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FEDERAL COURT OF AUSTRALIA - FULL COURT

Cummins and Another v Trustees of the Property of J   D Cummins, A Bankrupt

[2004] FCAFC 191

Carr, Tamberlin and Lander JJ

30 July 2004 - Sydney

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Carr and Lander JJ.    This case concerns a barrister who, 17 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 4 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) 194 ALR 94 ; Prentice v Cummins (No 2) [2002] FCA 1165 .

  5  The second appellant, Aymcopic Pty Ltd (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 4 children of the bankrupt.

  6  The respondent trustees applied for various declarations and orders, pursuant to ss 120 and 121 of the Bankruptcy Act 1966 (Cth) 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 £ 13,000.

  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 £ 670.

  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 £ 10,000. They borrowed £ 7000 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, $3000 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 2 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 $3000 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 the Legal Profession Practice Act 1958 (Vic) 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 $4611;

 •  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 $3400;

 •  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 (Wraith v Giannarelli [1988] VR 713 ; Giannarelli v Wraith (1988) 165 CLR 543 ; 35   A   Crim R 1 ; 62 ALJR 611 ; 81 ALR 417 ), 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 4 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 $9402" 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, that is, some 10 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 1920 (NSW) 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. The sale contract and subsequent transfer was for a consideration of $205,250 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 1969 (NSW). 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 representing their full value. Again the provisions of the Limitation Act 1969 (NSW) would apply. It should be noted that both debts, that is, 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 6000 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 unitholders and also a valuation figure obtained as the consideration in the transfer. In my letter to you of 7 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 2000 shares in Counsel ' s Chambers Ltd to Brett Shields for the sum of $177,154. Clearly enough, that transaction was at 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 nett worth individual who operates a company called Hospitality Hire Pty Ltd 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 Ltd loan of $950,000 which is currently fixed at the rate of 7.45 % per annum 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 nett 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 Ltd.

  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 1966 (Cth)

  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.

 

(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 Bankruptcy Act 1966 (Cth). 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 Bankruptcy Act 1966 (Cth) 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 above - mentioned claims.

  58  The primary judge ruled that the appellants were not entitled to make a no case submission on those 3 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 Bankruptcy Act 1966 (Cth).

  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 1966 (Cth) 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 1966 (Cth), 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 2 submissions.

 

[12] First, the respondents contended that the trustees were not entitled to a 50 % share in the Hunters Hill property, as they had claimed, but only a 24.19 % 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 $7500. It followed, so they argued, that the bankrupt held only a 24.19 % 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 % ) and 7.5/15.5 (48.38 % ) 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 2000 of the 6000 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 2 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 % . She argued that the property had been purchased for $31,000. She contributed $3000, 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 $7500.

  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; 59 ALJR 111 at 117; 56 ALR 483 at 494:

   

When 2 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 % 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 % .

  69  The primary judge accepted that Mrs Cummins had paid $12,900 towards the purchase price. As we have mentioned, his Honour found against her in relation to the payment of $3000. He assumed that the deposit paid was $3100. 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 % .

  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 2 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 2 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) of the Bankruptcy Act 1966 (Cth) 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 1966 (Cth). 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 A - CJ, Jacobs and Murphy JJ in Warren v Coombes (1979) 142   CLR 531 at 551; 53 ALJR 293 at 300-301; 23 ALR 405 at 423:

   

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 [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. His Honour concluded (at   [107]):

   

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 at [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 over - riding 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 30 years. By that time he had been in practice as a barrister for at least 22 years and probably 26 years.

 

…

 

[126] … By 1987, the bankrupt had been in practice as a barrister for at least 22 years and probably more. He had been appointed a senior counsel in 1981, 6 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 4 years (the 1992 - 1995 taxation years) averaged $337,420 and his annual nett 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 4 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 at   [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 at [549] and again, at [553]), discussed by a full court of this court in P T Garuda Indonesia Ltd v Grellman (1992) 35   FCR 515 at 528; 107 ALR 199 at   211. 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 (at [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 inquiries 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 ' 2 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 6 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, that is, 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) 204 ALR 258 at 262 [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 nett 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 nett 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 at [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 4 and 11 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 3 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 2 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 at [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 affairs showed 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 at [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 ' 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 2 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 para 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 12 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 and 716. It is true, as his Honour noted, that the bankrupt instructed Mr Harris, in relation to the 2 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 4 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 nett 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 June 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 ; 32 ALJR 395 other than to say that we think it was misplaced, for at least 2 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 Co of Australia Ltd (1997) 75   FCR 216 at 226 - 227; 144 ALR 497 at 507. 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 at   [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, that is, $3100.

 3.  On 30   April 1970   Mrs Cummins withdrew an amount of $3000 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 $3100 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 $3100. He gave the following reasons:

   

The difficulty facing the respondents ' submission, however, is that the debit of $3000 to Mrs Cummins ' loan account is recorded as having been made on 30   April 1970, 16 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 $3100 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 $3000 reflected moneys paid towards acquisition of the Hunters Hill property.

  130  The evidence shows that 2 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 2   years). The only other drawing before that date was in the sum of $3000. 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 fully 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 $3100.

  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 proportional to their contributions.

  138  He then reviewed some authorities including Pettitt v Pettitt [1970] AC 777 and Calverley v Green (1984) 155   CLR 242 ; 59 ALJR 111 ; 56 ALR 483 (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 4 factors justified the conclusion that the parties ' common intention in 1970 was to acquire the Hunters Hill property as joint beneficial owners.

  142  The 4 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 6 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 2 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.

 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 2 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 4 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 [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 proportional 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 CLR 247; ALJR 112; ALR 484-486). 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 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 QB 63 and many other cases.

  147  We respectfully agree with the primary judge that the first of his 4 factors (a combination of marriage in 1964, 6 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 2 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 2 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 [72] of his reasons) referred to the disbursement of the proceeds of sale of the second property which took place some 18 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 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 $3000 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, that is, to establish 2 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.