Worrell, in the matter of Tantner (Bankrupt) v Issitch

I Sigfried Tantner, now residing at Autumn Lodge Nursing Home of 691 Logan Road Greenslopes, want my wife, Ludmilla Issitch to sell my house at 97 Heather Street Wilston. With the proceeds of the sale I want my wife, Ludmilla Issitch, to build another house on the land that she owns in St Clair Crescent Wishart.

3 On 13 April 1993 the bankrupt executed a power-of-attorney in favour of the respondent, authorizing her:-

To do on my behalf anything that I may lawfully authorize an attorney to do.

4 On the second page of the power-of-attorney, the attorney's attention is drawn to Division 2 of Part IX of the Property Law Act 1974-1990 (Qld). There is a summary of the relevant provisions, stressing that the attorney must act having regard to the interests of the donor. On the same day, the bankrupt also executed a will. The respondent was the sole beneficiary. I was told that there is a later, putative will. Neither has been admitted to probate. On that day the bankrupt also executed a transfer in Form 2 under the Real Property Act 1861-1986 (Qld), purporting to transfer an estate in fee simple to himself and the respondent as joint tenants, but without describing the subject matter of the transfer. The transfer recited that it was "in consideration of the love and affection borne between the transferor and the transferee Ludmilla Anatolievna Tantner". The circumstances in which these documents were executed appear from a letter to the bankrupt and the respondent dated 19 April 1993 from Messrs Rouyanian Maunsell, who were their solicitors. The relevant parts are as follows:-

THE AFFAIRS OF MR SIGFRIED TANTNER We refer to the writer's attendance upon yourselves on the 15th instant and thank you for your instruction. We confirm your instructions that you wished us to act on your behalf in respect to your various affairs. We further confirm your instructions that:- 1. We were to prepare an enduring power of attorney to be granted by Mr Tantner in favour of Mrs Tantner. 2. That Mr Tantner wished to transfer a half interest in his home at 97 Heather Street Wilston. 3. Your will. 4. That you wish us to take over your affairs in respect to the squatters presently occupying your premises at 97 Heather Street.

5 The reference to "squatters" is a reference to the cross-respondents who, contrary to the bankrupt's wishes, continued to reside in the Heather Street property. It is not clear whether the reference to the attendance "on the 15th instant" is erroneous and should refer to an attendance on 13 April, or whether the power-of-attorney, the will and the transfer are incorrectly dated.

6 In July 1993, proceedings were commenced against the cross-respondents in the District Court, seeking possession of the Heather Street property, which was eventually obtained. That property was sold in October 1993. From the proceeds, some moneys were retained by Rouyanian Maunsell in settlement of outstanding fees. On 29 October, the bankrupt signed ex 4 which provides:-

I, Sigfried Tantner, would like the money from the sale of my house in Wilston to be put into my ANZ bank account. I want my wife to conduct all business in relation to the construct of a new house. I do not want the money from the sale to remain in the Rouyanian trust account.

7 It is signed and dated, but the bankrupt has then written, in almost illegible handwriting, the following:-

The money of the sale of my house to be paid immediately to me S Tantner. No cheque or money to be paid to Mr Rouyanian the solicitor. We need the money to build our new home. Signed by me S Tantner. Witness Lillian M Blades.

8 The balance of the proceeds of sale was deposited into the bankrupt's account. On 10 November 1993 the respondent withdrew $20,000 in cash and $90,167 by cheque. The latter amount was deposited into her account. 9 The cross-respondents had counter-claimed in the District Court for an amount said to be due to them pursuant to the deed of 21 December 1989. Mr Rouyanian acted for the bankrupt in connection with those proceedings until December 1993 when his instructions were withdrawn. I will discuss the circumstances in which they were withdrawn at a later stage. On 24 May 1994 the cross-respondents recovered judgment on their counter-claim in the amount of $68,000 plus interest. They subsequently issued a bankruptcy notice and a petition in bankruptcy, resulting in a sequestration order against the estate of the bankrupt on 29 September 1994. There were, in effect, no assets in the estate. The current proceedings were commenced on 29 May 1995. The bankrupt died on 3 October 1996. 10 In the current proceedings the applicant asserts that the amounts of $20,000 and $90,167 were withdrawn from the bankrupt's account and expended without his consent, claiming such sums as moneys had and received "to the use of the respondent". Obviously, the reference should be to the "bankrupt" or "the applicant". There is also an allegation concerning a further amount of $1,500, but it is no longer the subject of dispute. It is alleged that the respondent "wrongly applied the sum of $111,667 to her own use". That sum includes the additional $1,500. It is also alleged that subsequent to 10 November 1993, the respondent became the registered proprietor of certain land at Wishart and constructed a dwelling thereon, using the bankrupt's money to acquire the land and/or construct the dwelling, and that as a result of this, she holds that property on trust for the applicant. Alternatively, it is alleged that the moneys were transferred to the respondent "for the purposes of constructing a home in which the bankrupt and the respondent would live and have a joint interest", that this constituted a settlement within the meaning of s 120 of the Bankruptcy Act 1966 (Cth) (the "Bankruptcy Act") and is therefore void as against the applicant. There is also a general plea that any transfer of an interest in the Heather Street property to the respondent is void. The applicant does not persist in the allegation that the Wishart property was acquired by the respondent after 10 November 1993, nor in the allegation that moneys derived from the bankrupt were used in acquiring the property (as opposed to constructing the house). 11 Although it is for the applicant to establish his entitlement to relief, it is clear that the respondent has the most detailed knowledge of the transactions which occurred between her and the bankrupt. For that reason it is convenient to consider her evidence before that of the other witnesses. Unfortunately, much of that evidence merely demonstrates her marked hostility towards Mr Rouyanian, who gave evidence on behalf of the applicant, the cross-respondents and a person called Wally Osad who appears to have taken over the management of the bankrupt's affairs towards the end of his life, notwithstanding his marriage to the respondent. It is common ground that the respondent received $110,167 from the bankrupt in late 1993, and that this represented the balance of the proceeds of sale of the Heather Street property after deducting the moneys due to the solicitors. It is also common ground that at the time, the respondent was building a house at Wishart for a contract price of about $125,000. The respondent also admits that a sum of $4,242, derived from the bankrupt's account, was paid to the builder, but she says that this was the only sum so paid. 12 During her evidence, the respondent was assisted by an interpreter. She has a quite good command of English, but it is by no means perfect. On occasions, she did not wait for questions to be translated. She often responded in English. For these reasons and others, it was a little difficult to follow her evidence. The transcript is probably even more difficult to follow. 13 The respondent commenced visiting the bankrupt in late 1992. At some time thereafter, according to her, he asked her to marry him, proposing that if she did so, he would transfer his interest in the Heather Street property to them jointly so that she would have it after his death. They were to live there. She did not accept this proposal, but their friendship continued. Subsequently, she agreed to marry him "on the basis suggested by him". That marriage was celebrated by Mr Dragona on 11 April 1993. They then consulted Mr Rouyanian and as I have said, the bankrupt executed certain documents on 13 or 15 April 1993. The proceedings against the cross-respondents were commenced. According to the respondent, she paid substantial amounts on account of the costs incurred. The amount of $1,500 from the bankrupt's account (referred to above) also went to pay those costs, as did some part of the sale price of the Heather Street property.

14 Paragraphs 49, 50 and 51 of the respondent's affidavit state:-

49. On 10 November 1993 I withdrew $20,000 in cash from the ANZ account and I took that money home with me and put it with other moneys in cash held by me. This cash money was my and my mother's money of on the sale of our two units in Moscow. I had sold my unit in 1986 and the other was sold by my mother when she still in Moscow in 1988. My mother brought the money into Australia in US dollars (about $US 68,000) and I brought $US 44,000. I had permission from the USSR Ministry of Finance dated 1 December 1986 to bring foreign currency out of the Soviet Union - Annexure G: and my mother would have had a similar authority.

50. I converted the US dollars cash from time to time by selling to various Russian people including Gali Nicholls and at the Commonwealth Bank and Westpac Queen Street and at the Gold Coast currency exchanges. I also changed money from time to time into Australian dollars.

51. I also sold antiques and jewellery and icons to the Ricketts - Baboori Antiques and others.

15 The respondent asserts that she received $14,750 from the sale of antiques (par 52) and $45,000 from the sale of jewellery which she sold to "Russian tourists with an antique shop in Germany". (par 53) In par 54 she asserts that in November 1993, the total of her and her mother's cash holdings was around $A 100,000 which she kept in a cupboard in her flat at West End. She says that she used this money, together with moneys borrowed from the Credit Union of Australia ($35,000), to build the house at Wishart. The respondent claims that from early 1993, she paid "whatever expenses Mr Tantner needed". This was paid from "pooled money". She would visit him at the nursing home, taking a taxi at night time. She also says that, "Whenever money was needed for food or household supplies for myself and my family I would take money from my cupboard." This appears to be a suggestion that she used the bankrupt's money to the extent that it had been pooled with her own. She says at par 59:-

I was paying from my own moneys and from Mr Tantner's moneys when added, nursing home fees which are part of the bundle of documents no 73.

16 In par 60 the respondent says that in late November 1993 the bankrupt said that he wanted $60,000 in cash. She asked him why he needed so much money. He said that it was none of her business, that he wanted to give it to "very nice friends and I'm afraid you will give it to solicitors. You always have cash." She says that she withdrew $50,000 in cash from his account on 17 November 1993 and:-

… together with cash from home, and in a calico bag given me by the Commonwealth, I handed to Mr Tantner that sum and a further sum of $7,000 from the cupboard: a total of $57,000.

17 She was worried about Mr Osad (pars 61 and 62) who was "causing trouble for me and my husband and told things to Mr Tantner which Sigfried would then talk to me about." Presumably, this is meant to imply that she was concerned that the bankrupt was going to give the money to Mr Osad. The respondent was so concerned about this transaction that she took Mr Nicholls with her to witness it. I will deal with his evidence at a later stage. 18 The respondent's principal affidavit in this matter was filed on 21 September this year, very shortly before the commencement of the hearing. Until that time there had been no suggestion by the respondent that she had returned to the bankrupt a substantial part of the moneys which she had admitted receiving from him. There is a "receipt" signed by the bankrupt. It is ex K to the respondent's affidavit and is witnessed by Mr Nicholls. I will say more about this document at a later stage. For present purposes I record that the respondent asserts that the "receipt" was discovered as document no 27 in vol 5 of the affidavit of documents. It is common ground that no such document is identified as such in the affidavit, but the respondent's solicitor asserts that the "receipt" was attached to a document which is document 27. That is disputed by the applicant. The state of the evidence does not enable me to resolve that dispute. It is curious, however, that the respondent, having admitted receipt of moneys from the bankrupt's account, did not allege repayment of any part thereof until shortly before the trial. 19 Mr Rouyanian said in evidence that the respondent told him that the proceeds of the sale of the Heather Street property were given to her for use in building the house at Wishart. The respondent denies having said this and that it was the case. She says that at the end of 1993 she used some of the bankrupt's money (after discussing it with him) to purchase a video-recorder, a television set, a washing machine, a refrigerator and two cupboards. These items seem to have cost about $4,500. The respondent also used his money to pay for a holiday for herself and spent some of it on him. I formed the impression that she was suggesting that the bankrupt encouraged her to spend his money on herself. The respondent says that the bankrupt spoke of leaving the nursing home, but in the latter half of 1994, his health deteriorated.

I did not keep receipts for all of the moneys which I paid for Mr Tantner's nursing fees and expenses up until he was to Belasco Court (without my knowledge or consent by Mr Osad) but the list that I have is as follows: … . 21 There then follows a long list of amounts allegedly paid to Autumn Lodge Nursing Home on specified dates. The clear implication is that these amounts were paid by the respondent to the nursing home from her own funds, mixed with those received from the bankrupt. However it is quite clear from other evidence to which I will turn at a later stage that all of these amounts, with the possible exception of those dated 10 and 18 August 1994, were paid from other funds held or received by the bankrupt. Those funds comprised his pension and interest on his bank balance and were quite separate from the moneys taken by the respondent. Some attempt was made on behalf of the respondent to assert that she had not meant to say that she had paid the amounts identified in par 80, but I can attribute no other meaning to pars 58, 59 and 80. 22 In cross-examination the respondent said that in 1988 she and the bankrupt had discussed her acquiring half the Heather Street property, but the actual context is unclear. (See ts 578.) She said that they had discussed her getting a half-share "a long time before" the marriage. She also said that, "Every day Siggie Tantner talked - come on married - come on because I don't like the other - my home - nursing home." (See ts 579.) The better view of her evidence is that his proposal was repeated on numerous occasions. Mr Martin suggested to her at ts 579, ll 24-26 that "The only discussions you had with Mr Tantner before you got married was that he would sell his home and then you together would build one." She seems not to have responded to this, save to say that in 1988, he had offered to transfer half of the Heather Street property to her and regularly repeated the offer thereafter. 23 The respondent asserted in cross-examination that she had not expended the bankrupt's money on building the house but had used her own money. She was told by the bankrupt to withdraw his money quickly and in cash. She did so in small amounts, returning $57,000 to the bankrupt. With the balance, she took a holiday for ten days in New Zealand, bought food for the bankrupt, because he did not like the food at the nursing home, and also bought a "dress" every week. This appears to have been a reference to buying clothing for the bankrupt. She also took him on outings. At ts 588 she refers to buying furniture, although it is not entirely clear whether she is saying that she bought it from the bankrupt's money or from borrowed funds. She asserts that she paid money to Mr Rouyanian other than the $1,500 to which I have referred and the moneys which were retained from the proceeds of sale of the Heather Street house. This seems unlikely. Exhibit E1 to her affidavit is a letter from him dated 27 January 1994 which appears to render a final account. It was paid from the proceeds of sale. There is no suggestion that Mr Rouyanian acted for the bankrupt or the respondent thereafter.

24 In the course of cross-examination the respondent agreed that she had banked $90,167 into her own account on 10 November 1993 and that this came from the bankrupt's account. Her bank book, which is ex A to the affidavit of Mr McIntyre, shows the following subsequent withdrawals:-

17 November 1993 - $50,000 29 December 1993 - $2,000 17 December 1993 - $4,245 17 December 1993 - $5,000 20 December 1993 - $5,000 20 December 1993 - $5,000 21 December 1993 - $5,000 21 December 1993 - $10,000 27 December 1993 - $4,000

25 Of these sums, the amount of $50,000 was part of the moneys allegedly returned to the bankrupt. The sum of $4,245 was withdrawn by way of cheque and paid to the builder. She says that she put the rest of this money into the cupboard at home. I will return to these transactions at a later stage. 26 She entered into the building contract for the Wishart house on 16 December 1993. The price was $124,837. She borrowed $35,000 from Credit Union Australia, leaving a balance of $90,000. She claims that she paid that sum from funds which she had in the cupboard at home, apart from those derived from the bankrupt. She claims that most of her own money came from the sale of jewellery. In partial support of this contention she refers to ex G to her affidavit, which is an authority to take money out of the former Soviet Union, dated 1 December 1986. A translation appears at ts 609. It seems that when issued, it was accompanied by a certificate setting out the relevant amount. No such certificate has been produced. It would have been helpful to know how much money the respondent and her mother had brought from the Soviet Union. In support of her claim that she had sold jewellery, she produced two valuations, one dated 23 April 1991 and the other dated 8 October 1991. Unfortunately, the respondent included two pages from the first valuation and one from the second in ex H to her affidavit. The third page of the first valuation and two other pages from the second valuation constitute ex 54 which was tendered in the course of the trial. No explanation was given as to why the exhibit to her affidavit combined parts of the two valuations. It is a little difficult to know what to make of them. Neither is in the name of the respondent. One appears to be in the name of her son, Mr T Bolotnikoff. The other is in the name of her mother, Maria Bolotnikova. If nothing else, they show that the respondent's family had significant amounts of jewellery during 1991. 27 It seems that the respondent has not undertaken any substantial remunerative employment since arriving in Australia in 1986. However she received moneys from a Mrs Wolken. In par 72 of her affidavit she refers to receiving $15,000 which was used in the repayment of Credit Union Australia. In the course of cross-examination she asserted that she received $20,000 from Mrs Wolken in 1993 or 1994, which was used to pay off the credit union in 1996. If she used the gift of $20,000 to repay the loan in 1996, she cannot have used it to pay the builder in 1993. In re-examination she said that she had also received $15,000 from Mrs Wolken in 1991. She put this money into a cupboard and subsequently spent it on building the house. It seems that the sum of $20,000 was an additional gift by way of legacy.

28 As I have said, the respondent withdrew $50,000 on 17 November and on her version of events, paid $57,000 to her husband on 2 December. The delay was caused by the fact that she was looking for a "JP who could sign the documents". She was asked why she wanted a Justice of the Peace to witness the documents and replied:-

For the reason that such people like yourself (counsel for the applicant) would not torture me.

29 When asked what the bankrupt had done with the $57,000, she said that he put it under his pillow. She never saw it again. She implied that Wally Osad may have taken it, although she did not actually say so. A further explanation of this transaction appears at ts 642. She said:-

Well, first of all, he wanted me to build a house. … First of all he wanted me to build a house, in the beginning of our agreement. After he lost a lot of money, he said 'return my money, because you would give away all the money to the solicitors'.

30 Counsel for the applicant tried to put to the respondent a series of letters starting with ex 22 (a letter from Rouyanian Maunsell of 23 December 1993), followed by a letter of 12 January 1994 from the solicitors for the present applicant, who were then acting for the cross-respondents (the Ricablancas) in the District Court proceedings, and a letter in reply from the bankrupt dated 17 January 1994. Although the respondent's response was of little significance, the sequence of the letters is interesting. In ex 22 Mr Rouyanian acknowledges termination of his instructions in the District Court proceedings, advising the bankrupt and the respondent that the counter-claim by the cross-respondents is still proceeding and that, in the event of any judgment in favour of the cross-respondents, it would:-

… be open for the Ricablancas to execute that order against your assets and, if you should not have any assets, then to file for your bankruptcy, in which case, the Trustee in Bankruptcy may trace any moneys which you have given away, particularly to your wife or other members of your family, within two years of the bankruptcy order. You should not rest secure in the mere fact that you have given your moneys to Mrs Issitch-Tantner for the purposes of building a house on land which is in her name and now stand without funds.

31 As I have said, Mr Rouyanian said in evidence that the respondent had told him that the bankrupt had dealt with the proceeds of sale in this way. In the letter of 12 January 1994 (ex 52), Messrs Baker Johnson indicate that the counter-claim is proceeding and enclose a certificate of readiness. They enquire as to the proceeds of the sale of the Heather Street property. The bankrupt replies on 17 January 1994 (ex 47), denying liability to the Ricablancas and saying:-

Yes, I have sold my house and my wife gave the money to me. I used the money for debts. Now I have none. Solicitor Rouyanian took $15,000. My wife is building the house on her own money and money from her bank.

I will return to this correspondence at a later stage. 32 The respondent was asked when she had first met Mr Leo Nicholls, who was the Justice of the Peace who witnessed the so-called "receipt" for the return of $57,000 to the bankrupt. She said that she had known his wife in Moscow twenty-five or twenty-seven years ago and first met Mr Nicholls at that time. It emerged that she has a bank account in the name of "Ludmilla Nicholls". She initially claimed that she had changed her name because she was frightened of Wally Osad. She then declined to explain why she had changed her name to "Nicholls" but subsequently said that she had married Mr Nicholls and is currently married to him. She claims not to have lived with him since the marriage, although he gives a somewhat different version. She borrowed $15,000 from Mr Nicholls and is still indebted to him in that sum. 33 Mr Nicholls gave evidence. He says that on 2 December 1993, he and his wife met the respondent at the General Post Office in Brisbane. It seems that they had not met for many years. In the course of conversation it emerged that Mr Nicholls was a Justice of the Peace. The respondent asked him to come to the Autumn Lodge Nursing Home to witness a payment "to Mr Tantner". They then went to the nursing home in Mr Nicholls' car. He there "saw a lot of money in a bundle which Ludmilla Issitch-Tantner handed to Mr Tantner and I witnessed the receipt as a JP." He cannot remember the denominations of the notes in the bundle. The bankrupt put the money under his pillow. Mr Nicholls did not consider it to be his duty to check the amount. After the transaction Mr Nicholls left the bankrupt and the respondent together and went home with his wife who had been waiting outside. Exhibit K to the respondent's affidavit was written in his presence. The respondent wrote the first paragraph, presumably that above her signature. Mr Nicholls then wrote the certification clause and signed it. He asserts that the words commencing "Amound" (sic) were written by the bankrupt, but it seems more likely to me that they were written by the respondent. There are certain marked similarities between the handwriting and that in the first paragraph. The rather spidery handwriting is almost certainly the bankrupt's. The certification clause beneath this is again by Mr Nicholls. Mr Nicholls is eighty years of age and although he speaks English fluently, is originally from Czechoslovakia. He married Mrs Issitch in 1997. He says that they lived together for about a month. 34 Rodney Earl Reis is the son-in-law of the cross-respondents and so may be thought to have some interest in the outcome of this action. They are looking to satisfy their judgment from any moneys recovered from the respondent. This, in the end, does not lead me to doubt the reliability of his evidence. He was an entirely satisfactory witness. In his affidavit, filed on 26 August 1999, he asserts that he and his wife visited the bankrupt regularly whilst he was at the Autumn Lodge Nursing Home. He recalls being told by the bankrupt that he had married, this conversation being in about April 1993. On at least two occasions thereafter, the bankrupt told Reis that he intended to sell his house at Heather Street, Wilston and use the proceeds to construct a new home on property owned by Mrs Issitch in which they would live so that his wife could look after him. 35 It may assist at this stage if I summarize events as disclosed by the evidence. Mr Dragona conducted the marriage of the bankrupt and the respondent on 11 April 1993 and on that day, also witnessed the document the contents of which I have previously set out. Shortly thereafter, Mr Rouyanian prepared the power of attorney, the transfer and a will on instructions from the bankrupt and the respondent. This appears from the letter of 19 April 1993 which is exhibited to the respondent's affidavit. At that time, too, instructions were given with respect to proceedings against the cross-respondents. Exhibit L to the respondent's affidavit, a letter from Mr Rouyanian to the bankrupt dated 31 August 1993, suggests that the latter had doubts about continuing with the action. On 29 October 1993, the bankrupt signed ex 4 concerning the proceeds of sale. This was at about the time that the house was sold. On 22 December 1993 Mr Rouyanian wrote to the bankrupt and the respondent, apparently following a telephone call in which the respondent had queried his fees. He responded as one would expect but in particular, he referred to an assertion by the respondent that the bankrupt had no funds because the proceeds of sale of the Heather Street property had been expended in building the house on her land, this information having come from the respondent. 36 On 23 December 1993 Mr Rouyanian again wrote to the bankrupt and the respondent, apparently referring to a letter from them of that date. I am not sure that I have seen that letter, but it probably does not matter. Its terms may be inferred from the content of Mr Rouyanian's letter. In this letter, he offered the advice concerning bankruptcy to which I have previously referred. Exhibit 47 is a letter from the bankrupt to Messrs Baker Johnson who, it will be recalled, were then acting for the cross-respondents. I have previously referred to its terms, and particularly to the last paragraph in which the bankrupt asserts that he had received the proceeds of sale of the Heather Street property from the respondent and paid his debts, leaving him with nothing. He also asserts that the respondent was building the house using her own money. 37 On 27 January 1994 Mr Rouyanian wrote to the bankrupt and the respondent, enclosing a bill of costs in connection with the Ricablanca matter. By this time his instructions had been withdrawn (on 23 December 1993). The bill shows an amount of $5,521.80 as outstanding and an amount of $5,542.05 in trust, leaving a balance due to the clients of $20.25. The amount of the bill was presumably the same amount as was apparently due in September 1993 (see ex E to the affidavit of the respondent), although there is a slight difference in the amount. I infer that this account was paid from the funds in trust, being part of the proceeds of sale of the Heather Street property. 38 The particular importance of this evidence lies in the advice concerning bankruptcy in the letter of 23 December. I see no reason to doubt that the respondent had previously told Mr Rouyanian that she had taken a substantial part of the proceeds of sale to spend on the house at Wishart. By 17 January 1994, however, the bankrupt was asserting to Baker Johnson that he had not paid the money to her. This strongly suggests that either the bankrupt, or the bankrupt and the respondent had heeded Mr Rouyanian's advice as to bankruptcy and decided to change the story. The receipt for the sum of $57,000 allegedly returned to the bankrupt is dated 2 December 1993 which is, of course, prior to the date of the advice as to bankruptcy. I am inclined to suspect, however, that if the transaction referred to in that receipt occurred at all, it was probably after receipt of that advice. It is not necessary to take that matter further at present. I will return to it at a later stage. 39 The witness, M G J Lane is a partner in the accounting firm of which the applicant is a member. Mr Lane has had day-to-day responsibility for the administration of the bankrupt's estate. His evidence primarily relates to the payment to the nursing home of the various amounts referred to in the respondent's affidavit (par 80). I have previously recorded my satisfaction that she was, in her affidavit, trying to convey the impression that she had paid these amounts, either from funds received by her from the bankrupt or from her own funds. During the hearing, her solicitor asserted as much, saying that the amounts were paid from "intermingled funds" (ts 449, ll 24-25). Mr Lane's evidence must be seen in light of ex 24, which is the bankrupt's passbook for the period from 3 February 1993. It is common ground that the last entry (which shows a "deposit" of $70,000 and a "balance" of $39,740) is not a valid entry. It was written by the respondent for some unknown reason. Other relevant banking records are in ex 43 and ex 44. It is also relevant to have regard to the nursing home statements and receipts which are exs 25 to 42. The payments in question were allegedly made between March 1993 and August 1994. 40 A number of amounts are shown in par 80 as paid on 2 March 1993. They correspond with items appearing in ex 25 (the relevant nursing home statement), also shown as paid on 2 March 1993. According to ex 24, the bankrupt withdrew $4,268.40 from his account on 25 February 1993. The applicant invites the inference that part of that sum was used to meet these debts. Similarly, the respondent claims to have paid amounts of $726.95 and $6.75 on 13 April 1993. The relevant nursing home statement also shows that these amounts were paid on 13 April 1993. The passbook discloses a withdrawal of $3,004 on 25 March 1993. A similar inference is invited. The respondent claims to have paid sums of $711, $1.75 and $32.40 on 4 May 1993. Again, these amounts appear in the relevant statement as having been paid on 4 May 1993. There was a withdrawal of $8,000 on 23 April 1993. Again, the applicant invites the inference that part of the sum withdrawn was used to pay the nursing home. Such inferences are not compelled by the primary facts, but matters become much clearer when one looks at subsequent transactions. 41 The respondent claims to have expended $734.70 and $26.15 on 24 May 1993. The relevant statement (ex 28) shows that similar amounts were paid on that date. There was also a withdrawal of $760 from the account on that date. The respondent claims to have paid $711 and $23.95 on 17 June 1993. These amounts are shown in the nursing home statement as paid on that date. There was a withdrawal from the bankrupt's account on that day in the amount of $740. The respondent claims to have expended $734.70 and $24.90 on 15 July 1993. Those amounts (with a variation of 10 cents) appear in the relevant statement as paid on that date. $750 was withdrawn from the account on that date. It would be tiresome to take this exercise any further. The exhibits show similar transactions in each month until (and including) October 1993. 42 Thereafter, the relevant bank records are contained in ex 43. The first relevant entry relates to November 1993. The respondent claims in par 80 to have paid sums of $720 and $2.10 on 22 November 1993. There is a withdrawal of $750 on that date. The respondent claims to have paid $744 and $1.25 on 20 December 1993. There is a withdrawal of $785 on that date. The position is the same for each month until July 1994. In each case, the relevant amounts also appear in the nursing home statements as paid on the same dates. As for the amounts of $748.65 and $31.60 claimed to have been paid by the respondent in August 1994 (again reflected in the nursing home statements), ex 44 contains the bank records for that period. There is a withdrawal of $790 on 10 August. However there is some dispute about the admissibility of ex 44. It does not seem to matter very much. It is quite clear that for all of the entries until July 1994, amounts were withdrawn on, or shortly before the dates upon which the various outgoings were paid. Although some of the earlier withdrawals were of sums which did not directly reflect the amounts due, in most cases, the sums withdrawn did so. I infer that all amounts were paid to the nursing home from moneys held by the bankrupt, derived from his pension and interest on his account. I therefore reject the respondent's evidence that she paid these amounts from her own or "intermingled" funds. It is, of course, possible that she was responsible for drawing the moneys from the bankrupt's account and paying them to the nursing home, but she certainly did not supply the money to meet those outgoings, either from her own funds or from the proceeds of sale of the Heather Street property.

43 Finally, I refer to the affidavit of Mr Guy Andrew McIntyre filed on 14 September 1999. It exhibits the respondent's bank book, a building contract dated 16 December 1993 and a receipt from McCall Constructions dated 17 December 1993. The contract names the respondent and Timothy Bolotnikoff, presumably her son, as proprietors and is conditional upon their obtaining a loan in the sum of $35,000. The contract sum is $124,837, with a deposit of $6,242 and progress payments thereafter. The period for building is 16 weeks. The receipt is dated 17 December 1993 and is for $4,242. This is the amount which the respondent admits having paid from the bankrupt's account. Her bank account for the period from 8 November 1993 until mid 1994 shows a deposit of $90,167 on 10 November, being the funds taken from the bankrupt's account. Prior to that deposit, her balance was $50. The funds were disbursed as follows:-

These withdrawals total $90,245. After the last withdrawal on 23 December, her balance was $83.16. The only other deposit during the period over which these transactions occurred was the sum of $111.16, being interest. 44 It is necessary that I say something about credibility. There is no reason to doubt any of the witnesses called on behalf of the applicant. As one would expect, most of his evidence is documentary and seems to be beyond challenge. I cannot deal so easily with the respondent's evidence. As a witness she was most unimpressive, evasive and often unresponsive. Her numerous protestations of honesty were often accompanied by her taking the Bible in her hand and crossing herself in the Orthodox way. None of this made up for the otherwise unconvincing nature of her evidence, much of which was designed to attribute blame for the bankrupt's misfortunes to other people, in particular the cross-respondents, Mr Osad and Mr Rouyanian. Although it is neither relevant nor possible to form a concluded view as to the validity of her criticisms of these people, I should point out that the cross-respondents had written evidence of their agreement with the bankrupt and resided with him for three years. Mr Rouyanian served the interests of the bankrupt, at least to the extent of recovering possession of his house to enable it to be sold. Whatever Mr Osad did for the bankrupt, there is no evidence before me to suggest that he derived any benefit from it, although he may be a beneficiary under a will of dubious validity. 45 Even as between the respondent's version of events as reflected in her affidavit, which was sworn at a very late stage in proceedings, and her oral evidence, there was a discrepancy in connection with the amount of money derived from Mrs Wolken. This is not, of itself, a matter of great importance, but it suggests that the respondent was never particularly concerned to put the truth before the Court. The absence of any detailed explanation of how she spent the bankrupt's funds (assuming that, as she claims, they were not spent on her house) suggests a similar conclusion. 46 Two much more important matters substantially affect my view as to her credibility. Firstly, her assertion that she paid the amounts outlined in par 80 of her affidavit from funds in her possession is untrue. It is quite clear that these amounts (or at least most of them) were paid from the bankrupt's pension. This strongly suggests that the respondent was deliberately untruthful. Secondly, there is the question of the alleged return of $57,000 to the bankrupt. It is inherently improbable that the respondent returned such a large sum to the bankrupt. There is an available inference that both the respondent and Mr Nicholls (her supporting witness on this aspect) sought to conceal the fact of their marriage from the Court. Both initially declined to answer questions as to their relationship, claiming that it was "private". In any event, the fact that the respondent thought it necessary to have somebody witness the return of the money creates suspicion. It is not the way in which a wife would generally deal with her husband. Further, the circumstances in which she came to take Mr Nicholls to the nursing home are unusual. The suggestion that not having met him and his wife for many years, she should immediately take him to the nursing home to witness the transaction strains one's credulity. 47 As to the evidence of the transaction itself, she asserts that she handed the money over in a bank bag whilst Mr Nicholls says that he saw a wad of cash. Further, there is the question of what the bankrupt could possibly have wanted to do with $57,000. One wonders also about the conduct of a wife who would leave him with such a large sum of money. It is difficult to believe that she would not have taken steps to safeguard it. There is simply no explanation as to what happened to the $57,000, nor of any serious attempt to discover what the bankrupt did with it. It seems most unlikely to me that the respondent would have calmly accepted the possibility that such a large sum had been dissipated or even worse, given to Mr Osad, as she implied. 48 Above all, there is the fact that this allegation was not raised until very late in proceedings. Although the respondent had admitted receiving the bulk of the purchase price from the bankrupt, she did not allege that she had returned any part of it until just before trial. Although the evidence is equivocal as to whether the so-called receipt was disclosed during discovery, I think it most unlikely that if such a document had been drawn to the attention of her solicitor, he would not have pursued her for instructions as to its significance. In any event, I cannot believe that she, herself, would not have drawn the matter to the attention of her solicitor at an early stage. I should say that she is in no way stupid. She is both intelligent and relatively worldly. My conclusion from all of this is that she did not return $57,000 to the bankrupt. I do not entirely discount the possibility that she may have staged some form of "repayment" for the purpose of creating the receipt witnessed by Mr Nicholls. He may have been a knowing or unknowing party to that particular piece of deceit. I suspect that the receipt and any transaction it purports to evidence were results of the advice given by Mr Rouyanian concerning the possible consequences of bankruptcy. If so, then the date on the receipt is false. It is not necessary that I make findings in respect of these matters. I simply cannot accept the respondent's evidence that she returned $57,000 to the bankrupt, nor do I accept Mr Nicholls' evidence to the extent that it supports her assertions.

49 There are other unsatisfactory aspects to the respondent's evidence. They include:-

· the production of the document relating to her bringing money out of the Soviet Union without any indication as to the relevant amount;

· the assertion that she sold jewellery to unidentified Russian tourists;

· that she claims to have kept large amounts of money in a cupboard; and

· her rather half-hearted attempts to explain the ways in which she expended moneys (other than those identified in par 80) on behalf of the bankrupt and herself.

She suggested that she had bought clothes for him and visited him using taxis. She also said that she had cooked food for him and for other people in the ward. No attempt was made to quantify the amounts involved or to identify the frequency with which such events occurred. She claimed great, but largely unparticularized extravagance in spending on herself. The unsatisfactory state of the jewellery valuations is another cause for some concern. I come to the conclusion that I cannot act on any part of her evidence to the extent that it is self-serving. 50 I do not accept the respondent's assertion that there was any enforceable agreement made prior to marriage to transfer a half-interest in the property to her in consideration of marriage. In any event, no such agreement is pleaded. I also note that in pars 13.2 and 13.3 of the Points of Defence, it is alleged that the bankrupt had executed a transfer of the Heather Street property to himself and the respondent prior to 11 April 1993, the date of marriage. The only such transfer is that of which ex B to the respondent's affidavit is a copy. It is dated 13 April 1993. Mr Royanian's letter of 19 April, which is ex C to that affidavit, explains how the transfer came into being. It was clearly executed after the marriage. Indeed, I do not understand the respondent to have asserted otherwise at the trial. 51 The respondent admits withdrawing $111,667 from the bankrupt's account. Of this sum, $1,500 was the amount paid for legal fees in June 1993 and is not presently relevant. The sum in issue is $110,167. It was said in the course of the trial and not disputed, that $20,000 was withdrawn in cash and apparently dissipated. The balance was withdrawn in the way that I have previously discussed. The respondent asserts that she was given power of attorney and authorized to spend the money as she wished, including on herself. It is clear that she was appointed attorney, but that would not normally constitute authority to use the donor's assets for the attorney's private purposes. See Reckitt v Barnett, Pembroke & Slater Ltd [1929] AC 176 at 182, 184-5, 189, 191 and 193. The respondent claims that she had the bankrupt's oral authority to spend his money on herself. I reject that evidence because of my views of the respondent as a witness and because such authorization would be inconsistent with the bankrupt's wish to see the money applied in building the house at Wishart. 52 There was some attempt on behalf of the respondent to assert that in her capacity as wife, and with the benefit of the power of attorney, she was entitled to expend the bankrupt's money in any way which she thought appropriate, including on herself, and that there could be no action for recovery. No authority was advanced for this proposition. As I have said, an attorney is not usually entitled to expend the donor's money on him- or herself. The argument appears to be that the respondent, in using her power of attorney to apply funds to her own use, was acting on behalf of the bankrupt, and that as this resulted in moneys being made available to her, she was, in her capacity as wife, entitled to spend them. It may be that the argument owed something to the presumption of advancement, although no such express submission was made. The nature of that presumption was discussed by the High Court in Calverley v Green (1984) 155 CLR 242. Clearly, it relates to the presumed intention of a party who acquires an asset in the name of, or transfers an asset to his wife or child. In the present case, the presumption of advancement can hardly be prayed in aid of the respondent's case as she admits paying the money to herself. I have found that she had no authority to do so, although she was probably authorized to spend such money on building the house. 53 No authority was advanced for the proposition that a husband has no recourse against his wife for misappropriation of his funds. It seems that even before the Married Women's Property Act 1890 (Qld), a court of equity would permit an action by a husband against a wife in contract, or for moneys lent by him to her after marriage, or for moneys paid by him for her, after marriage, at her request. See Butler v Butler (1885) 16 QBD 374 at 377, 378 and 379. It is likely that such an approach would have permitted the bankrupt to recover moneys misapplied by the respondent. I see no reason to take this aspect any further. 54 The respondent applied the sum of $20,000 for her own purposes and not for construction of the house. Such expenditure was unauthorized. An action for moneys had and received therefore lay at the suit of the bankrupt and, on his bankruptcy, passed to the applicant. As to the balance of $90,167 withdrawn from the respondent's account between November and December 1993, she was then facing the prospect of substantial liability for the construction of her house. Her building contract was subject to finance which she obtained. It is reasonable to infer that the only funds available to her at that time were those which she had derived from the bankrupt and the loan funds. Curiously, they are, in total, almost equal to the contract price. I see nothing compelling in the respondent's assertion that she had other moneys in her cupboard. I do not accept that evidence. The bankrupt had authorized her to expend the proceeds of sale on her house, and I see no reason to doubt that she did so. She told Mr Rouyanian as much, and she had no reason, at that time, to lie to him. 55 I infer, on the balance of probabilities, that she spent $90,167 of the moneys derived from the bankrupt on the construction of her house. The bankrupt intended her to have the money for this purpose, subject to his own expectation that he would live in the house, and that she would care for him. Thus the bankrupt had no cause of action for recovery of the money, and no such claim vested in the applicant pursuant to s 116 of the Bankruptcy Act. However the applicant submits that the payment of those funds to the respondent was a settlement for the purposes of s 120(1) of the Bankruptcy Act, as it was at the date of bankruptcy. At that time, s 120(1) provided:- A settlement of property, whether made before or after the commencement of this Act, not being: (a) a settlement made before and in consideration of marriage, or made in favour of a purchaser or encumbrancer in good faith and for valuable consideration; (b) … … is, if the settlor becomes a bankrupt and the settlement came into operation after, or within two years before, the commencement of the bankruptcy, void as against the Trustee in Bankruptcy. 56 Sub-section 120(8) defined "settlement of property" to include any disposition of property.

57 In Barton v Official Receiver (1986) 161 CLR 75 at 78, the High Court (Gibbs CJ, Mason, Wilson and Dawson JJ) considered the meaning of the term "settlement" in s 120, although this was not critical to the case, which concerned a payment of $170,000 made shortly before sequestration. Their Honours said:-

It is not now disputed that the payment in question was a 'settlement' within the meaning of s 120. Clearly it was, bearing in mind the broad definition of 'settlement of property' in s 120(8) as including 'any disposition of property' and the circumstances in which the payment was made. Although made in the form of a loan, no part of the principal was repayable for twenty years and the purpose of the loan was to enable the appellant to buy property in the form of a house and company shares. There being no contemplation of the immediate dissipation or consumption of the money, the established principles governing the making of a settlement were satisfied: see Williams v Lloyd. In re Williams [(1934) 50 CLR 341 at 364, 375]; Re Hyams; Official Receiver v Hyams [(1970) 19 FLR 232 at 247-253].

58 Two other authorities assist in identifying the relevant principles. In Williams v Lloyd (supra) at 364, Starke J said:-

A settlement of property is a conveyance or transfer of property, and 'the voluntary settlements to which this section applies are only such conveyances or transfers of property as are in the nature of settlements in the sense of being dispositions of property to be held for the enjoyment of other persons, ie, where the donor contemplates the retention of the property by the donee, either in its original form or in such a form that it can be traced' (Wace on Bankruptcy (1904), p 241) … .

59 Similarly at 375, Dixon J (as his Honour then was) said:-

I have come to the conclusion that this payment was a settlement within the meaning of s 94. In Re Player; Ex parte Harvey [(1885) 15 QBD 682 at p 687] Cave J, after stating the course of the legislation and judicial decision and discussing the inclusion of "money" in the definition of "property", concluded:- The transaction must be in the nature of a settlement, though it may be effected by a conveyance or transfer. The end and purpose of the thing must be a settlement, that is, a disposition of property to be held for the enjoyment of some other person. Thus a purchase by the father of shares, which are registered in the son's name, and upon which the son receives the dividends, is within the Statute. But where the gift is of money to be expended at once, the transaction is not, in my opinion, within s 47 of the Act of 1883 - the provision upon which s 94 is founded. This exposition of the provision appears to have gained the approval of the Court of Appeal … . But it does not mean that there shall be any restriction on the donee's power of disposal, but merely that the retention of the property in some sense must be contemplated and not its immediate dissipation or consumption (in Re Tankard [(1899) 2 QB 57, at 59]. In the present case I think that the proper inference is that the sum of Ł1,000 was put by the bankrupt in the joint names of his wife and daughter as a provision to be retained by them in some form or other, and not to be spent at once. The money remained in this account until after the bankruptcy. No part was spent before the bankruptcy; so that the donees remained accountable for the whole … .

60 It is quite clear that the bankrupt contemplated the respondent's retaining the funds in the form of a house built on her land at Wishart. His expectations, that he would live there with her and that she would care for him, were consistent only with that intention. In the circumstances, there was a settlement within the meaning of subs 120(1). Paragraphs 13.2 and 13.3 of the Points of Defence seek to raise the defence provided by par 120(1)(a), but it is clearly not maintainable. Although the respondent alleges that the transfer was executed before marriage, that is simply not true. In any event, it may be doubted whether a defective form of transfer which does not identify the subject land can constitute a settlement for the purposes of subs 120(1). It is not necessary to decide that question as the transfer was executed after the marriage. It was not suggested in the pleadings or in argument that a mere agreement to transfer an interest in property in consideration of a promise to marry could be a settlement for the purposes of subs 120(1). I doubt whether equity would recognize any disposition of property pursuant to such an agreement until such time as the marriage took place. Thus it would not be a settlement made before marriage as required by par 120(1)(a). Again, it is not necessary to consider the question, firstly because, although I accept that the bankrupt may have spoken of transferring an interest to the respondent after marriage, I am not willing to infer that there was any binding agreement to do so, and secondly because such a case was neither pleaded nor argued.

61 The applicant is entitled to recover the subject matter of the settlement from the respondent. He also seeks to establish an entitlement to part-ownership of the Wishart house. In Official Trustee v Alvaro (1996) 138 ALR 341, Wilcox and Cooper JJ held that pursuant to s 121 of the Bankruptcy Act, a disposition of property is avoided against a trustee from the date when proceedings to establish that fact are commenced. By parity of reasoning, it follows that s 120 has the same effect. That means that the settlement of the funds on the bankrupt was not void as against the applicant ab initio, but only from the date of commencement of these proceedings, 29 May 1995. At that stage, the parties' intentions that the moneys be spent on construction of the house had presumably been carried into effect. The contract specified a construction period of 16 weeks. Their shared intention was that the house belong to the respondent, that they live together there, and that the respondent care for the bankrupt. Such an intention would not vest in the bankrupt any right beyond the right to live in the house. The applicant did not acquire any greater interest from the bankrupt. The right to reside in the house was personal to the bankrupt and died with him. The respondent had no duty towards the applicant concerning the settled funds until 29 May 1995. Section 120 of the Bankruptcy Act does not purport to deal with property purchased with settled moneys, but only with the settlement itself. Alvaro demonstrates that the applicant's claim is limited to the fund settled and interest.

62 Alternatively, the applicant sought an equitable charge over the Wishart property to secure repayment of the settled funds. In Alvaro at 390-1, Wilcox and Cooper JJ held that a court of equity will act to assist a trustee in bankruptcy to obtain an effective remedy following the avoidance of a disposition, citing Re Mouat; Kingston Cotton Mills Co v Mouat [1899] 1 Ch 831 at 834-5. In Alvaro, the court was concerned with funds lent to a company by the bankrupt and used to purchase property (described in the reasons as "Lombard St"). The court concluded that the disposition of such funds was void as against the Official Trustee pursuant to s 121, and that he should have a charge over the property to secure repayment of the moneys and interest. Although both Alvaro and Mouat involved fraudulent dispositions, neither decision seems to have relied upon that aspect. For that reason, I see no basis for distinguishing between a disposition avoided pursuant to s 121 and a settlement avoided pursuant to s 120 for the purpose of determining available relief. Relying upon the decision in Alvaro, I would allow the applicant the benefit of an equitable charge. It is true that such relief is not expressly sought in the statement of claim, but it is merely a lesser form of relief than that sought, namely a declaration that the applicant has a proprietary interest in the Wishart property. The respondent did not take any point as to the adequacy of the prayer for relief, even after this claim was raised in argument.

63 Subject to hearing submissions as to appropriate orders, I would: (a) Give judgment for the applicant against the respondent in the sum of $20,000; (b) Declare that as against the applicant, the disbursement on or about 10 November 1993 by the bankrupt to the respondent of the further sum of $90,167 is void;

(c) Order that the respondent account to the applicant for the sum of $90,167; (d) Declare that the applicant is entitled to a charge upon the respondent's property at Wishart to secure the payment of the said sum of $90,167.

64 I will hear submissions as to appropriate orders, interest and costs.

I certify that the preceding sixty-four (64) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett.

Date of Hearing: 20-23 September 1999