Pre-Bankruptcy Contributions to Property and the Remedies Available to a Trustee

Shaw as Trustee of the Bankrupt Estate of Nguyen v Vu & Anor [2019] FCCA 1451

In the recent case of Shaw as Trustee of the Bankrupt Estate of Nguyen v Vu & Anor [2019] FCCA 1451, an application was brought by Mr Shaw as Trustee of the Bankrupt Estate of Mr Nguyen seeking orders in relation to a property situated at St John’s Park in New South Wales (“Property”).

The Trustee claimed Mr Nguyen held a 61.75% interest in the Property even though the certificate of title recorded Mr Nguyen as being the registered proprietor as tenant in common “in 1/100 share” with his mother, the first respondent (“Ms Vu”), who was recorded as being the registered proprietor as tenant in common “in 99/100 share”.

The Court held that based on Mr Nguyen’s payment of the deposit and the payment of the shortfall funds at settlement, Mr Nguyen and Ms Vu held their legal interests in the Property under a resulting trust, the sole beneficiary of which was Mr Nguyen:

• The Court clarified that other payments relied upon by the Trustee as being in connection with the purchase of the Property (such as stamp duty, legal fees and mortgage repayments) were not ‘payment of the purchase price’ and were irrelevant.

However, even though Mr Nguyen was the sole beneficiary, Ms Vu had made certain admissions based on the Trustee’s claim and did not otherwise participate in the proceedings. As such, the Court was unable to grant the Trustee an order for anything more than the 61.75% interest that the Trustee claimed.

Accordingly,the Court made orders for possession and the appointment of Trustees for the sale of the Property and consequential orders for the application of such proceeds, namely: the Trustees for the sale of the Property were entitled to deduct from the sale proceeds the payment of: commission; insurance; rates; taxes; legal expenses on the conveyance; the mortgagees’ debts; the reasonable remuneration and expenses of the Trustees for sale including valuation costs and expenses; and the Trustee’s costs of the application to the Court. The net balance was to be split 61.75: 38.25.

Take away

When formulating a claim in respect to an interest in a property based on resulting trust principles, it is important to focus on relevant payments towards the ‘purchase price’.

As an aside, it is important to remember that Trustees are not restricted to equitable claims in such circumstances. Alternative statutory claims may be available to Trustees under Division 4A of the Bankruptcy Act.