A client may believe they have a strong claim to a share of a property. They may point to an agreement, to payments towards the purchase, to mortgage contributions, or to work improving the home. But before a court decides whether any of that establishes an entitlement, a prior question can arise: does that person still own the right they are asking the court to enforce?
Where bankruptcy forms part of the history, the answer can change the course of the litigation. The High Court’s decision in Cummings v Claremont Petroleum NL [1996] HCA 19; (1996) 185 CLR 124 explains why a person’s involvement in a dispute does not necessarily give them standing to pursue it.
A familiar property dispute, with an additional complication
Consider a general example. A couple acquire a home in one partner’s name. The other later alleges that they agreed to share its beneficial ownership, and that contributions towards the purchase, the repayments and improvements support a resulting or constructive trust. After separation, that person seeks a declaration of ownership, an account and a sale.
The registered owner disputes the agreement and the alleged contributions. Ordinarily, attention would turn to the evidence supporting each party’s account. But suppose the claimant was an undischarged bankrupt when the alleged proprietary interest arose.
That introduces a separate issue. Even assuming an interest arose, it may have vested in the trustee in bankruptcy. The claimant would then need to establish a proper basis for enforcing it personally. This example concerns an ordinary civil claim to an existing equitable interest, rather than an application for a discretionary property adjustment under family law legislation.
What Cummings actually decided
Cummings concerned two bankrupts against whom a money judgment of some $44.45 million had been entered. Sequestration orders had been made against each of them shortly before that judgment was entered, and well before their notices of appeal were filed. The High Court dismissed their appeals from the decision that they had no standing to prosecute those appeals in their own names.
The reasoning repays attention, because the Court divided on it. Brennan CJ, Gaudron and McHugh JJ rejected the proposition that a right of appeal is itself property vesting in the trustee: at [8], “it does not follow that a right to appeal against a money judgment entered in an action against a bankrupt is property of the bankrupt”. Their conclusion on standing rested instead on the operation of the bankruptcy scheme — the judgment created a provable debt enforceable through the estate, so the bankrupt had no financial interest sufficient to confer standing. Dawson and Toohey JJ reached the same result by the opposite route, holding that “property” in the Act was wide enough to include the statutory right of appeal.
The Court was therefore unanimous in outcome but divided in reasoning. It would misstate Cummings to say that it simply held that every right to litigate passes to the trustee.
For a proprietary claim, the key passage is at [10], where the Court drew from the earlier authorities “the negative proposition that a bankrupt has no right to bring or prosecute proceedings to protect, enhance or add to the property of which he has been divested on bankruptcy”. At [14], the Court added that a bankrupt’s contingent interest in any surplus remaining after the creditors are paid “does not give him an interest which would allow him to sue to enforce proprietary rights”.
Cummings did not decide whether a constructive trust arose between domestic partners. Its significance here is the distinction between having a personal stake in the outcome and having the legal entitlement to conduct litigation concerning property vested in a trustee.
Ritson v Ryan: the Queensland application
In Ritson v Ryan [2024] QCA 236, the applicant had commenced QCAT proceedings on debts assigned to him, and a sequestration order was made against his estate while those proceedings were on foot. After the claims failed in QCAT, he sought judicial review. The primary judge dismissed that application for want of standing, and the Court of Appeal dismissed his application for leave to appeal.
Cooper J, with Mullins P and Freeburn J agreeing, applied Cummings. The relevant question, his Honour held at [24], “is not whether the right to apply for judicial review is property according to general concepts. It is whether that right is property within the meaning of the Bankruptcy Act”. The classes of rights vested by s 58 are “wider than the common law concepts of choses in action and property” (at [30]). The right to seek judicial review was “properly characterised as an incident to the choses in action which were the subject of the QCAT Proceeding” (at [31]), and an appeal “takes its character from the underlying cause of action which is the subject of the decision appealed from” (at [32]).
For an equitable property claim, this reinforces the need to identify the underlying entitlement: seeking declaratory or discretionary relief does not itself establish personal standing. Ritson was not a constructive trust case, but its reasoning supplies a Queensland appellate application of the governing principle.
Ritson also shows how a claimed exemption must be made out. The applicant argued that the assigned claims had been purchased with money protected by s 116(2)(g), being a payment under the Defence Abuse Reparation Scheme. That argument failed at [40], principally as a matter of construction: the payment was not “damages or compensation” within s 116(2)(g), the Court reasoning that if such redress payments fell within that phrase there would have been no need to enact ss 116(2)(ga) and 116(2)(gb). The absence of evidence that the money was in fact used to purchase the claims was a further difficulty. A standing argument must therefore address vesting, the construction of any exemption relied upon, and the evidence supporting it.
How that principle applies to an equitable interest
The Bankruptcy Act 1966 (Cth) gives “property” a broad meaning in s 5(1). Sections 58 and 116 govern vesting and divisible property, including relevant property acquired during the bankruptcy and before discharge. Section 58(1)(b) provides for after-acquired property to vest as soon as it is acquired by, or devolves on, the bankrupt; s 58(2) addresses equitable vesting where a law requires the transmission of property to be registered. The statutory exceptions in s 116(2) must also be considered.
An interest need not appear on the title to be relevant. If the claimant establishes a beneficial interest arising during the bankruptcy, the absence of registered ownership does not, by itself, keep that interest outside the bankrupt estate. Nor does vesting ordinarily depend on the trustee first learning of the asset or demanding it.
Applied to the example, Cummings, reinforced by Ritson, supports a potentially decisive response: even if the claimant’s alleged interest existed, the right to enforce that vested interest would ordinarily belong to the trustee. The registered owner can therefore dispute both the existence of the interest and the claimant’s entitlement to enforce it. Those are distinct issues.
The argument must remain conditional. Bankruptcy does not itself prove that a trust exists, nor does it necessarily prevent an equitable interest from arising. The question is what happens to an interest if it arises, and who is then entitled to enforce it.
Discharge does not automatically restore ownership
A former bankrupt may assume that discharge means they can resume any property claim in their own name. That assumption can be costly. Discharge and the administration of vested assets are different matters, and the trustee may continue administering the estate after discharge.
It is equally important not to assume that property remains vested forever. Whether an asset has revested, been assigned or otherwise been dealt with must be checked. Section 129AA sets time limits for realising property, with revesting where those limits pass, and s 127 limits the time within which a trustee may make a claim to property. AFSA’s guidance treats both as relevant at the end of a bankruptcy. The fact of discharge alone answers neither the ownership question nor the standing question.
The chronology can determine the result
A careful analysis separates the alleged rights and identifies when each arose. A claim that a beneficial interest existed from the time of purchase during bankruptcy is different from a claim founded on a genuinely new agreement or an independently arising right after discharge.
Later payments, improvements or representations therefore need attention. They may support an existing vested interest, or they may be relied upon to establish a different right. Describing the relief sought as a “constructive trust” does not resolve when the relevant interest or cause of action arose. Equally, commencing proceedings after discharge does not convert an old vested right into a new personal claim.
This is why Cummings should not be treated as automatically disposing of every allegation in a dispute spanning periods before and after discharge. The pleading, the source of each asserted entitlement and the bankruptcy history must be considered together.
Bankruptcy does not remove every right to sue. Section 116(2)(g) excludes from divisible property a bankrupt’s right to recover damages or compensation for personal injury or wrong done to the bankrupt, their spouse or de facto partner or a member of their family, or in respect of the death of such a person, together with damages already recovered. Section 60(4) permits a bankrupt to continue, in their own name, an action of that kind commenced before bankruptcy.
Section 60(2) is different again. An action already on foot when bankruptcy occurs is stayed until the trustee elects in writing to prosecute or discontinue it, and under s 60(3) the trustee is deemed to have abandoned the action if no election is made within 28 days after a defendant serves notice. None of these provisions is a universal rule governing every later proceeding.
A property dispute does not become a protected personal action simply because it arises from a relationship breakdown or involves allegations of unfair treatment. The legal character of the right, and of the relief sought, must be examined.
Resolve standing before the litigation gathers momentum
For a claimant, the practical starting point is to establish the bankruptcy dates, identify the trustee and investigate the status of the particular interest or cause of action. If the right belongs to the estate, the trustee’s involvement or another legally effective basis for pursuing it must be addressed. Trustee inactivity alone does not establish the claimant’s entitlement to sue.
Cummings also recognised the role of court supervision where a trustee declines to act, referring to the then s 178. Section 178 has since been repealed. The equivalent supervisory jurisdiction now sits in Division 90 of Schedule 2 (the Insolvency Practice Schedule (Bankruptcy)), principally ss 90-15 and 90-20, and standing under those provisions is narrower than it was under the former section. Any application requires attention to the orders available and to the interests of the estate.
For a defendant, a properly established standing objection may narrow or bring an end to a claim without determining every contested contribution. But defeating proceedings brought by the wrong person does not necessarily extinguish an underlying right belonging to the trustee.
Before investing in an argument about who contributed what, establish who owns the right being asserted. Cummings and Ritson are a powerful reminder that the entitlement to sue is a substantive part of the case.
This article is general information about Australian law and is not legal advice. Bankruptcy and property outcomes turn on the particular facts, dates and documents. Advice should be obtained on any specific matter.