Sui Mei Huen v Official Receiver for and on behalf of the Official Trustee in Bankruptcy

Sui Mei Huen v Official Receiver for and on behalf of the Official Trustee in Bankruptcy - [2008] FCAFC 117 - FCAFC 2008 case summary — Zoe

[5]

THE COURT: 1 By notice of appeal filed in this Court on 10 April 2007 the appellant appeals from the whole of the judgment of Federal Magistrate Lucev made on 16 March 2007; Official Receiver v Huen [2007] FMCA 304. The appellant filed an amended notice of appeal on 22 May 2007. 2 By way of background, the appellant is the former wife of Yue Kwong Huen ("the bankrupt"), who became bankrupt on 22 August 2005. The respondent ("the trustee") is the trustee in bankruptcy of the estate of the bankrupt. The appellant and the bankrupt signed and filed a joint application for divorce on 6 October 2005, and the decree was made on 30 December 2005, taking effect on 31 January 2006. 3 The appellant and the bankrupt previously owned, and were joint registered proprietors of, a property at 18 St Claire Gardens, Atwell, Western Australia ("the Atwell property"). In or about August 2003, the Atwell property was sold, and the net proceeds of the sale were applied to the purchase of another property at 105 Rome Road, Melville in Western Australia ("the Melville property"). The appellant and the bankrupt are the registered proprietors as joint tenants of the Melville property which is comprised in Certificate of Title Volume 1239 Folio 294. The Melville property was purchased for $230,000. 4 On 12 August 2003 the National Australia Bank held mortgages over each of the Atwell property and the Melville property which together secured an amount of $417,570.89. On 22 August 2003, upon the settlement of the sale of the Atwell property an amount of $234,575 was credited to the mortgage account, reducing the amount secured on the Melville property to $185,072.89. 5 On or about 25 August 2003 the appellant, the bankrupt and their three children moved into the Melville property. In early September 2003 the bankrupt moved out of that property due to matrimonial difficulties. 6 On 1 September 2003 the bankrupt signed a document headed "Agreement" which recited; 'I Yue Kwong Huen agree that 100% of the house (105 Rome Road, Melville WA 6156) shares belong to Christina Sui Mei Huen.' 7 Between September 2003 and January 2004 the bankrupt drew for his own benefit amounts totalling $29,800 which were debited to the loan account secured by the mortgage over the Melville property. 8 On 20 February 2004 the appellant and the bankrupt separated. From September 2003 the appellant and her children have lived in the Melville property and since then the appellant has paid all rates and outgoings on the property and has made improvements to it. 9 On 22 August 2005, on the making of the sequestration order in respect of the bankrupt's estate, the respondent became the trustee of the bankrupt's estate. The bankrupt's interest in the Melville property vested in the respondent as an asset of the bankrupt estate, pursuant to ss 58 and 116 of the Bankruptcy Act 1966 (Cth) ("the Act"), and a caveat was lodged to protect the respondent's equity in the property. 10 On 6 October 2005 the appellant and the bankrupt filed a signed Form 11 application for consent orders in the Family Court of Western Australia. The proposed consent orders were: 'I, Yue-Kong HUEN within the first day of October, 2005 days of this date at the expense of Mr. Yue-Kong HUEN transfer to the Ms. Christina S HUEN all his right title and interest in the property situate at and know as 105 Rome Road, Melville in the state of WA and being the whole of the land more particularly described in the Certificate of Title Volume 1239 Folio 294 and sign all instruments and documents and do all acts and things necessary to effect such transfer.' 11 By way of letter dated 20 October 2005 a Registrar of the Family Court advised the appellant and the bankrupt that the proposed orders had not been made, as the document was "vague" in that it failed to specify any date for the transfer of the property, and secondly because the Court was not satisfied, without any supporting evidence from the parties, that the transfer of the whole property to the appellant was just or equitable. 12 On 31 January 2006 the appellant and the bankrupt became divorced. 13 By June 2006, payments totalling $51,784 had been made in reduction of the mortgage over the Melville property of which $26,784 had been paid by the appellant, and $25,000 had been contributed from a personal loan to the appellant and the bankrupt from the National Australia Bank. The appellant claims that all of the moneys paid in reduction of that personal loan have been advanced by her parents, who live in China.

[10]

The judgment of his Honour Lucev FMC made 16 March 2007 be set aside.
A declaration that the appellant is the beneficial owner of the Property at 105 Rome Road, Melville, being Lot 72 on plan 23420 being the whole of the land in Certificate of Title Volume 1239 Folio 294.
The respondent pay the appellant's costs of the appeal.' 17 By written submission filed on 7 November 2007 the appellant has contended that the respondent has conceded ground 1 of the appeal as set out in the amended notice of appeal, being; '1. The Court erred in law in that it failed to accord the appellant procedural fairness by making findings of fact in contradiction to the statement of facts agreed between the parties, and without giving the appellant (or the respondent) any opportunity to make submissions on those matters. 1.1 The respondent tendered a statement of agreed facts which was signed by the solicitors for each of the parties; 1.2 despite this, the court made findings which were different from those contained in the statement of agreed facts, in respect to: (a) the use by the appellant's bankrupt former husband of joint funds for the purposes of his business; (b) the appropriate amount of rental for the premises; and (c) the date on which the appellant and her former husband separated; and 1.3 in doing so, the learned Federal Magistrate did not invite submissions on or otherwise afford the parties any opportunity to address his intention to make findings which differed from those agreed between the parties.' 18 That concession, according to the appellant, makes it unnecessary to rely on ground 2 of the amended notice of appeal, which was as follows; '2. The Court erred in law in that it failed to accord the appellant procedural fairness by making findings as to the reliability of the appellant's affidavit evidence: 2.1 in the absence of cross-examination or any other challenge by the respondent's counsel; 2.2 when, in the main, the apparent inconsistencies between the portions of different affidavits of the appellant were not brought to the attention of counsel at the trial and submissions sought on those matters; and 2.3 in circumstances where the appellant was at a distinct legal disability, English not being her native language and her not having had any legal advice or assistance until after the filing of some of her affidavit evidence.' 19 Counsel for the appellant accepts that, if ground 1 or 2 of the amended notice of appeal were made out, she would only be entitled to have the orders below set aside. In order to establish full entitlement to the whole or a substantial part of the equity in the Melville property, the appellant must succeed on one or more of her further grounds of appeal. It has been noted on behalf of the appellant that the respondent, in its amended application to the Federal Magistrates Court, had sought a declaration that the appellant has an equity to the extent of 63.45%, and the respondent has an equity in the Melville property to the extent of the remaining 36.55%. 20 It was also pointed out in the appellant's written submissions that the parties have agreed that, regardless of the outcome of the appeal, there be no order as to the costs of the appeal, or of the proceedings below. The orders now sought by the appellant, as contained in her written submissions are: '1. The appeal be allowed.

[12]

21 The appellant submits that the nature of the appeal is similar to that described by Mansfield J as a member of a Full Court of this Court in Draper v Official Trustee in Bankruptcy (2006) 156 FCR 53, at 59. 22 Ground 3 in the amended notice of appeal is as follows: '3. The Court erred in law in finding that the rebuttable presumption that a married couple who hold property, particularly the former matrimonial home, as joint tenants (prior to the severance of that tenancy by the bankruptcy of the appellant's former husband), hold it in equal shares, was not rebutted, when: 3.1 the true nature of the transaction included the entire circumstances of the purchase of the property and not merely the matters leading up to settlement; 3.2 the learned Federal Magistrate failed to give sufficient weight to the total circumstances surrounding the purchase of the property and the breakdown of the marriage; 3.3 the learned Federal Magistrate erred in considering the subsequent conduct of the appellant and the bankrupt as being inconsistent with a resulting trust.' 23 According to Counsel for the appellant, the presumption, discussed in Trustees of the Property of Cummins v Cummins (2006) 227 CLR 278, at 302, that a married couple who hold the legal title to a matrimonial home as joint tenants, hold the property in equal beneficial shares is rebuttable and the legal effect of that presumption or others of a similar kind must not be overstated; see Mackowik v Kansas City St J & C B R Co 94 SW 256; Neilsen v Letch (No 2) [2006] NSWCA 254, at [26]; Draper v Official Trustee in Bankruptcy (supra), at 72. 24 It was further submitted on behalf of the appellant that, when considering the effect of a presumption in any particular case, a court should look to all the evidence of the circumstances surrounding a transaction, including subsequent dealings; see Trustees of the Property of Cummins v Cummins (supra), at 300 per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ, following Charles Marshall Pty Ltd v Grimsey (1956) 95 CLR 353, at 364. Reference was made in the same context to Midland Bank PLC v Cooke [1995] 4 All ER 562, at 574 per Waite LJ; Baumgartner v Baumgartner (1988) 164 CLR 137, at 156 per Gaudron J; Parianos v Melluish (Trustee) [2003] FCA 190; Trustees of the Property of Cummins v Cummins (supra), at 301. 25 Mr Martin QC who appeared with Ms Thompson for the appellant next submitted that the fact that the bankrupt was a joint mortgagee of the Melville property does not preclude the conclusion that a resulting trust arose at purchase; see Draper v Official Trustee in Bankruptcy (supra), at 72. However, on the hearing of the appeal Counsel for the appellant based her claim essentially on a constructive, not a resulting, trust. 26 The entire history of transactions between the appellant and the bankrupt in relation to the Melville property was relied on as rebutting the presumption. The appellant submits that Lucev FM erred in declining to take account of events occurring after 8 August 2003, when the Melville property was acquired. The history of what happened at the time of the purchase of the Melville property and thereafter was so immediately proximate as to constitute part of the transaction to which the Court was required to have regard in identifying the respective equities of the appellant and the bankrupt. That history, it was contended, compelled the conclusion that, from the time when the Melville property was purchased, both the appellant and the bankrupt intended that the appellant should acquire the whole of the beneficial interest in that property. That intention operated to displace any presumption that the appellant and the bankrupt should be entitled equally to the beneficial interest in the Melville property. It further supported the conclusion that, after the events which had commenced in August 2003, the appellant should hold the entirety of that beneficial interest to the exclusion of the bankrupt. 27 Ground 3A in the amended notice of appeal alleges that the learned Federal Magistrate erred in law in holding that the principle in Trustees of the Property of Cummins v Cummins (supra) precluded the appellant from attaining more than a half share in the property. The appellant submits that there is nothing in the reasons of the High Court in Cummins to suggest that the presumption there discussed is irrebuttable. Any such suggestion would be against both the weight of authority relied upon by the High Court in Cummins, and the principles of equity; see Meagher, Gummow & Lehane; Equity Doctrines and Remedies, 4th ed, 2002 at [1-005]. 28 Ground 3B of the amended notice of appeal was that the Court below had erred in law in failing to find that no express, or alternatively no implied, trust had arisen in the appellant's favour. That ground was not pressed on the hearing of the appeal. 29 Ground 4 of the amended notice of appeal recites; '4. The Court erred in law in failing to find a constructive trust had arisen in the appellant's favour, when: 4.1 the learned Federal Magistrate failed to properly consider the basis in law upon which a constructive trust may be imposed; 4.2 the learned Federal Magistrate misdirected himself as to the test to be applied for a constructive trust - (looking at whether the appellant's conduct and that of her bankrupt former husband precluded a constructive trust, rather than assessing whether equity should impose a constructive trust to remedy the inequity of the trustee taking a share, through the bankrupt, in the appellant's property); and 4.3 in determining that no constructive trust was to be imposed, the learned Federal Magistrate gave significant weight to the fact that the appellant had not, in her divorce proceedings from her former husband, raised questions about the bankrupt's conduct to her and in respect to the property, so as to infer either that equity ought not allow those matters to be raised in these proceedings, or alternatively, that the failure to raise them previously meant they were untrue, when the divorce proceedings were undertaken by consent and without legal assistance in the no fault jurisdiction of the Family Court of Australia.' 30 Counsel for the appellant have contended that equity would impose a constructive trust, if, in all the relevant circumstances, it would be unconscionable on the part of the respondent to deny the greater equitable interest of the appellant; see Baumgartner v Baumgartner (supra), at 147 per Deane J. In carrying out this exercise, the Court does not need to consider actual or presumed intentions of the parties; see Muschinski v Dodds (1985) 160 CLR 583, at 614. Instead, the appellant submits, the Court should look at all the conduct, both before and after the acquisition of the property, to assess what, in equity and good conscience, should be done; see Green v Green [1989] 17 NSWLR 343, at 355-356 per Gleeson CJ. The transaction history, including events occurring after the purchase of the property, is relevant to this assessment. 31 The appellant submits that, if no other remedy is suitable, relief in the nature of a remedial constructive trust is ordinarily imposed; see Farah Constructions v Say-Dee Pty Ltd (2007) 230 CLR 89, at 172. The appellant therefore submits that, even if Grounds 3, 3A and 3B of the amended notice of appeal were not made out, it would, in the circumstances, remain inequitable to deny the appellant her beneficial entitlement to the property, and that a remedial constructive trust could be imposed. 32 The appellant contends that the learned Federal Magistrate erred in concluding, at [86] of his reasons below, that the decision of the High Court in Trustees of the Property of Cummins v Cummins (supra) precludes the erection of a constructive trust in favour of the appellant. The decision of the High Court, the appellant submits, applies to resulting trusts and, therefore, should not be allowed to limit the ambit of the application of broad equitable principles governing the grant of a remedial constructive trust, where that is otherwise appropriate.

[14]

'1. If, which is not admitted, an express, alternatively implied, trust arose in the appellant's favour as to the appellant's former husband's (Bankrupt's) equitable interest in the property as claimed in Ground 3B of the appellant's Grounds of Appeal: (1) that constituted a transfer of property by the Bankrupt, who later became a bankrupt, to the appellant for no consideration; and (2) the transfer is void against the respondent (being the trustee in the Bankrupt's bankruptcy) under s 120(1) of the Bankruptcy Act 1966 (Cth), it having taken place within 5 years before the commencement of the Bankrupt's bankruptcy on 22 August 2005.' 34 The respondent submitted that the ultimate matter for determination on appeal is whether, on the alternate grounds argued by the appellant, the whole of the beneficial interest in the Melville property is held on trust for the appellant. The respondent contended that it has always been willing to do equity and that is why it sought a declaration in the Court below that the appellant and respondent were beneficial owners as tenants in common in the proportions of 63.5% and 36.55% respectively. 35 By letter sent to the solicitors for the appellant dated 10 September 2007, the respondent advised that it concedes ground one of the amended notice of appeal. In its submissions, the respondent acknowledged that, on any equitable accounting, the parties' proportionate interests ought to be determined according to the agreed facts. However, the respondent argued that, in the period that has passed since the judgment below and the appeal, additional contributions and benefits may have been made and may need to be taken into account. Thus, the respondent contended, final determination of the proportion of the equitable interests in the property ought to be made after the parties have had an opportunity to agree on their respective interests. 36 In relation to grounds 3 and 3A of the amended notice of appeal, the respondent submitted that it had agreed to proceed on the basis that Trustees of the Property of Cummins v Cummins (supra) establishes a presumption of equal beneficial ownership when husband and wife acquire a matrimonial home in joint names; see Stack v Dowden [2007] 2 WLR 831; Draper v Official Trustee (supra). However, it was noted that in Buffrey v Buffrey [2006] NSWSC 1349, at [14] Palmer J suggested that the presumption of resulting trust and advancement was not a new presumption. 37 The respondent further contended that, whether or not there is a rebuttable presumption of equal beneficial ownership, on the evidence in this case that presumption cannot affect the outcome of the appeal. 38 The respondent next argued that the extent of the respective beneficial interests must be determined at the time when the property was purchased and the resulting trust created; see Calverley v Green (1984) 155 CLR 242, at 252, 262. Accordingly, it was submitted, mortgage re-payments are not taken into account as a contribution to the acquisition cost and do not, by application of the doctrine of resulting trusts, alter beneficial interests; see Calverley v Green (1984) 155 CLR 242, at 252, 257-258; Draper v Official Trustee (supra), at [30] and [132]. According to the respondent, there is no doubt that the purchase of the Melville property involved a joint borrowing of money which amounted to a joint contribution. 39 On the respondent's argument, if a presumptive resulting trust has arisen, the evidence requires the conclusion that the respective beneficial interests were held in the proportions of 51.04% for the appellant, and 48.96% for the respondent. Whether an intention of equality of beneficial entitlement is sought to be inferred, or whether the appellant must rebut a presumption of equal beneficial ownership, the result is the same. It was, therefore, said to follow from the insignificant difference in outcome, that the Court ought to apply the maxim that equity favours equality; see Baumgartner v Baumgartner (supra), at 149-150. 40 On the analysis for which the respondent argued, the bankrupt's departure from the property in early September 2003 was not part of the transaction of purchasing the property, as the contract to purchase the property had been entered into in early July 2003, and the settlement of the sale was effected on or about 8 August 2003. There was, therefore, no common intention at the time of the purchase that there was to be an inequality of beneficial interest, or that the bankrupt was to have no beneficial interest. 41 Similarly, the respondent contended, the September 2003 agreement demonstrated that there was a common intention of equality of interests, as it would have been unnecessary, if, as the appellant argued, there had been a resulting trust so that the bankrupt had no beneficial interest. Likewise, according to the respondent, the proposed consent orders filed in the Family Court in October 2005 would have been equally unnecessary, if a resulting trust had already been brought into existence. Similar reasoning was said to apply to the application for consent orders in the Family Court on 6 October 2005, when the appellant stated that she and the bankrupt held the property in equal shares, thereby demonstrating that there was a common intention that there should be equality of interests. 42 The respondent next argued that there is a fallacy in the contention in ground 3B of the amended notice of appeal that the September 2003 agreement evinced an intention on the part of the bankrupt to declare that he held his beneficial interest on trust for the appellant; see Milroy v Lord (1862) 45 ER 1185, at 1190; an imperfect transfer or gift is not a declaration of trust; see Williams v Lloyd (1933) 50 CLR 341, at 369. There was nothing in the evidence evincing an intention by the bankrupt that after separation he would hold his beneficial interest in the Melville property on trust for the appellant; see Walsh Bay Developments Pty Ltd v Federal Commissioner of Taxation (1995) 130 ALR 415, at 422. Nor, according to the respondent, had there been any clear statement of intention by the bankrupt to hold the property for the appellant beneficially; see Brisbane City Council v Attorney General [1979] AC 411, at 421. 43 On the other hand, the respondent submitted, significance ought to be attached to the statements by the appellant and the bankrupt in relation to their respective interests in the Melville property when they applied to the Family Court for consent orders. 44 An alternative argument advanced in the respondent's notice of contention is that, even if the September 2003 agreement took effect as a declaration of trust, it was avoided by s 120(1) of the Act. The respondent submits that any declaration of trust was a "transfer of property", as defined in s 120(7)(b) of the Act; see Peldan v Anderson (2006) 227 CLR 471, at [26]. However, this argument was not pressed on the hearing of the appeal so it is unnecessary further to consider it or the related question of whether any consideration was given by the appellant for the acquisition of the equitable interest which she claims in the Melville property. 45 In relation to grounds 3B.4 and 4 of the amended notice of appeal, the respondent first contended that the learned Federal Magistrate had not erred by failing to consider the legal basis on which the appellant claimed that a constructive trust had arisen and could not be said to have misdirected himself as to the test applicable in evaluating the appellant's claim that a constructive trust had arisen. According to the respondent, it was open, in the circumstances, to give weight to the common understanding of the appellant and the bankrupt as to what were their respective individual beneficial shares in the Melville property as evidenced by statements in the application to the Family Court on 6 October 2005. In a related way it was contended that the authorities are clear that a court will not base a declaration of the existence of a constructive trust simply on notions of fairness or justice; see Muschinski v Dodd (supra), Baumgartner v Baumgartner (1987) 164 CLR 137, and s 79 of the Family Law Act 1975 (Cth). Nor will the mere existence of a matrimonial relationship form a sufficient basis for concluding that there is a constructive trust in respect of the matrimonial home; Green v Green (supra), at 353. 46 The respondent argued that a constructive trust may arise regardless of agreement or intention to preclude the retention or assertion of beneficial ownership to the extent that such retention or assertion would be contrary to equitable principle; Muschinski v Dodd (supra); a constructive trust is imported where refusal to recognise the equitable interest would constitute unconscionable conduct according to established equitable principles; Muschinski v Dodd (supra); Baumgartner v Baumgartner (supra). However, the respondent contended, there was nothing in the appellant's submissions to explain how the respondent's conduct in claiming a beneficial interest in the Melville property is unconscionable. There was nothing akin to a failed joint development or substantially disproportionate contributions to the purchase of the property to amount to the requisite unconscionability; see Muschinski v Dodd (supra). Nor was this a case where a de facto husband and wife had, for a number of years contributed from pooled funds to acquiring a property in the name of one spouse only and servicing a mortgage secured on that property; see Baumgartner v Baumgartner (supra). 47 Counsel for the respondent next referred to Green v Green (supra) in support of the contention that there was, here, no actual common intention that the appellant should have the sole beneficial interest in the Melville property. Nor had the appellant acted to her detriment on the basis of such a common intention, because she had paid the instalments of principal and interest under the mortgage and other outgoings in respect of the property as a matter of necessity. 48 The respondent submitted that before importing a constructive trust as a remedy, the Court should decide whether, having regard to the issues, there are other means available to quell the controversy; see Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 556, at [42]; Giumelli v Giumelli (1999) 196 CLR 101, at [10]. Accordingly, the equitable accounting process should provide for appropriate adjustments to the parties' beneficial interests by allowing for post-separation contributions and benefits. On this argument, the appellant, by submitting to the process of equitable accounting, cannot contend that it is inequitable or unconscionable for the respondent to assert the beneficial interest quantified by making appropriate allowance for those contributions and benefits.

[15]

Disposition of the appeal 49 On the making of a sequestration order, the property of a bankrupt vests in the Official Trustee, pursuant to s 58(1)(a) of the Act. In this instance, the joint tenancy at law of the appellant and the bankrupt in the Melville property was severed, creating a tenancy in common between the appellant and the respondent. 50 A joint tenancy in equity may be severed by agreement between the joint tenants or by one joint tenant effectively constituting himself or herself a trustee for the other joint tenant of the whole or part of his or her beneficial interest in the property. That may be done expressly provided that the creation of the presumptive trust conforms with any formal requirements such as those imposed by s 34 of the Property Law Act 1969 (WA). 51 In the present case, the learned Federal Magistrate considered that the "September 2003 Agreement" was ineffectual because it was unsupported by consideration passing from the appellant to the bankrupt and, in any event, was void as against the trustee by force of s 120(1) of the Act. However, in the circumstances, the search for the constituent elements of any agreement must, we consider, go beyond the four corners of the document headed "Agreement" and dated 1 September 2003 which was signed by the bankrupt. The facts from which an agreement as to the respective equitable interests of the appellant and the bankrupt can be inferred include the increase in the debt secured on the Atwell property by $59,578 for purposes solely for the benefit of the bankrupt and the payment by the appellant solely from her own moneys of a deposit of $5,000 on the purchase of the Melville property. Other relevant facts, in our view, were the existence of "matrimonial difficulties for some time" between the appellant and the bankrupt when they and their children moved into the Melville property on 25 August 2003. The bankrupt moved out of the Melville property within a week, more or less coincidentally with his signing of the "Agreement" of 1 September 2003. 52 Conduct of the parties after they completed the purchase of the Atwell property was also capable of corroborating the arrangement for which the appellant contended. As Mansfield J observed in Draper v Official Trustee in Bankruptcy (supra), at 63 [30]; 'The fact that Mrs Draper directly made all subsequent payments to the lending institution from her salary deductions in respect of the property is consistent with, and capable of being evidence of, that arrangement. As his Honour pointed out, however, the making of those payments after the date the property was acquired cannot by the mere fact of those payments create an equitable interest in the property in favour of Mrs Draper; that interest must have existed at the time of settlement. See Calverley v Green (1984) 155 CLR 242 at 252, 257; Official Trustee in Bankruptcy v Alvaro (1996) 66 FCR 372 at 391.' 53 In Calverley v Green (supra), Gibbs CJ held, at 252, that "The extent of the beneficial interests of the parties must be determined at the time when the property was purchased and the trust created." In the present case, in respect of the Atwell property, that was, at the latest, 22 August 2003. However, that is not to say that evidence of subsequent conduct is irrelevant to ascertaining the intention of the parties at the critical date. Indeed, in his discussion surrounding the passage just quoted, Gibbs CJ canvassed evidence of conduct including that occurring after the acquisition of the subject property. In relation to payment of the mortgage debt by the appellant, his Honour observed, also at 252; 'The fact that the mortgage debt was repaid by the appellant is therefore not relevant in determining the extent of the interests of the parties in the land, although it may be relevant on an equitable accounting between the parties.' 54 In the same case, Mason and Brennan JJ concluded, at 262; 'The Court of Appeal, having regard to those facts, inter alia, found that there was no common intention between the plaintiff and defendant that the plaintiff was to hold her interest in trust for the defendant. Nor did they find any other common intention. Their Honours held that the legal interests of the parties must prevail. The error in this approach is not in the refusal to find a common intention but in the failure first to apply the presumption that comes into play when the legal owners who are unequal contributors to the purchase price are not shown to have a common intention inconsistent with a tenancy in common in shares proportionate to their contributions. Applying the relevant presumption, the Court of Appeal should have held the parties to be equitable tenants in common in the Baulkham Hills property in proportion to the contribution each made to the purchase price. That proportion has not been precisely ascertained. The matter will have to be remitted to the Supreme Court to determine that proportion if the parties are unable to agree upon it.' (emphasis added) 55 At [33]-[82] of the reasons below, the learned Federal Magistrate examined what he called "the Cummins principle" as derived from the observations of the High Court in Trustees of the Property of Cummins (A Bankrupt) v Cummins (2006) 227 CLR 278 ("Cummins"). In that case, the High Court noted, at 303, the "disinclination of equity" to displace the incidents of the registered title of a husband and wife as joint tenants of a matrimonial home and held that there was nothing in the circumstances of that case to effect such a displacement in relation to a property for which the contract to purchase as vacant land had been dated 14 April 1970 and had been settled on 27 July 1970 and on which a dwelling house had been erected in the latter half of 1971. Their Honours also had regard, at 303, to a valuation obtained in 1987 which was consistent "with the conventional basis of their dealings which treated the matrimonial home as beneficially owned equally." However, there is nothing in the joint reasons for judgment in that case to suggest that the presumed intention in favour of an equitable joint tenancy of the matrimonial home can never be displaced by an express or constructive agreement between the husband and wife or by the enforceable creation by one of a trust in favour of the other of his or her presumed joint interests. We therefore consider that the learned Federal Magistrate was wrong when he concluded, at [35]-[36] of the reasons below; '35. There is nothing express in the principle in Cummins to indicate that it applies only to resulting trusts and not to constructive trusts. On its face the principle applies to all types of trusts.

[17]

56 In Re Francis Ex parte Official Trustee (1988) 19 FCR 149, a Full Court of this Court (Forster, Woodward and Spender JJ), held, at 153; 'When the estate of the male bankrupt in the land in question became vested in the Official Trustee, the unity of title was immediately destroyed, in that the respective interests of the Official Trustee and the female co-owner in the land did not derive from the same act or document. Nor is there any unity of time between the two estates. The unity of interest also does not exist because the interest of the Official Trustee is impressed with his responsibilities under the Bankruptcy Act and may, and very likely will, be of less duration than that of his co-owner.' 57 However, it was not disputed in that case that the male and female bankrupt (husband and wife) had, immediately before the estate of the male bankrupt vested in the Official Trustee, held the former matrimonial home as joint tenants at law and in equity. 58 Despite the conclusion reached in the paragraph from his reasons quoted at [55] above, the learned Federal Magistrate proceeded to consider the competing arguments on the alternative basis that the "principle in Cummins" creates a rebuttable presumption. He noted, first, that whether the presumption has been rebutted depends on the manifestation of a contrary intention "based on evidence available at the time of purchase or so immediately thereafter as to constitute part of the transaction"; Charles Marshall Pty Ltd v Grimsley (supra), at 365 cited in Cummins at 300 [65]. Although he referred to "evidence available at the time of purchase", his Honour clearly meant evidence whenever available of what the High Court in Charles Marshall called "the acts and declarations of the parties before or at the time of purchase ….. or so immediately thereafter as to constitute part of the transaction." That understanding is made clear by his Honour's acknowledgement, at [38] of the reasons below that "Subsequent events may however be considered", citing Cummins at [365]. The learned Federal Magistrate then rehearsed the facts in Cummins and asked rhetorically at [41] of his reasons; 'What then is the transaction which in this case determines whether the registered title to the Melville Property was not at variance with an equitable title, subsequent admissions or conventional assumptions or arrangements apart? (Adopting the form of question posed in Cummins.)' 59 There were then identified what his Honour considered to be the elements of the transaction beginning with the offer by the appellant and the bankrupt to purchase the Melville property and ending with the settlement of the sale of the Atwell property on 22 August 2003 and the movement into the Melville property by the bankrupt, the appellant and their three children on 25 August 2003. His Honour rejected the contention on behalf of the appellant that additional elements of the transaction were the bankrupt's leaving the Melville property in or about early September 2003 and his signing the 1 September 2003 Agreement. That conclusion was explained in these paragraphs from the reasons below; '46. The Bankrupt leaving the Melville Property, and thereby leaving the matrimonial home, his wife (the Respondent) and three children, is not, in the Court's view, connected to the transaction. That it has deeper and different origins is manifest by the Respondent's own evidence:

[26]

60 After noting that the Court below had not had the benefit of cross-examination of the bankrupt or of the appellant in relation to her evidence as summarised at [50]-[51] of the reasons below, which are reproduced at [59] of these reasons, his Honour accepted the existence of the "Agreement" of 1 September 2003 but pointed out what were perceived to be deficiencies in the substance of that document and the appellant's evidence as to why it had been brought into existence. The learned Federal Magistrate also observed a distinction in a second affidavit by the appellant on 15 June 2006 between the bankrupt's having moved out of the Melville property in early September 2003 and the "separation" of the bankrupt and the appellant on 20 February 2004. As well, he pointed to other perceived inconsistencies between that affidavit and a third affidavit affirmed by the appellant on 13 November 2006. It was also noted that what had been attributed by the appellant to the bankrupt as "words to the effect that this meant that I now owned all of the Melville Property" could, on the evidence only have been made on or after 17 May 2004, more than eight months after the September 2003 Agreement. His Honour then continued, at [61] of his reasons; '… The Respondent's own evidence casts doubt on the effect of the September 2003 Agreement as it implies that prior to a date on or after 17 May 2004 the Respondent did not own all of the Melville Property. That begs the question how much the Respondent did own at that time - to which the answer otherwise open on the evidence is that she owned a one half share as a joint tenant with the bankrupt, both legally and equitably. Further, such as statement was completely unnecessary if the Melville Property had already been transferred to the Respondent, and the fact that the statement was allegedly made casts significant doubt on the September 2003 Agreement. 62. Para.13 of the Second Huen Affidavit does not support a rebuttal of any presumption in the Cummins principle, because: a) it contradicts the September 2003 Agreement; and b) it is wrong in material respects relied upon by the Respondent. 63. The September 2003 Agreement is equally consistent with the Bankrupt, in the context of a marriage failure, simply wanting to transfer his interest to ensure that his wife (the Respondent) and his children, have somewhere to live. 64. It is agreed that in the period between September 2003 and January 2004 amounts totalling $29,800 were withdrawn against the mortgage secured by the Melville Property "by or for the benefit of the Bankrupt with those amounts being applied primarily to a company operated by the Bankrupt": Statement of Agreed Facts, para.17. 61 The learned Federal Magistrate then, correctly in our view, characterised payments to the bankrupt between September 2003 and January 2004 by way of withdrawals from the loan account secured on the Melville property as not having been made in consequence of any agreement or arrangement with, or concession or forbearance from, the appellant, but possibly having been permitted by her as part of her unsuccessful attempt to repair her relationship with the bankrupt. It was then concluded at [71]-[72] of his Honour's reasons; '71. If anything, the evidence of the Respondent's activities between September 2003 and January 2004 supports the Cummins principle, rather than rebutting any alleged presumption which might arise from that principle, and does not support an argument that the September 2003 Agreement dealt with the settlement, or disposition of, the Bankrupt's interest in the Melville Property.

[28]

62 Various features of the joint application for divorce and the accompanying application for consent orders were identified as inaccurate or otherwise as contradicting a rebuttal of "any presumption arising out of the Cummins principle." The response to Question 31 in Part 6 of the Form 11 was regarded as particularly noteworthy because the bankrupt and the appellant each claimed to have a half share in the Melville property on which the mortgage loan was said to be shared between them in an equal amount of $98,000. It was then proposed that the property should be "divided as to 100% to the appellant and 0% to the bankrupt." His Honour concluded his examination of that proposal by observing, at [80] of his reasons; '… No mention is made of the September 2003 Agreement in response to any of the above questions. In an exchange with Counsel for the Respondent the Court queried the responses to Questions 57 and 59, and Counsel indicated that all that was required to be disclosed, and all that was disclosed, was the legal interest in the Melville Property, and that what the consent orders attached to the Form 11 sought was "to effect the agreement that they'd made": Transcript, p.23. That is very curious given that the September 2003 Agreement is not referred to at all, particularly when Question 60 asks: "Are there any other relevant matters or facts in relation to the division of the property (eg health, financial resources, income earning ability)". (emphasis added) 81. The Respondent's answer to this question is "No" with which the Bankrupt agreed. Thus, in relation to a question which directly raises "other relevant matters" including "financial resources" there is simply no mention of: a) the September 2003 Agreement; or b) the borrowing of funds against the Atwell Property and Melville Property mortgages. 82. The above facts in relation to the Form 11 do not do anything to support the suggestion that the facts rebut any presumption arising from the Cummins principle. Again, if anything, they support an argument that any presumption is not rebutted, for the September 2003 Agreement and the borrowing of funds against the mortgage are simply not, or not considered important enough, to be considered relevant matters worthy of mention when applying for the consent orders.' 63 The learned Federal Magistrate could not discern anything in the conduct of the appellant and the bankrupt in relation to the Atwell property which would displace the application of "the Cummins principle." He also found that "it was not the intention of the parties to enter into or establish a resulting trust at or about the time of the purchase of the Melville property." As well, his Honour regarded "the Cummins principle" as precluding the imposition of a constructive trust "at least up until the time of the Bankrupt leaving the Melville property on 1 September 2003." A review of facts which had occurred, or were alleged to have occurred, after that date, including the Family Court application, led the [Magistrates] "Court to the view that it would not be equitable or in good conscience to impose a constructive trust." 64 No real reasons were given for that conclusion, but his Honour did go on, at [87] of the reasons below, to distinguish Muschinski v Dodds (supra) by instancing these circumstances of the present case; 'a) the Bankrupt and Respondent had been joint tenants of the Melville Property, to which the Cummins principle applies, or in relation to which any presumption was not rebutted; b) the Bankrupt and Respondent have sought consent orders from the Family Court without disclosing the circumstances now said to give rise to a constructive trust as a matter of equity and good conscience; and c) where, at least on one view of the facts, the circumstances give rise to an inference that all that has occurred is that the Bankrupt has walked away from the matrimonial relationship' 65 In our view, his Honour misunderstood what circumstances were available in the present case to distinguish it from Cummins where the presumption of an equality of equitable interests in the matrimonial home was not rebutted. In addition, sub-paragraph (b) of the passage just quoted suggests that the learned Federal Magistrate regarded the failure of the appellant and the bankrupt in their application to the Family Court to disclose all of the facts relevant to their respective interests in the Melville property as precluding a constructive trust from arising "as a matter of equity and good conscience." 66 We consider that, far from being a disqualifying factor, the assertions of the appellant and the bankrupt in their application to the Family Court were an historical recital in lay terms intended to support an order, at least arguably equivalent to what equity would have achieved, independently of the Family Court, by way of a constructive trust. We also find it difficult to support the learned Federal Magistrate's finding that "all that has occurred is that the bankrupt has walked away from the matrimonial relationship." In doing so, he also walked away from the Melville property, apparently leaving the appellant and the children in exclusive possession of it and disclaiming any responsibility for payments thereafter of instalments due under the mortgage or of any other outgoings in relation to the property. 67 In Muschinski v Dodds (supra) the presumption of a resulting trust was held not to have arisen out of the provision by a de facto wife of the whole of the purchase price of land on which a cottage was erected. The land had been transferred to the couple as tenants in common with the intention that the de facto husband would renovate the cottage and pay for the erection on the land of a pre-fabricated house. The parties separated before either of those works had been carried out. It was held by a majority of the High Court that the parties held their legal interests in the land upon trust, after payment of any joint debts incurred in improving the property, to repay to each his or her contribution and as to the residue for them both in equal shares. Deane J, with whom Mason J agreed and Gibbs CJ concurred in the orders proposed, noted, at 614, in respect of the constructive trust; 'When established or imposed, it is a relationship governed by a coherent body of traditional and statute law. Viewed in its modern context, the constructive trust can properly be described as a remedial institution which equity imposes regardless of actual or presumed agreement or intention (and subsequently protects) to preclude the retention or assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principle.' 68 His Honour next cautioned, at 616, that; 'The mere fact that it would be unjust or unfair in a situation of discord for the owner of a legal estate to assert his ownership against another provides, of itself, no mandate for a judicial declaration that the ownership in whole or in part lies, in equity, in that other: of. Hepworth v. Hepworth (1963) 110 C.L.R. 309, at pp. 317-318.' 69 However, Deane J was still able, at 619, to identify a "general principle of equity" of which he observed; 'Like most of the traditional doctrines of equity, it operates upon legal entitlement to prevent a person from asserting or exercising a legal right in circumstances where the particular assertion or exercise of it would constitute unconscionable conduct: cf. Story, Commentaries on Equity Jurisprudence, 12th ed. (1877: Perry ed.), vol. 2, par. 1316; Legione v. Hateley (1983) 152 C.L.R., at p. 444. The circumstances giving rise to the operation of the principle were broadly identified by Lord Cairns L.C., speaking for the Court of Appeal in Chancery, in Atwood v. Maude (1868) L.R. 3 Ch. App., at p. 375: where "the case is one in which, using the words of Lord Cottenham in Hirst v. Tolson(1850) 2 Mac. & G. 134 [42 E.R. 52], a payment has been made by anticipation of something afterwards to be enjoyed [and] where ... circumstances arise so that future enjoyment is denied". Those circumstances can be more precisely defined by saying that the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do: cf. Atwood v. Maude (1868) L.R. 3 Ch. App., at pp. 374-375, and per Jessel M.R., Lyon v. Tweddell (1881) 17 Ch. D. 529, at p. 531.

[30]

70 In our view, the argument in favour of holding that the bankrupt held his legal interest in the Melville property on a constructive trust for the appellant absolutely, subject to certain conditions capable of diluting her equity, is even stronger in the present case. The joint endeavour at or about the time when the purchase of the Melville property was settled was to provide a home for the appellant and the children on condition that she paid all future outgoings indemnifying him against any liability to the mortgagee or otherwise in respect of those outgoings and made no further claim on him under the Family Law Act or otherwise for maintenance and support of herself and the children. That joint endeavour has not collapsed but has been effectuated by both parties in all relevant respects. Although it is reasonable to infer that the parties contemplated in the latter half of 2003 that the joint endeavour might undergo a change or come to an end, eg upon a reconciliation being effected between the appellant and the bankrupt or upon the appellant ceasing to live in the Melville property or to pay all necessary outgoings in respect of it, nothing of that kind has happened. It would therefore be unconscionable in the sense used by Deane J for the bankrupt, or the trustee claiming through him, to seek to realise the value of his presumptive interest in the Melville property while the joint endeavour which we have identified remains on foot and the appellant continues to perform her obligations thereunder. Consistently with the approach taken by Deane J in Muschinski, we consider that there should be a declaration that the trustee holds the one-half share of the legal estate in the Melville property upon constructive trust for the appellant subject to her continued performance of her obligations under the joint endeavour as we have identified them. 71 The learned Federal Magistrate regarded this case as distinguishable from Green v Green (supra) where a de facto husband had, over many years, promised one of his de facto wives that she should have a proprietary interest in the relevant property and had, before his death, instructed solicitors to take steps to transfer the property into her name. In the present case, by contrast, his Honour observed; 'a) no steps had been taken to transfer the Melville Property in any formal way; b) there has not been any on-going evincing of an intention on the part of the Bankrupt to transfer the Melville Property to the Respondent: and c) the joint acts of the parties in relation to the Form 11 consent orders for the Family Court do not indicate any basis on which a constructive trust might be imposed.' 72 However, as we have already noted, the execution by the bankrupt of the Agreement of 1 September 2003 and his joining in the application to the Family Court designed to result in the appellant's becoming the sole proprietor of the Melville property can support a finding that he intended, at all relevant times from the end of August 2003, to bring about that result subject to his being protected from future or contingent liabilities. In Green v Green, Gleeson CJ, with whom Priestley JA agreed, applied Muschinski v Dodds and considered that the respondent de facto wife was entitled to rely upon the principles enunciated in Grant v Edwards [1986] Ch 638 at 657. His Honour concluded, at 358; '… in my opinion the proper approach to the resolution of this issue is to seek a result which will most closely give effect to the common intention of the parties bearing in mind, first, that they did not themselves specifically address the matter of the legal form which would be conducted to give effect to their intention, and secondly, that this is an area in which equity is at its most flexible.

[33]

73 In the same case, Gleeson CJ cited with approval a passage from the judgment of Cooke J in Hayward v Giordani [1983] NZLR 140, at 148. That passage ended with this sentence; 'While not alone enough to justify imposing a constructive trust, a stable de facto union provides a background in which one will tend to arise much more naturally than as between strangers.' 74 We consider that the background of a lawful marital union in which children have been born and the parties have entered into conventional arrangements in relation to real property provides even more strongly a background in which a constructive trust may naturally arise. 75 At [90]-[92] of the reasons below, the learned Federal Magistrate held, for reasons with which we agree, that there had been no gift effective in equity by the bankrupt of his interest in the Melville property. His Honour then proceeded to consider how "contributions" made by the appellant to building up an equity in the Melville property ought to be treated, presumably on an equitable accounting. However, in view of the orders which we consider should be made in consequence of the imposition of a constructive trust, it is unnecessary for present purposes to quantify what credit should be allowed to the appellant for contributions already made, or to be made by her in the future. 76 The undisputed evidence before the Federal Magistrates Court supports a conclusion that by early September 2003 the bankrupt held his beneficial interest in the Melville property for the appellant absolutely subject to the following conditions: (i) that the appellant continue to pay all mortgage instalments, rates, taxes and other outgoings and to carry out all necessary improvements and repairs so as to indemnify him completely against those expenses; (ii) that the appellant continue to live in the Melville property with the three children of the marriage and care for them; (iii) that the appellant make no further claim on the bankrupt under the Family Law Act or otherwise for the maintenance and support of herself and the children. 77 The evidence establishes the appellant has complied with these conditions and it does not suggest she will not continue to comply with them. Indeed, the inference can readily be drawn that her present intention is to do so, if for no other reason, as the manifestation of her maternal love and affection for her children. 78 In substance, the position appears to be this. At the forefront of the appellant's case is the proposition that relief should be granted based on a constructive trust. The gravamen of the respondent's case is that the appropriate remedy is equitable accounting taking into account the post-separation contributions and benefits of the parties. We accept that ordinarily relief by way of constructive trust is imposed only if some other remedy is not suitable: Farah Constructions v Say-Dee Pty Ltd (supra) at [200]. One rationale for this approach, as explained by various members of the High Court in Bathurst City Council v PWC Properties Pty Ltd (supra), is to avoid a situation where the plaintiff gains a beneficial proprietary interest which gives an unfair priority over equally deserving creditors of the defendant. In the same case it was observed in the joint judgment at 585 [42] that "before the court imposes a constructive trust as a remedy, it should first decide whether, having regard to the issues in the litigation, there are other means available to quell the controversy." In the present case, the equitable accounting for which the trustee contends could not quell the controversy once and for all because a present monetary value could not be assigned to the appellant's assumption of future liabilities, including the payment of instalments under the mortgage and the continuing provision of the Melville property as a home for the children. See also Giumelli v Giumelli (supra) where the interests of third parties being other members of a family partnership were regarded as decisive as supporting the provision of a monetary sum rather than the imposition of a constructive trust in respect of what had become partnership land. We accept that the imposition of a constructive trust cannot be based on a discretionary assessment of what is fair and just as a matter of abstract morality: seethe second paragraph of the extract from Muschinski v Dodds reproduced at [69] above. Whether a constructive trust exists is assessed by circumstances existing at the time when the property is acquired though events after its acquisition are not irrelevant: see Draper v Official Trustee in Bankruptcy at [30] and [76] and its existence does not depend on the intention of the parties. 79 However, the difficulty, as we see it, in following the course proposed by the trustee, is that it focuses only on the financial contributions made by the appellant together with financial benefits she has gained through, for example, the occupation of the Melville property since late August 2003. On the other hand, relief based on a constructive trust enables a wider range of matters to be taken into account in moulding relief. As Moore J noted in Lopatinsky v Official Trustee in Bankruptcy, in the matter of Lopatinsky [2002] 29 Fam LR 274, at [16]; 'It was recognised in Baumgartner v Baumgartner (at 150) that contributions both financially or in kind can be called into account. As Deane J noted in the earlier case of Muschinski v Dodds (1985) 160 CLR 583, the indirect contribution of one party can take the form of support, home-making and family care. The applicant provided all of these things in large measure in addition to her financial contribution. As Debelle J noted in Parij v Parij (1997) 72 SASR 153 at 166, substantial and not token regard should be had to the contribution of a partner who is the home maker and care giver. I should note that in that matter, the members of the Full Court identified, by a mechanism involving no particular exactitude, the interest in a constructive trust of the former de facto wife (in property, the legal title of which was vested in the former de facto husband) as one fifth (Cox and Millhouse JJ), on the one hand, and one-third (Debelle J) on the other. In the present case the applicant, with the assistance of her parents, overwhelmingly assumed the role, in relevant respects, as the provider of funds as well as the home maker and care giver.' 80 So too in this case, the appellant provided significant funds for the purchase of the Melville property, has assumed responsibility (with assistance from her parents) for the payment of the mortgage since it was purchased, has maintained the property which has included paying rates and the like and has, significantly, provided support to the bankrupt as the care giver of their children both before its purchase and since, a matter which appears to underlie, it at least in part, the declaration by the bankrupt on 1 September 2003 who was then plainly seeking to absolve himself of any parenting responsibilities. It can be inferred that the provision of that support freed the bankrupt to apply his time to earning income directly for his own use. How equitable accounting might occur in a case such as the present was discussed in detail by Besanko J in Draper v Official Trustee in Bankruptcy (supra) at [163]. As already pointed out, at [78] above, the last matter to which we have referred, care of the children, is not readily brought to account in any process of equitable accounting though, in our opinion, it is a matter of considerable importance in doing equity between the parties. It seems to us that the course proposed by the trustee which involves recourse to equitable accounting is for this reason not an apt remedy. That view leads, on the competing contentions of the parties, to the conclusion that a constructive trust over the property should be recognized in the relief we grant. 81 In our opinion, the evidence supports the contention of the appellant, namely that the bankrupt's former equitable interest in the Melville property, now vested in the respondent, is held on constructive trust for the appellant. We shall therefore allow the appeal and set aside the orders below. In lieu thereof it will be declared that the respondent trustee holds the legal estate as to one half-share in the Melville property upon trust for the appellant subject to the following conditions; (i) that the appellant continue to pay all mortgage instalments, rates, taxes and other outgoings in respect of the Melville property so as to indemnify Yue Kwong Huen ("the bankrupt") and the bankrupt's estate completely against those expenses; (ii) that the appellant continue to reside in the Melville property with the children of her marriage to the bankrupt; (iii) that the appellant make no further claim on the bankrupt or the bankrupt's estate under the Family Law Act 1975 (Cth) or otherwise for the maintenance or support of herself or the said children. 82 To reflect the agreed basis on which this appeal was conducted, there will be no order as to costs. I certify that the preceding eighty-two (82) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Ryan, Moore and Tamberlin.

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