FEDERAL COURT OF AUSTRALIA

Cummins v The Trustees of the Property of John Daniel Cummins,

A Bankrupt [2004] FCAFC 191

 

BANKRUPTCY – appeal – whether evidence at first instance sufficient to permit inference that bankrupt’s main purpose in transferring assets was to defeat or delay creditors – whether primary judge erred in finding proportions in which purchase price for one of those assets were contributed – whether primary judge erred in finding evidence was sufficient to rebut resulting trust. 

 

Bankruptcy Act 1966 (Cth), s 121(1)

Conveyancing Act 1919 (NSW) 

 

Warren v Coombes (1979) 142 CLR 531 applied

Michael v Thompson (1894) 20 VLR 548 referred to

PT Garuda Indonesia Ltd v Grellman (1992) 35 FCR 515 referred to

Gattellaro v Westpac Banking Corporation [2004] 204 ALR 258 referred to

Wraith v Giannarelli [1988] VR 713 referred to

Jones v Dunkel (1959) 101 CLR 298 referred to

Protean (Holdings) Ltd v American Home Assurance Co [1985] VR 187 referred to

Rasomen Pty Ltd v Shell Company of Australia Ltd (1997) 75 FCR 216 referred to

Pettitt v Pettitt [1970] AC 777 distinguished

Calverley v Green (1984) 155 CLR 242 referred to

Doohan v Nelson [1973] 2 NSWLR 320 referred to

Prentice v Cummins (No 5) [2002] FCA 1503 cited

Prentice v Cummins (No 6) [2003] FCA 1002 cited

Williams v Lloyd (1934) 50 CLR 341 referred to

Bernard v Josephs (1982) 1 Ch. 391 cited

Vedejs v Public Trustee (1985) VR 569 discussed

Commercial Union Assurance Company of Australia Limited v Ferrcom Pty Limited (1991) 22 NSWLR 389 referred to

Official Trustee in Bankruptcy v Lopatinsky (2003) 129 FCR 234 discussed

Giannarelli v Wraith (1988) 165 CLR 543 cited

British Railways Board v Herrington [1972] AC 877 discussed

Murray v Director of Public Prosecutions [1994] 1 WLR 1 discussed

Protean (Holdings) Ltd v American Home Assurance Co [1985] VR 187 distinguished

O’Donnell v Reichard [1975] VR 916 cited

Holloway v McFeeters (1956) 94 CLR 470 discussed

MARY ELIZABETH CUMMINS and AYMCOPIC PTY LTD v THE TRUSTEES OF THE PROPERTY OF JOHN DANIEL CUMMINS, A BANKRUPT

N1971 of 2003

CARR, TAMBERLIN & LANDER JJ

30 JULY 2004

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N1971 OF 2003

 

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

 

BETWEEN:	MARY ELIZABETH CUMMINS FIRST APPELLANT   AYMCOPIC PTY LTD (ACN 003 347 171) SECOND APPELLANT
AND:	THE TRUSTEES OF THE PROPERTY OF JOHN DANIEL CUMMINS, A BANKRUPT RESPONDENTS
JUDGES:	CARR, TAMBERLIN & LANDER JJ
DATE OF ORDER:	30 JULY 2004
WHERE MADE:	SYDNEY

 

THE COURT ORDERS THAT:

 

1.         The appeal be allowed.

2.         The declarations made on 24 October 2003 be set aside.

3.         Paragraphs numbered 1, 2, 3 and 4 of the orders made on 24 October 2003 also be set aside.

4.         In lieu thereof there be substituted orders as follow:

            “1.        The application be dismissed.

              2.       The applicants pay the second and third respondents’ costs of the application.”

5.         The respondents pay the appellants’ costs of the appeal.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N1971 OF 2003

 

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

 

BETWEEN:	MARY ELIZABETH CUMMINS FIRST APPELLANT   AYMCOPIC PTY LTD (ACN 003 347 171) SECOND APPELLANT
AND:	THE TRUSTEES OF THE PROPERTY OF JOHN DANIEL CUMMINS, A BANKRUPT RESPONDENTS

 

JUDGES:	CARR, TAMBERLIN & LANDER JJ
DATE:	30 JULY 2004
PLACE:	SYDNEY

REASONS FOR JUDGMENT

CARR & LANDER JJ:

INTRODUCTION

1                     This case concerns a barrister who, seventeen years ago, transferred his beneficial interest (which we have found to be slightly less than a quarter share) in the matrimonial home to his wife. At the same time he transferred some shares, which entitled him to occupy a double room in a set of barristers’ Chambers, to his family trust. The barrister became a bankrupt nearly four years ago.

2                     The central question in the appeal is whether the trustees of the bankrupt’s estate adduced sufficient evidence at the trial to permit the inference that the transfers were made with the main purpose of preventing those assets from being divided among his creditors. As will be seen below, we do not think that very much evidence was required to show that. But there had to be enough evidence. The transferees were entitled to require the trustees to prove their case. Our conclusion is that the evidence put before the Court below fell short of the minimum required for that purpose. It would not have been difficult, we think, for sufficient evidence to have been assembled.

3                     Our reasons in this matter cannot be said to reflect any judgment by us on the conduct of the bankrupt who, notwithstanding that he is a barrister and, later, one of Her Majesty’s counsel, failed to lodge any income tax returns for a period of about 45 years.  His conduct has been considered in other proceedings.  We are concerned only with whether the evidence before the learned primary judge was sufficient to justify the declarations and other orders which he made. 

4                     The respondents to this appeal (applicants before the primary judge) are the trustees of the bankrupt estate of John Daniel Cummins (the bankrupt).  His wife, Mary Elizabeth Cummins, is the first appellant on this appeal.  Originally, the bankrupt was a party to these proceedings but, on 17 September 2002 at the commencement of the hearing before the primary judge, the primary judge ordered that the bankrupt cease to be a party to the proceedings: Prentice v Cummins (No 1) [2002] FCA 1140; Prentice v Cummins (No 2) [2002] FCA 1165.

5                     The second appellant, Aymcopic Pty Ltd (Aymcopic), (the third respondent in the proceedings before the primary judge) is the trustee of the Cummins Family Trust, the beneficiaries of which are Mrs Cummins and the four children of the bankrupt and Mrs Cummins.

6                     The respondent trustees applied for various declarations and orders, pursuant to ss 120 and 121 of the Bankruptcy Act 1966 (Cth) (the Act) that certain assets transferred by the bankrupt to Mrs Cummins and Aymcopic are void as against them.

FACTS

7                     On 28 April 1961 the bankrupt, who had previously in 1957 been admitted as a solicitor of the Supreme Court of New South Wales, was admitted to the Bar in that State.  He married Mrs Cummins on 11 December 1964.

8                     Mrs Cummins’ mother had died on 12 January 1962 bequeathing to her about GBP13,000.

9                     Mrs Cummins’ tax return for the year ended 30 June 1965 showed her to be the holder of shares in a number of prominent public companies and in receipt of an income from dividends from those companies in that year in the order of GBP670.

10                  On 7 May 1965 the bankrupt and Mrs Cummins purchased a property at 7 Brook Street, Linley Point as joint tenants.  The purchase price was GBP10,000.  They borrowed GBP7,000 on mortgage from the United Permanent Co-operative Building and Investment Society on the security of that property.

11                  On 31 January 1967 the bankrupt, Mrs Cummins and Peter Howarth purchased a property at 12 Ferdinand Street, Hunters Hill as tenants in common.  The purchase price was $68,000.  The sum of $46,000 was borrowed from the vendor which was secured by mortgage over the purchase property.

12                  On 15 December 1967 the bankrupt and Mrs Cummins sold Brook Street, Linley Point for $22,600.

13                  Some time prior to 30 April 1970, Mrs Cummins negotiated a fully-drawn loan account with the Commonwealth Trading Bank of Australia.

14                  On 14 April 1970 the bankrupt and Mrs Cummins signed a contract to purchase a property at 77 Alexandra Street, Hunters Hill (the Hunters Hill property).  The contract was not tendered at the trial.  However, a Notice to Complete was given by the vendor’s solicitors to the bankrupt and Mrs Cummins on 10 July 1970.  That Notice to Complete refers to a contract dated 14 April 1970.  The Notice to Complete also refers to a deposit which was paid pursuant to that contract but does not disclose the amount of the deposit.

15                  On 30 April 1970 $3,000 was withdrawn from Mrs Cummins’ fully-drawn loan account with the Commonwealth Trading Bank of Australia.  The Commonwealth Trading Bank of Australia statement describes the transaction as a miscellaneous withdrawal.  At the trial Mrs Cummins contended that this was the deposit.  The primary judge did not accept that contention.

16                  On 10 July 1970 the Notice to Complete, to which we have already referred, was given to the bankrupt and Mrs Cummins requiring them to complete the purchase on or before 31 July 1970.  It might easily be inferred that, at that stage, they were in default.

17                  On 24 July 1970 Mrs Cummins paid the sum of $13,053.27 to J P Grogan & Co, (solicitors for Mrs Cummins and the bankrupt), and received a receipt for that amount.

18                  Some time prior to 27 July 1970 the bankrupt and Mrs Cummins opened a fully-drawn loan account in their joint names with the Commonwealth Trading Bank of Australia.

19                  On 27 July 1970 the sum of $15,000 was debited to that fully-drawn account.  It is significant, in our view, that two separate fully-drawn loan accounts were opened after the bankrupt and Mrs Cummins executed the contract to purchase the Hunters Hill property.  It is also significant, we think, that one account was solely in Mrs Cummins’ name and the other in their joint names.

20                  The memorandum of transfer of the Hunters Hill property was executed by the vendor on 27 July 1970 the same date upon which the sum of $15,000 was drawn on the joint fully-drawn loan account. 

21                  The total purchase price shown on the memorandum of transfer was $31,000.  $15,000 was contributed from the joint fully-drawn loan account.

22                  The Commonwealth Trading Bank of Australia’s statements for Mrs Cummins’ fully-drawn loan account show that, some time between 23 June 1970 when interest was debited to the account on the $3,000 borrowing and 27 August 1970, a further $13,000 was debited to that account.  Mrs Cummins contends that the only available inference is that that sum was the same sum paid to her solicitors.  The primary judge accepted that contention. 

23                  On 22 December 1971 the bankrupt and Mrs Cummins sold the property at Ferdinand Street for the sum of $58,500.

24                  In 1980 Mrs Cummins caused her accountant, Mr John Moore, to create the M. Cummins Family Trust.  Mr Moore said in an affidavit tendered in these proceedings that he had been Mrs Cummins’ accountant from the late 1960s until the early 1980s.  He never acted for the bankrupt who he met only once and that was after Mrs Cummins had created the M Cummins Family Trust.  Mr Moore said:

‘I recall advising Mrs Cummins at the time that the family trust structure was appropriate to her needs in relation to her investments, as this would enable her to distribute income from investments to her children.’

25                  Tax returns for this period show Mrs Cummins to be independently wealthy.  She was the owner of a number of investment properties.

26                  On 2 December 1980 the bankrupt was appointed one of Her Majesty’s counsel.

27                  Some time in 1986 the bankrupt acquired units which entitled him to occupy chambers in Parramatta. 

28                  On 9 May 1986 Marks J, a judge of the Supreme Court of Victoria, delivered a judgment which considered the provisions of s 10(2) of the Legal Profession Practice Act 1958 (Vic): Giannarelli v Wraith.  He was of the opinion that s 10(2) of that Act operated to subject barristers to liability in respect of a claim of negligence against them and that they did not enjoy any immunity from suit.  The matter went on appeal to the Full Court of the Supreme Court and eventually to the High Court of Australia.  We return later in these reasons to the significance of that litigation in this case. 

29                  In Mrs Cummins’ income tax return for the year ended 30 June 1987 she was described as a ‘Decorator of Events’.  The return discloses the following:

• from that business she received a gross income of $23,830.  Her expenses were in the order of $21,230; 

• Mrs Cummins traded in shares and made a profit of $17,008.36; 

• she owned a property at Surrey Street, Darlinghurst, which was rented, on which she made a loss of $4,611. 

• she owned a property, Gosford Farm, which was rented, on which she made a profit of $6,062; 

• she owned a property at Mermaid Beach, Queensland, which was also rented, and upon which a loss was incurred of $3,400; 

• she had sold shares in another company which had not been acquired with the intention of selling for a profit and had been held for more than 12 months.  No tax was payable on the profit which was not disclosed;

• in November 1986 she had purchased a property at 48 Beach Road, Bondi.  She said in that return:

‘This property was acquired with the intention and purpose of profit making by sale and or carrying out a profit making undertaking or scheme.  During the year of income, the taxpayer incurred costs in connection with the renovation and improvement of the building.  The costs incurred with the purchase of the building and renovation expenses will be brought to account in the taxpayer’s 1988 return of income when the property was sold.’ and

• she owned other investments.

30                  In summary, by 30 June 1987 Mrs Cummins had significant investments.  They were negatively geared but that is not surprising.  That allowed her to offset those losses against her income.

31                  On 14 August 1987 the plaintiffs in the Giannarelli litigation, the unsuccessful parties in the hearing before the Full Court of the Supreme Court of Victoria, were granted special leave to appeal to the High Court.

32                  In August 1987 the bankrupt instructed his solicitor, Mr Barry Harris, to arrange the transfer (the bankrupt proposed that the transfer be by way of gift) of the Hunters Hill property and shares in Counsel’s Chambers Ltd (“the Shares”) being the assets which are the subject matter of these proceedings.  On Mr Harris’ advice, a consideration equal to fair market value was expressed in each of the transfers. 

33                  The bankrupt and Mrs Cummins acquired Aymcopic, a shelf company, taking one share each.  On 24 August 1987 Aymcopic became the trustee of the Cummins Family Trust.   The beneficiaries included Mrs Cummins, her four children and any child or children of those children.  The bankrupt was not a beneficiary.

34                  Two days later, on 26 August 1987, the bankrupt transferred the Shares to Aymcopic for a consideration in the sum of $360,000.

35                  On the same day the bankrupt and Mrs Cummins executed an agreement for the sale of the bankrupt’s interest in the Hunters Hill property to Mrs Cummins for the sum of $205,250.  The transfer was lodged for registration on 26 August 1987.

36                  On the same day the bankrupt wrote to his solicitor enclosing ‘Mary’s cheque for $9,402’ in respect of various disbursements required in relation to the transfers.

37                  On 7 October 1987 Mr Harris wrote to the bankrupt confirming the bankrupt’s instructions to transfer the units in Barristers Chambers Parramatta Unit Trust to Aymcopic by way of gift.  Mr Harris, by oversight, never carried out those instructions. 

38                  Mr Harris’ recollection of these events was recalled by him in a letter dated 18 September 1997, i.e. some ten years later, which he wrote to the bankrupt in the following terms:

‘As promised in our telephone conversation on Monday, I have refreshed my memory concerning these transactions.  My file contains notes indicating that I have considered the application of the law relating to voluntary settlements and the manner in which a debt may be forgiven or released.  I have also been conscious of the fact that, as it was in 1987, the Stamp Duties Act imposed duty at higher rates on transactions which were gifts.  For these reasons each transfer had to be expressed in the form of a sale at full consideration.

I also seem to have come to the conclusion that (i) the subsequent forgiveness or release of a debt arising out of such a transfer was probably not a settlement within the meaning of the relevant legislation, and (ii) that in the case of the realty an oral forgiveness followed by a subsequent written confirmation would have been sufficient but, in the case of the shares, a release by deed would be preferable although it would have attracted stamp duty.

The above is by way of background.  Dealing now with your specific questions:-

1.         The house:

            The valuation figure obtained in 1987 was $410,500.00.  The sale contract and subsequent transfer was for a consideration of $205,250.00 for the one-half share sold.  I note that I had prepared a document for signature in 1987 confirming the oral forgiveness of that debt.  I think this is now unnecessary as the sale contract required payment of the consideration in 1987.  The debt would now be statute barred and therefore extinguished by virtue of the provisions of the Limitation Act.  I confirm that I am holding the Certificate of Title now standing wholly in Mary’s name.

2.         The shares:

            For the same reasons the consideration expressed in the transfer of shares was $360,000.00 representing their full value.  Again the provisions of the Limitation Act would apply.  It should be noted that both debts, i.e. in relation to the house and the shares, were simple contract debts so that they would have been extinguished in 1993.  I hold the share certificate for 6,000 shares standing in the name of the company.  I also have the company’s common seal but a new one will now be required since the provisions of the Corporations Law came into effect relating to Australian company numbers.

3.         The units in the Unit Trust:

            I note that before a transfer of the units could be prepared, it was necessary to have the consent of a meeting of unit holders and also a valuation figure obtained as the consideration in the transfer.  In my letter to you of 7^th October 1987 I have said that I will arrange for the preparation of the transfer when the consent is forthcoming and the 1987 accounts are available.  I note that I subsequently received from you in 1988 the minutes of the general meeting approving the transfer and at some time I also received the 1987 accounts.

            However, I can find no record of a transfer having been prepared nor a valuation ordered for this purpose.  This appears to have been an oversight on my part and I presently hold certificates in your name for 200 “A” class units and one “B” class unit in the trust.  I will discuss with you when convenient a number of possible courses of action.  Relevant factors to be taken into account will include (i) the value of the units then and now (ii) who has received the dividends and any other income from the units in the intervening years.

4.         Sale of shares:

            In our conversation on Monday, I expressed doubts as to whether the Articles of Association would permit the sale of shares other than in parcels carrying the right to occupy the whole of a designated floor space.  This has been my experience in all such similar schemes.  However, when I spoke to a lady from Counsel’s Chambers today, I was advised that a transfer such as you propose is indeed possible.  However, I will believe it when I see it and I have asked for a copy of the Articles of Association.  They cannot be given to me but they can be made available to you upon request.

Finally, you might advise whether Mr. Higgs continues to be your Co-Director.  I shall be glad to discuss these matters with you further when convenient.’

39                  Mr Harris’ letter shows that the bankrupt had also intended divesting himself of the units in his Parramatta chambers probably to Aymcopic.  Mr Harris overlooked carrying that transaction into effect.  The units were still owned by the bankrupt when the sequestration order was made.

40                  On 12 December 1997 Aymcopic sold 2,000 shares in Counsel’s Chambers Ltd to Brett Shields for the sum of $177,154.  Clearly enough, that transaction was arms length.

41                  On 2 March 1998 L & A Management Pty Ltd, acting on behalf of Mrs Cummins, applied to the National Australia Bank for finance in the sum of $1,250,000 for a residential investment loan and for $50,000 flexi-plus mortgage.

42                  The purpose of the facility was to refinance an existing loan of $950,000 currently extended to Mrs Cummins by Suncorp-Metway Ltd and to use the balance to fund the refurbishment of a residential investment property situated at Mermaid Beach, Gold Coast, Queensland.

43                  It was represented in the application:

‘Mrs Cummins, who is aged 54, is a hight net worth individual who operates a company called Hospitality Hire Pty Limited specialising in the hiring out of linen, table-cloth and various other items for large scale functions and events.

Borrower also operates a separate business trading under the name of Mary Cummins Special Events which acts as a co-ordinator/organiser of functions.  Mr Cummins, who is a Queens Counsel, is a prominent local identity and is on the AJC Committee.

Mrs Cummins has been a client of our company since early 1993.

It has been decided to refinance the Suncorp-Metway Limited loan of $950,000 which is currently fixed at the rate of 7.45%pa  until 6 March 1998.  The loan is currently secured by Borrower’s residential property at Mermaid Beach on the Gold Coast.

Mrs Cummins intends to refurbish the Mermaid Beach property and is in the process of having plans drawn up for the submission of a development application with the Gold Coast council.  It is intended to spend up to $300,000 on the upgrade of this property.

The attached Statement of Assets and Liabilities demonstrates the high net worth of Borrower.  In addition to substantial real estate holdings, which are held in her name for legal reasons in view of her husband’s occupation, Mrs Cummins currently has $1,000,000 invested in the share market and $300,000 on deposit with Macquarie Bank Limited.’

44                  It was further represented in the proposal that Mrs Cummins was a person of substantial wealth with liquid assets of $1,300,000.

45                  Her financial statement was shown:

Principal home                                                                 $2,000,000

Composite                                                                       $1,650,000

Accounts                                                                            $300,000

Motor vehicle                                                                       $30,000

Property Wyndham Street, Alexandria                             $1,100,000

Share portfolio                                                                 $1,000.000

Total                                                                              $6,080,000

46                  Her liabilities were shown:

Home loan                                                                          $950,000

Amex                                                                                     $3,000

Sanwa                                                                                  $14,000

Total                                                                                 $967,000

47                  The loan was assessed by the Business Banking Manager who wrote:

‘She is married to John Daniel Cummins who is a Barrister and maintains satisfactory account relationship with our Law Courts branch since 17/6/1983.  Due to his occupation all real estate property are in Mrs Cummins name who personally controls financial affairs.’

48                  On 31 August 1999 Mr Morelli was retained by the bankrupt to prepare income tax returns for the period between 1992 and 1999.  The bankrupt was referred to Mr Morelli by his solicitor, Mr Harris.

49                  On 25 July 2000 the Deputy Commissioner of Taxation issued a default statement of claim directed to the bankrupt claiming the sum of $955,672.92.

50                  On 13 December 2000, on the bankrupt’s own petition, a sequestration order was made against the estate of the bankrupt.

section 121 of the bankruptcy act

51                  The relevant provisions of s 121 are as follows:

‘121(1)   [Transfers that are void]  A transfer of property by a person who later becomes a bankrupt (the “transferor”) to another person (the “transferee”) is void against the trustee in the transferor’s bankruptcy if:

(a)       the property would probably have become part of the transferor’s estate or would probably have been available to creditors if the property had not been transferred; and

(b)       the transferor’s main purpose in making the transfer was:

            (i)         to prevent the transferred property from becoming divisible among the transferor’s creditors; or

            (ii)        to hinder or delay the process of making property available for division among the transferor’s creditors.

121(2)   [Showing the transferor’s main purpose in making a transfer] The transferor’s main purpose in making the transfer is taken to be the purpose described in paragraph (1)(b) if it can reasonably be inferred from all the circumstances that, at the time of the transfer, the transferor was, or was about to become, insolvent.’

THE TRUSTEES’ CLAIMS AT TRIAL

52                  The respondents’ claims (so far as they remain relevant on the appeal) were that, at the time of the transfers, the bankrupt’s main purpose in making them was to prevent the property from becoming divisible amongst his creditors or to hinder or delay the process of making the property available for division amongst his creditors.  The respondents claimed that the transfers were void as against them as trustees of the bankrupt’s estate.  In that regard, the respondents relied, before the primary judge, on the provisions of s 121(1)(b)(i) and (ii) of the Act. They did not plead that the bankrupt’s purpose could reasonably be inferred, from all the circumstances, that at the time of the transfer the bankrupt was or was about to become insolvent: s 121(2).

THE EVIDENCE GENERALLY

53                  The respondents had the onus of establishing the elements of the provisions of the Act upon which they relied for the purpose of these proceedings.  The respondents elected to prove their case, largely, by documentary evidence.  It was supplemented by the evidence of an accountant, Mr Morelli, who gave unchallenged evidence concerning tax returns which he had prepared from documents supplied to him by the bankrupt.  The tax returns prepared by Mr Morelli were, as he said, ‘incomplete and unsatisfactory in many serious respects’.  Those returns were constructed on the instructions of the bankrupt.

54                  The evidence adduced by the respondents was, as the primary judge said, ‘in some respects … somewhat sparse’.

55                  The primary judge described the content and quality of the evidence:

‘There was no documentary evidence as to the Bankrupt’s income from professional or other activities in respect of any period prior to the 1992 taxation year.  For that matter, there was no detailed evidence as to the nature of the Bankrupt’s professional activities between the date of his admission as a barrister (1961) and the date of the transactions that are the subject of the present proceedings (1987).’

56                  In our opinion, the primary judge’s criticism of the evidence, which was adduced before him, was appropriate.  The evidence prior to 1992 was, in the main part, merely a historical description of events.

THE COURSE OF THE TRIAL

57                  At the end of the respondents’ case, the appellants submitted no case to answer in respect of, relevantly, the abovementioned claims. 

58                  The primary judge ruled that the appellants were not entitled to make a no case submission on those three issues unless they elected to call no evidence.  Senior counsel for the appellants, Mr Brereton SC, elected to call no evidence.

59                  The appellants’ no case submission succeeded in relation to some claims which it is not necessary to describe here. 

60                  On the other hand, the appellants’ no case submission failed in relation to the trustees’ claims that the transfers of the bankrupt’s interest in the Hunters Hill property and the Shares were void against them by reason of s 121 of the Act. 

61                  The matter was adjourned for further consideration.

62                  In a further set of reasons, the primary judge indicated the issues which arose on the resumed hearing:

11     At the resumed hearing, the respondents accepted that, given my reasoning on the no case submissions, no further issues remained to be determined in respect of the Trustees’ claims to have satisfied s 121 of the Bankruptcy Act in relation to the transfers of the Hunters Hill Property and the Shares.  That is, they accepted that the Trustees had established, in terms of s 121 of the Bankruptcy Act, that each asset would probably have been available to creditors had it not been transferred and that the Bankrupt’s main purpose in transferring the assets was to prevent them from becoming divisible among his creditors.  However, the respondents disputed that the Trustees were entitled to the full measure of relief they had claimed.  In this respect, they made two submissions.

12     First, the respondents contended that the Trustees were not entitled to a 50 per cent share in the Hunters Hill Property, as they had claimed, but only a 24.19 per cent interest.  It was common ground that immediately prior to the 1987 transfer the Bankrupt was registered as joint proprietor with Mrs Cummins of the Hunters Hill Property.  The respondents submitted, however, that I should find that Mrs Cummins had contributed $23,500 of the purchase price of $31,000 paid for the Property in 1970 and that the Bankrupt contributed only $7,500.  It followed, so they argued, that the Bankrupt held only a 24.19 per cent beneficial interest in the Property (^7.5/₃₁).  That is, the Bankrupt held his legal interest as joint tenant on a resulting trust for Mrs Cummins and himself in the proportion of ⁸/_15.5  (51.62 per cent) and ^7.5/_15.5  (48.38 per cent) respectively.  On this approach, even if the 1987 transfer of the Bankrupt’s interest in the Hunters Hill Property was void as against the Trustees, they were entitled to relief only in respect of a 24.19 per cent share of the beneficial interest in the Property.

13     Secondly, the respondents accepted that, given my reasoning on the no case submissions, the Trustees were entitled to relief insofar as Aymcopic retained the Shares or the proceeds of the sale of any Shares.  However, the respondents pointed out that 2,000 of the 6,000 Shares had been sold prior to any demand being made by Aymcopic, yielding proceeds of $177,154.  Moreover, prior to any such demand, Aymcopic, as trustee of the Cummins Family Trust, had distributed $57,144 of the proceeds to a beneficiary of the Trust.  It followed, so Mr Brereton argued, on the authority of Brady v Stapleton (1952) 88 CLR 322, that the Trustees could not recover the sum of $57,144 so distributed.

14     The issues that arose on the adjourned hearing were the following:

 

         (i)       Whether the issues should be separated in the manner sought by the respondents in their motion.

         (ii)      The quantum of the Bankrupt’s beneficial interest in the Hunters Hill Property at the date of the transfer of his interest to Mrs Cummins.

         (iii)     …

         (iv)     Whether the Trustees are entitled to recover from Aymcopic the sum of $57,144 distributed to a beneficiary of the Cummins Family Trust prior to any demand being made by them in respect of the Shares.

         (v)      …’

63                  At the resumed hearing, Mrs Cummins gave evidence but only on two issues, neither of which is relevant on this appeal. 

64                  Mrs Cummins’ claim was that, although the legal title to the Hunters Hill property showed the bankrupt and Mrs Cummins as joint tenants in equal shares, in fact, she was entitled to a beneficial interest greater than 50 per cent.  She argued that the property had been purchased for $31,000.  She contributed $3,000, being the deposit.  She contributed $13,053 of her own money.  She also contributed half of the $15,000 borrowed from the Commonwealth Trading Bank on the fully-drawn loan account in the joint names of the bankrupt and herself.  Thus, she argued, her contribution was $23,500 and the bankrupt’s $7,500.

65                  She argued that she was entitled to 23,500/31,000 proportion of the property.

66                  Mrs Cummins relied upon the principle referred to in Calverley v Green (1984) 155 CLR 242 at 258:

‘When two or more purchasers contribute to the purchase of property and the property is conveyed to them as joint tenants the equitable presumption is that they hold the legal estate on trust for themselves as tenants in common in shares proportionate to their contributions unless their contributions are equal.’

67                  She argued that that presumption had not been displaced.

68                  In those circumstances, her contention was that she was entitled to 75.8 per cent of the property in any event and that, whatever else, the trustees could only attack the transfer of the bankrupt’s interest which did not exceed 24.2 per cent.

69                  The primary judge accepted that Mrs Cummins had paid $12,900.00 towards the purchase price.  As we have mentioned, his Honour found against her in relation to the payment of $3,000.  He assumed that the deposit paid was $3,100.  Accordingly, after taking into account her share of liability under the joint fully-drawn loan account of $15,000, the primary judge found that Mrs Cummins had contributed, in total, $20,400 of the purchase price, being 65.8 per cent.

70                  The primary judge next considered the presumption of a resulting trust and the decision of the High Court in Calverley v Green.  He found that the presumption of a resulting trust may be rebutted by circumstances showing that the parties’ common intention was that the beneficial interest of the property should be held otherwise than in proportion to their respective contributions.  He found that the presumption of a resulting trust had been rebutted.

71                  The primary judge’s findings about the deposit and rebuttal of the presumption of a resulting trust are challenged by Mrs Cummins on this appeal.

72                  The respondents were also successful in the claim against Mrs Cummins in relation to the Hunters Hill property and against Aymcopic in relation to the Shares.  The respondents succeeded in establishing that the bankrupt’s main purpose in making those two transfers was to prevent the property from becoming divisible among his creditors or to hinder or delay the process of making property available for division among the bankrupt’s creditors: s 121(1)(b).  The primary judge made no findings under s 121(2) which, as we have mentioned, the respondents had not relied upon in their statement of claim.

73                  In regard to those two assets, the primary judge made declarations and consequential orders in favour of the respondents.

74                  Put shortly, the appellants’ case on the appeal is that there was no evidence or no sufficient evidence to support the findings made by the primary judge which led to the declarations and orders to which we have referred.

PRELIMINARY MATTER

75                  A preliminary matter should be addressed.  On 17 May 2004, the day before the hearing of this matter, the respondents filed a Notice of Contention seeking to support the primary judge’s decision on the following grounds:

‘1.        the evidence disclosed that the Bankrupt was insolvent, as at the date of the transfer of his beneficial interest in the Hunters Hill property and the Shares (“the Transfers”), or alternatively became insolvent as a result of the Transfers that took place on that day;

2.         as a consequence, by virtue of s 121(2) the Bankrupt’s main purpose in entering into the Transfers is presumed to prevent the Hunters Hill property and the Shares from becoming divisible among the Bankrupt’s creditors or to hinder or delay the process of making the Hunter’s Hill Property and the Shares available for division amongst the bankrupt’s creditors.’

76                  Order 52 r 22(3) of the Federal Court Rules provides:

‘(3)      If the respondent proposes to contend that the judgment should be affirmed on grounds other than those relied on by the court below, but does not seek a discharge or variation of any part of the judgment, the respondent need not file a notice of cross-appeal, but must:

(a)        file a notice of the respondent’s contention and serve a copy of the notice on the appellant; and

(b)        give notice to the appellant of the record of evidence or documents before the court below relating to the contention, for inclusion in the appellant’s draft index of appeal papers; and

(c)        at the appointment to settle the appeal papers, request the Registrar to include the record of evidence or documents in the appeal papers.’

77                  The rule does not require a Notice of Contention to be filed by any particular time but the rule assumes that the Notice will have been filed prior to the appellant preparing the draft index of appeal papers and prior to the appointment to settle the appeal papers.

78                  The Notice of Contention was filed late.  Indeed, as we have pointed out, it was only filed the day before the hearing was to take place.  No proper notice was given to the appellants of the matters contained in the Notice of Contention.

79                  More particularly, however, the respondents did not rely upon s 121(2) in their pleadings or in the relief sought against the appellants.  The respondents’ claim, insofar as it relied upon s 121, relied upon s 121(1)(b)(i) and (ii).

80                  In his reasons, the primary judge said:

‘In view of the conclusion I have reached, it is not necessary to address Mr Cole’s undeveloped submission founded on s 121(2) of the Bankruptcy Act.  The findings of fact, however, suggest that that submission, had it been developed, might have had some force.’

81                  That undeveloped submission was made after the primary judge’s determination on the no case submission and on the resumed hearing.  When the matter was raised before the primary judge, the appellants’ counsel objected to the respondents’ counsel referring to s 121(2) because it had not been pleaded.

82                  On this appeal, the presiding judge invited the respondents’ counsel to present argument why this Court should have regard to the Notice of Contention in view of the fact that the respondents had not relied upon s 121(2) in their pleading and the Notice of Contention had been filed so late.  No explanation, other than oversight, was given for the lateness of the filing of the Notice of Contention.  No argument was offered, at least before this Court, that s 121(2) needed not be pleaded.

83                  The appellants made their election to call no evidence on the basis of the pleadings and the evidence at the stage when the respondents closed their case.  We accept the appellants’ submission that it cannot be said that if the appellants had known that s 121(2) was relied on, then that would not have influenced that decision. 

84                  It would be manifestly unfair to the appellants, in our opinion, to allow the respondents to rely upon a deeming provision not pleaded and not raised until as an afterthought in final submissions.

85                  In our opinion, the respondents ought to be confined to their pleadings and the issues for this Court should be confined to the issues raised by the appellants in the Notice of Appeal.  Those issues were as follows:

1.         Whether the evidence at first instance permitted the principal inference, made by his Honour, to be made reasonably and distinctly.  The principal inference was that the bankrupt’s main purpose in transferring the Hunters Hill property to the first appellant, Mrs Cummins, and the Shares to the second appellant, was to defeat or delay creditors.  

2.         Whether his Honour erred in inferring that Mrs Cummins had contributed 65% of the purchase price for the Hunters Hill property and should have found, as she claimed, that she had contributed slightly in excess of 75% of that amount. 

3.         Whether the primary judge erred in finding that a resulting trust in favour of Mrs Cummins proportionate to her contribution to the acquisition of the Hunters Hill property was rebutted by evidence of a contrary intention.  

1.         was there sufficient evidence of the bankrupt’s main purpose?

86                  We think that it is useful to refer to the established principles which an appellate court applies where the question is whether a particular inference drawn by the primary judge from proved facts was properly drawn.  Those principles are conveniently explained in the reasons for judgment of Gibbs ACJ, Jacobs and Murphy JJ in Warren v Coombes (1979) 142 CLR 531 at 551:

‘Shortly expressed, the established principles are, we think, that in general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge.  In deciding what is the proper inference to be drawn, the appellate court will give respect and weight to the conclusion of the trial judge, but, once having reached its own conclusion, will not shrink from giving effect to it.  These principles, we venture to think, are not only sound in law, but beneficial in their operation.’

87                  In this matter we are in as good a position as the primary judge to draw any inferences that have to be drawn, because the respondents’ case, with the exception of Mr Morelli’s evidence, which was inconsequential, was entirely documentary.  In those circumstances, the primary judge had no advantage over this Court.

88                  We now turn to the evidence upon which his Honour relied for inferring and concluding that the bankrupt’s main purpose was to prevent his assets from being divided among his creditors, specifically the Commissioner. 

89                  At pars [104]-[107] of his reasons, the primary judge referred to the (long) history of the bankrupt’s continuing liability to lodge tax returns, unless he had been a member of a class exempted by the Commissioner from that requirement.  He also referred to matters of liability to pay, by way of penalty, additional tax equal to double the amount of tax payable by a taxpayer in respect of a year of income.  At par [107] his Honour concluded: 

‘It is therefore accurate to describe the Bankrupt in 1987 as having a liability to pay tax in respect of the years of income for which he had failed to lodge returns, contingent on the issue and service of assessments by the Commissioner.’ 

90                  The problem with that conclusion (which was promoted to an “overriding factor in this case” – see par [122]) as we see it, is that there was no evidence that during the years before 1987 (or before 1992 for that matter) the bankrupt’s taxable income was at a level which gave rise to an obligation to pay tax.  We think that it is worthwhile setting out the following passages from his Honour’s reasons:

‘[122] It seems to me that there is one overriding factor in this case that cannot be pushed into the background or minimised.  It is that by August 1987 the Bankrupt had not lodged a tax return for over thirty years.  By that time he had been in practice as a barrister for at least twenty-two years and probably twenty-six years.

. . .

[126] … By 1987, the Bankrupt had been in practice as a barrister for at least twenty-two years and probably more.  He had been appointed a senior counsel in 1981, six years before the asset transfers took place.  Mr Brereton [senior counsel for the appellants] did not dispute that I could take judicial notice of the fact that appointment as a senior counsel is and was at the time a recognition of a barrister’s professional attainments and expertise.  Moreover, by 1987 the Bankrupt had acquired the Shares which were worth $360,000 and entitled him, as a practical matter, to occupy a “double room” on a floor of barristers’ chambers.  In 1986, the Bankrupt acquired units entitling him to occupation of another set of chambers in Parramatta for the purpose (so I infer) of facilitating his practice.  There is nothing to indicate that the assets connected with his practice were paid for otherwise than out of the bankrupt’s professional earnings.  These facts lead readily enough, in my opinion, to an inference that for many years prior to 1987 the Bankrupt derived substantial assessable income from his practice as a barrister and, after taking into account allowable deductions, would have been liable to pay tax on that income.

[127]  Any doubts about the appropriateness of drawing this inference are, I think, allayed by the information contained in the Bankrupt’s tax returns for the 1992-1999 taxation years.  Although based on incomplete information (which may well have resulted in an understatement of assessable income), the returns indicate that the Bankrupt’s annual gross receipts for the first four years (the 1992-1995 taxation years) averaged $337,420 and his annual net business income averaged $204,397.  For reasons not explained in the evidence, the recorded amounts decreased for the 1996 taxation year but increased again thereafter.

[128]  Clearly it would not be appropriate to extrapolate from the taxation returns to make findings as to the Bankrupt’s precise income for a particular period prior to the 1987 transfers.  Nor can I rule out significant variations in the Bankrupt’s income from year to year, depending upon such matters as changes in his practice, his health, the general vicissitudes of life and the changing value of money.  Nevertheless, the taxation returns cover a lengthy period, commencing slightly less than four years after the transfers themselves were executed.  There is nothing to suggest that the Bankrupt’s earnings during that period were abnormally high, or markedly out of alignment with earlier periods in which he practised as a barrister (although doubtless his appointment as a senior counsel in 1981 had some effect on his practice).

[129] In these circumstances, in my opinion, the returns support the inference available from other evidence that in 1987 the Bankrupt faced very substantial tax liabilities flowing from his tax default over many years.  It is not possible on the evidence to be precise as to the extent of the Bankrupt’s tax liabilities.  I am satisfied, however, that the contingent liabilities amounted at the very least to several hundred thousand dollars (in 1987 dollars) and, in all probability, to substantially more.  The Bankrupt also faced the strong likelihood that the Commissioner, once assessments issued, would impose additional tax of up to double the tax due, although the precise amount of additional tax would depend on how the Commissioner exercised his statutory powers.’  [Emphasis added]

91                  There was no need for his Honour to make any findings about the bankrupt’s precise income, but in our opinion, the evidence did not establish that, on a balance of probabilities, the bankrupt had a contingent liability to the Commissioner for any tax, let alone several hundred thousands of dollars. 

92                  If there had been evidence that some or all of the Shares or the units referred to in paragraph [126] of the above extract had been paid for out of the bankrupt’s professional earnings, the case would have been very different.  The authorities show that, in an appropriate case, “a very slight degree of proof should be sufficient to shift [the] burden” – see Michael v Thompson (1894) 20 VLR 548 at 553 (in that case there was evidence of pecuniary embarrassment on the bankrupt’s part, including pressure from his bank and other creditors – see 549 and, again, 553), discussed by a Full Court of this Court in PT Garuda Indonesia Ltd v Grellman (1992) 35 FCR 515 at 528.  But there was no evidence that these assets had been paid for out of the bankrupt’s professional earnings.  In our view, his Honour erred by shifting the onus of proof away from the respondents when he said, in the following sentence from paragraph [126]:

‘There is nothing to indicate that the assets connected with his practice were paid for otherwise than out of the Bankrupt’s professional earnings.’

[The bankrupt made no cash contribution towards the purchase price of the Hunters Hill property.  His contribution was to become jointly liable under the first mortgage to secure $15,000.]

93                  It is often the case that the purchase of income-generating assets is funded by loans. A few simple enquiries by the respondents could have ascertained whether or not the bankrupt had encumbered the Shares or the units by way of charge, bill of sale or the like at the time of purchase.  Even slight evidence to the contrary [readily obtainable from searches of the relevant Bills of Sale (or the like) registry] may well have shifted the burden. 

94                  There was some evidence that the Shares were encumbered at the time when the bankrupt was about to transfer them to Mrs Cummins. 

95                  A contemporaneous note made by Mr Harris on 10 August 1987 (the share transfer was dated 17 August 1987)read “Nat Bk L/Soc has scrip”.  It is clear that the reference was to the Shares.  There was a further note by Mr Harris on 13 August 1987 which read “JC says Bank has CT and Nat L/Soc has scrip”.  We would infer from those notes that the National Bank of Australasia Ltd, Law Society Branch, held the scrip for the Shares.  On 8 October 1987 Mr Harris recorded a telephone conversation with a Mr Bruce Wood, Assistant Manager of the National Bank, which included the following:

‘SS security for o/d

would need security @ $60,000 (I to get him to ring you) re alternative SECURITY.’

96                  In the context of Mr Harris’ two other diary notes, we infer that he used “SS” as a shorthand expression for the Shares.  How long the shares had been used as security was, in our view, something which the respondents (with all the powers vested in them as trustees in bankruptcy) could readily have ascertained and put into evidence.  The position is that there was simply no evidence that the bankrupt had purchased the Shares out of his professional earnings and in our view his Honour erred in reversing the onus of proof in the manner referred to above.  Such an approach tends to nullify the whole point of a “no case” submission, that is, to test whether an applicant has proved its case.  A careful application of the “no-case” procedure can result in a considerable saving in costs. 

97                  Nor did the respondents call any evidence from any officer of the Commonwealth Bank which held a mortgage over the Hunters Hill home and which might have been given as collateral security for borrowings to acquire the units relating to the Parramatta chambers. 

98                  The truth of the matter was that there was simply no evidence about the source of funds for this acquisition and accordingly nothing to support his Honour’s finding that the bankrupt purchased the shares and the units relating to the chambers at Parramatta out of his professional earnings. 

99                  His Honour also relied on an assumption that he could take judicial notice, in the absence of any dispute by Mr Brereton, of the fact that the bankrupt’s appointment as a senior counsel was recognition of his professional attainments and expertise.   

100               It might well be expected that, on average, a barrister who had been in practice for 22 years, including six years as senior counsel, would have enjoyed a large taxable income.  But, in our opinion, the respondents needed to adduce some evidence (albeit slight) of the likely level of taxable income which this particular barrister enjoyed, i.e. did he fit the stereotype average? Or even, was it likely that he did?  Presumably his Honour took judicial notice of this “fact” under the common law doctrine (as to which see now Gattellaro v Westpac Banking Corporation [2004] HCA 6 at [17]).  But even using s 144 of the Evidence Act 1995 (Cth) would not, in our view, permit the jump from the significance of the appointment as a senior counsel to an assumption about even the approximate level of the bankrupt’s taxable income. 

101               The appellants also criticised his Honour’s use of the figures for gross receipts and net business income shown in the tax returns eventually filed on behalf of the bankrupt for the subsequent years ended 30 June 1992 to 30 June 1999 respectively.  They submitted that there was no evidence as to the bankrupt’s other business interests or investments during the earlier period before 1987.  There was, so it was put, an inference of equal probability that in the years in respect of which the bankrupt had not lodged income tax returns, his net taxable income did not require him to pay any income tax for those years. 

102               In our view, the evidence offered by the respondents, and accepted by his Honour, fell short of the evidence required for the inference drawn by his Honour in the last sentence of paragraph [126] of his reasons. 

103               We do not think that, in those circumstances, it was open to his Honour to allay any doubts (which presumably he had) by extrapolating backwards for a period of between four and eleven years as the basis for justifying an inference that in 1987 the bankrupt faced contingent tax liabilities amounting at the very least to several hundred thousand dollars. 

104               Given the seriousness of the allegations (even allowing for the fact that there is no need to show fraud) the evidence fell short. 

105               It should not have been very difficult for the respondents to have assembled enough evidence to take their case over the line.  We have given some examples above.  We will mention three more obvious sources of such evidence.  A selection of solicitors who had regularly briefed the bankrupt could have been subpoenaed to produce their books to show how much they had paid him on behalf of their clients over some of the relevant years.  His bank could have been subpoenaed to produce its records of his deposits of fees.  So could the bankrupt’s clerk.  Nor would it be difficult to assemble sufficient evidence of any other assets in the bankrupt’s name in order to produce what in income tax circles is known as a betterment analysis or betterment statement.  This is a familiar tool for assessing income where no returns have been furnished.  Evidence of substantial unencumbered assets would have helped to tip the scale.  There was no such evidence.  Nothing of that type was in evidence in this case.  

106               The next factual question to which his Honour directed attention was whether the bankrupt had retained insufficient assets to satisfy his tax liabilities.

107               His Honour’s findings on this matter were as follows:

‘[130]  A similar factual question arises as to whether the Bankrupt retained insufficient assets to satisfy his tax liabilities, if the Commissioner were to issue assessments against him.  The significance of this question is that, if the Bankrupt left himself insufficient assets to meet his potential tax liabilities, it is much easier to infer that his main purpose was to defeat or delay his creditors, specifically the Commissioner.  Once again, Mr Brereton submitted that the evidence did not support the inference that the Bankrupt could not have paid any tax that might have become due.  He argued that I could not be satisfied that the Bankrupt did not retain assets, other than those transferred to Mrs Cummins and Aymcopic, that could be used to satisfy any debt to the Commissioner.

[131]  There is no evidence that, after executing the transfers in 1987, the Bankrupt retained assets substantial enough to enable him to satisfy his liability to pay tax.  (The Bankrupt did retain his units in the Parramatta Unit Trust, but this was due to his solicitor’s failure to implement instructions to transfer the units in 1987 by way of gift.)  However, the mere absence of evidence that the Bankrupt retained other assets could not, without more, satisfy me affirmatively that there were no such assets.  But there is some evidence from which inferences can be drawn.

[132]  If, as Mr Brereton contended, one of the Bankrupt’s motives for divesting himself of two valuable assets in 1987 was to protect himself against being sued by future clients, it would have made no sense for the Bankrupt to have retained other substantial assets in his own name.  Furthermore, if one thing is clear in this case, it is that the Bankrupt was not concerned to make provision for his income tax liabilities.  Moreover:

·         the Bankrupt’s tax returns give no indication that he either disposed of substantial assets or derived substantial income from investment assets during the period 1992 to 2000 (the disposal of substantial assets would have had implications for capital gains tax);

·         the Bankrupt’s 2001 statement of affairs disclosed no substantial assets in his own name, other than the units in the Parramatta Unit Trust, a motor vehicle and shares worth about $40,000; and

·         bank documents record, apparently on the basis of information supplied by or with the authority of Mrs Cummins in 1998, that “all assets are in her name”.

[133]  The evidence does not enable me to rule out definitively the possibility that the Bankrupt retained assets in his own name after the 1987 transfers, but disposed of them between September 1987 and June 1991 (the tax returns cover the period from July 1991 onwards).  However, I regard this as merely a possibility.  It is much more likely on the evidence that the Bankrupt disposed of virtually all his substantial assets in 1987.  Whether or not this is so, having regard to the documentary evidence to which I have referred, I am satisfied that the Bankrupt, after August 1987, did not retain sufficient assets to meet in full his then liability to pay income tax.  A fortiori he did not retain sufficient assets to ensure that he could meet in full his liability to pay income tax and any additional tax that the Commissioner might have chosen to impose.’  [Emphasis added]

108               The first sentence of paragraph [131] above strongly suggests that the appellants had some onus to establish the proposition that the bankrupt retained assets substantial enough to enable him to satisfy a correspondingly substantial tax liability.  Once again, in our view, his Honour reversed the onus of proof and once again the respondents failed to adduce sufficient evidence.  There was simply no evidence to show that, by the transfers, the bankrupt had denuded himself of assets sufficient to pay his supposed liability to pay tax. 

109               Furthermore, in our opinion, it is not correct to say that it would have made no sense for the bankrupt to have retained some assets in his own name even if he contemplated being sued by future clients.  We think it is quite conceivable, as Mr Brereton submitted, that a barrister facing the prospect of being sued by future clients might seek to protect the matrimonial home and his chambers, but at the same time leave some assets unprotected.  But in the absence of evidence, all this is speculation.  In our view, there was simply no evidence for his Honour’s conclusion that:

‘It is much more likely on the evidence that the Bankrupt disposed of virtually all his substantial assets in 1987.’

110               We accept Mr Brereton’s submission that those circumstances are equally consistent with the following inferences, namely that:

            (a)        the bankrupt sold assets between 1987 and 1992;

            (b)        the bankrupt sold assets after 1992 (but before 1998) which were pre-capital gains tax assets or were personal use assets or did not yield a taxable profit;

            (c)        the bankrupt had cash (or other assets) sufficient to enable him to discharge the liability and the cash and other assets were neither recorded nor required to be recorded in the tax returns from 1992 onwards; and

            (d)        the bankrupt had cash, or other assets sufficient to enable him to discharge the liability, but spent this money after 1987 and/or after 1992.

111               Mr Eric Morelli, an accountant, was retained to reconstruct accounts for the bankrupt and prepare income tax returns for the years to which his Honour refers.  This may be only a small piece of evidence, but Mr Morelli’s trial balances showed the bankrupt’s estimated cash at bank on 30 June 1995 was $152,389, at 30 June 1996 $31,617, at 30 June 1997 $35,690, at 30 June 1998 $65,353 and at 30 June 1999 $168,104.  The bankrupt’s statement of affairsshowed that when he became bankrupt he had cash and other assets amounting to well over $200,000.  Just under half of that amount ($100,000) was cash on deposit being the proceeds of sale of the bankrupt’s chambers at Parramatta. 

112               It is perfectly clear from Mr Morelli’s evidence that the documents which he relied upon to prepare those tax returns were incomplete and unsatisfactory in many serious respects.  Mr Morelli gave details.  He asked for information but, so he swore, on by far the majority of those occasions, no satisfactory information was available.  He also swore as follows:

‘In cases where I was unsure as to the nature or purpose of a payment or receipt, I treated it as taxable income and as a non-allowable deduction, respectively.’

113               The significance of that evidence is that Mr Morelli made those decisions in favour of the Commissioner. 

114               In the light of that evidence it is difficult to understand his Honour’s passing remark in parenthesis in paragraph [127] above. 

115               The next step taken by his Honour in assessing the bankrupt’s purpose or purposes in transferring the assets was to have regard to the form of the transactions and the advice which he appeared to have received.  His Honour said that he was not prepared to infer from Mr Harris’ contemporaneous notes that he was privy to the bankrupt’s “tax delinquency”.  His Honour opined that if Mr Harris had been so informed the likelihood was that the notes would have been expressed differently.  His Honour made the following finding or inference:

‘But the Bankrupt was well aware of his own tax delinquency and chose not to tell his solicitor of that critical fact, despite his proposal to divest himself of his major assets.’ 

116               In our opinion, this factor is neutral.  As Mr Brereton submitted, if the bankrupt had been concerned with his tax liability and wished to place his assets beyond the reach of the Commissioner, it is in our view just as likely that he would have told his solicitor about this so as better to secure his family’s position.  If the discussion had taken place we would not expect the solicitor to have recorded it.  The absence of any record of any such discussion, in our opinion, does not support a finding that there was no such discussion.  There is simply no evidence that there was or was not such a discussion.  We think that the finding was not open to the primary judge.

117               Furthermore, the finding suffers from the deficiency of evidence that the bankrupt in fact had taxable income which he had not returned. 

118               His Honour then referred to some of Mr Harris’s notes which included observations that the transfer should be for consideration in the hope of surviving subsequent scrutiny.  With respect, we agree with his conclusions that that was what Mr Harris recommended.  His Honour then said this:

‘[136]  It is very likely that the solicitor discussed his views with his client, the Bankrupt.  The Bankrupt, being aware of his own tax delinquency, would have seen the transactions in a very different light than his solicitor.  Given the Bankrupt’s state of knowledge, I think it virtually inevitable that, whatever techniques he used to rationalise his tax default, at the time of the transactions he had at the forefront of his mind the impact of the transfers on the Commissioner’s chances of recovering the income tax that he (the Bankrupt) should have paid over many years.  The fact that the Bankrupt had no intention of “coming clean” reinforces the inference that, in his mind, the principal or leading purpose of the transfers was to protect his major assets from any claims that would be made by the Commissioner if and when the tax delinquency was discovered.  Whether the Bankrupt took that view because he thought that the misleading form of the transfers would offer protection when the time came, or because the solicitor’s advice gave him reason for optimism, is not necessary to determine.’

119               Once again we accept the appellants’ submissions concerning the difficulties which arise with these conclusions, namely that:

            (a)        it is based on the assumption that the bankrupt did in fact have a considerable tax liability;

            (b)        it assumes that the instructions to Mr Harris to execute two simple conveyances included instructions to advise the bankrupt on the transactions, or otherwise to provide an occasion for him to “come clean” to Mr Harris;

            (c)        the evidence was to the contrary – Mr Harris’ file disclosed only private file notes and no advice to the bankrupt at all on the question of avoiding liabilities.  It included a contemporaneous letter from the bankrupt containing instructions to make a gift; and

            (d)        the conclusion that the bankrupt wished the transfers to be executed in a “misleading form” was contrary to the evidence that he simply intended the transfers to be gifts, but Mr Harris had expressed them as having been made for consideration, to avoid stamp duty at higher rates on transactions which were gifts.

120               There is one further matter to which we should refer.  Contrary to the impression, which might reasonably be gained from reading his Honour’s reasons, that the third hypothesis was a matter advanced solely by the respondent [the third hypothesis was that the bankrupt was motivated by his concern that the law relating to a barrister’s in-court immunity might change and his desire to avoid the possibility that his assets might be at risk if a future client sued him], the suggestion can be found in the respondents’ Second Further Amended Statement of Claim where in the particulars to paragraph 9 the trustees pleaded:

‘(v)      Further and in the alternative, Mr Cummins in his public examination on 6 June 2001 before Registrar Tesoreiro stated that his intention was “to divest [himself] of any assets in [his] name because of claims being then made on barristers in respect of negligence claims as a barrister in giving advices.’

 

121               In our opinion, the evidence was not strong enough to exclude that hypothesis on a balance of probabilities.  There is nothing in the evidence to suggest that in 1987 the bankrupt anticipated being unmasked as a person who had not filed income tax returns for many, many years.  On the contrary, the pattern of not filing income tax returns continued for another twelve years until Mr Harris referred the bankrupt to Mr Morelli for the purpose of preparing and lodging the returns.

122               On the evidence, the only thing special about 1987 was the Giannarelli litigation.  On 9 May 1986 Marks J of the Supreme Court of Victoria held in Giannarelli v Wraith that s 10(2) of the Legal Profession Practice Act 1958 (Vic) operated to subject the plaintiff’s barristers in certain criminal proceedings to liability in respect of the negligence alleged against them.  On 10 April 1987 the Full Court of the Supreme Court of Victoria discharged the orders made by Marks J, but did not publish its reasons for taking that course until 19 May 1987 – see Wraith v Giannarelli [1988] VR 713 at 715, 716.  It is true, as his Honour noted, that the bankrupt instructed Mr Harris, in relation to the two relevant transfers, before the High Court of Australia granted special leave in the Giannarelli case (on 14 August 1987).  But the application for special leave must have been made shortly after 19 May 1987 or, more likely, shortly after 10 April 1987.  Mr Harris received his instructions from the bankrupt no later than 10 August 1987, being the date shown on the first of the diary notes referred to above.  The approximate coincidence of the timing is, in our opinion, quite marked.  We would not attach the same importance as his Honour did to the fact that the High Court did not grant special leave in Giannarelli until four days later.  The litigation was very well known in legal circles at that time. 

123               Evidence consistent with the third hypothesis was, first, the observation made by a finance broker in an application, dated 2 March 1998, on behalf of Mrs Cummins to the National Australia Bank Ltd for financial accommodation of $1.3 million:

‘The attached Statement of Assets and Liabilities demonstrates the high net worth of Borrower [Mrs Cummins].  In addition to substantial real estate holdings, which are held in her name for legal reasons in view of her husband’s occupation, Mrs Cummins currently has $1,000,000 invested in the share market and $300,000 on deposit with Macquarie Bank Ltd.’ [Emphasis added] 

 

124               The third hypothesis was also consistent with a notation in the records of the National Australia Bank Ltd, dated 7 October 1998, in relation to Mrs Cummins:

‘She is married to John Daniel Cummins who is a Barrister and maintains satisfactory account relationship with our Law Courts branch since 17/6/1983.  Due to his occupation all real estate property are in Mrs Cummins name who personally controls financial affairs.’ (Emphasis added)

 

125               The case at first instance appears to have been conducted on the basis that if the bankrupt’s main purpose for making the dispositions was to put them beyond the reach of a client successfully suing him for negligence, then that purpose would not fall within s 121(1).  We should not be thought to be agreeing with the correctness of that assumption.

126               In answer to the first question in the appeal, in our view, the evidence at first instance did not permit the principal inference, made by his Honour, to be made reasonably and distinctly.  As we have mentioned, the principal inference was that the bankrupt’s purpose in transferring the Hunters Hill property to Mrs Cummins and the Shares to the second appellant was to defeat or delay creditors.  We would allow the appeal on that ground alone. 

127               It is not necessary for us to consider his Honour’s reliance on Jones v Dunkel (1959) 101 CLR 298 other than to say that we think it was misplaced, for at least two reasons.  First, it conflicts, in our view, with the statement of principle, that such an inference may not be drawn in the circumstances such as these, set out in a passage of Young CJ’s reasons for judgment in the decision of the Full Court of the Supreme Court of Victoria in Protean (Holdings) Ltd v American Home Assurance Co [1985] VR 187 at 330-331, which was set out with apparent approval in the Full Court of this Court’s decision in Rasomen Pty Ltd v Shell Company of Australia Ltd (1997) 75 FCR 216 at 226-227.  The circumstance that in both those cases the trial judge had not put the “no-case” moving party to an election only serves to make the present case an even stronger candidate for the application of that principle.  Secondly, reliance on Jones v Dunkel in cases such as these undermines the utility of the no-case procedure and, in our view, flies in the face of the policy on which it is based – see paragraph [96] above. 

3.         how much of the purchase price for the hunters hill property was paid by Mrs Cummins?

128               The respondents adduced only documentary evidence in support of their claim.  That evidence included the following:

1.         On a date undisclosed by the evidence, Mrs Cummins opened a fully-drawn loan account with the Commonwealth Trading Bank of Australia.  It is likely that the account was opened in or about April 1970, because the first transaction on that account was dated 30 April 1970 and appears as the first entry on p 1 of some 30 photocopy pages of bank statements.  

2.         By a contract of sale dated 14 April 1970, the bankrupt and Mrs Cummins entered into a contract of sale to purchase the Hunters Hill property for $31,000.  The contract was not in evidence, but his Honour relied on a notice to complete (which was in evidence) dated 10 July 1970 which stated that the contract was dated 14 April 1970.  That notice also showed that a deposit had been paid, although the amount of the deposit was not recorded.  His Honour, with respect quite properly, inferred, on the basis of usual conveyancing practice in New South Wales in 1970, that the amount of the deposit was 10% of the purchase price i.e. $3,100.00.

3.         On 30 April 1970 Mrs Cummins withdrew an amount of $3,000 from her fully-drawn loan account.  This was the first transaction on that account which we have mentioned above. 

4.         The only other entry on the first page of the statement of account for the fully-drawn loan account was a debit, on 23 June 1970, of $36 for interest.

5.         The second page of the bank statements is missing, but a comparison between the first and the third pages shows that between 23 June 1970 and 27 August 1970 an amount or a series of amounts totalling exactly $13,000 was debited to the fully-drawn loan account.  After allowing for the deposit of $3,100 and $15,000 being obtained on the security of a first mortgage, that sum of $13,000 was very close (within $100) of the balance of the purchase price for the property, disregarding for the moment any adjustments for rates and taxes.

6.         On 27 July 1970, the date of settlement, the solicitors for the vendor of the Hunters Hill property issued to Mrs Cummins a receipt for $13,053.27.  We infer that this was the balance payable at settlement. 

129               His Honour rejected the appellants’ submission that Mrs Cummins had paid the deposit of $3,100.  He gave the following reasons:

‘The difficulty facing the respondents’ submission, however, is that the debit of $3,000 to Mrs Cummins’ loan account is recorded as having been made on 30 April 1970, sixteen days after the date of the contract of sale.  In the ordinary course one would expect the deposit to be paid no later than the date of exchange of contracts and for the cheque to be presented almost immediately.  Mr Brereton suggested that the debit might not have been precisely $3,100 because a preliminary deposit of $100 may have been paid by Mrs Cummins.  He also suggested that the agent may have delayed presenting the cheque, thus explaining why the debit was not recorded until 30 April 1970.  These explanations are, however, speculative and are not supported by evidence.  It is, of course, possible that the debit was related in some way to the deposit paid in respect of the Hunters Hill Property, but in the absence of a receipt or other evidence linking the debit to the payment of the deposit, I cannot be satisfied on the balance of probabilities that Mrs Cummins paid the deposit from her own resources or that the debit of $3,000 reflected moneys paid towards acquisition of the Hunters Hill Property.’

130               The evidence shows that two fully-drawn loan accounts were established by the bankrupt and his wife at the time of their purchase of the Hunters Hill property, each with the same bank.  One of those accounts (number 202-920) was in respect of the $15,000 borrowed on security of a first mortgage of the property and was in their joint names.  We infer that because $15,000 was debited to that account on the settlement date, 27 July 1970.  The other account (number 201-486) was in the sole name of Mrs Cummins.  From that account she drew $13,000 to pay the balance owing at settlement.  That drawing brought the total debit on that date to $16,000 plus the interest of $36 (there were no other debits to that account apart from interest and the like for two years).  The only other drawing before that date was in the sum of $3,000.  We would infer that Mrs Cummins established that loan account to finance the balance of the purchase price for the Hunters Hill property.  The arithmetic is $15,000 + $16,000 equals the purchase price of $31,000.

131               In our view, his Honour should have inferred, from the documentary evidence which we have referred to above, that Mrs Cummins paid the deposit from her own funds.  Although the contract is referred to in the Notice to Complete as being dated 14 April 1970, there was no evidence as to when contracts were actually exchanged.  It must also be remembered that these events took place some 23 years before the relevant trial (there were several).  His Honour made no allowance for whatever number of days was required for clearance of cheques in those days. 

132               On the balance of probabilities we think that the appropriate inference from all the circumstances is that the purchase of the Hunters Hill property was financed, save for the jointly-executed mortgage to secure $15,000, by Mrs Cummins establishing her full drawn loan account.  From the pattern disclosed in the bank statements for that account we would infer that its main purpose was to fund the deposit and balance payable at settlement in respect of the purchase of the Hunters Hill property. 

133               His Honour accepted that the receipt for the balance payable at settlement, issued to Mrs Cummins, suggested that she probably provided those funds.  He added this:

‘That inference receives some modest support from the fact that at some time between 23 June 1970 and 27 August 1970, a sum or sums amounting to $13,000 was debited to Mrs Cummins’ fully drawn loan account (the relevant page of the bank statement was missing).  While there is not a precise equivalence between the cheque provided by Mrs Cummins and the debit to her account, the bank statements at least show that there was a source of funds from which Mrs Cummins could have made the payment, or at any rate all but a very small proportion of it.’ 

134               In our view, the same reasoning should have been applied to identify the source of the deposit of $3,100. 

135               His Honour was not prepared, as an alternative to finding that Mrs Cummins had paid all of the deposit, to find that the deposit had been provided in equal shares by Mrs Cummins and the bankrupt.  His reasoning as follows:

‘… if the only possibilities were that the deposit was paid by Mrs Cummins alone, the Bankrupt alone or both equally, I might have been able to conclude (assuming each possibility to be equally likely) that on the balance of probabilities Mrs Cummins contributed at least half the deposit.  But these are not the only possibilities.  In these circumstances, I cannot be satisfied on the balance of probabilities that Mrs Cummins paid any part of the deposit.’

136               It is not necessary for us to decide this question, because we have held that his Honour should have found that Mrs Cummins provided the whole of the deposit. 

4.         was the resulting trust in favour of Mrs Cummins rebutted by EVIDENCE OF A CONTRARY INTENTION?

137               His Honour acknowledge that the unequal contributions made to the purchase of the Hunters Hill property by Mrs Cummins and the bankrupt gave rise to a resulting trust for them as tenants in common in shares proportion to their contributions. 

138               He then reviewed some authorities including Pettitt v Pettitt [1970] AC 777 and Calverley v Green (1984) 155 CLR 242 (which concerned an unmarried couple), and Doohan v Nelson [1973] 2 NSWLR 320 (which concerned whether there was sufficient evidence to rebut a presumption of advancement in favour of a deceased wife).  His Honour drew from those cases the suggestion that the presumption of a resulting trust may be rebutted by relatively slight evidence where:

• the parties to a marriage had made substantial, albeit unequal contributions to the acquisition of a property;

• the property acquired was intended to be used as the matrimonial home; and

• the property was placed in the joint names of the parties.

139               His Honour then reasoned as follows:

‘[62]  The rationale for the presumption of a resulting trust having limited force in this situation is that there is some reason to think, given the committed nature of the parties’ relationship and the fact that they have chosen to place the property in joint names, that they intend that the matrimonial home should be enjoyed together during their lives and that, on the death of one of them, the beneficial interest should go to the survivor.  The circumstances I have identified indicate that the parties do not necessarily intend that beneficial ownership of the property should depend on mathematical calculations referable to the precise financial contributions made by each of them to the purchase price.  In other words, in the circumstances posited, there is not a particularly strong basis in practical modern experience for attributing to the parties an intention that the beneficial interests in the matrimonial home be allocated solely by reference to their respective financial contributions.

. . .

[65] In the present case, there is no occasion to consider all the circumstances in which the presumption of a resulting trust might be less difficult to rebut than is ordinarily the case.  It is enough to say that although the circumstances of this case attract the presumption, it can be rebutted by slighter evidence than might ordinarily be required of a common intention that the parties should be joint beneficial owners of the property.’

140               His Honour then turned to apply that reasoning to the facts of the present case. 

141               He found that four factors justified the conclusion that the parties’ common intention in 1970 was to acquire the Hunters Hill property as joint beneficial owners. 

142               The four factors were as follows:

1.         Mrs Cummins and the bankrupt were married in 1964 and, by 1970, had lived together as husband and wife for six years.  His Honour inferred that at the time the Hunters Hill property was acquired, both were committed to the matrimonial relationship.

2.         The Hunters Hill property became their matrimonial home in accordance with their intention to that effect when they acquired it.

3.         Mrs Cummins and the bankrupt had previously acquired two properties, one in 1965 and one in 1967, both of which became the matrimonial home for a time and in each case they were registered as joint proprietors; and

4.         The fact that in 1987 Mrs Cummins was prepared to agree to pay half the assessed value of the Hunters Hill property for the bankrupt’s interest.  This, so his Honour reasoned, amounted to a declaration against her interest. 

143               His Honour drew in his conclusions in the following terms:

‘[76]  I do not think that the first two factors I have identified would be sufficient, of themselves, to rebut the presumption of a resulting trust, although they have a bearing on the strength of the presumption.  But when all four factors are taken into account, they justify concluding that the parties’ common intention in 1970 was to acquire the Hunters Hill Property as joint beneficial owners.  Mrs Cummins, so I infer, was aware of the significance of the Hunters Hill Property being registered in joint names and understood that the 1987 transaction was structured on the basis that the Bankrupt had a joint beneficial interest in the Hunters Hill Property.

[77]  I am strengthened in the conclusion I have reached by the fact that Mrs Cummins has elected not to give evidence in relation to the Hunters Hill Property cause of action.  Given her failure to give evidence on this issue, I can be more confident about drawing the inference from the material to which I have referred that the common intention of the parties in 1970 was that the Bankrupt would have a joint beneficial interest in the Hunters Hill Property.’

OUR reasoning

144               The starting point is, as his Honour acknowledged at par [60] of his reasons, that the unequal financial contributions by Mrs Cummins and the bankrupt towards the purchase of the Hunters Hill property gave rise to a presumption that they held the property beneficially in proportion to their respective contributions. 

145               The authorities show that, depending on the circumstances, that presumption may be rebutted by a presumption of advancement.  But, as the authorities also show, the presumption of advancement is “no more than a circumstance of evidence which may rebut the presumption of resulting trust”.  The quotation is from Pettitt v Pettitt quoted by Gibbs CJ in Calverley v Green at 247.  In any event his Honour did not decide this question on the basis of any presumption of advancement.  His Honour found on the evidence that it was the common intention of the bankrupt and Mrs Cummins that the beneficial interest in the Hunters Hill property should be held otherwise than in proportion to their respective contributions. 

146               By referring to Pettitt v Pettitt we would not wish to be taken as indicating that that decision has any necessary bearing on the outcome of this case.  The facts of Pettitt v Pettitt were totally different to the facts of the present case.  The only basis upon which the husband claimed an entitlement in the matrimonial home in Pettitt v Pettitt was that he had carried out certain improvements to the matrimonial home after its purchase by Mrs Pettitt out of funds which were quite clearly all her own funds.  We would regard the passages in Lord Upjohn’s speech at pp 815-816 as not only being obiter dicta, but as references to several fact situations which not only had no direct relevance to the facts in that case, but no relevance whatsoever to the facts of the present matter, save for his Lordship’s observation at the foot of p 815:

‘Whether the spouses contributing to the purchase should be considered to be equal owners or in some other proportions must depend on the circumstances of each case: Rimmer v Rimmer [1953]1 Q.B. 63 and many other cases.’

147               We respectfully agree with the primary judge that the first of his four factors (a combination of marriage in 1964, six years living together as husband and wife and commitment to the matrimonial relationship at the time when the property was acquired), weighs quite heavily in the balance against the resulting trust. 

148               We agree also with his Honour that the evidence indicates that the Hunters Hill property became the matrimonial home of Mrs Cummins and the bankrupt and that that was their intent when they acquired it. 

149               But we disagree, respectfully, with his Honour’s reliance upon the fact that the parties had twice previously become registered as joint proprietors of other properties.  In our view, taking the legal title to those two properties as joint tenants was entirely neutral as an indicator of beneficial entitlement.  His Honour did not make any findings about the respective financial contributions made by Mrs Cummins and the bankrupt towards the purchase of the first two properties, although he did refer to amounts raised by way of mortgage.  Nor was there any attempt made to trace the proceeds of sale of those respective properties.  We were not taken to any evidence in relation to those matters and we assume there was none.

150               His Honour, at par [72] of his reasons referred to the disbursement of the proceeds of sale of the second property which took place some eighteen months after settlement of the purchase of the Hunters Hill property.  The evidence shows that the amount of $45,064.15, to which his Honour referred in that paragraph, was paid to the credit of the fully-drawn loan account (account number 202-920) maintained in the name of the bankrupt and Mrs Cummins.  A photocopy of the relevant bank statement was in evidence.  It shows that at the time of the deposit of this amount the account was $26,986.00 in debit.  But his Honour does not appear to have relied upon the distribution of this amount of $45,064.15 as part of the third factor.   

151               In relation to the third factor, his Honour made a finding that during the course of one or all of these various transactions of purchase one or other of the solicitors had explained to Mrs Cummins the significance of a joint tenancy.  His Honour inferred that in 1970 Mrs Cummins understood the concept of a joint tenancy and, in particular, the notion of survivorship attaching to a joint tenancy.  As Mr Brereton submitted, there was simply no evidence to support that inference and in our view, it should not have been made.  There was certainly no evidence of advice to Mrs Cummins from any solicitors about the significance of a joint tenancy.  In any event, as we have said, we do not think that taking legal title as a joint tenant is a factor to be weighed in rebuttal of a resulting trust when assessing where the beneficial interests lie. 

152               We think that his Honour also erred in the reliance which he placed upon Mrs Cummins’ conduct in 1987.  He attached importance to the fact that Mrs Cummins was prepared to agree to pay half the assessed value of the Hunters Hill property and to pay stamp duty on the contract price arrived at on that basis. 

153               In our view, that could not be taken into account as a declaration against her interest.  First, there is no evidence that Mrs Cummins understood the concept of a joint tenancy.  Secondly, as his Honour acknowledged, the reference in the contract of sale to “the interest of the Vendor as joint tenant” was equivocal because it could refer to the bankrupt’s legal interest as distinct from his beneficial interest.  Thirdly, all the evidence pointed to the bankrupt as the source of instructions to Mr Harris.  The bankrupt’s original instructions were that the transaction was to be by way of gift.  It was Mr Harris who came up with the idea of a purchase, with the debt never to be enforced.  In our opinion, Mrs Cummins’ actions in 1987 should not be taken as evidence that her intention in 1970 was to confer a beneficial interest on her husband. 

154               We do not think that the documentary evidence goes far enough to rebut the resulting trust in favour of Mrs Cummins. 

155               There is other evidence which we consider to be important.  As we have mentioned above, there were two fully-drawn loan accounts established at the time of the purchase of the Hunters Hill property.  Mrs Cummins established her own fully-drawn loan account (number 201-486) and paid, as we have inferred, first $3,000 of the deposit from that account and later an amount of $13,000 to enable settlement to take place.  She went to the trouble of obtaining a receipt in her own name for the moneys which she paid to the solicitors on the settlement date. 

156               At or about the same time, Mrs Cummins and the bankrupt jointly established the second fully-drawn loan account (account number 202-920) through which the balance of the purchase price was paid. 

157               The very fact that the parties went to such trouble i.e. to establish two separate fully-drawn loan accounts as the source of funds for the whole of the purchase price, points, in our view, quite strongly in favour of maintaining the resulting trust. 

158               For the foregoing reasons, and with all due respect to the primary judge, we think that he was in error in finding that the presumption of a resulting trust had been displaced on the evidence adduced by the respondents.

Conclusion

159               We would allow the appeal, set aside the declarations and orders made at first instance and dismiss so much of the application as related to the Hunters Hill property and the Shares.  In our opinion, the respondents should pay the appellants’ costs of the application and of the appeal. 

I certify that the preceding one hundred and fifty-nine (159) numbered paragraphs are a true copy of the Reasons for Judgment herein of Justices Carr and Lander.

Associate:

Dated:              30 July 2004

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 1971 OF 2003

 

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

 

BETWEEN:	MARY ELIZABETH CUMMINS FIRST APPELLANT   AYMCOPIC PTY LIMITED ACN 003 347 171 SECOND APPELLANT
AND:	THE TRUSTEES OF THE PROPERTY OF JOHN DANIEL CUMMINS, A BANKRUPT RESPONDENT

 

JUDGES:	CARR, TAMBERLIN AND LANDER JJ
DATE:	30 JULY 2004
PLACE:	SYDNEY

REASONS FOR JUDGMENT

TAMBERLIN J:

introduction

160               This appeal concerns two declarations made by Sackville J on 24 October 2003, and consequential orders which his Honour made on the same date.

161                           His Honour set out his reasons for the declarations and orders in judgments given on 5 December 2002, Prentice v Cummins (No 5) [2002] FCA 1503 (Cummins (No 5)) and on 24 September 2003, Prentice v Cummins (No 6) [2003] FCA 1002 (Cummins (No 6)).

162                           When the respondent had closed its evidence the appellants made a no case submission in relation to three of the respondent’s pleaded claims.  Two of the claims involved the transfer in August 1987, by the bankrupt (“Cummins”) of the following property:

(a)    an interest in the matrimonial home at Alexandra Street, Hunters Hill to his wife (“Mrs Cummins”) who is the first appellant; and

(b)    6,000 shares in Counsel’s Chambers Ltd to his family company, Aymcopic Pty Limited (“Aymcopic”), which is the second appellant.

163                           His Honour only permitted the no case submission to be made on these transfers on the basis that the appellants elected to call no evidence: see Prentice v Cummins (No 4) [2002] FCA 1215.  The appellants pressed their no case applications on that basis.

164                           His Honour upheld the appellants’ no case application in respect of the claim that the transfer of Alexandra Street was void against the Trustee in Bankruptcy pursuant to s 120 of the Bankruptcy Act 1966 (Cth) (“the Act”).  However, his Honour dismissed the no case application in respect of the claim by the respondent that the transfer of the Alexandra Street property and the shares in Counsel’s Chambers Ltd were void by reason of s 121 of the Act.  His Honour’s reasons are set out in Cummins (No 5).

165                           In dismissing the appellants’ no case submissions, his Honour held that the role of a judge sitting alone hearing a no case submission was to determine, not whether there was some evidence that could be the basis of proceeding to a jury, but whether the applicant had discharged its burden of proof.  This approach is not challenged.  The appellants challenge a number of findings by his Honour which are set out in the written submissions as follows:

(a)                that Cummins was well aware in August 1987 that he had incurred very substantial liabilities to the Commissioner of Taxation (“the Commissioner”), contingent only on the Commissioner issuing assessments in respect of past income years;

(b)               that Cummins was well aware in August 1987 that the Commissioner would issue assessments once Cummins’ longstanding tax delinquency became known, and that this was an event which could occur at any time.  The reference to “tax delinquency” is to the failure by Cummins to file any income tax returns over a period of forty-five years;

(c)                that Cummins divested himself voluntarily of virtually all of his substantial assets in August 1987;

(d)               that in any event, the assets retained by Cummins were not sufficient to meet his taxation liabilities if the Commissioner decided to issue assessments; and

(e)                that Cummins, at the time of transfers, intended to protect his assets from any claims by the Commissioner.

166                           Essentially the appellants make the following two submissions regarding Cummins’ main purpose in making the August 1987 transfers:

(a)                the evidence did not permit a finding as to what Cummins’ main purpose was in implementing the transfers, or whether he was insolvent at that time; and alternatively,

(b)               that on the whole of the evidence, there were other inferences which were more likely, or at least as likely, as the inferences his Honour drew as to those matters.

background

167                           This background is substantially taken from the two judgments of the primary judge referred to in paragraph [161] above.

168                           Cummins and Mrs Cummins were married in 1964 and at all material times up to their separation in February 2002, lived together as husband and wife.  Cummins was admitted as a solicitor of the Supreme Court of New South Wales in 1957.  In 1961 he was admitted as a barrister of that court and practised as a barrister thereafter.  He was appointed Queen’s Counsel in December 1980.

169                           In 1962 Mrs Cummins inherited an amount of approximately £13,000 from her mother’s estate.  Before the relevant transactions in August 1987, Cummins and Mrs Cummins had bought or sold a number of properties as follows:

• In about May 1965, they purchased a property at Linley Point for £10,000 as joint tenants.  The purchase was financed by a loan of £7,000 secured on the property.  It appears from subsequent references to the residential address of Cummins and Mrs Cummins that the Linley Point property was their residence.  The property was sold on 15 December 1967 for $22,600.
• In January 1967, Cummins and Mrs Cummins, together with a third party, purchased a property at 12 Ferdinand Street, Hunters Hill as tenants in common.  The purchase price was $68,000, of which the vendor lent $46,000 on the security of a mortgage. 
• In October 1967, Cummins and Mrs Cummins became registered joint tenants of a property known as 12A Ferdinand Street, Hunters Hill.  This property was the result of a subdivision of 12 Ferdinand Street, Hunters Hill.  This property was sold in about December 1968 for $58,500 and of this amount the sum of $45,064.15 was paid into their joint bank account.

170                           In April 1970 Mrs Cummins opened a loan account with the Commonwealth Trading Bank.  An entry dated 30 April 1970 shows a debit to that account of $3,000.

171                           On 14 April 1970, Cummins and Mrs Cummins contracted to purchase Alexandra Street.  The transaction was completed on 27 July 1970 and they became registered as joint tenants.  The transfer was expressed to be

“in consideration of $31,000 (the receipt whereof is hereby acknowledged) paid to [the vendor] by John Daniel Cummins and Mary Elizabeth Cummins.”

172                           In July 1970 Cummins and Mrs Cummins opened a Commonwealth Trading Bank Loan Account.  The purchase of Alexandra Street was financed in part by a loan of $15,000 from the Commonwealth Trading Bank, secured by a joint mortgage executed by both Cummins and Mrs Cummins as mortgagors.  The mortgage was not registered until 1974.  The solicitors acting for the purchasers issued a receipt to Mrs Cummins on 27 July 1970 for the sum of $13,053.27 in these terms:

J.P. GROGAN & CO

Solicitors

2a Florence Street, Hornsby

No 11134                                                                                Phone 47-3642

                                                                                                27^th July 1970

Received from M. E. Cummins

by cheque the sum of Thirteen thousand & fifty three dollars 27 cents

being advance re purchase.

                                                                                    J.P. Grogan & Co.

$13053:27                   Stamp

                                    Duty                                        per: D. Head.

                                    RS0444                                    Trust Account

173                           These payments, together with Mrs Cummins’ loan obligations and the debit of $3,000 recorded in the loan account of Mrs Cummins on 30 April 1970, referred to above, were relied on by her counsel as evidence that she provided the deposit and the balance of the purchase price.

174                           There was no documentary evidence as to Cummins’ income from professional or other activities in respect of any period prior to the 1992 taxation year.  Nor was there any detailed evidence as to the extent of Cummins’ professional activities between 1961 and the date of the transfers in August 1987, which are the subject of the present proceedings.  Some earlier transfers or mortgages to which Cummins was a party described him as a “barrister”.  These documents were executed in 1965, 1967, 1970, 1971, 1982 and 1987.  Cummins’ tax returns, constructed by his accountant in 1999 from some records then available, show that he derived substantial professional income from his practice as a barrister in years for which taxation returns were compiled retrospectively, that is to say, for the period 1992 to 1999, although the precise amounts vary considerably.  They disclose taxable incomes ranging between $181,026 to $397,050 over that eight year period.

175                           In 1986 Cummins acquired units in Barristers Chambers Parramatta Unit Trust for the sum of $30,000.  These units, which related to a second set of barristers’ chambers in Parramatta, formed part of his bankrupt estate and were ultimately sold by the trustee for $100,000.  By 1987 Cummins had acquired shares in Counsel’s Chambers Ltd, which entitled him to occupy a double room on a floor of barristers’ chambers.  The primary judge could not, on the evidence, determine when the shares were acquired or whether they were acquired in one transaction.  The shares in Counsel’s Chambers Ltd related to barristers’ accommodation at 174-176 Philip Street, Sydney.

176                           On 17 August 1987, Cummins and Mrs Cummins each acquired one share in Aymcopic, a “shelf” company.  On 24 August 1987, a deed was executed whereby Aymcopic became the trustee of the Cummins Family Trust.  The beneficiaries of the discretionary trust so created were Mrs Cummins and the four children of the marriage.  On 26 August 1987, Cummins executed a transfer of the shares in Counsel’s Chambers Ltd to Aymcopic, in consideration of the sum of $360,000, said to have been paid by Aymcopic.  It is common ground that Aymcopic did not pay any part of the purchase price.  Mrs Cummins provided the funds to meet the stamp duty on the transfer.  The shares were registered in Aymcopic’s name in December 1987.

177                           On the same day, 26 August 1987, Cummins agreed with Mrs Cummins to sell to her his interest as joint tenant of Alexandra Street, and executed a transfer in favour of Mrs Cummins as transferee.  The price was expressed to be $205,250, being half the value attributed to that property by a registered valuer.  The contract required the payment of the purchase price on completion.  The transfer was signed by Mr Harris, the solicitor who signed the transfer as “solicitor for” the transferee.  The transfer included an acknowledgement by Cummins that he had received the consideration of $205,250.  It is common ground that Mrs Cummins did not pay the purchase price or any part of it.  Nonetheless, she paid the ad valorem stamp duty on the contract and transfer and the valuer’s fees.  The transfer was subsequently registered and Mrs Cummins became registered as the proprietor of the fee simple estate in Alexandra Street, which later became the matrimonial home.

178                           On 7 October 1987, Mr Harris, the solicitor who prepared the documentation to give effect to the transactions of 26 August 1987, confirmed by letter to Cummins that his instructions were “to transfer by way of gift”, to Aymcopic, Cummins’ units in the Parramatta Unit Trust.  These instructions were never implemented and the units in the Parramatta Unit Trust ultimately formed the most valuable single asset in Cummins’ bankrupt estate following his bankruptcy.  In a letter written a decade later, the solicitor reported to Cummins, in response to an inquiry from the latter, that the failure to prepare a transfer of the units was an oversight on the solicitor’s part.  His Honour concluded that Cummins intended to transfer the units in the Parramatta Unit Trust to Aymcopic in 1987, but his instructions were not implemented.

179                           Handwritten file notes made by Mr Harris around the time of the transfers were in evidence.  These notes, although cryptic and incomplete, show that the solicitor paid attention to the possible application of s 121 of the Bankruptcy Act (which at that time was concerned with dispositions of property “with intent to defraud creditors”) and its State counterpart, namely s 37A of the Conveyancing Act 1919 (NSW). 

180                           After referring to the terms of the relevant legislation, these notes record the observation that “Mary [Mrs Cummins] Must be a Purchaser”.  The notes relating to the Alexandra Street property record questions - “what is valuable consideration [?]” and “is forgiveness of a debt a settlement [?]”.  They refer, without elaboration, to the decision of the High Court in Williams v Lloyd (1934) 50 CLR 341, which was concerned with dispositions of property for the benefit of a wife with intent to defeat or delay creditors by a person who became bankrupt.  They also record the observation that “[p]romise to pay is valuable consideration” and an apparent suggestion that a deed of release of debt should be executed after say four months.

181                           The notes relating to the transfer of the shares in Counsel’s Chambers Ltd record that, as Cummins was a director of the transferee, the company “could not escape notice of any intent on John’s [Cummins] part”.  The solicitor records that “[s]emble could be attacked under s 37A [of the Conveyancing Act 1919 (NSW)]” but asks, “where is evidence of intent[?]”.

182                           Because none of the participants in the 1987 transactions gave evidence, there was no direct express evidence of Cummins’ purpose in transferring assets to Mrs Cummins and Aymcopic.  However, business records were in evidence which were considered by his Honour to be relevant to the question of Cummins’ purpose.  In a letter dated 2 March 1998, the managing director of a company described as a “strong” source of referrals to the National Australia Bank, applied to that bank on Mrs Cummins’ behalf, seeking a loan of $1.3 million for residential investment purposes.  The letter stated that

“[I]n addition to substantial real estate holdings which are held in her name for legal reasons in view of her husband’s occupation, Mrs Cummins currently has [certain other assets]”. (Emphasis added.)

Contemporaneous records of the National Australia Bank, apparently recording information supplied on behalf of Mrs Cummins, refer to “all assets” or “all real estate property” being in her name.  In particular, one document, dated 3 April 1998, records that “Mary’s [Mrs Cummins’] husband is a Queens Council (sic) thus why all assets are in her name and only minimal income”.

CUMMINS’ 1992-1999 tax returns

183                           The tax returns constructed and filed retrospectively on behalf of Cummins by his accountant, Mr Morelli, for the eight financial years 1992-1999, show the following gross receipts and net income from his business or professional activities:

Year ended                 Gross Receipts          Net Business Income

   30 June                                $                                        $

 

1992                                 335,425                              181,026

1993                                 337,294                              208,277

1994                                 299,664                              188,859

1995                                 377,300                              239,426

1996                                 191,909                                89,679

1997                                 261,379                              151,756

1998                                 350,625                              264,051

1999                                 520,525                              397,050

184                           Not all the gross receipts were derived from Cummins’ practice as a barrister, but Sackville J concluded that the great bulk were derived from that source.  For example, the deposits for the 1992 tax year show that of the $335,425 recorded as gross receipts, the sum of $325,032 constituted fees received by Cummins.

185                           None of the returns disclose the sale or disposal of any substantial assets during the period 1992 to 1999.  The details of income and expenditure suggest that throughout the eight year period Cummins owned a motor vehicle and had a small share portfolio.  The returns do not indicate that Cummins derived any substantial income from a source other than his practice as a barrister.  This picture is not changed by the 2000 return, which covered an earning period after Cummins had finally recognised the need to lodge at least some income tax returns.  Cummins presented a petition for his bankruptcy on 13 December 2000.  On 16 March 2001, Mr Maxwell Prentice was appointed as trustee of his estate.

186                           Cummins’ Statement of Affairs as at 30 January 2001 disclosed that his assets totalled $259,614 and his liabilities to unsecured creditors totalled $1,040,400.  His principal assets were the units in the Parramatta Unit Trust ($100,000), a motor vehicle (sold for $51,750) and shares (sold for approximately $42,000).

187                           Mrs Cummins gave evidence on the hearing that she and Cummins separated in February 2002, largely in consequence of the events leading up to her husband’s bankruptcy.  Mrs Cummins’ evidence was to the effect that her marriage to Cummins had broken down before the first hearing of the matter. 

188                           The evidence is that Mrs Cummins filed a number of tax returns over the period 1965 and 1987 showing amounts of taxable income ranging between $950 through to $17,140.

Appellants’ submissions

189                           The alleged errors relied on by the appellants can be summarised as follows:

(a)        His Honour could not and should not have reached the conclusions and drawn the inferences that he made as to:

(i)      the non-payment of the deposit by Mrs Cummins;

(ii)    the respective entitlements of the interests in the transferred property as at the date of the transfers by Cummins in August 1987;

(iii)   the existence of an intention to hinder or delay creditors in relation to the August 1987 transfers;

(iv)  the effect of the failure of the appellants to adduce evidence as to the August 1987 transfers in order to reach the conclusion that there was the necessary intent within s 121(1) of the Act;

(v)    the earnings of Cummins between 1965 and the time of the transfers in August 1987;

(vi)  the inferences drawn as to the likely source of the purchase price in respect of the purchase of Counsel’s Chambers Ltd by Cummins;

(vii)the importance of the tax returns prepared retrospectively by Mr Morelli for the income years 1992-1999.

(b)        His Honour erred in making the inferences when other more probable or possible inferences were available on the evidence.  This includes the source of funds used to purchase Counsel’s Chambers Ltd.  In particular, it is said that the inference drawn by his Honour that the source of the funds to purchase 6,000 shares in Counsel’s Chambers Ltd was from Cummins’ income as a barrister was not open, because there was no evidence as to Cummins’ income or financial position in the period before the purchase.

Purchase price contribution

190                           The primary judge accepted that Mrs Cummins paid an amount of $13,053.27 towards the purchase price of Alexandra Street from her own funds, and that she was jointly liable for one half of the $15,000 borrowed for the purchase price from the Commonwealth Trading Bank.  His Honour was not satisfied that she paid the deposit, and therefore concluded that she had contributed only 65.8% of the purchase price for the Alexandra Street property, and not 76.3%. as she contended.

191                           In reaching this conclusion, his Honour accepted that the required deposit was probably $3,100, being 10% of the purchase price in accordance with usual conveyancing practice.  His Honour saw the difficulty in Mrs Cummins’ contention that she had paid the deposit as being the fact that the debit in her bank loan account for $3000 was made on 30 April 1970, which was 16 days after the date of the Contract for Sale.  His Honour had regard to the practice that deposits in contracts for the sale of land are ordinarily paid on the date of contract.  His Honour considered that possible explanations for the 16 day period could be delayed presentation of the deposit cheque or a preliminary deposit of $100.  But his Honour considered that these explanations on behalf of Mrs Cummins were speculative.

192                           His Honour considered that he could not make an affirmative finding as to whether or not Mrs Cummins or a third party paid most or all of the deposit.  I note that there is no evidence whatsoever that any third party had any reason to pay the deposit.  In view of the fact that $3,000 was debited to the account of Mrs Cummins shortly after the date of the contract, and because his Honour found that the balance purchase price was paid from Mrs Cummins’ funds and out of the same bank account, I consider the correct inference to be drawn on this question is that Mrs Cummins paid the deposit.  It is well-settled in circumstances such as the present that an appeal court can substitute what it considers to be the correct inference for that drawn by the primary judge: see Warren v Coombes (1979) 142 CLR 531 at 551.

193                           The evidence is that in April 1970, Mrs Cummins opened a loan account with Commonwealth Trading Bank at Liverpool.  On 14 April Cummins and Mrs Cummins signed a contract to purchase Alexandra Street.  On 30 April there was a miscellaneous debit of $3,000 recorded in Mrs Cummins’ account.  The receipt is not in evidence, but on 24 July 1970 Mrs Cummins paid $13,053.27 towards the purchase from the same bank account, which amount his Honour found to have been paid out of her funds.

194                           In July 1970, Cummins and Mrs Cummins opened a Commonwealth Trading Bank Loan account, and on 27 July 1970 that Bank lent $15,000 for the purchase of Alexandra Street by way of the fully drawn joint loan account.

195                           On this evidence I consider the proper and more probable inference is that Mrs Cummins paid the deposit from her own monies, notwithstanding the delay of 16 days and the difference of $100, which was probably part deposit.  I consider that it would be most unusual if she were prepared to pay $13,053 from the same account and not to have paid the $3,000 which was an almost identical amount to the deposit customarily paid on entry into a binding contract. Accordingly, in my view, his Honour erred in relation to this matter and the proper finding should be that she paid the deposit from her own monies.

RESULTING TRUST

196                           The primary judge concluded that given the unequal contributions of the parties there was a presumption of a resulting trust with the consequence that Cummins and Mrs Cummins each had an unequal interest in the Alexandra Street property in accordance with their contributions.  In reaching this conclusion, his Honour adopted the formulation of the principle as to a resulting trust expressed by Mason and Brennan JJ in Calverley v Green (1984) 155 CLR 242, (“Calverley”) at 258, which was in the following terms:

“… When two or more purchasers contribute to the purchase of property and the property is conveyed to them as joint tenants the equitable presumption is that they hold the legal estate in trust for themselves as tenants in common in shares proportionate to their contribution unless their contributions are equal. ...”

197                           The primary judge considered that the presumption of resulting trust based on the contributions had been rebutted, because as at the date of transfer the interests of the parties were to be adjusted on the basis that each had one equal half share beneficial in the property.  In reaching this conclusion, his Honour referred to the remarks of Lord Upjohn in Pettitt v Pettitt [1970] AC 777 (“Pettitt”) at 815, which addresses property held in the names of husband and wife:

“… where both spouses contribute to the acquisition of a property, then my own view (of course in the absence of evidence) is that they intended to be joint beneficial owners and this is so whether the purchase be in the joint names or in the name of one.  This is the result of an application of the presumption of resulting trust.  Even if the property be put in the sole name of the wife, I would not myself treat that as a circumstance of evidence enabling the wife to claim an advancement to her, for it is against all the probabilities of the case unless the husband’s contribution is very small.”

198                           These observations of Lord Upjohn were referred to by Mason and Brennan JJ in Calverley at 259 in these terms:

“In some instances, the drawing of such an inference might work to the disadvantage of a wife who holds a legal interest in property greater than a joint tenancy and who would otherwise be entitled to rely upon the presumption of advancement to assert as large a beneficial interest as the legal interest which she holds.  It is not necessary now to consider whether the founding of a joint beneficial tenancy in husband and wife upon their inferred intention ‘is the result of an application of the presumption of resulting trust.’”

199                           Statements are made to similar effect, with respect to the decision in Pettitt, by the editors of Lewin on Trusts 17^th ed (2000) at 9-57 and 9-61.  See also the judgment of Kerr LJ in Bernard v Josephs (1982) 1 Ch. 391 at 408.

200                           The primary judge concluded from these remarks in Calverley that their Honours understood Lord Upjohn to contemplate that where both spouses contribute to the acquisition of a property, and place it in joint names, they may be equal beneficial owners in equity, notwithstanding the effect that their contributions are unequal.  His Honour the primary judge said at paragraph [56] of Cummins (No 6):

“Mason and Brennan JJ appear to have understood Lord Upjohn to contemplate that where both spouses contribute to the acquisition of property and place it in joint names, they may become equal beneficial owners in equity notwithstanding that their contributions are unequal.  In particular, by referring to the presumption of a resulting trust as perhaps being ‘qualified’ by Lord Upjohn’s inference, their Honours seem to accept as a plausible view (without committing themselves) that if both parties contribute to the acquisition of an asset they may be equal joint beneficial owners even if the wife contributes a greater proportion of the purchase price than the husband.”

201                           His Honour also cited at paragraph [57], the remarks of Deane J in Calverley:

“The weight to be given to a presumption of a resulting trust in the resolution of what is essentially an issue of fact may vary in accordance with changing community attitudes and with the contemporary strength or weakness of the rationale of the rule embodying the presumption: see, e.g., Snell’s Principles of Equity, 28^th ed. (1982), p. 183 and the case there cited, and per Mahoney J., Doohan v. Nelson [1973] 2 NSWLR 320, at 325-326. …”

202                           In Doohan v Nelson at 325-326 Mahoney J accepted that the strength of the presumption of a resulting trust and of the evidence required to rebut it will be less where the interests are in the matrimonial home of the parties.

203                           In Vedejs v Public Trustee (1985) VR 569 (“Vedejs”), Nicholson J held that there was at the time of the acquisition of a property by a deceased and his common law wife an implied common intention that the property should be acquired on the joint behalf of the plaintiff and the deceased.  At 573 his Honour said:

“… I am satisfied on the evidence that there was at the time of the acquisition of the property a common intention that the property should be acquired on their joint behalf.  There was no evidence of an expressed statement to this effect but I find that it can readily be implied from what occurred. … the house was obviously acquired for the purpose of their relationship so that they might live together and for no other purpose, and the fact that they both contributed their savings to the purchase are to my mind strongly indicative of a common intention expressed at the time of acquisition of the property that the house should become a jointly acquired asset held equally by them.”

204                           The primary judge considered that the above dicta indicated that the presumption of a resulting trust might be rebutted by relatively slight evidence in circumstances where the parties to a marriage have made substantial even if unequal contributions to the acquisition of a property; where the property is intended to be used as the matrimonial home; and where the property is placed in the joint names of the parties.

205                           His Honour said at [65] of Cummins (No 6):

“In the present case, there is no occasion to consider all the circumstances in which the presumption of a resulting trust might be less difficult to rebut than is ordinarily the case.  It is enough to say that although the circumstances of this case attract the presumption, it can be rebutted by slighter evidence than might ordinarily be required of a common intention that the parties should be joint beneficial owners of the property.”

206                           His Honour in reaching his conclusion referred to a number of factors.  The first was that Cummins and Mrs Cummins had been married for six years at the time of the purchase of Alexandra Street, and that at the time of purchase both were committed to the matrimonial relationship.  Second, that Alexandra Street was the matrimonial home.  Third, that Alexandra Street was not the first property acquired by the parties jointly or as a matrimonial home.  The parties had acquired a property at Linley Point in 1965, and one in Ferdinand Street, Hunters Hill in 1967, and the parties were registered as joint proprietors on both properties.  Fourth, the Linley Point property was acquired and financed by a mortgage loan of £7,000 secured on that property, and both Cummins and Mrs Cummins were mortgagors.  That property was sold in December 1967 for $22,600 and the sum was paid to them.  Fifth, in October 1967, Cummins and Mrs Cummins were registered as joint proprietors of 12A Ferdinand Street, Hunters Hill as a result of a sub-division of a property originally acquired by them as tenants in common with a third person in January 1967, and the original purchase of this property was arranged by a mortgage loan of $46,000, which was executed by all three tenants in common as mortgagors.  The property at 12A Ferdinand Street was later sold by Cummins and Mrs Cummins in December 1971 for $58,500, and an amount of $45,064.15 was paid into a joint account of Cummins and Mrs Cummins, which was a fully drawn loan account.  His Honour inferred that it was likely that the net proceeds of sale were paid to the parties jointly.  His Honour noted, having regard to these transactions, that Alexandra Street was not a one-off occurrence.  This was the third occasion on which Mrs Cummins was registered as co-owner with her husband.  His Honour inferred that solicitors in the various transactions had, in the ordinary course, explained to her the significance of joint ownership.  His Honour concluded that in 1970 it was more likely than not that Mrs Cummins understood the concept of a joint tenancy and the notion of survivorship attaching to it.

207                           His Honour considered that the conduct of Mrs Cummins in 1987, in the absence of any explanation, was an acknowledgement that she regarded Alexandra Street as beneficially jointly owned by Cummins.  He attached importance to the fact that Mrs Cummins agreed to pay one-half the appraised value of Alexandra Street for Cummins’ interest, and that this suggested she regarded him as having a joint equal beneficial interest in the property.  His Honour had regard to the fact that stamp duty was paid by her on the contract price on the basis of the transfer of a half interest.  The fact that the purchase price was not ultimately paid, and perhaps was never intended to be paid, was not, in his Honour’s view, to the point.  The transaction was not a “sham”.  The transfer of the interest was effective and was registered.  His Honour considered that the transfer was structured on the basis, and in such a way that acknowledged, that Cummins had a joint beneficial interest.  He inferred, in the absence of evidence from her on this aspect, that Mrs Cummins understood that the transaction was structured in this way and was content for it to be so structured.  A solicitor acted on the transfer of the assets.  His Honour considered that he was entitled to take account of what occurred in 1987 when determining the common intention of the parties as to beneficial ownership of Alexandra Street in 1970.

208                           In evaluating these matters his Honour considered that when all of them were taken into account, they justified the conclusion that the common intention in April 1970 was to acquire Alexandra Street as joint beneficial owners in equal shares, and that therefore, the presumption of resulting trust in unequal shares was rebutted.  His Honour was supported in this conclusion by the fact that no evidence was given by Cummins or Mrs Cummins in relation to Alexandra Street, and he therefore more confidently drew the inference from the material and had to regard to the principles set out by Handley JA in Commercial Union Assurance Company of Australia Limited v Ferrcom Pty Limited (1991) 22 NSWLR 389 at 418, which concerned a failure to lead evidence from a witness on a central issue.  In this case, although some evidence was elicited from Mrs Cummins, no evidence was led from her as to the intention of the parties on the acquisition of Alexandra Street.

209                           Counsel for the appellants submits that no authority cited by the primary judge has expressly followed the statements of Lord Upjohn in Pettitt, with the exception of Vedejs referred to by his Honour and that these statements had no bearing on this case. 

210                           Counsel for the appellants referred to a decision of the Full Federal Court in Official Trustee in Bankruptcy v Lopatinsky (2003) 129 FCR 234.  In that case, the Court concluded that there was nothing in the evidence which was capable of giving rise to a suggestion that Mrs Lopatinsky intended to make a gift to her husband of a payment by her and pointed out that there was no presumption of advancement in favour of her husband.  At 252 the Court said:

“We do not accept the Trustee’s submission that the equitable presumption was rebutted by certain concessions made by Mrs Lopatinsky in cross-examination as to her understanding of the nature of the joint tenancy and her intention that the Peakhurst property was to pass by survivorship.  In our view, this evidence established, at most, that Mrs Lopatinsky intended the legal interest in the property be held by the parties as joint tenants.” (Emphasis added)

211                           The decision in that case accepted that the presumption could be rebutted.  However, the case turned on its own facts.  The court did not decide the quantum of the interest of the parties and remitted the matter to the primary judge for reconsideration.  The question whether an equitable presumption has been rebutted is a question of degree.  In my view, Lopatinsky does not provide support for the proposition that the principles adopted by his Honour were erroneous or misapplied.

212                           In relation to the property transactions referred to by his Honour, counsel for the appellants has pointed out that the property in Ferdinand Street was acquired as tenants in common with a third person, namely Mr Howarth, and submits that there is no evidence that either Linley Point or Ferdinand Street, were intended to be the matrimonial home.  This is simply not correct.  The tax returns of Mrs Cummins for 1965 and 1966 show Linley Point as her residential address and refer to Cummins as her husband.  Her occupation is stated to be “Home Duties”.  Her tax returns for 1968 and 1970 show her residential address as 12 or 12A Ferdinand Street and again refer to her husband.  It should also be recalled that when purchased, the property at Alexandra Street was vacant land.  It did not immediately become the matrimonial home.

213                           In my view, the cumulative weight of the factors referred to by his Honour provide adequate support for his Honour’s inference of equality of interests.  I can see no error in his Honour’s reasoning or statement of principle in relation the rebuttal of the resulting trust in favour of the intention at the time of acquisition being that the parties should have equal beneficial interests.

MAIN PURPOSE

214                           The issue is whether his Honour erred in finding that Cummins’ main purpose in transferring Alexandra Street was to prevent that property becoming divisible among his creditors, or to hinder or delay the process of making that property available for division among his creditors.

215                           The submissions for the appellants analyse in detail each of the circumstances relied on by his Honour to determine the intention of Cummins in an attempt to demonstrate that, on the whole of the evidence, there were other equally or more likely inferences to be drawn than those made by his Honour.

216                           In support of the submission concerning the purpose of the August 1987 transfers, counsel for the appellants submits that the litigation concerning barristers in-court immunity that was ultimately decided by the litigant on 13 October 1988 in Giannarelli v Wraith (1988) 165 CLR 543 (“the Giannarelli litigation”) explained the reasons for the transfers, and that his Honour erred in not accepting that submission.  This is said to be at least an equally plausible hypothesis for the transfer of the assets which was equally open, or indeed more likely, because Cummins wanted to protect his assets from risk of suit by a client.

217                           This argument was rejected by his Honour after careful analysis of the time scale of the litigation at first instance in the Full Court of the Supreme Court Victoria and in the High Court: see Cummins (No 5) at [56]-[61].

218                           It would be most unusual to take the significant decision to commit to a divesting of major assets before the decision of the High Court on a special leave application, when that decision may have brought an end to the question of barristers in-court immunity by refusal of leave.  At the time when the steps were taken to effect the transfer of assets by Cummins, the decision of the Victorian Full Court, following a well settled line of authority, was in effect a unanimous decision rejecting the proposition that barristers did not have in-court immunity.  In my view, the likelihood is that the existence of the Giannarelli litigation focussed the attention of Cummins on the need to protect his assets from pursuit by the Commissioner in the light of his decisions over the preceding forty-five years not to lodge any tax returns.

219                           I am not persuaded that there was any error in his Honour’s analysis and treatment of submissions based on the Giannarelli litigation, particularly as no evidence was adduced from Cummins or Mrs Cummins as to the purpose of the August 1987 transfers.  I now turn to the principles relating to the failure to call evidence from an important available witness.

220                           Judges do not leave common sense and experience outside the door when they enter the courtroom.  Nor do they prefer speculative hypotheses as opposed to making available inferences arising from the circumstances where a key witness who could testify to those matters is not called by the party who advances the hypothetical alternative.  As Rich J notes in Insurance Commissioner v Joyce (1948) 77 CLR 39 at 49:

“… when circumstances are proved indicating a conclusion and the only party who can give direct evidence of the matters prefers the well of the court to the witness box a court is entitled to be bold …

All sorts of hypotheses may be suggested … But this is not a criminal case in which we are called upon to allow our imagination to play upon the facts and find reasonable hypotheses consistent with innocence.  A balance of probability is enough.  And when the greater probability is that both had enough consciousness to be aware of what they had been doing, although not enough judgment and discretion to drive, why should a judge hesitate to find accordingly against a plaintiff who gives no evidence.”  (Emphasis added)

221                           A similar approach was adopted by Lord Diplock in British Railways Board v Herrington [1972] AC 877 at 930-931 as follows:

“The appellants, who are a public corporation, elected to call no witnesses, thus depriving the court of any positive evidence as to whether the condition of the fence and the adjacent terrain had been noticed by any particular servant of theirs …  This is a legitimate tactical move under our adversarial system of litigation.  But a defendant who adopts it cannot complain if the court draws from the facts which have been disclosed all reasonable inferences as to what are the facts which the defendant has chosen to withhold.

…

Anyone of common sense would realise the danger that the state of the fence so close to the live rail created for little children coming to the meadow to play … A court is accordingly entitled to infer from the inaction of the appellants that one or more of their employees decided to allow the risk to continue of some child crossing the boundary and being injured or killed …”

222                           These words concerning litigious strategy and common sense are apposite to the present case.

223                           In Holloway v McFeeters (1956) 94 CLR 470 at 480-481, Williams, Webb and Taylor JJ, in referring to the drawing of inferences in the absence of an explanation, said:

“Inferences from actual facts that are proved are just as much part of the evidence as those facts themselves. In a civil cause, ‘you need only circumstances raising a more probable inference in favour of what is alleged … where direct proof is not available it is enough if the circumstances appearing in evidence give rise to a reasonable and definite inference; they must do more than give rise to conflicting inferences of equal degree of probability so that the choice between them is a mere matter of conjecture: see per Lord Robson, Richard Evans & Co Ltd v Astley (1911) AC 674, at p 687 … All that is necessary is that according to the course of common experience the more probable inference from the circumstances that sufficiently appear by evidence or admission, left unexplained, should be that the injury arose from the defendant’s negligence.  By more probable is meant no more than that upon a balance of probabilities such an inference might reasonably be considered to have some greater degree of likelihood.’” (Emphasis added) 

224                           In the House of Lords decision in Murray v Director of Public Prosecutions [1994] 1 WLR 1 at 11-12, Lord Slynn, in his speech giving reasons that were concurred in by other members observed:

“There must be thus some basis derived from circumstances which justify the inference.

If there is no prima facie case shown by the prosecution there is no case to answer.  Equally, if parts of the prosecution case had so little evidential value that they called for no answer, a failure to deal with those specific matters cannot justify an inference of guilt.

On the other hand, if aspects of the evidence taken alone or in combination with other facts clearly call for an explanation which the accused ought to be in a position to give, if an explanation exists, then a failure to give any explanation may as a matter of common sense allow the drawing of an inference that there is no explanation and that the accused is guilty.

In the present case, if the only evidence relied on was that relating to fibres in the hair, on the clothing and in the car, it might well not be enough to justify an inference that the defendant was guilty beyond a reasonable doubt.  The cartridge residue on the jeans, the thumb print on the mirror and the mud on the trousers, the evidence that he was not at home during the night, clearly taken in combination call for an explanation if there was one.  The judge was, moreover, entitled to have regard to the cumulative effect of all the circumstantial evidence in deciding whether a failure to give evidence justified an inference of guilt.

In my opinion the evidence adduced by the prosecution established a clear prima facie case and the trial judge was entitled in all the circumstances of the case, and as a matter of common sense, to infer that there was no innocent explanation to the prima facie case and that the defendant was guilty.  That inference was a ‘proper’ one open to the judge on all the material before him.”  (Emphasis added)

225                           These comments were of course made in the context of proof beyond reasonable doubt.

226                           The relevant principles and authorities are collected and considered in detail in Cross on Evidence, 6^th Australian ed, J D Heydon (2000) at [1190]-[1220].

227                           Rather than provide evidence from Cummins and Mrs Cummins, the appellants proffered a series of possible hypotheses as to what their intention could have been when acquiring Alexandra Street in 1970, and transferring the interest of Cummins in August 1987 in the Alexandra Street property and Counsel’s Chambers Ltd.

228                           In Jones v Dunkel (1959) 101 CLR 298 at 308, Kitto J expressed the evidentiary principle which applies where there is a failure to call a witness in these terms:

“… any inference favourable to the plaintiff for which there was ground in the evidence might be more confidently drawn when a person presumably able to put the true complexion on the facts relied on as the ground for the inference has not been called as a witness by the defendant and the evidence provides no sufficient explanation of his absence.”

229                           These remarks apply with considerable force here because the persons best able to testify as to their intent and purpose were not called.  His Honour applied that principle in this case to strengthen and prefer the available inference that Cummins had the necessary intent under s 121 of the Act.  Counsel for the appellants submits that his Honour’s reliance on the failure of the appellant to call Cummins was wrong in the present case where there had been a requirement to elect to call no evidence because such an approach was inconsistent with the decision of the Full Court of Victoria in Protean (Holdings) Ltd v American Home Assurance Co [1985] VR 187 at 215 (Protean); which decision was cited with approval by the Full Federal Court in Rasomen Pty Ltd v Shell Company of Australia Ltd (1997) 75 FCR 216 at 226.  The passage from Protean referred to by Counsel is in the judgment of Young CJ at 215, where his Honour referred to three results which may ensue in a situation where there is a no case submission without an election being required.  His Honour said:

“The third possible result of a submission that there is no case to answer is that the judge is persuaded by it and decides to uphold it.  In reaching such a conclusion a trial judge is entitled to draw all proper inferences from the evidence, but he cannot draw inferences against the party making the submission based upon the absence of evidence from that party.”  (Emphasis added)

230                           It is important to note that the above remarks were made in the context of a situation where there was no requirement of an election not to call evidence as a condition of entertaining the no case submission.  That situation was specifically left open by Young CJ.

231                           The binding election not to call evidence was a conscious voluntary choice by the appellants that neither Cummins nor Mrs Cummins would be called as witnesses on the relevant issues.  Therefore, in principle, it was open to the trial judge to rely on the commitment made by the appellants that Cummins would not be called in the appellants’ case and to use it to reinforce the inference which was open to his Honour as to the intent of the parties.  This is quite a different situation to that in Protean where there had been no election.  Counsel for the appellants referred to but conceded that the case of O’Donnell v Reichard [1975] VR 916 was not a case in which there had been an election. 

232                           I can see no sound reason why the principles in the above cases cannot apply in this case when determining Cummins’ main purpose in executing the August 1987 transfers.  It is a consideration of central significance that evidence was not led on this question from Cummins or Mrs Cummins.  In my view, it is not a “sufficient explanation” of the absence of evidence from Cummins to say that the appellants had made a deliberate choice made by way of their election not to call Cummins, or lead any evidence as to the intent of Cummins.  It is also suggested that the appellants were precluded from doing so by being put to their election in making their no case submission, but the fact is that the appellants had the choice as to whether or not they were going to call evidence, and decided not to do so.

233                           It is next submitted that it was for the respondent to call Cummins, because the respondent had examined Cummins and was in a position to call him to support the respondent’s hypothesis.  However, in the circumstances of this case the party with particular, if not unique, knowledge of Cummins’ purpose in making the transfer was Cummins, and he could reasonably have been expected to be called by the appellants in support of their case if the main purpose was not to hinder or delay any claims by the Commissioner.

234                           I am not persuaded that his Honour’s reasoning discloses any error of law in relation to the importance he attached to the appellants’ failure to call Cummins to give evidence of his intent in making the transfers.  No explanation whatsoever has been proffered for Cummins’ absence from the witness box, or from giving any evidence whatsoever in this proceeding, where a central issue turns on his purpose.  

235                           The primary judge was satisfied on the evidence that Cummins was well aware in August 1987 that he had incurred very substantial liabilities to the Commissioner, contingent only on the Commissioner issuing assessments in respect of past income years; that Cummins was well aware at that time that the Commissioner would issue assessments once his long standing tax delinquency became known; that Cummins divested himself voluntarily of virtually all of his substantial assets in August 1987; that any assets retained by Cummins were not sufficient to meet his taxation liabilities if the Commissioner decided to issue assessments; and that Cummins saw the transfers as increasing the chances that his assets would be protected from any claims made by the Commissioner.  On the basis of these findings, his Honour concluded that the main purpose of Cummins was to prevent the transferred property becoming divisible among his creditors, and in particular, the Commissioner.

236                           The first matter challenged by counsel for the appellants relates to the conclusion of his Honour that Cummins had bought the chambers at Parramatta in 1986 out of his professional earnings.  It is submitted that there is no evidence as to how this purchase for $30,000 was financed.  It is said there was an infinite array of other possible sources of funds.  For example, some form of borrowing, proceeds of sale from the other assets, or assistance from his wife or a third person.  Because there was no evidence as to the source of funds for this acquisition, it is said that his Honour’s finding that the source was from Cummins’ professional earnings was not open, or was not probable, as a matter of inference.  Accordingly, it could not be said as a matter of inference that for many years prior to 1987 Cummins derived substantial assessable income from his practice as a barrister.

237                           His Honour at paragraph [126] of Cummins (No 5) sets out a range of considerations, and notes that there is nothing in the evidence to indicate that the assets connected with Cummins’ practice as a barrister were paid for otherwise than out of Cummins’ professional earnings.  This observation, together with the other factors set out in that paragraph, then form the basis for his Honour’s inference that for many years, Cummins had derived substantial assessable income from his practice as a barrister, which is inherently probable, and that he would have been liable to pay tax on that income.  In my view, it beggars belief to suggest that by August 1987, after spending over twenty-two years in practice at the New South Wales Bar, six of which as Queen’s Counsel, without paying any tax, Cummins had not built up a substantial liability for unpaid tax and the attendant penalties and interest consequent upon such defaults, or that he was not fully conscious of his exposure to the Commissioner when the August 1987 transfers were implemented.

238                           The next error alleged is said to arise from his Honour’s reliance on the assessable and taxable income disclosed in the taxation returns prepared by Mr Morelli, which are said to have been compiled from inadequate data and information for these income years between 1992 and 1999.  The submission is that his Honour was not entitled to rely on these records to reach a conclusion that in the years leading up to 1987 it was probable that Cummins had earned substantial taxable income.  In support of this submission, counsel for the appellants speculates as to aspects of Cummins’ financial position in 1987 which may have caused him to transfer assets for the purpose set out in s 121(1) of the Act.  Counsel says that it was not open to infer from the gross receipts shown for the 1992-1999 tax years what Cummins’ financial position was in 1987, and that his Honour failed to take into account that there was no evidence at all of Cummins’ net income in any of the years before 1992, or of his assets and liabilities during that time.  Counsel submits that in any event, tax returns give a relatively incomplete picture of a person’s financial position, in that they do not record assets and liabilities.  It is suggested, for example, that an inference of equal probability may be made to the effect that, in the income tax years prior to 1992, Cummins’ net taxable income was such that he was not required to lodge any income tax returns possibly because of offsetting losses in other varieties apart from his profession.  It is said there was no evidence as to Cummins’ other business interests or investments during this period and that critical unanswered questions arise as to first, the quantum of Cummins’ income tax and liabilities in August 1987; second, whether Cummins was able to pay all of his debts as and when they fell due; and third, whether by the August 1987 transfers he rendered himself unable to pay such liabilities. 

239                           Counsel submits that other equally consistent inferences with those drawn by his Honour are that Cummins sold assets between 1987 and 1992, and that assets may have been sold after 1992 but the sale did not attract capital gain, or were personal use assets, or did not yield a taxable profit.  He raises the possibility that Cummins had cash or other assets sufficient to enable him to discharge his liabilities and that these were not required to be recorded in the tax returns from 1992, and that Cummins had cash sufficient to enable him to discharge the liabilities, but spent the money after 1987.  It is suggested that there are other available inferences, such as Cummins having had significant cash balances in the bank account.  It is pointed out that when he became bankrupt in 1999 he had cash and other assets amounting to over $200,000.

240                           It is further said that another available inference was that Cummins in fact did not have a considerable tax liability in 1987 and the fact that he said nothing to his solicitor about it did not in any way indicate any intention to defraud creditors.  Counsel attempts to meet the lack of any evidence that Cummins told the solicitor in 1987 about his failure to pay tax over a considerable period by asserting that this was not significant because Cummins’ solicitor was presumably engaged only in relation to conveyancing transactions, and it could not reasonably be expected that Cummins would disclose his taxation position to the solicitor.  There is no basis in the evidence for this supposition.

241                           A most important consideration in determining the purpose of Cummins is the advice and notes of the solicitor at the time of the August 1987 transactions, which specifically draw attention to ss 120 and 121 of the Act and to s 37A of the Conveyancing Act 1919 (NSW), which is concerned with transfers made with intent to defraud creditors.  There is also reference in the notes to the High Court decision in Williams v Lloyd, which considered the principles relating to transfers of property to a wife with intent to defraud creditors under the Bankruptcy Act 1924 (Cth).  His Honour concluded that Cummins must have been well aware of his own tax delinquency over the period leading up to 1987, and that he chose not to tell his solicitor of that fact despite his proposal to divest himself of his major assets.  The solicitor’s notes record advice that the transfers state that the expressed consideration had actually been received.  There is a note by the solicitor that “Mary [Mrs Cummins] must be a purchaser”. 

242                           It is evident that Cummins did not tell his solicitor in 1987 of his liabilities to the Commissioner.  The solicitor’s notes can be taken to have resulted from, and summarised legal issues arising from, discussions between Cummins and his solicitor in 1987 prior to the transfers.  There is a reference in those notes which reads as follows:

“Do

We need to lease back of shares for TAX purposes.”

243                           This reference to tax purposes would have been of academic interest if Cummins had in fact disclosed to his solicitor his failure to pay tax over twenty-two years, and his omission to ever file any tax return. His intention in 1987 was probably never to file tax returns because he had successfully avoided the attention of the Commissioner for over twenty years and did not wish to be detected.  The fact is he did not file any return until twelve years later.  There can be no suggestion that Cummins ever intended to pay income tax or lodge a return for 1987 or any of the years following.  Cummins did not need a tax deduction in 1987 and subsequent years.  He never paid tax or disclosed his tax position.

244                           There is reference in a letter written ten years after the transfers by the solicitor that the solicitor considered in 1987 that if the transfers were for an expressed consideration and Cummins subsequently forgave the indebtedness, the transfers would not constitute “settlements” for the purposes of s 120 of the Act.  These records support the inference that Cummins wished to place his major assets beyond the reach of his creditors.

245                           His Honour formed the view that given Cummins’ circumstances, it should be inferred that he had at the forefront of his mind, at the time of the August 1987 transfers, the impact of the transfers on the Commissioner’s chance of recovering the income tax that Cummins should have paid over the preceding twenty-two years.  The fact that Cummins did not inform his solicitor served, in his Honour’s view, to reinforce the inference that the main purpose of the transfers was to protect Cummins’ major assets from any claims made by the Commissioner.

246                           In summary, in this case there has been an unexplained failure by the appellants to call evidence or witnesses or tender documents or other evidence as to the intention of Cummins and Mrs Cummins.  No sufficient explanation has been given for this failure.  It is clear that Cummins and Mrs Cummins could both give relevant evidence.  They appear to be in the same camp notwithstanding the fact that they have separated.  Facts are in evidence, which, in my view, raise an inference which requires an answer: see Jones v Dunkel at 322.  There is no question of privilege.  I do not accept that the respondent should have been expected to call Cummins.  There has been a failure to ask Cummins and Mrs Cummins questions in chief in relation to the issues of intent.  It is clear that inferences are not to be drawn in favour of her case by reason of not leading the evidences and the comments in the Ferrcom case establish that the omission to ask questions of a friendly witness may be more significant than the failure to call the witness.

247                           Having regard to the cumulative weight of the considerations referred to by his Honour on this issue, I do not consider that any appellable error has been shown in the reasoning or conclusions reached by his Honour as to the purpose of Cummins in making the August 1987 transfers such as would warrant interference with the orders and determinations made by his Honour, which were the subject of this appeal.

248                           My conclusion is that this appeal should be dismissed with costs.

I certify that the preceding eighty-nine (89) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin.

 

 

Associate:

 

Dated:              30 July 2004

 

 

Counsel for the Appellants:	Mr P L G Brereton SC (with Mr M Ashhurst)
Solicitors for the Appellants:	Messrs Russell and Co
Counsel for the Respondents:	Mr B Coles QC (with Mr C Newlinds SC)
Solicitors for the Respondents:	Messrs Clayton Utz
Date of Hearing:	18 May 2004
Date of Judgment:	30 July 2004