Micheletto (Trustee) v Chen, in the matter of Chen

1. If the respondents fail to comply with paragraph 1 above, a writ of possession shall issue in the applicants' favour immediately.
2. The applicants be appointed as trustees for the sale of the Property, with all the obligations and privileges that relate to that appointment, including:

(a) executing all documents, and taking all necessary or appropriate steps on behalf of the respondents in relation to the sale of the Property; and

(b) determining the price at which the Property is to be sold, and the method of sale.

1. Upon completion of the sale of the Property, the proceeds of sale be distributed in the following manner and priority:

(a) first, payment of such amount as is necessary to discharge any mortgage or charge (in order of priority) registered on the title of the Property and any loan/s secured by that mortgage registered prior to the applicants' appointment as trustees over the Property such amounts to be debited as appropriate against:

(i) the applicants' portion; or

(ii) the applicants' portion and the second respondent's portion, pro rata.

(b) second, payment of all statutory levies, rates and charges payable on settlement of the sale of the Property, and legal expenses of the sale and transfer of the Property, such amounts to be debited pro rata against the applicants' portion and the second respondent's portion;

(c) third, the remaining balance of the second respondent's portion to the second respondent;

(d) fourth, the agent's commission and advertising expenses;

(e) fifth, remuneration, costs and expenses of the applicants incurred in acting as trustees for sale of the Property;

(f) finally, the balance to the applicants.

Where for the purposes of giving effect to paragraph 4 of these Orders, the applicants' portion is defined to be 90% of the gross proceeds of sale of the Property and the second respondent's portion is defined to be 10% of the gross proceeds of sale of the Property.

1. The respondents pay the applicants' costs of this proceeding on a party and party basis, to be assessed in default of agreement.
2. The applicants' costs of this application are otherwise deemed to be proper costs of administering the first respondent's bankrupt estate.
3. The applicants be at liberty to seek the direction of the Court on any matter arising from their appointment or from this Order.

Note: The form of the order is subject to the entry in the Court's records.

Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 24.04(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2025 (Cth)), or to record a variation to the order pursuant to r 24.04 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2025 (Cth).

1. Mr Fabian Kane Micheletto and Mr Michael Caraffa (the Trustees) were appointed on 11 April 2024 to administer the bankrupt estate of the first respondent, Mr Jason Chen (the bankrupt).
2. On 28 November 2025, the Trustees lodged an originating application by which they seek relief directed at a property located at 47 Corhampton Road, Balwyn North, Victoria (the Property). In particular, they seek orders for vacant possession of the Property and orders that would authorise its sale. They seek a declaration that the Property vested in the Trustees as to nine of ten equal shares, which proportion they say reflects the position in law and in equity.
3. The relief is opposed by the second respondent, Ms Cecelia Yan Zhang. Ms Zhang is the bankrupt's wife, and she has a legal interest in the Property of 10%. She claims in this proceeding that her beneficial interest in the Property is more significant and that the question of her entitlement should be determined ahead of any action taken by the Trustees to deal with the Property. The attitude of the bankrupt to the orders sought by the Trustees is not known. He has not filed any document in the proceeding or taken an active role in any hearing held in connection with the matter.

1. The Trustees rely on:
   • Application lodged on 28 November 2025 and accepted for filing on 10 December 2025;
   • Affidavit of Mr Micheletto sworn and filed on 10 December 2025; and
   • Written submissions filed on 24 March 2026.
2. Ms Zhang relies on:
   • Her affidavit filed on 26 February 2026 (Zhang affidavit); and
   • Written submissions filed on 26 March 2026.
3. A second (supplementary) affidavit was filed by Ms Zhang on 26 March 2026, but she was refused leave to read and rely on it, for reasons given at the time.
4. At the substantive hearing on 27 March 2026, the Trustees were represented by Mr Bevan of counsel. Ms Zhang represented herself. Neither deponent of their affidavit was required for cross-examination and the matter proceeded by way of submissions only. Ms Zhang was assisted by an interpreter in the Mandarin and English languages.

1. On 9 November 2023, the bankrupt committed an act of bankruptcy.
2. On 11 April 2024, an order was made sequestrating the estate of the bankrupt and the Trustees accepted an appointment as trustees in bankruptcy.
3. On 14 July 2025, the Trustees instructed their lawyers to issue correspondence to the respondents that:
   • confirmed that the Trustees had obtained the consent of the six holders of a security interest recorded on the title of the Property to sell the Property;
   • requested the respondents to provide access to the Property on the provision of no less than 24 hours written notice; and
   • provided 60 days' notice to vacate and deliver the keys of the Property to the Trustees.
4. On 1 August 2025, the Trustees were registered as proprietors as to nine of ten equal undivided shares of the Property. This distribution reflects what was recorded on the property search statement obtained by the Trustees, namely, that the bankrupt and Ms Zhang hold the Property as tenants in common as to nine and one share respectively.
5. On 25 August 2025, the respondents provided access to Mr Chen of Marshall White Balwyn, estate agent, for the purpose of preparing an appraisal of the Property.
6. On 12 September 2025, the Trustees gave instructions to their lawyers to send further correspondence to the respondents that noted their failure to deliver vacant possession of the Property and invited Ms Zhang to submit an offer to acquire the Trustees' interest, which the Trustees valued at between $3,150,000 and $3,420,000 (reflecting a market appraisal of between $3,500,000 to $3,800,000 for the Property).
7. On 19 September 2025, the Trustees' lawyers received correspondence from law firm Moray and Agnew which confirmed they acted for Ms Zhang, acknowledged that their client had been invited to submit a proposal to acquire the Trustees' interest and requested that the Trustees defer taking any steps towards enforcement or marketing of the Property until 24 October 2025. The correspondence noted that the Property was the family home and occupied by Ms Zhang and the respondents' two children, one of whom was in their final year of secondary school.
8. On 7 November 2025, the Trustees gave instructions to their lawyers to write to Moray and Agnew to, among other things, request that they confirm by 5 pm on 10 November 2025, that Ms Zhang had vacated the Property and to foreshadow an application for possession and sale.
9. At the time of hearing, Ms Zhang had not vacated the Property and had not made an offer to purchase the Trustees' interest in the Property.

1. Ms Zhang's case emerges principally from her affidavit which describes the following circumstances and events.
2. The Property was purchased in April 2012 for $910,000. Ms Zhang was the sole signatory as purchaser on the contract of sale. She paid 10% of the purchase price as deposit from what she describes as "funds lawfully available to me".
3. Between 2012 and 2014, the Property was leased to tenants. Ms Zhang entered into the tenancy agreement as landlord. Mortgage obligations were honoured during the period of the tenancy.
4. In 2014, the existing dwelling on the Property was demolished and reconstruction works began pursuant to a building contract that was executed by both respondents. Payments were made pursuant to the building contract.
5. Upon completion of the reconstruction project, the Property was occupied as the principal family residence.
6. Ms Zhang deposes in her affidavit that in addition to her payment of the deposit, she made contributions to the Property of two principal kinds.
7. In the first category, Ms Zhang deposes that during the demolition, construction and subsequent fit-out of the Property, she was actively involved in overseeing the works. She says that she attended the Property regularly, liaised with builders and tradespersons and was involved in decisions relating to construction progress and completion. As evidence of these contributions, Ms Zhang relies on an inspection completion document that bears her signature in acknowledgement of completion of the construction works performed on the Property.[1] It is Ms Zhang's evidence that following completion of the construction works, she continued to manage matters relating to the Property on an ongoing basis.
8. In the second category, Ms Zhang deposes that prior to her husband's bankruptcy, mortgage payments for the Property were made from a joint account held in the names of both respondents. The mortgage facility was established upon the acquisition of the Property and remained in place throughout the respondents' ownership. Following the first respondent's bankruptcy, Ms Zhang said that she paid the mortgage payments for the Property from a personal account held in her name. As evidence of these mortgage payments, Ms Zhang relies on a series of bank statements that span the date range 30 November 2024 to 29 November 2025.[2]
9. Ms Zhang submitted that having regard to all of the matters described above, the Court should be satisfied that she holds a "substantial equitable and beneficial interest" in the Property, well in excess of the interest recognised by the Trustees. Ms Zhang submits that her entitlement to an enlarged interest in the Property reflects the following "established equitable principles":
   • Beneficial interests in property are to be determined having regard to the parties' contributions;
   • The Court may recognise and adjust interests where it would be unjust or unconscionable not to do so;
   • Contributions include both financial and non-financial contributions, including the care of children and the management of household and property affairs; and
   • The Property is a family home and is directly connected to the day-to-day living arrangements and welfare of the children.
10. Ms Zhang is critical of the failure to the Trustees to put on further affidavit evidence (beyond the affidavit filed on 26 February 2026) and says that in the absence of any further evidence, her sworn evidence has not been displaced.
11. Ms Zhang submits that the Trustees have not made comparable contributions to the Property following bankruptcy, including because they have not been involved in the management, construction or maintenance of the Property or otherwise made any contribution to decisions affecting the Property.
12. Ms Zhang submits that the Court should determine that her interest in the Property is no less than 70% and restrain any sale or disposition of the Property until such determination is made. Alternatively, Ms Zhang should be given the opportunity to acquire the Trustees' interest, presumably in a proportion that reflects Ms Zhang's case for an enlarged interest.
13. When invited to make oral submissions at the hearing, Ms Zhang asked the Court to take account of her role as homemaker for ten years, looking after two children, as well providing administrative assistance to her husband's business.
14. Ms Zhang submitted that if the Court decided ultimately to make orders requiring the sale of the Property those orders should provide to her what would in effect be a first right of refusal to purchase the Property. She requested also that she be able to manage the sale process because her knowledge of the Property would allow its value to be maximized through informed advertising and promotion.

1. The Trustees press for a declaration that the bankrupt was, at the date of his bankruptcy, a joint registered and beneficial owner in fee simple of nine of ten equal shares in the Property. They continue to press for orders for vacant possession of the Property and orders that would facilitate its timely sale with distribution of sale proceeds in proportions that reflect the declaratory relief sought, after accounting for sale costs and discharge of any mortgage or statutory charge or levy.
2. The Trustees acknowledge that Ms Zhang has made representations concerning contributions made by her to the Property.
3. The Trustees do not accept that the contributions identified by Ms Zhang support a claim for an enlarged interest in the Property. They submit it is notable that Ms Zhang does not depose that she made any further contribution to the purchase price beyond the deposit, her personal income or assets were the source of any mortgage repayments, or that she made any payments under the construction contract.
4. The Trustees submit that the evidence relied upon by Ms Zhang falls short of establishing an entitlement under either a resulting or constructive trust.
5. As to the resulting trust analysis, the Trustees acknowledge that where two parties each contribute part of the purchase price, there is a presumption that each party takes a beneficial interest in the property as tenants in common in shares that are proportionate to their respective contributions (referring to Vlahos v Vlahos [2017] VSCA 166 at [55]). They submit that in this case, there is no evidence that the conveyance of the Property did not reflect the respective contributions of the respondents so that no resulting trust can arise.
6. As to the constructive trust analysis, the Trustees acknowledge that a joint endeavour constructive trust may be imposed where the assertion of legal title by one party amounts to an unconscionable denial of a beneficial interest to another (referring to Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137). They submit that the imposition of this construct operates to protect the equitable interest that arises. The Trustees submit that authorities such as Hatziminas v Hatziminas [2024] VSC 513 at [86] establish that before a constructive trust arises, the Court must be satisfied that:

(a) The parties shared a joint endeavour or relationship in which effort and expenditure were shared;

(b) The substratum of the joint endeavour or relationship is removed without blame; and

(c) It is unconscionable for one party to retain as against the other party contributions made to the joint endeavour.

1. The Trustees acknowledge that contributions are not limited to direct financial contributions but can comprehend contributions in the context of the whole relationship which were "directed to the acquisition and maintenance of the assets in respect of which the plaintiff claims an interest under the constructive trust" (referring to Cressy v Johnson (No 3) [2009] VSC 52 at [197]).
2. The Trustees submit however, that when evaluated, the matters identified by Ms Zhang as supporting an enlarged entitlement to the Property, do not constitute evidence of valuable contributions to the acquisition, maintenance or improvement of the Property which would make it unconscionable for the Trustees (standing in the shoes of the bankrupt) to assert their full legal title.
3. The Trustees submit that there is no evidence of any financial contribution beyond the payment of the deposit, which they contend is reflected in the proportionate split of the legal interest to the Property as between the first and second respondent. The Trustees note that where there is evidence from Ms Zhang that it was a deliberate and informed choice made by the respondents to structure the legal ownership of the Property in the manner that they did, so as to take advantage of negative gearing benefits during the period that the Property was tenanted, this is a further reason not to depart from the arrangement.
4. The Trustees submit that insofar as Ms Zhang relies on her involvement in overseeing the construction works, her evidence on this topic is truncated and lacking in detail, including as to the duration of this involvement, and its nature and extent. The Trustees submit that it would not be appropriate to make any adjustment to legal interests on the strength of this evidence.
5. As far as Ms Zhang deposed to having made repayments of the mortgage following her husband's bankruptcy, the Trustees submit that on analysis, the bank statements produced by Ms Zhang appear to show payments being made to two different loan accounts across the period December 2024 to August 2025. Over this period, payments to each loan account were $25,136 and $48,615. It was unclear which payments were referable to the mortgage over the Property.
6. The Trustees acknowledge that s 233(2)(c) of the Property Law Act 1958 (Vic) permits an adjustment to the distribution of the proceeds of sale of property to account for a payment by a co-owner of more than their proportionate share of mortgage repayments. Section 233(2)(e) of the Property Law Act makes provision for a co-owner who has occupied the land to pay an amount equivalent to rent to a co-owner who did not occupy the land.
7. The Trustees submit that in circumstances where Ms Zhang has occupied the Property for the past two years since the bankruptcy of her husband, her contribution of mortgage payments for the lesser period of nine months has been more than adequately compensated by her enjoyment of the Property. In essence, there has been an equalisation of contribution and benefit, and no adjustment should be made on account of the mortgage payments.
8. The Trustees acknowledge Ms Zhang's desire to retain the Property but do not consent to any order that would give Ms Zhang a right of first refusal for its purchase. They note instead that she would be entitled to bid at any auction. They would be concerned, having regard to the history of the bankruptcy and lack of cooperation from the respondents in relation to the Property that they would be ill advised to agree to an order that would allow Ms Zhang to participate in the sale and marketing process for the Property.

1. The Trustees rely upon a number of different provisions of the Bankruptcy Act 1966 (Cth), namely, ss 27, and 30(1)(b), s 79 of the **Judiciary Act** 1903 (Cth) and ss 228(1) and 228(2)(a) of the Property Law Act as the sources of the Court's power to make orders, including facultative orders, for the sale of the Property.
2. The relevant provisions of the Bankruptcy Act are as follows:

(1) The Federal Court and the Federal Circuit and Family Court of Australia (Division 2) have concurrent jurisdiction in bankruptcy, and that jurisdiction is exclusive of the jurisdiction of all courts other than:

...

30 General powers of Courts in bankruptcy

(1) The Court:

(a) has full power to decide all questions, whether of law or of fact, in any case of bankruptcy or any matters under Part IX, X or XI coming within the cognizance of the Court; and

(b) may make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court consider necessary for the purposes of carrying out or giving effect to this Act in any such case or matter.

1. Section 79(1) of the Judiciary Act provides that:

The laws of each State or Territory, including the laws relating to procedure, evidence, and the competency of witnesses, shall, except as otherwise provided by the Constitution or the laws of the Commonwealth, be binding on all Courts exercising federal jurisdiction in that State or Territory in all cases to whey they are applicable.

1. Section 228 of the Property Law Act provides relevantly that:

(1) In any proceeding under this Division, VCAT may make any order it thinks fit to ensure that a just and fair sale or division of land or goods occurs.

(2) Without limiting VCAT's powers, it may order -

(a) the sale of the land or goods and the division of the proceeds of sale among the co-owners;

1. The Court's task is to quell the controversy between the parties and to that end it has jurisdiction under the Bankruptcy Act to deal with issues arising under that Act as well as accrued jurisdiction to determine those aspects of the matter that involve claims for relief under State laws. When a cognisable application to a court exercising federal jurisdiction, including an application engaging the accrued jurisdiction, seeks relief under a State law, s 79 of the Judiciary Act picks up that State law and applies it as a surrogate federal law, thereby enabling that court to provide remedies otherwise afforded only under State law in the exercise of State jurisdiction: Coshott v Prentice (2014) 221 FCR 450; [2014] FCAFC 88 at 475 [111]- [113].
2. In this matter, which is concerned with the Trustees' discharge of their duties under the Bankruptcy Act, the Court's accrued jurisdiction and s 79 of the Judiciary Act operate to empower it to make orders under s 228 of the Property Law Act, notwithstanding the Bankruptcy Act refers to VCAT and not to it: Coshott v Prentice at 475 [113], 476 [116] and 477 [120]; Pekar v Holden (Trustee) [2017] FCA 596 at [46]- [47].

1. It is not difficult to feel sympathy for the position that the second respondent, Ms Zhang, finds herself in. If the Trustees are successful in their application, she and her family members will be required to vacate the respondents' family home, and it will be offered for sale to the public. However, this reality does not alter the law that the Court is required to apply or the persuasive onus of proof that Ms Zhang is required to discharge.
2. Ms Zhang presented as a sympathetic litigant who stated her case plainly and without embellishment. The difficulty she must confront however is that her case, and more particularly the evidence led in its support, was short on detail of the kind required to establish a constructive trust in her favour.
3. Ms Zhang's case was based principally on non-financial contributions, which the authorities recognise can, in appropriate circumstances, support the imposition of a constructive trust. Her case, regrettably, suffers from a paucity of detail. Starting with the claim that Ms Zhang oversaw the work associated with the construction of a new dwelling on the Property, there has been no attempt to explain the nature, extent or regularity of any commitment that might be comprehended by this category of contribution and how, importantly, it could be said to have contributed materially to the improvement of the Property.
4. As far as Ms Zhang asserts that she has been involved post construction, with the ongoing management of the Property, her evidence is similarly characterised by a lack of detail. While it is entirely plausible that because the Property serves as the respondents' family home, Ms Zhang has been involved in its upkeep. However, there is insufficient evidence to satisfy me that any involvement transcends what might be described as a contribution to the material wellbeing of the parties to the relationship (and their children), which the authorities also make plain constitutes an insufficient basis for the imposition of a constructive trust. It is to be recalled that the remedy of a constructive trust is not a response by equity to a perceived unfairness where, on the termination of a personal relationship (or in this case, the bankruptcy of the first respondent and interposition of the Trustees) the legal arrangements of the parties are said not to reflect the respective commitment and contributions each made to the relationship. There must be a correlation that is based firmly in evidence of any contribution to the acquisition, maintenance or improvement of the subject property. Evidence of such a relationship is absent in this case.
5. As far as there is evidence that Ms Zhang made payments into the mortgage accounts for the Property, I accept the submissions of the Trustees that these contributions do not defray the benefit enjoyed by Ms Zhang (and her family) through the use and occupation of the Property from the date of the first respondent's bankruptcy up until the present day. There is no basis to make an adjustment of funds in Ms Zhang's favour under the mechanisms available under the Property Law Act.
6. I consider in all of these circumstances that it is appropriate that I make a declaration and orders in substantially the terms sought by the Trustees. I do not consider it appropriate to create a separate entitlement for Ms Zhang to purchase the Property. There is no restriction on her participating in an auction process, and I note that to date, no offer to purchase has been forthcoming. Similarly, I am not persuaded that it would be appropriate or prudent to involve Ms Zhang in the sale or marketing process for the Property. Ms Zhang is no doubt well acquainted with the Property. However, what is now required is a dispassionate and expedient approach to its marketing and sale that will most likely occur if the process is managed by the Trustees who assume obligations under the Bankruptcy Act to administer the estate as efficiently as possible and to exercise powers and perform functions in a commercially sound way: ss 19(1)(j) and 19(1)(k).

I certify that the preceding fifty-six (56) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Symons.