Conclusions
41 The main issue to be resolved in this proceeding is whether the "gift" to the family trust in 1987 was "perfected" in accordance with the principles established by the High Court in Corin v Patton. In other words, did the bankrupt do all that was necessary to arm the donee with the capacity to register the titles in the name of Optquest Pty Ltd, the trustee of the family trust?
42 That question can best be answered by considering the position of the mortgagees of the various properties at the time of the supposed gift. There is no evidence whatever that consents to the transfers were obtained from any of the mortgagees. The transfers executed in 1987 bore no endorsement by the mortgagees. The evidence goes no further than to establish that correspondence passed between Mr Dwyer and one mortgagee, the Bendigo Building Society, regarding what one might infer concerned the obtaining of such consent. That falls well short of establishing that any such consent was actually obtained.
43 Without the consent of the mortgagees of each of the properties having first been obtained, the transfers could not have been registered. Accordingly, the bankrupt would not have done all that was necessary to place the vesting of the legal title within the control of Optquest Pty Ltd, and so beyond his recall or intervention. In other words, there was nothing to prevent the bankrupt from changing his mind, and electing not to proceed with the gift.
44 In addition to the absence of evidence concerning the mortgagees' consents, I note that when the bankrupt was cross-examined he was shown a number of documents, all of them created after 1987, in which he represented to third parties that he personally was the owner of each of the properties. A number of these documents were loan applications to various banks and other financial institutions. There were also statements made by the bankrupt to various local government bodies, and to VCAT, to the same effect.
45 The bankrupt agreed that he had made these representations, but claimed that he had done so only because lenders would not have been prepared to provide funds had they known that the properties belonged to a family trust. He described one of the loan applications as a "silly document", which he claimed was never intended to be taken seriously. That does not explain why the same representations were made to local government bodies, and to VCAT as well.
46 It appears that the first time anyone who has dealt with the bankrupt in relation to his various business ventures was ever told that these properties were not his own, but belonged to the family trust, was after the sequestration order was made. Neither his former solicitors (Tassiopoulous Lambros), nor Glenvill Homes, were ever told that the properties with which they were directly concerned were not the bankrupt's own properties. Indeed, as indicated, VCAT proceeded upon the same assumption. The bankrupt's explanation for that state of affairs was simple. These people did not need to know who actually owned the properties, and what they did not need to know, he did not tell them.
47 The bankrupt was a witness who presented as something of an enigma. He repeatedly stated that it was acceptable, in his view, to lie to lending institutions about his ownership of various assets, including the three properties in question, if he needed money, and telling lies was the only way to obtain it. He was warned repeatedly that his answers might have a tendency to incriminate him. On some occasions, he took heed of those warnings and declined to answer questions that were put to him. I of course do not take his exercise of the privilege against self-incrimination into account in my assessment of his evidence.
48 At the same time, there was something disarmingly candid about the bankrupt. He seemed genuinely affronted at the suggestion, initially made by the applicant, but later specifically withdrawn, that the family trust was a sham, and that the documents regarding its creation had been fabricated. Mr Dwyer's evidence, after he was called by the bankrupt, put an end to that limb of the applicant's case.
49 In any event, the bankrupt's somewhat cavalier attitude towards prospective lenders is of little consequence in resolving this proceeding. The plain fact is that, according to the principles laid down in Corin v Patton, whatever may have been the bankrupt's intent in 1987, he did not do enough to perfect the gift of the properties to the family trust.
50 I accept that the bankrupt set out to establish a family trust, and to transfer ownership of the properties to that trust. However, the evidence shows that mortgage consents were not obtained. There were no endorsements by the mortgagees on the transfers, as would have been required before the transfers could be registered. In addition, stamp duty was not paid, though this obligation ordinarily rests upon the transferee, rather than the transferor.
51 The bankrupt was well aware, within a few weeks of executing the transfers, that stamp duty had not been paid. He took no steps in relation to that matter, and made no complaint to the Law Institute regarding Mr Dwyer's conduct. I infer, on the basis of the letter sent to him by Mr Dwyer on 1 March 1988, that he was aware, at least by that date, that further steps needed to be taken in relation to procuring the mortgagees' consents to the transfers. Therefore, to the extent that it may be relevant, the bankrupt cannot claim ignorance of that fact in order to overcome the difficulty that the gift was not perfected.
52 It seems to me that the bankrupt subsequently used the fact that the transfers had not been registered to his own advantage by claming ownership of the properties in various loan applications. It may be that he did not much care whether the properties formally belonged to the family trust or not. He may have regarded much of the "paperwork" as having been completed. However, the question whether a gift has been perfected in equity must be determined by objective, not subjective considerations.
53 A number of events occurred after 1987 which bear some discussion. In 1995, Optquest Pty Ltd was deregistered, and the bankrupt himself was made trustee of the family trust. Whatever Optquest Pty Ltd purported to do with any interest it may have had in the properties in question is, of course, irrelevant if the original gift to the family trust failed. Optquest Pty Ltd had no interest in any of the properties that it could pass to the bankrupt in his capacity as trustee of the family trust. There is nothing to indicate that the bankrupt did anything in 1995, or afterwards, to pass title from himself "to himself in his capacity as trustee of the family trust". Indeed, on his own case, he believed that the properties already belonged to the family trust, and had done so since 1987.
54 In 2001, the bankrupt discharged each of the mortgages, and took possession of the duplicate certificates of title relating to each of the properties. However, there is nothing to indicate that he paid out the mortgages as part of any plan, at that stage, to convert his legal and beneficial title in the properties to a legal title held on trust for the beneficiaries of the family trust. As I understand it, the titles office would not register a declaration of trust not involving a change in the registered proprietor. Of course, the bankrupt's case has always been that the gifts were perfected in 1987. He must stand or fall by that case. The attempt by Optquest Pty Ltd, in 1995, to transfer the properties to the bankrupt as trustee of the family trust was of no effect because Optquest Pty Ltd had no interest, legal or beneficial, in the properties. By 2001, when the mortgages were discharged, Optquest Pty Ltd, the designated transferee in 1987, had long been deregistered. It was no longer in any position to transfer the properties to anyone.
55 The bankrupt argued that he could overcome any technical defects associated with the gift in 1987 by the simple expedient of taking into account the fact that the duplicate certificates of title fell into his hands in 2001. That argument is plainly misconceived. The intention in 1987 was to make a gift of the land to Optquest Pty Ltd, on behalf of the family trust. As I have found, that gift failed. There is no evidence that the bankrupt intended to make a gift of those properties to the family trust in 2001. All that he can point to is the fact that the duplicate certificates came into his possession after the mortgages were discharged. That would obviate the need for any mortgagee consents, but not perfect a gift that had not been perfected in 1987.
56 In addition, the bankrupt contended that, in late 2004, he obtained duty assessments from the State Revenue Office ("the SRO") on the 1987 transfers. He asserted that in April 2006, shortly before this proceeding commenced, the duty assessed had been paid. Although not strictly in evidence, I did have several documents marked for identification which suggested that the SRO had indeed assessed duty on the 1987 transfers, and that a cheque had been made out to the SRO by the bankrupt's wife for an amount of $6,614.00. The assessments identified the party liable to pay duty as "Opiquest Proprietary Ltd" (sic).
57 Even if duty has been paid on the 1987 transfers, nearly 20 years after the transfers were executed, this would not perfect the gift. The duty has been assessed on a transfer to a company that is now deregistered. The bankrupt's wife has purportedly paid stamp duty on a transaction involving an entity that is no longer capable of being trustee of the family trust, because it no longer exists.
58 Accordingly, legal and beneficial ownership of the three properties remained at all times in the hands of the bankrupt. By virtue of his bankruptcy, title in those properties passes to his trustee in bankruptcy (see s 58 of the Bankruptcy Act 1966 (Cth)). The trustee in bankruptcy can sell one or more of those properties to recover sufficient funds to enable creditors whose proofs have been admitted to be paid, and to meet the trustee's own fees and disbursements.
59 It is unnecessary to deal with the alternative case advanced on behalf of the applicant. Put simply, this was that if the properties had been gifted to the family trust, the bankrupt had a right of indemnity from the trust in relation to expenses which he had incurred in relation to the properties, and that this right of indemnity passed to the trustee.
60 I will, for completeness, say something briefly about two additional matters raised by the bankrupt. These are his claims of estoppel and adverse possession.
61 The claim of estoppel was essentially raised only in answer to the applicant's alternative case. Accordingly, it need not be addressed.
62 The claim of adverse possession requires the trustee of the family trust (now the bankrupt's wife) to establish possession of the properties, to the exclusion of all others, for the requisite statutory period. Logically, that must mean exclusion of the bankrupt himself over that period. The evidence does not support that contention. Indeed, it seems as though the bankrupt never differentiated, while he was trustee of the family trust, between his own right to go on to these properties (one of which he actually occupies) and his right to do so as trustee.
63 A claim of adverse possession brought without any evidence to support it cannot hope to succeed. It cannot defeat the applicant's claim, which is derived by statute through the bankrupt, unless it would also have defeated any claim that the bankrupt might have.
64 It is a sad feature of this case that two relatively small debts, both of which the bankrupt could easily have met, have now escalated through the additional costs of litigation (and will escalate further by reason of the costs of administering the bankrupt's estate), into a very substantial amount.
65 The bankrupt insists that he should never have been made bankrupt. He has attempted repeatedly to re-litigate that issue. Though his challenge to his bankruptcy has failed at every stage, both in this Court and elsewhere, he seems determined to pursue his cause, as he sees it. Perhaps the only saving grace is that the three properties in question, which will now be vested in the applicant, seem to be worth a great deal more than the value of the debts that have been admitted to proof. The bankruptcy, once sufficient assets are sold, can easily be brought to an end, and quickly.
66 The applicant did not seek an order for costs in this proceeding. That position was made explicit by the applicant's counsel at the hearing. Accordingly, I will make no order as to costs.
I certify that the preceding sixty-six (66) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Weinberg.