Mayne v Public Trustee [1945] HCA 38

Mayne v Public Trustee [1945] HCA 38 - HCA 1945 case summary — Zoe

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the bankruptcy did was to entitle the official assignee to receive the interest of the bankrupt whilst he remained a bankrupt and until his debts were paid. The moneys were received by the bankrupt in respect of his interest under the will; they were received as his own moneys and not as trust moneys. The fact that he received those moneys as his own did not make him an express trustee because he was a bankrupt. He received those moneys in his own right and it was his duty to account therefor to the official assignee. His failure to perform that duty is not a matter which gives rise to an express trusteeship on the part of the bankrupt, but is merely a failure to per- form a duty. The moneys so received by the bankrupt cannot be identified or traced and the only action available to the official assignee was one for money had and received by the bankrupt. The bankrupt having received and retained the moneys was not an express trustee, and it does not follow merely because of those facts that the bankrupt may not well have been entitled to the moneys. In paying the moneys to the bankrupt the trustees under the will had not themselves committed any wrong. The onus was on the appellant to establish that the bankrupt was, in the circumstances, created an express or direct trustee and the mere facts that there had been a bankruptcy, that he had been discharged, and, in the meantime and after his discharge he had received certain moneys to which the official assignee was entitled would not constitute the bankrupt an express trustee. The principle involved is not to be found in Soar v. Ashwell (1), which dealt only with the case of moneys being received by a person as moneys upon a trust. The mere fact that all the pro- perty of the bankrupt has vested in the official assignee does not make express trustees all persons who may hold it on the bankruptcy. So far as the bare receipt of the moneys is concerned, the facts show that the bankrupt received them properly and lawfully. It is not to be inferred that merely because a bankrupt has received moneys in the circumstances shown he is not entitled to retain those moneys. The conduct of the bankrupt in retaining the moneys should not be assumed to be wrongful. There is not any authority which creates express trusteeship in a person who holds property to which the official assignee is entitled.

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The purpose of the notice of motion was to recover this sum of £942 13s, 3d. from the respondent as administrator of the estate of the bankrupt. The learned Judge in Bankruptcy held that the proceed- ings were in the nature of an action for money had and received so that the respondent was entitled to rely on the Statute of Limitations, and that the appellant could therefore only recover payments of income made to the bankrupt within six years of the filing of the notice of motion. These payments totalled the above sum of £150 9s. 7d. The only ground which has been argued on the appeal is that his Honour was wrong in so holding and that he should have ordered the respondent to pay the whole of the sum of £942 13s. 3d. to the appellant. The case made for the appellant was that, since the effect of the sequestration order was to vest the life estate in the official assignee, the bankrupt ceased to be a cestui que trust under the trusts of the will, his place being taken by the official assignee, so that when the bankrupt received payments from time to time from the trustees of the will he received moneys which were to his knowledge impressed with an express trust in favour of the official assignee. We were referred to Soar v. Ashwell (1); In re Divon; Heynes v. Dizon (2); In re Eyre-Williams ; Williams v. Williams (3); In re Blake; Re Minahan's Petition of Right (4); and it was contended that the receipt of the moneys by the bankrupt constituted him a constructive trustee of the property for the official assignee, and that the circumstances were such that, when called upon to account for the moneys, he, and therefore his personal representative, could not avail himself of the lapse of time as a defence. As Dizon J. pointed out in Cohen v. Cohen (5), the Statute of Limitations, by its terms, does not operate directly on equitable remedies, but such remedies are barred in courts of equity by analogy to the statute. He said : - " The analogy is found in the case of constructive trusts, where the equity is fastened upon the trustee not because he intended to become the fiduciary of property but because of the character of his dealings and in spite of his intention to take the property for himself. But

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with as an express, and not merely a constructive, trustee of such property. His possession of such property is never in virtue of any tight of his own, but is coloured from the first by the trust and confidence in virtue of which he received it. He never can discharge himself except by restoring the property, which he never has held otherwise than upon this confidence . . . and this confidence or trust imposes on him the liability of an express or direct trustee" (1). In Hovenden y. Lord Annesley (2), Lord Redesdale said, with respect to the operation of the Statute of Limitations upon cases of trust in equity, that the distinction is, if the trust be constituted by an act of the parties, the possession of the trustee is the possession of the cestui que trust, and no length of such possession will be a bar; but if a party is to be constituted a trustee by the decree of a court of equity founded on fraud, or the like, his possession is adverse, and the Statute of Limitations will run from the time that the circumstances of the fraud were discovered: Cf. Macintosh v. Macintosh (3) ; Lawrence v. Birmingham (4). This distinction between the cases where property is received by a person under such circumstances that his possession is considered in equity to be the possession of the cestuis que trust, and where property is received by a person under circumstances which create a constructive trust, was clearly stated by Maugham J. in In re Blake (5), when he said that " constructive trusts are of various kinds, and without attempting a classification I may point out that there is a wide difference from the point of view of the effect of lapse of time between cases where the constructive trustee must be taken to have knowingly assumed the obligations of a trustee and those where the relationship is due merely to equitable principles" (6). Soar v. Ashwell (7), therefore, would appear to be an authority that a person who for some purposes may be described as a constructive trustee is only placed in the same category as an express trustee in relation to lapse of time as a defence when he accepts property in the circumstances mentioned in the second proposition in Cohen v. Cohen (8), and then proceeds to dispose of it in a manner inconsistent with express trusts of the property of which he has knowledge.

At a glance

Court

Decision date

Before

Source

Judgment (57 paragraphs)