“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 Occupation rent Bankruptcy Act

The bankrupt co-owner


Case study


Bankrupt

$50,000

Spouse $50,00

0

Resulting trusts


Constructive trusts


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:


2. Joint property except trust over his undeserved equity


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


Exoneration?


Farrugia: trustee’s claim


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


Item Sum

Sale price $41,000


Sub‑total $28,500

Bankrupt’s share $14,250


BANKRUPT’S ESTATE $3,750


Shortfall scenario


Item Sum

Sale price $30,000


Sub‑total $17,500

Bankrupt’s share $8,750


BANKRUPT’S ESTATE NIL

Wife’s interest $8,750



What could possibly go wrong?


Equitable accounting Occupation rent

Div 4A Bankruptcy Act Elements for a claw back


Claw back provisions


Birdseye v Sheahan


Div 4B Bankruptcy Act


The Edelsten factor; income diverted from the bankrupt to a third party

What about the PPSA?


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


“Which little pig are you?” – Creditor Claims and the Family Home

Documents

Transcript of “Which little pig are you?” – Creditor Claims and the Family Home