He said that the plaintiff agreed.
38 The plaintiff denied having had a conversation with his brother in 2004 about the Citibank debt. He denied that the defendant had made payments on his behalf or that he had otherwise incurred debts to the plaintiff of around $8,000. He agreed that the plaintiff had provided him with some monetary assistance to buy food, but denied having received money from the defendant for petrol or towards making payments on the plaintiff's truck, or that he was indebted to the defendant for repairs carried out to a gearbox on the defendant's utility vehicle which needed repairs following the plaintiff's use of that vehicle. The plaintiff said that the defendant may have paid a fee for the hire of a trailer.
39 There was no satisfactory evidence to show that the plaintiff was indebted to the defendant in December 2004 for an amount of approximately $8,000. Nor am I satisfied that a conversation occurred to the effect deposed to by the defendant that the plaintiff would resume responsibility for the Citibank debt. There was no objective corroboration of such an agreement. The defendant's evidence as to the payments he made to reduce the Citibank debt did not demonstrate that he ceased making such payments in about November 2004, being the time of the alleged agreement. Rather, the defendant said that he paid interest, but did not say when he ceased to pay interest. He said that he paid cash to the plaintiff so that the plaintiff would meet the payments of principal, but his evidence was that those payments ceased in November 2003, that is, a year before the alleged agreement.
40 The defendant claimed corroboration for the arrangement in a note signed by the plaintiff and dated 15 December 2004, which specified an amount of $850 for mortgage and insurance and stated "ea 2nd pay f/nite". According to the defendant this was an acknowledgment that the amounts the plaintiff expected the defendant to pay from December 2004 was $850 per fortnight for mortgage and insurance payments. The plaintiff denied this interpretation and said that the page was only one of about six pages. The document is cryptic and I am not persuaded that it is an acknowledgment that the defendant was no longer responsible for the Citibank debt.
41 There is some objective corroboration of the plaintiff's version of events. If it had been agreed that the defendant would no longer be responsible for payment of the Citibank debt, there would be no rational reason for the plaintiff not to have included that as one of the debts to be repaid from the refinancing in May 2006 if the refinance extended so far. It is clear from clause 13 that there had been discussions between the parties in November 2005 as to the identity of the plaintiff's debts. Given the plaintiff's financial circumstances, it must have been apparent to the defendant in November 2005 that it was likely that some moneys remained owing to Citibank. After all, the plaintiff had not kept up the mortgage payments to the Commonwealth Bank. There was no explanation as to why the Citibank debt would have been omitted from the list of the plaintiff's liabilities in clause 13 unless it were because the defendant was responsible to the plaintiff to pay that debt.
42 A further unsatisfactory aspect of the defendant's evidence in this respect is that on settlement there was paid from an amount of $313,333.97 (described as the defendant's loan to the plaintiff) an amount of $23,872.69 as reimbursement of a "pre-existing debt" owed by the plaintiff to the defendant. It is unclear how this sum was made up except that the deed acknowledged that the plaintiff was liable to the defendant in amounts set out at para [14] above. How those amounts arose is unclear. The defendant did not demonstrate that the debts which the plaintiff allegedly incurred to him prior to November 2004, which he says, in effect, were forgiven in return for his being forgiven from his liability to indemnify the plaintiff against the plaintiff's liability to Citibank, were excluded from the payment made on settlement.
43 In short, I am not satisfied that an agreement was made between the defendant and the plaintiff that the defendant would cease to be responsible for meeting the Citibank debt. Accordingly, the plaintiff was not required to notify that debt.
44 Moreover, the purpose of clause 13 was that all of the plaintiff's liabilities could be paid out from the moneys to be raised on the refinancing. On the proper construction of the clause, the plaintiff's obligation was to provide the defendant with details so that settlement cheques could be drawn and forwarded to creditors to pay out all of his liabilities as at the date of settlement of the refinance, so far as the refinancing extended. On the agreement as altered by the defendant, the refinancing was to be in a sum of $450,000, and of that amount the plaintiff was to be responsible for meeting repayments of $315,000 of the principal sum which was borrowed plus interest. There is an ambiguity in that sums of both $313,000 and $315,000 are stated, but reading the clause (as amended) as a whole, the plaintiff was to be responsible for $315,000 of the mortgage debt of $450,000. The defendant borrowed $450,000 from an entity calling itself Central Coast Home Loans. $446,857.75 was paid into the trust account of the defendant's solicitors. $2,000 was held in trust, the defendant asserting that he was required to pay other creditors of the plaintiff. Apart from the moneys used to discharge the mortgage debt to the Commonwealth Bank, the whole of the rest of the funds was, according to the defendant, applied in discharge of debts for which the plaintiff was responsible. In other words, on the defendant's accounting, it would not have been possible to draw a settlement cheque to pay out the Citibank debt from the refinancing. There was thus no breach of clause 13 even if the defendant were not responsible for paying the Citibank debt, or even if the clause applied to debts for which the plaintiff was liable, even though the defendant had agreed with the plaintiff to discharge the liability or indemnify the plaintiff against it.
45 A further reason the notice of termination was ineffective is that the plaintiff was not given an opportunity to remedy the default. Clause 7 provided for the termination of the deed after default by the plaintiff and the plaintiff's "failing to remedy such default within a period of two (2) months or, such earlier time as Colin may reasonably consider the default is not capable of remedy [sic]". The default would have been committed once and for all at the time of settlement. The settlement appears to have taken place contemporaneously with entry into the agreement. But it does not follow that because it would not be possible for the plaintiff to rectify the default in providing the details at settlement, that the defendant was entitled to terminate the agreement forthwith. Clause 7 only confers on the defendant the right to terminate the agreement after the plaintiff failed to remedy a default within a period of two months or such earlier time as the defendant might consider reasonable. No such time was specified. The alleged default was not one for which there was a right of termination.
46 For these reasons the agreement was not terminated. The plaintiff remained the equitable co-owner of the land. It is therefore unnecessary to explore the other questions which would arise if there were a contractual right to terminate. It is sufficient to say that it would in any event be seriously arguable that because the agreement operates in substance as a mortgage, the plaintiff retained an equity of redemption. Prima facie, that equity of redemption could not be displaced by the contractual term that the plaintiff waived any rights to seek relief against forfeiture (Fisher & Lightwood's Law of Mortgage at 23-24 [1.14]). It is unnecessary to pursue these questions.
47 Because the defendant continued to hold the property on trust for himself and the plaintiff as tenants in common in equal shares, the plaintiff continued to enjoy a right of occupation. As Professor Butt notes (Peter Butt, Land Law, 5th ed Lawbook Co (2006) at 228-229 [1435]:
" Unless the co-owners have agreed otherwise, each co-owner is entitled to occupy the whole property, along with any other co-owner who chooses to do so. "
48 It appears that the parties had made an agreement otherwise, in that they had agreed as to which parts of the property each should occupy. By virtue of his beneficial co-ownership the plaintiff remained entitled to occupy his unit.
49 On his becoming bankrupt, the plaintiff's equitable ownership of the property vested in his trustee in bankruptcy. It was submitted for the plaintiff that by having elected not to continue the plaintiff's action, the trustee had abandoned his claim to equitable co-ownership. I do not agree. All that was abandoned was the plaintiff's action. That could not be an abandonment of property which vested in the trustee in bankruptcy, even if it were possible for the trustee to divest himself of such property by "abandonment". As the learned authors of McDonald, Henry & Meek: Australian Bankruptcy Law & Practice (looseleaf), Lawbook Co say (at [60.3.20]), the weight of authority favours the view that abandonment of an action under s 60(3) does not destroy the underlying right of action which is retained in the trustee, and can be the subject of a future proceeding by the trustee.
50 The plaintiff's becoming bankrupt was a default under clause 1(iv). However, the defendant did not thereby hold the property free from the plaintiff's equitable interest as co-owner. That interest passed to the plaintiff's trustee in bankruptcy. It was too late for the defendant to attempt to give a notice of termination by reason of that default. Nor did the defendant give any such notice of termination.
51 A co-owner is entitled to allow others to occupy the property, although he will be liable if he purports to exclude the other co-owner (Thrift v Thrift (1975) 10 ALR 332 at 338-339). Accordingly, if the plaintiff is in occupation under licence from his trustee in bankruptcy, the plaintiff cannot complain.
52 The defendant did not put his case on the basis that the plaintiff had no such licence. I have rejected the grounds upon which the defendant contended that the plaintiff had lost his right of occupancy.
53 For these reasons, I order that paragraphs 2 and 3 of the cross-claim be dismissed. The defendant will be liable to pay the plaintiff's costs in respect of that part of the cross-claim. I will hear the parties on what costs orders should be made in relation to the balance of the proceedings which are either stayed or abandoned.