After several sweaty rounds in the Federal Court, Justice Ronnie Sackville has ordered Mary Cummins, the estranged wife of bankrupt former silk John (Gus) Cummins to cough up half the value of their former matrimonial home in Hunters Hill (sold last year for $2.2 million).
This is an exciting development for John Cummins’ trustee in bankruptcy, Max Prentice, who has fought for twelve months to establish that “JC-QC-AJC” did indeed have a joint beneficial interest in the family home when he “sold” his half to Mary in 1987.
At the time he made the transfer to Mary, Gus was somewhat behind in his payments to the Australian Taxation Office, having neglected to lodge a return since 1955. (He currently owes close to $2 million in tax and that’s just for the returns in he did file in 2000 for the period 1992 to 1999).
At the initial hearing in September 2002, Mary Cummins took a “no case” position in relation to the Hunters Hill property and to shares in Gus’ former chambers (sold for around $570,000).
This proved an expensive gamble. In his judgment of December 5, 2002, Sackville found that when John Cummins transferred almost all his assets 16 years ago, he was “well aware that he had incurred very substantial liabilities to the [Australian Taxation] Commissioner”.
This opened the way for a full-frontal attack on the assets of the family trust, including Mrs Cummins’ successful catering and party business, Hospitality Hire Pty Ltd.
The transfer of the choice Hunters Hill property in 1987 was top of Max’s hit list.
Paul Brereton, for Mary, argued that the trustee wasn’t entitled to 50 percent of the value of the property because she had contributed so much more of the initial purchase price – $31,000 in 1970.
After examining what he described as “incomplete documentary evidence” Sackville concluded that Mrs C probably did provide the bulk ($13,053.27) of the purchase price as well as the $3,100 deposit. A $15,000 mortgage in joint names made up the difference.
This inference however was not sufficient to defeat the idea that Mary and John were joint beneficial owners, the judge said.
”...where both spouses contribute to the acquisition of a property and place it in joint names, they may become equal beneficial owners in equity notwithstanding that their contributions are unequal.”
Sackers also took into account the fact that the Cumminses had acquired two other properties as joint proprietors prior to 1970 and that they had continued to live in the matrimonial home until 2002.
He concluded, and this appears to be the clincher:
“The fact that Mrs Cummins was prepared to agree to pay half the assessed value of the Hunters Hill property for the bankrupt’s interest, suggests that she regarded him as having joint beneficial interest in the property… In effect Mrs Cummins’ actions in1987 amount to a declaration against her interest.”
But all was not lost.
Mrs C successfully defended Hospitality Hire from the trustee’s clutches.
Sackville accepted her evidence that it was her business alone and that Gus was only named as a beneficiary because she was told she needed two directors and two shareholders to establish the company. She even paid for her husband’s share – $1.
Apart from wolfing down left over plates of the company’s delicious finger food, Gus had no interest in Hospitality Hire.
The judge found Mary to be a truthful witness who never intended her husband to benefit from Hospitality Hire’s business.
He also accepted her evidence that she had repaid a $138,546.80 personal loan from her husband in 1992 and 1993.
As to the former Phillip Street chambers, Gus had transferred his 6,000 shares in Counsels’ Chambers Ltd to the family trust in 1987. The trust received about $570,000 from the subsequent sale of those shares after Gus’ balloon burst. About $57,144 of that amount had been paid to an unnamed beneficiary of the Cummins’ family trust before any claim had been made by the trustee in bankruptcy.
The trustee can have the proceeds of the sale of the shares, but Sackers invited further submissions as to who should get their paws on the miserable $57,144.
All in all, out of this round the trustee in bankruptcy can expect to haul in about $1.6 million – minus expenses, of course.