JUDGMENT No. 626) CATCHWORDS Bankruptcy - moneys passing through accounts of bankrupt land and business broker unable to be traced ~ accounts in confusion - whether registered mortgagees entitled to moneys paid to discharge mortgage when loan moneys cannot be traced to them but advanced by bankrupt - moneys repaid subject to resulting or constructive trust in favour of bankrupt and in turn held by him and thus by official trustee on trust for investment creditors of bankrupt. Bankruptcy Act 1966 Matter No. SA G44/87 STEPHENSON NOMINEES PTY LTD and THE OFFICIAL RECEIVER ON BEHALF OF THE OFFICIAL TRUSTEE IN BANKRUPTCY and ex parte ANTHONY FEELEY ROBERTS and MAREE MELVILLE ROBERTS FORSTER, SPENDER & GUMMOW JJ. ADELAIDE 6 NOVEMBER 1987 IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION JUDGES MAKING ORDER WHERE MADE DATE OF ORDER THE COURT ORDERS THAT: ee ee ee No. G44 of 1987 On Appeal from the Federal Court of Australia Re: STEPHENSON NOMINEES PTY LTD Appellant and : THE OFFICIAL RECEIVER ON BEHALF OF THE OFFICIAL TRUSTEE IN BANKRUPTCY Respondent and ex parte : ANTHONY FEELEY ROBERTS and MAREE MELVILLE ROBERTS Mortgagor FORSTER, SPENDER and GUMMOW JJ. oo ADELAIDE 6 NOVEMBER 1987 i. The appeal be dismissed with costs. Note: Settlement and entry of order is dealt with by Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA ) ) SOUTH AUSTRALIA DISTRICT REGISTRY ) No. G44 of 1987 ) GENERAL DIVISION ) ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA BETWEEN: STEPHENSON NOMINEES PTY LTD Appellant - and - THE OFFICIAL RECEIVER ON BEHALF OF THE OFFICIAL TRUSTEE IN BANKRUPTCY Respondent - and - ANTHONY FEELEY ROBERTS and MAREE MELVILLE ROBERTS Mortgagor CORAM: FORSTER, SPENDER AND GUMMOW JJ : DATE: 6 NOVEMBER, 1987 REASONS FOR JUDGMENT FORSTER J. : This is an appeal from a judgment of a single judge of this Court (Fisher J.) on an application by the Official Receiver for and on behalf of the Official Trustee in Bankruptcy ("the official receiver") as trustee of the bankrupt estate of Ross Daniel Hodby. In order that the official receiver's application and his Honour''s decision may be understood, it is necessary to 2. recite some background facts and matters. The bankrupt ("Hodby") presented his own petition in bankruptcy on 17 October 1986. He had, for some years prior to this date, carried on business as a land broker and a finance broker under the name Ross D. Hodby and Associates. He was also director of a company, Hodby Nominees Pty Ltd which, until 3 June 1986 was the registered proprietor of the business name Archer Finance Brokers. The registered proprietor of this business name from 4 June 1986 to 1 July 1986 was another company, Domitex Pty Ltd of which Hodby was also a_ director. In the course of these businesses Hodby received funds placed with him for investment. In some cases the loan of such moneys was secured by registered mortgage, in other cases there was no security. In many cases a mortgage was given by a borrower toa named mortgagee when that mortgagee's money could not possibly have been advanced to the mortgagor. In other cases money was collected from borrowers by Hodby and paid out to lenders who were not entitled to it. It is said that one way or another some five million dollars passed through Hodby's various accounts during the last eight years. The affairs of Hodby and his companies are in a confused mess. There has been a great deal of mixing of funds in the accounts and it is difficult, if not impossible, in most cases to establish who may be entitled to receive moneys due by borrowers. In his petition, presented on 17 October 1986, Hodby revealed a deficiency in his estate of $2,069,157. Some persons and companies who had given registered mortgages were desirous of 3. repaying the loans and having a discharge of mortgage registered on their certificates of title. In all these circumstances the official receiver applied to this Court for directions. In order principally to hold the position until a thorough investigation of the tangled affairs of Hodby and his companies might be undertaken, Fisher J. made an order on 22 December 1986 para. 1 of which was as follows : "The respondents, all persons named in the statement of affairs of the bankrupt which is annexed hereto and marked 'A', either as _ secured or unsecured creditors, all other creditors or persons claiming to be creditors of the bankrupt and all those persons whose names are set out in the schedule hereto and marked 'B' and all persons other than those set out in the said schedule 'B' who have at any time borrowed monies on loans or otherwise made through the agency of the bankrupt or any company with which the bankrupt may have been associated or otherwise from funds placed with him and those loans or some part thereof remain due and owing including all such loans in which the principal sum remains outstanding be and are hereby restrained until further order from paying or receiving any monies whether by way of interest or principal with respect to any such loans otherwise than pursuant to this order or any further order made herein." On 8 October 1986 Anthony Feeley Roberts and his wife Maree Melville Roberts executed a mortgage in favour of Stephenson Nominees Pty Ltd ("the company") in expressed consideration of $75,000, said to have been lent by the company to Mr and Mre Roberts. This mortgage was registered on the certificate of title of some land of Mr and Mrs_ Roberts. Pursuant to an order of the court made on 4 March 1987, following the order of 22 December 1986, the Registrar-—General was directed 4. to endorse a memorandum of a discharge of the mortgage on the relevant certificate of title and the money necessary to discharge it ("the mortgage sum"), was paid to the district Registrar of this Court and held by him ina special trust account. The order expressly preserved the right of the company to seek from the Court an order that the money in Court be paid out to it. In the proceedings before the trial judge the official receiver claimed the mortgage sum on behalf of creditors of the bankrupt estate generally or, in the alternative, on behalf of what may be called the investment creditors, i.e. those who had deposited funds with Hodby for investment. The company claimed to be entitled to the mortgage moneys as registered mortgagee. The facts of this particular transaction were really not in dispute and proved before the learned trial judge by the affidavit of Athol Raymond Stephenson, a director of the company. In mid-1986 the company agreed to lend to Hodby and men named Ward and Donato the sum of $60,000 to be secured by a_ registered mortgage of land at Pooraka. This sum was notionally held by Hodby on behalf of the company as the balance of funds placed with him for investment by the company and Stephenson from time to time. Stephenson inspected this land which had a home unit erected on it and agreed to the proposed loan. Stephenson thought the loan was for a period of twelve months unless sooner repaid. The purchase of the Pooraka land by Hodby and the other two did not go ahead but Hodby paid two monthly instalments of interest to the company. The mortgage, although executed, was 5. never registered, as indeed it could not be because Hodby and the other two never became registered proprietors of the land. On about 26 August 1986 Hodby telephoned Stephenson and told him that the mortgagees under the Pooraka mortgage wished to repay this mortgage and asked whether the company would be prepared to advance $80,000 to Mr and Mrs Roberts on the security of a mortgage of a property at North Adelaide. Stephenson inspected this property and said that the company was prepared to advance $75,000 on the security of it. Hodby had the company execute a discharge of the Pooraka mortgage. On 28 August Stephenson handed to Hodby a cheque for $15,000 which, together with the sum of $60,000 supposedly available from the repayment of the Pooraka loan which was never advanced, added up to the sum of $75,000 to be advanced to the Roberts by the company. Although the Roberts executed a mortgage to secure a loan of $75,000, which mortgage was registered, they only received $60,000 from Hodby. The remaining $15,000 was never paid to them. The $60,000 paid to the Roberts was possibly the money of one Prior. Certainly it was not the money of the company or Stephenson. It was conceded by counsel for the appellant at the trial that the company could not trace its funds whether $60,000 or $15,000 into the mortgage sum. His Honour found that although the company was the registered proprietor of an estate as mortgagee, the funds which were advanced viz. $60,000 were advanced by the bankrupt, not by the company and thus that the company had no beneficial interest in the sum secured by the mortgage because it had given no 6. consideration therefor. The consequence of this was that the legal estate in the registered mortgage was held in trust for Hodby who provided the moneys. His Honour also found that Hodby almost certainly had himself no beneficial interest in the moneys which he held on behalf of the investors who had provided them, if they could be identified, and if not, for the pool of investors. His Honour went on to find that the mortgage moneys were not trust moneys in which, pursuant to para. 116(2)(a) of the Bankruptcy Act, the official receiver had no interest. His Honour agreed with White J. in re Goode (1974) 4 A.L.R. 579 that the provisions of this paragraph do not apply when a pool of mixed funds becomes subject to tracing principles, even though at an earlier stage they have been held upon constructive trust. His Honour found that the company had no _ beneficial interest in the funds secured by the mortgage and that the official receiver was entitled to them for the bankrupt estate. Who may ultimately be entitled to them as part of a share in the pool of money held in court on behalf of investors or in some other way remains to be seen. His Honour has decided that as a volunteer giving no consideration for the mortgage the company has no beneficial interest in the moneys. The company appeals against his Honour's decision and claims to be beneficially entitled to the whole of the moneys. I should say that although the Roberts only received the sum of $60,000 in order to obtain a discharge of the mortgage they were obliged to pay $81,187-50 being the sum of $75,000 purported to be secured by the mortgage together with accrued interest which 7. sum was paid into court. A number of points were taken at the trial and the notice of appeal raised a number of grounds. In the end senior counsel for the company based his argument on two points only. First he said that his Honour was wrong to find that the company gave no consideration and was consequently a volunteer with no beneficial interest in the mortgage moneys and secondly he said that in the circumstances an estoppel arose against Hodby which prevented him from asserting any beneficial interest in the mortgage and that the official receiver who was, so to speak, in Hodby's shoes could be in no better position in this respect than Hodby was. The estoppel was said to arise because Hodby was the common agent of the company and other persons who contributed funds for investment. Hodby assured the company that he would pay moneys on its behalf to the Roberts, the mortgagors and the company paid money to Hodby who received it on this assumption. Hodby, and thus the official receiver, are now said to be estopped from claiming any beneficial interest in the mortgage moneys. This estoppel point was not taken before the learned trial judge. As to the consideration point it is argued that' the company gave value by accepting a registerable and later registered mortgage from the Roberts and giving up a right of action against Hodby for the moneys it paid to him. It is said that this consideration was of a real and substantial value and not merely nominal, trivial or colourable. fhe answers to this contention seem to me to be twofold. In the first place the mortgage expresses the consideration for 8. the promise to repay and the giving of security to be the payment by way of loan by the company to the Roberts of the sum of $75,000. It is accepted that it cannot be proved that the $60,000 actually paid by Hodby to the Roberts came from the company, rather the reverse. The balance of $15,000 paid by the company to Hodby never found its way to the Roberts at all. The company and the Roberts have said and acknowedged in a deed what the consideration passing from the company to the Roberts was. That statement and acknowledgement have proved to be false as is agreed on all sides or at least if not false then incapable of being established. In the second place even if it is possible to assert some consideration for the covenants in the mortgage other' than the consideration expressed therein, it can hardly be said that the forbearance of the company to take proceedings against Hodby and its acceptance of the mortgage instead of exercising its right to do so, provides consideration for a loan to the Roberts made by Hodby and not by the company at all. In my view his Honour was quite correct to treat the company in the circumstances in this case as a volunteer having given no consideration. I should add that if I be wrong about this and I. should regard the company as having given value by accepting the mortgage from Roberts and giving up the right of action against Hodby for the moneys it had paid him, I should doubt that' the consideration given was real and substantial. It seems to me that the company can assert no legal claim to the moneys which 9. the Roberts had to pay to discharge the mortgage and cannot establish an equitable claim superior to that of the other investment creditors wherever the legal title may be. So far as the estoppel point is concerned I mention again that this was not raised before the learned trial judge and was raised in the notice of appeal for the first time as para. 3(h) of the grounds as follows "(h) The learned trial judge ought to have held that the bankrupt and anybody claiming through him were estopped from alleging any beneficial interest in the appellant's registered mortgage." Upon the basis that SHodby assured the company that' the $15,000 paid to him by the company would be paid by him to the Roberts and received the $15,000 on this assumption, it is argued that Hodby is estopped from denying that the $15,000 was paid to the Roberts. Despite the fact that it was shown that $60,000 of the consideration expressed in the mortgage came from a general fund maintained by Hodby and held for investment to which at some time in the past the company had contributed this sum, it was argued that the estoppel argument applied to the $60,000 as well as the $15,000. The case of Thompson v. Palmer (1936) 49 C.L.R. 507 and in particular the judgment of Dixon J., as he then was, is cited in support of this estoppel argument. Were it not for the matter which I am about to mention, I would agree that this judgment supports the proposition that an estoppel arises with respect to the sum of $15,000, but not I think, with respect to $60,000. However this may be the effect of the estoppel, if it 10. exists, would be that Hodby and thus the official receiver, would be estopped from denying that the money of the company went' to the Roberts. We are informed by counsel for the official receiver and this is not contradicted by counsel for the company, that at the outset of the hearing in the Court below, counsel for the company conceded that the moneys of the company could not be traced into the hands of the Roberts and no mention was then made of any countervailing estoppel. The case was run in the Court below on the footing that it was not possible to trace and as it seems to me the company cannot now be heard to say in effect that the concession was wrongly made and that the estoppel now precludes the official receiver from maintaining that none of the company's money went to the Roberts. It also seems to me with the greatest respect to those who may think otherwise that the appellant has chosen its battleground and is restricted to that. As I have said senior counsel on its behalf argued two points only and in my view those two points fail. The appeal should be dismissed with costs. I certify that this and the % preceding pages are a true copy of the Reasons for Judgment of Mr Justice Forster. Associate Wi had Pyare Dated: 6 November, 1987 IN THE FEDERAL COURT OF AUSTRALIA ) ) SOUTH AUSTRALIA DISTRICT REGISTRY ) No. G44 of 1987 ) GENERAL DIVISION ) On Appeal from a Single Judge of the Federal Court of Australia. BETWEEN : STEPHENSON NOMINEES PTY. LTD. Appellant THE OFFICIAL RECEIVER ON BEHALF OF THE OFFICIAL TRUSTEE IN BANKRUPTCY Respondent AND: EX PARTE; ANTHONY FEELEY ROBERTS AND MAREER MELVILLE ROBERTS Mortgagor CORAM: FORSTER, SPENDER & GUMMOW JJ. PLACE: ADELAIDE DATE: 6 November, 1987. REASONS FOR JUDGMENT SPENDER J. : The facts of this appeal are fully set out in the reasons for judgment of Gummow J., which I have had the benefit of reading in draft form. Notwithstanding the wide-ranging erudition of those reasons, I have to say that I am of a N different opinion as to the disposal of this appeal. I agree with the reasons for judgment of Forster J. In my view, much turns on the way in which this litigation has been conducted. The first of the two arguments for the appellant on the appeal was that, if the contributors to the fund from which the monies advanced to the Roberts came have only a mere equity, their rights are defeated by a party who obtains a_ subsequent equitable interest for value; Stephenson Nominees gave value by accepting the mortgage by the Roberts and giving up a right of action against Hodby for the monies it had paid to Hodby, relying on Taylor v. London & County Bank Co. £1901] 2 Ch.231, and that such consideration was real and substantial and not merely nominal, trivial or colourable. The second submission by the appellant on the appeal was that Hodby was a common agent for the appellant and other contributors to the fund. Hodby and those claiming through him are estopped from asserting any beneficial interest in the appellant's registered mortgage interest, by reason that Hodby assured the appellant that he would pay monies on behalf of the appellant to the mortgagor, and the appellant paid monies to Hodby who received them on that assumption. In the circumstances Hodby is required to abide by that assumption. As to the second submission, I need say nothing more than that I share the view of Forster J. and Gummow J.. The assumption relied on as establishing the estoppel is that Hodby would pay Stephenson Nominees' money to the Roberts. This is inconsistent with the basis on which the trial before the learned primary judge was conducted, namely that none of the monies of the appellant could be traced into the $60,000.00 received by the Roberts. The estoppel point was not argued helow and it ought not be permitted to be raised for the first time on the appeal. As to the consideration point, the learned primary judge had said:- "Mr. Angel also contended that the company's registered title prevails over all others. He said that vis-a-vis the Roberts and the bankrupt the company was a purchaser for value without notice and that it was not correct to say that the company was a trustee of its registered estate for the Official Receiver. In this regard, counsel doubtless had in mind s.71 of the Real Property Act 1886 S.A. which section expressly preserves certain rights. It is, to the extent relevant, in the following terms: '71. Nothing in the two preceding gections contained shall be construed so as to affect any of the following rights or powers, that is to say - (iv)... (v) the rights of a cestuil que trust where the registered proprietor is a trustee, whether the trust shall be express, implied, or constructive: (vi)... Provided that no unregistered estate, interest, power, right, contract, or trust shall prevail against the title of a registered proprietor taking bona fide for valuable consideration, or of any person bona fide claiming through or under him.' " In my view, the proviso to s.71 postponing unregistered rights to the title of the registered proprietor who takes bona fide for valuable consideration, addresses the consideration flowing between Stephenson Nominees and the Roberts. There was none. The mortgage itself expresses the consideration for the covenants therein. The concession made below establishes that there was, in fact, no consideration of the kind expressed in the mortgage. The giving up of any rights that Stephenson Nominees may have had against Hodby in consideration of his procuring a mortgage from Roberts to Stephenson Nominees, does not constitute Stephenson Nominees a "registered proprietor taking bona fide for valuable consideration", within the meaning of the proviso to 3.71. The above deals with the extent of the argument on the question of consideration. It was not argued by the appellant that, even in the absence of consideration, nonetheless there was no constructive or resulting trust. That is to say, whether Stephenson Nominees Pty.Ltd. held the registered mortgage as a constructive or resulting trustee for the bankrupt was not' the subject of argument by the appellant on the appeal, although it is right to recognise that the first three grounds in the Notice of Appeal challenge the correctness of the learned trial judge's finding that the appellant held its registered mortgage as a constructive or resulting trustee for the bankrupt. His Honour had found:- "Because the bankrupt provided the funds lent, it ils my opinion that the company holds the registered mortgage as a constructive or resulting trustee for him of the registered mortgage." In my opinion it would be wrong to consider the appeal as pleaded, and not as argued. The right of a party to an appeal to be heard on that appeal is fundamental. That right is denied 1f matters not relied on by an appellant in its submissions can properly provide a basis for the determination of an appeal. The question of whether in the circumstances of these transactions, the appellant was a resulting or constructive trustee, in my opinion, is outside the ambit of this appeal. The finding by his Honour that there was a constructive or resulting trust by the company for the bankrupt was expressed to be because the bankrupt had provided the funds. The learned primary judge had found:- "The fact is that the company did not pay to or provide the Roberts with the mortgage funds. These funds were provided by the bankrupt." The finding of fact that the company did not pay to or provide the Roberts with the mortgage funds means that they were provided by somebody else. The mortgage is expressed to be in consideration of $75,000.00 said to have been lent by Stephenson Nominees to the Roberts. This document was prepared by Hodby. His conduct in this affair was a charade, concealing the true source of the funds supplied to the Roberts. It was engaged in by Hodby to deceive Stephenson Nominees or Mr. Stephenson and conceal the misappropriation of the funds which Hodby had purported to advance in respect of the Pooraka property. Hodby was the agent of the company for the purpose of investing its funds. He had no basis for believing that the funds advanced to the Roberts came from Stephenson Nominees. It is clear that if the actual source of the funds supplied to the Roberts could be identified, that source would be legally entitled to the monies in court. However, there was a wholesale misappropriation of funds by Hodby. It may be accepted that, if the funds supplied to the Roberts by Hodby had been misappropriated from an identified source, the claim by Stephenson Nominees to the monies paid by the Roberts into court would be defeated. I do not accept that if the monies advanced by Hodby had been misappropriated from a number of persons, the precise identity and amounts of which cannot be ascertained, the result would be a@ifferent. The legal result cannot in my view depend on whether Hodby stole from one or many. The banking records in evidence before the learned primary judge permit no other conclusion but that the company did not pay to or provide the Roberts with the mortgage funds. On 29 August, a cheque drawn on the Co-operative Building Society in the sum of $15,000.00 and made payable to A.R. Stephenson was credited to the account entitled Ross D. Hodby & Associates No.2 Account (Account No.02-730-6421). That cheque was part of a deposit totalling $51,999.50 made on that day and the balance of that deposit were not funds of A.R. Stephenson or Stephenson Nominees Pty.Ltd... Prior to the deposit of that $51,999.50, the account was overdrawn to the extent of $4,181.56. This establishes that the $15,000.00 paid by Mr. Stephenson on behalf of Stephenson Nominees to Mr. Hodby found its way into the Ross D. Hodby & Associates No.2 Account. A different account, the Ross D. Hodby & Associates No.2 Trust Account, (Account No.02-730-6528) on 1 October had a credit balance of $717.96. On 3 October, a deposit of three amounts totalling $122,126% was made into that account. These cheques represented the proceeds of a sale of a house by Mrs. Prior and an amount in payment of a mortgage by W.I.P. International. Stephenson Nominees had no interest in any of these funds. On 7 October, a cheque (No.122184) for $60,000.00 payable to Mr. & Mrs. Roberts was drawn on that account, and the cheque was debited to that account on 8 October. That is to say, the monies advanced to the Roberts came out of an account which on 1 October had a credit balance of only $717.96 and, between then and the date of payment on 7 October, had received funds by way of deposit from sources in which neither Mr. Stephenson or the company had an interest. A cheque inthe sum of $15,000.00 numbered 285007 dated 10 October and signed by Hodby payable to A.F. andmM.M. Roberts was drawn on the account of Ross D. Hodby & Associates (A/c No.00174-0672). The cheque was presented on 16 October and dishonoured. In these circumstances, and recognising that the question has not been the subject of argument before us, I have no reason to doubt the correctness of the finding of the learned primary judge that Stephenson Nominees holds the mortgage as a constructive or resulting trustee for the bankrupt. To the suggestion that a resulting trust could not have been established, because it was Hodby's intention, when the monies were advanced to the Roberts, to give to Stephenson Nominees the benefits of the mortgage securing that advance, that intention, if it was held, was held by Hodby contemporaneously with the knowledge that the funds advanced to the Roberts were being misappropriated by him from other persons, other' than Stephenson Nominees itself, perhaps persons the identity of whom he might not be able to ascertain. In short, by robbing an unascertained number of Peters, he was hoping to pay Paul. In my view, such a state of mind does not rebut the existence of a resulting trust in favour of the supplier of the funds. It is clear that a constructive trust can exist quite independently of the existence of any tracing claim by any particular person. It might be said that part of the great utility of the doctrine resides in this circumstance. The existence or otherwise of such a person therefore is not determinative of the existence of such a trust. A constructive trust may be imposed in respect of property, if in all the circumstances it would be unconscionable for one person to assert a beneficial title to that property against another person. The problem of the dishonest agent is not new, but the facts in this case raise in sharp relief the competing claims of the various victims of their common agent's dishonesty. In purporting to give to Stephenson Nominees the benefits of the mortgage, including the covenants by the Roberts to repay the monies advanced, when he knew that the funds had not been advanced by Stephenson Nominees, Hodby was a "conscious wrongdoer", in the sense used in the literature. In securing the mortgage, he was acting as the company's agent and the company is tainted by that conscious wrongdoing. Hodby was also the agent of those persons who were the true source of the funds advanced to the Roberts. In my respectful opinion, it would be unconscionable and unjust for the company to assert a beneficial title to the funds in court as the fruit of the covenants in the mortgage, to the denial of the rights of those persons supplying these funds, as represented by Hodby in his capacity as their agent. The Official Receiver stands in Hodby's shoes. The equities owed by Hodby to persons other than Stephenson Nominees do not disappear on his bankruptcy. For the reason that neither of the bases argued for allowing the appeal has been made out, I would dismiss the appeal with costs. R ! certify that tris « peerd tat pages are a true (Opyv ci tne reasons for judgment herein of His Honour Mr Justice Spender G Me. . > i ° Associate Dated 6 "//-57 IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY No. G 44 of 1987 GENERAL DIVISION On Appeal from a Single Judge of the Federal Court of Australia. BETWEEN: STEPHENSON NOMINEES PTY. LTD. Appellant AND: THE OFFICIAL RECEIVER ON BEHALF OF THE OFFICIAL TRUSTEE IN BANKRUPTCY Respondent AND: EX PARTE: ANTHONY FEELEY ROBERTS AND ANOTHER Mortgagors CORAM: FORSTER, SPENDER AND GUMMOW JJ. DATE: 6 November 1987 PLACE: ADELAIDE REASONS FOR JUDGMENT Gummow J. Introduction This is an appeal from the decision of a single Judge of this Court on an application by the Official Receiver acting for and on behalf of the Official Trustee in bankruptcy in respect of the estate of Ross Daniel Hodby. The bankrupt presented his own petition to the Court on 17 November 1986. There has been a number of other applications in his estate. In his judgment in the present matter his Honour referred to his reasons for judgment delivered on the same day in another application in the same estate. It was agreed, on the hearing of the appeal, that it was appropriate to have regard to that other judgment as indicating the background to the present appeal. Before the presentation of his own petition, the bankrupt had carried on business in South Australia as a land broker, being licensed as such under The Land and Business Agents Act 1973 (S.A.). He also carried on business as a finance broker. He carried on his land broking business under the business name "Ross D. Hodby and Associates", whilst the finance broking business was conducted under the business name "Archer Finance Brokers", first by Hodby Nominees Pty. Ltd. and in June 1986 by Domitix Pty. Ltd.. In the course of these activities, the bankrupt received substantial sums of money for investment from what his Honour described as "investor creditors". His Honour described the situation as follows:- At the time of his bankruptcy he lodged a statement of his affairs in which he stated, in respect of unsecured creditors, a deficiency of $2,069,157.00 These unsecured creditors were persons whom I have called investor creditors and who have placed funds with him for investment on first mortgage. Frequently however no mortgages were obtained or were available as security for the investment of such funds. The bankrupt also listed 109 additional investor creditors whom he described as secured creditors for amounts totalling $2,799,700.. However the entitlement of these 3. creditors... to security is at least very dubious and the short fall of $2,200,000.00 estimated by the bankrupt is unrealistically low.... Proofs of debt at (13 March 1987] totalling $4,200,000 had been received and the most substantial asset got in to date which might be available for unsecured creditors was a number. of amounts totalling in excess of $1,000,000 which had been paid into Court pursuant to orders made subsequent to the date of bankruptcy. Prior to his bankruptcy the bankrupt operated a number of bank accounts under the following titles: (a) Ross D. Hodby & Associates Trust Account No. 00174-0664. (b) Ross D. Hodby & Associates Office Account No. 00174-0672. (c) Ross D. Hodby No. 2 Account No. 02730-6421. (ad) Archer Finance Brokers Account No. 00100-1589. (e) Archer Finance Brokers No. 2 Account No. 02734-5033. Also during the period 1 May to 29 August 1986 a further trust account was conducted under the name Ross D. Hodby and Associates No. 2 Trust Account. The trust account specified in (a) above was the account which the bankrupt was obliged to keep and have audited annually as a licensed landbroker. It appears that it was last audited for the year ending December 1983, although thereafter the bankrupt was permitted to hold a license not withstanding the lack of an auditor's certificate.... The bankrupt acknowledged in his public examination that he commenced using clients' moneys for unauthorised purposes in 1978-1979 when he withdrew the sum of approximately $80,000 from his trust account to discharge a personal liability. He had not thereafter reimbursed the trust account this sun. During his public examination the bankrupt agreed that very many irregularities had occurred in the operation of the accounts and his dealings with his clients' funds and their securities. Stated generally and briefly these irregularities comprised, inter alia, discharging mortgages without receiving the loans secured thereby, paying interest to clients whose funds had not been invested, not applying funds for the specific 4. purpose for which they were remitted, making unsecured advances of his clients' funds and preparing inaccurate mortgages. When the confused state of the bankrupt's affairs became apparent to the Official Receiver, he applied to the Court and, on 22 December 1986, Fisher J. made certain orders. They included an injunction in the following terms:~- The respondents, all persons named in the statement of affairs of the bankrupt which is annexed hereto and marked "A", either as secured or unsecured creditors, all other creditors or persons claiming to be creditors of the bankrupt and all those persons whose names are set out in the schedule hereto and marked "B" and all persons other than those set out in the said schedule "B" who have at any time borrowed moneys on loans or otherwise made through the agency of the bankrupt or any company with which the bankrupt may have been associated or otherwise from funds placed with him and those loans or some part thereof remain due and owing including all such loans in which the principal sum remains outstanding be and are hereby restrained until further order from paying or receiving any moneys whether by way of interest or principal with respect to any such loans otherwise than pursuant to this order or any further order made herein. The Facts It is against this background that I turn to the particular transactions the subject of the present appeal. Mr. A.R. Stephenson is a director of the appellant Stephenson Nominees Pty. Ltd. He had dealt with the bankrupt since about 1976 and had placed moneys with the bankrupt for investment on mortgage mainly in the name of his company, but on some occasions in his name or the names of his family. At its peak the amount so placed with the bankrupt was in the order of $150,000. The amounts of moneys placed with the bankrupt had ranged from $25,000 to $75,000. In mid 1986 Stephenson Nominees Pty.Ltd. agreed with the bankrupt to lend to the bankrupt and persons known as Ward and Donato, the sum of $60,000. The loan was to be secured over title to a home unit at Pooraka. Mr. Ward was a land agent and Mr. Donato was a friend of Mr. Ward. Mr. Stephenson believed that the sum of $60,000 was advanced in this manner and that this was by way of reinvestment of moneys already placed by him or his company through the bankrupt on other security. Mr. Stephenson was told that the reinvestment was effected pursuant to a registered first mortgage over the Pooraka property and Stephenson Nominees Pty. Ltd. thereafter received two monthly payments purportedly of interest due under the mortgage. The evidence indicates that no such mortgage ever came into effect. On 26 August 1986, that is to say at a time when Mr. Stephenson believed the Pooraka mortgage to be on foot, the bankrupt telephoned him at his house and told him that the mortgagors under the Pooraka mortgage proposed to repay immediately the principal sum that was owing thereunder. The bankrupt asked Mr. Stephenson whether his company was prepared to advance the sum of $80,000 to a Mr. and Mrs. Roberts over a property at Molesworth Street, North Adelaide. Mr. Stephenson replied that subject to an inspection and satisfaction as to the adequacy of his security, his company might well be interested in making this advance. On 27 August 1986 Mr. and Mrs. Stephenson went to Molesworth Street where they met Mr. and Mrs. Roberts. Mr. Roberts indicated to Mr. Stephenson that Mr. Roberts and his wife wished to borrow $100,000 on the property at 134 Molesworth Street but Mr. Stephenson declined that offer on behalf of his company. He proposed instead a loan of $75,000. Mr. Roberts indicated that he and his wife would accept that proposal and Mr. Roberts indicated that he expected the bankrupt to be able to raise the remainder of the finance for them. On their part, Mr. and Mrs. Roberts had dealt with the bankrupt for some eight years. They had placed with him moneys for investment on mortgage and in 1985 the sum "peaked" at $270,000. Mr. and Mrs. Roberts lived at 134 Molesworth Street and wished to develop adjacent properties. It was for this development that Mr. Roberts had approached the bankrupt seeking finance and the bankrupt had said he would endeavour to raise the money from other of his clients. On 28 August 1986 Mr. Stephenson, on behalf of his company, withdrew the sum of $15,000 by cheque payable to him personally. He attended the office of the bankrupt and handed him the cheque for $15,000. The bankrupt told Mr. Stephenson that Mr. and Mrs. Roberts required the money urgently. Mr. Stephenson requested the bankrupt to give him a receipt. The 7. bankrupt gave Mr. Stephenson a receipt for the sum of $75,000. The receipt was on account both of the $15,000 represented by the cheque and the $60,000 which Mr. Stephenson believed was being repaid under the Pooraka mortgage and re-advanced to Mr. and Mrs. Roberts. The receipt is signed by the bankrupt and reads: Received from Stephenson Nominees Pty. Ltd. the sum of $75,000.00 for first mortgage A/C A.F. and M.M. Roberts, 134 Molesworth Street North Adelaide 16.5%. On 29 September, 1986 Stephenson Nominees Pty. Ltd. received from the bankrupt a cheque for $1,031.25 representing the first payment of interest under the mortgage. The mortgage was dated 8 October 1986. On the same day the bankrupt produced the mortgage for registration and it was noted on the certificate of title. Mr. and Mrs. Roberts furnished the bankrupt with the duplicate certificate of title and this was lodged with the mortgage on 8 October 1986. The mortgage was registered under the provisions of the Real Property Act 1886 (S.A.) on 19 December 1986, as dealing No. 6259622. The mortgage recites the receipt of the sum of $75,000 as the principal sum lent by Stephenson Nominees Pty. Ltd. as mortgagee to Mr. and Mrs. Roberts together as mortgagors. The principal sum is stated to be repayable on 29 August 1987, and it would appear that interest was payable on the 29th day of each month at a rate of 17.5% per annun, reducible to 16.5%. The mortgage goes on to state that for the consideration therein expressed and for better securing to the mortgagee the repayment of the moneys thereby secured, the mortgagor, inter alia, undertakes a personal liability to pay the moneys thereby secured, such liability being additional to any other liability under the mortgage. This obligation, on registration, took effect as a covenant in a deed (Real Property Act 1886 (S.A.),S.57). The mortgage also provides that the mortgagor may repay the whole of the moneys thereby secured upon or after the expiration of the first three months of the term on any of the interest days that I have mentioned; however the mortgagor is obliged to give the mortgagee not less than one month's prior notice in writing of intention to make such Payment or to pay one month's interest in lieu of such notice. Mr. and Mrs. Roberts were among the persons affected by the order of this Court made 22 December 1986. On 28 January 1987, as contemplated by the order, they made an application to the Court for the order to be varied to enable them to discharge the mortgage which they had granted in favour of Stephenson Nominees Pty. Ltd.. Arrangements had earlier been made with Stephenson Nominees Pty.Ltd. for a settlement on 23 December 1986 on discharge of this mortgage, the objective being the obtaining by Mr. and Mrs. Roberts of finance elsewhere. On 4 March 1987 an order was made for payment of $81,187.50 by Mr. and Mrs. Roberts into Court and directing the 9. Registrar General to endorse a memorandum of discharge of mortgage on the relevant certificate of title. The order expressly preserved the right of Stephenson Nominees Pty.Ltd. to claim payment out of the moneys in Court on the footing that the mortgage remained in full force and effect. The Official Receiver claimed to be entitled the sum involved, $81,187.50, for the benefit of the general body of unsecured creditors of the bankrupt or, alternatively, for the benefit of another class of creditors, namely the unsecured creditors who contributed to the moneys in the control of the bankrupt from which the advance was made to Mr. and Mrs. Roberts. This claim by the Official Receiver was contested by Stephenson Nominees Pty. Ltd.. It claimed to be entitled to receive the moneys in Court. The Official Receiver relied for the entitlement asserted by him upon matters of general property law and the general vesting provisions of s.116 of the Bankruptcy Act 1966; he did not seek to rely upon any other provisions of Part VI, Division 3 of that Act. The bankrupt gave evidence that the Pooraka mortgage had been prepared and, he had thought executed, although he, Mr. Ward and Mr. Donato, did not in fact purchase the home unit over which the mortgage purported to give security to Stephenson Nominees Pty. Ltd.. Interest payments had been made out of the joint account in the names of the bankrupt, Mr. Ward 10. and Mr. Donato. The bankrupt said that when the arrangements were made for investment on the mortgage by Mr. and Mrs. Roberts, he had Stephenson Nominees Pty. Ltd. execute under seal a discharge of the purported Pooraka mortgage. Although the mortgage over the Molesworth Street property indicated that a loan of $75,000 had been made by Stephenson Nominees Pty.Ltd. to Mr. and Mrs. Roberts, his Honour found that no moneys of Stephenson Nominees Pty.Ltd. could be traced into any funds received by Mr. and Mrs. Roberts. Senior counsel for the company acknowledged this at the trial and this aspect of the matter was not reagitated on the appeal by the company. Nor, I should add, does it presently appear that any other former client of the bankrupt can trace its moneys into those furnished to Mr. and Mrs. Roberts. This is so, although, as his Honour held, in furnishing funds to Mr. and Mrs. Roberts, the bankrupt was "almost certainly" not dealing with moneys which he was free to disburse in this way. Mr. and Mrs. Roberts received an amount of $60,000 by cheque from the bankrupt. He told them he was waiting on another settlement before he could make available the balance of $15,000. Subsequently a cheque for this amount was given to Mr. and Mrs. Roberts but on presentation it was dishonoured. The result was that whilst Mr. Stephenson believed that $75,000 had been advanced, Mr. and Mrs. Roberts received only $60,000 of the $75,000 referred to as principal moneys in the 11. mortgage. Nevertheless, in order to achieve a discharge of the mortgage, Mr. and Mrs. Roberts in due course, as I have indicated, paid into Court a sum of $81,187.50. This apparently contained an interest component and was computed on the footing that the principal moneys secured by the mortgage were indeed $75,000. The Proceedings at First Instance On the hearing of the application in question on this appeal, the company, Stephenson Nominees Pty.Ltd. submitted that the Court had no jurisdiction to make the orders sought by the Official Receiver. His Honour held the Court had jurisdiction to make those orders and on the appeal no complaint was pursued as to this part of his Honour's judgment. The company also asserted at the hearing that it was entitled to rely upon what it described as its indefeasible title as registered proprietor of an estate as mortgagee, 50 as to resist any claim to entitlement to the moneys in Court made by the Official Receiver. His Honour held that the argument on this point also failed. In the result, his Honour made orders, the material portions of which read as follows:- 12. 1. The Official Receiver is entitled to the sum of $81,187.50 standing in Court to the credit of an account entitled "Estate of Ross Daniel Hodby - Stephenson Nominees Pty. Ltd. - Roberts" together with accrued interest thereon for the benefit of the estate of the bankrupt Ross Daniel Hodby subject to any application which may be made by any party other than Stephenson Nominees Pty. Ltd. to trace his own money into the said sum of $81,187.50. 2. The question whether the said sum should be held by the Official Receiver for the benefit of the unsecured creditors of the bankrupt who prove in this bankruptcy or of the unsecured creditors who contributed to the moneys in the control of the bankrupt from which the advance was made to the mortgagors which is secured by Memorandum of Mortgage No. 6259622 be adjourned for further consideration. 3. The cross claim of Stephenson Nominees Pty. Ltd. be dismissed. By its cross claim Stephenson Nominees Pty. Ltd. had claimed to be entitled to and receive payment of the said sum together with accrued interest. The passage in his Honour's judgment which sets out the reasoning which led him to rule in favour of the Official Receiver and against the claim of Stephenson Nominees Pty.Ltd. is as follows: Because the bankrupt provided the funds lent it is my opinion that the company holds the registered mortgage as a constructive or resulting trustee for him of the registered mortgage. In so far as the bankrupt's intention as regards the company is of any relevance, that intention related to the protection or advantage which he hoped the allocation of a security might give to it. The funds he had in the past received from the company had been inextricably mixed by him, misapplied and 13. invested if at all, without security. He could not make an effective gift to the company of the mortgage funds to replace the funds he had lost... In this regard 1t 1s nothing to the point that the bankrupt was almost certainly not lending his own monies. While the company is answerable to the bankrupt, who provided the funds to Mr. & Mrs. Roberts, the monies in the hands of the bankrupt are also subject to equities in favour of the investors. In my opinion the company is a trustee of the mortgage for the bankrupt and its claim is at the most a claim against the fund which provided the advance to Mr. & Mrs. Roberts. I expressly reserve for further consideration the extent of the company's entitlement. I turn then to consider whether in the circumstances it is correct to say that the company Stephenson Nominees Pty. Ltd. held the registered mortgage as a constructive or resulting trustee for the bankrupt. There was much attention in submissions made below as to the effect on the present dispute of the principles of "indefeasibility" of registered interests such as that taken by the mortgagee company. However, these submissions appear to have been somewhat out of focus. No challenge had been made seeking to remove the mortgage from the title or to displace its priority in favour of another dealing with the subject land. There was no challenge to the indefeasibility of the registered title in respect of the mortgage. The issue was rather, granted the existence of the security, one of identifying the obligations, if any, of the mortgagee to third parties in respect of the enjoyment by the mortgagee of the rights flowing from the mortgage. 14. Further, there was no evidence to indicate that there ever had been at any stage any question of default by Mr. and Mrs. Roberts, the mortgagors, and accordingly, there had been no question of the mortgagee, Stephenson Nominees Pty. Ltd., exercising any powers under its security against the subject land. Thus, there has been no question, in any real sense, of whether the benefit of the secured remedies of the company as Mortgagee were held upon trust for any other person. On the hearing of the appeal, it was not strongly disputed that the real issue is a narrower one. It 1s whether the benefit of the obligations by Mr. and Mrs. Roberts under the covenants in the mortgage to pay principal and interest to the party shown in the mortgage as the mortgagee, Stephenson Nominees Pty. Ltd., were held by Stephenson Nominees Pty. Ltd. upon trust, resulting or constructive, for the Official Receiver as successor to the bankrupt. It was not submitted that the transaction was a sham within the meaning of the principles discussed, with some divergence of opinion, in Esanda Ltd.v Burgess [1984] 2 NSWLR 139 at 146-7, 153-4. Nor was it submitted that the Official Receiver stood other than in the shoes of the bankrupt. If the benefit of the promise to pay contained in the mortgage had been held by Stephenson Nominees Pty. Ltd. on trust for the bankrupt, it would follow that, in the events that had happened, the funds in court would be held upon the same trusts. Thus, they would be held for the Official Receiver. 15. The first three grounds of appeal are in the following terms: (a) The Learned Trial Judge was wrong in law in holding that the appellant was a trustee of it's [sic] registered estate as Mortgagee for the Official Receiver. (b) The Learned Trial Judge was wrong in law in holding the appellant had no beneficial interest in the monies secured by the said Mortgage and that the Official Receiver was entitled to claim them for the bankrupt estate. (c) The Learned Trial Judge was wrong in law in holding that because the bankrupt provided the funds lent that the appellant held it's (sic] registered Mortgage as a constructive or resulting trustee for the Official Receiver of the registered Mortgage. Accordingly, I turn to consider whether the claim to the existence of a resulting or constructive trust was properly made out. Resulting Trust The relevant principles have recently been reaffirmed for Australia by the High Court in Calverley v Green (1984) 155 CLR 242. Those principles are called into play where money is paid for the acquisition of property in the name of another. The presumed intention of the party paying the money is that the person taking the title to the property does so as nominee 16. with the result that the legal title is held on trust for the party paying the money, subject to proof of any contrary intention. I put to one side that class of case found where there is a presumption of advancement by the person paying the money of the person taking the title. There is no presumption of advancement affecting the present dispute. In the earlier decision in Napier v Public Trustee (W.A.) (1980) 32 ALR 153 at 158, Aickin J. (with the concurrence of Gibbs A.C.J., Mason, Murphy and Wilson JJ.} stated the basic principle as follows:- Where property is transferred by one person into the name of another without consideration, and where a purchaser pays the vendor and directs him to transfer the property into the name of another person without consideration passing from that person, there is a presumption that the transferee holds the property upon trust for the transferor or the purchaser as the case may be. The doctrine of resulting trusts, as reaffirmed by the High Court, is not concerned with moneys supplied by one party to procure or support a promise by the recipient to repay another party, with interest, a sum equal to the principal sum received. This would still be the case if the promise to repay was secured to that other party mortgage over property bought by the mortgagor with the funds so received by him. The party supplying the money would not have acted "as a purchaser" within the meaning of the authorities in this field, and the benefit of the mortgage would not be held on resulting trust: cf Waters "Law of Trusts in Canada" 2nd ed., 305-306. 17. In any event, the existence of a resulting trust 15s subject to rebuttal, the proof of contrary intention of the party providing the money: Muschinski v Dodds (1985) 160 CLR 583 at 590, 598-599, 604, 612. In the present case, if the party supplying the money is treated as being the bankrupt, as it must be if the bankrupt is to be the beneficiary of the proposed resulting trust, then it is to the intention of the bankrupt that one must look. The evidence indicates, in my view, that the bankrupt, wishing to put the affair of the Pooraka mortgage behind him, or at least to one side, intended to secure for Stephenson Nominees Pty. Ltd. the protection or advantage which would flow to it from the existence of covenants to repay by Mr. and Mrs. Roberts, secured by the registered mortgage which he lodged for registration on 8 October 1986; cf In re Sullivan (1927) 21 F 2d 834. In other words, the intention was that the legal title and interest of the mortgagee flowing from the mortgage would coincide with the equitable entitlement thereto. His Honour in the extract from his judgment which I have set out referred to the intention of the bankrupt as regards the mortgagee Stephenson Nominees Pty. Ltd. as being one that related to the protection or advantage which the bankrupt hoped the allocation of a security might give to Stephenson Nominees Pty. Ltd.. In my view, with respect, his Honour was correct so to view the matter. Further, however, it follows there is no room to find any resulting trust in favour of the bankrupt or the Official Receiver as his successor. 18. Constructive Trust - General Considerations At the outset it should be emphasised that the term "constructive trust" is used in numerous and to some extent disparate senses. In argument both parties made reference to the reasoning in Re Goode (1974) 24 FLR 61 at 80-81. That case illustrates the point that the term constructive trust 1s on occasion used to describe one remedy by which effect is given to the equitable rights to trace property from one hand to another and from one form to another. Another remedy in aid of tracing rights, to which I later refer, is the equitable lien or charge for the amount of the claim; In re Hallett's Estate (1880) 13 Ch.D 696 at 709,717 is a famous example. However, and this has to be borne in mind in the present case, a constructive trust may be imposed upon a particular asset or assets not because pre-existing property of the plaintiff has been followed in equity into those assets but because, quite independently of such considerations, 1t 1s, within accepted principle, unconscionable for the defendant to assert a beneficial title thereto to the denial of the plaintiff. The constructive trust found in the present case at first instance was of this latter description. 19. The company cannot trace its funds, in particular those furnished for reinvestment on the abortive Pooraka mortgage, into the $60,000 received from the bankrupt by Mr. and Mrs. Roberts. The constructive trust was not in favour of the company and was not in aid of any tracing of the funds of the company. The opposite is the case. The constructive trust in question is one imposed upon the company and in favour of the bankrupt and the Official Receiver as his successor. Further, it is not asserted, as matters presently stand, that the Official Receiver claims the constructive trust in his favour in support of any tracing right enjoyed by any other client of the bankrupt to follow its moneys into the $60,000 that reached Mr. and Mrs. Roberts. In that setting, no equities appear to favour any particular third party which bind Stephenson Nominees Pty. Ltd. through a tracing remedy. The question then arises as to the footing, 1f any, upon which the Official Receiver may rely for a constructive trust imposed upon the company and in his favour as successor to the bankrupt. In approaching the issue, 1t must be borne in mind (as was not disputed on the appeal) both that the bankrupt was fiduciary to the company in respect of the dealings with Mr. and Mrs. Roberts and that the bankrupt fell short of honouring the confidence reposed in him by the company as his client: Daly v The Sydney Stock Exchange Limited (1986) 160 CLR 371 at 377, 384-386. 20. On the face of 1t, if the company, Stephenson Nominees Pty. Ltd., is entitled in its own right to receive moneys pursuant to the obligations by Mr. and Mrs. Roberts to pay principal and interest which are expressed in the mortgage, the result is an unjust enrichment of Stephenson Nominees Pty.Ltd. in the sense that it cannot show that 1t was the source of the $60,000 received by Mr. and Mrs. Roberts. However, the bankrupt, as its agent, was bound to account to it for the total sum $75,000 which he was directed to invest on loan to Mr. and Mrs. Roberts. Thus, as between the bankrupt and Stephenson Nominees Pty. Ltd., it would not be appropriate to speak of unjust enrichment of Stephenson Nominees Pty.Ltd. when it received from Mr. and Mrs. Roberts moneys expressed to represent that which the bankrupt as agent of the company had purported on its behalf to invest on loan to Mr. and Mrs. Roberts. In any event, as the law stands in Australia, (a) there is no general principle requiring restitution in cases of unjust enrichment of the defendant at the expense of the plaintiff and (b) even if there were, it would not necessarily follow that the constructive trust was the appropriate remedy to express that right to restitution. This follows from Muschinski v Dodds (1985) 160 CLR 583, particularly from what was said by Deane J. (with the concurrence of Mason J. (as he then was)) at 614-618; see also the warning by Gibbs CJ. (with the concurrence of Wilson J. and Dawson J.) against too readily 21. confounding ownership (ie. by dint of constructive trust) with obligation (e.g.in account, a personal remedy), in Daly v The Sydney Stock Exchange Limited (1986) 160 CLR 371 at 379-380. Care is called for against over emphasising the role of the constructive trust in this area. Whilst the constructive trust may readily in many cases be seen as a restitutionary remedy for an unjust enrichment at the expense of the plaintiff, this by no means always will be the case. The constructive trust may be imposed as a cautionary or deterrent remedy even where there has been no unjust enrichment at the expense of the plaintiff. For example, leading cases have made it plain that it is no answer to the application to company directors of the rule forbidding fiduciaries placing their interest in conflict with their duty, that the profits they have made are of a kind the company itself could not have obtained or that no loss to the company 1s caused by their gain: Furs Limited v Tomkies (1936) 54 CLR 583 at 592; Regal (Hastings)Ltd. v Gulliver [1967] 2 AC 134 (n). Relief by way of constructive trust may be available in these cases even though the profit or benefit obtained by the fiduciary was not one the obtaining of which was an incident of his duty to the plaintiff: Hospital Products Limited v United States Surgical Corporation (1984) 156 CLR 41 at 107-109. In such situations the constructive trust operates not to restore to the company that of which it was deprived by the conduct complained of, but to enforce observance of the fiduciary duty not to prefer 22. personal interest to duty to the plaintiff. As Professor Birks has observed, it is difficult, in the situations revealed in these and other cases, to treat a constructive trust remedy as necessarily operating to prevent unjust enrichment at the expense of the plaintiff: Birks, "An Introduction to the Law of Restitution" (1985) pp. 88-89. Nor, even if 1t be established that in Australian law, unlike English law as expounded by Lord Diplock in Orakpo v Manson Investments Ltd. [1978] AC 95 at 104, there is a general doctrine of unjust enrichment, it by no means will follow that the constructive trust with its proprietary character will always or necessarily be the appropriate remedy. It would, for example, be quite wrong to assume that in the United States the law of restitution is concerned principally with proprietary remedies in the nature of a constructive trust. "Restitution" is used as a term identifying a range of remedies linked by a perceived common character. Australian decisions such as Sabemo Pty. Ltd. v North Sydney Municipal Council [1977] 2 NSWLR 880, and Pavey & Matthews Pty. Ltd. v Paul (1987) 61 ALUR 151, although based immediately in quasi contract apparently would be classed in the United States as cases of restitution, although no constructive trust was involved. The leading American treatise on the subject, Professor Palmer's four volume work, "The Law of Restitution" contains the following (§ 1.3 at p.16):- 23. The recognition of constructive trust as a remedy aimed at preventing unjust enrichment has been accompanied by a growing recognition of its connection with quasi contract, a legal remedy with the same general aim... It is important to recognize the connection between the two remedies; but as long as distinctions between law and equity persist, it needs to be recognised that "quasi contract" and "constructive trust" are not interchangeable terms... It is a striking fact nonetheless that judges often seem to find it easier to reach and rectify an unjust enrichment by describing the recipient of the enrichment as a constructive trustee, even though the judgment entered is one for money and can be obtained at law, in quasi contract. The constructive trust idea stirs the judicial imagination in ways that assumpsit, quantum meruit, and the other terms associated with quasi contract have never quite succeeded in duplicating. Deane J. spoke to like effect in Pavey and Matthews Pty. Ltd v Paul (1987) 61 ALJR 151 at 165-6. See also Palmer op.cit. 1982 Supplement to Vol.1, p.6; Scott on Trusts 3rd ed., § 462 and 1983 Supp., §666; and Stoljar "Unjust Enrichment and Unjust Sacrifice" (1987) 50 MLR 603 at 604-5, 609-610. In the standard United States student text by Leavell, Love and Nelson, "Equitable Remedies and Restitution", 3rd ed.,(1980), the subject of restitution is introduced by describing it (at page 495) as "an abstraction that describes a variety of remedies" including such legal remedies as quasi contract and such equitable remedies as constructive trust, equitable lien and accounting. Further, as I have earlier indicated, it will be apparent that the security given by an equitable lien or charge 24. affords a proprietary remedy; it would be wrong to treat the constructive trust as the only proprietary remedy in this field: Hewett v Court (1983) 149 CLR 639 at 645-6, 650,662-669; Calverley v Green (1984) 155 CLR 242 at 263; Muschinski v Dodds (1985) 160 CLR 583 at 598; Morris v Morris {1982] 1 NSWLR 61 at 64; In re Hallett's Estate (1880) 13 ChD 696 at 709, 717. The equitable lien is not confined in its operation to cases where the parties are in contractual relations (as with vendor and purchaser). It has been described as an equitable remedy, created by the court, regardless of the intent of the parties, as a remedial device to protect a party against some inequitable loss: McClintock "Equity" 2nd ed. §118. See also Pomeroy "Equity Jurisprudence" § 1238-1241, Note "Equitable Liens" (1931) 31 Col. L. Rev. 1335. The lien may attach to incorporeal as well as corporeal property: Dansk Rekylriffel Syndikat Aktieselskab v Snell [1908] 2 Ch. 127. In an earlier passage in his work (§ 1.1) Professor Palmer writes: Today, anything like a whole view of the law of restitution must take into account both law and equity, and both are therefore within the scope of this book. At law the principal remedy is quasi contract, leading to a money judgment, but replevin of goods is sometimes a form of restitution. In equity the principal remedy is constructive trust; but equitable lien, subrogation, and accounting are techniques frequently used to prevent unjust enrichment. It would be a major advance if courts, having identified an enrichment felt to be unjust, were free to choose the form of relief that seems fairest and most appropriate to the circumstances. This is the largely hidden tendency of modern decisions, but our legal system has not yet reached the point of giving it explicit recognition. In the application of equitable relief it may be necessary to consider whether the legal remedy is adequate, and this is not quite the same as determining which remedy is most appropriate. 25. The last sentence quoted above may be read wath those passages in the judgment of Gibbs C.J. in Daly v The Sydney Stock Exchange Limited (1986) 160 CLR 371 at 377-380, where his Honour, in dealing with a claim for a constructive trust where a fiduciary, in breach of duty, had taken moneys on loan froma client, considered whether the client's legal remedies were adequate to meet the case. Gibbs C.J. said (at 379):- In deciding whether or not the money should be held to have been subject to a constructive trust it is not unimportant that the ordinary legal remedy of a creditor would have been adequate to prevent the firm from being benefited at the expense of the appellant... Further, a serious difficulty with any general legal principle of restitution for unjust enrichment lies in isolating the criteria which indicate in a given case whether a personal or proprietary remedy (constructive trust or equitable lien or charge) is appropriate. It has recently been said (by Professor Klippert in 'Unjust Enrichment" (1983), p.196):- One of the great advantages of constructive trust is that it gives the plaintiff a claim over the defendant's assets that takes precedence over the claim of general creditors. But this very advantage creates a problem, because it means that the remedy cannot be made available to just anyone. For example, it would be unfair if contractual claimants were always granted a lower priority than any claimants in unjust enrichment. All unsecured creditors would seek to claim unjust enrichment and thus in effect become secured creditors. 26. In the well known work by Lord Goff and Professor Gareth Jones "The Law of Restitution", 3rd ed., p.78, the learned authors say only: In our view the question whether a restitutionary proprietary claim should be granted should depend on whether it is just, in the particular circumstances of the case, to impose a constructive trust on, or an equitable lien over, particular assets, or to allow subrogation to a lien over such assets. In United States law, it has been suggested that a proprietary remedy should apply only against a fiduciary or a "conscious wrongdoer" in the sense of one whose conduct moral blame attaches: Restatement on Restitution §202 (1937), Palmer op.cit. §2.14. Reference was made by Gibbs C.J. (in Daly v The Sydney Stock Exchange Limited (1986) 160 CLR 371 at 379) to the effect of the constructive trust in withdrawing assets from the general body of creditors; this generally will be so unless the beneficiary of that trust himself holds his rights for the benefit of a fund he administers, for example, on insolvency (as would be the position of the Official Receiver in the Present case). However, in general the result may be seen, as the Chief Justice observed, as unjust to the general creditors of the constructive trustee unless there is given further explanation of the raison d'etre of the trust. 27. Where the beneficiary of the constructive trust dealt with the constructive trustee as a fiduciary and the general creditors did not do so, the case for preferring the fiduciary Claimant has been seen as more readily apparent. The Privy Council has so spoken in Space Investments Ltd. v Canadian Imperial Bank of Commerce Trust Co. (Bahamas) Ltd. [1986] 3 All ER 75 at 76-77. Lord Templeman, in dealing with the case of an insolvent bank which also had acted as a trustee, and the priority given to beneficiaries over claims of customers of the bank, said: This priority is conferred because the customers and other unsecured creditors voluntarily accept the risk that the trustee bank might become insolvent and unable to discharge its obligations in full. On the other hand, the settlor of the trust and the beneficiaries interested under the trust never accept any risks involved in the possible insolvency of the trustee bank. On the contrary, the settlor could be certain that if the trusts were lawfully administered the trustee bank could never make use of trust money for its own purposes and would always be obliged to segregate trust money and trust property...free from any risks involved in the possible insolvency of the trustee bank. In Daly v The Sydney Stock Exchange Limited (supra) no constructive trust attached to moneys borrowed by the fiduciary to go into its general funds and without any obligation on the fiduciary to apply it for a particular purpose. On the other hand, in the United States there is authority expressed in wider terms that bases the priority given a fiduciary claimant over general creditors on the footing that inherent in the 28. nature of the fiduciary relationship was the reposition of trust in the honesty of the fiduciary, whilst the general creditors took the risk of his solvency: In re _ Kountze Bros.(1935) 79 F. 2d 98 at 102. Daly's Case (supra), suggests this alone may not always suffice in Australian law to found a constructive trust, even though the defendant acted in breach of fiduciary duty to the plaintiff. Senior counsel for the respondent submitted that the treatment of the constructive trust by Gibbs CJ. in Daly's Case (supra) was consistent with the proposition that the company held the right to receive payment from Mr. and Mrs. Roberts on a constructive trust in favour of the bankrupt and thus of his client, the Official Trustee. It follows from what I have said that I do not agree. Indeed, the situation in the present case iS more extreme than that in Daly's Case in so far as here no relevant fiduciary duty was owed by the appellant company to the bankrupt upon which the Official Receiver can rely for imposition of a constructive trust upon the former. The bankrupt owed a fiduciary duty to his client, the appellant, not vice versa. No doubt the bankrupt also owed fiduciary duties to other clients, but, as I have indicated, none of them has at this stage made any tracing claim in respect of the subject matter of the constructive trust challenged on this appeal by the appellant. 29. Constructive Trust - The Present Case I turn then to the question whether in the present case there is any, and if so what, basis for the constructive trust asserted in this case. It follows from the judgments in Muschinski v Dodds (1985) 160 CLR 583 at 594-5, 598, 608, 615-6, 624, that in Australia relief by way of constructive trust will only properly be available if the applicable principles of equity require that the person in whom the ownership of property is vested should hold it for the use or benefit of the person asserting the existence of the trust. General notions of fairness and justice may be relevant, but in the context of the traditional equitable notion of unconscionable conduct which influences many fundamental doctrines or principles of modern equity. Do any such doctrines or principles apply in the Present case? In Muschinski v Dodds, (supra at 620), Deane J. (with whom Mason J. agreed) relied for the imposition of a constructive trust upon the principle of equity that comes into play where the sub-stratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property, contributed by one party on the basis and for the purpose of that relationship or endeavour, would otherwise be enjoyed by that other party in circumstances in 30. which it was not specifically intended or specifically provided that the other party should so enjoy it. The content of the principle is that in such a case equity will not permit that other party to assert or retain the benefit of the relevant property to the extent it would be unconscionable for him to do so. That principle has no application to the present case. In Chase Manhattan Bank N.A. v Israel-British Bank (London) Ltd. [1981]Ch.105 a debtor bank had paid moneys by mistake to a creditor bank twice over. The payments were made through the New York clearing house system. The mistake was successfully relied on as providing a foundation for a tracing remedy and constructive trust. Any principle to be deduced from that case does not appear in the present case. The bankrupt is not said to have made any relevant mistake in furnishing funds to Mr. and Mrs. Roberts. It may be noted that in the Chase Manhattan Case (supra) Professor Palmer gave expert evidence as to the law of New York State, which Goulding J. found valuable ([1981] Ch. at 122-123), although in the end there was no relevant difference between English and New York law. In events that have happened in the present case there appears no particular equitable principle or doctrine which attracts the operation of a constructive trust. As I have said, there is presently no claimant before the Court asserting a right to a constructive trust in aid of its rights to funds 31. traced by 1t through the bankrupt and into the hands of Mr. and Mrs. Roberts. Even if such a claimant were before the Court, it might, without expressing any concluded view upon the subject, still prove difficult to trace those moneys further into the moneys used by Mr. and Mrs. Roberts to discharge the mortgage and pay the funds into Court. I have said earlier that whilst the bankrupt was a fiduciary with duties to Stephenson Nominees Pty. Ltd., that company did not owe any relevant pre-existing fiduciary duties on its part to the bankrupt such as to provide a footing for a constructive trust imposed by it in favour of the bankrupt. The fiduciary duties flowed in the opposite direction. Indeed, even if the matter were to be approached on a broad basis, it would, as I have indicated earlier in these reasons, be difficult to say that it would be unconscionable, as between Stephenson Nominees Pty. Ltd. and the bankrupt, for the company to assert absolute entitlement to moneys received from Mr. and Mrs. Roberts. The company was the client of the bankrupt and had charged him with the placing of funds on investment with Mr. and Mrs. Roberts. Of a total of $75,000 to be invested, $15,000 was directly provided by the company and misapplied by the bankrupt, and the balance of $60,000 represented funds for which the bankrupt was liable to account to the company and then apply on fresh investment with Mr. and Mrs. Roberts. 32. It may have been a proper conclusion from what transpired that, as the appellant company submitted, the appellant gave value to the bankrupt by giving up its rights against him in respect of the abortive Pooraka investment in consideration of him procuring the provision of security by Mr. and Mrs. Roberts: cf. Taylor v London and County Banking Company (1901) 2 Ch.231 at 257. If that were so, it would appear unconscionable to impose a constructive trust upon the company in respect of the proceeds of repayment of the security it bargained for. Even if the company did not give up its rights in this way in respect of the Pooraka investment, Hodby would have faced formidable difficulties if, by relying upon some principles of quasi contract, he had sought to have the company account to him for the proceeds of repayment by Mr. and Mrs. Roberts. The company most likely in all the circumstances would have had the protection of an equitable set-off viz its right to have Hodby account to it for the $75,000 of its moneys misapplied by him, a claim "impeaching" that brought by Hodby against it, in accordance with the principles explained in Ralston v South Greta Colliery Company (1912) 13 SR (NSW) 6; and Popular Homes Ltd. v Circuit Developments Ltd. [1979] 2 NZLR 642 at 658-660. In such circumstances, there appears no equity to impose a constructive trust in favour of Hodby, and the Official Receiver does not stand in a superior position to the bankrupt. 33. Further, and in any event, in seeking any constructive trust remedy in his favour the bankrupt would have had to do equity on his part by first accounting for the $75,000 misapplied by him in breach of his fiduciary duty to the appellant company, and, as I have indicated, it was not submitted that the Official Receiver was, as regards any constructive trust, in a better position than the bankrupt himself. Some support for this approach, principally by way of analogy, is offered by the broad principle of equity that a person entitled to participate in a fund and also bound to contribute to the same fund cannot receive the benefit without discharging the obligation: In re Dacre [1915] 2 Ch 480 at 484, affd. {1916] 1 Ch 344, Cowcher v Cowcher [1972] 1 WLR 425, at 432-433. This principle is an application of the fundamental precept that he who seeks equity must do equity: Scott on Trusts, 3rd, ed., §251. The principle has been developed particularly in relation to express trusts where the trustee has the right to retain what would otherwise be trust property coming to a beneficiary if the beneficiary, in respect of that trust, owes money to the trustee, whether as a liquidated or unliquidated sum: In re Weston [1900] 2 Ch 164 at 169-172. The principle has been said to be of wide utility and broad equity and not to depend upon any refined or technical considerations: In re Jewell's Settlement {1919] 2 Ch 161 at 174, 177. In my view it is applicable by analogy in the present case, and 34. indicates that, even approaching the matter on a broad basis, the equities between the parties, are against rather than in favour of the constructive trust asserted against the appellant company. In these circumstances, there was, in my view, no constructive trust as asserted by the respondent, in respect of the funds in Court. Estoppel The appellant company also relied upon an estoppel as a means of denying to the respondent any beneficial interest in the funds in Court. Reliance was placed upon Thompson v Palmer (1933) 49 CLR 507 at 546-7. The appellant submitted, to adapt the language of Dixon J. in that case, that no unjust departure by the respondent would be permitted from an assumption adopted by the appellant as the basis of some act or omission which, unless the assumption be adhered to, would operate to the detriment of the appellant. The assumption in question was said by the appellant to be that the bankrupt was to pay to Mr. and Mrs. Roberts the sum of $15,000 represented by the cheque Mr. Stephenson handed to the bankrupt on 28 August 1986; the assumption was said to apply likewise to the $60,000 to be repaid under what Mr. Stephenson believed was the Pooraka mortgage. It was then 35. submitted that if the estoppel was effective so that the case had to be approached on the footing that moneys totalling $75,000 had been received by Mr. and Mrs. Roberts by way of advance from the appellant, the respondent would fail in the assertion of a constructive trust in its favour over the fund in Court. This was because, the appellant submitted, central to the reasoning of the learned trial judge in holding there was a trust was the importance attached to the failure of the appellant to identify itself as the source of the funds received by Mr. and Mrs. Roberts from the bankrupt. The estoppel would remove that central element. However, as I have mentioned earlier in these reasons, at the trial the case for the present appellant was conducted on the footing that none of its moneys could be traced into any funds received by Mr. and Mrs. Roberts. The "assumption" (again to use the language of Dixon J. in Thompson v Palmer (supra)) which now on appeal the appellant seeks to have the Court make is in substance a denial of the basis on which the case was run below. Accordingly, I agree with the conclusion reached by Forster J. that the appellant is bound by the conduct of the trial. I should add that had I been of the contrary view, namely that the estoppel point was available, I would not have seen the case, as the appellant submitted, as one of estoppel by convention; it more closely resembles an estoppel by representation: Con-Stan Industries of Australia Pty. Ltd. v Norwich Winterthur Insurance (Australia) Ltd.(1986) 160 CLR 226 36. at 244-5. judgment 547: various convention and by representation) The appellant relied upon the following passage in the of Dixon J. in Thompson v Palmer (1933) 49 CLR 507 at The object of estoppel in pais 1s to prevent an unjust departure by one person from an assumption adopted by another as the basis of some act or omission which, unless the assumption be adhered to, would operate to that other's detriment. Whether a departure by a party from the assumption should be considered unjust and inadmissible depends on the part taken by him in occasioning its adoption by the other party. He may be required to abide by the assumption because it formed the conventional basis upon which the parties entered into contractual or other mutual relations, such as baailment; or because he has exercised against the other party rights which would exist only if the assumption were correct, as in Yorkshire Insurance Co. v Craine [1922] 2 ac 5 at -7... or because knowing the mistake the other laboured under, he refrained from correcting him when it was his duty to do s0; or because his imprudence, where care was required of him, was a proximate cause of the other party's adopting and acting upon the faith of the assumption; or because he directly made representations upon which the other party founded the assumption. But, in each case, he is not bound to adhere to the assumption unless, as a result of adopting it as the basis of action or inaction, the other party will have placed himself in a position of material disadvantage if departure from the assumption be permitted. It may well be that Sir Owen Dixon was identifying the estoppels he mentioned (including estoppel as species of the genus, 37. estoppel in pais; see Legione v Hateley (1983) 152 CLR 406 at 430-432 per Mason, Deane JJ., Waltons Stores (Interstate) Ltd. v Maher (1986) 5 NSWLR 407 at 416-421 per Priestley JA. But that, as Sir Owen Dixon plainly indicated, does not mean that the issue of estoppel in pais is, in a given case, at large. The facts must supply one or more of the reasons mentioned by Sir Owen Dixon as sufficient to prevent an unjust departure from an assumption adopted by a party, which departure would operate to the detriment of that party. In my view, had it been open for it to do so, the appellant could have found the necessary assumption (viz the payment of moneys on its account by the bankrupt to Mr. and Mrs. Roberts) in the representations made to Mr. Stephenson by the bankrupt on 26 and 28 August 1986, including the issue of the receipt for $75,000. These representations were the basis (again to use the language of Sir Owen Dixon) of some act or omission by the appellant, the act being the handing over of the cheque for $15,000, and the omission the failure to call upon the bankrupt otherwise to account for the moneys the appellant believed secured by the Pooraka mortgage and which the bankrupt represented would be repaid shortly; cf Thompson v Palmer (supra) at 519-20, 525-528, 539-549, 551-553, 558-559. However, the estoppel point is relied upon by the appellant as a step in defeating what otherwise would be a constructive trust raised against it. As I have indicated, in 38. my view no such trust arose, so that even 1f 1t had been open to the appellant, the estoppel point would not have been necessary for the appellant to succeed on the appeal. Conclusion In my view the appeal should be allowed, but any declaration made in favour of the appellant and the Official Receiver should be subject to any application which may be made by any party other than the appellant to trace his own money into the fund in Court. Accordingly, the orders I would have the Court make are, (1) Appeal allowed. (2) Declare that the appellant is entitled for its own benefit to the sum of $81,187.50 standing in Court to the credit of an account entitled "Estate of Ross Daniel Hodby-Stephenson Nominees Pty.Ltd. - Roberts" together with accrued interest thereon, subject to any application which may be made by any party other than Stephenson Nominees Pty. Ltd. to trace his own money into the said sum in Court. (3) The appellant's costs of the appeal be paid eut of the estate of the bankrupt. Otherwise reserve all other questions of costs arising on the appeal or the 39. application below for further consideration by a single Judge of the Court. (4) Also reserve for further consideration by a single Judge of the Court, the question of the making of any application to trace in respect of the said sum in Court, as provided for in paragraph (2) hereof, and the question of any consequential directions pursuant to sub-s.134(4) of the Bankruptcy Act 1966. I certify that this and the thirty eight (38) preceding pages are a true copy of the Reasons for Judgment of his Honour Mr Justice Gummow. Associate: Mark dln : Date: 6 November 1987 Counsel for the appellant Solicitors for the appellant Counsel for the respondent Solicitors for the respondent Date of hearing Mr D. Angel Q.C. with Mr A. Brown Grope Hamilton & Co. : Mr J. Perry Q.C. with Mr M. Barrett Kelly & Co. 24 August, 1987