Official Trustee in Bankruptcy v Timms

Federal Court of Australia|2001-02-09|Before: Mansfield J

background 1 The first respondent Rowan Timms ("Mr Timms") was declared bankrupt on 3 June 1992 and was discharged from bankruptcy on 30 July 1995. The applicant is the trustee of his bankrupt estate. Mr Timms submitted that the appointment of the applicant was not proved, but I accept the evidence of Jeremy Gordon Peel ("Mr Peel") as to that fact. 2 On 22 July 1992 the applicant took possession of a Volvo semi trailer registered number SV 73AV and a car carrying trailer registered number TDC-024 ("the Volvo and the trailer") in the belief that they were the property of the respondent. The Volvo and the trailer were stored at the expense of the applicant for some time. The sum of $6,500 held in a bank account in the name of SA Freightlines was also seized. 3 Promptly upon their seizure, the second respondent Lisa Timms ("Ms Timms") as trustee for the McEwen Trust (sometimes called the McEwen Family Trust) ("the trust") on 28 July 1992 claimed that the Volvo and the trailer were the property of the trust, and not the property of the respondent. Extensive communications took place between the applicant and Ms Timms on that matter. Ultimately, on 24 April 1997, solicitors for the applicant wrote to Ms Timms in the following terms:

"My client emphatically denies the alleged unlawful confiscation of assets belonging to the McEwen Trust and further denies that the trust is entitled to any damages. I note that in your letter of 23 April 1997 you have requested the return of the prime mover and trailer. In view of Mr Timms' discharge, my client is prepared to instruct [the company holding the Volvo and the trailer] to release the Volvo prime mover and car carrying trailer to the McEwen Trust. The storage costs incurred will be met by my client. My client is further prepared to hand over the sum of $6,500 representing the fund received from the State Bank account over to you as trustee of the McEwen Trust. In returning these assets my client does not admit and continues to deny that he is liable for damages to the McEwen Trust arising from the confiscation of the assets. To the extent that proceedings are instituted against my client, those proceedings will be strenuously defended to the full extent of the law." 4 On 15 May 1997, the Official Receiver wrote to Ms Timms at SA Freightlines in the following terms:

"I hereby confirm that my agent has been instructed to deliver the Volvo prime mover and car carrying trailer to 12 Jenkins Street, Birkenhead between 3.30pm and 4.00pm tomorrow (16/5). Please have a representative available to accept delivery. I also confirm that a cheque for $6,500 has now been drawn and will be sent to your Post Office box within the next few days. It should arrive no later than 23/5/97. A further payment for interest calculated in accordance with Section 20J(4) of the Bankruptcy Act will be made as soon as possible." 5 A cheque for interest dated 21 July 1997 drawn in the sum of $2186.25 was subsequently paid to SA Freightlines. 6 I find that, to that point, the applicant suspected, but had been unable to establish, that the Volvo and the trailer were the property of the respondent at the time of his bankruptcy or during his bankruptcy. Hence, in the face of the demand by Ms Timms on behalf of the trust, the applicant transferred possession in the Volvo and the trailer to her. 7 In circumstances which are unclear, proceedings were later commenced by Barry Matthews ("Mr Matthews"), SA Marine and Salvage Pty Ltd, and Birkenhead Development Corporation Pty Ltd ("the plaintiffs") against the respondent in the Port Adelaide Magistrates Court (Civil Jurisdiction). The circumstances giving rise to that claim occurred after Mr Timms' discharge from bankruptcy. On 7 August 1997, judgment was obtained by the plaintiffs in that proceeding against Mr Timms, in the sum of $12,676.92. On 17 October 1997, a warrant of execution was issued at the request of Mr Matthews to enforce that judgment. On 4 February 1998, pursuant to that warrant, the Volvo and the trailer were seized, and subsequently on 23 March 1998 were sold at auction. The funds realised substantially exceeded that judgment debt. Immediately following the sale, Ms Timms as trustee of the trust claimed that the proceeds of sale should be paid to her, on the basis that the Volvo and the trailer were not the property of Mr Timms but were the property of the trust. That matter was separately litigated, but in the same action as the plaintiff's claim. It had a lengthy history. Ultimately on 21 December 1998 judgment was given dismissing Ms Timms' claim as trustee of the trust. The applicant learnt of her claim, and applied to be a party to that proceeding, or to intervene in it, but then withdrew that application. The applicant adopted a "watching brief" during the hearing. 8 The issue in that proceeding was the same issue as the issue confronting the applicant when considering what to do with the Volvo and the trailer during administration of Mr Timms' bankrupt estate. Ms Timms claimed that the McEwen Trust Deed was settled on 9 October 1991, that the Volvo and the trailer were subsequently acquired on behalf of the trust, that the trust registered itself as an employer both with the Australian Taxation Office and with the Workcover Corporation, and continued to operate and use the Volvo and the trailer (until they were seized by the applicant) under the name SA Freightlines, and that the trust was the owner of the business name SA Freightlines. 9 In that proceeding, the Magistrate gave judgment on 21 December 1998. He pronounced orders on 4 January 1999 in the following terms:

"1. Order that the sheriff not recognise the claim of Lisa Timms to the monies the subject of the present action. 2. Order that the sheriff on 29th January 1999 do disburse the monies the subject of the respondent's claim, less lawful expenses to [Mr Matthews'] creditors Nichols Gervasi & Co. 3. Order that [Mr Matthews] do have costs against the applicant Lisa Timms to be agreed or taxed in relation to opposing the applicant Lisa Timms' claim. 4. Order that the sheriff do hold the surplus of monies in trust pending determination by a court of competent jurisdiction in relation to lawful entitlement to that surplus between Rowan Timms and the Official Trustee in Bankruptcy." Clearly, the learned Magistrate determined that the trust had no interest in the Volvo and the trailer. The proceeds of sale were applied in satisfaction of the judgment debt and costs of the plaintiffs. The balance outstanding was regarded as being held by the Sheriff for Mr Timms or for his bankrupt estate. 10 On 17 February 1999, Ms Timms appealed from that decision to the Supreme Court of South Australia. On 31 March 1999, the applicant applied to be joined as a party to that appeal, and to adduce evidence on the hearing of the appeal. On 14 April 1999 the applicant was joined as a party to the appeal. Ms Timms unsuccessfully sought leave to appeal from that joinder order. On 17 June 1999 the appeal to the Supreme Court was dismissed. At the hearing of the appeal, counsel for the applicant indicated that he made no claim on such part of the moneys in court as might be necessary to satisfy any ultimate ruling in favour of the judgment creditors (the plaintiffs) in the Port Adelaide Magistrates Court action. The warrant of execution was in the amount of $12,985.40, so the applicant's participation in the appeal was directed to preserving his position in respect of the balance of the moneys in court, in the order of $17,000. It is not clear how the applicant could formally adopt that position. The Volvo and the trailer, if they were assets of Mr Timms at the time of his bankruptcy, vested forthwith in the applicant on 3 June 1992: s 58(1), Bankruptcy Act 1966 (Cth) ("the Act") and became property divisible amongst Mr Timms' creditors: s 116(1)(a) of the Act. In that event, Mr Matthews (who did not become a creditor of Mr Timms until after his discharge) would have no claim to those assets or to the proceeds of their sale. Perhaps the applicant recognised that, by the release of the Volvo and the trailer to Ms Timms, some form of estoppel might arise in favour of Mr Matthews against the applicant. In any event, for reasons which appear below, it is not necessary to resolve that question. 11 The learned judge on appeal said that the effect of the finding by the magistrate was that the evidence of both Mr Timms and Ms Timms that the trust was a bona fide trust to which the property in the Volvo and the trailer had been transferred was disbelieved. It is clear from the reasons of the learned magistrate that, effectively, he found that legal ownership in the Volvo and the trailer remained in Mr Timms, as did the practical day to day management of the business of SA Freightlines in which he was employed. That finding was described by the learned judge on appeal as "fully justified by the evidence".

the claim 12 This application seeks a declaration that the surplus proceeds of sale of the Volvo and the trailer personally held in the Supreme Court is the property of Mr Timms, the former bankrupt, and subject to the claims of the Sheriff of the Supreme Court and of Mr Matthews (sic, the plaintiffs), vests in the applicant pursuant to ss 58 and 116 of the Act because it was his property at the time of his bankruptcy. There is not the slightest suggestion on the evidence that the Volvo and the trailer became the property of Mr Timms after his discharge from bankruptcy. Provided the decision of the learned magistrate, as upheld on appeal, provides a proper foundation for the assertion that Ms Timms as trustee of the trust had no interest in the Volvo and the trailer, as a matter of logic the applicant's claim appears to be correct. 13 In recognition of the somewhat peculiar position of the applicant, now claiming the proceeds of sale of property said to be property of Mr Timms at the time of his bankruptcy, but which has been applied in part to discharging the liability of an independent and post-bankruptcy creditor of Mr Timms, the applicant procured the Inspector General in Bankruptcy on 1 October 1999 to undertake that, if the Court determines this application in favour of the applicant, he will cause the bankrupt estate of Mr Timms to be reimbursed from the Legal and Compensation Fund maintained by the Attorney General's Department the amount of moneys comprising all the sums paid out of the sale proceeds of the Volvo and the trailer to Mr Matthews and the Sheriff of South Australia, together with interest at the rate allowed on judgment sums pursuant to the third schedule of the Supreme Court of South Australia Rules. Those amounts are respectively $12,986.40 plus interest of $1,607.61 and costs of $1,974.09, a total of $16,568.10 paid by the Sheriff to Mr Matthews, and $749.30 fees paid to the Sheriff. The total thus proposed to be reinstated to the estate of the bankrupt under that arrangement is $17,317.40. As noted earlier, the balance of the proceeds of sale of the Volvo and the trailer are of the order of $17,000. 14 In addition, by Deed dated 12 February 1999 between the applicant and Mr Matthews, it was agreed that Mr Matthews would be entitled to $16,568.10 out of the proceeds of sale in priority to the claim of the applicant to that sum. That document recites the effect of the matters referred to in pars 1-9 of these reasons, and the fact that the applicant and Mr Matthews recognise that each has competing claims to the proceeds of sale of the Volvo and the trailer. The arrangement represented a commercial resolution of those competing claims, and was made without any admission as to the entitlement of the other party to those proceeds of sale.

the respondents' position and the course of the hearing 15 Ms Timms, who is on the evidence still one of the trustees of the trust, chose not to participate in the hearing. At some point during the course of the appeal from the learned magistrate, the evidence suggests that Mr Timms also became a trustee of the trust. 16 It is unclear what Mr Timms sought to achieve in the proceedings. At the completion of the applicant's case, he sought to submit that the applicant's claim should be dismissed on the ground that the claim was not proved or not sufficiently proved, as there was no evidence that the Volvo and the trailer formed part of his bankrupt estate. I ruled, in the exercise of my discretion, that he could not make that submission without first electing whether or not he would call evidence in the hearing: Rasomen Pty Ltd v The Shell Company of Australia Ltd (1996) 71 FCR 540, upheld on appeal at (1997) 75 FCR 216. Mr Timms then chose not to give evidence himself, nor to call any other evidence. 17 He then adopted the unhelpful position in the course of his final submissions of declining to explain what he contended should be done with the monies held by the Sheriff of the Supreme Court of South Australia. He would not tell me whether he himself now made any claim to those monies. He took the position that he was not obliged to identify, or justify, any ground of defence to the claim of the applicant which he might have, but that he was just "testing the veracity" of the applicant's claim. In a number of respects, he contended that the claim was not made out. 18 His extensive cross-examination of the principal witness for the applicant, Jeremy Gordon Peel ("Mr Peel"), also suggested that Mr Timms was embarking upon what was in reality a destructive approach to the applicant's case, rather than endeavouring to make out matters which would support some positive case on his part. Mr Peel, an Assistant Official Receiver, was cross-examined over a lengthy period. I found him to be frank and cautious. He did not make claims beyond those which documentary material available to him warranted. I have no hesitation in accepting him as a reliable witness. The cross-examination, at least in part, hinted at the suggestion that Mr Peel had not maintained the integrity of computer records taken from Mr Timms upon his bankruptcy, and even that Mr Peel had somehow selectively produced such records to the Court. No express contention to that effect was put in final submissions by Mr Timms, and I have no hesitation in accepting Mr Peel as an honest and reliable witness. Moreover, I find that he has endeavoured to put before the Court in an open and frank way all the documentary material which he regards as directly touching upon the applicant's claim. It is largely for the Court to determine what it makes of that material, in the light of all the evidence. 19 It is also convenient at this point to indicate that I also accept as honest and reliable witnesses Annette Lewis ("Ms Lewis"), Bessie Morin ("Ms Morin"), Frank Boyes ("Mr Boyes"), and William Scalzi ("Mr Scalzi"). Evidence was also given by other officers of the applicant, but it was not really challenged and it did not figure as of great importance in the final submissions. I accept that evidence also. Mr Timms' final submissions did not assert that the evidence of Ms Lewis or Ms Morin was untruthful or unreliable. 20 Because the time initially set aside for the hearing was insufficient, it was necessary to fix a further hearing date. At that point, the applicant had not closed her case, although counsel had indicated that no further evidence was proposed to be adduced. Some significant period before the resumed hearing, the applicant served upon Mr Timms affidavits of further proposed evidence. At the resumed hearing, Mr Timms objected to the receipt of that further evidence. I indicated that, as the applicant's case had not been closed, the evidence was admissible and that, even if the applicant had closed its case, I would give the applicant leave to re-open its case because that would cause no injustice to Mr Timms. He had not started his case, and suggested no injustice to him by the Court permitting that to occur. The evidence then proceeded, but again the time set aside for the hearing proved insufficient. The hearing was then further adjourned. 21 As one proposed witness was resident interstate, to ensure that the cross-examination of that witness could proceed smoothly, I directed Mr Timms to inform the applicant's solicitors of any particular documents which he might require to be available to that witness for her cross-examination. There was no suggestion that her credit was, or might be, in issue so I did not consider that that direction might unfairly impair her cross-examination. Mr Timms chose not to comply with that direction. As it happened, the solicitors for the applicant had arranged to have available to that witness a bundle of material which included any documents upon which Mr Timms wished to cross-examine her and her cross-examination proceeded smoothly. 22 Shortly before the further resumed hearing, Mr Timms sought a directions hearing. He then without notice applied for an order for general discovery on oath from the applicant. I declined to make that order. The consequence of any such order would have involved yet a further adjournment of an already prolonged matter. The oral application was not made in a timely manner. The Court, at a much earlier directions hearing on 14 December 1999 had already declined to make an order for general discovery. At that time, Mr Timms had filed and served an affidavit sworn on 20 October 1999 on the merits of the claim in reply to the applicant's initiating affidavit. That affidavit (which is not part of the evidence on the hearing of this application, but which was referred to in relation to the application for discovery) inter alia contained assertions as to the assets available in Mr Timms' bankrupt estate, as to the standing of the applicant to maintain this application, as to the adequacy of the documentation then disclosed by the applicant, and as to whether the applicant is precluded from succeeding on this application by reason of the later dealings with the Volvo and the trailer and with the proceeds of their sale, as well as to the jurisdiction of the Court to hear and determine the application. A judge of the Court, at a directions hearing on 14 December 1999, then directed that the applicant give discovery only on the matters referred to in two specified paragraphs of that affidavit. Mr Timms' application for general discovery was refused. Moreover, in the course of Mr Peel's cross-examination he had produced to Mr Timms certain folders containing printouts of material stored on directories within the computer records of Mr Timms taken by the applicant following the bankruptcy. Those folders had been available to Mr Timms for his inspection, and I saw no particular purpose in having them formally discovered. Mr Timms identified particular documents which he identified on the application for general discovery as being of particular moment. I regarded one such document, namely a master code for the entry of costing items onto the computer costing records maintained by Mr Timms as not of sufficient relevance to require its discovery. There was no real issue about the meaning of the coded entries about which evidence was to be, or had been, given. There remained one category of documents. In view of the imminence of the hearing, I did not formally order discovery of that remaining category of documents but I directed the applicant to use best endeavours to identify and produce those documents for inspection if they were held by the applicant. Counsel for the applicant reported the next day, when the hearing resumed, that the applicant did not hold those documents.

findings 23 I find that the Volvo and the trailer were acquired in November or December 1991. The Volvo was registered in the name of SA Freightlines on 5 December 1991. The business name SA Freightlines was used from 11 November 1991, although it was first registered on 3 March 1992. The person carrying on that business from 11 November 1991 was Mr Timms. So much appears from the business names extract provided by the State Business and Corporate Affairs Office (SA) printed on 21 July 1992. 24 On 10 March 1992, an application discloses that the trust applied to be the registered owner of the trailer. On the same date, the trust appears to have executed an application to be registered as the transferee owner of the Volvo. However, a statement of assets and liabilities which I find concerned Mr Timms' personal assets and liabilities indicates that the Volvo and the trailer were owned personally by him. 25 More importantly, as it is clear that the only real option as to the entities which owned the Volvo and the trailer at 3 June 1992 were Mr Timms or the trust, I find that the trust was not established on 9 October 1991 as the trust deed suggests. I find that the trust was brought into existence only on 2 April 1992, only after Mr Timms was served with the bankruptcy notice on 23 March 1992. I further find that Mr Timms procured the trust deed then to be created to generate a facade behind which the real ownership of the Volvo and the trailer was to be concealed. The consequence of these findings is that I am satisfied that the Volvo and the trailer were in fact owned by Mr Timms from late November 1991 or thereabouts, and that the documents apparently dated 10 March 1992 in which the trust appears to have sought to become registered as the owner of the Volvo and the trailer were fabricated for the purposes of putting the Volvo and the trailer beyond the reach of the creditors of Mr Timms' bankrupt estate. 26 The reasons why I find that the trust was not created until 2 April 1992, notwithstanding that the trust deed dated 9 October 1991, are relatively straightforward. They flow from my acceptance of the evidence of Ms Morin, Ms Lewis and Mr Boyes as well as the evidence of Mr Peel. 27 In 1991 and 1992, at material times, Mr Timms was a member of the accounting firm Aaron Stevens and White ("Aarons") in partnership with Paul Beresford Robertson ("Mr Robertson"). Mr Timms had also, by then, completed a law degree but had not been admitted to practice. In the course of completing that degree, he had come to know Mr Robertson, who by 1991 was also practising law under the name Beresford Robertson & Associates ("BRA") and Mr Boyes who also from April 1991 was practising law on his own account at Elizabeth. According to the statement of affairs, Mr Timms was also employed as a law clerk to BRA in 1991 and 1992. The practices of Aarons and BRA operated closely together, in the sense that to some degree they shared facilities and staff at the premises of Aarons in Peel Street in Adelaide. Mr Timms also performed accounting work for BRA. They also provided some clerical and administrative support for Mr Boyes when he required work to be done in Adelaide, and Aarons through Mr Timms also provided certain accounting services to Mr Boyes' practice. 28 As noted, the trust deed for the trust bears date 9 October 1991 and is signed by Mr Boyes as settlor and by Mr Timms as trustee. Mr Boyes does not recall signing the trust deed. He is adamant, however, and I find, that he did not draw it nor advise Mr Timms with respect to it. It was not part of his practice to do such work nor to give advice concerning such matters. He has never drawn a trust deed. Nor did he ever intend to create any trust for or on behalf of Mr Timms. From his knowledge of the relationship of Aarons and BRA, he can identify the internal reference "bra\355_pres\pres001\ad1" as indicating that the document was created by the legal firm BRA. 29 It is clear that the trust deed was first presented for stamping to the Commissioner of Stamps (SA) on 2 April 1992. It was then rejected, and represented and stamped the following day. There was then an application for the opinion of the Commissioner of Stamps (SA) dated 3 April 1992. It was expressed to be made in the name of Mr Boyes. I accept his evidence that he had no part at all in that process. Ms Lewis, who was formally employed by Aarons, worked under the direction of Mr Timms. Her duties included typing for him and delivering documents at his direction. I find that she typed the trust deed (a fact she accepted by her initials "adl" appearing on the internal reference). Ms Lewis prepared a number of trust deeds under Mr Timms' direction whilst she was employed by Aarons. Both Ms Morin and Ms Lewis confirmed that the application for opinion of the Commissioner of Stamps was prepared and signed by Ms Morin, who was Ms Lewis' immediate supervisor and also worked for Mr Timms in Aarons. I accept the evidence that Ms Morin wrote on that application the name "Frank Boyes - Barrister and Solicitor" as the applicant for the opinion. It was not uncommon for Ms Morin to prepare documents at the instruction of Mr Timms but in the name of Mr Boyes. 30 I also find that there was within the computer-stored precedents available to Mr Timms a precedent for a trust deed. It was part of the precedent records of BRA, but available also to Aarons and to Mr Timms. The evidence suggests that the penumbra between the practices of BRA and Aarons, at least in some respects, was not narrow nor clearly defined. On the whole of the evidence, I infer that the trust deed was prepared by Ms Lewis on the instructions and at the direction of Mr Timms. 31 The "screen print" records from Mr Timms' computer indicate that the precedent for the deed was "created", that is entered as a document in those records, on 19 April 1991. 32 Thereafter that precedent deed may have been worked on from time to time, for various purposes, but may still have been saved in its initial form for use as a precedent and may also have saved it in an altered form in another directory. The computer system records only the date of creation and the date of last revision. The evidence of Ms Morin also indicates that the date of last revision is the date upon which the document is last to be "saved" in a particular directory. The date of last revision need not necessarily be a date upon which the document was last altered; it could be called up and saved without being altered and then it would attract the notation that it was last revised on that date. However, as a matter of common sense, there is little point in resaving a document which has not been altered when it is available in that form anyway. 33 The trust deed bears an internal reference which cannot be traced by the applicant to a particular directory or subdirectory of the computer records of Mr Timms seized by the applicant. An identical document, but for that notation, is found in a subdirectory with which Ms Lewis was familiar. It contains a screen print indicating that the document was created on 19 April 1991, that is it was based upon that initial precedent, and was last revised on 2 April 1992. Ms Lewis' evidence accepted that that precedent document may have been revised between those dates, and that the revised date which appears represents only the last date of any revision. She indicated that the revised date would appear only because it represented a date upon which that document was altered by her in some way, and then saved at that time. There is no reason identified in her evidence why she would have resaved an unchanged document on 2 April 1992. Her evidence persuades me that the trust deed in its precise form only came into existence on 2 April 1992. Of course, prior to that date, the precedent document may have been altered and saved but in a different form or with somewhat different content. The fact that the document as now printed out corresponds exactly with the trust deed indicates, to my mind, that some alteration to that document has have been made on 2 April 1992 and that it was only after that alteration that the trust deed was produced in its precise terms. That conclusion is also consistent with other records found in the computer data of the respondent by Mr Peel. Mr Peel described how those records reveal that the precedent document was also altered on 23 January 1992, including at the time to establish a proposed trust in the name of McEwen Trust. That document provided for a settlor or proposed settlor who was not Mr Boyes. The inference which I draw is that some work had been done on that document in the process of its evolution by 23 January 1992, because it was revised and saved on that date in that form, but with a different settlor, but that the trust deed in its final form was not determined upon by 23 January 1992. There is then nothing to indicate that the proposed trust deed further evolved towards its final form until Mr Timms was served with the bankruptcy notice on 23 March 1992. Thereafter, as I have found, it only came into existence in its final form on 2 April 1992. 34 There are other indications which, in my judgment, tend to support that conclusion. It was on 2 April 1992 that the trust deed was first presented to the Commissioner of Stamps for stamping. The process of recording work chargeable to various clients involved Ms Lewis reporting to Ms Morin of the work she did each day, and of Ms Morin then keying in that information to generate the charging records. That process of recording work chargeable was in place from December 1991. Prior to that date, the evidence does not clearly indicate whether there was some different computer process for recording work and charging work, or whether it was done manually. In my view, it is significant that there is an item of work charged to the client number applicable to the trust on 2 April 1992 for fifty-three pages for "Deed of Trust" charged at the copying rate of $1.30 per sheet. The trust deed has fifty-three pages. No other document has been suggested as having been brought into existence on that date on behalf of the trust. In my view, it is a very strong inference that the document brought into existence on that date or charged on that date was the trust deed. If the trust deed had been executed on 9 October 1991, as appears on its face, it is unlikely that it would have needed to be copied on 2 April 1991, especially as the computer printout indicates that it was revised on that date, and so brought up on the computer screen on that date, and probably altered on the screen on that date. 35 Consequently in my judgment, the trust deed and the trust itself were brought into existence only on 2 April 1992. Although, in the course of the long cross-examinations of Mr Peel and Mr Boyes, Mr Timms may have suggested that the trust may have been created on 9 October 1991 by the trust deed to reflect the trust only formally prepared and executed only on 2 April 1992, there is no evidence to support any such suggestion. Mr Boyes did not, I find, settle the trust on 9 October 1991 nor indeed did he ever do so consciously. In the examinations of Mr Timms under s 81 of the Act, and in his evidence in the hearing in the Magistrates Court, Mr Timms did not assert that to have been the case. 36 It is also consistent with the evidence of Mr Scalzi that, at interview on 24 July 1992, Mr Timms told Mr Scalzi that he (Mr Timms) had acquired the Volvo from a person by the name of Marco Dimasi for $35,000, paid for by $10,000 cash and by the release or waiver of a debt of $25,000. Mr Timms did not then suggest to Mr Dimasi that the Volvo and the trailer were acquired by the trust at that time. 37 It may well be, as Mr Timms put in cross-examination of Mr Peel and Mr Boyes, and in certain of his examinations, that he intended to create a trust to preserve and secure his assets from being vulnerable to attack through him being liable for any debts of BRA (although he was not an admitted legal practitioner and so could not be a partner of that firm) or of Aarons. However, in my judgment, given the course of events, I think it is likely that any such intention was not brought to fruition until Mr Timms was served with the bankruptcy notice on 23 March 1992. 38 The consequence of that conclusion is that the Volvo and the trailer were not assets of the trust at any time from 9 October 1991, and I further find that they did not become assets of the trust at any time between its creation on 2 April 1992 and Mr Timms' bankruptcy on 3 June 1992. There is no suggestion of any transaction between 2 April 1992 and 3 June 1992 by which that might have occurred. 39 I further find, upon the evidence, that the Volvo and the trailer were acquired in late 1991 by Mr Timms and were his property at the time of his bankruptcy. They therefore vested on 3 June 1992 in the applicant: s 58(a) of the Act. Pursuant to s 116(1)(a) of the Act, they also then became property divisible amongst his creditors at that time. 40 As both Mr Timms and Ms Timms are parties to this proceeding, and as they are the trustees of the trust (Mr Timms was reappointed a trustee of the trust on 18 May 1999), those findings affect both them personally and the trust. It is not therefore necessary to consider whether, by reason of the decision of the Supreme Court of South Australia referred to in pars 11 and 12 above, there also exists an issue estoppel against the trust or against either of them in their personal capacities. That issue gives rise to interesting questions as to the nature of the "issue" decided by the Supreme Court where the appeal is by way of rehearing: see s 40 Magistrates Court Act 1991 (SA) and Rule 97.17 Supreme Court Rules (SA). The applicant was not a party to the proceedings in the Magistrates Court. Nor was Mr Timms a "party" to those proceedings in the sense that once the judgment was entered against him in favour of the plaintiffs, he did not participate as a party in the claim by Ms Timms on behalf of the trust to be entitled to the proceeds of sale of the Volvo and the trailer, although he gave evidence in the course of that hearing. He remained a nominal party in that action. He applied unsuccessfully to be joined as a party at the hearing of the appeal to the Supreme Court of South Australia after he was reappointed as a trustee of the trust. 41 The applicant tendered the transcripts of the examinations of Mr Timms under s 81 of the Act, and of his evidence during the hearing of Ms Timms' claim in the Port Adelaide Magistrates Court. I suspect that tender was in part in anticipation of Mr Timms giving evidence himself in the hearing. I do not consider that those transcripts of examination are admissible against Ms Timms, and I have not had regard to them to the extent that I have made the findings set out above against her. As they are part of the admissible evidence against Mr Timms, I have had regard to them in considering the issues of fact in relation to him. I do not consider that they present any reliable material leading to any different factual conclusions. They do not show any consistent and coherent factual thread sufficient to indicate some other version of the facts than that which I have found, as there are inconsistencies between them as well as indications of the development of a version of the facts over time which was not initially asserted. Mr Timms' claims in his evidence in the Port Adelaide Magistrates Court are also not consistent with the evidence of Mr Boyes which I have accepted without hesitation, and with the clear impact of documentary evidence which I also regard as reliable, and to convey the matters explained by Ms Lewis and by Ms Morin. 42 Mr Timms contended, however, that the applicant could not maintain the claim, even if I found (as I do) that the Volvo and the trailer were his assets at the time of his bankruptcy. He submitted that the applicant had abandoned any interest which existed in the Volvo and the trailer under s 58 of the Act by returning the Volvo and the trailer to Ms Timms as trustee for the trust on 24 April 1997. The applicant was entitled to have registered the Volvo and the trailer in the name of Official Trustee in Bankruptcy once the Volvo and the trailer were seized, but had not done so. As he put it, the applicant had abandoned any "claim of right" to those assets. 43 I reject that submission. The relevant principles are discussed in the recent judgment of Lindgren J in Australian Olympic Committee Inc v The Big Fights Inc [1999] FCA 1042 [378-386]. I have found that the Volvo and the trailer were returned to Ms Timms as trustee for the trust because the applicant was not then confident of being able to establish that the Volvo and the trailer were assets of the bankrupt estate of Mr Timms rather than of the trust. That decision was made in the face of the clear claim by Ms Timms on behalf of the trust that they were assets of the trust, and in the face of threatened legal proceedings by Ms Timms on behalf of the trust for conversion. 44 He has referred to passages in the evidence of Mr Peel, as well as to the terms of the letter of 24 April 1997 set out in par 3 above. I do not consider that those matters, either taken alone or together, demonstrate an intention on the part of the applicant to abandon the Volvo and the trailer or to abandon any claim to ownership of those assets: Moorhouse v Angus & Robertson (No 1) Pty Ltd [1981] 1 NSWLR 700 per Samuels JA at 706 ("Moorhouse"). Whether the test to determine abandonment is a subjective one or is to be judged objectively (see Moorhouse per Samuels JA at 707 and per Mahoney JA at 713; Cook v Saroukos (1989) 97 FLR 33 per Angel J at 40-41, I do not consider that the applicant abandoned the Volvo and the trailer. 45 The applicant made it clear, when the Volvo and the trailer were handed over to Ms Timms as trustee for the trust, that the reason for doing so was not an acknowledgment that those assets were not part of the bankrupt estate of Mr Timms. It was a commercial decision, made on the evidence on legal advice and in the face of a persistent claim by Ms Timms on behalf of the trust which (at that time) the applicant did not confidently consider could be disproved. That circumstance falls far short of the applicant intending permanently to abandon the claim that the Volvo and the trailer were assets of Mr Timms at the time of his bankruptcy, and the terms of the letter of 24 April 1997 fall far short of indicating on an objective basis that the applicant was abandoning any such claim. 46 The terms of the arrangement between Mr Matthews and the applicant are referred to in par 14 above. Again, it is clear that the applicant neither intended to abandon any claim to the Volvo and the trailer at that time, nor acted in a way which judged objectively demonstrated any such intention. The claim of the applicant was expressly stated, and the arrangement entered into acknowledged that ongoing claim. 47 It was unclear to me at the end of his submissions whether Mr Timms claimed also that some form of estoppel arose against the applicant. At one point in his submissions, he made it clear that he was not advancing any particular proposition before the Court in relation to the applicant's claim, other than to contend the applicant had not proved the case. To the extent that Mr Timms relies upon some form of estoppel, the claim must fail. There is no evidence that Mr Timms acted upon the circumstance of the handing over of the Volvo and the trailer to Ms Timms as trustee for the trust, in the circumstances in which that occurred, to his detriment. Nor is there any claim by Ms Timms (or by Ms Timms and Mr Timms together) as trustee for the trust that the trust did so. I am firmly of the view that there is no reason in conscience why the applicant should not be permitted to succeed in the claim, given the facts as I have found them, because Mr Timms or the trust have acted to their detriment by reason of any conduct of the applicant: see generally Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 404 per Mason CJ and Wilson J, at 413 per Brennan J, at 443 per Deane J; Commonwealth v Verwayen (1990) 170 CLR 394 at 413 per Mason CJ and 444-445 per Deane J. 48 I accordingly propose to declare that the applicant is entitled to the proceeds of sale of the Volvo and the trailer held by the Sheriff of the Supreme Court of South Australia because the Volvo and the trailer were assets of Mr Timms at the time of his bankruptcy on 3 June 1992 and then vested in the applicant under s 58(a) of the Act. I note that the creditors of the bankrupt estate of Mr Timms will not be disadvantaged by reason of certain of those proceeds of sale having been provided to Mr Matthews, a creditor of Mr Timms only after Mr Timms' discharge from bankruptcy, due to the arrangement with the Inspector General in Bankruptcy referred to in par 13 above. 49 In my judgment, the applicant should also recover the costs of the application from Mr Timms. Ms Timms played no part in the proceedings and I do not propose to make any order for costs against her. The applicant seeks costs on an indemnity basis against Mr Timms, and I will give the parties an opportunity to make submissions on that question. I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.

Associate: Dated: 9 February 2001 Counsel for the Applicant: Ms S Maharaj with her Mr G Gretsas

Solicitors for the Applicant: Gretsas Chrzaszcz

Counsel for the First Respondent: The First Respondent appeared in person

Counsel for the Second Respondent: No appearance for the Second Respondent

Date of Hearing: 11 December 2000

Date of Judgment: 9 February 2001

At a glance

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Before

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Judgment (13 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (6)

Cited By (1)