“which little pig are you?” – creditor claims and the family home
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“Which little pig are you?” – Creditor Claims and the Family Home. Tim McGrath, Partner Melanie Husband, Senior Associate 24 July 2014. Miller Harris in Business. Looking below the surface: home ownership. Constructive trusts Resulting trusts Exoneration Equitable accounting - PowerPoint PPT PresentationTRANSCRIPT
Tim McGrath, Partner Melanie Husband, Senior Associate
24 July 2014
Miller Harris in Business
Looking below the surface: home ownership
Miller Harris in Business
Constructive trusts Resulting trusts Exoneration Equitable accounting Occupation rent Bankruptcy Act
The bankrupt co-owner
Miller Harris in Business
Case study
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Bankrupt
$50,000
Spouse $50,00
0
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Resulting trusts
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Constructive trusts
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Remedial in nature; what is required to do justice between the parties?
Muschinski v Dodds Calverley v Green
1. Joint property except his interest greater because:
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2. Joint property except trust over his undeserved equity
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Here is how the trust worked:
Her $ contribution
His $ contribution His ½ share
property
Her ½ share property
He must account to her for this
He retains this equity
She retains this equity
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Exoneration?
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Farrugia: trustee’s claim
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Item Sum
Sale price $41,000
Less “acquisition” finance ($12,500)
Sub‑total $28,500
Less “business” finance ($10,500)
Net proceeds $18,000
BANKRUPT’S ESTATE $9,000
WIFE’S SHARE $9,000
Mrs Farrugia’s figures
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Item Sum
Sale price $41,000
Less “acquisition” finance ($12,500)
Sub‑total $28,500
Bankrupt’s share $14,250
Less “business” finance ($10,500)
BANKRUPT’S ESTATE $3,750
WIFE’S SHARE $14,250
Shortfall scenario
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Item Sum
Sale price $30,000
Less “acquisition” finance ($12,500)
Sub‑total $17,500
Bankrupt’s share $8,750
Less “business” finance ($8,750)
BANKRUPT’S ESTATE NIL
Wife’s interest $8,750
Less “business” finance ($1,750)
WIFE’S SHARE $7,000
What could possibly go wrong?
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Equitable accounting Occupation rent
Div 4A Bankruptcy Act Elements for a claw back
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Claw back provisions
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Birdseye v Sheahan
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Div 4B Bankruptcy Act
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The Edelsten factor; income diverted from the bankrupt to a third party
What about the PPSA?
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No application to land No application to equitable interests No application to Bankruptcy Act recovery
What does it all mean?
Tim McGrath Partner
Melanie Husband Senior Associate
Miller Harris in Business