Citation: Turnbull v Gorgievski [2000] NSWSC 365
Court: Supreme Court of New South Wales (Equity Division)
Date: 8 May 2000
Judge(s): Hamilton J
Background
The plaintiff was a judgment creditor of the first defendant (the son), having obtained a District Court judgment of $181,451 after the son assaulted him at work in 1988, causing the loss of an eye. The son had been registered as a joint tenant of a residential property in Bankstown along with his parents since 1988.
In November 1995, while the plaintiff's civil proceedings against the son were on foot, two instruments were registered: a notice of death removing the deceased father from title, and a transfer of the son's interest to his mother (the second defendant) for nominal consideration of $1. The plaintiff sought to have that transfer set aside under s 37A of the Conveyancing Act 1919, which allows courts to void dispositions of property made with intent to defraud creditors.
The central factual dispute was whether the son held any genuine beneficial interest in the property, or whether he had been placed on title purely as a convenience to satisfy the bank's requirement for two income earners when the mortgage was arranged.
Legal Issues
- Whether the son held a beneficial interest in the Bankstown property, having contributed nothing to the purchase price and having been placed on title solely to facilitate borrowing
- Whether relevant presumptions of resulting trust or advancement applied to the property arrangements between the parents and the son
- Whether the transfer of the son's legal interest to the mother was made with intent to defraud creditors, as required to set aside a disposition under s 37A of the Conveyancing Act 1919
Decision
Hamilton J examined the circumstances of the original property purchase. The parents had provided the entire purchase price: $140,000 from their own funds and $35,000 borrowed from the Commonwealth Bank. The son contributed nothing financially, but was joined as a borrower and placed on title at his father's request, so that the bank had two wage earners as security. The parents repaid the entire loan from their own resources. The son had agreed that his name would be removed from the title once the mortgage was discharged.
The court considered the competing presumptions in this area. Where a parent provides purchase money and title is taken in a child's name, there is ordinarily a presumption of advancement (meaning an outright gift is presumed). However, that presumption can be rebutted by evidence of contrary intention. Here, the arrangement ran in the opposite direction: the parents placed the son on title, not the other way around. The evidence showed that the son was not intended to take any beneficial interest, even to the extent of his contribution through the mortgage borrowing, because the parties had agreed from the outset that the parents would repay the entire loan.
Hamilton J accepted the evidence of the mother and the son that it was the mother who requested the transfer of legal title, and that this was done to align the legal title with the equitable position. Because the son held no beneficial interest, his transfer of the bare legal title to his mother could not support an inference of intent to defraud creditors. The nominal $1 consideration was consistent with the true position rather than evidence of concealment, and the court was not persuaded by the argument that honest parties would simply have left the title unchanged.
The plaintiff therefore failed to establish the requisite fraudulent intent under s 37A, and his claim was dismissed.
Orders Made
• The plaintiff's claim is dismissed.
Key Takeaways
- Under s 37A of the Conveyancing Act 1919, the plaintiff bears the onus of proving that a disposition of property was made with intent to defraud creditors; suspicious timing alone is insufficient where the defendant can establish an absence of beneficial interest.
- A strong inference of fraudulent intent may arise from the sequence of events surrounding a transfer, but that inference may be displaced once it is established that the transferor held no beneficial interest in the property being transferred.
- Where a person is placed on title solely as a convenience for borrowing purposes, with the understanding that the true owners will repay the loan and the nominee will transfer the title back on request, equity may treat that person as holding only bare legal title with no beneficial interest.
- Presumptions of resulting trust and advancement are rebuttable by evidence of the parties' actual intentions at the time of the original acquisition.
- Nominal consideration in a transfer does not necessarily support an inference of fraudulent intent where the transfer simply corrects the legal title to match an established equitable position.
Legislation and Cases Referenced
Legislation
- Conveyancing Act 1919 (NSW), s 37A
Cases
- Brown v Brown (1993) 31 NSWLR 582
- Calverley v Green (1984) 155 CLR 242
- Cannane v J Cannane Pty Limited (In Liquidation) (1998) 192 CLR 557
- Muschinski v Dodds (1985) 160 CLR 583
- Napier v Public Trustee (WA) (1980) 55 ALJR 1
- Nelson v Nelson (1994) 33 NSWLR 740
Secondary Sources
- Jacobs on Trusts (6th ed, 1997) [1210]–[1215]