Legal Tip 406: Asset Protection Related Legal Cases

I will use this thread to record cases that relate to asset protection. I will add new cases as they appear and sometimes add in old cases when I get the time.


Bosanac v Commissioner of Taxation [2022] HCA 34

This case involved the ATO chasing the ex-spouse of a person that owed them a large amount of money in tax and was bankrupt. The wife legally owned a property, 100% in her name. The ATO argued that the husband was beneficial owner for 50% of the property as he partially contributed to the purchase price with cash from a joint account and was also a joint borrower on the loan used to buy the property.

The ATO lost.

See https://eresources.hcourt.gov.au/downloadPdf/2022/HCA/34

 

Relevant case
Cantrell & North and Anor [2020] FamCAFC 175
Cantrell & North and Anor [2020] FamCAFC 175 (23 July 2020)

FAMILY LAW – APPEAL – PROPERTY – Appeals from orders made by a judge of the Supreme Court of New South Wales – Where transfers of a property from the husband to the wife and property settlement consent orders made in the Family Court of Australia were obtained to affect the first respondent’s claim for payment of a debt owed to him by the husband – Where the transfers of the property were declared to be void pursuant to s 37A of the Conveyancing Act 1919 (NSW) – Where the property settlement consent orders made in the Family Court of Australia were set aside – Where the property is to be sold to satisfy the debt owed to the first respondent – Whether the primary judge should have made the make available order – Failure to disclose and notify creditors – Where the failure to disclose and notify the first respondent as a creditor was of such magnitude to justify setting aside the consent orders – Appeal dismissed

 

NSW Trustee and Guardian v Togias [2022] NSWCA 225
(09 November 2022) (Mitchelmore JA at [1]; Basten AJA at [118]; Griffiths AJA at [154])

Catchwords
EQUITY – trusts and trustees – constructive trusts – where respondent’s former de facto partner convicted of drug-related charge – Forfeiture Order made in respect of de facto partner’s assets pursuant to Criminal Assets Recovery Act 1990 (NSW) – where respondent performed domestic duties, raised children, and worked in business founded by de facto partner – whether “joint relationship and endeavour” formed pursuant to which respondent made contributions to acquisition of two properties the subject of the Forfeiture Order – application of principles in Baumgartner v Baumgartner (1987) 164 CLR 137; [1987] HCA 59 – challenges to findings as to how respondent’s contributions to properties were said to be established – application of maxim “equity is equality”

 

Fordyce v Ryan; Fordyce v Quinn [2016] QSC 307
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Trustee in bankruptcy tried to attack a trust arguing the bankrupt beneficiary controlled the trust by being the director of the trustee and being the only beneficiary to ever receive a distribution from the trust, therefore they said the assets of the trust were the assets of the bankrupt and this was property divisible under the bankruptcy act.

BS said the court.

Similar to the NSW case of Smith v Public trustee.

 

Dwyer v Ross (1992) 34 FCR 463.

“… [W]here the interest in the trust is a mere discretionary interest, the right to be considered for the purposes of a distribution, it is difficult to see that the right to enforce the due administration of the trust can be property which passes to the trustee in bankruptcy. The interest in the trust would seem to be a personal right which remains with the bankrupt. Of course, if a distribution of money or property is made to the bankrupt during the period of the bankruptcy, the trustee will be entitled to it as after-acquired property. See ss 58(2) and 116(1)(a) of the [BA]. However that may be, if [R’s] estate is sequestrated, the operation of ss 58 and 116 of the [BA] will not entitle the Trustee in Bankruptcy to claim the [trust fund] or any aliquot share thereof. The distribution of the income and assets of the trust fund will continue to be a matter for the trustee of the [trust] and in the trustee’s discretion.”

 

Lewis v Condon (2013) 85 NSWLR 99

 

Koprivnjak v Koprivnjak [2023] NSWCA 2
Koprivnjak v Koprivnjak [2023] NSWCA 2 - BarNet Jade

In November or December 2011, the respondent, Ms Natalie Koprivnjak, acquired in her name alone a property in Shoal Bay NSW for a purchase price of $300,000. The appellant, Mr John Koprivnjak, who is the respondent’s father, assisted her financially with the purchase by providing the $15,000 deposit and transferring a further $60,000 into her bank account to apply towards the purchase price. Those sums derived from the bank account of the appellant’s company, Titles Strata Management Pty Ltd (TSM). On 18 November 2011, the parties executed a mortgage referencing an advance of $75,000 to the respondent. The balance of the purchase price was paid by a loan taken out by the respondent which was secured by a mortgage in favour of the National Australia Bank (NAB).

In the years following the purchase, the appellant paid towards renovations and property maintenance and caused TSM to make monthly payments of $1,400 into the respondent’s personal bank account, from which mortgage repayments were made.

The property was sold in December 2020 in the context of Family Court proceedings between the appellant and his then wife. By this time, there existed disagreement between the appellant and respondent as to the true beneficial ownership of the property. Whereas the appellant considered himself to be the beneficial owner, the respondent contended that the appellant merely assisted with her purchase of the property by providing a loan of $75,000. The proceeds of sale were paid into a controlled monies account pending determination of the appellant and respondent’s competing claims.

On 8 February 2021, the appellant commenced proceedings claiming that the respondent held 25% of the property on resulting trust for him because he contributed to the purchase price. He also claimed that there was a common intention constructive trust as to the other 75% based on a common understanding between him and the respondent by reason of his contributions to the discharge of the mortgage in favour of the NAB and property maintenance. The appellant alternatively sought to enforce the covenants in the mortgage document between him and the respondent together with a sum of money for the improvements that he said he made to the property. The respondent agreed that the appellant was entitled to repayment of the loan secured by the mortgage document.

 

Galati v Deans [2023] NSWCA 13 (15 February 2023) (Macfarlan and White JJA, Basten AJA)
This decision has a headnote.
Catchwords
EQUITY – trusts – resulting trusts – constructive trusts – characterisation of trusts – where appellant and respondents engaged in joint venture in hope of redevelopment of Sydney Fish Market – where in the course of the joint venture companies controlled by appellant and first respondent acquired call option for the acquisition of shares in an unrelated company – where nominee company appointed to exercise call option on behalf of grantees – where grantees provided finance for nominee company to exercise call option – whether evidence established that grantees intended nominee company to hold acquired shares on trust for them in equal shares – whether such trust is properly characterised as a presumed resulting trust or a common intention constructive trust – whether parties intended that trust over shares should only arise upon allocation of units to appellant in nominee company’s unit trust – held that nominee company holds half of its shares acquired under call option deed on trust for appellant

EQUITY – fiduciary duties – secret commissions – entitlement of company related to joint venturer to commission under antecedent agency agreement – commission retained in its entirety by joint venturer’s company upon receipt – whether receipt of commission amounts to breach of fiduciary duty – whether liability of other joint venturer for breach of fiduciary duty ought to be reduced by amount of commission said to be wrongfully received and retained – no breach of fiduciary duty established in circumstances where antecedent agency agreement unconnected with joint venture

 

Many non-lawyers dont appreciate the decisions made in equity regarding resulting trusts etc. eg Accountants. It can also be used to (partially ?) defeat creditors (or not) and can be common with bankrupties and and even tax cases were a spouse seeks to limit the rights of others to seek proceeds on disposal. eg the ATO.

 

That is why I have started the 'resulting trust appreciation society'. So far I am the only member It can also allow for transfers without duty and CGT too potentially.

 

I have seen others. I know enough to refer people for professional legal advice.

One was a wealthy lady who bought a whole floor penthouse in Sydney for a massive price. Her dumb former accountant suggested a company own it. I was stunned. No main residence exemption. Paying land tax etc...And she had no asset protection concerns. Off to a specialist legal guru foradvice. He then argued his ways and OSR allowed a duty free and CGT transfer to her own name. We had to produce her personal records of her making payments for the company to settle and a letter from her bank that they lent to her nominee and really would have lent to any name provided she guaranteed it.

Also can be common where a parent joins a adult child in buying property and getting loans. Can be used to facilitate the ownership back to one name. Many get told by tax advisers its a done deal when it may not be. Its certainly not simple but saving CGT and duty can offset the advice.

 

Recently I was asked to help teach the trusts unit at the law school I work at. Some of the trust law is so complicated and counter intuitive, especially with more recent cases - it was an easy "no thanks" from me haha.

 

And now the property in question is for sale.

https://www.domain.com.au/property-profile/82-philip-road-dalkeith-wa-6009

 

Thorne Developments Pty Ltd v Thorne & Anor [2016] QCA 63
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A trustee in bankruptcy tried to take control of a discretionary trust upon the bankruptcy of the person that was controlling it. They argued that the wife's appointment as trustee was invalid because her appointment was defective as there was a gap between her appointment and the de registration of the trustee company from 4 Dec 2011 to 22Aug12.


This was because in the deed of appointment the appointor said that there was no trustee of the trust when in fact it was the Commonwealth that was the trustee. i.e. the factual circumstances in which the appointment was made was incorrect as there was no vacancy in the office of trustee because of s601AD of the Corporations Act. The court ruled that this didn’t matter because all that was required was that the appointor appoint a trustee in writing and this is what occurred.

 

The Cleaning Doctor NSW Pty Ltd v Fonseca [2023] NSWCA 110 (26 May 2023) (Brereton and Mitchelmore JJA, Simpson AJA)
This decision has a headnote.
Catchwords
EQUITY – trusts and trustees – express trusts – resulting trusts – constructive trusts – where property purchased by the second appellant was later transferred to the second respondent – whether, pursuant to an agreement between the second appellant and the second respondent, the property was held on trust for the second appellant – whether the transfer of the property to the second respondent occurred without consideration for the second appellant’s equity or for false consideration – whether the transfer of the property to the second respondent was a sham giving rise to a resulting trust in favour of the second appellant – whether the later transfer of the property to a third party to release mortgages over properties belonging to the respondents impressed those properties with constructive trusts in the second appellant’s favour

BANKING AND FINANCE – banks – bank accounts – where bank account was opened in the name of the first appellant, with the second appellant as sole signatory – where second appellant provided first and second respondents with signed blank cheques, a debit card and online access for the bank account – where first and second respondents and other persons made withdrawals from the bank account – whether the second appellant was the legal and beneficial owner of the money in the bank account – whether the first and second respondents bore the onus of proving their authority to make withdrawals from the bank account

RESTITUTION – nature of restitutionary liability – common counts – money had and received – whether primary judge failed to decide appellants’ claim as to money had and received – whether primary judge erred in finding that the appellants did not discharge the onus of proving that the withdrawals from the bank account were made without authority

TORTS – interference with goods – conversion – where first and second respondents withdrew sums of money from a bank account in the first appellant’s name by the cashing of cheques – whether primary judge erred in finding that the appellants did not discharge their onus of proving that the first and second respondents made the withdrawals without authority and therefore converted the cheques to their use and/or the use of other respondents

 

Aravanis (Trustee) v Kapp, in the matter of the Bankrupt Estate of Kapp [2023] FCA 702

Aravanis (Trustee) v Kapp, in the matter of the Bankrupt Estate of Kapp [2023] FCA 702 (28 June 2023)

BANKRUPTCY AND INSOLVENCY – application by trustees in bankruptcy to recover proceeds of sale of properties – whether transfers of property void against the trustees under ss 120 and 121 of the Bankruptcy Act 1966 (Cth) – whether alienation of property void against the trustees under s 37A of the Conveyancing Act 1919 (NSW) – whether property was held on constructive trust in favour of bankrupt – equity of exoneration – Anshun estoppelBANKRUPTCY AND INSOLVENCY – application by trustees in bankruptcy to recover proceeds of sale of properties – whether proceeds held on trust for the bankrupt estate – whether trustees entitled to relief under ss 139D(2) and 139E(2) of the Bankruptcy Act 1966 (Cth) in relation to payments to trust for services provided by bankrupt – whether payments void against trustees under ss 120 and 121 – whether trustees entitled to relief under s 37A of the Conveyancing Act 1919 (NSW) on the same basis – whether trustees entitled to taking of accounts

 

Peter Sleiman Investments Pty Ltd as trustee for the Sleiman Family Trust v Deputy Commissioner of Taxation [2017] NSWCA 81 Peter Sleiman Investments Pty Ltd as trustee for the Sleiman Family Trust v Deputy Commissioner of Taxation [2017] NSWCA 81 (18 April 2017)


In this case a trustee holding multiple properties was issued a notice of assessment from the ATO for $7mil
The trustee then participated in a restructure where each of the 9 properties was transferred to a separate trust. Payment was made to the the trustee of the original trust.
Complex transactions then mean the ATO was now behind the owner of the company as a preferred creditor. The effect was that the ATO missed out on tax and challenged this under s37A Conveyancing Act.
ATO lost

 

Ridge Estate Pty Ltd v Fairfield Pastoral Holdings Pty Ltd [2024] FCAFC 17
Ridge Estate Pty Ltd v Fairfield Pastoral Holdings Pty Ltd [2024] FCAFC 17 - BarNet Jade

TRUSTS AND TRUSTEES - trustee removed by deed - nature and characteristics of former trustee's right of indemnity following removal - principles



CONVEYANCING - fraudulent conveyance - whether deed of removal of trustee voidable under s 86 of the Law of Property Act 1936 (SA) as conveyance of property made with intent to defraud creditors - where trustee entitled to payment from trust assets pursuant to right of indemnity - whether trustee a creditor for purpose of s 86 - whether trustee a person prejudiced for purpose of s 86 - where removal denied trustee its rights of self-help and delayed payment - whether deed of removal entered into with intent to defraud creditors - whether intention to hinder, delay or defeat creditors - where primary judge declared deed of removal and underlying conveyances void - orders of primary judge upheld



PRACTICE AND PROCEDURE - second appellant received secret commissions - second respondent claimed recovery of secret commissions - where principal entitled to pursue recovery of secret commissions but did not do so - where appellants denied in pleaded defence that second respondent had standing to pursue claim - where principal and second respondent entered into deed of assignment by which principal assigned all rights to pursue recovery of secret commissions to second respondent - deed of assignment not pleaded but disclosed during trial - where primary judge ruled during trial that deed of assignment admissible - primary judge held second respondent entitled by deed of assignment to pursue recovery of secret commissions - primary judge ordered second appellant to pay sum of secret commissions to second respondent - procedural fairness - whether primary judge denied appellants procedural fairness by permitting respondents to rely on unpleaded assignment - whether respondents ought to have been held to pleaded case - where legal issue raised late - role of pleadings and submissions - application of principles - whether deed of assignment 'in play' - appeal grounds dismissed



COSTS - application for leave to appeal costs orders of the proceeding - where primary judge took into account outcome of thirteen claims - broad brush analysis to consideration of apportionment - applicable principles - not sufficiently arguable that House v The King error made out

 

Kite (Trustee), in the matter of the Murray [2023] FCA 198
Kite (Trustee), in the matter of Murray (a Bankrupt) v Murray [2023] FCA 198

Federal Court of Australia
Raper J
Bankruptcy - a trustee in bankruptcy sued to recover the 50% interest in a property which was
owned by the bankrupt’s wife - s139DA of the Bankruptcy Act 1966 (Cth) - porpertly largely paid
for by financial contributions made by the bankrupt - trustee contended the Court should make
an order pursuant to ss139A and/or 139DA of the Bankruptcy Act and order that the respondent
transfer to the trustee 50% of the interest in the property - held: trustee succeeded on his
s139DA claim but only to the extent of a 11% interest in the property - trustee’s claim he would
be entitled to vesting of entirety nor 50% of respondent’s interest not accepted - trustee’s claim
of a beneficial interest in property by reason of there being a resulting trust not accepted -
intentions of bankrupt and respondent rebut the presumption of a purchase money resulting
trust - trustee successful on his voidable transaction claims - trustee satisfied Court of the
requirements of s121(2) - application allowed in part.
Kite (Trustee), in the matter of Murray (a Bankrupt)

 

Roufeil as Trustee of the Bankrupt Estate of Tarrant v Tarrant Enterprises as trustees for the MRT Family Trust [2023] FCAFC 142
BarNet Jade - Find recent Australian legal decisions, judgments, case summaries for legal professionals (Judgments And Decisions Enhanced)



Derrington, Abraham and Jackman JJ
Catchwords: BANKRUPTCY AND INSOLVENCY – appeal from decision of Federal Circuit and Family Court of Australia (Division 2) – where transfers made by a person who later became bankrupt from his current account to a loan account held by a company – whether the transfers may be avoided on the basis that each transfer constituted a “payment of money” within the meaning of ss 120 and 121 of the Bankruptcy Act 1966 (Cth) – “payment of money” bears its ordinary meaning and the mere fact of receipt of value, despite intermediary steps, is sufficient to constitute a payment of money – no defence to the avoidance of the transfers by reason of reg 31 of the Bankruptcy Regulations 2021 (Cth), double recovery or set-off PRACTICE AND PROCEDURE – whether the proceedings ought to have been stayed as an abuse of process – whether there was a failure to comply with the rule in Browne v Dunn in relation to the issue of whether there was an agreement to forbear suing the bankrupt in negligence – ample notice given of intention to challenge existence of agreement and direct challenge to the witnesses in cross-examination – whether pre-judgment interest ought to be awarded on the judgment in circumstances where it was not pleaded