid for the purchase or acquisition of property and money paid in respect of extensions, alterations or improvements since purchase or acquisition. Where protected money is so applied, as would seem to be Ms Klewer's case, the claim is, under s 116(4), to part of the proceeds of sale of the Korora property upon realisation by the trustee. 65 I agree with Raphael FM that, subject to proof, Ms Klewer has a right to make a claim pursuant to s 116(4) for so much of the proceeds of realising the property as can be attributed to protected money which constituted an "outlay" with the definition in s 116(2D). As his Honour said at [18]: When the Boambee Gardens property was sold, Mrs Klewer says most of the money went into paying the mortgage or making improvements in the Korora property. But the proceeds of sale of the Boambee Gardens property is not exempt money. For the avoidance of doubt, I would make it clear that my finding in relation to the s.116(2)(g) moneys is that if Mrs Klewer can satisfy the trustee that those moneys were used either in the original purchase of the property or in paying back some of the mortgage loan (in which case they would become exempt loan moneys) or in affecting improvements of the property, then it would appear she has the right to make a claim under s.116(4) but because of the amounts involved I am unable to find that they constitute substantially the whole of the moneys paid for the purchase so that s.116(3) would not apply.