TRUSTEES OF THE PROPERTY OF ZOLTAN SANDOR, A BANKRUPT v RAMIREZ

Court of Appeal (NSW)|1999-06-24|Before: Meagher JA, Sheller JA, Beazley JA, Young J, By Sheller JA

New South Wales Court of Appeal CITATION : TRUSTEES OF THE PROPERTY OF ZOLTAN SANDOR, A BANKRUPT v RAMIREZ [1999] NSWCA 261 revised - 07/09/99 FILE NUMBER(S) : CA 40290/97 HEARING DATE(S) : 24 June 1999 JUDGMENT DATE : 20 August 1999

PARTIES : Trustees of the Property of Zoltan Sandor - Appellant Jeanette Ramirez - Respondent JUDGMENT OF : Meagher JA at 1; Sheller JA at 2; Beazley JA at 78

COUNSEL : M D Broun QC/DJ Durston - Appellant R W Tregenza - Respondent SOLICITORS : Michell Sillar - Appellant Watson Stafford - Respondent CATCHWORDS : EVIDENCE ACT 1995 - prior inconsistent statement - application of s43 - effect of ss60 and 64; TRUSTS - whether resulting trust - principle in Calverley v Green (1984) 155 CLR 242 inapplicable; EVIDENCE - parties admittedly engaged in dishonest activity - whether evidence could be relied on; COSTS - trustee in bankruptcy - whether costs should follow event where bankrupt engages in dishonest activity - whether fraudulent - trial Judge's discretion Bankruptcy Act 1966 ACTS CITED : Real Property Act 1900 Conveyancing Act 1919 Evidence Act 1995 Calverley v Green (1984) 155 CLR 242 Little v Little (1988) 15 NSWLR 43 CASES CITED: State Rail Authority of NSW v Earthline Constructions Pty Ltd (In Liquidation) (1999) 73 ALJR 306 Jones v Dunkel (1959) 101 CLR 298 Ex parte Angerstein (1874) LR 9 ChApp 479 Watson v Holliday [1882] 20 ChD 780 DECISION : Appeal dismissed with costs

THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40290/97 ED 2990/95 MEAGHER JA SHELLER JA BEAZLEY JA

THE TRUSTEE OF THE PROPERTY OF ZOLTAN SANDOR, A BANKRUPT v RAMIREZ Mr Sandor, a friend of the respondent, was made bankrupt and pursuant to s58 of the Bankruptcy Act 1966 (Cth) his property vested in the appellant. This property included a house and land situated at 23 Baltimore Road Mortdale Heights of which Mr Sandor was the registered proprietor. The respondent began proceedings in the Equity Division claiming that Mr Sandor acquired the Baltimore Road property and held it for her on trust. The respondent was successful in these proceedings, the trial Judge finding that all of the purchase monies for the property had been provided by the respondent and declaring that Mr Sandor held the whole of the Baltimore Road property as trustee on behalf of the respondent, subject to a mortgage in favour of Permanent Trustee Company Limited executed by Mr Sandor as Ms Ramirez's nominee. The appellant appealed against this decision on the ground that the trial Judge erred in failing to apply the principle in Calverley v Green and hold that the money borrowed by Mr Sandor on his own liability and obligation to repay was a contribution made by him to the purchase price. The appellant argued that the trial Judge erred in finding that the respondent provided all the money for the purchase of the property and that the only monies that Mr Sandor had were in a single bank account. The appellant claimed that the trial Judge was in error in failing to admit evidence of an alleged prior inconsistent statement by Mr Sandor. The appellant argued that the trial Judge erred in not relying on certain evidence from third parties about the relationship between Mr Sandor and the respondent, and in relying on the evidence of Mr Sandor and the respondent despite their having admitted to engaging in a dishonest activity. The appellant sought orders setting aside the judgment of the trial Judge and dismissing the respondent's claim, or, alternatively, a declaration that Mr Sandor had contributed to the purchase price of the property to the extent of the mortgage entered into and was a beneficial owner to that extent. The appellant argued that the trial Judge's order that the appellant pay the costs of the respondent should be set aside on the basis that there were special factors in this case which meant that costs should not follow the event, or, alternatively, that any costs should only be against the bankrupt estate. Held: By Sheller JA, Meagher and Beazley JJA agreeing: (1) The trial Judge was not in error in failing to admit evidence of a prior inconsistent statement contained in an affidavit of Mr Wise, a solicitor who acted for the Permanent Trustee Company Limited, because the conditions under s43 of the Evidence Act 1995 for the admission of Mr Wise's evidence were not met. Furthermore, s60 or s64 do not allow a party to by-pass the requirements of s43 where it wishes to rely upon a witness's prior inconsistent statement. Section 60 is concerned not with admissibility, but with the way in which a statement which has been admitted for non-hearsay purposes, for example, a prior inconsistent statement admitted for the purpose of assessing a witness's credibility, can be used. For the purposes of s64, the occurrence of the asserted fact cannot be said to be fresh in the memory of Mr Sandor when two and a half years had passed between the occurrence of the asserted fact and the date the representation was allegedly made. (2) The trial Judge did not err in finding, contrary to the evidence of Ms Collin and Mr Sampson and in reliance upon the evidence of the respondent and Mr Sandor, that the respondent and Mr Sandor were, at any relevant time, in a de facto relationship. (3) The failure to call Mr McBride, a solicitor who assisted Mr Sandor in the purchase of the property, did not undermine Ms Ramirez's case because it was quite consistent with her case that Mr McBride did not know that she was the purchaser of the property. The thrust of her case was that pretence was essential to her being able to acquire the property. (4) There is nothing in Calverley v Green directed to the situation where a person borrows money on behalf of another and the money borrowed is used to pay the purchase price of a property bought by the first party on behalf of the second. The trial Judge's finding that Mr Sandor entered into the mortgage as the respondent's nominee means that Calverley v Green is inapplicable. Accordingly, payment to the purchaser of the monies borrowed is not a contribution to the purchase price by Mr Sandor, but by the respondent; Calverley v Green (1984) 155 CLR 242 distinguished. (5) Judges must always scrutinise with care the evidence of parties or witnesses who have admittedly engaged in dishonest conduct such as falsifying documents and making false declarations. But that does not mean that the claims or evidence of such people must necessarily be rejected. Ultimately, the judge must weigh up the evidence with the degree of care required and make findings based on it. The dishonest conduct in the present case was part of the respondent's strategy to raise money to purchase the property. Once that is recognised, the significance of the dishonesty in the case is diminished. (6) In a case where a trustee in bankruptcy had made an unsuccessful application to the Court for payment of a sum of money, which the trustee alleged to belong to the bankrupt's estate, the trustee should be ordered to pay the other party his costs of the application. A trustee in bankruptcy who takes up the defence of an action begun against a bankrupt puts itself entirely in the bankrupt's place with respect to costs, subject to s105 of the Bankruptcy Act 1966. However, the award of casts remains discretionary and if a bankrupt has engaged in transactions which appear fraudulent and the trustee believes that it has a good cause of action or defence against the bankrupt, the Court may decide not to order the trustee, even though unsuccessful, to pay the bankrupt's costs. The trial Judge was not in error in deciding not to exercise this discretion; Ex parte Angerstein (1874) LR 9 ChApp 479 and Watson v Holliday [1882] 20 ChD 780 applied. Statutes Bankruptcy Act 1966 (Cth) Conveyancing Act 1919 Evidence Act 1995 Real Property Act 1900 Cases Calverly v Green (1984) 155 CLR 242 Ex parte Angerstein (1874) LR 9 ChApp 479 Jones v Dunkel (1959) 101 CLR 298 Little v Little (1988) 15 NSWLR 43 State Rail Authority of NSW v Earthline Constructions Pty Ltd (In Liquidation) (1999) 73 ALJR 306 Watson v Holliday [1882] 20 ChD 780

THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40290/97 ED 2990/95 MEAGHER JA SHELLER JA BEAZLEY JA

THE TRUSTEE OF THE PROPERTY OF ZOLTAN SANDOR, A BANKRUPT v RAMIREZ JUDGMENT

1 MEAGHER JA; I agree with Sheller JA. 2 SHELLER JA:

This appeal concerns the ownership of land on which a house known as 23 Baltimore Road, Mortdale Heights (the Baltimore Road property), is erected. The registered proprietor is Zoltan Sandor. On 30 September 1994 Mr Sandor was made bankrupt and pursuant to s58 of the Bankruptcy Act 1966 (Cth) his property vested in the appellant, Hugh Jenner Wily as trustee. 3 On 21 February 1991 Mr Sandor entered into a contract to purchase the Baltimore Road property for $175,000. On 4 February a deposit of 10 per cent had been paid to the estate agent. On 24 April 1991 the legal title to the land was transferred to Mr Sandor in accordance with the terms of the contract. 4 The respondent, Jeanette Ramirez, who lives in the Baltimore Road property, began proceedings in the Equity Division in which she claimed that Mr Sandor acquired the Baltimore Road property and held it as trustee for her. This claim was put on the alternative bases either that there was an agreement made in January 1991 that the land be so acquired, or, that the land was acquired solely from funds provided by Ms Ramirez. According to the statement of claim these funds were provided, as to $15,000, on 31 January 1991, $2,500, on 4 February 1991 (these two amounts making up the deposit), $5,000, on 4 March 1991 (used for the payment of stamp duty) and $49,500, on 23 April 1991, used to complete the contract. Ms Ramirez alleged that the balance of the money paid on completion, which Mr Sandor borrowed on the security of a mortgage of the Baltimore Road property, was borrowed on her behalf from "Home Fund" pursuant to an agreement between Mr Sandor and Ms Ramirez. The payment of these moneys, including the money raised by mortgage, were said to give rise to a resulting trust for the benefit of Ms Ramirez. 5 On 2 August 1994 Ms Ramirez lodged a caveat under s74F of the Real Property Act 1900 and on 9 July 1996 the trustee served on Ms Ramirez a lapsing notice pursuant to s74I of the Act. The trustee filed a cross-claim for mesne profits.

Trial 6 The proceedings were heard by Young J. On 23 April 1997 his Honour delivered his reasons for judgment and on 23 October 1997 with further reasons for judgment on costs declared that Mr Sandor held the whole of the Baltimore Road property as trustee on behalf of Ms Ramirez but subject to a mortgage number Z638053 and the indebtedness secured by this mortgage in favour of Permanent Trustee Company Limited by Mr Sandor. His Honour extended the caveat and dismissed the cross-claim. He ordered the defendant trustee to pay Ms Ramirez's costs of the proceedings. 7 Not surprisingly considerable attention was directed at the trial to the source of money used for the purchase of the property. Young J observed that the matters posed for decision really depended on questions of fact and credibility and that unfortunately most of the alleged payments were made in cash so there was little by way of corroborative documentary evidence to assist. 8 According to Ms Ramirez she intended to use money amounting to more than $83,000, which she had received by way of a property settlement following her marriage breakdown, to buy a flat and travel overseas. In January 1991 she withdrew $20,000 from her account at the Kingsford branch of the National Australia Savings Bank (National Bank) to purchase tickets for herself and her children to travel to Chile, her country of origin. She also withdrew the sum of $40,000 which she wished to invest with National Mutual Assets Management. After doing this, an estate agent introduced her to the Baltimore Road property. She fell in love with the house and wished to buy it. She cancelled the tickets and received a refund. On 31 January 1991 she withdrew $15,000 from her account and this, together with a refund of $2,500 which she had deposited on another property, was used towards the deposit on the Baltimore Road property. 9 At some time before payment of the deposit Ms Ramirez realised that she needed a loan to buy the house. Mr Sandor agreed to help her and they attempted to apply for a Home Fund loan but were told that their combined income would put them over the limit on which Home Fund was prepared to lend to the poorer section of the community. Apparently, she then made an attempt to obtain a loan in her own name but this was impossible because she was a pensioner. It was suggested to her that the problem could be overcome by putting the property into Mr Sandor's name alone and his then seeking a loan. 10 According to Ms Ramirez she asked Mr Sandor whether he would be the borrower and whether the house could be put in his name. After a couple of days consideration he agreed to do this. The solicitor on the purchase was Peter McBride of the firm of McBride Harle & Co. 11 Young J said: "There is no doubt at all that the cash was conveyed to the solicitors by the plaintiff." By cash his Honour apparently meant the $17,500 deposit, the $5,002 for stamp duty and the $49,500 to complete the purchase. This left a shortfall from the purchase price of $110,000 which was borrowed from Home Fund. 12 Young J said that the only moneys which Mr Sandor seemed to have had were in his savings bank account with the Broadway branch of the Commonwealth Savings Bank (Commonwealth Bank). That account showed receipts by Mr Sandor of money, one in October 1990, which his Honour identified as coming from his sister in Germany, and another on 7 February 1991, of an amount of $12,840 shown to have come from Coemini Travel Service, which his Honour said was almost certainly the refund of the air fares to Chile and was from Ms Ramirez. Young J observed that on 21 April 1991 $24,400 was paid out by the Commonwealth Bank to Mr Sandor in cash, $20,000 in $50 notes and $4,400 in $100 notes. Part of this money found its way back to Ms Ramirez and then on to McBride Harle & Co. 13 I interpolate that, at most, it seems possible that, putting aside the mortgage, approximately $12,000 of the $24,400 paid out of Mr Sandor's account on 21 April 1991 might have been treated as his money, or at least not Ms Ramirez's, being the balance of the amount which had come from Mr Sandor's sister. Mr Sandor said that this was used to pay his debts and expenses. 14 Young J said that when one looked at all the details they did not all fit together nicely but if one looked at the bigger picture it was very hard to see how the purchase price could have come about otherwise than in the way Ms Ramirez said it came about. 15 Ms Ramirez completed a loan application form for a "Home Fund Low Start Loan" which was signed by Mr Sandor and verified by a statutory declaration which he made before a Justice of the Peace. Shown amongst his assets were the then balance at the Commonwealth Bank, being $25,840, $30,000 in cash and the amount of the deposit, $17,500. Undoubtedly, according to what Ms Ramirez said, the document was false. 16 Mr Sandor became the sole mortgagor but Young J found on the facts that he was merely the nominee for Ms Ramirez. His Honour said: "It was always intended between the two of them that, although the property was 'technically mine' as Mr Sandor put it, the property was really (in other words in equity) the sole property of Ms Ramirez."

Grounds of Appeal 17 The trustee appealed from Young J's decision on the following grounds:

His Honour erred in failing to apply the principle enunciated in Calverley v Green (1984) 155 CLR 242, to hold that the money borrowed by Mr Sandor on his own personal liability and obligation to repay was a contribution made by him to the purchase price.

His Honour erred in finding that Ms Ramirez alone provided all the money for the purchase of the Baltimore Road property.

His Honour erred in rejecting evidence given by a solicitor, Mr Peter Wise, of an admission made by Mr Sandor in November 1993.

His Honour erred in finding that the only moneys that Mr Sandor seemed to have were in his bank account at the Commonwealth Bank in Broadway.

Grounds 5, 6 and 7 were that his Honour erred in not rejecting Ms Ramirez's and Mr Sandor's evidence because: 5. of different, contradicting versions which Ms Ramirez gave under cross-examination and re-examination on the money making its way from her account to the purchase of the Baltimore Road property; 6. Ms Ramirez had prepared false documents including statutory declarations for Mr Sandor to execute; 7. Mr Sandor had lied on a statutory declaration and his reason for doing so was to assist Ms Ramirez to have the property.

His Honour erred in rejecting certain evidence of Ms Collin and Mr Sampson, both officers of the appellant, regarding the relationship between Ms Ramirez and Mr Sandor.

His Honour erred in not making any finding on Ms Ramirez's failure to call the solicitor handling the conveyance of the property to give evidence even though Ms Ramirez made submissions that that solicitor was knowingly a party to the fraud.

Ground 10 related to costs. 18 The appellant sought orders that Young J's judgment be set aside and Ms Ramirez's claim be dismissed or, alternatively, a declaration that Mr Sandor had contributed to the purchase price of the property to the extent of the mortgage entered into and was a beneficial owner to that extent. The appellant asked for the costs of the appeal and in the Court below or, alternatively, that the appellant pay the costs out of Mr Sandor's estate only. 19 Ms Ramirez filed an amended notice of contention claiming that there was an express trust in relation to the Baltimore Road property and that the provisions of s23C of the Conveyancing Act 1919 did not apply because there was part performance by Ms Ramirez. Finally "in the alternative to the respondent's entitlement to a beneficial interest in the whole of the said house property, the respondent relies upon her contribution to the purchase moneys of the said house property in the proportions as determined by the trial Judge or, alternatively, by this Court."

The evidence and findings of fact 20 A good deal of the appellant's argument was directed to the trial Judge's acceptance of Ms Ramirez's evidence that she had contributed all or part of the money that was used to purchase the Baltimore Road property. However, in oral argument Mr Broun QC, who appeared for the appellant, said that it seemed probable that some money, perhaps as much as half of the payment that was not borrowed from the bank, came from Ms Ramirez. He suggested that because of an alleged de facto relationship it was not unlikely that Ms Ramirez would have lent money to Mr Sandor for the purpose of the purchase. Counsel seemed to accept that Ms Ramirez would have been "in a stronger position" had she made a claim to have an equitable half interest in the Baltimore Road property. 21 In evidence were bank statements for Ms Ramirez's account with the National Bank from 4 October 1990 to 3 April 1991 and for Mr Sandor's account with the Commonwealth Bank from 4 June 1990 to 7 February 1991. These statements showed the following significant deposits and withdrawals from Ms Ramirez's account:

Mr Sandor's statements showed the following significant deposits and withdrawals: 7 October 1990 deposit $13,392.48

22 Counsel proceeded to take us chronologically through the order of events from 16 October 1990 when $13,392.48 was deposited to Mr Sandor's bank account through to late 1995. Mr Sandor's sister and her partner claimed to have deposited $13,400 in Mr Sandor's account on or about 16 October 1990. 23 The chronology showed that on 24 January 1991 Mr McBride addressed a letter under his firm's letterhead confirming his instructions to "Mr Z Sandor and Ms J Ramirez". He confirmed that the firm would be pleased to act "for you on your proposed purchase of" the Baltimore Road property. 24 Counsel pointed to discrepancies in Ms Ramirez's evidence as to how she used the $15,000 she withdrew from her account on 31 January 1991. Ultimately she said this sum went to the deposit. Asked whether there was any indication that the deposit money came from Mr Sandor's bank account, Mr Broun submitted that, since there was a deal of evidence about the keeping of sums of cash in the house, there was no reason whatever to believe, either that Mr Sandor had only one bank account or that all money he had was in a bank account. This submission was repeated more than once in support of ground 4 of the appeal. Counsel relied upon Mr Sandor's occupation at the time as a house painter said to be "notoriously a cash job" in the building trade where "it was notorious there is a problem about the cash economy". It was pointed out that a trustee in bankruptcy largely depends upon what the bankrupt chooses to reveal about his or her affairs and in particular about any bank accounts. Mr Sandor was not cross-examined to suggest that he had cash resources other than the credit from time to time in his savings bank account to pay for the Baltimore Road property. When questioned about repaying his debts and asked if he often carried $3,000 in cash, he said: "Yes, because I don't believe in banks." In answer to the next question: "You don't deal in banks?" he said "I have no bank account so sometimes I have $3,000 in my pocket." He was then asked: "You often have large amounts of cash in your pockets?" to which he replied: "Not really, unfortunately, no. I wish I had more." 25 There were discrepancies about what Ms Ramirez said when interviewed by an officer of Home Fund. It was suggested that what the officer was in fact saying to Ms Ramirez was that she could not get a loan by herself. Therefore why did not she get someone else to do it with her? Ms Ramirez's evidence was that the idea of putting it into Mr Sandor's name came from the Home Fund officer. 26 The estate agent's receipt for the 10 per cent deposit of $17,500 dated 4 February 1991 showed the payment as being by cheque received from Mr Sandor. There was no withdrawal shown in Mr Sandor's bank statement indicating that the money could have come from this source. There were previous withdrawals from Ms Ramirez's bank account, notably one for $4,000 on 21 January 1991 and one for $15,000 on 31 January 1991 which could have been the source of this payment if translated into a bank cheque. Ms Ramirez said that $2,500 came as a refund of a deposit placed on another property. Mr Broun said that, against this, account had to be taken of when Ms Ramirez first inquired about finance and the letter from Mr McBride of 24 January addressed both to Mr Sandor and Ms Ramirez. Counsel accepted that there was nothing specific to indicate the money came from Mr Sandor's resources. 27 Relevant background material was said to be that Mr Sandor and Ms Ramirez were living together. She was a pensioner and he was employed as a painter. His bank account did not show receipts of amounts which might have been wages. Ms Ramirez was maintaining two children. These suspicions were said to justify the conclusion that, although money sufficient to make the payments had at various times been drawn from Ms Ramirez's bank account, the better view was that, although none up to this point had come from Mr Sandor's bank account, it came from other unknown bank accounts of Mr Sandor or from cash he kept elsewhere and accordingly Ms Ramirez's claim should be rejected. 28 Undoubtedly on 24 April 1991 $24,400 was withdrawn from Mr Sandor's account. Mr Broun said that if the money that Mr Sandor received from his sister and her partner had remained in his account until the day before settlement when the $24,400 was withdrawn, quite clearly that money went into the purchase price. 29 As I previously noted, on 5 February 1991 Mr Sandor signed documents which made up the two parts of what was called an "Application for NSW Government Home Fund Low Start Loan". The entries in these forms were filled in by Ms Ramirez. If Ms Ramirez's evidence is to be accepted, the entries were partly false. Mr Sandor, who gave his address as 1 Downey Street, Bexley, which he said he occupied as a tenant, was the applicant for the loan. He said he was employed as a commercial painter at $900 per week. Among the assets he listed were his bank account balance, cash of $30,000 and the deposit on the Baltimore Road property. The Baltimore Road property was offered as security. Its purchase price was referred to. The loan required was $110,000. On 11 February 1991 Mr Sandor signed a statutory declaration declaring and affirming that to the best of his information, knowledge and belief the statements and answers in the application were true and correct in every particular. These documents might be regarded as a powerful admission by Ms Ramirez, because she wrote the entries, and Mr Sandor, because he signed the documents, that Mr Sandor had contributed or intended to contribute the whole of the purchase price for the Baltimore Road property from his own resources and from money borrowed by him. 30 According to Ms Ramirez the information in the application form was inserted in order to obtain a loan to purchase the Baltimore Road property. Ms Ramirez had no choice but to use Mr Sandor's name and assert he was the purchaser of the property and was providing the balance of the purchase money additional to the loan. At the trial the trustee's counsel had the opportunity to cross-examine about this and to put submissions to the trial Judge. In the result the trial Judge found the facts against the trustee. 31 On 11 February 1991 Mr Sandor subscribed yet another statutory declaration in which he said: "I have my savings to the total of $30,000 in cash, which I intend to use on the purchase of a residential property." This statutory declaration was provided to the Home Fund lender. 32 On 13 February 1991 McBride Harle & Co wrote to Mr Sandor alone about the proposed purchase of the Baltimore Road property: "We refer you to our recent telephone conversations with Ms Ramirez and advise that we have now received draft form of agreement for sale of land from the Vendors' Solicitors. In the light of our recent discussions, you might kindly advise as to whether we are to proceed any further in this matter." 33 If it matters Mr Sandor's name was misspelt "Zandor". It seems to me there is little to be taken from this letter beyond the fact that in accordance with Ms Ramirez's and Mr Sandor's intended deception, Mr Sandor was to appear to be the purchaser of the Baltimore Road property. 34 On 19 February 1991 McBride Harle & Co wrote to Mr Sandor, with his name correctly spelled, regarding the proposed purchase of the Baltimore Road property, confirming an appointment with him on that date and noting that the solicitors had handed to him the pest inspection report and building report and that he was satisfied with the information contained in both. Instructions were also confirmed that the deposit was to be transferred to the vendors. The solicitors said they discussed the deletion of the penalty interest clause with the vendors' solicitor and that upon receipt of satisfactory instructions in this regard they would attend to the exchange of agreements "on your behalf". Counsel remarked that if Mr Sandor was a nominee, a dummy, a front man, or somebody who was not the real purchaser, it was strange that he went to the solicitor and gave instructions. He also was given the pest inspection report and the building report. As stated earlier, the trustee's ninth ground of appeal turned upon Ms Ramirez's failure to call Mr McBride to give evidence. 35 Page 1 of the standard form Agreement for Sale of Land said to have been made on 21 February 1991 showed the purchaser as follows: "Zoltan Sandor of 1Downey Street Bexley and Janette Ramirez of the same address"

It was submitted that this clearly established that the original intention was that they would be purchasing together. 36 On 4 March 1991 $5,000 was withdrawn from Ms Ramirez's bank account. On 15 March 1991 McBride Harle & Co issued a trust account receipt for $5,002 on account of stamp duty, said to have been "Received by cheque, Commonwealth Savings Bank CSB Sydney". The account was shown as: "Z & J Sandor & Ramirez 1 Downey Street, Bexley NSW 2207"

It was open to conclude, and there was evidence from Ms Ramirez, that the $5,000 was used for the deposit. There was no withdrawal of any sum sufficient to provide $5,000 from Mr Sandor's bank account on or before 15 March 1991. Young J was mindful of the significance, or lack of it, of the payment by one party of stamp duty in determining whether there was a resulting trust; compare Little v Little (1988) 15 NSWLR 43 at 46. 37 The use of Mr Sandor's bank rather than Ms Ramirez's for the bank cheque was said to raise doubts about the source of the fund. It seems to me that the use of a Commonwealth Savings Bank bank cheque, if it has any significance, may have been no more than a step in continuing the fiction that Mr Sandor was the purchaser. Counsel submitted that it indicated that it was more likely that the $5,002 was Mr Sandor's money. Although the trustee sought to make some point about Mr McBride's answer to para 34 of the requisitions on title, counsel accepted that this led nowhere. 38 On 26 March 1991 a further $5,000 in cash was withdrawn from Ms Ramirez's bank account. At one stage in her evidence she had said, obviously wrongly, that this was the money used for the payment of stamp duty. 39 On 22 April 1991 the $24,400 was withdrawn from Mr Sandor's bank account in cash. On 23 April 1991, a "money received docket" was issued by McBride Harle & Co acknowledging the receipt in cash of $49,500 from Mr Sandor "on account bal payment moneys and costs" to be banked to the trust account. On the same day McBride Harle & Co also issued a receipt "received from Z Sandor - cash on account balance set moneys and costs" for the same amount. The account was shown as "1013371 Z & J Sandor". The bank statement showed, so it is said, that Mr Sandor accordingly attributed at least $12,840 of the purchase money. 40 After settlement Mr McBride gave a certificate that he had explained the mortgage to Mr Sandor. On 1 May 1991 McBride Harle & Co wrote to Mr Sandor confirming that settlement had taken place and enclosing, amongst other things, their memorandum of costs and disbursements. On 16 October 1991 McBride Harle & Martin (the firm had changed its name) sent Mr Sandor a letter of demand for its fees and threatened legal proceedings. On 24 October Mr Sandor agreed to commence paying $200 per week immediately and thereafter made two payments on 28 October and 11 November 1991. On 14 November 1991 McBride Harle & Martin wrote to Mr Sandor asking for the instalment payments to be made. On 26 November 1991 a general account receipt for $200 received by cash from Mr Sandor issued to him. A later receipt of 9 December 1991 was from "Z & J Sandor - cash". A receipt dated 4 February 1992 was addressed to Z Sandor and acknowledged receipt from Z Sandor of $200 cash. The account was described as Z & J Sandor. 41 In March 1993 Mr Sandor and Ms Ramirez signed a document she had written out certifying that he owed to his sister and her partner $13,400 given to him as a loan. The lenders also signed the document. The document finished "In the event of my death prior to settling the debt Ms Jeanette Ramirez of the same address will repay you in full." On 2 April 1993 Peter Wise & Co wrote on behalf of the lenders to Mr Sandor demanding repayment. 42 On 24 June 1993 McBride Harle & Martin wrote again to Mr Sandor seeking resumption of the payment of instalments towards their fees. Thereafter a general account receipt of 6 July 1993 from the Commonwealth Bank acknowledged payment of $265 on account of the purchase of the Baltimore Road property. 43 On 17 November 1993 the lenders obtained judgment against Mr Sandor in the Local Court. Mr Sandor's affidavit as to property and means, which appears to have been sworn on 22 February 1994, referred to the value of a house/land $195,000 approximately and a mortgage of $110,000 which was almost certainly a reference to the Baltimore Road property although the location was shown as "Bexley - Home Fund". On 2 August 1994 the caveat was verified though not by Ms Ramirez. The caveat, the trustee claims, was the first assertion by her that she had an interest in the property. 44 The trustee alleged that Ms Ramirez and Mr Sandor were in a de facto relationship. Ms Ramirez did not run a case at trial that this circumstance meant that she had a claim to at least a part interest in the Baltimore Road property. The trustee relied on this relationship to suggest that Ms Ramirez would not, as she claimed at the trial, have had a 100 per cent interest. Part of this evidence was that of Lisa Margit Collin and David Henry Sampson, persons assisting the trustee in the administration of the bankrupt estate. Ms Collin said that on or about 5 October 1994 she telephoned a number 579 5216 in an attempt to contact Mr Sandor about his bankruptcy and that a woman answered the call and in the course of the conversation when asked whether Mr Sandor was available said "I'm his wife" and that her name was "Jeanette". In a later conversation Ms Collin spoke to a woman who said it was "Mrs Sandor speaking". The witness accepted that the last conversation could have been with another Miss or Ms Sandor and not Jeanette Ramirez. 45 Mr Sampson was an accountant employed by the trustee's firm. During an interview in October 1994, when asked by Mr Sampson what his marital status was, Mr Sandor said: "I'm single. I live with my girlfriend". 46 On 12 October 1994 the trustee wrote to Watson Stafford Wilmot Klint who, he understood, acted for Ms Ramirez. The letter referred to Ms Ramirez as "Mr Sandor's de facto spouse". In the following correspondence that statement was not denied. In a letter of 27 October 1994 Ms Ramirez's solicitors, writing to the trustee, referred to the Baltimore Road property as "the current matrimonial home". 47 The trustee submitted that Ms Ramirez made up her account of events after bankruptcy proceedings were brought in 1994. Until that time the sworn documents indicated that the property belonged to Mr Sandor. The trustee submitted that the decision of the High Court in State Rail Authority of New South Wales v Earthline Constructions Pty Limited (In Liquidation) (1999) 73 ALJR 306 was an authority which enabled this Court to reach behind the findings of fact that Young J made with the benefit of seeing and hearing the witnesses. The evidence to which I have referred, particularly the documentary evidence, was, it was submitted, such that we should conclude that Young J had "too fragile a base" to reach the conclusion he did. 48 Young J considered that a matter of particular importance was how the purchase price could have been funded or paid otherwise than in the way that Ms Ramirez said it was. In a passage of his judgment which I have already paraphrased, his Honour said: "The only moneys which Mr Sandor seems to have had were in his bank account with the Commonwealth Bank in Broadway. Mr Durston says 'We don't know whether the bankrupt had other bank accounts'. That comment is quite accurate, but I can only act on the material that the parties have placed before me, doubtless after appropriate preparation considering all the circumstances. Mr Sandor did have some money in his bank account which was money that had come from his sister in Germany. He also had some money which the plaintiff had handed to him and at the end of April 1991 he withdrew $24,400 from his bank account. The deposit slip which is part of Exhibit DX08 has a deposit made on 7 February into that account which shows that $12,640 came in from the Coemini Travel Service and this would almost certainly be the refund of the airfares to Chile which was from the plaintiff. On 21 April $24,400 was paid out by the Commonwealth Bank to Mr Sandor in cash, $20,000 in fifty dollar notes and $4,400 in hundred dollar notes. Part of this money found its way back to Ms Ramirez and then on to McBride Harle & Co. Part of it was used by Mr Sandor, on his evidence, to repay some debts." 49 In his affidavit evidence Mr Sandor said that the $12,840 placed in his account in February 1991 was put there by Ms Ramirez from her money to build the account up to $25,000 which Mr Sandor understood was required by Home Fund as one of the requirements for obtaining the loan. On 22 April 1991 the sum of $24,400 was withdrawn from that account. Of that sum the $12,840 which Ms Ramirez had deposited in February 1991 was given back to her. The balance of the moneys was used in part for specific purposes Mr Sandor enumerated including repaying loans from Janos Hemelia, Mary Farkas and Robert Sebes. The balance of the moneys he said he used for day to day living expenses, including rent, food, clothing, transport, etc as at this stage he had had no source of income for two months. 50 One of the creditors, Mary Farkas, was not available to give evidence at the time of trial though she had been in Australia after the litigation had begun and his Honour took that into account. Mr Hemelia swore an affidavit but was not present for cross-examination. His Honour said he read para 1 of his affidavit which confirmed he had lent Mr Sandor some money. Although his Honour said the details did not completely coincide between Mr Sebes' evidence and Mr Sandor's, they agreed that $1,500 in cash was lent to Mr Sandor by Mr Sebes and that that money was repaid in cash somewhere early in 1991. His Honour said he had no reason to disbelieve anything Mr Sebes said. This evidence corroborated Mr Sandor as to part of the disposal of the moneys which he received in cash on 21 April from the Commonwealth Bank. 51 His Honour said of Ms Ramirez and Mr Sandor: "The plaintiff gave her evidence confidently. She was cross-examined for almost three hours and although she did have the propensity for saying 'Do you want me to lie?' every so often, it seemed to me, in view of the fact these events happened six years ago, that she gave her evidence confidently and honestly and I accept her evidence. Mr Sandor was not as impressive. He was not as fluent, but perhaps that is partly explained by the fact his mastery of English was not quite as good as the plaintiff's. Both the plaintiff and Mr Sandor were involved in an enterprise which was illegal, but this would not be the first case I have tried in which persons have justified in their own minds that their need to obtain something, such as a roof over their heads, justifies them in 'cutting corners' even dishonestly or criminally. It seems to me on the evidence which has been given by the plaintiff, corroborated by the little material that there is, even bearing in mind the rule in [ Michael v Thompson (1894) 20 VLR 548 at 552], on the balance of probabilities the cash component for the purchase of the property was provided by the plaintiff and that Mr Sandor, the registered proprietor, would hold in on trust for her accordingly."

Review of Findings 52 Ms Ramirez explained to the satisfaction of Young J why Mr Sandor was used as her nominee, namely so that she could obtain a Home Fund loan. If that was accepted, what followed in terms of documentary evidence was consistent with it albeit that it involved preparing and signing false documents. Undoubtedly, as his Honour acknowledged, that course of action told against their credit. But once the reason for the course they followed is accepted as being true then what they did, though dishonest or criminal, was consistent with the account they gave of the true nature of the transaction. 53 Moreover, the suggestion that this was all concocted once bankruptcy proceedings began did not explain the fact that Ms Ramirez was looking for and found a property and that, with the possible exception of the money deposited in Mr Sandor's bank account by his sister, she provided the cash resources used for the purchase. In the absence of any sign that Mr Sandor was paying for the property from his only known bank account, I think it fanciful, particularly as he was not cross-examined to show this, to suggest that the money was coming from some other account or that it was money he held in cash. There was no suggestion that he was looking to purchase a house or had the means to do so. 54 I will now deal with the grounds of appeal in the most convenient order.

Ground 3 - Evidence of Peter Wise 55 The trustee read an affidavit by Mr Wise, a solicitor, who had acted for the lenders in proceedings against Mr Sandor. In para 7 Mr Wise deposed that on 17 November 1993 he attended the Local Court at the Downing Centre representing his clients in those proceedings. There he met Mr Sandor. That part of the paragraph I now set out Young J rejected: "During one particular conversation at the Local Court, I recall saying to him words to the following effect: 'My clients gave you money in trust and you went ahead and spent it including using it towards the purchase of a house.' The Bankrupt said words in reply to the following effect: "I used some of it towards the deposit. I borrowed moneys to buy the house.' I then said to him words to the following effect: 'Mr Sandor, I did not suggest my clients had so much money that my clients could buy a house with what they sent to you.' "

The trustee submitted that his Honour wrongly rejected this evidence. 56 In accordance with the practice of the Equity Division Mr Wise's affidavit was read before any oral evidence was taken. The part of para 7 I have quoted was objected to and rejected by Young J. The transcript does not disclose the ground of the objection. I assume the material objected to was pressed but that is not recorded and the grounds for pressing it are not recorded. 57 On its face the material was evidence of a prior inconsistent statement by Mr Sandor, a witness who was not himself a party to the proceedings. Section 43 of the Evidence Act 1995 subs (1) provides that a witness may be cross-examined about a prior inconsistent statement alleged to have been made by the witness whether or not complete particulars of the statement have been given to the witness or a document containing a record of the statement has been shown to the witness. Subsection (2) provides: "If, in cross-examination, a witness does not admit that he or she has made a prior inconsistent statement, the cross-examiner is not to adduce evidence of the statement otherwise than from the witness unless, in the cross-examination, the cross-examiner: (a) informed the witness of enough of the circumstances of the making of the statement to enable the witness to identify the statement, and (b) drew the witness's attention to so much of the statement as is inconsistent with the witness's evidence."

Subsection (3) provides that for the purpose of adducing evidence of the statement, a party may re-open the party's case. 58 Young J could correctly have rejected the prior inconsistent statement unless and until the conditions in s43 (2) were fulfilled. Clearly if this had been done the statement could have been tendered by the defendant trustee in its case, after Mr Sandor had been cross-examined. 59 Mr Sandor was cross-examined about the statement in a way which arguably would have made Mr Wise's evidence of his alleged prior inconsistent statement and the circumstances in which he made it admissible if it had been re-tendered. It was not re-tendered though Mr Wise was cross-examined to the opposite effect of the conversation he had deposed to. He denied this different conversation. 60 I see no error in the course his Honour took in relation to this part of Mr Wise's evidence. On this appeal the trustee relied upon ss 60 and 64 of the Evidence Act to say that the trial Judge erred in rejecting the evidence. Counsel for Ms Ramirez, who was present at the trial, said that the grounds relied on in the trustee's written submissions were not, as far as he could recall, made to the trial Judge. 61 I would be content to hold that this ground of appeal fails because the conditions under s43 for the admission of Mr Wise's evidence were not met. Furthermore, I do not think either s60 or s64 allow a party to by-pass the requirements of s43 where it wishes to rely upon a witness's prior inconsistent statement. Section 60 is concerned not with admissibility, but with the way in which a statement which has been admitted for non-hearsay purposes, as, for example, a prior inconsistent statement admitted for the purpose of assessing a witness's credibility, can be used. 62 Section 64 presents another problem. Subsection (3), upon which the trustee relies, provides that if the person who made the representation (Mr Sandor) has been or is to be called to give evidence, the hearsay rule does not apply to evidence of the representation that is given by a person who saw or heard the representation being made (Mr Wise) "if, when the representation was made, the occurrence of the asserted fact was fresh in the memory of the person who made the representation." When Mr Sandor made the representation alleged, in November 1993, nearly two and a half years had passed since the occurrence of the asserted fact, namely the use of the money towards the deposit. We could hardly assume that the occurrence of the asserted fact was fresh in the memory of Mr Sandor. In my opinion, ground 3 of the notice of appeal fails.

Ground 8 - The evidence of Ms Collin and Mr Sampson 63 I have already referred to Ms Collin's and Mr Sampson's evidence. Young J did not regard the evidence of Ms Collins and Mr Sampson of great weight. He said: "First of all, it was quite apparent that the officers had been influenced by the material which they had been given by the solicitor for the petitioning creditor, who was hardly sympathetic to Mr Sandor. Secondly, the evidence of Ms Ramirez, which, as I have said, I accepted, and indeed the evidence of Mr Sandor shows that, whilst there had been a relationship between himself and the plaintiff in the late 80's, there was no current relationship. I can only conclude that there has been some misunderstanding on the part of the trustee's officers. I certainly would not find on their evidence that the parties were in a de facto relationship or any other close relationship as at 1994-1996. 64 Both Ms Collin and Mr Sampson were cross examined. There is no basis, in my opinion, upon which this Court can say that Young J erred in not finding, contrary to the evidence of Ms Ramirez and Mr Sandor, and in reliance upon what Ms Collin and Mr Sampson said, that Ms Ramirez and Mr Sandor were at any relevant time in a de facto relationship.

Ground 9 - Ms Ramirez's failure to call Mr McBride 65 The most that the trustee could make of Ms Ramirez's failure to call Mr McBride was to submit that Mr McBride's evidence would not have assisted Ms Ramirez's case. It would, however, have been quite consistent with Ms Ramirez's account that Mr McBride did not know that she was the purchaser of the Baltimore road property and that Mr Sandor was no more than her nominee. Ms Ramirez gave evidence that she discussed with the lady she went to see at Home Fund putting the Baltimore Road property in Mr Sandor's name alone. After further cross examination and some prevarication she gave the following evidence: "Q. Did Mr McBride ever suggest to you that you should put the property in Mr Sandor's name? A. That was the suggestion that we had. Q. Sorry? A. That was the suggestion, to put it in his name and do it that way. That's how we did it. Q. Was that Mr McBride's suggestion? A. I just explained you that. It was the lady at Home Fund and the solicitor who said, "You can do it in his name and get it all" you know, the way I want it. Q. Was it your solicitor that told you that you could put it in Mr Sandor's name? A. It was the lady at Home Fund and the solicitor. Q. Which solicitor? A. Well I already had the solicitor, Peter. Q. The Peter solicitor? A. Yes. Q. Your solicitor? A. My solicitor. Q. You [sic] solicitor told you to do this? A. He, said - he didn't tell me to do it. He suggested that was one of my options if I wanted to buy something and I could not really do it." 66 The trustee relies upon what was said in Jones v Dunkel (1959) 101 CLR 298 particularly at 308. The trustee submits that the more likely inference is that Mr McBride did not advise fraud but advised that Mr Sandor should be both the legal and equitable purchaser. While Ms Ramirez's evidence about the source of the idea to put the property in to Mr Sandor's name is unsatisfactory and unclear, this does not advance the trustee's case except to the extent that it reflects upon her credit. There is no reason why Mr McBride should advise Ms Ramirez or Mr Sandor to put the property into Mr Sandor's name unless he believed that Mr Sandor was the purchaser. But the thrust of Ms Ramirez's case was that that pretence was essential to her being able to acquire the property. In my opinion, the failure to call Mr McBride does not undermine Ms Ramirez's case.

Ground 1 - Calverley v Green 67 Calverley v Green concerned a question of resulting trust where a man and a woman, living in a de facto relationship, financed the purchase of a house in their joint names by raising money on a mortgage under which they were jointly and severally liable to make repayments. The parties agreed that the man would make the repayments to the finance company, which he did. At 257 Mason and Brennan JJ said: "It is understandable but erroneous to regard the payment of mortgage instalments as payment of the purchase price of a home. The purchase is what is paid in order to acquire the property; the mortgage instalments are paid to the lender from whom the money to pay some or all of the purchase price is borrowed. In this case, the price was $27,250, of which $18,000 was borrowed from the mortgagee by the plaintiff and defendant jointly. The balance was paid by the defendant out of his own funds … thus the plaintiff and the defendant both contributed to the purchase price of the … property. … The payment of instalments under the mortgage was not a payment of the purchase price but a payment towards securing the release of the charge which the parties created over the property purchased." 68 The trustee submits that since Mr Sandor borrowed approximately $110,000 from the mortgagee and was responsible for the repayment of this loan and paying interest on it the proceeds of the loan used to pay the purchase price of the Baltimore Road property must be treated as his contribution to the purchase price. However, there is nothing in Calverley v Green directed to the situation where a person borrows money on behalf of another and the money so borrowed is used to pay the purchase price of a property bought by the first party on behalf of the second. Young J's finding, which was open on the evidence, that Mr Sandor entered into the mortgage as Ms Ramirez's nominee means that the passage in Calverley v Green on which the trustee relies is inapplicable. Accordingly, payment to the purchaser of the monies borrowed is not a contribution to the purchase price by Mr Sandor, but by Ms Ramirez. 69 This ground of appeal fails.

Grounds 2, 4, 5, 6 and 7 70 All these grounds of appeal relate to findings of fact that Young J made. For reasons I have already given, I am not persuaded that any of the findings attacked were not open to Young J on the evidence. Judges must always scrutinise with care the evidence of parties or witnesses who have admittedly engaged in dishonest conduct such as falsifying documents and making false declarations. But that does not mean that the claims or evidence of such people must necessarily be rejected. Ultimately, the Judge must weigh up the evidence with the degree of care required and make findings based on it. The dishonest conduct in the present case was part of Ms Ramirez's strategy to raise money to purchase the Baltimore Road property for herself. Once that is recognised, as his Honour found, the significance of the dishonesty in this case is diminished. Accordingly, all these grounds of appeal fail.

Costs 71 On 23 October 1997 Young J delivered a separate judgment dealing with costs. He ordered the trustee to pay Ms Ramirez's costs of the proceedings. The trustee had argued that there were special factors in this case which meant that costs should not follow the event or, alternatively, that any costs should only be against the bankrupt estate. As to the first the trustee relied upon the wrongful conduct of Ms Ramirez in arming Mr Sandor with title, assisting him in preparing false documents to obtain the mortgage including false statutory declarations and placing moneys in Mr Sandor's account so that he could represent to the lender that the moneys were his. In general terms the trustee submitted that trustees have a public duty to discharge and did not come to a matter such as the present with first hand knowledge of the facts. If a trustee was to be made liable in the circumstances where the plaintiff's own dishonesty gave rise to the bankrupt's name being on the title and where the plaintiff failed to keep any contemporaneous records setting forth the true nature of the transaction, it would deter trustees from defending what might in other matters amount to frauds on creditors. 72 In Ex parte Angerstein (1874) LR 9 ChApp 479 Mellish LJ said that it was quite right that, in a case where a trustee in bankruptcy had made an unsuccessful application to the Court for payment of a sum of money, which the trustee alleged to belong to the bankrupt's estate, the trustee should be ordered to pay the other party his costs of the application. His Lordship said at 479-480: "The reason for ordering the trustee to pay costs is, that applications of this kind to the Court of Bankruptcy are in substitution for actions at law. In an action at law a trustee in bankruptcy would be liable in the same way as any other plaintiff. In a case where a trustee makes an application the success of which is doubtful, he ought, before making it, to get from the creditors an indemnity against the costs, if he knows there are no assets out of which they can be paid." 73 The rule so stated still applies in Australia; see McDonald, Henry & Meek, Australian Bankruptcy Law and Practice, 5th ed, at 134.1.80. Subject to s105 which relieves the official trustee or a registered trustee from personal liability for costs in relation to an application to review a decision made by the official trustee under s102 (1), (3) or (4) in respect of a proof of debt, unless, in the case of a registered trustee, the Court is of opinion that there are special circumstances that justify an order that the trustee be personally liable, a trustee in bankruptcy who takes up the defence of an action begun against a bankrupt puts itself entirely in the bankrupt's place with respect to costs; Watson v Holliday [1882] 20 ChD 780 at 785. 74 However, the award of costs remains discretionary and if a bankrupt has engaged in transactions which appear to be fraudulent and the trustee believes that it has a good cause of action or defence against the bankrupt, the Court may decide not to order the trustee, even though unsuccessful, to pay the bankrupt's costs. However, Young J, after referring to the authorities and acknowledging there was some suspicion brought about by Ms Ramirez's conduct said in his reasons for judgment of 23 October 1997: "However, her conduct, which was described by Mr Durston, [who appeared for the trustee] as 'fraudulent', and by Mr Tregenza [who appeared for Ms Ramirez] as 'resourceful', was not aimed at misleading the trustee but was rather aimed at getting over what the plaintiff thought were barriers of red tape against her obtaining a commercial result, namely, a home loan for a home in which she was investing the proceeds of her divorce settlement. Furthermore, the trustee was not misled by any misstatements made by the plaintiff. As I said in my judgment of 23 April, the trustee's officers seemed to have poisoned their minds by accepting too readily statements made about the plaintiff and the bankrupt by creditors who were unsympathetic to them rather than being misled by the bankrupt or the plaintiff. I further said, in retrospect, perhaps rather kindly, that the trustee's officers had some misunderstanding as to what they were told by the plaintiff. Although this case does get close to the line, it does not seem to me that the suspicious circumstances of the transaction in the light of all the material and in the light of my findings on 23 April, justifies me from departing from the ordinary rule." 75 Applying the rule in Ex parte Angerstein his Honour was not prepared to limit the trustee's liability to pay the plaintiff's costs to the assets in Mr Sandor's estate. I see no error in the exercise of this discretion. 76 In my opinion no sufficient ground is shown for disturbing the order for costs.

Orders 77 The appeal should be dismissed with costs. 78 BEAZLEY JA: I agree with Sheller JA. *********

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