Lofthouse v Baxter & Anor [2007] FMCA 1481 | Case summary

Lofthouse v Baxter & Anor [2007] FMCA 1481 | Case summary | Zoe

[17]

"1. A declaration that the beneficial title to each of the following properties has vested in the applicant pursuant to ss 58 and 116 of the Bankruptcy Act 1966 (Cth) (the Act):

(a) 94 Richardson Street, Middle Park, Victoria, being the property more particularly described in Certificate of Title Volume 3584, Folio 687;

(b) 235 Richardson Street, Middle Park, Victoria, being the property more particularly described in Certificate of Title Volume 10074, Folio 251;

(c) 24 Hill Street, Hawthorn, Victoria, being the property more particularly described in Certificate of Title Volume 8615, Folio 308, and

(d) 78 Wattle Road, Hawthorn, Victoria, being the property more particularly described in Certificate of Title Volume 9239, Folio 723 and Volume 8039, Folio 848.

2. A declaration that the second respondent:

(a) has no caveatable interest in the Properties;

(b) forthwith execute and deliver to the applicant all documents necessary to transfer to the applicant, the title to the properties; and

(c) withdraw all caveats lodged against any of the properties.

3. A declaration that the document commencing 'THIS DECLARATION OF TRUST is made on 20 day of December 2000";

(a) was not effective to transfer the Property or to settle the Properties on the Richardson Trust;

(b) was not effective to constitute the second respondent as trustee in respect of the Properties;

(c) was not effective to dispose of the second respondent's beneficial interest in the Properties.

4. An order that the second respondent account to the applicant for all rent received from the properties since the date of bankruptcy.

5. In the alternative to 1 to 3:

(a) declarations that:

(i) the second respondent holds the Properties on trust for the Richardson Trust;

(ii) any right of the second respondent to indemnity out of the Properties for debts incurred by the second respondent as trustee has vested in the applicant pursuant to section 58 of the Act;

(iii) the Properties are charged in favour of the applicant with payment of -

1. all remuneration to which the applicant is entitled relating to, concerning or arising from them -

a. this application; and

b. the identification, protection, realisation and distribution of the proceeds of realisation of the properties;

c. all liabilities, costs and expenses suffered or incurred by the Applicant relating to, concerning or arising from -

i. this application; and

ii. the identification, protection, realisation and distribution of the proceeds of realisation of the Properties; and

d. the liabilities incurred by the second respondent with respect to the Properties incurred since 20 December 2000.

[24]

"7. On 29 March 2005, the Bankrupt swore an affidavit in the Federal Magistrates' Court Proceeding No. (P)MLG 1436/2004 ("Bankruptcy Proceeding") ("29 March Affidavit"). The Affidavit was relied upon by the Bankrupt and she was cross examined on it.

8. I seek leave to refer to the 29 March Affidavit, in particular, paragraphs 22 to 26, where the Bankrupt deposed to the following:

"Ability to pay my debts:

22. I am able to pay all my proper debts and liabilities from my assets. Annexed to this my affidavit and marked with the letters respectively set out opposite each item are the following documents relevant to my financial position:-

"SO5" A statement of my assets and liabilities

"SO6" Copy title searches in regard to each of the four properties owned by me

"SO7" Copy appraisals and valuations relating to each of the four properties

"SO8" Copy documents from mortgage lenders secured over the properties indicating the outstanding balance of the loan in each case.

"SO9" Letter from ANZ confirming availability of drawdown facility

23. As is set out on exhibit "SO5" in addition to the assets comprised of real estate owned by me I have fees owing to my legal practice of $638,000 and work in progress valued in excess of $500,000.

24. I refer to exhibit "SO6" and the title search over 78 Wattle Road, Hawthorn. This search shows a mortgage to the ANZ Bank. There is presently an amount of $51,000 owing on that mortgage. I have a drawdown facility available from the ANZ allowing me up to $400,000 which I am able to draw on immediately. Accordingly I still have a remaining amount of $349,000 available which means I have ready access to funds of an amount which is more than sufficient to pay out all my creditors including those whose claims I dispute as set out below. I refer to exhibit "SO9" a letter from the ANZ confirming the availability of that drawdown facility.

25. My net equity in real estate is accordingly as follows:

Property Value Amount Net Value Secured

78 Wattle Road, $1,320,000.00 $0.00 $1,320,000.00

Hawthorn

94 Richardson Street, $750,000.00 $560,000.00 $190,000.00

Middle Park

235 Richardson Street, $830,000.00 $110,000.00 $720,000.00

Middle Park

24 Hill Street, $450,000.00 $300,000.00 $150,000.00

Hawthorn

Totals $3,350,000.00 $970,000.00 $2,380,000.00

26. In regard to the title searches referred to above I provide the following further explanations:

a) The caveats lodged by Pauline Baxter will be withdrawn forthwith.

b) The caveats lodged by Point Corp Ltd will be withdrawn forthwith.

c) The title to 24 Hill Street, Hawthorn is in my former married name of Sue McDougall.

d) The caveat lodged by Mortgage Masters Pty Ltd relates to a disputed fee of approximately $2,000 claimed by that company.

e) The caveats lodged by my former husband John McDougall have been withdrawn as he has no further claim on the properties.

f) The warrants of seizure and sale have all been satisfied by payment to the Sheriff of the amounts respectively claimed by the creditors. Those warrants lodged in 2001, 2002 and 2003 have not been renewed subsequently due to that payment and have ceased to affect the title.

g) The mortgages to the Commonwealth Bank on 94 Richardson Street have been discharged and a new mortgage granted to Perpetual Trustees Limited."

Now produced and shown to me and marked "DJL-5" is a true copy of the 29 March Affidavit.

9. On 19 May 2005, the bankrupt swore a further affidavit in the Bankruptcy Proceeding ("19 May Affidavit"). The 19 May Affidavit was relied upon by the Bankrupt and she was cross examined on it.

10. I seek leave to refer to the 19 May Affidavit, in particular, paragraphs 19 and 20, where the Bankrupt deposed to the following:

'19. My net equity in real estate is accordingly as follows:

78 Wattle Road, $1,320,000.00 $0.00 $ 1,320,000.00

Hawthorn

94 Richardson Street, $750,000.00 $560,000.00 $ 190,000.00

Middle Park

235 Richardson Street, $830,000.00 $110,000.00 $ 720,000.00

Middle Park

24 Hill Street, $450,000.00 $300,000.00 $ 150,000.00

Hawthorn

Totals $3,350,000.00 $970,000.00 $ 2,380,000.00

[29]

"2. Ms Owens is the registered proprietor of the properties at 78 Wattle Road, Hawthorn, 94 and 235 Richardson Street, Middle Park, and 24 Hill Street, Hawthorn.

3. Ms Owen's family trust, 'The Richardson Family Trust', was established by a trust deed dated 12 August 1994. The trustee appointed under the deed is Pauline Baxter. The primary beneficiaries are defined as Ms Owens' children and grandchildren. She in fact has children but no grandchildren. The general beneficiaries are defined as the primary beneficiaries, their spouses, widows, widowers and descendants for the time being, Ms Owens' brother, nephews and nieces and other categories of persons which I understand not to be presently relevant.

4. By a deed dated 20 December 2000, Ms Owens purported to transfer her interest in the above properties to the Richardson Family Trust. Whilst there are evidently some drafting defects in this document and whilst it is headed, "Declaration of Trust", it seems that its intent was that a gift or settlement of the properties be made by Ms Owens in favour of Ms Baxter to hold on trust for the family trust.

5. Over the last few years, Ms Owens has received conflicting advice from different lawyers as to the validity of the deed of 20 December 2000. Some have advised that it was effective to divest her of her beneficial interest in the land, some have advised that it was invalid and ineffective. This is no doubt a result of the unsatisfactory drafting of the deed. These differing opinions have led Ms Owens to adopt inconsistent positions from time to time (and further to the allegation that she does so to suit her interests at the time) For example, some time after December 2000, Ms Owens gave an authority to a solicitor under s 188 of the Bankruptcy Act 1966 to call a meeting of her creditors to consider a proposal by her under Part X of the Bankruptcy Act 1966. At that time, Ms Owens was evidently advised, and asserted, that the land was beneficially owned by the trust and not her. She has also given evidence in oral examinations in the past denying an interest in the properties. However, in recent affidavits sworn by her in her bankruptcy proceedings (Federal Magistrates' Court Action No. ((P)MLG1436/2004), Ms Owens has deposed that she is the beneficial owner of these properties.

6. The 20 December 2000 document manifests an intention to create a trust, which intention is essential to the creation of a trust (The Commissioner of Stamp Duties (Qld) v Jolifffe [1920] HCA 45; (1920) 28 CLR 178 per Knox CJ and Gavan Duffy J at 181). However, as a general rule equity will not give remedies, or recognize interests in, persons who have not given valuable consideration. It is now considered necessary for a gift of Torrens land to be complete and enforceable in equity that the donor has done everything within his or her power to enable the donee to be registered as its proprietor. This usually involves the handing over of an executed transfer of land. In Brunker v Perpetual Trustee Co Ltd [1937] 57 CLR 553, Dixon J took the view that, whilst an intended donee cannot obtain equitable remedies against the donor compelling the donor to give legal effect to the intention to give, under the Torrens system of land registration, if a volunteer has acquired an 'indefeasible right to registration' of a transfer of land, then he could compel the registration of his interest. However, this view of the law was rejected in Corin v Patton [1990] HCA 12; (1990) 169 CLR 540 by Mason CJ and McHugh J (at 560), in favour of the stricter view taken by Griffith CJ in Anning v Anning [1907] HCA 13; [1907] 4 CLR 1049:

'... Accordingly, we conclude it is desirable to state that the principle is that, if an intending donor of property has done everything which it is necessary for him to have done to effect a transfer of legal title, then equity will recognize the gift So long as the donee has been equipped to achieve the transfer of legal ownership , the gift is complete in equity ...

... Where a donor, with the intention of making a gift delivers to the donee an instrument of transfer in registrable form with the certificate of title so as to enable him to obtain registration, and equity arises, not from the transfer itself, but from the execution and delivery of the transfer and the delivery of the certificate of title in such circumstances as will enable the donee to procure the vesting of that legal title in himself. Accordingly s 41 does not prevent the passing of an equitable estate to the donee under a completed transaction.'

Similarly, Deane J said at (at 582)

The test is a twofold one. It is whether the donor has done all that is necessary to place the vesting of the legal title within the control of the donee and beyond the recall or intervention of the donor. Once that stage is reached and the gift is complete and effective in equity, the equitable interest in the land vests in the donee and, that being so, the donor is bound in conscience to hold the property as trustee for the donee pending the vesting of the legal title.

Deane J's statement of the relevant test has since been applied by the New South Wales Court of Appeal in Costin v Costin (1997) 7 BPR 15.167 and more recently by Gzoll J in Gardiner v Chief Commr of State Revenue [2004] NSWSC 107; (2004) 59 NSW LR 549

7. I am instructed that in the present case Ms Owens did not ever provide executed transfers to the trustee of the family trust. In the absence of such documents, the 20 December 2000 deed was ineffective as a deed of settlement to divest Ms Owens of beneficial ownership of the properties." (emphasis added)

[33]

"21. On 21 August 2006, Tolhurst Druce & Emmerson wrote to Aitken Walker & Strachan advising as follows:

"We refer to your letter of 10 August 2006. On the basis of our instructions, we respond as follows.

The Richardson Trust

1. On 12 August 1994, a deed of trust was executed which established the Richardson Trust. It is a discretionary trust and its primary beneficiaries are Ms Georgia MacDougall and Ms Clare MacDougall (the MacDougalls). The general beneficiaries are Mr Barry Owens, an uncle of the MacDougalls, and their cousins, Ms Sharni Owens and Mr Danny Owens. In addition, pursuant to sub-clauses 1.3(f)-(h) of the deed, unnamed charities are included as general beneficiaries of the Richardson Trust.

The second trust

2. On 20 December 2000, Ms Suzann Janet Owens (also know as Ms Suzann MacDougall) executed a declaration of trust (the Second Trust), pursuant to which she declared that "her interest in all property owned by her including the property situated at 78 Wattle Road Hawthorn inclusive of its contents" was held on trust for the Richardson Trust and its beneficiaries (namely, the MacDougalls). Ms Owens acts as trustee of the Second Trust.

Legal effect of the trusts

3. By operation of the Second Trust, on 20 December 2000, the beneficial interests in the properties at 94 and 235 Richardson Street Middle Park, 24 Hill Street Hawthorn, and 78 Wattle Road Hawthorn (collectively, the Properties) vested in the trustee of the Richardson Trust and the MacDougalls. Ms Owens has not owned the beneficial interests in the Properties since 20 December 2000. Accordingly, those interests have not vested in the trustee in bankruptcy and he has no right to deal with them.

4. Any dealing with the Properties by your client would be adverse to the interests of the Richardson Trust and the MacDougalls. By her letter of 7 August 2006 Ms Suzann Owens put the trustee in bankruptcy on notice of the beneficial interests of the Richardson Trust and the MacDougalls in the Properties. (We are instructed, however, that the Trustee was aware of those interests in any event because of previous discussions with Ms Suzann Owens.)

Conclusion

5. In the circumstances, we call upon the trustee in bankruptcy to undertake that he will not deal with the Properties. If the trustee fails to give such an undertaking by 4:00pm on 28 August 2006, we are instructed to issue a proceeding to protect the MacDougalls' beneficial interests in the Properties. Should that be necessary, we reserve the right to produce this letter on the question of costs.

6. We understand that the trustee in bankruptcy will need to take legal advice in relation to this matter. To assist, we enclose a copy of the Richardson Trust and a copy of the Second Trust for your perusal. If you require further information, please request it in writing and we will seek further instructions.

7. Finally, if the trustee in bankruptcy requires more time in order to obtain advice, if he undertakes not to deal with the Properties in the interim, we are prepared to negotiate a brief extension beyond 28 August 2006. Please contact us as soon as possible if this is the case."

22. Now produced and shown to me and marked "DJL-17" is a true copy of the letter from Tolhurst Druce & Emmerson to Aitken Walker & Strachan together with a copy of the Richardson Trust and the Second Trust."

[47]

34. The Applicant referred in detail to the evidence set out earlier in this judgment. Mr Gardiner of Counsel for the Applicant submitted that the Applicant was entitled to the declaration sought in relation to the properties set out in paragraphs 1 to 4 of the Application. Mr Gardiner submitted that despite orders being made by the court on 5 February 2007 granting leave to the Second Respondent to file and serve any affidavits to be relied upon in response to the application, it was to be noted that the Bankrupt had not in fact filed any affidavit material at all in response to the application.

35. However, it was submitted as at the date the sequestration order was made, namely 10 May 2005, the Bankrupt was the registered proprietor of the properties. On the affidavit evidence Mr Gardiner submitted that there will only be a surplus in the Bankrupt Estate if the properties form part of the divisible property of the Bankrupt Estate.

36. It was noted that if the court should find that there was no trust created and that the beneficial ownership of the properties remain with the Bankrupt, then those properties can be sold to satisfy the debts and there would be a surplus. In the alternative, it was conceded that if the properties are not part of the Bankrupt Estate then there would be a significant deficiency.

37. It is clear to me on the evidence that that submission regarding the surplus is correct. It is not necessary for the court to further examine the evidence in relation to that submission in the absence of any evidence to the contrary.

38. Mr Gardiner submitted that it is relevant for the court to take into account the fact that after the sequestration order was made, application was made for annulment by Ms Owens. That application he submitted, and I accept, was "effectively abandoned".

39. Mr Gardiner referred to the annulment application and noted that in those proceedings it was contended by the Bankrupt that the properties were owned beneficially by her and were therefore appropriate to take into account when assessing her solvency. It was further noted that solvency was raised as an issue to resist the sequestration order.

40. Reference was made to the Bankrupt's affidavit of 29 March 2005 in the Bankruptcy proceedings the details of which were set out in the Applicant's affidavit referred to earlier in this judgment, with particular reference to the Bankrupt's claimed ability to pay her debts.

41. It was noted that the Bankrupt in the Bankruptcy proceedings claimed to have had work in progress valued in excess of $500,000 and fees owing to her legal practice of $638,000.

42. It was noted that whilst reference was made by the Bankrupt in the earlier affidavit material to the properties and the amount owed to her in her legal practice, no reference was made to the December 2000 document. Reference was made to paragraph 24 of the Bankrupt's affidavit in the Bankruptcy proceedings sworn 29 March 2005 where she claims to have a "draw down facility available from the ANZ" allowing the Bankrupt "up to $400,000 which I am able to draw on immediately". It was submitted that there was no mention in the affidavits of the Bankrupt in the other proceedings that the properties were not beneficially owned by her. It was further noted, as set out earlier in this judgment, that the Bankrupt knew nothing about the caveats which she had purportedly referred to which were to be "withdrawn forthwith".

43. It was specifically submitted by Mr Gardiner as follows,

[61]

59. It was argued that the document may be given a number of interpretations. For example, it was submitted that although the Bankrupt is referred to as the trustee, it may be that the other reference in the document to "the trustee" is meant to refer to the trustee of the Richardson Trust. It is further noted that there are two paragraphs numbered '4'. The reference to any agreement by the trustee to transfer her interest in all the property owned by her, including the property at 78 Wattle Road, Hawthorn, it was argued, is unnecessary if, indeed, this is purported to be a deed where no agreement is required. It was noted that this was the document which Counsel for the Bankrupt was asked to interpret as a declaration of a trust.

60. Reference was then made to the second paragraph number 4 set out above. It was argued that there is difficulty making sense of the document arising from the confusion in reference to the trustees, though it appears to be a declaration by the Bankrupt executed in her name, MacDougall, appearing to assert that the Richardson Trust holds the trust "on trust for the beneficiaries of the trust". The language of the document, it was argued, leads one to the conclusion that nothing will happen until the beneficiary requests the transfer. The uncontradicted evidence, it was submitted, is that no transfer has ever been executed to give effect to the December 2000 document.

61. It was noted that Ms Baxter had no knowledge of the December 2000 document and, at best, it may be construed as an intention to create either a trust or a gift of the Bankrupt's properties for no consideration but one which has never been completed in the sense that it has to be pursuant to the principles set out by the High Court in Corin's case.

62. It is noted that the original of the December 2000 document has not been produced in evidence by the Bankrupt or the Applicant.

63. Mr Gardiner referred to the affidavit of Ms Baxter set out earlier in this judgment and submitted that that affidavit "is a powerful affidavit" because it is by a person who would be expected to have had the terms of the deed/trust made known to her or communicated to her and knows nothing whatsoever about it".

64. It was argued that:

[65]

68. Counsel for the Applicant referred to another affidavit of the Bankrupt in the Bankruptcy proceedings sworn 31 May 2005 where the Bankrupt appears to repeat in substance matters referred to in her other affidavit in the same proceedings sworn 19 May 2005 which the Applicant refers to as "the 19 May affidavit". In the later affidavit of 31 May 2005, the Applicant repeats the assertion she made concerning the ANZ draw down facility which had been set out in her affidavit of 29 March 2005, so it is not necessary to repeat the contents of the further affidavit.

69. It is sufficient to note that Counsel for the Applicant submitted that the affidavits which refer to the property interests of the Applicant make no mention of any trusts and specifically no mention of the December 2000 document. It was argued that the failure to make reference to the existence of the trusts occurred because the Bankrupt never "had the intention, if she did have the intention of creating a trust, of bringing it to fruition".

70. Counsel for the Applicant sought to further refer to and read another affidavit in the Bankruptcy proceedings, namely an affidavit of the partner of the Applicant, Mr Richard John Cauchi. Mr Cauchi had sworn an affidavit on 3 June 2005. Reference was made to the statement of affairs exhibited to Mr Cauchi's affidavit and marked "RJC20". Mr Cauchi refers to the statement of affairs and based upon that document, concludes that the Bankrupt had a total amount of assets of $4,279,000 with liabilities of $1,066,924 leaving a surplus of $3,000,212.76. In determining assets it was argued that Mr Cauchi relied upon paragraph 28 of the statement of affairs which provides for details concerning "real estate". Next to that heading appear the words "see attached valuation documents". It is clear that the properties are the subject of separate valuations. It was submitted that the evidence indicates that the Bankrupt had contended in the statement of affairs that she beneficially owned the properties subject to the mortgages referred to in her statement of affairs. It is also noted that in the statement of affairs declared on 13 May 2005, that the Bankrupt, at page 5 of her statement, refers to income received from property investments of $58,760.

71. In paragraph 44 of the Statement of Affairs headed "Trusts" the following appears,

[71]

79. Mr Gardiner then analysed in detail other evidence given by the Bankrupt concerning payments made by way of rent on some of the properties and ultimately submitted that the Bankrupt gave evidence that she personally received rental from each property and specifically agreed that she had asserted that rental of $58,760 was received. It was submitted that an analysis of the evidence by the Bankrupt before the Federal Magistrates Court on 17 June 2005 was that the Bankrupt was offsetting her income with expenses on her personal income. Ultimately, it was submitted that the conduct of the Bankrupt in relation to the properties was inconsistent with the assertion that the properties were held on trust.

80. Counsel then submitted that the analysis of the evidence provided by the Bankrupt revealed in the transcript of the proceedings before the court on 17 June 2005 resulted in the observation by Counsel that the Bankrupt "has chosen not to file any material at all in this proceeding, and therefore there is no explanation before the court from her and essentially it has to be emphasised that she is the person who knows of the circumstances of the creation of the document in December 2000, aside from perhaps the witness to that document who, likewise, has not been given or even really identified." It was submitted that "on the other hand, the trustee of the Richardson Trust, Ms Baxter, who is the first respondent, attended court yesterday and has filed an affidavit, indicates that she knows nothing of the document or any transaction however, that transaction be characterised, be it a trust or a gift, to the trust until given a copy of Mr Lofthouse's affidavit in support of this application."

81. It is to be noted in the proceedings before the court on 17 June 2005 the Bankrupt did not appear to rely upon the December 2000 document.

82. It was submitted that there is no independent source as to the date of its creation and that the Bankrupt has not provided any evidence concerning its creation, including who drafted the document. Again, it was noted that the original has not been provided. It was conceded that in an examination in the State Magistrates Court the court did refer to the Richardson Street trust.

83. Counsel then, after referring to the material, made the following submission,

[82]

"34 The onus of establishing a trust is on the person who alleges it.

35 It is true that a person can create a fully effective trust merely by declaring himself or herself a trustee. As Jacobs notes at [623] the express declaration must be intended to be final and binding on the settlor. It is also true that, if a fully constituted trust has been declared, it may be enforced even though the plaintiffs are volunteers: Collinson v Pattrick [1838] EngR 357; (1838) 2 Keen 123; 48 ER 575; Sheslow v Kostin - Young J, 2 May 1997, BC 9702183.

36 However, difficult questions of fact not infrequently arise where a person, despite that declaration continues to exercise personal dominion over the so-called trust property. In Hughes v Stubbs [1842] EngR 877; (1842) 1 Hare 476, 479; [1842] EngR 877; 66 ER 1119, 1120, Wigram VC said, "a person not intending to give or part with the dominion over his property may retain such dominion, notwithstanding he may have vested the property in trustees, and declared a trust upon it in favour of third persons" and that, when that occurs, it is a very difficult question for equity to determine whether the trust exists or not.

37 In Commissioner of Stamp Duties (Queensland) v Jolliffe [1920] HCA 45; (1920) 28 CLR 178, 181, Knox CJ and Gavan Duffy J applied a statement which was to be found in the 11th (1904) edition of Lewin on Trusts, viz:

"It is obviously essential to the creation of a trust, that there should be the intention of creating a trust, and therefore if upon a consideration of all the circumstances the Court is of opinion that the settlor did not mean to create a trust, the Court will not impute a trust where none in fact was contemplated."

38 That passage which was included in all subsequent editions of Lewin up to and including the 16th (1964) p 35, is missing from the current (17th ed (2000)) where the authors say in a footnote to para 4-23 that the dissenting judgment of Isaacs J would to-day be preferred in England. Whether this is so or not, Jolliffe's case, or at least Jolliffe's case as interpreted by later decisions of the High Court, is binding on me.

39 The cases cited by Lewin are instructive. The principal authority is Gaskell v Gaskell [1828] EngR 743; (1828) 2 Y & J 502; 148 ER 1017. That was a case where there were many indicia of a trust created by a man now deceased, yet that man had never communicated the trust to the trustees appointed and the surrounding circumstances showed that it was more likely than not that the man considered what he was doing would save legacy duty. Alexander LCB held in all the circumstances that no trust had been created.

40 The High Court has revisited this matter at least twice, namely in Kauter v Hilton [1953] HCA 95; (1953) 90 CLR 86 and Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (2000) 202 CLR 588. In the latter case, four justices said at 605:

"in Kauter v Hilton, the Court treated Jolliffe as deciding, for the purposes of the legislation there in question that 'all the relevant circumstances must be examined in order to determine whether the depositor really intended to create a trust.' "

41 In Arthur v Public Trustee (1988) 90 FLR 203, 209, Asche CJ, giving the judgment of the Full Northern Territory Supreme Court approved the trial judge's test that:

"equity will only enforce a trust to the extent that the intention to create a trust is clear. .... Words alone may suffice but where those words are at odds with the donor's action proof may be lacking."

42 It is possible to create a trust by declaration without communication to any person, see Jacobs on Trusts [521] based on Middleton v Pollock (1876) 2 Ch D 104 and Rose v Rose (1986) 7 NSWLR 679, 686. However, the fact of little or no communication is a relevant factor to take into account when assessing whether any trust exists at all.

43 In In re Cozens [1913] 2 Ch 478, 486, Neville J considered the effect of non-communication of a declaration of trust. He said at p 486:

"the absence of communication raises a strong inference against an intention to make an appropriation irrevocable. In the absence of evidence to the contrary I think the inference of silence was intended to enable the declarant to adhere to or to abandon the declaration as best served his advantage for the time being."

44 There is no doubt that the authorities which I have summarised above guide me as to how I approach the question as to whether there is any trust.

...

46 The analysis of Neville J in In re Cozens at 486-7 is quite apposite to this case even if the court is of the view that Robert Yazbek did not simply fail to implement the transaction envisaged in the document entitled "Declaration of Trust" and leads to the conclusion that even if a trust was created, it was at all times revocable.

47 If any trust was created in 1998, it was not irrevocable and was revoked by its (immediate) abandonment. Given the evidence that the facts in the recitals were quite untrue, there was every reason to do so.

...

52 There is no evidence led by the plaintiff as to who drew the declaration of trust or as to any surrounding circumstances at the time.

53 Indeed with the onus of proof on the plaintiff, its failure to assist in casting light on the totality of material circumstances counts heavily against it in discharging its onus of proof.

...

57 Further, one would have expected a record of the trustee of the trust as provided for in the trust deed, and indeed formal documentation, providing the indemnity envisaged as a requirement in the second bullet point in the declaration of trust, if the transaction was intended to be effective.

58 The absence of a transfer in blank in favour of Hyhonie accompanying the declaration of trust, also, along with the failure to stamp the declaration of trust, are indicative of a proposed transaction which never reached the point where Robert Yazbek intended it to be completed. It is to be noted that Mr Alexandrou's evidence is inconsistent with any implied direction to stamp the document; that was not within his sphere of responsibility.

...

60 After the date of the document, 14 March 1997, nothing further happened for years to give any indication of the existence of a trust. Yet otherwise the records indicate that transactions were properly recorded.

...

64 The plaintiff called no evidence from those who created the annual returns as to their instructions, nor any explanation as to why they were not called.

65 There was no notification to Aldora Holdings Pty Ltd that the shares were not owned beneficially by Robert Yazbek being registered owner despite the special provision for notification in the company's articles of association (clause 23.9).

66 Indeed, years passed and there was not a single scrap of paper other than the document itself to indicate that the transaction was ever carried into effect. Rather, the business records of all relevant entities as prepared on the instructions of Robert Yazbek were quite inconsistent with the transaction ever having been carried into effect.

...

68 As was the case with Mr Alexandrou, the plaintiff led no evidence of Mr White being instructed to bring the shares into the accounts of the trust. The lack of such evidence is startling.

...

73 Robert Yazbek's statement of affairs shows:

(1) Robert Yazbek treating the shares in Aldora Holdings Pty Ltd as being held by him personally and transferred to Leila Yazbek for value (again $1,000).

(2) States in item 11 that he has not transferred any assets to a trust in the last 5 years. In the absence of payment for the shares by the plaintiff, if the declaration of trust was asserted at the time to be effective, the answer would have been, "yes", and not "no" as appears in the document.

74 The most plausible explanation of the course of events is that at no time before Robert Yazbek's bankruptcy, was there any intention to treat the declaration of trust as being effective. It is a plausible explanation of events that the scheme of attempting to transfer shares to Leila Yazbek was one originally designed to assert that there was a transfer for value to her.

...

84 The question is one of fact in all the circumstances. As in many cases, there are indications going each way. However, in my view, the facts referred to by Mr Connell far outweigh factors the other way.

85 It is not really a question to be decided on credit as Mr Yazbek and Mr Alexandrou cannot remember the circumstances of the coming into existence of the declaration of trust, nor why it was not immediately acted on. The onus is on the plaintiff, yet there are so many unexplained events. How can it be that two successive accountants ignored the declaration of trust? Why were the shares in Aldora Holdings allotted to Mr Yazbek personally? Why was there the last minute attempt to vest the shares in Leila Yazbek, if they were already protected by being a trust asset?

86 The proper conclusion is that Mr Yazbek and his advisors were seeking the best of all worlds. The trust deed was in existence, but it was never seriously considered until the time came for it to be given significance about the time of Robert Yazbek's bankruptcy.

87 It is of little purpose to analyse whether the trust ever came into existence or whether it was merely incompletely constituted. I incline to the first, but, if this is wrong, then the plaintiff fails because of the second.

88 Thus the plaintiff fails on its principal case.

89 3. In the circumstances there is no need to explore abandonment.

90 4. As to the transaction being a sham, again it is not necessary to explore this. Indeed as Lockhart J said in the Full Federal Court in Sharrment Pty Ltd v Official Trustee in Bankruptcy [1988] FCA 179; (1988) 18 FCR 449, 461, to find a sham needs a strong finding. It is sufficient to say that the bulk of the evidence points to transactions being conducted on the basis that there was no trust at all and that this reinforces the conclusion reached with respect to questions 1 and 2.

...

97 5(d) This point does not arise on the findings I have already made. However, it is clear that a person who seeks equity must do equity. If the trust owes Robert Yazbek or his bankrupt estate $439,053.94 and if the shares in Aldora Holdings are a trust asset, it follows that one way or another, that sum has to be paid to the estate before the beneficiaries can enjoy the fund. Whether that is done by a condition of payment as a term of doing equity, set-off or otherwise is immaterial. I will not spend further time on it because, in the light of my findings, the matter is academic."

[83]

90. It was submitted that there are many similarities between the facts in the case to be decided by the court at first instance in Hyhonie and that this court should apply the law set out by the court in that case. It was submitted that this court should apply the authorities referred to by the court at first instance in Hyhonie.

91. Particular reference was made to the decision of Ashe CJ in Arthur v Public Trustee (1988) 90 FLR 203 where the court states as set out in the extract from the Hyhonie first instance decision that, "Equity will only enforce a trust to the extent that the intention to create a trust is clear ... words alone may suffice but where those words are at odds with the donor's action proof may be lacking." It was submitted that those words in the present case provide a response to any suggestion by Counsel for the Bankrupt that the instrument on its face should be construed and "left alone at that". It was argued that the fact that there was no communication is a relevant factor to take into account in the present case, as it was a relevant factor for the court at first instance to take into account in Hyhonie.

92. Reliance was also placed upon the decision of Neville J in Re Cozens (1913) 2 Ch 478 at 486 (Cozens) referred to in the judgment of the court in Hyhonie at first instance.

93. It was submitted that applying the principles set out by Neville J in Cozens, relied upon by the court at first instance in Hyhonie, that this court in the present case should draw similar conclusions regarding the purported declaration of trust relied upon by the Bankrupt, having regard to the state of evidence or indeed, lack of evidence concerning the creation of the declaration, lack of communication and lack of evidence of action upon the declaration, together with the production of a photocopy and unstamped copy of the December 2000 document.

94. Reference was made to the failure of the Bankrupt to give evidence in the present case and otherwise reference made to evidence provided by way of affidavits and under cross-examination in other proceedings by the Bankrupt. It was then submitted that in the present case the only evidence about the accounts of the trust is the evidence provided by Ms Baxter, referred to earlier. It was submitted that this case is in fact stronger than the case before the court at first instance in Hyhonie. Counsel submitted:

[86]

"27 The primary judge held that the trust purportedly declared on 14 March 1997 never come into existence, or else was incompletely constituted. He inclined to the first, apparently on the basis that the intention to create a trust was not proved; but alternatively, he was not satisfied that any intention to create a trust was carried into execution. The primary judge did not explore the question whether the transaction was abandoned, or a sham.

...

40 I would first note, before dealing with the issues that have been argued, that this case was never put on the basis that the subjective intention of Mr. Yazbek was irrelevant because the document took effect as a deed: it would seem that if it had taken effect as a deed, Mr. Yazbek would be conclusively bound by what he stated in the deed that he was effecting, undertaking or permitting (see Halsbury's Laws of England (4th Ed.) Vol.12 [1353]). The document was executed as a deed, but it would not take effect as a deed unless delivered. For a deed to be delivered, the party whose deed the document is expressed to be must, by words or conduct, expressly or impliedly, acknowledge his intention to be immediately and unconditionally bound by the provisions contained in it (Halsbury's Laws of England (4th Ed.) Vol.12 [1329]). The words "signed, sealed and delivered" on the document is evidence of delivery, but not conclusive evidence.

41 Accordingly, if the appellants had relied on this document as a deed, this would have squarely raised the question of whether or not the deed had been delivered, and if so, whether or not it had been delivered in escrow (see Halsbury's Laws of England (4th Ed.) Vol.12 [1333]-[1334]). These questions involve very similar questions of fact to the questions which were disputed, namely whether it was shown that Mr. Yazbek had an intention to create a trust there and then. There is every reason to think that the same result would be reached.

42 In order to create a trust of shares, no writing is necessary: s.23C of the Conveyancing Act 1919 relevantly applies only to real property or to disposition of an existing equitable interest. What would be necessary in this case is an express declaration of trust, intended to be final and binding on the trustee.

43 I accept the statement of the position made by Bray CJ in Lamshed at 239:

It is clear law that despite the unambiguous words of the declaration the trust apparently created by them can be rebutted by evidence of a contrary intention (Commissioner of Stamp Duties (Qld) v. Jolliffe [1920] HCA 45; (1920) 28 CLR 178). But the onus is on those who seek to prove such an intention and strong evidence is required for the purpose (In Re Steele [1925] SASR 272). Many cases were cited to me where this had been done successfully. In some of these cases the depositor was alive and gave evidence of his own intention and was believed (Jolliffe's case; Starr v. Starr [1935] SASR 263). In other cases when the depositor was deceased there was evidence of specific declarations made by him during his life time (Winter v. Grady (1921) SR(NSW) 686 at 691), though sometimes these related to the interest only and the trust stood as to the principal (Kauter v. Hilton [1953] HCA 95; (1953) 90 CLR 86; Re Armstrong (Deceased) [1960] VicRp 34; [1960] VR 202 at 206). And in some cases the trust was held to be rebutted after the death of the depositor by evidence entirely or largely circumstantial (In Re Appleby's Estate (1930) 25 TasLR 126; Re McGuire, Deceased (1937) 41 WALR 120; Teasdale v. Webb (1940) 57 WN(NSW) 151; Abbot v. Miles (unreported, Supreme Court of South Australia, Napier, CJ, 12 May 1952); Jeffrey v. Miles (unreported, Supreme Court of South Australia, Mayo J, 10 December 1952).

44 That quotation related particularly to declarations of trust concerning a bank account, but in general terms it applies to declarations of trust generally. It is consistent with the later High Court decision of Associated Alloys Pty. Limited v. ACN 001 452 106 Pty. Limited (2000) 202 CLR 588. I note also that the Privy Council decision in T. Choithram International SA v. Pagarani [2000] 1 WLR 1 depended on a finding by the Privy Council that the donor in that case had an intention to make an immediate and absolute gift.

45 I accept that the signing of the declaration, and having it witnessed, is some evidence of the required intention, and that there was an onus on Mr. Leroy to rebut that intention. However, this onus on Mr. Leroy was an evidentiary onus, and the ultimate onus remained on the appellants to prove the creation of a trust. The existence of this ultimate onus had some significance in this case, where there was substantial evidence tending to rebut an intention to create a trust.

46 The substantial evidence against an intention to create a trust in this case was the passage of over five years, when (with small exceptions) all documents that were created by Mr. Yazbek, and/or Mr. Alexandrou or Mr. White on Mr. Yazbek's instructions, relating to the Trust and Aldora, were inconsistent with the existence of a trust, and consistent only with beneficial ownership of the shares by Mr. Yazbek.

...

51 In my opinion, the evidence tending to rebut the existence of an intention to create a trust was strong evidence. Mr. Yazbek gave evidence in the case for the appellants, and in the face of the strong evidence tending to rebut an intention to create a trust, one would have expected Mr. Yazbek to give direct evidence of his intention and of the circumstances of the creation of the trust and an explanation of its non-implementation, if any of this evidence would have assisted the appellants' case. Similarly, Mr. Alexandrou gave evidence for the appellants, and if evidence from him concerning the circumstances and the non-implementation would have assisted the appellants' case, one would have expected that evidence to have been given.

52 The fact that this evidence was not given by Mr. Yazbek or Mr. Alexandrou means that the primary judge's non-satisfaction of the existence of an intention to create a trust then and there does not depend on credit findings, so the appellants do not face the difficulty discussed in Abalos v. Australian Postal Commission [1990] HCA 47; (1990) 171 CLR 167. However, it also means that it was and is open to the Court to draw the inference that direct evidence of Mr. Yazbek's intention and of the circumstances of signing would not have assisted the appellants: see Commercial Union Assurance Co. of Australia Limited v. Ferrcom Pty. Limited (1991) 22 NSWLR 389 at 418-9.

...

55 Turning to Mr. Powell's particular submissions, there was in my opinion no need for the primary judge to find a sham. The expression "sham" suggests some kind of pretence being put up. Here, there is just a document signed and witnessed and then simply left with other papers, not acted on, and never shown to anyone else. In my opinion, those circumstances strongly suggest a lack of intention to give effect to the document, in a way that does not merit the description "sham".

...

60 For those reasons, in my opinion there was no error in the primary judge's view that the appellants had not established that there was, at the time of the signing of the document of 14 March 1997, or at any relevant time thereafter, an intention to create a trust. I would for myself have come to the same decision, particularly having regard to the principles stated in Ferrcom. There is no need to consider the question of revocability, the question of whether the appellants would be required to do equity, or issues raised by the Notice of Contention."

[104]

115. In the present case it was argued that the court is required to construe the language of the possible creator of the trust "to determine whether the circumstances of the case, and on the true construction of what was said and written are sufficient intention to create a trust as being manifested". Reference was made to Tito v Waddell (No 2) (1977) Ch 106 at 111.

116. It was conceded that given that the properties remain registered in the Bankrupt's name then under the provisions of the TLA "the applicant's claims must be equitable only". However, it was argued that there was a competing equitable entitlement between the children of the Bankrupt and the Applicant, all equities, it was argued, which "could have been asserted against the bankrupt can be asserted against the applicant." The Applicant, it was submitted, "Is liable to the children's claims relevant to the declaration of trust and is in no better position that than the bankrupt herself would have been if she'd been sued by her children in her capacity as trustee."

117. A comparison was drawn between the present case and the facts in Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) [1965] HCA 17; (1965) 113 CLR 265 (Latec). In that case general law land was involved and no party had a registered interest.

118. It was noted that in that case "the default priority rule between equitable claims was acknowledged to be that the first right in time prevails" (see Latec at 291 per Menzies J). In the present case it was submitted this favours the children's interests, although it was noted in Latec that Kitto and Taylor JJ held that the temporal rule "could be displaced by a comparison of the parties' conduct and omissions". In the present case it was argued the Applicant's interests derives from s.58 of the Bankruptcy Act, whilst the children's interests is derived from a private trust.

119. It was submitted by Counsel that "equitable priorities have a significant and continuing role to play in determining entitlement to land registered under the TLA".

120. It was submitted that it is unsafe to make the declaration sought by the Applicant and that priority questions as between the parties depend on examination of the parties' conduct in a way "which should be better focused than proceedings have been up to this date". It was further argued that no injustice will be done by postponing determination of the Applicant's claim for further hearing. It was argued that there is evidence in other proceedings yet to be determined by the court which discloses an imbalance between the Bankrupt's assets, her debts and the costs of her insolvency administration.

121. During the course of submissions Counsel for the Bankrupt made it clear that it is not the Bankrupt's position that there was a gift in the present case. It was specifically submitted as follows:

[106]

122. During the course of submissions Counsel for the Bankrupt conceded that the instrument of 20 December 2000 was "unhappily worded" and "imprecise". When confronted with evidentiary issues concerning its creation it was submitted that the Bankrupt could rely upon equitable estoppel, which would apply in the present case, preventing the Applicant from denying the existence of the December 2000 document.

123. Counsel submitted that a proper reading of the December 2000 document, where reference is made to "all property" would include the properties which are the subject of this application. It was conceded that the words "declaration of trust" may be difficult to construe "because it has features both of a trust by transfer, trust by declaration and a simple addition to an existing trust".

124. Reference was made to the specific words of the documents and it was submitted that "those words are pointing in several directions and very difficult to construe". However, it was then submitted that equity "has often been faced with documents like this or worse" and in any event, it was submitted that the Bankrupt claims that new ownership rights came into existence by virtue of the December 2000 document.

125. It was argued that the role of the court, as a Court in Equity, is to "construe the language of the creator of that trust to determine ... whether in the circumstances of the case and on a true construction of what was said and written a sufficient intention to create a trust has been manifested."

126. The relevant intention was submitted to be the intention of the declarant on 20 December 2000. It was argued that the only relevance of subsequent acts and subsequent disavowals of that trust are as they bear upon the intention on that day.

127. During the course of submissions the court raised with Counsel for the Bankrupt the reference in the December document to "the Richardson Trust and its beneficiaries". It was noted and conceded by Counsel for the Bankrupt that "people rarely declare subtrusts comparable to this". The court then explored the way in which it may characterise the December document, having regard to the recitals and the reference to the Richardson Trust as at least leading to a conclusion that it may be intended to create a subtrust. Ultimately, after referring to a brief history of the development of equity, Counsel submitted that a Court of Equity, whilst acknowledging that the document is "a bit of a nonsense" would still then seek to give "best effect to the intention, the confused intention of the declarant by enforcing a trust by declaration".

128. It was noted there was no existing trust in relation to the properties and therefore the December document would not be subtrust as there is no possibility of the Bankrupt needing to transfer the properties to herself. It was argued that it would be unlikely to be characterised as a "trust by transfer" hence the likeliest construct it is submitted is "trust by declaration".

129. It was argued that the circumstances in the present case do not present facts analogous to the circumstances in the Hyhonie decision.

130. Counsel attempted to characterise the benefit obtained by the Bankrupt's children by reference to an affidavit of the Bankrupt sworn in other proceedings referred to earlier on 10 June 2005 where reference was made in paragraph 12 to, "for the benefit of my two children. During the period after 1994 my eldest child became addicted to drugs." Reference was also made to transcript and reference was made to the borrowing of the houses over the years and amounts borrowed used for the maintenance and support of children. Unlike Hyhonie's case it was submitted that in the present "the intended beneficiaries had been benefiting since the year 2000, whereas the other trust was kept as a virtual secret".

131. In the present case there is no comparable material to the annual return of a company which occurred in Hyhonie's case. In the present case one would not expect the December document to be referred to an accountant, nor is there any evidence of the degree of secrecy about the trust in this case compared with the trust in Hyhonie's case. It was also suggested in the present case that unlike Hyhonie's case the existence of the December document emerged in proceeding 2003 or 2004. With some reservation Counsel appeared to accept the reasoning in Hyhonie, save to note that in Counsel's submission that case appears to confuse a trust by declaration and a trust by transfer on a couple of occasions.

132. The evidence concerning subsequent disavowals by the Bankrupt of any trust, it was argued, it can only be relevant to the point of the existence of the attention at the time the December document was created. It was conceded that the Bankrupt "made opportunistic denials of the declaration of trust when it suited it".

133. The court then raised with Counsel the relevance of the opportunistic denials when considering equitable relief and the requirement that the parties seeking equity should come to the court with clean hands. It was argued that equity would enforce trust, regardless of what the Applicant thinks and regardless of the Applicant's conduct. The conduct after the creation of the December document it was submitted "doesn't in any way lessen the act in law which created the trust".

134. Some attempt was made to explain the statement of affairs completed by the Bankrupt and it was suggested that the document was prepared "under the supervision of solicitors". It was conceded, however, that the declaration by the Bankrupt, who is a solicitor, appeared to be in her name and signed by her.

135. It was noted that attached to the statement of affairs were the valuations in relation to the properties referred to in this judgment. It was argued that legally the Bankrupt was the registered proprietor and owner and that it would be a misstatement to deny registered proprietorship in any way. Further, it was argued in any event the Bankrupt was not sure that the trust was effective at the relevant time, the Bankrupt it was submitted had received different advice from people, presumably meant to be a reference to lawyers.

136. Counsel appeared to concede that, applying the decision of the court of first instance in Hyhonie, the court can consider the conduct of the Bankrupt after the December document had been created when seeking to understand the intention of the creator rather than when the document existed based on subsequent conduct.

[107]

137. In reply Counsel for the Applicant reiterated submissions made earlier concerning the onus on the Bankrupt to establish the existence of the trust and again noted that the Bankrupt had not given evidence. It was further noted that there were deficiencies in the December document referred to earlier in this judgment. The Applicant had never accepted the December 2000 document as genuine and it was argued that there can be no estoppel which applies to the Applicant in the circumstances where the Applicant has not accepted the December document as being authentic. It is the Bankrupt, it was argued, who is in a position to produce the original document and explain its creation.

138. Criticism was then made of document itself referred to earlier in this judgment. It was argued that the December 2000 document could not be interpreted as a declaration of the trust. There was confusion about whether the Bankrupt as trustee "at all relevant times" agreed to act as trustee of the trust because there was no reference to any person with whom the Bankrupt has agreed. Difficulties arise, it was argued, by the Bankrupt agreeing with herself in a deed poll to transfer property. The document itself does not declare a trust, but simply refers to the Bankrupt holding the property and the property being transferred to the beneficiaries referred to in the Richardson Trust.

139. Counsel for the Applicant referred to the December 2000 document as a "series of a typed, nonsensical words which are incapable of interpretation".

140. It was argued that in the present case the court should not make a finding that the December 2000 document is a declaration of a trust. Reference was made to the decision of the Milroy v Lord (1862) DeGF and J 264 and it was argued in the present case there has not been a valid ineffectual trust in favour of the objects.

141. It was submitted that the reasoning in the court's decision in Hyhonie at first instance does apply to the present case. There was no evidence concerning enjoyment of the trust of the children from December 2000 and rather the statement of affairs in the transcript refers to the bankrupt enjoying rental from the property. Although in the present case there is no annual return depicting beneficial ownership as appeared to be the case in Hyhonie, it was argued the present case is more powerful given the sworn evidence, namely the report as to the affairs and numerous affidavits resisting sequestration proceedings and seeking to set aside a sequestration order by asserting ownership. The court was invited to assess the veracity and creditworthiness of the Bankrupt from an inconsistency in the materials over the period of time referred to in detail by Counsel in earlier submissions. The absence of taxation returns in this case, referred to by Counsel for the Bankrupt, does not, it was submitted, assist the Bankrupt as if the properties were held on trust then some allowance would be made for that rather than simply claiming deductions against rental. Further, it was noted that the trustee of the Richardson Trust, Ms Baxter, knew nothing about the December 2000 document. It was conceded that a failure to refer to the December 2000 document in the statement of affairs may be consistent with the document not being in existence as at the date the statement of affairs was declared by the Bankrupt.

[108]

142. There was no dispute that at all material times up to the alleged date of the December document the Bankrupt was the registered proprietor of the properties.

143. Likewise there does not appear to be any dispute that the value of the properties exceeds the amount payable to creditors and other expenses leaving a surplus.

144. It is also clear to me on a proper assessment of all the evidence referred to by Counsel for the Applicant that the Bankrupt from time to time has effectively chosen to argue as a matter of convenience that the properties were owned by her, at least in affidavit material and a statement of affairs and other material and has also claimed rental benefit and income tax deductions in relation to the properties. I accept, as submitted by Counsel for the Applicant, that when it suited the Bankrupt she otherwise sought to exert the existence of the December document.

145. I have great difficulty interpreting the December 2000 document. In my view applying the principles of law set out by Young CJ in Hyhonie at first instance and having regard to the extracts from the decision of the Court of Appeal in that case, I accept the court is able to consider the intention of the Bankrupt based upon her conduct after the purported execution of the December 2000 document. The court does not necessarily accept that the December 2000 document was executed on the date asserted for reasons which shall appear later in this judgment.

146. Dealing, however, with the intention, it seems clear to me on the authorities referred to by both Counsel that the court is able to consider the intention of the Bankrupt based on the evidence of the Bankrupt's conduct and representations since December 2000. It is clear for the reasons advanced in my view by Counsel for the Applicant that the Bankrupt, on numerous occasions in affidavit material and a statement of affairs, together in transcript, to which reference has been made, has positively asserted that she owns the properties and has not asserted the existence of the December 2000 document. It is equally clear that the trustee of the Richardson Trust, according to the affidavit of Ms Baxter, which I accept, had no knowledge of the existence of the December 2000 document. Further, there have been no claims by any beneficiaries under the December 2000 document and there is no evidence that it contents were ever communicated to the beneficiaries. There is also no evidence that any effect was given to the December 2000 document.

147. In the present case there is simply no evidence from the Bankrupt as to the creation of the December 2000 document and I am not satisfied that it was created at the time asserted by the Bankrupt. I accept, as submitted by Counsel for the Applicant, that the onus is on the Bankrupt to provide evidence in relation to the creation of the December 2000 document. If that evidence had been provided and if evidence given as to its intention, then the court would still need to look at the document and determine as best it can whether it was a subtrust, a transfer of a trust or indeed, as suggested by Counsel for the Bankrupt, a declaration of trust.

148. In this case the conduct of the Bankrupt and her subsequent affidavits and evidence on oath before another court lead me to conclude that I am not satisfied that the December 2000 document was intended to be a transfer of a trust or a subtrust or indeed, that it was created at the time when it is asserted to have been created. For at least three years no reference was made to the document and, for a significant period of time during the course of other proceedings it is clear the Bankrupt disavowed the December 2000 document. I am not satisfied that there is sufficient evidence from the Bankrupt of an intention to create a trust, nor indeed a declaration of a trust. I make that finding based upon the affidavit evidence and the matters referred to comprehensively in the submissions of the applicant set out in detail earlier in this judgment. I accept, applying the principle of Ashe CJ in Arthur v Public Trustee, that equity will only enforce a trust to the extent that the intention to create the trust is clear. In the present case I am not satisfied that there is sufficient evidence of the intention. Further, I am not satisfied that the words alone in the December 2000 document could in any way be consistent with the action of the Bankrupt as evidenced in the material referred to earlier in this judgment.

149. Applying the principles in Cozens, I am satisfied in the present case there is an absence of communication and that this raises a strong inference against the intention to make an appropriately irrevocable deed.

150. I accept that there are similarities between the facts in the present case and those in the Hyhonie decision. There is a striking similarity in relation to the state of evidence, as in the present case there is simply no evidence from the Bankrupt in relation to the creation of the December document and nothing to indicate that the transaction set out in the December document was carried out.

151. I accept, applying the principles of the Full Federal Court in Sharrment Pty Ltd v Official Trustee in Bankruptcy [1988] FCA 179; (1988) 18 FCR 449 at 461 cited with approval by Young CJ in Hyhonie at first instance that to find a sham needs a strong finding. In the present case it is sufficient, as it was in Hyhonie, to simply find that there is insufficient evidence for the court to conclude that there was any trusts at all and/or, in my view, any declaration of a trust.

152. Apart from the chronology of events set out in detail by counsel for the Applicant I further find that in any event that a proper analysis of the 2000 document, even if it was accepted as being genuinely executed on the date it was purportedly executed, does not of itself provide anything other than a vague intention to somehow deal with the properties then registered in the Bankrupt's name. I accept the criticism of the document made in the submissions by Counsel for the Applicant. There is a fundamental difficulty understanding the nature of the document and whether or not the Bankrupt had agreed with herself to transfer her interests in "all property owned by her". It is interesting that the Bankrupt has not seen fit to actually recite all the properties, but simply refers to "78 Wattle Road, Hawthorn".

153. I do not accept that the evidence referred to by Counsel for the Applicant could be properly described as irrelevant or inadmissible having regard to the authorities referred to in this judgment. Indeed as I understood it the basis upon which it is claimed the material is inadmissible was relevance and in my view according to the authorities to which reference has been made the material is clearly relevant. In particular I rely upon the decision of the Court in Hyhonie.

154. It is also noteworthy that reference is made to the Richardson Trust and somehow seeks to assert that the Bankrupt has declared, without notifying Ms Baxter as trustee of the Richardson Trust, that Ms Baxter holds the trust estate for the benefit of the "Richardson Trust and its beneficiaries, the children of the trustee". There is no evidence that the December document was ever communicated to the beneficiaries and certainly there is evidence that it was never communicated to Ms Baxter. The December document is confusing as it is not clear to me in recital 3 that the reference is meant to be a reference to the Bankrupt, having agreed at all relevant times to act as trustee of the trust. It is also not clear as to what the "terms set out" are meant to refer to, other than the terms of the Richardson Trust where indeed Ms Baxter is the trustee.

155. As I indicated during the course of the hearing, the December document is vague and hopelessly drafted. So much was conceded by Counsel for the Bankrupt. In those circumstances, having regard to the relevant authorities, it is neither appropriate, nor desirable for a Court in Equity to seek to interpret the document in the manner suggested in submissions by Counsel for the Bankrupt.

156. I note and apply the principles set out by Weinberg J in Marchesi, referred to earlier in this judgment, and in particular His Honour's reference to the principles arsing from Milroy v Lord. Whilst Counsel for the Bankrupt has sought to characterise the December document as not being a gift, but rather a declaration of trust, in my view the vague contents of the document analysed in part in my reasoning and in further detail which I accept in Counsel for the Applicant's submissions, make the task of characterising the document extremely difficult. To the extent that it may be characterised as a purported gift, I accept the principles set out in Milroy v Lord that there is "not equity in this court to perfect an imperfect gift". In this case, the Bankrupt has done nothing to transfer the property or even bring to the notice of the beneficiaries or the trustee of the Richardson Trust the existence of the December document.

157. In the present case, the Bankrupt, far from doing all that is necessary to place the vesting of legal title within the control of the donee and beyond the recall or intervention of the donor, has in fact continued to control the properties, claiming rent and relying upon deductions for the maintenance of the properties. As indicated earlier, the Bankrupt has otherwise conducted herself in a manner which I conclude could properly be regarded as in fact not vesting legal title within the control of the donee, but rather retaining control with the Bankrupt (see Corin v Patton at 502).

158. In my view the legal and beneficial ownership of the properties on the material before me and accepting the submissions of the Applicant has, at all times, remained in the hands of the Bankrupt. It follows, therefore, that as a result of the bankruptcy the title in the properties should pass to the Applicant pursuant to s.58 of the Bankruptcy Act. It is appropriate to grant the declaration sought and for the trustee in bankruptcy to sell one or more of the properties to pay creditors and meet the trustee's fees and disbursements.

159. In the present case it should be noted that the Bankrupt is a solicitor and I do not accept the suggestion made on her behalf, in the absence of clear evidence, that she has somehow been misled in relation to the legal effect and impact of the December document. Rather, I accept that the Bankrupt has conducted herself in a manner where it appears to be common ground she has denied the declaration of trust in subsequent proceedings and has done so to suit what she perceived as being an outcome in those other proceedings, namely establishing solvency. I do not rely on that conduct, nevertheless, to determine whether a valid trust was created on 20 December 2000, but rather find, as I have found, that that conduct is not consistent with evidence of an intention to create a trust at the alleged time.

160. It follows for the reasons given that the Applicant is entitled to the declaration sought in the application and an order for costs.

161. I should add that throughout the course of submissions both Counsel referred to the question of onus proof in relation to the December document. Based on the authorities to which reference has been made, it is my concluded view that it is the Bankrupt who bears the onus and it is not sufficient for a photocopy of a document to simply be relied upon without contemporaneous evidence concerning its creation, nor indeed production of the original for the Applicant to then somehow assume the onus of disproving the intention of the document. Likewise, it is not a question in the present case of any estoppel applying to the applicant merely by the production and correspondence of a photocopy of the December document. The December document, if it is to have any meaning at all, would have a meaning attributed to it in equity as submitted by Counsel for the Bankrupt. The conduct of the Bankrupt who, as I have indicated is a solicitor, by disavowing the existence of the December 2000 document and conducting herself in a manner in consistent with any purported intention to transfer her interest in the property to her children as beneficiary of the Richardson Trust is conduct of a kind which I further find is sufficient for the court to conclude that the Bankrupt does not come to this Court in Equity with clean hands. Accordingly, the Bankrupt should not benefit from that conduct and nor, in the circumstances, should she receive the benefit of the application of equitable principles where the court is not able to undertake a clear and valid interpretation of what I regard as being an ambiguous and vague document.

162. As indicated it follows that orders will be made of the kind sought by the Applicant with costs.

Lofthouse v Baxter & Anor

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