Federal Court: June 2023

RESULTING TRUSTS

Presumption of resulting trust arises where a person provides the purchase money for property which is conveyed into the name of another person – the proceedings below had been fought as a contest between two opposing views on the source of the purchase monies – a party on appeal is generally bound by the conduct of its case at first instance – it was not open to the appellants to contend on appeal that the presumption of resulting trust did not arise or was rebutted

Stolyar v Scott (Trustee) [2023] FCAFC 61 (Banks-Smith, Downes and Jackman JJ)

This was an appeal (largely) from Scott (Trustee), in the matter of Stolyar (Bankrupt) v Stolyar [2022] FCA 691. In those proceedings, a trustee in bankruptcy of a bankrupt married couple (‘Trustee’) sued the mother of the husband and the mother’s company, Fanchel Pty Ltd (‘Fanchel’). The Trustee sought relief in relation to recovering the proceeds of share sales and interests in several Sydney properties that he contended were held by the mother and/or Fanchel on trust for the married couple or had otherwise been transferred by the mother and/or Fanchel in a manner that was void against the Trustee.

The primary judge found that property purchased in the mother’s name was held on resulting trust for the couple on the basis that the couple had contributed to its purchase price. In doing so, the primary judge noted that the presumption of a resulting trust arising from the payment of purchase money of property may be rebutted by evidence to the contrary. However, the mother and Fanchel had not led any such evidence, but instead, denied that various transactions occurred as the Trustee had alleged. The primary judge accepted the Trustee’s allegations, and ruled the assets were held by the mother on trust for the Trustee (at [26]).

The primary judge also found there was an arrangement (‘Share Arrangement’), whereby the Canchel Partnership (a partnership related to the couple) would sell to Fanchel, shares in various companies it owned in order to reduce the Canchel Partnership’s tax liability, and the amount Fanchel owed for these shares was to be paid to the husband. The Court found that some shares and their proceeds were held on trust by Fanchel for the husband pursuant to the Share Arrangement, and these were in fact paid by Fanchel to the mother instead of to the husband who was bankrupt at the time. Therefore, Fanchel committed a breach of trust and was liable to account to the Trustee for the amount paid to the mother. The mother was personally liable to account to the Trustee for those funds, having received trust property with knowledge of the breach of trust, by reason of the husband’s knowledge as her agent being attributed to her (at 51]).

The mother and Fanchel appealed, and the Trustee cross-appealed. There were numerous grounds of appeal. However, the appellants identified three principal submissions:

1. The presumption of a resulting trust was either rebutted or did not arise;
2. The resulting trusts found by the primary judge should have been in favour of entities other than the married couple; and
3. The Share Arrangement was merely a contractual arrangement rather than one creating a trust.

The Court’s findings

Banks-Smith, Downes and Jackman JJ

Banks-Smith, Downes and Jackman JJ produced a joint judgment. With respect to the first principal submission, their Honours noted that at the trial, there was no dispute about the principles applicable to establish a resulting trust and summarised them (at [55] – [58]). They also noted that between the date of the first instance decision and the appeal, the High Court handed down Bosanac v Commissioner of Taxation [2022] HCA 34 (‘Bosanac’), and the decision was the subject of much debate.

The appellants submitted that the primary judge had wrongly focused on the source of the purchase money of the various properties as determinative of the question whether a resulting trust arose. They pointed to passages in Bosanac describing the presumption as ‘weak’ and submitted (among other things) that it arose only where there was no evidence revealing the objective intention of the person providing the purchase funds at the time of the purchase, or where the presumption resolves a factual contest where that evidence is uninformative or truly equivocal.

The Trustee argued that there was no dispute at the trial as to the principles applicable to establishing the resulting trust and pointed out that the mother and Fanchel had not sought to lead any evidence rebutting the presumption and had made no submissions opposing the Trustee’s reliance upon the presumption. The Trustee submitted that the appellants were bound on appeal by the conduct of their case at trial; and he submitted that the appellants, having made the forensic choice not to seek to rebut the presumption by offering some alternative explanation (e.g. an intention to make a gift) for the transfers to the mother, were not entitled to raise new issues of fact where, if raised in the Court below, could have meant the trial would have been run differently.

The Court agreed with the Trustee. A party on appeal is generally bound by its conduct of the case at first instance, and is not entitled to raise new issues on appeal. In a case where, had the issue been raised in the Court below, evidence could have been given which could have prevented the point from succeeding, the point cannot be taken afterwards (citing Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 438; Coulton v Holcombe (1986) 162 CLR 1 at 7–8; Water Board v Moustakas (1988) 180 CLR 491 at 497; University of Wollongong v Metwally (No 2) [1985] HCA 28 at 71) (see [62]).

The proceeding below had been fought as a contest between two opposing views as to the source of the purchase monies (at [63]). The appellants’ case was confined to the proposition that the couple’s financial contributions, asserted by the Trustee, never occurred and therefore the presumption of a resulting trust was not in issue. Accordingly, it was not open to the appellants to contend that the presumption of a resulting trust either did not arise or had been rebutted (at [63]-[65]). Further, the Court did not read Bosanac as containing any binding ratio which would require departure from the principle that there is a presumption of a resulting trust in circumstances where a person advances purchase money for property which is held in the name of another person (at [66]).

With respect to the second principal submission regarding the identity of the beneficiaries of a resulting trust, the appellants submitted that the primary judge had not given sufficient consideration to the various legal structures involved in the relevant transactions, in particular the Canchel Partnership. They submitted that any resulting trust should have been in favour of the Canchel Partnership to the extent of its contributions to the purchase of the properties. The Trustee’s submission was that (again) the appellants were bound on appeal by the conduct of their case at trial and this argument had not been run at first instance. The Court accepted the Trustee’s submission and further noted that any such arguments were not pleaded in the defence in accordance with Federal Court Rules 2011 (Cth) r 16.08(c) (at [67]-[70]).

There was a similar outcome in relation to the third principal submission regarding the Share Arrangement. The Court examined the pleadings, affidavits, submissions, and transcript of the proceedings below and concluded that the trial was conducted on the basis that the Share Arrangement gave rise to a trust of the shares and the proceeds. It also concluded that those shares/proceeds were transferred to Fanchel under that arrangement. The point the appellants sought to make was not taken at trial, and it was not open for them to take it for the first time on appeal.

The Court considered each of the grounds of appeal and largely dealt with them in accordance with their findings on the three principal submissions. Most of the grounds of appeal did not succeed on the basis that it was not open to the appellants to run their points on appeal given that they had not raised them at trial.

MIGRATION AND ADMINISTRATIVE LAW

Where appellant was convicted of criminal offences and sentenced to terms of imprisonment – appellant’s visa was cancelled under s 501(3A) of the Migration Act 1958 – whether the Tribunal erred in assessing the appellant’s criminal offending or conduct as ‘very serious’ or ‘serious’ under the applicable Direction

LPDT v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2023] FCAFC 64 (Markovic, Thomas and Button JJ)

The appellant was a Vietnamese national who came to Australia in 1997. In 2008, the appellant was granted a spousal visa. Between 2008 and 2017, the appellant was convicted of a number of offences in Victoria. The appellant’s most recent conviction for which he was sentenced (on 17 August 2017) is the most relevant as it resulted in cancellation of the appellant’s spousal visa. The appellant was sentenced in the County Court of Victoria to 4 years and 6 months of imprisonment for two counts of trafficking a drug of dependence and dealing with property suspected to be the proceeds of crime (at [9]).

As the appellant’s most recent sentence was more than one-year of full-time imprisonment, his spousal visa was automatically cancelled under s 501(3A) of the Migration Act 1958 (Cth) (‘the Act’). The appellant sought administrative review of the decision by the Minister pursuant to s 501CA(4) of the Act and the former ‘Direction 90 – Visa refusal and cancellation under section 501 and revocation of a mandatory cancellation of a visa under section 501CA’ (‘Direction 90’). On 13 April 2021, a delegate of the Minister declined to exercise their discretion to revoke the mandatory visa cancellation.

The appellant sought an administrative review of the Ministerial Delegate’s decision in the Administrative Appeals Tribunal (‘the Tribunal’). After hearing the matter, the Tribunal declined to exercise its discretion under s 501CA(4) of the Act to revoke the mandatory visa cancellation (LPDT and Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2021] AATA 2224 at [165]) (‘LPDT AATA’). The appellant then applied for judicial review of the Tribunal’s decision in the Federal Court of Australia pursuant to s 476A(1)(b) of the Act. Snaden J held the Tribunal’s decision was not affected by jurisdictional error and dismissed the application (LPDT v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2022] FCA 810 at [94]-[95]) (‘LPDT FCA’). The appellant appealed to the Full Court of the Federal Court of Australia (‘FCAFC’).

Legal issues for the Full Court

Before examining the grounds of appeal put forward by the appellant, it is worth taking some time to consider the discretionary powers of ministerial delegates to revoke a mandatory visa cancellation and the role of ministerial directions in the exercise of that discretion. In exercising their discretion under s 501CA(4) whether to revoke an automatic visa cancellation under s 501(3A), ministerial delegates must consider and apply directions made by the Minister pursuant to s 499(1) of the Act (see also ss 496(1A), 499 (2A)). The applicable ministerial direction in this case was Direction 90 (Direction 90 has since been repealed and replaced with ‘Direction no 99 – Visa refusal and cancellation under section 501 and revocation of a mandatory cancellation of a visa under section 501CA’ (‘Direction 99’)). Both the former Direction 90 and the current Direction 99 require ministerial delegates to consider ‘protection of the Australian community’ as a primary consideration when determining whether to exercise their revocation powers under s 501CA(4) of the Act.

Ground one – the ‘serious’ issue

Ground one of the appeal addressed sub-paragraph 8.1.1(1)(b) of Direction 90 and its application when determining the nature and seriousness of the conduct committed by the non-citizen which has led to their visa cancellation. Put simply, when determining if protection of the Australian community weighs in favour of or against revocation of the mandatory visa cancellation, ministerial delegates are required to consider whether the Australian Government and the Australian community would regard the offending as ‘serious’ (Direction 90, [8.1.1(1)(b)). In determining whether the offending meets the ‘serious’ threshold, decision makers need to be mindful that crimes committed against vulnerable members of the community (such as the elderly and the disabled) would be considered serious by the Australian Government and the Australian community (Direction 90, [8.1.1(1)(b)(ii)]).

The issue raised by the appellant before the FCAFC was whether the Tribunal erred in its application of sub-paragraph 8.1.1(1)(b)(ii). The appellant submitted the Tribunal did err, making two errors. The first was the Tribunal’s determination that crimes committed against vulnerable members of the community did not require the identification of specific individual vulnerable members of the community who were actually impacted by the appellant’s offending (at [111]). The second was the Tribunal’s characterisation of the appellant’s offending as ‘very serious’ rather than ‘serious’ (at [112]).

The FCAFC rejected the appellant’s first argument, but found the Tribunal’s characterisation of the offending as ‘very serious’ was in error because of ‘the failure of the Tribunal to elucidate a course of reasoning by which those deemed views could support its “very serious” conclusion’ (at [118]-[119]). Additionally, the FCAFC held that the Tribunal’s failure to provide those reasons could not be overcome ‘by pointing to a course of reasoning that theoretically could have been engaged in by the Tribunal’ nor by imposing the burden of disproving that possibility on the appellant (at [120]). However, the FCAFC declined to find the Tribunal’s mistake amounted to jurisdictional error as it was not considered material. In other words, there was no realistic possibility that the Tribunal would revoke the mandatory visa cancellation if it were required to remake the decision according to the law (at [124]).

Ground two – the ‘very serious’ issue

Ground two of the appeal addressed sub-paragraph 8.1.1(1)(a) of Direction 90 and the Tribunal’s finding that the appellant’s offending was of a ‘very serious’ nature (LDPT AATA at [71]). Sub-paragraph 8.1.1(1)(a) also deals with the nature and seriousness of the non-citizen’s conduct. In particular, it describes conduct which would fall within the ‘very serious’ category and would weigh against revocation of the cancellation decision. Here, the FCAFC held the Tribunal’s application of sub-paragraph 8.1.1(1)(a) was in error (at [55]). Specifically, the FCAFC held the Tribunal did not provide any reasoning to link the appellant’s evidence regarding his involvement in drug trafficking and his remorse to its finding that the appellant’s offending had been of a ‘very serious’ nature (at [64]). Additionally, the FCAFC noted:

‘It is not incumbent on the appellant to establish just how the Tribunal came to state the conclusion that it stated, and that [the] unstated method of reasoning involved error. Rather, the error lies in the very lack of any articulated comprehensible connection between the conclusion and the articulated basis for it’ (at [64]).

Further, the FCAFC rejected Snaden J’s findings of the Tribunal’s reasoning being acceptable, on the basis that it was a permissible form of analogical reasoning (at [65]). The FCAFC indicated that ‘to infer that the Tribunal in fact adopted an analogical course of reasoning goes too far in filling in [the] gaps in the Tribunal’s path of reasoning’ (at [66]).

Despite finding error, however, the FCAFC held the error was not material given the appellant could not establish there was a realistic possibility of the Tribunal making a decision to revoke the mandatory visa cancellation if the matter were sent back to the Tribunal for determination (at [94]).

Grounds three and four – the ‘formally warned’ issue

Grounds three and four of the appeal were dealt with together in the initial application for judicial review before Snaden J and on appeal before the FCAFC (at [125]). Both grounds concern sub-paragraph 8.1.1(1)(g) of Direction 90 which also deals with the nature and seriousness of the non-citizen’s conduct. Specifically, this sub-paragraph is directed at whether the non-citizen’s offending occurred after they had been given a formal warning to the effect that their status as a lawful non-citizen in Australia could be compromised should they reoffend. In this case, the appellant had offended on two previous occasions and had been given a warning by implication when, during sentencing by Montgomery J of the County Court of Victoria for prior offending in 2011, reference was made to the statement of an officer which raised the possibility of the appellant being deported (at [126]). After considering the evidence, the Tribunal held the appellant had received a formal warning for the purposes of sub-paragraph 8.1.1(1)(g) (LPDT AATA at [91]). On judicial review before Snaden J, this approach was upheld (LPDT FCA at [89]).

The FCAFC held that while a warning of the kind given to the appellant may have put him on notice of the potential consequences of future offending for his status as a lawful non-citizen in Australia, it did not satisfy the requirements of sub-paragraph 8.1.1(1)(g) (at [146]-[147]). For a warning to be within the requirements of sub-paragraph 8.1.1(1)(g), it must be in writing, and it must directly address the consequences of further offending (at [143]). Consequently, the FCAFC held that the Tribunal erred in its application of sub-paragraph 8.1.1(1)(g) (at [150]).

Despite this, it was still open to the Tribunal to consider the warning provided as a ‘relevant non-mandatory consideration’ (at [160]). Ultimately, the appellant could not demonstrate that there was a realistic possibility that if the FCAFC sent the matter back to the Tribunal for reconsideration, a different decision would be made (at [160]).

Decision

In conclusion, despite the appellant successfully demonstrating error on the part of both the Tribunal and the Federal Court at first instance, he was unable to prove that any of the errors made were material. In other words, the appellant could not prove that there was a realistic possibility of the Tribunal making a different decision and revoking the mandatory visa cancellation if the matter were to be sent back to the Tribunal by the FCAFC for determination. Consequently, the appeal was dismissed.

Vincci Chan is a barrister at University Chambers. Michael Morgan is a barrister at Third Floor Wentworth Chambers.