Sutherland v Hanna [2004] NSWSC 900

The first defendant, Hanna, became bankrupt. The plaintiff, Sutherland, was the trustee of Mr Hanna’s bankrupt estate. While an undischarged bankrupt, Hanna, as purchaser, exchanged contracts for sale of four parcels of land. He subsequently became the registered proprietor of the properties. The second defendant and cross claimant, Shonoda, the wife of Hanna, said that she and Hanna had agreed that the properties would be hers. She made a cash contribution to the purchase price of the properties far in excess of that of Hanna.

Sutherland claimed that Hanna’s interests in the properties vested in him as after-acquired property of the bankrupt and he was entitled to become the registered proprietor of them. Shonoda claimed that Hanna held his interest in the properties for her absolutely as a constructive trustee or, alternatively, there was a resulting trust in her favour to the extent of the proportion of her contributions to the purchase price of the properties.

Express Trust
The principal submission of counsel for Hanna and Shonoda was that an express trust was created by the conversations the terms of which were that Hanna was to acquire the four properties as trustee for Shonoda absolutely.

The Court did not accept the uncorroborated assertions of Hanna and Shonoda as to the terms of their conversations. The Court accepted the evidence of Mr Sheanoda (Mrs Shonada’s brother) as to his conversation with Hanna. Mr Sheanoda did not recollect the words to the effect of a purchase on behalf of Mrs Shonoda.

In order to constitute an express trust there must be certainty of intention, subject matter and object The statements made by Hanna were not an unambiguous statement of intention to hold the properties at Kellyville and West Pennant Hills on trust. They were equally consistent with Hanna acquiring the properties in his own right to which Shonoda would succeed on his death, it being expected that his life expectancy was shorter than hers by reason of his age and health.

This was not a case of a declaration of trust made by Hanna subsequent to the exchange of contracts or after the four properties were registered in his name. Shonoda’s case was that Hanna declared himself to be a trustee of property to be acquired. What was required was his use of such language as would show a sufficiently clear intention that if the properties were acquired by him, he would hold them in trust for Shonoda absolutely.

Resulting trust
It was submitted that since Shonoda paid the instalments to the Adelaide Bank and to the National Australia Bank and since she had made substantial cash contributions to the purchase of the four properties, the minor amounts contributed by Hanna should be regarded as gifts to his wife and her contributions should give rise to a resulting trust in her favour with respect to the entirety of the four properties.

The Court rejected that submission. Hanna was the party bound to discharge the liability to the Adelaide Bank and that liability must be taken into account in determining relative proportions if a resulting trust came into existence by reason of those relative contributions.

In Calverley v Green (1984) 155 CLR 242 a property was purchased in the joint names of a man and a woman. Money had been raised on a mortgage under which both parties were jointly and severally liable to make repayments. It was agreed that the man would, in fact, make the repayments under the mortgage and he did so. The parties subsequently parted. It was held that the woman’s obligation under the mortgage constituted a contribution to the purchase price and the arrangement that the man would make the repayments under the mortgage did not establish that he alone provided the whole of the price.

There is a presumption that where two persons contribute to the purchase price in unequal shares and the property is purchased in their joint names, the property is held by the purchasers in trust for themselves as tenants in common in the proportions in which they contributed the purchase money (Calverley at 246-247, 255-256).

The presumption of a resulting trust is not confined to the circumstance that a property is held by two or more people. It may arise when one person provides the purchase price of property that is conveyed into the name of another.

There is no countervailing assumption of advancement where a wife makes a purchase in the name of her husband. But the presumption of a resulting trust may be rebutted (Muschinski v Dodds (1984-1985) 160 CLR 583). If the intention of Shonoda in making the contributions to the purchase price of the properties was that Hanna should own the properties, any presumption of a resulting trust with respect to her contributions is rebutted.

The lengths to which Hanna and Shonoda went to enable funds to be borrowed by Hanna suggests that the properties were to be his. If the properties were to be Shonoda’s, one would have expected the finance applications to have been made in her name. That approach would have avoided the problems of an undischarged bankrupt making applications for finance. These circumstances coupled with assertions by both parties in the other proceedings that the properties were Hanna’s and the assertions in the statutory declarations that Shonoda was to make a gift of $158,000.00 to Hanna followed by her contribution of $150,000.00 to the purchase of the properties lead to the view that the presumption of a resulting trust has been rebutted in this case.

Constructive trust
Finally, counsel for Hanna and Shonoda submitted that a constructive trust arose in favour of Shonoda on the basis that it would be unconscionable for Hanna to assert his legal entitlement to the properties without recognising Shonoda’s contributions in line with the decision of the High Court in Muschinski.

For the reasons indicted above, the Court found it was Shonoda’s intention to make a gift of her contributions to the purchase price of the properties to her husband and, consequently, there was nothing unconscionable in Hanna maintaining his legal title.

Conclusion

Sutherland made out his case that Hanna’s interests in the properties vested in him as after-acquired property divisible amongst Mr Hanna’s creditors in terms of the Bankruptcy Act 1966 (Cth), s 58 and that Sutherland was entitled to be registered as the proprietor of those properties.

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