Federal Court of Australia

Mansfield (Trustee), in the matter of Frugtniet v Frugtniet [2025] FCA 803

ORDERS

THE COURT DECLARES THAT:

1.    Pursuant to ss 31(1)(f) and 58 of the Bankruptcy Act 1966 (Cth) (the Act), the following properties vested in the applicant on and from 11 February 2021, being the date of the applicant’s appointment:

(a)    2/57-61 Penelope Lucas Lane, Rosehill NSW 2142 with certificate of title 2/SP79889;

(b)    10/57-61 Penelope Lucas Lane, Rosehill NSW 2142 with certificate of title 10/SP79889;

(c)    9/50 Hythe Street, Mount Druitt NSW 2770 with certificate of title 9/SP63235; and

(d)    8/22-24 Swete Street, Lidcombe NSW 2141 with certificate of title 8/SP9057,

(collectively, the Properties).

2.    Pursuant to s 134(1)(a) of the Act, the applicant may exercise a power of sale in respect of any of the Properties.

3.    Pursuant to s 30(1) of the Act, the applicant is entitled to and justified in:

(a)    marketing the Properties for sale;

(b)    otherwise taking any and all steps ancillary or necessary to secure, preserve and realise the Properties; and

(c)    dealing with, and distributing the proceeds of sale of, the Properties in accordance with the requirements of the Act.

4.    Pursuant to s 30(1) of the Act, the applicant is entitled to vacant possession of the Properties.

5.    Pursuant to s 30(1) of the Act, the applicant is entitled to receive all monies paid as rent for any of the Properties from 11 February 2021 onwards.

THE COURT ORDERS THAT:

1.    The net proceeds of the sale of any of the Properties and any Personal Property (as defined below), after payment of any monies due to any encumbrance or encumbrances according to their priorities, the costs of these proceedings, and all other costs, charges and expenses of the sale of any of the Properties and any Personal Property, be paid to the Bankrupt Estate of Jerome Frugtniet.

2.    The applicant serve a copy of these orders on the respondents, the registered mortgagee of the Properties and any occupants of the Properties (by delivery of the orders to the Properties) within three (3) business days.

3.    The respondents and any occupants of the Properties vacate each of the Properties within sixty (60) days after the date of these orders.

4.    The respondents and any other occupants of the Properties deliver up to the applicant (or his legal representatives):

(a)    all keys for each of the Properties; and

(b)    all keys for all buildings or improvements on or within any of the Properties,

within sixty (60) days after the date of these orders.

5.    A warrant of possession issue forthwith in the event the respondents or any occupants of any of the Properties fail to provide vacant possession of any of the Properties in accordance with these orders.

6.    The respondents or any other occupants of any of the Properties must remove from the each of the Properties all personal property being vehicles, rubbish and chattels (Personal Property) which are not vested in the applicant within sixty (60) days of these orders and, if the respondents or any other occupants fail to do so, then the applicant is authorised to sell and dispose of any Personal Property not removed from any of the Properties, after being vacated.

7.    The applicant’s costs of, and incidental to, this proceeding be the applicant’s costs of administering the Bankrupt Estate of Jerome Frugtniet pursuant to the Act.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

STEWART J:

Introduction

1    The trustee of the bankrupt’s estate seeks a declaration pursuant to ss 31(1)(f) and 58 of the Bankruptcy Act 1966 (Cth) that certain properties in New South Wales vested in the trustee from his date of appointment, being 11 February 2021. The bankrupt, Jerome Frugtniet, is the registered proprietor of the properties. The trustee also seeks ancillary orders facilitating the exercise of a power of sale over and vacant possession of the properties, as well as orders that the trustee is entitled to receive all monies paid as rent for any of the properties from the date of appointment and that a trust deed dated 2 September 2014 between the bankrupt and the first respondent is void and unenforceable as against the trustee.

2    The first and second respondents, Brian and Suzanne Frugtniet, are the married but separated parents of Jerome. They were initially represented by a solicitor but were later self-represented until shortly before the trial, including at the time that some of their evidence was prepared. They were represented at trial by Mr Horobin of counsel who was appointed pursuant to a certificate under r 4.12 of the Federal Court Rules 2011 (Cth). I am grateful to Mr Horobin for accepting the appointment. He has been of great assistance to the Court.

3    As will become apparent, the proceeding has the character of a family dispute. Brian and Suzanne, and the bankrupt, Jerome – on the encouragement of his parents – were involved in a series of transactions concerning the above-mentioned properties which eventually led to the latter’s bankruptcy. Jerome and his parents disagree as to the purposes behind those transactions. Jerome says he purchased the properties as an investment for his own benefit albeit with the assistance of his parents, whereas they say that the properties were held on trust for one or the other of them. The resolution of this disagreement will ultimately determine the entitlement of the trustee to the properties and the consequential relief he seeks.

4    More specifically, the respondents plead that what are referred to below as the First and Second Rosehill Properties and the Mount Druitt Property are owned by Brian and the Lidcombe Property is owned by Suzanne.

5    For the reasons that follow, I find that the trustee is entitled to the properties.

6    To avoid confusion, I will refer to the trustee of the bankrupt estate, David Mansfield, by name. I also refer to the bankrupt and his parents and other family members by their first names, intending no disrespect in doing so.

Principal facts

7    There are four properties in issue. They were acquired by Jerome over a period between March 2008 and January 2016. Each property was sourced for Jerome through the efforts of his parents, who assisted him with obtaining finance, liaising with the banks and completing the necessary documentation. It is necessary to identify each property.

First Rosehill Property: June 2008

8    The first property is at 2/57-61 Penelope Lucas Lane, Rosehill NSW with certificate of title 2/SP79889 (the First Rosehill Property).

9    In or about 2008 when Jerome was only 19 or 20 years of age (Jerome was born in August 1988), Brian began discussing with Jerome the prospect of purchasing the First Rosehill Property. Put on the market as a mortgagee in possession sale, Brian described it as “cheap” and a “good way to get into the real estate market”. Jerome entered into the purchase and the property was transferred to him from the registered proprietors, Mohamad Elhaddad and Robert Pincevic. The transfer is dated 5 June 2008 (dealing AD939680K). The purchase price was $260,000. It was financed with a mortgage in favour of the Commonwealth Bank of Australia (CBA) registered on 5 June 2008 (dealing AD939681H), later refinanced with CBA in 2011 and then on 25 February 2014 with the National Australia Bank (NAB) (dealing AI406069W).

Lidcombe Property: December 2014

10    The second property is at 8/22-24 Swete Street, Lidcombe NSW with certificate of title 8/SP9057 (the Lidcombe Property).

11    The Lidcombe Property was owned by Jerome’s maternal grandmother, Cynthia de Souza. Upon Cynthia’s death in February 2013, the property came into the possession of the executors of Cynthia’s estate, Suzanne’s siblings Frederick de Souza and Ingrid Scharenguivel. It was agreed between the various family members that the property should be acquired by Jerome, following which it was transferred from the executors to Jerome on 18 December 2014 (dealing AJ125585S) in exchange for consideration of $500,000. The purchase was financed with a mortgage in favour of NAB (dealing AJ125586Q).

Second Rosehill Property: January 2016

12    The third property is at 10/57-61 Penelope Lucas Lane, Rosehill NSW with certificate of title 10/SP79889 (the Second Rosehill Property).

13    The Second Rosehill Property was owned by Edward Frugtniet, Jerome’s paternal grandfather. However, Jerome deposes that he was unaware that his grandfather was the owner of the property. The property was transferred to Jerome by Edward on 13 January 2016 (dealing AK132922L) in exchange for consideration of $440,000. The purchase was financed with a mortgage in favour of NAB (dealing AK132923J).

Mount Druitt Property: January 2016

14    The fourth property is at 9/50 Hythe Street, Mount Druitt NSW with certificate of title 9/SP63235 (the Mount Druitt Property).

15    The Mount Druitt Property had been purchased by Brian in his own name in 2007. According to Jerome, he was unaware that his father was the owner of the property, being under the impression at the time that he had purchased the property from another individual. The property was transferred to Jerome by Brian on 13 January 2016 (dealing AK132996E) in exchange for consideration of $400,000. The purchase was financed with a further mortgage in favour of NAB (dealing AK132997C).

Generally in relation to the properties

16    Jerome opened certain accounts with NAB in association with the transactions described above. From 2014, he had two pairs of mortgage offset accounts linked to home loan accounts (account number ending in 8938 linked to 4114, and account number ending 5465 linked to 1741). The significance of this is that it shows that as at November 2015 Jerome was party to two home loans with NAB that are secured by mortgages on each of the four properties. As at November 2015, the loans were for $400,000 and $900,000. The $400,000 loan and mortgage was in respect of the Lidcombe Property and the $900,000 loan and mortgages were in respect of the other properties.

17    In late 2019 or early 2020, Jerome’s parents asked him whether he would guarantee a loan with NAB and provide the four properties as security in order to finance the purchase of shares in a company for a nursing home business venture. Suzanne sought a loan of $56 million for the venture. Jerome refused to provide the guarantee.

18    In 2020, Jerome noticed rent was not being collected from tenants at the properties and that the utility bills for the properties had not been paid. His assumption until this point had been that his parents had been collecting rent from tenants to meet outgoings including utilities and mortgage repayments. He informed his parents that he was not able to service the loans taken out to acquire the properties or pay the expenses associated with the properties in such circumstances. Ultimately, Jerome incurred a level of debt which he considered he did not have any prospect of repaying and he could not trust his parents to collect the rent as had been arranged. He made the decision to enter voluntary bankruptcy.

19    Mr Mansfield obtained two desktop appraisals for each of the properties as at November 2024. Each of the two appraisers gave a range bounded by a low and high appraisal for each property. Those values are not contradicted by other evidence. The highest value given by any appraiser (reflecting a best-case scenario) and the average of the midpoint of the values of each appraiser (representing a more realistic but nevertheless optimistic scenario) for each of the properties is as follows:

20    Although the property values may have increased since the appraisals were done, there is no evidence of anything having been spent on them by way of maintenance and upkeep. In the circumstances, for present purposes the November 2024 appraisals can be accepted as remaining current.

21    As at the time of trial, the loan account debts amounted to $1,716,463 and the credits in the accounts of the estate amounted to $166,614, leaving a debit balance of $1,549,850 – say, $1.55 million.

22    On those figures there is positive equity in the properties of approximately $675,000 (on the average of the midpoints) to $910,000 (on the high estimates) (see values at [19] above).

23    As at February 2025, Mr Mansfield estimated that the costs of administering the estate, which I understand to include the outstanding utility charges and strata levies, was $546,354. To that figure would now have to be added the costs of the proceeding and capital gains tax. Nevertheless, there are also possible claims in favour of the estate including unpaid rental by the tenants and rent collected by Brian and/or Suzanne not paid into the relevant accounts.

24    This analysis shows that there may be a material positive balance in the estate, but there may not be. It is not until the properties are sold that there can be any confidence on that question, one way or the other.

Issues

25    The critical issue is whether the properties were held by Jerome prior to bankruptcy subject to some kind of trust as alleged by his parents. Although the respondents consistently used the language of “constructive trust”, as I understand it their argument in substance proceeds by all of the potential avenues of express, resulting or constructive trusts. Should the existence of a trust be established, no declaration of the vesting of the properties in Mr Mansfield as trustee could be made.

26    However, Mr Mansfield submits that the Court in this situation may still make orders pursuant to the general jurisdiction in s 30(1) of the Act to facilitate the sale of the properties and related orders. This is in circumstances where Jerome, if he is a trustee, has a right of indemnity for liabilities incurred as a result of having held the properties in his name. That being the case, the respondents would be liable to Jerome for his liabilities to NAB and others, and thus to Mr Mansfield where that right would then vest in him as the trustee in bankruptcy: Boensch v Pascoe [2019] HCA 49; 268 CLR 593 at [3]-[4] per Kiefel CJ, Gageler and Keane JJ, [92]-[93] per Bell, Nettle, Gordon and Edelman JJ. Alternatively, the respondents would become subject to those liabilities as proprietors of the properties over which NAB is the secured creditor. On either situation, Mr Mansfield says that the properties would need to be realised to meet those liabilities.

Bankruptcy Act: principles

27    Section 58(1)(a) of the Act provides that when a debtor becomes a bankrupt their property, not being after-acquired property, vests forthwith in the registered trustee. Nevertheless, s 116(2)(a) excludes property held by the bankrupt on trust for another person from being property divisible amongst the creditors of the bankrupt.

28    The principles applicable to the constitution of an express trust are well established. The voluntary creation of an express trust by declaration must satisfy the three certainties most prominently identified by Lord Langdale MR in Knight v Knight (1840) 3 Beav 148 at 173, being certainty of intention, subject and objects. See further the summary provided by the Full Court in Pascoe v Boensch [2008] FCAFC 147; 250 ALR 24 at [19]-[22] per Finn, Dowsett and Edmonds JJ.

29    Where the subject matter of a trust is real property, the requisite intention by the settlor to create a trust must be recorded in writing: Conveyancing Act 1919 (NSW), s 23C(1)(b). Absent a written document recording a declaration of trust in real property, there can be no express trust in the ordinary course. However, s 23C(2) provides that the writing requirement “does not affect the creation or operation of resulting, implied, or constructive trusts.” The significance of this is that the respondents rely on what they term a “constructive trust” in addition to and independently of a trust deed dated 2 September 2014.

30    It is convenient to commence with the purported trust deed.

The express trust by deed

31    There is a long history of correspondence between one or other of the respondents and Mr Mansfield between March and November 2021. Mr Mansfield called for any evidence supporting the respondents’ contention of beneficial ownership of the properties. Initially Brian responded by saying that there was a constructive trust. Later he said that a new family trust had been established which was awaiting approval by the bank for an application for finance to be able to have the properties transferred to the new trust. Still later, Brian and Suzanne offered inspection of “copies of documents pertaining to the constructive trust arrangements which are Private and Confidential”.

32    Eventually, by letter dated 14 December 2021, Brian and Suzanne provided a document that purports to be a deed of trust dated 2 September 2014 to Mr Mansfield. In cross-examination they sought to explain the late production of that document, and the inconsistency between it being genuine and what they had previously said about a constructive trust and a new family trust by variously saying that “it was an informal document within the family” (T48:10), it was “[v]ery confidential” (T49:21), it was part of “confidential family documents” (T52:7-8), it was “confidential and private” (T116:10-12) or they had not been able to find it earlier (T51:24-28, T52:1-2). None of that is convincing.

33    Ultimately the question of whether the document is genuine does not arise because I refused its tender in evidence under s 304 of the Duties Act 1997 (NSW), which relevantly provides:

304    Receipt of instruments in evidence

(1)     An instrument that effects a dutiable transaction or is chargeable with duty under this Act is not available for use in law or equity for any purpose and may not be presented in evidence in a court or tribunal exercising civil jurisdiction unless—

(a)    it is duly stamped, or

(b)    it is stamped by the Chief Commissioner or in a manner approved by the Chief Commissioner.

(2)    A court or tribunal may admit in evidence an instrument that effects a dutiable transaction, or is chargeable with duty in accordance with the provisions of this Act, and that does not comply with subsection (1)—

(a)    if the instrument is after its admission transmitted to the Chief Commissioner in accordance with arrangements approved by the court or tribunal, or

(b)    if (where the person who produces the instrument is not the person liable to pay the duty) the name and address of the person so liable is forwarded, together with the instrument, to the Chief Commissioner in accordance with arrangements approved by the court or tribunal.

34    Section 8(1)(b)(ii) of the Duties Act lists “a declaration of trust over dutiable property” as a “dutiable transaction” (see subs (2)). Section 11(1)(a) defines “dutiable property” as including “land in New South Wales”. Section 8(3) defines “declaration of trust” as any declaration that “any identified property vested or to be vested in the person making the declaration is or is to be held in trust for the person or persons, or the purpose or purposes, mentioned in the declaration…”.

35    The deed is undoubtedly on its face a declaration of trust over land located in the state which in its present condition is unstamped. However, to the extent that a trust was already in existence and the deed formalised those arrangements in writing (see, eg, T46:1-48:10), s 8AA(1) also charges duty over statements that “purport[] to be a declaration of trust over dutiable property, but … merely has the effect of acknowledging that identified property vested, or to be vested, in the person making the statement is already held, or to be held, in trust for a person or purpose mentioned in the statement.” Subsection (2)(a) confirms that the making of such a statement is “taken to be a declaration of trust over dutiable property and, accordingly, is a dutiable transaction”. All this being said, there is no debate that the deed is a dutiable transaction requiring stamping and assessment (the respondents did not argue otherwise), and there is no question of s 304 being inapplicable due to an exemption under the Duties Act: cf Marley and Ormonde [2020] FamCA 784 at [9] per McClelland DCJ citing Metricon Homes Pty Ltd v Carbone [2017] NSWDC 256 at [45] per Dicker DCJ.

36    The effect of s 304 is therefore to preclude the admission into evidence of the terms of the trust deed. This is the case whether the document is tendered by either the Mr Mansfield or the respondents. As observed by Lee J in Dixon (Trustee) v Citiline Developments Pty Ltd, in the matter of Nasr (Bankrupt) [2018] FCA 1446 at [8], the Commonwealth law of evidence cannot override the stamping requirements imposed by the state legislation to the extent of any inconsistency: see Evidence Act 1995 (Cth), s 9(3)(b).

37    There is, of course, the exception in s 304(2) extracted above. It contemplates the giving of an undertaking to ensure the relevant instrument is brought to the attention of the Chief Commissioner of State Revenue, “in accordance with arrangements approved by the court”. In the Supreme Court of New South Wales, this is addressed at r 31.13 of the Uniform Civil Procedure Rules 2005 (NSW):

(1)     The “usual undertaking by person liable” if given to the court by a party in relation to an instrument referred to in section 304(2) of the Duties Act 1997 is an undertaking that the party will, within a time specified by the court, transmit the instrument to the Chief Commissioner of State Revenue.

(2)    The “usual undertaking by person not liable” if given to the court by a party in relation to an instrument referred to in section 304(2) of the Duties Act 1997 is an undertaking that the party will, within a time specified by the court, forward to the Chief Commissioner of State Revenue the name and address of the person liable to pay duty on the instrument under that Act together with the instrument.

38    There is no equivalent rule in the Federal Court Rules.

39    In the course of the first day of the hearing, I admitted the deed provisionally for the purposes of cross-examination, while reserving the question of its final admissibility in order to give the respondents time to make some arrangement to my satisfaction such as to enable it to be admitted. On the resumption of the hearing for its second day some two months later, the respondents had still not made any such arrangement. On my invitation, Brian then proffered a written undertaking that he would pay the stamp duty on the trust deed. It was apparently him who proffered that undertaking because the deed purports to be between him as “beneficiary” and Jerome as trustee. Although not mentioned in the terms of that undertaking, it was implied that Brian would take steps to transmit the deed to the Chief Commissioner for stamping (T137:42-138:2, T139:8-14).

40    The difficulty, though, is that Brian is impecunious. In an affidavit, he deposed to facts that led me to give him a certificate for legal representation. The details are not important. The short point is that there is little to no prospect that Brian would be able to pay the stamp duty on an ad valorem basis, whether the dutiable transaction were ultimately adjudged to be a declaration of trust or an acknowledgment of trust. The result is that I was not satisfied, and could not possibly be satisfied, that the stamp duty would be paid. The consequence of this is that I was not satisfied the deed would be either “duly stamped” or stamped by the Chief Commissioner in accordance with s 304(1) in circumstances where s 288 provides that the Chief Commissioner will stamp an instrument when duty “is paid in full”.

41    There is a divergence of authority as to the consequence of stamping being absent, even if the instrument is transmitted to the Chief Commissioner: Fineglow Pty Ltd v Anastasopoulos [2002] NSWSC 1181; 57 NSWLR 39 at [36]-[37] per Palmer J. One view is that the unstamped instrument is admissible in evidence but not for “use in law or equity for any purpose” as said at s 304(1) – ie, a “nullity” incapable of bearing upon title pending its stamping: see Reliance Financial Services Pty Ltd v Baddock [2002] NSWSC 857 at [46] per Young CJ in Eq and Dent v Moore [1919] HCA 11; 26 CLR 316 at 324. The other is that the giving of an undertaking under subss (2) and (3) creates an exception allowing general use as “there would be no point in admitting the unstamped document into evidence if the court could not make use of it”: see Weston v Metro Apartments Pty Ltd [2002] NSWSC 682 at [20] per Campbell J. This debate “still appears to remain unresolved”: Mathews v Council of the Shire of Gunnedah [2010] NSWSC 412 at [7] per Ball J (although his Honour in that case followed the view of Campbell J, accepting an undertaking on an interlocutory basis). The upshot is that it is likely that Brian’s inability to pay any ad valorem duty would result in the deed being of no utility to the respondents’ case, notwithstanding the proffering of an undertaking to pay the duty.

42    Ultimately, I was not satisfied that the proffered undertaking to pay any duty would be able to be complied with. The respondents were put on notice of the deficiency in stamping at the first day of the hearing on 29 April 2025. They had had plenty of time to make the necessary arrangements and yet failed to do so by the second day of the hearing on 26 June 2025, some two months later. They did not provide an explanation for that failure. I saw no reason why they should be afforded additional time, in particular given how they had previously failed to abide by various timetabling and procedural orders since 2023 when the matter was in a Registrar’s docket, and the delay in the ultimate hearing of the case. “[T]he public interest in the protection of the revenue rises above any of the private interests of parties to litigation”: Arnautovic & Sutherland t/as Jirsch Sutherland & Co v Cvitanovic [2011] FCA 809; 199 FCR 1 at [77] per Katzmann J citing Dent v Moore at 330. It is important to give effect to the prohibition in s 304(1) and not avoid its effect merely because a party proffers an undertaking which, on further scrutiny, may not be efficacious in facilitating the assessment of revenue – that is part of the role of the Court in “approving” the arrangements in question.

43    For those reasons, it is not necessary to consider any further the question of an express trust.

44    That means that the creation and operation of any possible resulting or constructive trust as allowed by s 23C(2) of the Conveyancing Act must be considered.

Constructive or resulting trust: principles

45    The respondents submit that the surrounding circumstances in which the properties were acquired in Jerome’s name, and subsequently, give rise to a constructive or, alternatively, a resulting trust. It is necessary to consider each in turn.

Constructive trust

46    The respondents submit that the critical matter which gives rise to the asserted constructive trust is the making of contributions for the purposes of a joint endeavour or relationship and the retention by one party, in this case Jerome, of those contributions when the substratum of the joint relationship or endeavour fails, in circumstances where it was not intended that the other party should enjoy them.

47    This is, of course, a reference to the kind of joint endeavour constructive trust considered by the High Court in Muschinski v Dodds [1985] HCA 78; 160 CLR 583 and Baumgartner v Baumgartner [1987] HCA 59; 164 CLR 137. As explained in Muschinski v Dodds at 620 by Deane J (adopted by a majority of the Court in Baumgartner v Baumgartner at 147-149):

the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do…

48    The requirements can be stated with a simplicity which “belies the difficulty that can attend the application of those elements”: NSW Trustee and Guardian v Togias [2022] NSWCA 225; 110 NSWLR 86 at [61] per Mitchelmore JA, Basten and Griffiths AJJA agreeing. The elements restated by the Court there were as follows (at [62] quoting Woods v McKinlay (No 2) [2021] NSWSC 1510 at [231] per Parker J):

(1)    the formation of a joint endeavour between the parties;

(2)    the acquisition of property pursuant to that joint endeavour; and

(3)    the premature termination of the joint endeavour, leaving one [party] with a legal interest which that party was not intended to enjoy beneficially in those circumstances.

Resulting trust

49    The starting position is that the beneficial ownership of real property is commensurate with the legal title: Currie v Hamilton [1984] 1 NSWLR 687 at 690E per McLelland J. That position can be displaced by the presumption of a resulting trust arising from the payment of the purchase price of property by someone other than the ultimate legal owner: Calverley v Green [1984] HCA 81; 155 CLR 242 at 246 per Gibbs CJ, 255 per Mason and Brennan JJ, at 266 per Deane J; Bosanac v Federal Commissioner of Taxation [2022] HCA 34; 275 CLR 37 at [12] per Kiefel CJ and Gleeson J, [51] per Gageler J, [104] per Gordon and Edelman JJ. Also, where two or more persons advance the purchase price of property in different shares, it is presumed that the person or persons to whom the legal title is transferred holds or hold the property upon resulting trust in favour of those who provided the purchase price in the shares in which they provided it: Calverley v Green at 266-267 per Deane J; Bosanac at [51] per Gageler J. Those presumptions can in turn be rebutted by the counter-presumption of advancement or by evidence of actual intention: Bosanac at [13]-[14] per Kiefel CJ and Gleeson J, [52]-[53] per Gageler J, [115], [121] per Gordon and Edelman JJ.

50    The presumption of advancement, which is strictly not a presumption, is that there are certain relationships from which equity infers that any benefit provided for one party at the cost of the other has been provided by way of “advancement”; the consequence is that the equitable estate follows the legal estate as there is an absence of any reason for assuming that a trust arose. The operation of the presumption of advancement may be rebutted, or supported, by evidence of the actual intention, at the time of the purchase, of the parent or other person who provided the purchase money. See Nelson v Nelson [1995] HCA 25; 184 CLR 538 at 547 per Deane and Gummow JJ.

51    As explained in Bosanac at [14], the presumption of advancement allows an inference as to intention to be drawn from the fact of certain relationships including that of parent and child or husband and wife. That is to say, such a relationship can be considered by itself to afford “good consideration” for the conveyance, although a rationale for the presumption is also found in the prima facie likelihood that a beneficial interest is intended in situations to which the presumption has been applied.

52    Particularly relevant to the present case is that, unless the evidence establishes a contrary position, if the purchase price is funded in whole or in part by moneys raised on mortgage, the mortgage moneys are treated as a contribution by the person who is liable to repay them; where purchasers jointly borrow funds on mortgage loan, they are to be regarded as contributing the part of the purchase price so raised equally: Calverley v Green at 251 per Gibbs CJ, 257-258 per Mason and Brennan JJ, 267-268 per Deane J; El-Debel v Micheletto [2021] FCAFC 117; 153 ACSR 15 at [7(6)] per Markovic, Derrington and Colvin JJ.

The evidence in detail

53    Brian, Suzanne and Jerome all gave evidence and were cross-examined. Their evidence was far from clear or consistent, which is at least in part explained by the long passage of time since the properties were purchased and in part by their lack of understanding or appreciation of the legal relationships they purported to give evidence about.

54    Much of Brian and Suzanne’s affidavit evidence is objectionable for one or other reason, including the form in which they recount conversations, conclusionary statements they assert and irrelevance. Particularly given that they were unrepresented in the preparation of their affidavits, and the obligation to treat them fairly and do justice in the case, I acceded to the parties’ agreement that I not laboriously make rulings on each objection but rather adopt a sensible approach to their evidence when assessing it and making findings of fact. A further difficulty with Brian and Suzanne’s affidavits is that they were both typed by Suzanne and were obviously prepared in collaboration. I can have no confidence that their evidence is each their own independent recollection.

Brian’s evidence

55    In his affidavit, Brian said that he paid the deposit of $50,000 on the First Rosehill Property, as well as the stamp duty and legal costs of $2,200, but he provided no supporting documentation even as to the sum of the deposit, if any. He said that he and Suzanne put the property into Jerome’s name “because it was bought pursuant to a family trust agreement between the two respondents and their children in order to establish the family trust fund.” He said that that was an oral agreement. He said that he explained to Jerome that Jerome would be the trustee and that that and future properties would be purchased for the trust but that he, Brian, would be the beneficial owner of the properties.

56    Brian said that Jerome agreed to the arrangement, saying words to the effect that he wished to live in the city area, rather than far from the city where Rosehill is, and asked Brian to give him the deposit to enable him to purchase a home for himself.

57    In cross-examination, Brian said that he told Jerome that purchasing the properties would be good for his credit rating for when he wanted to buy something for himself, he would get tax benefits (T57:34-43) and it would get Jerome’s “foot in the door” of the property market (T58:16-17). The idea was for the purchases to be “positively geared” so that they would pay for themselves – ie the rental payment would pay off the loans (T58:23-44). The management of the properties with regard to collecting rent and the application of the rent to the mortgages was done by him and Suzanne (T59:27-30). He accepted that he did not contribute “much at all” to the properties because the rentals were enough to cover the debts (T65:4-17), but occasionally he paid if there was a shortfall (T66:29-33; T74:40-41).

58    Brian has resided in the First Rosehill Property since April 2008.

59    In respect of the Second Rosehill Property, Brian said that it was purchased in 2008 on trust for him in the name of his father, Edward. Brian said that he paid the deposit of $50,000, the stamp duty and legal costs in the sum of $2,200, but once again he provided no independent evidence of those matters. He did not explain how the balance of the purchase price of $250,000 was paid. Later, in January 2016, when the property was transferred to Jerome’s name, Brian paid the costs associated with the purchase and transfer of the property. That was when Edward was 87 years of age.

60    Again, Brian said that Jerome agreed to that arrangement and asked that Brian help him with the deposit when he found a suitable place for himself.

61    In respect of the Mount Druitt Property, Brian said that he bought the property in his own name in 2007 for $400,000. He said that he transferred it to Jerome in 2016 and paid all the expenses associated with the transfer. Again, he says that Jerome agreed to the property being held in his name as trustee for Brian. In cross-examination he accepted that he did not pay anything towards Jerome’s acquisition of the property except possibly stamp duty although he asserted that there was “equity in the property” (T68:23-44, T69:7-9). Presumably he meant that the amount of the loan was less than the value of the property, but he did not say that or try to quantify the difference.

62    In respect of the Lidcombe Property, Brian said that the property was Suzanne’s inheritance from her mother, Cynthia de Souza. He said that he and Suzanne put the property into Jerome’s name for consideration of $500,000 paid to Suzanne’s family. He said that Suzanne paid the estate of Cynthia de Souza the deposit of $90,000, the stamp duty and legal costs of $15,200, but again this is unsubstantiated. He said that the property was registered in the name of Jerome as trustee for “our family trust”. He accepted that he made no contribution to the purchase of the property, asserting that Suzanne contributed (T74:26-27). Suzanne also occupied the property (T74:32).

63    Brian said that in December 2017, he, Suzanne and Maryrose Salubre sought financing from NAB for an aged care facility development they were considering. He said that Jerome signed consents and provided his payslips from his employment at American Express to assist in obtaining finance. He said that copies of Jerome’s emails with the signed consents and payslips were annexure “BF-4” to his affidavit. In fact, no signed consents and payslips are attached to the affidavit. The annexure consists of some emails in 2018 and 2020 which I will return to below. For the present, it can be observed that they do not support the contention that Jerome agreed to support his parents in the aged care facility venture.

64    Brian also deposed to a conversation he says that he had with Jerome in December 2020 in which Jerome agreed that the properties were held by him on trust and Jerome said that Brian had promised that he would pay a deposit of 20% of the value of a property that he, Jerome, wished to purchase.

Suzanne’s evidence

65    Suzanne’s affidavit evidence covers the same ground as Brian’s and is in some respects word for word the same. She also deposes to conversations that she says that she had with Jerome in which he accepted that he was trustee and in which she agreed that she and Brian would work towards getting a 20% deposit for Jerome when he found a property near to the city that suited him.

66    With regard to the Lidcombe Property, Suzanne exhibited documentary support for the contentions that the property had been registered in the name of her mother and that following her mother’s death there was discussion about who it would be transferred to. The estimated value of the property in the inventory of property for the deceased estate was $450,000.

67    Suzanne accepted that she intended all her children, including Jerome, to have properties and to be financially secure (T94:5-16). She said that Brian had said to all the children that they should get their “foot in the door with cheap, maybe out-of-the way” properties (T96:14-15). Suzanne agreed that she and Brian assisted Jerome by collecting the rent on the properties (T97:16). She also accepted that the way the arrangement worked was that she collected rent and at least part of it was applied to the bank loans (T98:39-42), the deposit on occasion being made by her other son Sascha (T103:4-9). She said that at one point she collected rentals that she did not deposit to Jerome’s account (T102:34-38).

Jerome’s evidence

68    Jerome does not have tertiary qualifications. After leaving school at 18 years of age, he worked primarily in call-centre customer service-based roles including for more than 14 years with American Express and its subsidiary Resy. He does not have experience in investments in shares or properties but he has limited experience in financial matters such as credit limit increases and credit applications through his employment.

69    Jerome said in his affidavit that he acquired the properties that are the subject of this case as investments. He never had any intention of living in any of properties and acquired them to build an investment portfolio. He did so on the urging of his parents. He denied Brian and Suzanne’s version that the arrangement was that they would pay a deposit on a future property for him in which he intended to live – he said that one of the benefits of having the investment portfolio was that he would be able to rely on the equity in it when he came to buy a property for him to live in in due course (T160:27-29, T162:14-15).

70    He said that, to help him, his parents presented to him what they considered to be good investment opportunities. They recommended that he obtain bank loans and mortgages to assist in acquiring property and then lease the properties in order to satisfy the mortgage repayments. They also assisted him in obtaining finance from the bank to acquire the properties. They assisted in liaising with the bank and obtaining and completing the necessary documentation. In cross-examination, he said it was one of his parents’ “cornerstones that getting a foot in the door of the Sydney property market was always going to set you up for the future” (T153:10-12) but that he was “extremely lazy in that [he] paid no attention to any of the details back then” (T152:14-15).

71    He said that he believed that his parents had his best interests in mind. Since he was inexperienced in property and investment related matters, he trusted his parents completely and took their advice with respect to the purchase of the properties and what to do with them after they were purchased. He said in cross-examination that he “presumed everyone had good intentions” and he “signed what was necessary” (T152:25-26). The arrangement with his parents was that they would manage the properties – “they would handle the rental income, incoming, outgoing, everything, so I could just sit back” (T151:15-20); he “had left it to Brian and/or Suzanne” to collect the rent, pay the mortgages and to pay for other outgoings such as council rates (T153:20-28). When asked what was in it for Brian and Suzanne, Jerome said that they were “[b]eing good parents” and that he presumed that “they would have taken a cut”; “[i]f it benefited them, benefited me, that was fine” (T151:24-33).

72    With regard to the First Rosehill Property, Jerome said that he and his father discussed and agreed that he would purchase the property and that Brian would reside there and cover the mortgage and utilities. He said that he understood from those discussions that his father could not himself get finance and that that was a way for him, Jerome, to enter the property market and also assist his father. Jerome accepted in cross-examination that he did not pay the deposit for the purchase of the property; he presumed that Brian paid it (T152:4-9).

73    Jerome said that he never agreed with his parents that he would hold the property, or any other property, on trust for his parents. Rather, he said the property was purchased by him and was intended to be his beneficially.

74    Jerome said that his parents also recommended that he acquire the Lidcombe Property when his maternal grandmother died. He said that he agreed with Suzanne that she would reside at the property after he had acquired it and she would cover the mortgage and utilities.

75    Jerome referred to an email received from Suzanne dated 22 December 2020 in which she said to him, “I promised you Swete Street and it is all yours – Do with it whatever you wish – Never mind what Dad says – that property is mine and it is now yours absolutely – Always been”. The email tends to show that even if there had been a trust in relation to that property, the Lidcombe Property, it was terminated at that time and Jerome owned the property outright from then. In cross-examination, Suzanne agreed that the email is inconsistent with there being, or ever having been, a trust relationship is respect of that property, but she explained mood swings as being responsible for her writing the email (T113:38-47).

76    Jerome said that his parents also recommended that he acquire the Second Rosehill Property, although he was unaware that he had purchased it from his paternal grandfather. He said that at that time he discussed with his parents that the property would be rented out to a third party or a family member and the rent would cover the mortgage and utilities.

77    Jerome said that Brian insisted that he purchase the Mount Druitt Property. Brian told them that the property was available at less than market value and would be worth a lot more in the future. He remembers Suzanne visiting his place of work with a NAB representative to sign paperwork, namely a loan application in relation to the Mount Druitt Property.

78    Jerome has no recollection of ever discussing a family trust with his parents or having used any words to that effect. He said that he and his parents did not use the terminology of trustee, beneficiary, family trust or “Frugtniet Family Trust” in conversation. He also denies ever having signed the purported trust deed and points to some irregularities in the deed, including that it listed his residential address as the Lidcombe Property, despite him never having lived there, and that the beneficiary (Brian) had “paid the whole of the purchase money” for the properties, despite Jerome having had to borrow from the bank to pay most of the purchase price.

79    Jerome said that his understanding was that his parents had the relationship with and managed the tenants of the properties that were not occupied by them and that they collected the rent on his behalf.

80    Jerome said that in late 2019 to early 2020 his parents asked him to guarantee a loan with NAB and provide the properties as security for the purchase of shares in a company and land associated with that company. He refused that request as he was not comfortable with it. He said that following that, the relationship between him and his parents began to deteriorate. He had assumed that his parents had been collecting rent from the tenants of the properties to meet payments for utilities charges and mortgage repayments. He trusted that his parents would not let the tenants fall behind on rent and that they would maintain the properties. However, in 2020, he became aware that rent was not being paid into his accounts, utility bills had been unpaid and there was a garnishee order on his salary from American Express and his credit cards were frozen.

81    Jerome said that he had further discussions with his parents in the course of 2020. He told them that he was not able to service the loans and expenses without the rental payments which had stopped being paid into his accounts. He said that his parents repeatedly informed him that they were working to fix the situation with “a loan from NAB”, which he understood to be a reference to the development they were planning for which they wished to use the properties as security. He said that ultimately the debts became too high in value for him to have any prospect of repaying them and for that reason he decided to enter bankruptcy. He said that he received independent legal advice and that he felt he had no choice but to enter bankruptcy as he believed that the debts had got out of control.

82    By the end of 2020 and into 2021, the relationship between Jerome and his parents had broken down to the extent that he was writing to them through a solicitor in an effort to settle their disputes. Jerome said when he realised just how uncooperative Brian and Suzanne were, he was willing to turn over the properties to them except for the Lidcombe Property because it had sentimental value to him having been his grandmother’s house; he was happy to do so if they paid the stamp duty on the transfers and the outstandings because he realised that having the portfolio “was more trouble than it was worth” (T160:15-20).

Jerome’s 15 March 2018 email

83    By email dated 15 March 2018, Suzanne wrote to Jerome. She said that “we” (who from the evidence I understand to be her, Brian and Ms Salubre) were on the verge of purchasing a property at 16 Oak Street Parramatta (ie for the aged care facility) for which they had paid $11,000 as a deposit of 0.25%. She asked Jerome to “[p]lease help with this loan as otherwise we cannot pay off any of the outstandings – this is the only way Dad can bring all the monies up to date and it will be monitored very carefully from now on.” She asked Jerome for various documents that the bank had sought, including payslips.

84    There is what appears to be part of an email in reply from Jerome on the same day. In it, he said that the “biggest issue” for him had been “the mismanagement of funds for the existing properties.” He said that he had not been consulted before the plans for the development had been put in motion and that he never wanted any part of it. He asked for rental income and tenant details of each of the four properties in his name, and he asked for details of legal action taken by Sydney Water in respect of defaults on three of the properties. He said that his credit cards were still frozen.

85    In the email, Jerome said that “Dad made it clear that they are ‘his’ properties” and went on to set out what he would require from his parents, including saying that he had been told that he would receive a 20% deposit “as recompense for using [his] name on these loans.” Jerome said that by putting “his” in quotation marks he was conveying a mocking tone, ie the properties were not Brian’s but that is only what Brian asserts (T161:27-29).

Brian’s 22 December 2020 email

86    There is in evidence an email from Brian to Jerome on 22 December 2020. In it, Brian says that Jerome’s “benefit from the present arrangement was Suzanne’s promise that you could keep the [Lidcombe Property] for yourself or use the equity to raise the equivalent of 20% of $1million to use as a deposit in a home or for any purpose you choose.”

Consideration

87    Most of Brian and Suzanne’s evidence goes to trying to establish that there was an oral express trust agreement. Even if the evidence established that, such an express oral trust cannot defeat the vesting of the properties in the bankruptcy trustee because of the operation of s 23C(1)(b) of the Conveyancing Act. In any event, I am not satisfied that there was such an agreement. The evidence of Brian and Suzanne on the one hand and Jerome on the other is diametrically opposed. The principal difficulty for Brian and Suzanne is that their evidence is too inconsistent. Sometimes the arrangement was described as being for the benefit of the whole family and in other places for Brian, and yet finally became three of the properties for Brian and one for Suzanne. There is simply insufficient evidence on which to base a conclusion that there was an express trust created. The respondents’ contention that the properties were held on trust for them is also at odds with their evidence and that of Jerome that the properties were bought for Jerome to “get his foot in the door.”

88    Taking into account the commonalities in the evidence of Brian, Suzanne and Jerome, I find that the arrangement was that when Brian or Suzanne identified good opportunities to invest in property, the properties were bought and registered in Jerome’s name. Brian or Suzanne paid the deposits where deposits were required. They also paid the other transfer costs. The remainder of the purchase price was paid by bank loans to Jerome for which he was liable to the relevant bank. The properties were mortgaged to secure the loans. Between them, Brian and Suzanne managed the properties by ensuring they were tenanted, collecting the rent, paying the bills and depositing the balance to the loan accounts. It was the expectation all round that the properties would remain positively geared and in that way be paid for by the rentals collected.

89    The contention that the arrangement included that Brian and Suzanne would help Jerome by paying a 20% deposit on a property for him to live in is not material to those conclusions. In any event, I do not accept it. It seems to have arisen as a proposal in the parties seeking to settle the dispute that they had got into about the properties. That explains why it is in the emails of 15 March 2018 and 22 December 2022. There is no earlier documentary evidence of that proposal, or arrangement. It appears to have been seized on by Brian and Suzanne in their re-creation of the arrangement from its inception.

90    Jerome’s contemporaneous statement in the email of 15 March 2018 that he never wanted any part of the aged care facility development puts paid to the evidence of Brian that Jerome had agreed to participate in it. That issue would in any event appear to be extraneous to the issues that have to be decided.

91    The question then is: why would Brian and Suzanne assist Jerome to acquire a property portfolio including by paying the deposits and transfer costs and managing the properties? Aside for the benefit that they obtained by residing separately in two of the properties for a period (and then later together in one of them), I am ultimately satisfied that they did it for Jerome’s benefit. As Suzanne explained, she wished all her children to get into the property market and to be financially secure. Brian also emphasised the importance to him and Suzanne of the family as a whole doing well and of the children getting a “foot in the door” in the property market. That is not only a plausible explanation, but also probable. In short, Brian and Suzanne did it for their son because he is their son whom they love and whom they wanted to be financially secure.

92    The result of those conclusions is that there was no constructive trust; there was no joint endeavour which subsequently failed, and there was no intention that in the circumstances of failure beneficial ownership would not follow legal ownership.

93    With regard to a resulting trust, the bulk of the purchase price was paid by Jerome in the form of loans for which he was liable to the bank. To the extent that Brian and Suzanne made some contributions to the purchase price, the presumption of advancement is not displaced by evidence, objectively determined, of any contrary intention (see the characterisation of the relationship above at [91]). That is to say, to the extent that Brian and Suzanne contributed to the purchase of the properties by paying deposits and transfer costs, and to the extent that they contributed thereafter by managing the properties, they did that for the benefit of their young son. They may well also have had in mind that they could impose on him to make the properties available as security for development opportunities that they later wished to pursue, but their contributions were nevertheless by way of advancement.

94    There is evidence of Brian and Suzanne paying monies from time to time into the loan accounts. The details of those payments are proved by the bank statements and they are summarised in the document labelled “MFI-1”. It shows that deposits in the sum of $13,237.10 were made in Brian’s name and $36,572.41 in Suzanne’s name. That is the only reliable evidence of the extent of the contributions made by Brian and Suzanne, but in any event those payments were in all probability rental payments that they had collected. So, although I accept that Brian and Suzanne paid the deposits and transfer costs on the properties, how much those in fact were was not proved. I do not accept their say-so on the amounts many years later when they cannot be expected to remember them. I place no weight on that evidence. I am also not satisfied that the amounts recorded in “MFI-1” are contributions from them – rather, they are rentals collected and properly due to Jerome.

95    In the result, the properties vest in Mr Mansfield as trustee of the bankrupt estate of Jerome and did so from the date of his appointment. The trust issue having been determined in this way, there is no need to consider in the alternative whether the general jurisdiction in s 30(1) of the Bankruptcy Act ought to be exercised to facilitate the sale of the properties notwithstanding the existence of an arrangement with Jerome as trustee. If a decision on that point was required, I would decide it in Mr Mansfield’s favour for the reasons identified at [26] above.

Relief

96    I am satisfied that the tenants of the properties have been given notice of this proceeding and the relief sought against them. None has appeared.

97    In the circumstances, the relief that is sought by Mr Mansfield in relation to the properties should be granted.

98    Insofar as the costs of the proceeding are concerned, in the short minutes of order handed up by counsel for Mr Mansfield shortly before the conclusion of the hearing there is an order that the applicant’s costs of the proceeding be costs of administering the bankrupt estate and an order that the respondents pay the costs of the proceeding. Those orders are inconsistent. Perhaps they are intended to be in the alternative. In my view, the proper order is the former. In circumstances where Brian and Suzanne doubtless did make some contribution to the purchase of the properties and responsibility for the confusion and lack of clarity as to the exact arrangement for their purchases is not only theirs but also Jerome’s, including from his apparent disinterest and inattentiveness over a long period, the fairest order is that the estate pay the applicant’s costs.

The costs of the aborted hearing on 3 April 2025

99    The final hearing was previously listed on an earlier date, 3 April 2025, pursuant to the orders made by me on 13 December 2024 shortly after the matter was transferred to my docket. There was no opposition from the respondents to that course at the case management hearing on 13 December. At that time the solicitor on the record for the respondents was Alex Attapallil of Lexis Lawyers.

100    On 20 December, Mr Attapallil filed a notice of intention to cease to act, giving notice that after seven days he would file a notice of ceasing to act. That time elapsed without such a filing. On 31 March, my Associate wrote to the parties enquiring as to the status of the respondents’ representation in the lead-up to the hearing. The respondents said, inter alia, that “Mr Attapallil is unwell and his office is temporarily closed”. However, Mr Mansfield continued to correspond with Lexis Lawyers throughout this time in the absence of a notice of ceasing to act.

101    One day before the hearing, the respondents filed an interlocutory application seeking the vacation of the hearing. In an accompanying affidavit Suzanne deposed that “all parties were aware that my legal representation were seriously ill and unable to represent me.” The respondents also requested legal assistance under r 4.12 (which I subsequently granted – see [2] above) on the basis that not only was Mr Attapallil ill, but so was their counsel at the time – in effect, saying that they were unrepresented, notwithstanding that Mr Attapallil had not filed a notice of ceasing to act.

102    On the day of the hearing, the respondents indicated that they had not been served with any of the necessary material, including the contents of the court book. It became apparent that this was because Mr Mansfield’s solicitors had continued to serve material on Lexis Lawyers where the principal contact, Mr Attapallil, was indisposed and other solicitors (if any) at the firm did not take carriage of the respondents’ proceeding.

103    In light of that, I adjourned the final hearing and ordered Mr Attapallil to forthwith file and serve a notice of ceasing to act and to show cause at the next hearing date (29 April) why Lexis Lawyers should not pay the applicant’s wasted costs. A notice of ceasing to act was filed later that day. In a subsequent affidavit, Mr Attapallil explained that his illness had prevented him from acting and that he had overlooked filing a notice of ceasing to act. He was also unable to appear on 29 April due to an operation. In a letter provided to the Court, he mentioned that he would be undergoing further medical procedures preventing any further participation in the proceeding.

104    Mr Mansfield seeks the wasted costs of the adjournment from Mr Attapallil, but makes no submissions on the issue and concedes that it is ultimately a matter for the Court. In light of the evidence provided by Mr Attapallil and the respondents on his incapacity, Mr Mansfield’s potential prior notice of that incapacity and, in the light of that, the failure by Mr Mansfields’ solicitors to seek authority or leave to serve directly on the respondents, I consider that no order as to the wasted costs of the adjournment should be made. Those costs will become costs in the cause.

Associate:

Dated:    15 July 2025