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1 of 10 DOCUMENTS: Unreported Judgments WA 39 Paragraphs

Re The Estate of FERRARI ex parte THE PUBLIC TRUSTEE AS PLENARY ADMINISTRATOR OF THE ESTATE OF FERRARI BC9903119
SUPREME COURT OF WESTERN AUSTRALIA IN CHAMBERS MCKECHNIE J CIV 1520 of 1999 19 May 1999, 19 May 1999 Re Estate of Vitalina Ferrari; Ex parte the Public Trustee as Plenary Administrator of the Estate of Vitalina Ferrari [1999] WASC 50
Public Trustee -- Directions to commence litigation -- Undue influence -- Unconscionable conduct -Gift of estate after reservation of life interest -- Effect of Alzheimer's disease -- Whether justification for commencement of litigation Legislation: Public Trustee Act 1991 Case(s) referred to in judgment(s):

1 2 3 4 5 6 7
Nil

Beeck v Beeck, unreported; FCt SCt of WA; Library No 990209; 23 April 1999 Blomley v Ryan (1954-56) 99 CLR 362 Bridgewater v Leahy (1998) 72 ALJR 1525 Commercial Bank of Australia v Amadio (1983) 151 CLR 447 Inche Noriah v Shaik Allie Bin Omar (1929) AC 127. Louth v Diprose (1992) 175 CLR 621 Wilton v Farnworth (1948) 76 CLR 646

Case(s) also cited: Re s58 of the Public Trustee Act 1991; The Estate of VITALINA FERRARI, Leighton Nursing Home, 40 Florence Street, West Perth in the State of Western Australia, Widow, A represented person

McKechnie J
[1] This is an application under the Public Trustee Act 1991 s58 which reads:

Page 3 "The Public Trustee may, ex parte, take the opinion or obtain the direction of the Supreme Court upon any question, whether of law or of fact, arising under this Act, or in the course of his duties, or with respect to the exercise of any of the powers over persons or estates conferred upon him by this Act." The section requires, furthermore: "The Judge shall give his opinion or direction to the Public Trustee, who shall thereupon act in accordance with such opinion or direction, and shall, upon the request in writing of any such interested person, communicate to him the effect of such opinion or direction." [2] The Court is given little discretion as to whether or not it may proffer the opinion sought. It is not necessary, for the resolution of this case, to determine whether there is a discretion because in any event I propose to provide to such an opinion. This is an appropriate matter for the Public Trustee to seek directions. The powers of the Public Trustee [3] The general powers of the Public Trustee are enumerated in the Public Trustee Act s49, and include the power to bring and defend actions, suits and other proceedings, s49(j), and generally to do all such acts and exercise all such powers as effectively and in the same manner as the person whom the Public Trustee represents might have done, s49(r). Orders sought by the Public Trustee [4] The Public Trustee seeks the following orders: "1. The opinion of and obtain the direction of a Judge of this Honourable Court on whether an action should be brought by the applicant against Attilio Ferrari seeking directions that the Transfer of Land 6242209 registered on Certificate of Title Volume 1147, Folio 597 on 31 July 1996 pursuant to a deed of gift dated 18 June 1996 wherein Vitalina Ferrari transferred her estate in fee simple as the sole registered proprietor to an estate for life to herself and an estate in fee simple to Attilio Ferrari upon her death, be set aside on the grounds that Vitalina Ferrari at the time she executed the Deed of Gift:

8 9 10

(a) lacked legal capacity; and/or (b) was subject to undue influence; and/or (c) a party to unconscionable conduct.

2. An order that the costs of the application be paid from the estate of Vitalina Ferrari." [5] It can be seen immediately that the orders sought are, in the words of s58, with respect to the exercise of the powers over the estates conferred upon the Public Trustee. A descent into Alzheimer's disease [6] On 9 January 1998 the Guardianship and Administration Board made the following order, appointing the Public Trustee as administrator: "Upon an application dated 19 November 1997 by the applicant in respect of the represented person and upon the Guardianship and Administration Board ("the Board") being satisfied that the represented person (a) is unable, by reason of mental disability, to make reasonable judgments in respect of matters relating to all of her estate; and (b) is in need of an administrator of her estate; (c) and cannot have such need met by other means less restrictive of her freedom of decision and action. IT IS ORDERED THAT:

Page 4 1. THE PUBLIC TRUSTEE of 565 Hay Street, Perth IS APPOINTED PLENARY ADMINISTRATOR of the estate of the represented person with all the powers and duties conferred by the Act. 2. This Administration Order be reviewed by 9 January 2001. 3. The administrator is exempted from submitting to the Board accounts in respect of the represented person." [7] There follows then a direction to the administrator from the board: "The administrator is directed to examine any significant financial transactions and the transfer of title to the property at 31 Dangan Street, Perth to ensure that the best interests of the represented person are protected." [8] Mrs Ferrari is now aged 83, and a widow. In September 1997 she was diagnosed with Alzheimer's disease and it was that diagnosis which appears to have led to the making of the order. Dr Spear, a consultant psychiatrist for older people, says that in his experience Alzheimer's disease develops over a number of years. [9] Her general practitioner was Dr Pham. He looked after Mrs Ferrari from 5 October 1993 to 10 August 1997. She did not speak English and attended Dr Pham with her son Attilio. In Dr Pham's opinion her mental state was considered to be normal until 20 August 1997. [10] A question which arises is the extent to which the onset of Alzheimer's disease may have affected Mrs Ferrari's mental capacity prior to 1997. Dr Spear doubts her mental capacity in 1996, and says: "In my opinion Mrs Ferrari may well have been demented in 1995." A gift is made [11] In 1996 Mrs Ferrari entered into a deed of gift. In that deed she gave to her son Attilio, in consideration of her natural love and affection, her house at 31 Dangan Street, Perth, together with all household chattels. The gift was to remain expectant upon her death. [12] Attilio has apparently lived with his mother all his life until she was admitted to a nursing home in 1997. It is this gift which gives rise to the present application and was the subject of the direction of the Guardianship and Administration Board. It comprises nearly all her property except for some $9000 in a bank account. Mrs Ferrari is a pensioner. [13] Members of her family, other than Attilio, have expressed concern that Mrs Ferrari may have lacked the requisite legal capacity when she executed the deed of gift. They question whether she entered the deed because of undue influence by Attilio or unconscionable conduct by him. This is the reason why the Public Trustee seeks the direction of this Court Principles for setting aside a gift inter vivos [14] In Louth v Diprose (1992) 175 CLR 621, Brennan J said at 626 and 627: "The jurisdiction of equity to set aside gifts procured by unconscionable conduct ordinarily arises from the concatenation of three factors: a relationship between the parties which, to the knowledge of the donee, places the donor at a special disadvantage vis--vis the donee; the donee's unconscientious exploitation of the donor's disadvantage; and the consequent overbearing of the will of the donor whereby the donor is unable to make a worthwhile judgment as to what is in his or her best interest. A similar jurisdiction exists to set aside gifts procured by undue influence." [15] His Honour then refers to the Commercial Bank of Australia v Amadio (1983) 151 CLR 447 and continues: "Although the two jurisdictions are distinct, they both depend upon the effect of influence (presumed or actual) improperly brought to bear by one party to a relationship on the mind of the other whereby the other

Page 5 disposes of his property. Gifts obtained by unconscionable conduct and gifts obtained by undue influence are set aside by equity on substantially the same basis." [16] In Blomley v Ryan (1954-56) 99 CLR 362, the High Court discussed some of the circumstances in which equity will relieve against unconscionable bargains. Fullagar J, while noting that the list is of great variety and is not easily able to be classified, nevertheless included the following at 405: "The circumstances adversely affecting a party, which may induce a Court of Equity either to refuse its aid to set a transaction aside, are of great variety and can hardly be satisfactorily classified. Among them are poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary. The common characteristic seems to be that they have the effect of placing one party at a serious disadvantage vis-a-vis the other." [17] The general principles in relation to both undue influence and unconscionable conduct have been set out in a series of cases, the latest of which in the High Court is Bridgewater v Leahy (1998) 72 ALJR 1525, and in the Full Court of Western Australia in Beeck v Beeck, unreported; FCt SCt of WA; Library No 990209; 23 April 1999. The Court's approach to this application [18] This Court is not trying an action to set aside the gift. It does not have the immeasurable advantage of seeing the parties and estimating their characters and capacities, for not only does that advantage affect credibility but it also affords the best evidence of what are the essential factors in the case, viz the intelligence and other faculties of the respective parties to the transaction - per Rich J in Wilton v Farnworth (1948) 76 CLR 646 at 654. [19] However, a trial Judge in any action taken by the Public Trustee is unlikely to have that advantage. I infer from the fact of the guardianship order, and from common knowledge of Alzheimer's disease, that it is most unlikely that Mrs Ferrari could now present a coherent account of her side of the transaction. [20] In my judgment the Court in giving its opinion must adopt a commonsense approach to the prospect of litigation and the possible effect of an action on the corpus of the estate. Apart from some $9000 and some household effects of little value, the estate is in fact the life interest in the land unless the deed is set aside. [21] It will be hardly sensible to commit the resources of this estate to the vagaries of litigation without substantial prospects of success. I propose therefore to examine the evidence surrounding the deed. Mrs Ferrari's mental state at the time of the deed [22] Opinion is divided as to how far Mrs Ferrari may have been mentally incapacitated by her disease. Dr Spear is unsure as to her capacity. She may well have been demented. He did not see her until a year after the deed had been executed. In his report dated 19 November 1998 he says: "Alzheimer's Disease causes a gradual deterioration in cognitive functioning over a period of years. However, I am unable to state whether Mrs Ferrari had the legal capacity to transfer the house into her son's name on the 18th June, 1996. However, I do believe there is doubt over her ability to give testamentary capacity at that time. Because of her language difficulties I am unsure whether she would have been able to appreciate a complex legal document and therefore any testamentary capacity at that time may have been invalid unless an interpreter was with her to explain the contents of the Will. Reports from her sons differ. In a family meeting held on the 1st October, 1997, one of her sons claimed she had memory problems going back as long ago as four years earlier. Others claimed that she had been confused over the previous 18 months and one claimed she was confused over the previous three months." [23] He then proceeds to detail the fact that reports from her sons differ as to the length of memory problems. He tested her formally on 21 October 1997 and he concluded: "At that time she was disoriented for time and place and unaware of her cognitive impairment. She was

Page 6 quite clearly unable to describe her estate and would have been unable to understand a complex legal document. At this time I recommended an application to the Guardianship Administration Board for a Guardianship Order. In my opinion Mrs Ferrari may well have been demented in 1995." [24] Her general practitioner, Dr Pham, thought she was normal until August 1997. He thought she was quite lucid. She enunciated quite well with her son and performed Dr Pham's instructions. [25] As I have said, the balance of her family differ in their view as to how long Mrs Ferrari had memory problems. [26] I would have to conclude that in assessing whether to conduct litigation the available evidence as to Mrs Ferrari's mental state at the time of the deed does not point unerringly towards incapacity. There is a real risk that incapacity could not be proved. The evidence is equivocal. [27] This by itself is not decisive. Undue influence - the relationship [28] The relationship between Mrs Ferrari and her son Attilio was long and they lived under the same roof. From Dr Pham's letter I infer that he looked after her. [29] In view of her advancing age and her possibly declining state I have little hesitation in concluding that Attilio stood in a special relationship with his mother, or more precisely, that she may have been at a special disadvantage in the relationship. [30] It is asserted, although without any admissible proof, that Attilio had threatened his mother that if she did not transfer the home to him, he would leave her and there would be no-one to look after her, and if she left the house to the six children then they could kick him out into the street when she died. For present purposes I accept that evidence could be obtained in admissible form if there were an action. [31] I observe that the previous mutual wills made by Mr and Mrs Ferrari (as asserted by the family other than Attilio) did leave everything to their six children as tenants in common in equal shares. If that is so then a consequence may be that on her death Attilio would need to find other accommodation if he could not buy them out. As he apparently had lived with her all her life therefore, the transfer to him of the house on her death is not such bizarre behaviour by itself to ring alarm bells as to either her mental capacity or his special position of influence. Circumstances of the deed of gift [32] It appears that Attilio consulted solicitors who prepared a deed. Mrs Ferrari did a very sensible thing. She consulted her own solicitor Mr Martella. There are important matters of significance. First, Mr Martella advised her in Italian, because she was unable to read English. It can be seen in the passage which I have already quoted from Dr Spear's letter that this deals with one aspect, namely the presence of an interpreter. [33] Secondly, she did not accept the deed as proposed by her son's solicitors. After advice she required that it be altered so that she would be able to live in the house for the rest of her life. This was done. Thirdly, in the deed she acknowledged that she had obtained independent legal advice and made the gift voluntarily and without duress or coercion by her son. Finally, Mr Martella, the solicitor, witnessed her signature, certifying that she appeared to understand fully the deed's nature and effect. [34] The case has some similarities with the facts of Inche Noriah v Shaik Allie Bin Omar (1929) AC 127. That case was decided in part on a presumption of innocence which was not rebutted but it is of some assistance in that it indicates that the intervention of legal advice is not wholly determinative of a case. Conclusions [35] It is not necessary for me to make a judgment as to whether the deed is void because of a lack of

Page 7 mental capacity by Mrs Ferrari, undue influence and unconscionable conduct by Attilio, or both. I must decide whether there are sufficient prospects of success for the Public Trustee to embark upon potentially expensive litigation at the probable expense of the estate. [36] In my opinion the prospects of success are not so substantial as to justify the action. The relationship between the two undoubtedly gives rise to a suspicion of influence. There is, apart from the conversation attributed to Attilio about leaving, no other direct evidence of undue influence or unconscionable behaviour. Therefore inferences would have to be drawn. [37] While the circumstances give rise to a possibility of undue influence, it should be remembered that equity is concerned with undue influence in all the circumstances, not just simply influence. Mrs Ferrari's mental state at the time of the deed is problematic and the evidence is equivocal. Mrs Ferrari will almost certainly be unavailable to give evidence. This is a factor of some weight. [38] In my opinion, the interposition of a solicitor to give independent advice at the time of the deed is a substantial barrier to any successful action. The interposition of a solicitor who speaks Italian, together with the change to the deed is such that with all the other circumstances I am of opinion that, although litigation would have some prospects of success, the strength of the case is not such that justice requires an action be brought by the Public Trustee. In my opinion the Public Trustee should not commence legal action, and I make a direction accordingly. [39] Of course, this judgment does not affect the rights of others who may wish to take action. Order Direction not to commence litigation. Counsel for the applicant: Mr D L Jones Solicitors for the applicant: Public Trustee

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Page 9 2 of 10 DOCUMENTS: CaseBase Cases

Sheahan v Cooper
[1999] FCA 190; BC9900736 Court: FCA Judges: Mansfield J Judgment Date: 8/3/1999

Catchwords & Digest

Real property -- Co-ownership -- Partition and sale of land -- Sale ordered by court under s 69 of (SA) Law of Property Act 1936 Disposition of proceeds of sale. Determination of interests in property. Whether agreement intended to grant exclusive possession of property. Whether agreement resulted in licence or lease. Whether proportion of distribution of proceeds of sale to be held on constructive trust. Value of property to be determined in light of value of life interest. Application to direct sale of property and distribution of proceeds instead of division of property. Whether appropriate to make order permitting offer to purchase applicant's share only. Held: Detailed orders for sale. Agreement was for a licence, not a lease. Court unable to direct sale of applicant's share only. Cases considered by this case Annotations: All Cases Sort by: Judgment Date (Latest First) Annotation Case Name Citations (1995) 61 FCR 489; (1995) 133 ALR 545; Taxation, Commissioner of v Applied (1995) 96 ATC 4063; Krakos Investments Pty Ltd (1995) 32 ATR 7; BC9501996 (1990) 170 CLR 394; (1990) 95 ALR 321; (1990) 64 ALJR 540; Applied Commonwealth v Verwayen [1990] ANZ ConvR 600; (1990) Aust Torts Reports 81-036; [1990] HCA 39; BC9002931 [1990] WAR 62; [1989] Considered Martin-Smith v Woodhead ANZ ConvR 611 Applied AG Securities v Vaughan [1990] 1 AC 417; [1988] 3 All ER 1058; [1988] 47 EG 193; [1988] 2 EGLR 78;

Court FCA

Date 19/12/1995

Signal

HCA

5/9/1990

WASC UKHL

21/4/1989 10/11/1988

Page 10 [1988] 3 WLR 1205; (1988) 21 HLR 79; (1988) 57 P & CR 17 (1979) 27 ALR 330; (1979) 39 FLR 106 (1959) 101 CLR 209; [1959] ALR 1253; (1959) 33 ALJR 214; BC5900200 (1938) 61 CLR 96; (1938) 12 ALJR 270; BC3890119 (1905) 2 CLR 387; (1905) 11 ALR 154; [1905] HCA 12; BC0500055 (1880) 5 App Cas 651

Applied Followed

Squire v Rogers Radaich v Smith

FCA HCA

29/8/1979 7/9/1959

Applied

Hill v O'Brien Brickwood v Young & Minister for Public Works (NSW) Pitt v Jones

HCA

4/10/1938

Applied Considered

HCA UKHL

14/4/1905 21/6/1880

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3 of 10 DOCUMENTS: Unreported Judgments Federal Court of Australia 74 Paragraphs

SHEAHAN, TRUSTEE OF THE BANKRUPT ESTATE OF MARSHALL AND OTHERS v COOPER and ORS - BC9900736
FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY MANSFIELD J SG 112 of 1998 9-12 February 1999, 8 March 1999 Sheahan v Cooper [1999] FCA 190
REAL PROPERTY -- orders for disposition of proceeds of sale ordered under s69 of Law of Property Act 1936 (SA) -- whether document created lease or licence -- whether exclusive possession intended by document -- value of life interest -- application to direct sale of property and distribution of proceeds instead of division of the property -- whether order should be made permitting offer to purchase applicant's share only. Law of Property Act 1936 (SA) s69, s70, s71

11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Radaich v Smith (1959) 101 CLR 209 applied Chelsea Investments Pty Ltd v Commissioner of Taxation (1966) 115 CLR 1 considered Goldsworthy Mining Ltd v Federal Commissioner of Taxation (1973) 128 CLR 199 considered Luke v Luke (1936) 36 SR (NSW) 310 considered Rees v Rees [1931] SASR 78 considered Ferguson v Miller [1978] 1 NZLR 819 considered Hedley v Roberts [1977] VR 282 considered AG Securities v Vaughan [1990] 1 AC 417 applied Commissioner of Taxation v Krakos Investments Pty Ltd (1995) 61 FCR applied Hill v O'Brien [1938] 61 CLR 96 considered Brickwood v Young (1905) 2 CLR 387 considered Squire v Rogers (1979) 27 ALR 330 applied Baumgartner v Baumgartner (1987) 164 CLR 137 applied Commonwealth v Verwayen (1990) 170 CLR 394 applied Pitt v Jones (1880) 5 App Cas 651 considered Perman v Maloney [1939] VLR 376 considered Anderson v Anderson [1957] VR 317 considered Schnytzer v Wielunski [1978] VR 418 considered

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29

Martin-Smith v Woodhead [1990] WAR 62 considered

Sheahan, Trustee of the bankrupt estate of Jillian Helen Marshall and the bankrupt estates of Richard John Cooper and Simon Vincent Cooper (Applicants)

Mansfield J
Introduction [1] On 1 December 1998, I published reasons for my decision that, under s69 of the Law of Property Act 1936 (SA) ("the Act"), the property known as Rothmore Farm should be sold. The question of the disposition of the proceeds of that sale remained to be determined. In addition, I stayed the operation of that order upon certain terms, to enable the fourth respondent ACC to pursue an application under s71 of the Act in respect of Rothmore Farm. This judgment addresses those two matters. I shall not repeat the findings and conclusions in those reasons. I shall also use the same terms and descriptions in those reasons, again without repeating them. [2] There are certain other matters which these reasons also address: whether an order should be made under s69 or s70 of the Act for the sale of the land in Crown Lease Register Book Volume 498 Folio 76 ("the Heritage land"); whether an order should be made under s69 or s70 of the Act, or under s71 of the Act on the application of the second respondent JEC, for the sale of the 48 Bay Road Moonta property, and whether on the application of the Trustee I should vary the order previously made to permit the separate sale of a small part of Rothmore Farm to Tiparra Sanctuary Pty Ltd ("Tiparra"), being s284 and s285 in the Hundred of Tiparra ("the sanctuary land") which is part of the land in Certificate of Title Register Book Volume 3222 Folio 200 ("the Title"). [3] The Commonwealth Bank of Australia and the Commonwealth Development Bank of Australia Ltd ("the Banks") appeared. They have an interest in the second part of Rothmore Farm as registered mortgagees of the undivided moiety of Rothmore and in the first part of Rothmore Farm as registered mortgagees of the undivided moiety of JHM. They have not participated in the hearing. [4] Elsie May Cooper is also a mortgagee of the undivided moiety of Rothmore in the second part of Rothmore Farm, by mortgage granted on 30 November 1983. It is not registered. The parties accept the existence of that mortgage, and that it would take priority over any later unregistered interest granted in the relevant moiety of Rothmore Farm, but be subject to the registered interest of the Banks. Elsie May Cooper attended the hearing on 1 December 1998 by counsel, but did not participate in the subsequent hearing of this matter. [5] Initially, Mr Tennyson Turner applied orally to be joined as a respondent. I declined that application. My reasons of 1 December 1998 explain that decision. On 22 January 1999, both Mr Turner and Agri-Steel Pty Ltd ("Agri-Steel") applied to be joined as respondents. That application was granted with the consent of the parties, and without either Mr Turner or Agri-Steel filing any affidavits in support of their application. The interests in Rothmore Farm [6] On the question as to the distribution of the proceeds of sale, the Trustee seeks orders that the proceeds of the sale of the first part of Rothmore Farm, including the sanctuary land, be applied:

30 31 32 33

(a) as to one half, to him as trustee of JHM to reflect the moiety in her name, and (b) as to the other half, (i) 67.56% to him as trustee of JHM to reflect her life interest in the other half (ii) 16.22% to him as trustee of RJC and SVC to reflect their quarter interests in the remainder of that other half

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34 35 36 37 38

(iii) 8.11% to ACC to reflect his quarter interest in the remainder of that other half, and (iv) 8.11% to MJC to reflect his quarter interest in the remainder of that other half, and that the proceeds of the land comprising the second part of Rothmore Farm be applied: (c) as to one half to Rothmore to reflect the moiety in its name, and (d) as to the other half, in the same manner as (b) above.

[7] The interests referred to in (a) and (c) are mortgaged to the Banks, and in the case of the interest referred to in (c) it is also mortgaged to EMC. The parties acknowledge that any orders for the distribution of the proceeds of sale should recognise and give effect to those mortgages. [8] The Trustee seeks that the distribution of the proceeds of sale of the Heritage land also be effected in the same manner as in (a) and (b) above. [9] The Trustee arrives at the apportionment in respect of the moiety in Rothmore Farms subject to JHM's life interest by valuing JHM's life interest, and then by calculating that value as a percentage of the total value of Rothmore Farm. The balance then remaining is divided equally between the four remaindermen. The respondents dispute that methodology, and the figures upon which the calculations are based. As appears below, I agree generally with the submissions of the Trustee. [10] It is necessary first to consider the present claim of Mr Turner to an interest in Rothmore Farm. Contrary to his earlier position, he now claims an equitable interest in Rothmore Farm itself as lessee or in some other capacity so as to be entitled to a share in the proceeds of the sale. He was supported in that claim by ACC. The claim is a derivative one, in the sense that it is dependent upon certain earlier transactions. [11] By letter dated 15 February 1993, JHM entered into an agreement with Belgravia Pty Ltd ("Belgravia") in the following terms: "I hereby grant your company, Belgravia Pty Ltd, a licence to freely enter at all times upon all the properties where I have a life interest, or any other interest, for the purposes of cultivating crops of your discretion and performing engineering and other works which you deem suitable. This licence also allows you to erect building, sheds and other improvements to the land or the buildings standing upon the land subject to the improvements being approved by the various regulatory authorities. This licence is irrevocable and transferable. In exchange for this licence, you or the holder of this licence will maintain me for the balance of my life." [12] The letter was typed. Adjacent to the signature of JHM there was printed by hand the following: "We the Trustees of the Jill Cooper Family Trust and Directors of Rothmore Farms Pty Ltd and Rothmore Pty Ltd do hereby agree with the granting of the Licence under the terms stated by Jillian Helen Marshall." [13] The three individual signatures under that printing were of ACC, RJC and SVC. No seal of Rothmore was fixed. ACC deposes to being a director of Rothmore, but the capacity in which RJC and SVC signed the document is not explained. [14] ACC deposes to having thereafter, with Belgravia and his brothers, provided accommodation and living expenses to JHM. He and his brothers and Belgravia have cropped the land. He does not explain the relationship between Belgravia, his brothers and himself, or how income and expenses have been shared between them, or indeed how he and his brothers have been entitled to participate with Belgravia in cropping the land. [15] Belgravia, by one of its directors Noelene Michelle Cooper ("NMC"), by affidavit sworn 4 February 1999, asserts a continuing interest in Rothmore Farm. She does not refer at all to any transfer of Belgravia's interest in Rothmore Farm to ACC, or by ACC to Mr Turner.

Page 15 [16] However, ACC asserts that in May 1988 Belgravia transferred to him the whole of its assets. He has produced a letter apparently from Belgravia, signed by NMC, to himself dated 22 May 1998. It reads: "As we agreed when you said you would accept the vesting of the Jill Cooper Family Trust, you must understand that you yourself have to take care of your Mother, provide money for her and accommodation if it becomes necessary. It's no secret that she is not happy sharing homes with each of you boys, so you can be sure you'll have to provide a house for her some time in the future. You can take this letter as an assignment of those rights and obligations to your Mother along with the vesting of the assets of the trust. At least you'll have the use of the life interest land while she lives, so you may be able to carry the cost of looking after her that Belgravia has had." [17] On 7 August 1998, ACC asserts that he sold the whole of the assets and property acquired from Belgravia to Mr Turner. He did not initially give any details of that arrangement. It was the arrangement by reason of which, as noted in my earlier reasons, Mr Turner claimed at the earlier hearing no more than access to Rothmore Farm to farm the crops presently growing and to harvest them, and to retain the benefit of those crops. [18] Rothmore's directors at material times have been RJC, SVC, ACC and JHM. The shareholders of its ten issued shares are RJC, SVC and ACC one each and JHM seven. The sequestration orders were made on 20 April 1998, so thereafter the Trustee in effect became interested in nine of the ten shares, and only ACC remained eligible to act as a director. It is unclear whether the quorum for a directors' meeting is only one director. Rothmore does not appear to have participated in any way in the agreements of 22 May 1998 or 7 August 1998, either by signifying its assent to either arrangement or in any other way. [19] On 1 February 1999, ACC signed an agreement with Mr Turner which he was asked to sign "to clarify the agreement" of 7 August 1998. That document is more formal in appearance. It recites the interest of JHM and the agreements of 15 February 1993 and 22 May 1998, and the assignment by ACC to Mr Turner on 7 August 1998 of "the whole of the rights" assigned to ACC on 22 May 1998. It recites that Mr Turner would then perform ACC's obligations in favour of JHM. It records that the arrangement of 7 August 1998 was partly in writing. No document to that effect has been produced in evidence. It then reaffirms the agreement of 7 August 1998 recorded in the recitals. [20] In Radaich v Smith (1959) 101 CLR 209, the High Court laid down that the decisive factor in determining whether a document such as the letter of 15 February 1993 creates a lease as opposed to a licence is whether the right which the document confers creates the right of exclusive possession: per McTiernan J at 214, Taylor J at 217-218. In that case, the instrument in question was in much more formal and detailed terms than the letter of 15 February 1993. See also Chelsea Investments Pty Ltd v Commissioner of Taxation (1966) 115 CLR 1 at 7; Goldsworthy Mining Ltd v Federal Commissioner of Taxation (1973) 128 CLR 199 at 212. [21] In my judgment, the agreement between JHM and Belgravia was not intended to, and did not, grant to Belgravia the exclusive possession of Rothmore Farm. It is not expressed to relate only to the first part of Rothmore Farm but its whole including the second part in which Rothmore has an undivided moiety. In fact, as noted below, ultimately Belgravia built improvements on the second part of Rothmore Farm. Up to the time of the agreement, at least in respect of the second part of Rothmore Farm, both Rothmore and JHM were entitled to use each and every part of the land co-owned but only so long as each did not exclude the other from the land: Luke v Luke (1936) 36 SR (NSW) 310; Rees v Rees [1931] SASR 78; Ferguson v Miller [1978] 1 NZLR 819. JHM therefore had the right to lease, or licence, the use of Rothmore Farm but not to the exclusion of Rothmore, or to the extent of interfering with Rothmore's rights in relation to the land: Hedley v Roberts [1977] VR 282. I do not consider that the agreement of Rothmore to the grant of the licence by JHM constituted a grant of Rothmore's interest in the second part of Rothmore Farm to Belgravia. The endorsement is not expressed in terms appropriate to such a grant. [22] In addition, the letter expressly confines the purposes to which Rothmore Farm may be used to cultivating crops or performing engineering or other works. At the time, ACC and his family were living in a house on Rothmore Farm, presumably under some informal family arrangement with JHM and

Page 16 Rothmore. The letter was not intended to exclude ACC and his family from Rothmore Farm, but exclusive possession would have had that consequence. In fact, ACC and his family continued to live on Rothmore Farm. This position is not addressed in the letter at all. [23] Those two considerations point firmly, in my judgment, to the fact that JHM's letter of 15 February 1993 did not give Belgravia the right to exclusive possession of Rothmore Farm. There are other indications which also point to the same conclusion. [24] The letter is expressed in terms of granting a "licence" rather than a lease. Whilst that term is not of itself decisive, it is a significant indicator of the parties' intention: AG Securities v Vaughan [1990] 1 AC 417. As Hill J (with whom von Doussa J and O'Loughlin J agreed) said in Commissioner of Taxation v Krakos Investments Pty Ltd (1995) 61 FCR 489 at 495-496, where it is not suggested that the label used is not a genuine statement of the parties' intention, that label should be given its proper weight. Moreover, the mortgages to the Banks by both Rothmore and JHM of their respective undivided moieties in the second part and the first part of Rothmore Farm were granted well before the letter, but there is no recognition of the rights which those mortgages granted to the Banks, or any apparent consideration of the Banks' interests. Any intention to grant a lease would have been very likely to lead to those issues being addressed in some way in the document. In particular, no apparent consideration was given to who, as between JHM and Belgravia, or even as between Rothmore and Belgravia, would maintain interest payments under the mortgages or, if that obligation remained with JHM and Rothmore, how Belgravia's position would be protected in the event of their default. It is also significant, in my view, that the letter granting the licence does not identify any particular term. Although it might be inferred that the term of the "licence" was for JHM's life, the letter is expressed to grant the licence in respect of the properties in which JHM has "any other interest" presumably referring to her undivided moiety in the first part of Rothmore Farm. It is said to be "irrevocable". Although the consideration is the obligation to maintain JHM for the balance of her life, that does not of itself convey that the licence expired at that time. The letter also does not deal with the impact of any interest if granted upon the interest of the remaindermen, in particular MJC whose approval to the licence was not obtained. It does not deal with matters such as who should pay for rates and taxes and any other statutory outgoings. It does not provide in any detail for the nature of the obligation to maintain JHM. Its language overall lacks the formality of expression usually found in the grant of a lease or of an agreement for a lease. The fact that it was really, as EMC deposed, a restructuring of existing informal arrangements involving JHM and members of her family to provide a more formal structure to enable JHM's sons to continue to work on Rothmore Farm and to run the engineering repair and manufacturing business also in my view tends to support the conclusion to which I have come: see, for example, Hill v O'Brien [1938] 61 CLR 96. I also observe that, in respect of those parts of Rothmore Farm which comprise Crown leasehold, the lease terms prohibit alienation by the leaseholder without permission of the relevant Minister. There is no evidence that such permission was contemplated, or sought, by JHM. That was a consideration which Dixon J address in Hill v O'Brien at 110. [25] I conclude that the letter of 15 February 1993 gave Belgravia a licence to enter upon Rothmore Farm to use it for certain stipulated purposes, but did not give it the right to exclusive possession of Rothmore Farm. [26] I have not had regard to the way in which Rothmore Farm was run after 15 February 1993 in construing that letter. That conduct is however consistent with the conclusion I have reached that the letter was not intended to grant Belgravia a lease of Rothmore Farm or exclusive possession of it: AG Securities v Vaughan (above). The evidence indicates that the obligation to support JHM was undertaken by ACC and his brothers as well as Belgravia, and that they all continued to crop the land. The transfer to ACC, and then to Mr Turner, during 1998 was effected very informally. In each event, Rothmore's position was not apparently considered. It was not asked to approve those later transactions. Until the document of 1 February 1999, as his earlier attitude illustrates, Mr Turner had apparently accepted that the transfer to him was in respect of the 1998-1999 crop only, with the right to enter Rothmore Farm to manage and harvest that crop. [27] There was a separate claim for some equity in Rothmore Farm arising from Belgravia's expenditure on improvements to Rothmore Farm in or after 1993. I have referred in more detail to the evidence and my

Page 17 findings on that topic when considering the value of Rothmore Farm. [28] I have found that Belgravia expended $50,000 or more on a shed on the second part of Rothmore Farm. In my view, it did so pursuant to a contractual arrangement with JHM to which Rothmore assented. I also find in my reasons below that that expenditure increased the value of Rothmore Farm by $7,500. In my judgment, that expenditure created an equitable claim in favour of Belgravia as against JHM in respect of her life interest in the second part of Rothmore Farm, because I find that it was incurred on behalf of JHM under the terms of the letter of 15 February 1993: Brickwood v Young (1905) 2 CLR 387, and with Rothmore's knowledge and approval. That claim exists only to the extent to which those improvements have increased the value of Rothmore Farm, namely $7,500: Squire v Rogers (1979) 27 ALR 330. Any claim by Belgravia against JHM in respect of that sum will be a personal claim against JHM, rather than one which separately entitles Belgravia (or ACC or Mr Turner as the successors to that personal claim) to participate directly in the distribution of the proceeds of sale. For reasons which appear below, I conclude that the proportion of the distribution of proceeds of sale representing that $7,500 is held by JHM or her estate on constructive trust for Belgravia or ACC or Mr Turner: cp Baumgartner v Baumgartner (1987) 164 CLR 137. [29] I reject the submission that that expenditure by Belgravia gave rise directly to some form of equity in Rothmore Farm, so as to entitle it to participate directly in the distribution of the proceeds of sale of Rothmore Farm. The improvement became part of the land itself, and at common law the person erecting the improvement has no claim to an interest in the land by reason only of having made that improvement. In equity, however, Belgravia's position in relation to JHM and Rothmore should be recognised so that neither benefits unconscionably by reason of Belgravia's expenditure: Commonwealth v Verwayen (1990) 170 CLR 394 at 409, 434-437, 440-441. In the light of my conclusion that the letter of 15 February 1993 did not grant to Belgravia an interest in the land, and in the absence of any other evidence of communications between JHM and Belgravia before it carried out the improvements that there was any assurance by JHM or Rothmore that the expenditure by Belgravia for the improvements would lead to Belgravia somehow getting an interest in Rothmore Farm, I conclude that equity will give effect to that circumstance by the constructive trust referred to in the preceding paragraph. [30] ACC also claims to have a right to have the distribution of the proceeds of sale adjusted to reflect certain maintenance and improvements which he carried out to Rothmore Farm. He has replaced the hot water service and the water pressure pump to the house on Rothmore Farm in which he lives with his wife and two young children, and has repainted that house, installed a new soakage pit, and effected other repairs. He has provided no evidence to quantify the amount expended on that maintenance and on those improvements. Mr Clark was not asked about them. I am unable to find that they added to the value of Rothmore Farm in any measurable way. I reject that claim. [31] I accordingly find that those entitled to participate in the distribution of the proceeds of sale of Rothmore Farm should be the interests for which the Trustee contends, subject to the distribution to JHM in respect of her life interest in the second part of Rothmore Farm being subject to a constructive trust in the sum of $7,500 in favour of Belgravia or the successors to its contractual rights namely ACC and then Mr Turner. [32] It is necessary to determine the value of Rothmore Farm so as to quantify the respective interests in the moiety held by JHM for life as between herself and the four remaindermen. That value will also be significant if ACC is to be given the opportunity to purchase that portion of Rothmore Farm other than his interest and that of MJC. The value of Rothmore Farm [33] There was no dispute that I should accept as a starting point the value of Rothmore Farm in accordance with the evidence of Mr John Clark, a qualified land valuer experienced in rural valuations. That value is $1,193,373. That does not include the value of the improvements added by Belgravia. [34] On the basis of his evidence, I find that the value of the first part of Rothmore Farm is $583,545 including the sanctuary land (valued by him at about $5,525), and the value of the second part of Rothmore

Page 18 Farm is $609,828 plus $7,500 for improvements, namely $617,328. That additional small sum reflects the value of improvements which he did not value when first he inspected Rothmore Farm because he did not see them. On that occasion, he was shown around the property by RJC, so I do not think that initial omission from his valuation is of significance. I conclude that those improvements are on the second part of Rothmore Farm, based upon the evidence of NMC. I have not had regard to the offer of Tiparra for the sanctuary land for the purpose of determining the value of JHM's life interest. [35] During 1993, Belgravia arranged for the construction of a steel workshop and other buildings at a cost of about $50,000 (on the evidence of ACC) and at least $66,500 (on the evidence of NMC) on part of Rothmore Farm. That is the improvement which Mr Clark included in his additional allowance of $5,000$10,000 and in respect of which I have allowed the $7,500 referred to above. Since then, Belgravia operated a business of repair and manufacture of farm machinery from those buildings, and ACC, RJC and SVC have been employed in that business as well as cropping the farm. Prior to that time, ACC, RJC and SVC had been operating that business apparently in a more desultory way in sheds already existing on the property. I infer that Mr Turner has continued to operate that business probably through Agri-Steel Pty Ltd since August 1998. [36] Notwithstanding that evidence as to the cost of those improvements, I accept Mr Clark's evidence that they added only $5,000-$10,000 to the value of the property overall. He explained that there is no direct correlation between the cost of improvements and the value they add to rural land, and that in his experience such sheds only add minimally to the value of a property such as Rothmore Farm. His evidence on this topic was not contradicted in any respect by the evidence of Mr Gerald Dee, who was called by the respondents. I make an adjustment to the value of Rothmore Farm of $7,500 for those improvements as noted above, to reflect the mid point of his range. [37] Counsel for ACC suggested that, whilst the respondents generally accepted Mr Clark's valuation, there were matters of "interpretation" which it was necessary to address. One such matter was whether he intended that the values he arrived at should be reduced by $75,000 for the expenses of surveying and water metering, to which he referred in his valuation of 11 June 1998. I understood the reference to that sum as being the additional costs to be incurred if Rothmore Farm was not to be sold as a whole, although his valuation is somewhat cryptically expressed on that issue. He confirmed in his oral evidence that the $75,000 was only an expense to be incurred if Rothmore Farm was broken up and the several titles of land it comprised were sold severally. If it were sold as a whole, and for its present cropping use, that cost would not be incurred. I do not therefore reduce its value on that score. JHM's life interest [38] The value of JHM's life interest in Rothmore Farm, and in the sanctuary land, and in the Heritage land, needs to be determined so as to make orders concerning the distribution of the proceeds of sale of those various pieces of land. The amount to be distributed to the remaindermen, namely MJC, ACC and the estates of SVC and RJC, will be determined only in the light of the amount to be distributed to the estate of JHM for her life interest. [39] JHM was born on 21 May 1938. She is now sixty. She deposes to having had three "heart attacks", the first when she was only thirty-six years of age, and that she suffers from hypertension for which she takes blood pressure lowering medication. It is submitted that she has a very high risk of further heart problems, so that her life expectancy is significantly lowered. [40] Evidence was called from Dr C Kamenjarin, her general practitioner from May 1998 until recently, and from Mr P Hetzel, a qualified and practising cardiologist since 1958. They each had access to JHM's medical notes extending back to the 1970s. Each was an impressive and careful witness. They were agreed that she suffered from long standing hypertension. The difference in opinion between them was whether JHM had suffered myocardial infarction in 1977 and myocardial ischaemia thereafter, and consequently whether her life expectancy was diminished from the normal for her age by five years or ten years. [41] She clearly suffered a transient episode of chest and left arm pain in 1977, and was hospitalised for a brief period. Thereafter, she has suffered from hypertension, largely but not entirely controlled by

Page 19 appropriate medication, and worsened during periods of emotional stress. During Dr Kamenjarin's treatment, apart from elevated blood pressure on occasions, JHM was asymptomatic. The 1977 incident was treated conservatively, and her then general practitioner diagnosed possible old myocardial infarction. He obtained two ECG traces which were not conclusive. Mr Hetzel said that those traces were not indicative of a (then) recent heart attack, and that any significant ongoing ischaemic heart disease would have been likely to have produced further significant episodes of heart pain. None were recorded in her medical history from 1977. [42] I prefer the evidence of Mr Hetzel that JHM's life expectancy is diminished by five years from the normal life expectancy for a person of her age. I do so because I think the assessment of her medical condition in the light of the data from 1977 is more in his area of particular expertise, and because of his long experience. I do not think Dr Kamenjarin was in a position of particular advantage in the diagnosis of the incident in 1977 or thereafter, until 1998, compared to Mr Hetzel as her findings were limited to those on clinical examinations only during 1998, and they were largely normal apart from the elevated blood pressure. She too was forming a diagnosis and prognosis on medical history, but without the specialisation and experience of Mr Hetzel. She acknowledged that her estimate of life expectancy was "speculative". [43] Mr Clark's evidence was that Rothmore Farm could be leased for an annual sum equivalent to 5% of the unimproved value of the property, to be paid half yearly in advance. Mr Dee accepted that that was a common approach among valuers. Mr Clark said that more recently, annual rental was sometimes up to 6% of unimproved land value in respect of better quality land, but he did not put Rothmore Farm into that category. I accept Mr Clark's evidence on that topic. [44] On the basis of Mr Clark's valuation, I find that the unimproved value of Rothmore Farm is $1,159,973. That figure is arrived at by deducting from the value of $1,193,373 the value of the improvements as identified by Mr Clark. I appreciate that I have included in that sum $5,525 for the sanctuary land. In my view, it is appropriate to do so as the purpose of the exercise is to determine the value of JHM's life interest in Rothmore Farm as a whole. I was not asked by any party to do otherwise, and I was not given any evidence upon which I could otherwise value JHM's life interest separately in the sanctuary land. One half of that sum is $579,986.50. The income at 5% per annum which would be earned from that land would be $28,999.33. [45] Jon Holbrook is a Fellow of the Institute of Actuaries of Australia. His unchallenged evidence is that the present value of $1 per annum paid half-yearly in advance to a female aged sixty and ceasing upon death is $13.989, based upon a female whose life expectancy is five years less than normal. On the basis of a life interest generating a gross income of $28,999.33 per annum, the present value of the life interest is therefore $405,672. No party argued that I should make an allowance for taxation. [46] As the finding I have made is that the present value of Rothmore Farm is $1,200,873 (excluding any special value for the sanctuary land), I conclude that the value of JHM's life interest in one moiety of Rothmore Farm is 67.56% of the value. If Rothmore Farm is to be sold, in my judgment the estate of JHM should receive 67.56% of the proceeds of the sale of the moiety in which she has a life interest. [47] Mr Dee was somewhat critical of the approach adopted above, although ultimately he did not provide any other valuation method for JHM's life interest. He agreed that the methodology adopted by the Trustee through the evidence of Mr Clark and Mr Holbrook was a possible method of valuing a life interest. I discerned that he had been retained to address somewhat limited questions. He explained that the sale of a life interest only is very difficult because of the speculative nature of the life expectancy, and that it is also difficult to value a life interest reliably without detailed knowledge of the health, age and insurability of the life in question. I accept that evidence. However, in the present circumstances, I am called upon to determine the appropriate distribution of the proceeds of sale of Rothmore Farm, and it is necessary therefore to place some value upon the life interest of JHM. I have had the benefit of the expert evidence of Mr Clark and Mr Holbrook, and of the expert medical evidence of Mr Hetzel and Dr Kamenjarin in relation to the very matters Mr Dee said should be considered. I have no other methodology or valuation suggested by him. As indicated earlier I found Mr Clark to be an impressive witness and I accept his views and propose to proceed on the basis of them.

Page 20 [48] Counsel for JHM contended that the share of the disposition of the proceeds of sale of Rothmore Farm to which the estate of JHM was entitled for her life interest should be reduced because, under the will giving her that life interest, she was obliged to pay the rates and taxes and other like outgoings on Rothmore Farm. No evidence at all was adduced on the amount of those outgoings, and neither Mr Clark nor Mr Holbrook were cross-examined to suggest that that consideration would in any way affect their conclusions, or to ascertain whether either had made any assumptions on that topic which might be incorrect. In those circumstances, I am unable to conclude that JHM's obligation to pay those outgoings would alter the evidence upon which I have relied in reaching my conclusions, or that I should alter my conclusions because of it. [49] On the basis of my findings, therefore, the life interest of JHM in Rothmore Farm is worth 67.56% of the value of one moiety in each of the first part and of the second part of Rothmore Farm. It follows that interest of each of MJC, ACC, RJC and SVC should each attract one quarter of the balance, namely 8.11%. I shall treat those proportions as applicable also to the sanctuary land if it is to be separately sold. No evidence was directed specifically to the value of JHM's life interest in the Heritage land, nor was any submission made that I should treat it differently. I propose to proceed upon the same apportionment for the distribution of the proceeds of sale in respect of the Heritage land, especially in the light of its small value. ACC's application under s71 [50] S71 provides: "On any application for partition, if any party interested in the property requests the court to direct a sale of the property and a distribution of the proceeds instead of a division of the property between or among the parties interested, the court may, if it thinks fit, unless the other parties interested in the property, or some of them, undertake to purchase the share of the party requesting a sale, direct a sale of the property, and give all necessary or proper consequential directions, and in case of such undertaking being given the court may order a valuation of the share of the party requesting a sale in such manner as the court thinks fit, and may give all necessary or proper consequential directions." [51] I have determined in my earlier reasons that s69 and s70 of the Act create rights independent of s71, and that s71 does not establish any legal proviso or qualification to the operation of those two sections: Pitt v Jones (1880) 5 App Cas 651; Perman v Maloney [1939] VLR 376; Anderson v Anderson [1957] VR 317; Schnytzer v Wielunski [1978] VR 418; Martin-Smith v Woodhead [1990] WAR 62. I did however stay the operation of the sale orders then made to enable ACC to pursue the making of an order that he be permitted to purchase Rothmore Farm or part of it under s71. [52] Counsel for ACC pointed out that the rationale for the independence of the rights under s69 and s70 lies in the undesirability of the party seeking the sale being forced to sell to another part owner of the property an interest in the property at a price determined by valuation, rather than being able to put the property to an open public sale: see eg per Lord Blackburn in Pitt at 659-660. It is then put that, in the particular circumstances, there is no real issue as to the valuation of Rothmore Farm, or as to the preparedness of the Trustee to accept that valuation for the purposes of an order under s71. The Trustee has not indicated that, for the purposes of any order under s71, he is prepared to accept the valuation of Rothmore Farm by Mr Clark. In that circumstance, it is not necessary to determine whether the only foundation for the decision in Pitt v Jones is as contended, although the discussion in Martin-Smith v Woodhead at 67-69 lends strong support to that submission. [53] There is a more significant reason in my view as to why I should decline to make an order under s71 in favour of ACC. I have decided that Rothmore Farm would be most effectively sold as one unit (subject to the application to separate the sanctuary land). Any order under s71 could not result in the sale of the moiety of Rothmore in the second part of Rothmore Farm. That is because s71 contemplates, in the present circumstances, ACC undertaking to "purchase the share of the party requesting a sale", namely the Trustee in respect of the interests of JHM, RJC and SVC. I reject the contention that the power to give all necessary or proper consequential directions contained within s71 is sufficient to empower the Court under s71 to direct the sale of Rothmore's interest in the second part of Rothmore Farm. I do not think those words are

Page 21 intended to do other than to facilitate the sale by the party interested from the party requesting the sale. No authority to the contrary was referred to. The result of any order under s71 would therefore leave Rothmore's interest, mortgaged to the Banks and to EMC, remaining with ACC owning the balance of Rothmore Farm other than the interest of MJC. MJC through counsel was prepared to submit to that position. However, as I indicated earlier in these reasons the Trustee holds through the estates of JHM, RJC and SVC nine of the ten issued shares in Rothmore. I am not persuaded that, in the circumstances, I should make an order which would leave Rothmore in that position. The sanctuary land [54] The sanctuary land is at the south western corner of Rothmore Farm, with frontage to Spencer Gulf. It occupies about 110.5 hectares. [55] Tiparra, on 7 December 1998, offered to purchase the sanctuary land for $120,000. The offer is unconditional. It has the capacity to pay for that land, and I find that its offer is genuine. [56] That offer is very greatly in excess of the value ascribed to the sanctuary land by Mr Clark. He valued the sanctuary land as scrub and sand hills worth $50 per hectare, and so worth about $5,525. Mr Clark was cross-examined to suggest that part of the sanctuary land was put to crop, and may have been of greater value than he suggested. There is now no physical mark clearly depicting the line between s284 and s285 and the balance of the land in the Title. However, Mr Clark was clear that the land in those sections was properly described as scrub and sand hills, and that a prospective buyer would so regard it, even if it was in a particular season partly put to crop. He focussed particularly on the sandy nature of the soil. He was sure that the scrub and sand hills land was that nearest the coastline. He assessed the land in the Title, and in Certificate of Title Register Book Volume 4214 Folio 545 as containing 182 hectares of scrub and sand hills in all. As s284 and s285 comprise the land closest to the coastline, I accept his evidence that the land in those sections is properly described as scrub and sand hills. Indeed, that scrub and sand hill area must extend inland even a little further to make up his assessment of 182 hectares of scrub and sand hills. In any event, even if the sanctuary land were in part land capable of being cropped, the Tiparra offer would clearly exceed any value which might ordinarily be ascribed to it. [57] The separation of the sanctuary land from the balance of Rothmore Farm will involve some additional costs for surveying. I find on the evidence that the separate sale of the sanctuary land will not affect the amount which would be obtained for the balance of the land in the Title, or for the balance of Rothmore Farm. There was some cross-examination of Mr Clark to explore whether a part of Rothmore Farm adjoining a wildlife sanctuary (the proposed use of the sanctuary land by Tiparra) would be adversely affected by weeds and vermin, but Mr Clark did not agree with those suggestions. There was no evidence adduced to support those suggestions. As I have indicated, I generally accept Mr Clark's evidence, including on this topic. [58] It is appropriate for all those interested in Rothmore Farm that the sanctuary land be sold in a manner that achieves the best price reasonably obtainable. The sale of the sanctuary land separately to Tiparra or to someone else will achieve that end. I therefore propose to vary the orders made on 1 December 1998 to direct the separate sale of the sanctuary land for $120,000. The Heritage land [59] The Heritage land is the land in Crown Lease Register Book Volume 498 Folio 76. It is owned as to one undivided moiety by JHM, subject to mortgages to the Banks, and as to the other undivided moiety by JHM for life and then for RJC, SVC, ACC and MJC equally. [60] Ultimately it was not contended that an order should not be made for the sale of the Heritage land. It is worth $5,000. The net proceeds should be applied in the same manner as in respect of the first part of Rothmore Farm, namely 50% to the Trustee on behalf of the estate of JHM and being subject to mortgages to the Bank, 33.78% to the Trustee on behalf of the estate of JHM unencumbered, 4.055% to the Trustee on behalf of the estate of RJC, 4.055% to the Trustee on behalf of the estate of SVC, and 4.055% each to ACC

Page 22 and MJC. The 48 Bay Road Moonta property [61] This property is in the names of SVC and JEC. It is their family home. They have three children aged fourteen, ten and eight. [62] The property is subject to a mortgage to the State Bank of South Australia ("the State Bank"), securing an indebtedness at 5 August 1998 of $29,934.65. The State Bank is aware of the application. It has not participated in the hearing. [63] It is common ground that the property is worth $90,800. [64] JEC has applied for an order under s71 of the Act that she be permitted to purchase SVC's interest in the property. That order is not really opposed. The issue is as to the sale price at which she should be given that opportunity. If she does not obtain such an order, or does not purchase the property pursuant to such an order, an order for sale under s69 and s70 of the Act is also not then opposed by her. [65] The only real issue is as to the value of SVC's interest. The Trustee claims that it is 50% of the value. JEC contributed $8,000 of her own money to the purchase of the property, and she claims that her equity in the property should reflect that contribution so that the amount she should have to pay to acquire SVC's interest should be reduced by that amount. I do not accept that contention simply because I am not satisfied on the evidence that there was inequality in the respective contributions of JEC and SVC to the acquisition of the property or subsequently. I do not have evidence as to when that property was purchased, or the sources of funds then used in its purchase (other than JEC's assertion of having contributed $8,000 cash), or the extent to which its purchase price was financed by borrowed funds, or the extent of any improvements to that property following its purchase, or the source of any funds applied to any such improvements. [66] It is common ground that a sale to JEC of SVC's interest will save about $5,000 in selling costs. [67] In the circumstances, I propose to order and direct under s71 of the Act that JEC be permitted to purchase the interest of SVC in the 48 Bay Road Moonta property within a period of thirty-five days from the date of the order for a price of $42,900 less half the amount then due to the State Bank, but of course subject to the consent of the State Bank. That figure represents my conclusion as to the value of SVC's interest in the property, less $5,000 to reflect selling costs which would otherwise be incurred if the Trustee were selling the property on the open market. That assumes that the State Bank mortgage will remain. JEC will have to pay the costs of the transfer including any stamp duty. If the State Bank does not agree to the mortgage remaining, JEC will have to pay $42,900 plus one half of the amount owing under the mortgage, and the Trustee will have to discharge fully the State Bank mortgage at settlement. The result, on the assumption that the amount outstanding under the mortgage is $30,000, will be that in either case the Trustee will recover clear the sum of $27,900 for SVC's interest in that property. The end result will be the same, and JEC will thereby get an unencumbered title with which she may be able to finance the purchase price by borrowing from another lending institution, if necessary. [68] If JEC does not exercise the opportunity to purchase the property in accordance with the above terms, then I am of the view that a sale of the property and a distribution of the proceeds would be more beneficial for JEC and the estate of SVC than a partition of the property. Accordingly, in that event, I would direct a sale of the property under s69(2) of the Act in a manner and at a time to be determined by the Trustee, and that after discharge of the mortgage to the State Bank of South Australia, the net proceeds of sale be distributed to JEC and to the estate of SVC equally. The 77 Bay Road Moonta property [69] The Trustee has not yet pursued this remaining aspect of the application (para3 of the amended application). I propose to adjourn it to a date to be fixed with liberty to apply to restore it to the list for directions on seven days' notice.

Page 23 The orders [70] The Trustee has indicated that he is prepared to accept an offer by ACC to purchase all of Rothmore Farm except for the interests of ACC and MJC, upon the basis of Mr Clark's valuation, including the amount offered for the sanctuary land, provided the source of funds used by ACC for that purpose is not funds to which he claims to be entitled in separate proceedings in this Court derived from the vesting of the Jill Cooper Family Trust. Evidence shows that, at present, such funds are available to ACC. MJC is prepared to acquiesce in that order. I have not been asked by any party to make any adjustment to that amount to reflect selling costs which would not be incurred by the Trustee by such a sale. [71] Both the Trustee and ACC submit that the Court has power to make such an order under s74 of the Act, which provides: "On any sale under this Part the court may, if it thinks fit, allow any of the parties interested in the property to bid at the sale, on such terms as to non-payment of deposit, or as to setting off or accounting for the purchase-money, or any part thereof, instead of paying the same, or as to any other matters as to the court seem reasonable." [72] As there is no dispute about that matter, I am disposed to make such an order. [73] To calculate the distribution of the proceeds of sale, I have fixed the value of the first part of Rothmore Farm at $698,020 to reflect the greater value of the sanctuary land. Mr Clark's value of the first part of Rothmore Farm has been adjusted to reflect the increased value of the sanctuary land, that is by taking off the $5,525 ascribed to the sanctuary land by Mr Clark and adding the potential sale price of $120,000. The total value of Rothmore Farm including the sanctuary land is $1,315,348. That figure is arrived at by adjusting the value of $1,193,373 also to reflect the increased value of the sanctuary land, and secondly by adding $7,500 for the improvements of which Mr Clark's initial valuation did not take account. Accordingly, for the purposes of the respective half interests of JHM and Rothmore in the first and second parts of Rothmore Farm, I have applied the percentage which reflects the proportion which each part bears to the total value. Those percentages are 53.0673% for the first part of Rothmore Farm and 46.9327% for the second part of Rothmore Farm. The figure in para2 of the orders and directions below represents 91.89% of the total value, that is excluding the interests of ACC and MCJ as remaindermen in one half of Rothmore Farm. Their respective interests represent 8.11% of the total value based upon the conclusions expressed above. [74] I make the following orders and directions: 1. I vary the order made on 1 December 1998 by separately ordering the sale of the sanctuary land. 2. I direct that the Trustee sell or offer for sale Rothmore Farm and including the sanctuary land (but excluding the interests of ACC and MJC) to ACC upon the conditions (i) that he pay the sum of $1,208,673 subject to any normal adjustments for rates and taxes and other outgoings (ii) that he settle the sale and purchase of that land within twenty-one days of the date of this order (iii) that the Trustee is satisfied that the source of the funds to be used by ACC to purchase that land is not funds to which he otherwise claims to be entitled in Action No SG 3019 of 1998 in this Court by reason of the claim by Rothmore Farms Pty Ltd (In Liq) of which the Trustee is liquidator to the assets and funds made available to ACC by the vesting of the Jill Cooper Family Trust (iv) otherwise specified in para1-para7 of my order of 1 December 1998. 3. If Rothmore Farm including the sanctuary land is sold to ACC pursuant to para2 hereof, I direct that the proceeds of that sale be distributed as follows: (i) to the Trustee for the estate of JHM in respect of her $ 349,014 undivided moiety in the first part of Rothmore Farm including the sanctuary land (26.534% of the full value) (ii) to Rothmore in respect of its undivided moiety in the $ 308,660

Page 24 second part of Rothmore Farm (23.466% of the full value) (iii) to the Trustee for the estate of JHM in respect of her life interest in Rothmore Farm including the sanctuary land (33.78% of the full value of Rothmore Farm) but subject to the sum of $7,500 to be held on constructive trust for Belgravia or its contractual successors (vi) to the Trustee for the estate of RJC in respect of his remainder interest in Rothmore Farm including the sanctuary land (4.055% of the full value) (v) to the Trustee for the estate of SVC in respect of his remainder interest in Rothmore Farm including the sanctuary land (4.055% of the full value)

$ 444,325

$ 53,337 $ 53,337 __________ $1,208,673

subject to the above figures being adjusted in proportion to reflect any alteration to the purchase price by reason of the normal adjustments at settlement. 4. If ACC does not settle a contract for the sale and purchase of Rothmore Farm including the sanctuary land within twenty-one days of the date of this order, I direct (i) the Trustee sell the sanctuary land to Tiparra for $120,000, to be settled at such time and in such manner as the Trustee and Tiparra may arrange, and (ii) the Trustee sell Rothmore Farm excluding the sanctuary land upon the terms ordered in para1 - para7 of my order of 1 December 1998, and to the extent necessary to give effect to (i) hereof, my order of 1 December 1998 is varied. 5. I direct that the Trustee sell the Heritage land upon the same terms as ordered in respect of Rothmore Farm on 1 December 1998. 6. The net proceeds of the sale of Rothmore Farm and the sanctuary land be distributed as follows: (i) to the Trustee in respect of the undivided moiety of JHM in the first part of Rothmore Farm including the sanctuary land - 26.534% (ii) to Rothmore in respect of the undivided moiety of Rothmore in the second part of Rothmore Farm 23.466% (iii) to the Trustee in respect of the life interest of JHM in Rothmore Farm including the sanctuary land, but subject to $7,500 being held on constructive trust for Belgravia or its contractual successors - 33.78% (iv) to the Trustee in respect of the remainder interest of RJC in respect of Rothmore Farm including the sanctuary land - 4.055% (v) to the Trustee in respect of the remainder interest of SVC in respect of Rothmore Farm including the sanctuary land - 4.055% (vi) to ACC in respect of his remainder interest in Rothmore Farm including the sanctuary land - 4.055% (vii) to MJC in respect of his remainder interest in Rothmore Farm including the sanctuary land - 4.055%. 7. I direct that the proceeds of the sale of the Heritage land be distributed in the same manner as directed in para6(i)-para6(vii) hereof. 8. I direct that the interest of the estate of SVC in the 48 Bay Road Moonta property be offered for sale by the Trustee to JEC for $42,900 but subject to that price being adjusted so that the estate of SVC bears one half of the amount owing under the State Bank mortgage and upon the following terms: (i) the price be subject to any normal adjustments for rates and taxes and other outgoings

Page 25 (ii) settlement be effected by JEC within thirty-five days of the date of this order and the proceeds of such sale be distributed to the Trustee for the estate of SVC. 9. If JEC does not settle the purchase of the 48 Bay Road Moonta property in accordance with para8 hereof, I direct that the 48 Bay Road Moonta property be sold by the Trustee upon the same terms as specified in respect of the sale of Rothmore Farm in the order of 1 December 1998, and that the net proceeds of the sale be distributed (j) as to one half thereof to the Trustee as Trustee for the estate of SVC, and (ii) as to one half to JEC. 10. I direct that para3.1 of the amended application be adjourned to a date to be fixed with liberty to apply to restore that part of the application to the list on seven days' notice. Order 1. Para1.4 of the order made on 1 December 1998 be varied by adding at the end thereof the words "other than the land comprised in s284 and s285 in the Hundred of Tiparra, and being portion of the land comprised in that title". 2. That John Sheahan as trustee of the bankrupt estate of Jillian Helen Marshall and of the bankrupt estates of Richard John Cooper and Simon Vincent Cooper ("the Trustee") sell or offer for sale to Andrew Charles Cooper the land known as Rothmore Farm and being the land referred to in para1 and para2 of the order made on 1 December 1998 as varied by this order and the land referred to in para4(i) of this order (but excluding the interests therein of Andrew Charles Cooper and Martin James Cooper) upon the conditions (i) that the Trustee sell and Andrew Charles Cooper pay for those interests in that land the sum of $1,208,673, subject to any normal adjustments for rates and taxes and other outgoings to settlement (ii) that Andrew Charles Cooper settle the sale and purchase of that land within twenty-one days of the date of this order (iii) that the Trustee is satisfied that the source of the funds to be used by Andrew Charles Cooper in the purchase of that land is not funds to which the Trustee otherwise claims to be entitled in Action No SG 3019 of 1998 in this Court by reason of the claim by Rothmore Farms Pty Ltd (In Liq) of which the Trustee is liquidator to the assets and funds made available to Andrew Charles Cooper by the vesting of the Jill Cooper Family Trust and otherwise upon the terms specified in para3, para5, para6 and para7 of the order made on 1 December 1998. 3. If Andrew Charles Cooper purchases the land referred to in para2 of this order in accordance with its terms, the proceeds of that sale be distributed as follows: (i) to the Trustee for the bankrupt estate of Jillian Helen $ 349,014 Marshall in respect of her undivided moiety in the land comprised and described in Certificates of Title Register Books Volume 4384 Folio 117, Volume 4214 Folio 545 and Volume 3322 Folio 200 and in Crown Lease Register BooksVolume 544 Folio 90, Volume 545 Folio 9 and Volume 658 Folio 95 (26.534% of the full value of the land referred to in para1 and para2 of the order made on 1 December 1998 as varied by para1 of this order and of the land referred to in para4(i) of this order) (ii) to Rothmore Pty Ltd in respect of its undivided $ 308,660 moiety in the land comprised and described in Certificate of Title Register Book Volume 3323 Folio 1 and in Crown Lease Register Book Volume 543 Folio 89

Page 26 (23.466%) (iii) to the Trustee for the bankrupt estate of Jillian Helen Marshall in respect of her life interest in the land referred to in para1 and para2 of the order of 1 December 1998 as varied by para1 of this order and the land referred to in para4(i) of this order (33.78%) but subject to the sum of $7,500 to be held on constructive trust for Belgravia Pty Ltd or its contractual successors (iv) to the Trustee for the bankrupt estate of Richard John Cooper in respect of his remainder interest in the land referred to in para1 and para2 of the order of 1 December 1998 as varied by para1 of this order and the land referred to in para4(i) of this order (4.055%) (v) to the Trustee for the bankrupt estate of Simon Vincent Cooper in respect of his remainder interest in the land referred to in para1 and para2 of the order of 1 December 1998 as varied by para1 of this order and the land referred to in para4(i) of this order (4.055%)

$ 444,325

$ 53,337

$ 53,337

__________ $1,208,673 subject to the above figures being adjusted to reflect the percentages above to represent any alteration to the purchase price referred to in para2 hereof by reason of any adjustment thereto at settlement pursuant to para2(i) of this order. 4. If Andrew Charles Cooper does not purchase the interests in the land referred to in para2 of this order in accordance with its terms, (i) the land comprising s284 and s285 in the Hundred of Tiparra and being part of the land comprised and described in Certificate of Title Register Book Volume 3322 Folio 200 be sold to Tiparra Pty Ltd for $120,000 at such time and in such manner as the Trustee and Tiparra Sanctuary Pty Ltd may arrange, and otherwise be sold in conjunction with the land referred to in para4(ii) of this order; and (ii) the land referred to in para1 and para2 of the order made on 1 December 1998 as varied by para1 of this order be sold in accordance with para2 to para7 of that order. 5. The land comprised and described in Crown Lease Register Book Volume 498 Folio 76 be sold in accordance with para2 to para7 of the order made on 1 December 1998. 6. The net proceeds of the sale of the land referred to in para4 of this order be distributed as follows: (i) to the Trustee for the bankrupt estate of Jillian Helen Marshall in respect of her undivided moiety in the land referred to in para3(i) of this order: 26.534% (ii) to Rothmore Pty Ltd in respect of its undivided moiety in the land referred to in para3(ii) of this order: 23.466% (iii) to the Trustee for the bankrupt estate of Jillian Helen Marshall in respect of her life interest in the land referred to in para1 and para2 of the order made on 1 December 1998 as varied by this order and the land referred to in para4(i) of this order but subject to $7,500 being held on constructive trust for Belgravia Pty Ltd or its contractual successors: 33.78% (iv) to the Trustee for the bankrupt estate of Richard John Cooper in respect of his remainder interest in the land referred to in para1 and para2 of the order made on 1 December 1998 as varied by this order and the land referred to in para4(i) of this order: 4.055% (v) to the Trustee for the bankrupt estate of Simon Vincent Cooper in respect of his remainder interest in the land referred to in para1 and para2 of the order made on 1 December 1998 as varied by this order and the land referred to in para4(i) of this order: 4.055%

Page 27 (vi) to Andrew Charles Cooper in respect of his remainder interest in the land referred to in para1 and para2 of the order made on 1 December 1998 as varied by this order and the land referred to in para4(i) of this order: 4.055% (vii) to Martin James Cooper in respect of his remainder interest in the land referred to in para1 and para2 of the order made on 1 December 1998 as varied by this order and the land referred to in para4(i) of this order: 4.055%. 7. The net proceeds of the sale of the land referred to in para5 of this order be distributed in the same manner and in the same proportions as directed in para6(i) to para(vii) of this order. 8. The Trustee as trustee for the bankrupt estate of Simon Vincent Cooper sell or offer for sale to Janet Ethel Cooper the interest of Simon Vincent Cooper in the land comprised and described in Certificate of Title Register Book Volume 5439 Folio 585 upon the conditions (i) that the Trustee sell and Janet Ethel Cooper pay for that interest in that land the sum of $42,900 but subject to that sum being adjusted so that the bankrupt estate of Simon Vincent Cooper bears one half of the amount owing under the mortgage to the State Bank of South Australia, (ii) that the purchase sum being adjusted at settlement to reflect any normal adjustments for rates and taxes and other like outgoings (iii) that Janet Ethel Cooper settle the sale and purchase of that interest in that land within thirty-five days of the date of this order and the proceeds of such sale be distributed to the Trustee for the bankrupt estate of Simon Vincent Cooper. 9. If Janet Ethel Cooper does not purchase the interest in the land referred to in para8 of this order in accordance with its terms, the land referred to in para8 of this order be sold by the Trustee in accordance with para2 to para7 of the order made on 1 December 1998, and the net proceeds of the sale of that land be distributed (i) as to one half thereof to the Trustee as trustee for the bankrupt estate of Simon Vincent Cooper, and (ii) as to one half thereof to Janet Ethel Cooper. 10. Para3.1 of the amended application be adjourned to a date to be fixed, with liberty to apply to restore that part of the application to the list on seven days' notice. Note: Settlement and entry of orders is dealt with in O36 of the Federal Court Rules. Counsel for the applicant: Mr R Whitington QC with him Mr G Davis Solicitor for the applicant: Piper Alderman Counsel for the first to the fifth respondents: Mr D Kennelly Solicitor for the first to the fifth respondents: Aldermans Consultant Solicitors No attendance for the sixth repondent The seventh respondent appeared in person

Page 28

Page 29 4 of 10 DOCUMENTS: CaseBase Cases

Webster, In the Marriage of

(1998) 24 Fam LR 198; (1998) FLC 92-832; [1998] FamCA 1517 Court: FamCA Judges: Ellis, Finn and Gee JJ Judgment Date: 24/12/1998

Catchwords & Digest

Family law -- Property interests -- Inherited property -- Trust Appeal by husband against property settlement orders. Application by husband for leave to appeal against child support departure order. Whether trial judge erred in adjustment made for factors under s 75(2) of Family Law Act 1975 (Cth). Whether trial judge's determination under s 79 of Act was outside reasonable exercise of discretion Whether within full court's power to re-exercise discretion. Where wife's father set up discretionary trust and wife beneficiary of trust. Where discretionary trust purchased group of companies. Where, in accordance with father's testamentary intentions, total control of companies passed to wife. Where two further trusts established. Where wife's mother had life interest in first trust. Where second trust set up for benefit of children of marriage. Where trial judge treated second trust as resource of wife and not an asset, and included value of first trust as asset, discounted for mother's life interest. Where wife made undertaking to court to distribute second trust only to children of marriage. Where trial judge in assessing contributions by parties for purposes of s 75(2) of Act, found weight in favour of wife. Where trial judge found husband entitled to additional $500,000 due to wife's resource of second trust. Whether trial judge erred in treating second trust as resource of wife and in adopting global approach to assessment of contributions. Whether trial judge erred in assessment of husband's contributions. Held: Appeal allowed. Application for leave to appeal refused. Trial judge did not err in treating second trust as financial resource of wife, or in adopting global approach to contributions. Trial judge erred in adjustment made for factors under s 75(2) of Act, in light of disparity in property of parties, significant contribution of husband to second trust and financial resources of wife. Trial judge's s 79 orders outside reasonable exercise of discretion and not just and equitable within meaning of section. Appropriate for full court to re-exercise discretion. Adjustment of $2 million made in favour of husband for s 75(2) factors. Cases referring to this case Annotations: All CasesSort by: Judgment Date (Latest First) Annotation Case Name Citations

Court

Date

Signal

Page 30 Cited Cited Smith v Fields Stephens v Stephens (Enforcement) [2012] FamCA 510; BC201250415 (2009) 42 Fam LR 423; (2009) FLC 93-425; [2009] FamCAFC 240; BC200951218 (2009) 42 Fam LR 336; (2009) FLC 93-420; [2009] FamCAFC 222; BC200951106 (2008) 238 CLR 366; (2008) 251 ALR 257; (2008) 83 ALJR 145; (2008) 1 ASTLR 271; (2008) 40 Fam LR 1; (2008) FLC 93388; [2008] HCA 56; BC200810608 (2007) 212 FLR 362; (2007) 38 Fam LR 149; (2007) FLC 93-336; [2007] FamCA 680 (2004) 181 FLR 220; (2004) 31 Fam LR 608; (2004) FLC 93-184; [2004] FamCA 249 FamC A FamC A FamC A 6/7/201 2 24/12/2 009 15/12/2 009

Cited

Kostres v Kostres

Cited

Kennon v Spry; Spry v Kennon

HCA

3/12/20 08

Followed

Stephens v Stephens

FamC A FamC A

13/7/20 07 24/3/20 04

Cited

Coventry v Smith

Journal articles referring to this case Article Name Webster v Webster; Casenotes Cases considered by this case Annotations: All Cases Sort by: Judgment Date (Latest First) Annotation Case Name Citations (1994) 117 FLR 335; Davidson, In the Marriage of Considered (1994) 17 Fam LR 656; (No2) (1994) FLC 92-469 27/04/1990 FamCt Considered Reynolds, In Marriage of Unreported (1986) 11 Fam LR 457; Considered Ashton, In the Marriage of (1986) FLC 91-777 (1986) 161 CLR 513; (1986) 65 ALR 12; (1986) 60 ALJR 335; Considered Norbis v Norbis (1986) 10 Fam LR 819; (1986) FLC 91-712; [1986] HCA 17; BC8601421 (1981) 148 CLR 150; (1981) 37 ALR 66; Thomson Australian Holdings (1981) 55 ALJR 614; Considered Pty Ltd v Trade Practices (1981) ATPR 40-234; Commission [1981] HCA 48; BC8100114

Citations (1999) 5(3) CFL 128

Signal

Court FamCA FamCA FamCA

Date 13/4/1994 27/4/1990 27/8/1986

Signal

HCA

30/4/1986

HCA

11/9/1981

Page 31 Considered Considered Pastrikos, In the Marriage of M Lewis Plant Hire Pty Ltd v Thompson (1979) 6 Fam LR 497; (1980) FLC 90-897 02/11/1976 NSWCA Unreported FamCA NSWCA 21/9/1979 2/11/1976

Legislation considered by this case Legislation Name & Jurisdiction Family Law Act 1975 (Cth) Family Law Rules (Cth)

Provisions s 75(2), s 79(1) O 32 r 2(3)

Page 32

Page 33

5 of 10 DOCUMENTS: Unreported Judgments NSW 47 Pages

REGISTRAR-GENERAL v HARRIS and ANOR - BC9805500; [1998] 45 NSWLR 404

SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MASON P, POWELL AND STEIN JJA CA 40701/97 15 May 1998, 22 October 1998
Torrens System -- remedies for deprivation -- claim against assurance fund -- whether person liable to pay damages was "insolvent" -- relevant time for determination -- Real Property Act 1900, s126(5) Statutes -- interpretation -- extrinsic matters -- legislative history of act -- whether provision was a consolidation of its predecessor -- whether entitled to beneficial interpretation -- ordinary and natural meaning -- "insolvent" -- Real Property Act 1900, s126(5) John Ham and Raymond Ham held beneficial interests in land under the Real Property Act 1900 (the "Act") as tenants in common. These interests were held subject to a life interest which came to an end in 1988. In 1989 the land was transferred by way of sale to Mr and Mrs Camley who believed that they were dealing with both brothers. In fact, it was Raymond alone who executed various documents, forging his brother's signature. On 24 October 1991, John Ham filed a Cross Claim against the Registrar-General for damages for deprivation of his interest in the land pursuant to s126(5) of the Act. At this date, Raymond Ham had not been declared bankrupt. However, it was found that he lacked funds to meet his debts as they fell due, including his liability to damages under s126(1)(a), s126(2)(b) and s126(3). By the time of trial in 1997, John Ham had died and the proceedings were continued by his legal personal representatives, the respondents in the appeal. BC9805500 at 2 Young J held that the word "insolvent" in s126(5) means unable to pay his, her or its debts as they fall due. Accordingly, his Honour held that Raymond Ham was "insolvent" at the date of commencement of proceedings and that John Ham's estate was entitled to recover damages from the Torrens Assurance Fund. HELD, dismissing the appeal: (1) A person seeking to invoke the provisions of s126(5) of the Act must establish that the relevant fact upon which he or she seeks to rely exists at the time of the commencement of the proceedings. It is irrelevant that that fact may no longer exist at the time of the hearing. Saade v Registrar-General (NSW) (1993) 179 CLR 58, followed. (2) (By Mason P, Stein JA concurring; Powell JA dissenting) In the Real Property Act 1900, s126(5), the word "insolvent" means unable to pay his, her or its debts as they fall due. Re Muggeridge's Settlement (1859) 29 LJ Ch 288; Attorney General for British Columbia v Attorney

Page 34 General for Canada [1937] AC 391; James v Rockwood Colliery Co (1912) 106 LT 128; London and Counties Assets Co Ltd v Brighton Grand Concert Hall and Picture Palace Ltd [1915] 2 KB 493; Corporate Affairs Commissioner of New South Wales v Yuill (1991) 172 CLR 319, applied. Discussion of insolvency and bankruptcy laws in Australia and England during the nineteenth century.

Mason P
John Ham and Raymond Ham held beneficial interests in land under the Real Property Act 1900 ("the Act"). John had a two thirds interest and Raymond a one third interest as tenants in common. The beneficial interests arose under Terms of Settlement filed in proceedings brought in 1959 against their late father's estate. The brothers held their interests subject to a life interest which came to an end in 1988. In 1989 the land was transferred by way of sale to Mr and Mrs McCamley who believed that they were dealing with both brothers. In fact it was Raymond alone who executed various documents, forging his brother's signature. One such forged document was a Withdrawal of Caveat which purported to withdraw a Caveat lodged by John in 1962 to protect his equitable interest in the land. S126 of the Act gave John statutory causes of action for damages against his fraudulent brother, and against the Registrar-General as nominal defendant. So far as relevant, s126 provides: Compensation for party deprived of land 126.(1) Any person deprived of land or of any estate, or interest in land:

39 40

(a) in consequence of fraud; ...

may bring and prosecute in any Court of competent jurisdiction an action for the recovery of damages. (2) An action under subs(1) shall, ... subject to subs(3), subs(4) and subs(5), be brought and prosecuted against the person:

41 42 43

... (b) upon whose application the erroneous registration was made; ...

(3) In every case in which the fraud, error, omission, or misdescription occurs upon a transfer for value, the transferor receiving the value shall be regarded as the person upon whose application the transferee was recorded as registered proprietor in the folio of the Register. ... (5) In any of the following cases, that is to say:

44 45

... (b) when the person liable for damages under this section is dead, bankrupt, or insolvent, or cannot be found within the jurisdiction,

such damages with costs of action may be recovered out of the Torrens Assurance Fund by action against the Registrar-General as nominal defendant. BC9805500 at 3 By the time of trial in 1997 John had died, and the proceedings were continued by his legal personal representatives who are the respondents to this appeal.

Page 35 Raymond Ham was served but did not appear. Young J held that it was clear that the respondents (as executors of John Ham's estate) had a cause of action pursuant to s126 against Raymond for damages in consequence of fraud. Raymond was ordered to compensate John's estate in a sum in excess of $200,000. But this judgment was worthless in view of Raymond's financial position. Young J also held that John's estate was entitled to recover damages from the Torrens Assurance Fund ("the Fund") pursuant to s126(5). That decision is the subject of this appeal. The issue arises in this way. On 24 October 1991 John filed a Cross Claim against the Registrar-General which propounded the claim under s126(5). At this date, Raymond Ham had not been declared bankrupt. However, it was found that he then lacked funds to meet his debts as they fell due, including his liability to damages under s126(1)(a), s126(2)(b) and s126(3). In other words, he was insolvent in the lay sense of the word. But he was not made bankrupt until 1993 (pursuant to a petition presented by BC9805500 at 4 a bank). What is at issue in the appeal is whether Raymond Ham was "insolvent" according to the terms of s126 in 1991. The appellant contends that he was not, because of the absence of "some public or overt fact or event [marking] the commencement of a voluntary [or involuntary] sequestration" (cf R v Davison (1954) 90 CLR 353 at 365 per Dixon CJ and McTiernan J). LEGISLATIVE HISTORY OF S126 S126 has stood in its present form, with immaterial exceptions, since 1900. When Mr Heydon, Commissioner for the Consolidation of the Statute Law, certified the Bill for the Real Property Act 1900 he provided a Memorandum informing the reader that: This Bill consolidates the whole or part of six Acts. The original Acts are very badly drawn, but such large interests are governed by them that it has been reluctantly decided that it would be too hazardous to use a free hand in reforming their arrangement and language. ... Cl126. This most confused section would have been dealt with more freely but that its subject matter is very important, and its real meaning obscure. ... I certify that save as aforesaid this Bill solely consolidates and does not alter, add to, or amend the law as contained in the Acts therein consolidated. BC9805500 at 5 S126 re-enacted s117 of the Real Property Act 1862. So far as relevant the 1862 section provided: Any person deprived of land ... in consequence of fraud ... may bring and prosecute an action at law for the recovery of damages against such person as the Governor ... may appoint as nominal defendant and in any other case against the person upon whose such land the application was brought under the provisions of this Act or who acquired title through such fraud ... provided further that ... in case the person against whom such action for damages is directed to be brought as aforesaid shall be dead or shall have been adjudged insolvent or cannot be found within the jurisdiction then and in any such case such damages with costs of action may be recovered out of the assurance fund by action against the Registrar-General as nominal defendant. It can be seen that the presently critical portion of the enactment proceeded from "shall have been adjudged insolvent" in 1862 to "is ... bankrupt, or insolvent" in 1900. YOUNG J's REASONS Young J pointed out that the time proceedings were commenced was the relevant time for determining the

Page 36 operation of s126(5)(b) (see Saade v Registrar-General (NSW) (1993) 179 CLR 58 at 68-69). The learned judge then referred to s126 as a practical scheme for compensation requiring a purposive construction to meet its beneficial objective. S126 complements provisions such as s41, s42, s43, s43A, s124 and s135 which give indefeasibility of title to registered proprietors in certain BC9805500 at 6 circumstances. His Honour recognised that the present form of s126 is replete with ambiguities (see generally New South Wales Law Reform Commission, Torrens Title: Compensation for Loss, Report 76, 1996). The judge then addressed the Registrar-General's specific submission that "insolvent" in s126 means "adjudged insolvent". He noted that the argument could take many forms, but the strongest version of it was that, when the Real Property Act was consolidated in 1900, there were two types of people whose estates had been sequestrated: (a) those who had been made insolvent under the Insolvency Act 1841; and (b) those who had been made bankrupt under the Bankruptcy Act 1898. Young J observed that the Registrar-General's argument also drew strength from the reference in s131(2) to a right of recovery of moneys paid in respect of a claim on the Fund against "the estate of such insolvent or bankrupt". S131(2) also appears to contemplate that the insolvent or bankrupt will have his or her estate administered by "the Official Receiver in Bankruptcy". (In its original form in 1900, the words were "the official assignee") As against this, there were difficulties in completely merging s131(2) with s126(5). These include BC9805500 at 7 the fact that it is not necessarily the case that the insolvent mentioned in s126(5) remains insolvent at the time the Registrar-General makes the claim under s131(2). His Honour continued: Accordingly, although s131(2) points toward the construction that "insolvent" means "adjudged insolvent", it does not seem to me that it goes the whole way. His Honour then reviewed the arguments in favour of the claimant. Citing Re Muggeridge's Settlement (1859) 29 LJ Ch 288 and Re Bevin [1936] NZLR 789, he noted that the normal meaning of "insolvent" is "unable to pay his or her debts as they become due". Secondly, he repeated that the purpose of the scheme was to make sure that people who have been deprived of their actions in an ejectment by the Torrens system should not go away empty-handed. Thirdly, he concluded that Registrar-General (NSW) v Behn [1979] 2 NSWLR 496 (Holland J), [1980] 1 NSWLR 589 (CA), (1981) 148 CLR 562 (HC) supported the claimant, because an award against the Fund was made in that case on the basis of a fraudulent dealing by an "insolvent" company. The company (Cornic Loan & Credits Pty Ltd) was without funds, but there was no finding that it had been "adjudged bankrupt" or ordered to be wound up. BC9805500 at 8 These three arguments led the learned judge to conclude that the word "insolvent" in s126(5)(b) means unable to pay his, her or its debts as they fall due. THE APPELLANT'S CHALLENGE TO YOUNG J's REASONS Counsel for the appellant have submitted that Young J's interpretation of the word "insolvent" does not give sufficient weight to the legislative history. The appellant's submission, in essence, is that: (a) The term "insolvent" was originally used in the relevant provision of the Real Property Act 1862 to refer to persons adjudged insolvent under the insolvency laws then in force. (b) When the insolvency laws were replaced by bankruptcy laws, the reference to bankruptcy was added. There remained, however, persons to whom the insolvency laws were applicable. That was the reason for retaining the reference to insolvency in the Real Property Act consolidation of 1900.

Page 37 (c) Nothing has occurred since 1900 to require that a new or expanded meaning be given to "insolvent" in s126(5)(b). BC9805500 at 9 This submission was developed in detail as follows. When the Real Property Act 1862 was passed, the only law relating to insolvency in New South Wales was the Insolvency Act 1841. The 1862 Act's predecessor to s126 (s117) made no reference to "bankrupt", confining itself to the phrase "shall have been adjudged insolvent". Other references to insolvency in the 1862 Act are also to be read as references to the technical sense of the word involving a change of status consequent upon formal steps having been taken by a creditor or the debtor (see s3 (definition of "Transmission"), s50, s75 and s123). It was submitted that the relevant alteration in language between s117 of the 1862 Act and s126 of the 1900 Act (whereby "shall have been adjudged insolvent" was replaced by "is ... bankrupt, or insolvent") did not betoken a change in meaning. The word "adjudged" was otiose. Next it was submitted that that the principles of construction of consolidating statutes are to be applied and that they support a presumption against an intention to effect any substantive amendment. The parliamentary debates contain nothing to suggest an intention to effect a substantive amendment. Adoption of the lay meaning of "insolvent" brings uncertainty and problems of proof. BC9805500 at 10 Young J's reliance upon the Behn decisions was said to be misplaced, because the present issue was not argued at any stage in the litigation. Indeed, there is a contradictory dictum of Gibbs CJ (Registrar-General (NSW) v Behn (1981) 148 CLR 562 at 567) where his Honour said: The words of s126(5) show that the damages recoverable out of the Assurance Fund are the damages for which the person who is insolvent is liable "under the section", that is the damages recoverable under subs(1). This conclusion is supported by the provisions of s131 and s132; the fact that the money paid out of the fund is recoverable from the estate of the insolvent indicates that it was contemplated that the fund was not liable for any greater amount than that for which the insolvent was liable to the person deprived of the land. (emphasis added) Finally, the appellant relied upon the opinion expressed in Hogg, The Australian Torrens System (1905) where the learned author said (at 990-991): The words "bankruptcy " and "insolvency " are (except in the case of New Zealand) used in the Torrens Statutes with reference to their meaning in the respective local enactments relating to bankruptcy or insolvency, and usually in a semi-technical sense to indicate the status of a debtor whose property - whether by "adjudication" of his person as a bankrupt, or "sequestration" of his effects for the benefit of creditors is being administered under the protection of the Courts with a view to liquidation. (The author added a footnote referring to the principal Bankruptcy or Insolvency Acts of the various States. This included the New South Wales Bankruptcy Act 1898.) BC9805500 at 11 INSOLVENCY AND BANKRUPTCY IN THE NINETEENTH CENTURY The Oxford English Dictionary 2nd ed relevantly defines "bankrupt" to mean "a merchant, trader, or other person whose property and effects, on his becoming insolvent, are administered and distributed for the benefit of all his creditors, under that system of statutory regulations called the Bankrupt or Bankruptcy Laws". (The earliest such law was passed in 1542.) This and other definitions in that work distinguish between insolvency as a state of affairs and bankruptcy as a formal consequence thereof. One such reference is a statement of Lord Ellenborough CJ in 1817, when he spoke of a man who "knew himself insolvent, and when ruin and bankruptcy were staring him in the face" (Simpson v Sikes (1817) 6 M & S 295 at 316, 105 ER 1253 at 1261). However, the Oxford English Dictionary also gives examples of "bankruptcy" being used to denote a general state of impecuniosity; and definitions of "insolvency" involving a formal status. Wharton's Law

Page 38 Lexicon (14th ed) points out that the noun "insolvent", when distinguished from "bankrupt", was an insolvent who was not a trader: for (in England) only a trader could originally be made bankrupt in the sense of obtaining an absolute discharge from debts, while the future estate of an insolvent remained liable for debts even after discharge. In his monograph Bankruptcy and Insolvency in London during the BC9805500 at 12 Industrial Revolution (1985) Ian Duffy demonstrates at length the legal distinctions between the Bankruptcy Laws and the Insolvency Laws as each evolved in England during the period 1750-1850. Until the mid nineteenth century, the benefits and burdens of the bankruptcy laws only fell on traders of various categories. The petitioner had to establish that the debtor was a trader who had committed an act of bankruptcy. There were various offences, some even punishable by death. A complex and much-abused system operated to gather assets and divide them among creditors. Subject to these matters, bankruptcy was a privilege because it could result in discharge from indebtedness. By contrast, the insolvency laws addressed the plight of non-traders. The principal remedy - imprisonment was harsh, extremely dilatory, and (unlike bankruptcy) did not lead to release from indebtedness short of payment. From the early nineteenth century there were English statutes "for the relief of insolvent debtors" (53 Geo III c1 & 2 (1813), 102 Vic cl10, subs23ff (1838)), primarily designed to relieve against the rigours, inadequacies and dangers of imprisonment. In England the distinction between insolvent and bankrupt in their formal senses was gradually broken down, culminating in the application of the bankruptcy legislation generally to non-traders with the Bankruptcy Act 1861. By the Bankruptcy Repeal and Insolvent Court Act 1869, all the enactments BC9805500 at 13 on the subject were repealed, and provision was made for winding up and terminating all matters pending under the Acts for the relief of insolvent debtors. This parallel system was not replicated in New South Wales. Imprisonment for debt (through the writ of capias ad satisfaciendum) was severely curtailed from 1846 onwards (see 10 Vic No 7, An Act to simplify the Law abolishing Imprisonment for Debt). In 1839 the Supreme Court of New South Wales confirmed that the English Bankrupts Act 1825 (6 Geo IV cl6 was not in force in New South Wales: see Ex parte Lyons; In re Wilson (1839) 1 Legge 140. This ruling spurred the legislature to pass the Insolvency Act 1841 (5 Vic No 17), which was in force when the Real Property Act 1862 was passed. Its long title was: An Act for giving Relief to Insolvent Persons, and providing for the due Collection, Administration, and Distribution of Insolvent Estates, within the Colony of New South Wales, and for the Prevention of frauds affecting the same. Unlike the situation then prevailing in England, the Insolvency Act 1841 dealt compendiously with traders and non-traders. And it used the expression "insolvency" both in the lay sense, and as a description of the BC9805500 at 14 formal status which current English statute law described as "bankruptcy". As will be demonstrated below, it was not until 1887 that the New South Wales legislature commenced to use "bankruptcy" to describe the formal status. The New South Wales Insolvency Act 1841 bears many of the hallmarks of a modern bankruptcy statute. It provided for the appointment of a Chief Commissioner of Insolvent Estates and other ministerial officers (s1). Debtors were enabled to declare themselves insolvent by petition and to surrender their estate for the benefit of creditors (s3). And creditors could obtain sequestration orders based upon stipulated "acts of Insolvency " (s13, s5). Various dealings by persons "actually Insolvent" (s6) or "being Insolvent" (s8) were avoided. Certain payments made by or to a person "knowing himself to be Insolvent" were declared fraudulent (s12). These and other provisions (eg s31, s53) indicate that "insolvent" could be used (even in a statute) to describe a person unable to pay debts as they fell due, even though formal process had not yet been taken to sequestrate that person's estate. At other times, the Act spoke of a person's estate being "surrendered or sequestrated as Insolvent" (s107) with formal notification thereof in the Gazette (s34).

Page 39 These latter references connote some formal step or determination, including official recognition capable of being described as "adjudged BC9805500 at 15 insolvent". Provision was made for discharge from the status of insolvency (s16). The Insolvency Act 1841 was amended a number of times. In 1887 the various enactments were repealed upon the commencement of the Bankruptcy Act 1887, described in its long title as "An Act to amend and consolidate the Law relating to Insolvency and Bankruptcy and to provide for the due collection, administration, and distribution of Insolvent and Bankrupt Estates, and for the prevention of frauds affecting the same." The 1887 Act followed the English Act of 1883 in using "bankruptcy" to denote the formal steps capable of being taken in response to an "available act of bankruptcy". It enabled sequestration orders to be made by a Judge of the Supreme Court upon the petition of a creditor or the debtor, whereupon "the debtor becomes a bankrupt" (s5(II)). "Bankruptcy" was defined to include a composition or arrangement made under the provisions of the Act (s3). PtVII of the Bankruptcy Act 1887 dealt with "Jurisdiction". Bankruptcy jurisdiction was transferred from the Supreme Court, or a Judge thereof, or the Chief Commissioner for Insolvent Estates, to the BC9805500 at 16 Supreme Court in its Bankruptcy Jurisdiction, to be exercised by "the Judge in Bankruptcy". By way of transitional provision, s127(2) stipulated that: Whenever the terms 'Insolvency' or 'Insolvent' are used in any statute in force at the date of the passing of this Act such terms shall include the terms respectively 'Bankruptcy' and 'Bankrupt, and wherever the 'Chief Commissioner of Insolvent Estates' is mentioned or signified in any such statute the term shall be interpreted to mean the Judge in Bankruptcy. All matters arising out of the repealed Insolvency Acts were transferred to the Judge in Bankruptcy (s131). The Bankruptcy Act 1887 was amended in 1888 and 1896. The Bankruptcy Act Amendment Act 1888 made further transitional provision preserving the appropriate operation of the "Acts relating to Insolvency" preceding the 1887 Act. A further consolidation occurred in 1898 with the passing of the Bankruptcy Act 1898. Once again there were transitional provisions addressing estates vested in official assignees before the passing of the Bankruptcy Act 1887 (see s106, s133(3)). In particular, s133(3) provided that: Whenever the terms "Insolvency" or "Insolvent" are used in any statute now in force, such terms shall include the terms BC9805500 at 17 "Bankruptcy" and "Bankrupt" respectively, and wherever the "Chief Commissioner of Insolvent Estates" is mentioned or signified in any such Statute, the term shall be interpreted to mean the Judge. As the nineteenth century progressed, legislators came to distinguish insolvency and bankruptcy more clearly, reserving the latter expression for the formal status stemming inter alia from a judicial determination or some other step that brought a relevant legislative scheme into operation (such as assignment of assets to trustees for the benefit of creditors). As indicated, the differentiation occurred much earlier in England than it did in the Australian colonies. In Hunt v Fripp (1897) 58 LT 516 Byrne J in England accepted expert evidence as to the law of Victoria, finding that the "Insolvency Act 1890" of that colony, so far as applicable to the case at hand, did not differ materially from the English bankruptcy law. When the Australian Constitution was framed, legislative power to make laws with respect to "bankruptcy and insolvency" were conferred on the federal Parliament (s51(xvii)). The meaning of "insolvency" in this context has not been explored. However, the meaning of s44(iii) of the Constitution has. That section

Page 40 renders incapable of being chosen or of BC9805500 at 18 sitting as a senator a person who "Is an undischarged bankrupt or insolvent". In Nile v Wood (1988) 167 CLR 133 the High Court held that the adjective "undischarged" attaches to both "bankrupt" and to "insolvent". In other words, insolvent in that context is not adjectival and merely describing a person who cannot pay his or her debts as they fall due. Brennan, Deane and Toohey JJ said (at 139): It is ... part of a composite reference to the status of a person who has been declared bankrupt or insolvent and who has not been discharged from the condition. Because of this, the exposition of s44(iii) does not assist with the more opaque s126 of the Real Property Act. However, their Honours went on to explain (at 140); At the turn of the century some Australian Colonies had bankruptcy laws (Bankruptcy Act 1898 (NSW), Bankruptcy Act 1892 (WA), Bankruptcy Act 1870 (Tas)); some had insolvency laws: Insolvency Act 1890 (Vict), Insolvency Act 1874 (Q), Insolvent Act 1886 (SA). In each case the statute provided for the adjudication of a person by a court as either a bankrupt or an insolvent. In each case the statute provided machinery for the discharge of the person so adjudicated. It is true that the word "insolvent", standing on its own, is not a term of art and may mean no more than unable to pay debts that are due: Re Muggeridge's Trusts. But against a statutory background such as the Insolvent Act 1886 (SA), the term has been held to mean adjudicated insolvent: In re Salom; Salom v Salom [1924] SASR 93. BC9805500 at 19 This passage supports the appellant's case to a degree, because it reinforces the perceived interchangeability of the terms "bankrupt" and "insolvent", if viewed from a national perspective. The South Australian case of Salom to which reference was made involved the 1903 will of a testator domiciled in South Australia, where an interest was given subject to a proviso that if the beneficiary became insolvent or attempted to sell, charge, encumber or dispose of his estate, then such interest should cease. In the light of the Insolvent Act 1886 (SA) that was current at the time the will was made, and the wording and context of the particular will, it is hardly surprising that insolvent was construed in its specialised or technical meaning of adjudicated insolvent on proof of a sufficient act of insolvency. But the case is of little assistance in construing the Real Property Act 1900 (NSW). The existence in England and Australia of formal, statutory mechanisms to deal with "bankruptcy" or "insolvency" did not mean that legislatures or courts were ignorant of the condition of insolvency in its lay sense of inability to pay debts. Depending on context, "insolvency" could mean at least one of three different concepts: inability to meet debts; the technical sense of being the condition or standard of inability to meet debts, upon the occurrence of which the statutory law enabled a party such as a creditor or the debtor to some curial relief; or the status of a BC9805500 at 20 person by whom or against whom curial relief has been granted or some other formal step actually taken. See Re Bevin. There are many cases where judges have grappled with whether "insolvent" was used in a statute or other legal context in one or other of these different senses. In England at least the choice was usually seen as one between construing a reference to insolvency as "ordinary acceptation [as] a person who cannot pay his debts" (Parker v Gossage (1835) 5 LJ Ex 4 at 5 per Parke B) or in the sense of a person who has taken the benefit of an enactment passed for the relief of insolvent debtors (Parker; The Princess Royal (1845) 9 Jur 433). The differences in statutory nomenclature between England and Australia require caution in handling the English cases. Nevertheless there are statements of general application to the effect that "insolvent" and "insolvency" may be construed in its lay sense. It all depends on context. In Re Muggeridge's Settlement, a settlement created a life interest in remainder, determinable (in favour of another member of the family)

Page 41 inter alia in the event of the life tenant being "bankrupt or insolvent". In this context Wood VC held that "insolvent" did not possess its technical meaning. He regarded it as "now settled that it is not a technical term, but simply means a person who is incapable of BC9805500 at 21 paying his debts". In Attorney General for British Columbia v Attorney General for Canada [1937] AC 391 at 402, Lord Thankerton, speaking for the Judicial Committee, said: In a general sense, insolvency means inability to meet one's debts or obligations; in a technical sense, it means the condition or standard of inability to meet debts or obligations, upon the occurrence of which the statutory law enables a creditor to intervene, with the assistance of a Court, to stop individual action by creditors and to secure administration of the debtor's assets in the general interest of creditors; the law also generally allows the debtor to apply for the same administration. The non-technical meaning was applied in James v Rockwood Colliery Co (1912) 106 LT 128 and London and Counties Assets Co Ltd v Brighton Grand Concert Hall and Picture Palace Ltd [1915] 2 KB 493 (CA). Each case involved the construction of Articles of Association of a company which provided that the office of director was to be vacated if the director "became bankrupt, lunatic or insolvent" (James) or "became bankrupt or insolvent or compound with his creditors" (London and Counties). In each case "Insolvent" was construed in its lay sense. In the later case Buckley LJ referred to several nineteenth century cases on the meaning of "insolvent", observing that "they all state that 'insolvency' means commercial insolvency, that is to say, inability to pay debts as they become due". These two English cases distinguished an earlier House of Lords decision in Reg v Saddlers Co BC9805500 at 22 (1863) 10 HLC 404, 11 ER 1083 on the basis that the context in the later cases provided nothing to suggest that the word "insolvent" was ejustem generis with bankrupt, or that it was critical that the insolvency date from a particular time. In James, Lush J said (at 130): The context in which the word 'insolvent' is used in the present case is different, and the proper rule to apply in determining the meaning to be given to it is to ask oneself first what the word means as ordinarily used, and then to see whether the context in which the word is used and the object of the article are such as to lead one to give the word a meaning other than it ordinarily bears. I agree. INTERPRETING "INSOLVENT" IN S126(5) After this excursus I proceed to the task at hand: 1. S126(5)(b) has stood unamended since 1900 (save for the presently irrelevant alteration from "assurance fund" to "Torrens Assurance Fund"). Since the Real Property Act is not a constitution capable of attracting the notion of an expanding "denotation" (cf Kartinyeri v The Commonwealth (1998) 72 ALJR 122 at [132]) the meaning of "insolvent" should be taken as fixed at 1900. And the provision should be construed from the standpoint of the draftsman and Parliament in 1900 (contemporaneous exposition) (Corporate Affairs BC9805500 at 23 Commissioner of New South Wales v Yuill (1991) 172 CLR 319 at 321-322, 331). 2. In New South Wales the ordinary or natural meaning of "insolvent" in 1900 was the lay sense of the word: see cases discussed above. In addition to the usual canons of statutory interpretation, this meaning draws support from (a) the contrast within the subsection between "bankrupt" and "insolvent" and (b) the fact that the New South Wales parliament had ceased to use "insolvent" as its description of the formal status of "bankruptcy" (voluntary or involuntary) since 1887. 3. True, it was possible that there may in 1900 still have been persons who or whose estates could be said still to have the formal status of insolvency, stemming from some judicial determination or "public or overt fact or event [marking] the commencement of a voluntary sequestration" (R v Davison at 365) stemming from the Insolvency Act 1841 (as amended) when it was in force prior to 1887. But there was nothing in the

Page 42 Real Property Act 1900 or any other statute in force at that time to deem "insolvent" in s126(5)(b) to have this anachronistic meaning. The transitional provisions in the Bankruptcy Act 1887 and the Bankruptcy Act 1898 (s133(3)) deemed "insolvent" to include "bankrupt", but in terms this was only where the word BC9805500 at 24 "insolvent" appeared "in any statute in force" at the date of the passing of those respective Acts. These transitional provisions could not directly extend the meaning of "insolvent" in s126(5) of the Real Property Act 1900. In any event, the collocation of "bankrupt" and "insolvent" in s126(5) meant that some work had to be found for the latter term. It is possible that the word was intended to pick up persons whose estates had prior to 1887 been "adjudged insolvent" (in the language of the Real Property Act 1862), but this is a speculative rather than an indicated intent. 4. The legislative history of s126 (which I have recounted) precluded any inference that parliament necessarily intended that "insolvent" (in the 1900 Act) should mean the same as "should have been adjudged insolvent" (in the 1862 Act). Normally, one assumes that a change of language signals a change of meaning. Such assumption may be strengthened where the greater part of the relevant statute is a pure consolidation, but the critical provision is not. The enigmatic comment about cl126 in the certificate of the Commissioner for the Consolidation of Statute Law certainly does not enable the reader to infer conscious continuity of meaning. Quite the reverse. The certificate reveals that cl126 was an exception to pure consolidation, and that the section had been amended, albeit not "freely". The appellant's BC9805500 at 25 submission that the change merely deleted as otiose the word "adjudged" is circular, and cannot be accepted to boost the strength of the appellant's case. 5. The Commissioner's certificate acknowledged that the real meaning of cl126 was "obscure". In that situation, a court should be slow to divine a purpose undisclosed in the language and arguably at variance with it (in that the subsection distinguishes "bankrupt" and "insolvent"). The obscure message of legislative history (putting the matter at its highest) and doubtful ambiguity of "insolvent" (when viewed solely in its linguistic context) do not bring s33 or s34 of the Interpretation Act 1987 into play. One is therefore left with Scalia J's descriptive injunction that "judges interpret laws rather than reconstruct legislators' intention" (Immigration and Naturalisation Service v Cordoza-Fonseca 480 US 421 (1987) at 452-453. Cf Evans v Marmont (1997) 42 NSWLR 70 at 80, 86). 6. Even if s126 were to be seen as an attempted consolidation of its predecessor (which it clearly was not), it would not follow that a court was obliged to interpret it as if enacted in 1862 (when existing statute law would arguably have construed "insolvent" to mean "adjudged insolvent") as distinct from 1900 (when existing statute law gave no such BC9805500 at 26 meaning to "insolvent"). In Maybury v Plowman (1913) 16 CLR 468 at 479, Isaacs, Gavan Duffy and Rich JJ adopted what Lord Watson had said in Administrator-General of Bengal v Prem Lal Mullick (1895) LR 22 Ind App 107 at 116: The respondent maintained this singular proposition, that, in dealing with a consolidating Statute, each enactment must be traced to its original source, and, when that is discovered, must be construed according to the state of circumstances which existed when it first became law. The proposition has neither reason nor authority to recommend it. The very object of consolidation is to collect the statutory law bearing upon a particular subject, and to bring it down to date in order that it may form a useful code applicable to the circumstances existing at the time when the consolidating Act is passed. 7. The subject matter of s126 clearly qualifies it for a beneficial interpretation, however much the sorry history of attempts to make claims on the Fund suggests to the contrary. I see no reason why claims should be frustrated by a niggardly interpretation. "After all the Assurance Funds are not State funds, but were built up as insurance funds by the contribution of landowners; furthermore very little of the accumulated funds has been disgorged. (Whalan, The Torrens System in Australia, 1982 p352) This is reinforced when one recognises that the compensation principle is one of the key planks of the

Page 43 Torrens system. As the New South Wales BC9805500 at 27 Law Reform Commission observed in its report, Torrens Title: Compensation for Laws, 1996, Report 76 (quoting Whalan op cit, p345-p346): "The scheme of the Act is to provide a fund for compensating all persons who are deprived of their land by the operation of the Act, and reason and justice require that no qualification should be put upon the rights so given which is not in express terms imposed by the statute. ... In short, the provisions aim to form the second part of the complement that, under the Torrens system, a man is to have either his interest in the land or adequate monetary compensation therefor." 8. The strongest argument favouring the appellant is based on references in other sections of the Act as enacted in 1900 which refer to insolvent in the sense of a status consequent upon steps invoking a statutory regime. These are s3 (definition of "transmission" as the acquirement of title consequent upon "bankruptcy, insolvency" etc); s54(1) (reference to the surrender of a lease "under the provisions of any law at the time being in force relating to bankrupt or insolvent estates"); s90 (transmission "upon the bankruptcy or insolvency of the registered proprietor", a provision explained in Commissioner Heydon's memorandum as appropriate because "there may still be some old cases to which the words 'or insolvency' may still be appropriate"); s131(2) (reference to a debt "due from the estate of such insolvent or bankrupt"). BC9805500 at 28 (Some of these provisions have been amended since 1900.) Like Young J, I acknowledge the force of this reasoning. However, there are two characteristics of s126(5)(b) which are not shared by any of the foregoing provisions, ie conscious alteration from the 1862 model, noted by Commissioner Heydon; and a context freed from an express reference to something suggesting the formal status, ie the references to a law, an estate or devolution of title to property. 9. In its principal formulation, the appellant's case involved the plea that "insolvent" should be read as if the words "adjudged insolvent" were used. Yet the case does not satisfy the principles governing when courts may perform this exercise (cf Bermingham v Corrective Services Commissioner of New South Wales (1988) 15 NSWLR 292). Notwithstanding the differing uses of "insolvent" in the nineteenth century, indeed because of such differences, a court would require fairly unambiguous legislative history or evidence of purpose to turn s126 into the consolidation provision that the Commissioner indicated (by words and conduct) it was not. In Stuart v The Queen (1974) 134 CLR 426 at 437 (cited by McHugh J in R v Barlow (1997) 188 CLR 1 at 19) Gibbs J pointed out that: it may be justifiable to turn back to the common law where the Code contains provisions of doubtful import, or uses language which had previously acquired a technical meaning, or on some BC9805500 at 29 such special ground ... If the Code is to be thought of as 'written on a palimpsest, with the old writing still discernible behind' (to use the expressive metaphor of Windeyer J in Vallance v The Queen (1961) 108 CLR 56 at 76), it should be remembered that the first duty of the interpreter of its provisions is to look at the current text rather than at the old writing which has been erased; if the former is clear, the latter is of no relevance. These ideas apply a fortiori to the present situation. 10. The appellant's argument that Young J's conclusion brings uncertainty and problems of proof is unpersuasive. The law is used to identifying "insolvency" in a number of contexts. The present tense "is bankrupt, or insolvent" indicates that s126 is not a situation where it was critical to know when "insolvency" started (cf London and Counties at 502). 11. I have not found it necessary to consider whether Behn requires this result. I agree with the appellant that the point now in issue does not appear to have been debated at any stage in the Behn litigation. Nevertheless, there are statements consistent with the respondent's submissions that cannot lightly be overlooked: see eg Gibbs CJ at 567-568.

Page 44 12. At the end of the day there are indications pointing either way. That is not unusual in matters of statutory construction. It may well be BC9805500 at 30 that the subjective intention of those who drafted s126 was to use "insolvent" in its formal sense. But that is an ultimately speculative and irrelevant consideration (see Dobbie v Davidson (1991) 23 NSWLR 625 at 634-635). In Yuill, Brennan J observed (at 321) that it is not strictly accurate to describe statutory construction as the search for the intention of Parliament. His Honour preferred Lord Reid's description in Balck Clawson Ltd v Papierwerke AG [1975] AC 591 at 613: "We often say that we are looking for the intention of Parliament, but that is not quite accurate. We are seeking the meaning of the words which Parliament used. We are seeking not what Parliament meant but the true meaning of what they said." I agree. The appeal should be dismissed with costs.

Powell JA
The circumstances in which the Court has been called upon to determine the only question which has been argued on the hearing of this appeal are, if I may say so, decidedly odd. Despite the fact that the hearing at first instance - the tender of evidence, submissions of counsel and the delivery of an ex tempore judgment occupying some 24 pages - concluded within the day, none of the evidentiary material - which seems to have been rather sparse - which was tendered on the hearing was made available to this Court on the hearing of the appeal. The result is that it is quite impossible for the Court to be satisfied that any of the findings of fact made by Young J - some at least of which appear to me to be rather suspect - can be justified. However, as the Appellant has sought to maintain only one ground of appeal, namely that: "His Honour erred in law in not holding that the word 'insolvent' for the purposes of s126(5)(b) of the Real Property Act 1900 meant adjudged insolvent." and as no Notice of Contention was filed on behalf of the Respondents, it appears that the Court must proceed upon the basis - unsatisfactory though it seems to be - that the Appellant accepts that, at the relevant date - a matter to which I will shortly turn - the deceased's brother, although not adjudged insolvent, was nonetheless unable to pay his debts as they became due from his own money and that the Respondents accept that, if the meaning to be attributed to the word "insolvent" in s126(5)(b) of the Real Property Act 1900 ("the Act") is "adjudged insolvent", the appeal must be upheld, the Orders made by Young J set aside and the Cross-Claim dismissed. I say that proceeding upon this basis seems unsatisfactory primarily because Young J's conclusion upon the factual issue which has given rise to this appeal was as follows (AB 83-84): " ... ... ... Accordingly, in my view, the word 'insolvent' in s126(5)(b) means unable to pay his, her or its debts as they fall due. Therefore, I need to look at the facts. Mrs Donohoe says that the evidence would not satisfy me that the fraudster was insolvent as at 24 October 1991. Under s140 of the Evidence Act 1995, I have to be satisfied on the balance of probabilities that the fraudster was insolvent on that day. The facts are that the fraudster had a business in Cairns. It closed down in February 1990 because he or his company could not pay the rent. He then ceased living in Cairns and lived with his daughter at her expense. By 1993 he was receiving

Page 45 a pension and told his trustee in bankruptcy in 1993, which the trustee in bankruptcy seems to accept, that he was ill. The only inference is that he ceased working after the restaurant in Cairns failed in 1990, was not able to earn income, had assets as disclosed in the statement of affairs of some $420 and that the estate was administered in bankruptcy without paying a dividend anywhere near a hundred cents in the dollar. The only contrary material is that Westpac Bank granted the fraudster a business loan together with his partners in 1992. However, this is equivocal and the point has not been strengthened at all by any corroborative evidence of the loan. It could well have been a loan that consolidated previous loans or there may have been a guarantee by the partners. The mere fact that it was made does not seem to me to alter the balance of the evidence, and I find as a fact that, from 1990 through to August 1993, the fraudster was insolvent." If I may say so, the basis for the conclusion which his Honour recorded in the last sentence of this extract seems to me to have been a very insubstantial one. It is clear enough that, in order that the deceased - and after his death, the Respondents, as executors of his will - might, in the circumstances, recover damages against the Assurance Fund, it was necessary for him and them - to establish that, at the relevant date: 1. the deceased had been deprived of an estate or interest in the subject land in consequence of fraud (s126(1)(a); 2. the deceased's brother was the person "upon whose application the erroneous registration was made" (s126(2)(b)); 3. The deceased's brother was insolvent. Although, in the end, Young J - in my view correctly - adopted, as the relevant date, the date of the filing of the Cross-Claim, his Honour appears to have doubted (AB 73-74) the correctness of his so doing, despite the decision of the High Court in Saade v Registrar-General (NSW) ((1993) 179 CLR 58). The bases upon which Young J founded his doubts appear to have been, first, that the question was not considered be at first instance (Saade v Saade 1 December 1989 (unreported)), or by the Court of Appeal (Registrar General v Saade 18 June 1992 (unreported)); and, second, that "it is not really clear how the High Court came to deal with it. It may be that the passage is obiter dicta ...". Contrary to what appears to have been Young J's understanding, it was necessary for me, in Saade v Saade (supra), to consider, and I did consider, what was the relevant date at which it must be demonstrated that Mr Saade could not be found within the jurisdiction. This was due to the fact that, although, at the time of the commencement of the proceedings, Mr Saade was in Lebanon, he had returned to the jurisdiction prior to the hearing, and, on one day during the hearing, attended court to answer a subpoena ad testificandum which had been served upon him after the hearing had commenced. In the event, I concluded that the relevant date was the date of the commencement of the proceedings. In order that I might dispel any lingering doubts on the matter, I record that, in the course of my Judgment, I said (inter alia): "I have recorded the relevant provisions of the Act as they stood in 1976 and 1977, first, since, to the extent to which Mrs Saade seeks relief against Mr Khoury, she must establish that, at the time of the commencement of the first of these proceedings in June 1977, she then had a crystallized cause of action against him (see, for example In re Keystone Knitting Mills' Trade Mark (1929) 1 Ch 72, 103 per Lord Hanworth MR; Wigan v Edwards (1973) 47 ALJR 586, 592 per Gibbs J (as he then was), 596 per Mason J (as he then was)); second, since, although the Registrar-General did not become a party to the first of these proceedings until the filing of the Amended Statement of claim on 9th March 1982, the Plaintiff cannot succeed against the Registrar-General unless she had a crystallized cause of action against him at the time of the commencement of the first of these proceedings (see, for example, Sneade v Wotherton Barytes and Lead Mining Co (1904) 1 KB 295, 197 per Collins MR; Eshelby v Federated European Bank Ltd (1932) 1 KB 254; Baldry v

Page 46 Jackson (1976) 2 NSWLR 415 and, later: "The question which then arises is, what is the effect of the views which I have recorded above upon Mrs Saade's claim against the Registrar-General. It seems to me that the fact that Mrs Saade had, and has, a cause of action against Mr Saade is not enough to deprive Mrs Saade of any cause of action which she might have had against the Registrar-General. I say this since, at the time of the commencement of the first of these proceedings - at which time, as I have earlier noted, Mrs Saade needed to have a crystallized cause of action against the Registrar-General - Mr Saade was - as he continued, until late 1986, to be - in Lebanon (Real Property Act 1900 s126(5)(b); see also Heron v Broadbent (supra); Registrar-General v Behn (1981) 148 CLR 562). The fact that Mr Saade subsequently returned to Australia does not, so it seems to me, operate so as to deprive Mrs Saade of any cause of action against the Registrar-General which she might theretofore have had The appeal to the Court of Appeal was upheld upon the basis that I had erred in holding that Mrs Saade could not recover damages from Mr Khoury, who had at all relevant times been within the jurisdiction, in consequence of which conclusion it was not open to Mrs Saade to rely upon the provisions of s126(5) of the Act. The High Court, however, appears to have proceeded upon the basis that, as I had dismissed the proceedings against Mr Khoury, he could not be regarded as "the person ... who acquired title to the land ... through the fraud ..." (s126(2(c)), or that, even if he could be so regarded, the fact that he had been served and had taken part in the proceedings meant that the provisions of s126(5)(b) could not form the basis of a claim against the Registrar-General. The High Court then turned to consider whether the provisions of s126(2)(b) provided a remedy to Mrs Saade, and, having done so, for the reasons to which I will shortly turn, concluded, first, that there had been an "erroneous registration" (s126(2)(b)), and, second, that Mr Saade was to be regarded as "the person upon whose application the certificate of title was issued" (s126(2)(b),(3)) to Mr Khoury. This being so, it became necessary for the Court, if Mrs Saade were to succeed on the appeal, to determine whether, at the relevant date - whatever that date be held to be - Mr Saade "(could) not be found within the jurisdiction". The Court dealt with that issue in the following way ((supra) at 68-69): "Could Mr Saade be found within the jurisdiction? Because of this conclusion, the availability to Mrs Saade of an action against the Registrar-General under subs(5) depends upon whether her husband could be found within the jurisdiction at the relevant time. A decision on that aspect requires a determination of what is the relevant time (or times) and an application of that determination to the facts. Mr Saade could not be found within the jurisdiction at the time proceedings were commenced. Counsel for Mrs Saade submitted that this is the relevant time for determining the operation of s126(5)(b). We agree. The right to bring action against the Registrar-General only arises 'when the person liable for damages .. cannot be found within the jurisdiction'. The right of action against the Registrar-General crystallises at that time. And, at that time, Mr Saade could not be found within the jurisdiction. If this approach were not right, there would need to be an inquiry as to the whereabouts of the person concerned at each stage of the proceedings up to and including the time of the hearing. This could cast an impossible burden on a claimant and is inconsistent with the purposes of an Assurance Fund designed to provide a practical scheme of compensation for persons who have suffered loss through the operation of the Torrens system of indefeasibility of title. It must also be said that the existence of two persons against whom action may be brought under s126(2) is no answer to a claim made, in this case, against Mr Saade and therefore the Registrar-General. The reasons sufficiently appears from the judgment of Griffith CJ in Cox v Bourne ((1897) 8 QLJ 66). As the Chief

Page 47 Justice pointed out (ibid at p68), the contrary construction would '[set] a trap for an innocent victim of fraud, which I cannot think that the Legislature intended'. And as his Honour observed later in his judgment (ibid at p69): "I think that when once the conditions set forth in [s126] exist, with respect to the actual and immediate perpetrator of the fraud, the right of action is complete against the [Registrar-General], whose liability, it seems to me, is put in the place of that of the person defrauded. And even if the plaintiff knew of the existence of other parties to the fraud, it is ordinarily no answer to an action against one person for a wrong to show that some other person is also liable. I do not see any sufficient reason for holding the present case to be an exception.' If Mrs Saade had recovered any damages from Mr Khoury, her entitlement to claim compensation from the Registrar-General would, of course, be eliminated or to that extent reduced. Otherwise, her right of action against Mr Saade (and, in the circumstances of this case, the Registrar-General) is unaffected by any rights which she may had had, or may have unsuccessfully sought to enforce, against Mr Khoury. It follows then that Mrs Saade is entitled to be compensated from the Assurance Fund on the basis that Mr Saade is a person upon whose application the 'erroneous registration' of Mr Khoury was made and that Mr Saade is a person who 'cannot be found within the jurisdiction.'" In the circumstances, it is, in my view, clearly established - and not merely obiter - that a person seeking to invoke the provisions of s126(5) of the Act must establish that the relevant fact upon which he seeks to rely exists at the time of the commencement of the relevant proceedings or cross-claim, and, that it is irrelevant that that fact may no longer exist at the time of the hearing. Although it was not, and is not now, disputed that the deceased had been deprived of an estate or interest in the subject land, or that his brother was the person "upon whose application" the erroneous registration was made, it should be noted that, in concluding that the registration of the transfer to Mr Khoury constituted an "erroneous registration", the High Court distinguished its earlier decision in Registrar of Titles (WA) v Franzon ((1975) 132 CLR 611), which decision had, meantime, been applied by Needham J in Armour v Penrith Projects Pty Ltd ([1979] 1 NSWLR 98). It should also be noted that, in the course of its reasoning to that conclusion, the High Court said ((supra) at 66-67): "The second element of s126(2)(b) is that action be brought against the person 'upon whose application' the erroneous registration was made. In fact the memorandum of transfer was presented for registration by Mr Khoury. However, counsel for Mrs Saade contended that there was an erroneous registration and that, by reason of the presence of subs(3) of s126, Mr Saade must be regarded as the person upon whose application the erroneous registration was made. Subs(3), in one form or another, is not unique in Australian Torrens legislation, but it did not appear in the Western Australian statute considered in Franzon. As will be seen, its presence in s126 clearly distinguishes the New South Wales legislation, for the purposes of the present case, from that under consideration in Franzon. The purpose of subs(3) is to identify, the person upon whose application the certificate of title was issued to the transferee. It operates in every case in which 'the fraud, error, omission or misdescription occurs upon a transfer for value'. The litany fraud, error, omission or misdescription' appears of course in s126(2)(c) and it may be thought that subs(3) is correspondingly limited in its operation. But that cannot be so since para(c) is concerned with action against the person 'who acquired title to the land'. It is of no relevance to para(c) to identify the person upon whose application the transfer was registered. That identification is relevant only in the context of para(b) of subs(2). This in turn lends support to the argument that 'erroneous registration' in para(b) has a meaning beyond that attributed to the expression in Franzon. The predecessor of s126 was found in s117 of the original Torrens legislation in New South Wales, the Real Property Act 1862 (NSW). S117 contained a proviso which was very similar to s126(3) but, it must be said, clearer in its intended operation. The proviso read:

Page 48 'Provided always that in every case in which the fraud error or misdescription shall occur upon a transfer made for value the person making the transfer and receiving the value shall be regarded as the person upon whose application the certificate of title was issued to the transferee.' Millard, writing in 1894 (An Appendix to Williams' 'Law of Real Property' for the Use of Students in New South Wales, p283-p284), treated the proviso as a reference to what is now s126(2)(b), commenting that an action could be brought: 'against the person upon whose application the land was brought under the Act, or through whom such erroneous registration was made (in the case of a transfer for value, the person transferring and receiving the value), or who acquired title through such fraud, error, or misdescription.' (Emphasis added) In s126(3) the words 'person making the transfer' are replaced with 'transferor'. That term is not defined in the Act but would ordinarily be taken to have a corresponding meaning (Interpretation Act 1987 (NSW) s7) to 'transfer' which is defined (s3 of the Real Property Act 1900) as the 'passing of any estate or interest in land'. Counsel for Mrs Saade argued that as the Torrens system is a system of title by registration and not registration of title, a person who forges a form of transfer which is subsequently registered does effect a transfer of that interest notwithstanding that the person was not the registered proprietor of the interest transferred. This argument has force, but in any event the opening words of s3 of the Act provide that the definitions only apply in the absence of inconsistent context and subject matter. The context and subject matter of s126(3) are directed at the provision of remedies for persons affected by fraud and mistake within the Torrens system. Although the words used in the 1862 Act add greater clarity to the provision, it is apparent that, in terms of s126(3), Mr Saade is the 'transferor receiving the value'. The form of and commentary on s117 of the 1862 Act lead to the conclusion that s126(3) is a section which identifies the person to whom s126(2)(b) relates. Mr Saade is therefore to be regarded as the person upon whose application Mr Khoury was issued with the certificate of title. In the absence of subs(3) it would ordinarily be the case that it is the person who acquired title who is the person upon whose application registration was made. Clearly, the sub-section fastens on to the transferor as the person to answer that description, in the circumstances to which it refers. And it does so in order to widen the category of persons against whom the statutory cause of action will lie." As will be apparent, in reaching its conclusion in this respect, the High Court relied upon the terms of s117 of the Real Property Act 1862 ("the 1862 Act") which, as Mason P has noted in his Judgment, which I have had the opportunity to read in draft, was "re-enacted" by s126 of the Act. Given that the Act, as Mason P has noted, was a consolidating Act, this is hardly surprising, for the presumption - albeit that it is rebuttable - is that a consolidating Act is not intended to change the law. Approaching the provisions of s126 of the Act in that way, I would read the word 'insolvent' in s126(5) of the Act as meaning 'adjudged insolvent' rather than as meaning no more than 'unable to pay his debts as they fall due from his own moneys'. In expressing that view I have not overlooked the fact that, in Behn v Registrar-General ([1979] 2 NSWLR 496 (Holland J); affd Registrar-General v Behn [1980] 1 NSWLR 589; affd Registrar-General (NSW) v Behn (1981) 148 CLR 562), the Registrar-General was held liable in an action for damages pursuant to s126(5) of the Act although the relevant '"fraud" was held to be that of a company - which, although insolvent, not being a natural person, could not be adjudged insolvent, and the property of which could not be made the subject of a sequestration order - and which, although subsequently removed from the register of companies, was still on the register at the time of the commencement of the proceedings. It should, however, be noted that the primary defence relied upon by the RegistrarGeneral was, not that the company was not insolvent in the relevant sense, but ([1979] 2 NSWLR at 514) "that the plaintiff had lost her right to claim damages for fraud under s126 because, after discovering the fraud, she affirmed the contract for sale by electing to sue (the company) in the Common Law Division of (the) Court and obtain judgment for the balance of the purchase money owing under the contract, and by thereafter causing a writ for levy of property to be issued in respect of the judgment and a notification

Page 49 thereof to be endorsed on the certificate of title", a defence which, as will be apparent, failed. In the circumstances, I am unable to share the view expressed by Young J (AB 82) that "the point is really decided by ... Registrar-General v Behn". Far from that being so, it seems to me that, quite apart from the fact that it is a consolidating Act, the provisions of s131, s132 of the Act - which, in substance, reproduce the terms of s123 of the 1862 Act provide support for the view which I have expressed. That this is so is demonstrated by the fact that s123 of the 1862 Act provided: "123. Whenever any amount has been - paid out of the assurance - fund on account of any person who may be dead such amount may be recovered from the estate of such person by action against his personal representatives in the name of the Registrar General and whenever such amount has been paid on account of a person who shall have been adjudged insolvent the amount so paid shall be considered to be a debt due from the estate of such insolvent and a certificate signed by the Colonial Treasurer certifying the fact of such payment out of the assurance fund and delivered to the official assignee shall be sufficient proof of such debt and whenever any amount has been paid out of the assurance fund on account of any person who may have absconded or who cannot be found within the jurisdiction of the Supreme Court and may have left any real or personal estate within the said Colony it shall be lawful for the said Court or a Judge thereof upon the application of the Registrar General and upon the production of a certificate signed by the said Treasurer certifying that the amount has been paid in satisfaction of a judgment against the Registrar General as nominal defendant to allow the Registrar General to sign judgment against such person forthwith for the amount so paid out of the assurance fund together with the costs of the application and such judgment shall be final and signed in like manner as a final judgment by confession or default in an adverse suit and execution may issue immediately and if such person shall not have left real or personal estate within the said Colony sufficient to satisfy the amount for which execution may have been issued as aforesaid it shall be lawful for the Registrar General to recover such amount or the unrecovered balance thereof by action against such person at any time thereafter when he may be found within the jurisdiction of the Supreme Court. " (my emphasis) while s131, s132 of the Act provide: "131 Moneys paid in respect of a claim on Torrens Assurance Fund may be recovered against estate of deceased or bankrupt person (1) Whenever any amount has been paid in respect of a claim on the Torrens Assurance Fund on account of any person who is dead, such amount may be recovered from the estate of such person by action against the person's personal representatives in the name of the Registrar-General. (2) Whenever such amount has been-paid on account of a person who is insolvent or bankrupt, the amount so paid shall be considered to be a debt due from the estate of such insolvent or bankrupt, and a certificate signed by the Registrar-General certifying the fact of such payment in respect of a claim on the Torrens Assurance Fund and delivered to The Official Receiver in Bankruptcy shall be sufficient proof of such debt . 132 Where person liable is out of New South Wales (1) Whenever any amount has been paid in respect of a claim on the Torrens Assurance Fund on account of any person who has absconded or who cannot be found within the jurisdiction and has left any real or personal estate within New South Wales, the said Court, upon the application of the Registrar-General and upon the production of a certificate signed by the Registrar-General certifying that the amount has been paid in satisfaction of a judgment against the Registrar-General as nominal defendant, may allow the Registrar-General to sign judgment against such person forthwith for the amount so paid in respect of the claim on the Torrens Assurance Fund together with the costs of the application. (2) Such judgment shall be final and entered or signed in like manner as a final judgment by confession or default in adverse proceedings, an execution may issue immediately. (3) If such person has not left real or personal estate within New South Wales sufficient to satisfy the amount for which execution has been issued as aforesaid, the Registrar-General may recover such amount

Page 50 or the unrecovered balance thereof by action against such person at any time thereafter when the person is within the jurisdiction." Quite apart from such matters, however, it seems to me that the need for a person who seeks to rely upon the provisions of s126(5) of the Act to establish that, at the time of hiscommencing his proceedings, or filing his cross-action, the person primarily liable for damages under s126 of the Act, was, relevantly "insolvent, or bankrupt", dictates that the fact of insolvency or bankruptcy is to be established in a simple way - by proof of an adjudication, or the making of a sequestration order, or the filing of a debtor's petition - rather than by an exhaustive examination of the financial affairs of the person primarily liable for the damages, of which affairs one would think that the plaintiff, or cross-claimant, will ordinarily have little, or no, knowledge (see, to a not dissimilar effect, the first passage from the Judgment of the High Court in Saade v Registrar-General (NSW) (supra) which I have set out above ((supra) at p6-p7). The Orders which I propose are: 1. ORDER that the appeal be upheld 2. ORDER that the Orders made by Young J be set aside. 3. IN LIEU THEREOF ORDER that the Cross-Claim be dismissed. 4. ORDER that the Respondents pay the Appellant's costs of the Appeal and of the Cross-Claim but, if qualified, have a certificate under the Suitors Fund Act 1951.

Stein JA
I agree with Mason P. Order Appeal dismissed with costs. Counsel for the appellant: D F Jackson QC/H L Donohoe Solicitors for the appellant: K C Hall Counsel for the respondent: W Haffenden Solicitors for the respondent: Roderick B Harris & Co

Page 51

Page 52 6 of 10 DOCUMENTS: CaseBase Cases

Coller v Coller
[1998] VSC 80; BC9805004 Court: VSC Judges: Smith J Judgment Date: 28/9/1998

Catchwords & Digest

Succession -- Family provision -- Application by widow -- Whether adequate provision Application for adequate provision from estate of deceased by estranged wife who did not receive any benefit from deceased's estate valued at $380,000. Where applicant and deceased had been married in 1949 and had 6 children. Where applicant had been full-time wife and mother and had endured a stormy and violent relationship with deceased and had separated 16 years before death. Whether pensions should be taken into account when determining whether adequate provision made. Value of wife's contribution as homemaker. Competing claims of other beneficiaries. Whether life interest to applicant adequate provision. Held: Adequate provision not made for proper maintenance of applicant. Applicant to have equivalent of lump sum of $120,000 to purchase home and further $70,000. Cases referring to this case Annotations: All CasesSort by: Judgment Date (Latest First) Annotation Case Name Citations [2011] VSC 185; Considered Bruce v Matthews BC20110285 [2006] VSC 204; Cited White v Muldoon BC200604085 Cases considered by this case Annotations: All Cases Sort by: Judgment Date (Latest First) Annotation Case Name Citations (1994) 181 CLR 201; (1994) 123 ALR 481; (1994) 68 ALJR 653; Applied Singer v Berghouse (No 2) (1994) 18 Fam LR 94; [1994] HCA 40; BC9404642 Applied/ King v White [1992] 2 VR 417 Considered Followed Caldwell v Ang BC9102124 Followed Court v Hunt 28/10/1987 SCNSW

Court VSC VSC

Date 5/5/201 1 8/6/200 6

Signal

Court

Date

Signal

HCA

14/9/1994

VSC NSWSC NSWSC

13/2/1992 11/4/1991 28/10/1987

Page 53 Applied Shah v Perpetual Trustee Co Unreported (1981) 7 Fam LR 97 NSWSC 15/7/1981

Legislation considered by this case Legislation Name & Jurisdiction Administration and Probate Act 1958 (Vic)

Provisions Pt 4

Page 54

Page 55 7 of 10 DOCUMENTS: CaseBase Cases

Stanbrook v Perpetual Trustees WA Ltd

BC9803748 Court: WASC Judges: Murray J Judgment Date: 24/7/1998

Catchwords & Digest

Succession -- Wills and codicils -- Testamentary trust -- Revocation Trusts -- Express trusts -- Testamentary trusts -- Unborn and unknown potential beneficiaries Application for variation and revocation of testamentary trust. First and second applicant daughters sought variation and revocation of trust arising under will pursuant to (WA) Trustees Act 1962 s 90. Deceased gave life interest in income of residuary estate equally to three daughters. Will directed residuary estate be divided equally among all grandchildren over 25-years-old upon death of all daughters. Applicants sought order that residuary estate be divided into three parts and that each part be apportioned between daughter and grandchidlren. Respondent third daughter did not oppose orders sought. Appropriate in circumstances to consider remote possibility of deceased's daughters bearing or adopting further children. Remote risk of detriment to further potential grandchildren or infant grandchild by loss of estate's income earning capacity did not warrant dismissal of generally beneficial application. Proposed arrangement ensured that each party received interest that would have ultimately fallen to them in administration of deceased's estate. Application granted. Cases referring to this case Annotations: All CasesSort by: Judgment Date (Latest First) Annotation Case Name Citations Public Trustee as Executor of the [2007] WASC 296; Considered Will of Fiedler (decd) v Fiedler BC200710715 Muhling v Perpetual Trustees WA [2001] WASC 225; Considered Ltd BC200104912

Court WAS C WAS C

Date 7/12/20 07 15/8/20 01

Signal

Page 56

Page 57

8 of 10 DOCUMENTS: Unreported Judgments NSW 27 Pages

BALKIN and ANOR v PECK and ANOR - BC9803370; [1998] 43 NSWLR 706
SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MASON P, PRIESTLEY JA and SHEPPARD AJA CA 40744/95 12 February 1998, 24 July 1998
Trusts and trustees -- right of trustees to personal indemnity from beneficiaries Negligence -- duty of trustees in their capacity as solicitors of the trust Trusts and trustees -- general principles -- right of trustees to personal indemnity from beneficiaries -- tax liability arising from retention of assets by trustees -- trust assets distributed before tax liability paid by trustees Negligence -- duty of trustees in their capacity as solicitors of the trust -- whether failure to minimise tax payable on settlement Mr Rosenberg sought to provide income and a home in London for his sister, Mrs Urquhart. In consequence, Mr Rosenberg settled property on trustees by Deed of Settlement. The Trust Fund was settled upon trust to pay the income to Mrs Urquhart during her life and thereafter upon trust for the children of Mr Rosenberg, the Settlor. The Settlor had three daughters: Mrs Balkin, Mrs Blumberg and Mrs Smirin ("the remaindermen"). Mrs Balkin and Mrs Blumberg (the appellants) resided in Australia. The original trustees were Mr Rosenberg and Mr Bayer. When Mr Rosenberg died in 1975 he was replaced as trustee by Mr Peck. Mr Bayer is now deceased leaving Mr Peck as the surviving respondent. The fund settled upon the trust was used to purchase a flat in London which was the home of the life tenant between 1968 and her death on 2 February 1986. In July 1986 the trustees sold the flat for 320,000 pounds and distributed the net proceeds of sale to the remaindermen. Under the Capital Transfer Tax Act 1984 (UK) there was a "chargeable transfer" in BC9803370 at 2 relation to the London flat consequent upon the life tenant's death. This liability was entirely overlooked by the Trustees between 1986 and 1989, when the British Internal Revenue levied the tax upon the trustees. A request to the Settlor's daughters for funds to meet the tax was answered by Mrs Smirin but declined by the appellants. The trustees were forced to pay two-thirds of the tax liability out of their own funds together with interest. Proceedings were commenced by the trustees against the appellants for reimbursement. In response, the appellants brought a cross-claim against the trustees for failure to re-structure the settlement in a manner "tax effective" to the beneficiaries. Cohen J found each of the appellants liable to pay a sum representing

Page 58 one-third of the tax and a proportion of the interest accruing on the tax liability. His Honour also dismissed a Cross Claim against the trustees for negligence in their capacity as solicitors. HELD, dismissing the appeal: (1) A trustee has a right of indemnity in respect of liabilities incurred in favour of third parties provided that these liabilities are properly incurred. This right of indemnity is of two types: a right of indemnity out of the trust property itself, and an additional right to proceed against a beneficiary personally for recoupment. Such rights, unless grounded in contract or statute, derive from the unfairness of a person who gets all or part of the benefit of property or a legal transaction not bearing all or the proportionate part of the burden associated with it. Hardoon v Belilios [1901] AC 118; Causly v Countryside (No 3) Pty Ltd, Court of Appeal, unreported, 2 September 1996; J W Broomhead (Vic) Pty Ltd v J W Broomhead Pty Ltd [1985] VR 891; Armstrong v Commissioner of Stamp Duties (1967) 69 SR (NSW) 38, approved. (2) It was no objection to the availability of the right of personal indemnity that: (a) Indemnity was sought from more than one beneficiary. (b) The beneficiaries did not request the trustees to make the payment in question. BC9803370 at 3 (c) There were successive interests in the trust, such as life interests followed by a remainder interest. (d) The liability was a tax liability. (e) The trust had come to an end when its corpus had been entirely distributed. Re German Mining Co; Ex parte Chippendale (1853) 4 D M & G 19, 43 ER 415; Causly v Countryside (No 3) Pty Ltd, Court of Appeal, unreported, 2 September 1996; J W Broomhead (Vic) Pty Ltd v J W Broomhead Pty Ltd [1985] VR 891, Hardoon v Belilios [1901] AC 118, applied. (3) The trustees, in their capacity as solicitors, did not breach the duty of care owed to the beneficiaries.

Mason P
In Hardoon v Belilios [1901] AC 118 at 124 the right of trustees to a personal indemnity from a beneficiary in respect of liabilities incurred by reason of retention of the trust property was described by Lord Lindley as "well established" and "one as old as trusts themselves". As beneficiaries, the appellants contend that this right was not available to the trustees of the Fritz Rosenberg Settlement for various reasons. If held liable, they seek damages for negligence from the trustees in their capacity as the Settlement's solicitors. The negligence is said to be the failure to re-structure the Settlement in a manner "tax effective" to the beneficiaries. FACTS Mrs Clara Urquhart was South African by birth. She came to live in the United Kingdom in about 1955. She had a substantial income from business interests in South Africa and Swaziland, but owned no property in nor received any income from the United Kingdom. In 1968 Mrs Urquhart suffered a heart attack and required hospital treatment. Her brother Mr Fritz Rosenberg told his solicitor Mr Bayer that he wanted to buy a home in London for Mrs Urquhart to live in. He later gave Mr Bayer instructions to set up a trust which could provide Mrs Urquhart with a home in London during her lifetime. Mr Bayer was asked to be a trustee with Mr Rosenberg, and because of his close friendship with the family he agreed. Mr Rosenberg wanted the trust to be as simple as possible. At the same time he wished to avoid the imposition of tax or death duties on his estate arising out of it. He told Mr Bayer that he did not want to establish a trust outside England.

Page 59 In consequence, Mr Rosenberg settled property upon trustees by Deed of Settlement dated 13 March 1968. The Trust Fund was settled (in the events which happened) upon trust to pay the income to the Settlor's sister Clara Urquhart ("the life tenant") during her life and thereafter upon trust for the children of the Settlor. The Settlor had three daughters: Mrs Balkin, Mrs Blumberg and Mrs Smirin. The first two reside in Australia and they are the appellants. The original trustees were Mr Rosenberg and Mr Bayer. When Mr Rosenberg died in 1975 he was replaced as trustee by Mr Peck. Mr Bayer gave evidence at the trial but is now deceased. The respondent, Mr Peck, is the surviving respondent. The fund of 30,000 that was settled upon the trust was used to purchase a flat at London House, Avenue Road, London. This was the home of the life tenant between 1968 and her death on 2 February 1986. Cl4(d) of the Deed of Settlement gave the trustees power to permit any beneficiary to reside in any dwelling house which was subject to the trusts thereof. All of this was known to the three daughters of the Settlor in whom the remainder interest was vested. Under the Capital Transfer Tax Act 1984 (UK) ("the Act") (now known as the Inheritance Tax Act 1984) there was a "chargeable transfer" in relation to the London flat consequent upon the life tenant's death. This tax was levied upon the trustees. A request to the Settlor's daughters for funds to meet the tax was answered by Mrs Smirin but declined by the appellants. The trustees were forced to pay two-thirds of the tax liability out of their own funds together with interest. These proceedings were commenced for reimbursement. BC9803370 at 4 Cohen J found each of the appellants liable to pay a sum representing one-third of the tax together with certain interest accruing on the tax liability. He held that the trustees could not recoup so much of the interest they had incurred as was attributable to delay flowing from their mistake. His Honour also dismissed a Cross Claim against the trustees for negligence in their capacity as solicitors. UNITED KINGDOM CAPITAL TRANSFER TAX S1 of the Act provides that capital transfer tax ("CTT") shall be charged on the "value transferred" by a "chargeable transfer". A chargeable transfer is defined in s2 as "any transfer of value which is made by an individual but is not ... an exempt transfer". A transfer of value can be actual or notional: see generally, McCutcheon and Whitehouse, McCutcheon on Inheritance Tax 3rd ed, 1988, 1-03. One such notional transfer occurs in relation to settled property in which a person has an interest in possession. If a person dies entitled to an interest in settled property, the settled property in which the interest subsists is treated as having been comprised in the deceased's estate immediately before death: Id, p5. The charging provisions relating to settlements subsequent to their creation are to be found in PtIII of the Act (s43-s93). A person BC9803370 at 5 beneficially entitled to an interest in possession in settled property is treated for the purposes of the Act as beneficially entitled to the whole of the property in which the interest subsists (s49(1)). S52(1) provides in effect that a deemed transfer of value occurs upon the coming to an end of an interest in possession during the lifetime of a beneficiary. This includes the death of the beneficiary, because A treats the interest in possession as having been disposed of immediately prior to the death. S4(1) provides: "On the death of any person tax shall be charged as if, immediately before his death, he had made a transfer of value and the value transferred by it had been equal to the value of his estate immediately before his death." It was common ground that a tax liability arose by reason of the "value transferred" consequent upon the death of the life tenant (albeit that the transfer was deemed by s4(1) to have, occurred immediately before death). In this event the persons that became liable for the tax were both the trustees at the time of death and the three daughters of the Settlor. This is because s200 relevantly provided: "Transfer on Death200(1) The persons liable for the tax on the value transferred by a chargeable transfer

Page 60 made (under s4 above) on the death of any person are (a) ... BC9803370 at 6 (b) so far as the tax is attributable to the value of property which, immediately before the death, was comprised in a settlement, the trustees of the settlement; (c) ... (d) so far as the tax is attributable to the value of any property which, immediately before the death, was comprised in a settlement, any person for whose benefit any of the property or income from it is applied after the death." S237(1) effectively imposed a statutory charge over the property in favour of the Inland Revenue for unpaid tax. As indicated, it was common ground at the trial that CTT was payable in accordance with the provisions which I have summarised. Unfortunately, this liability was entirely overlooked by the Trustees between 1986 and 1989, and disputed by the appellants between 1989 and the trial of these proceedings in 1995. In July 1986 the trustees sold the flat for 320,000. In October 1986 the whole of the net proceeds of sale were distributed to the life tenant's three nieces as remaindermen under the Settlement. Before doing this Mr Bayer, who was the active trustee at the time, took the advice of counsel in London. Counsel was asked to advise whether the trustees would be liable for tax on the sale of the flat. Counsel confined himself BC9803370 at 7 to the precise question asked. He noted that a capital gain would arise on the sale of the flat and that this rendered the trustees prima facie liable to UK capital gains tax in the hands of the trustees. He concluded nevertheless that the sale transaction was exempt from capital gains tax because there was in effect a disposal of a private residence. In so concluding, counsel addressed only the provisions of the Capital Gains Tax Act 1979 (UK). He did not discuss the issue of liability for CTT under the Capital Transfer Tax Act 1984. His conclusion that "the gain on the disposal of the flat will be exempt from capital gains tax, and not liable to any other tax "(emphasis added) was literally correct. Unfortunately, it appears to have contributed to Mr Bayer overlooking the question of liability to CTT which, as previously indicated, arose upon the death of the life tenant as distinct from the sale of her former residence. In his evidence at trial Mr Bayer made it clear that he was aware of the CTT regime at all times since its commencement in 1975. CTT was introduced pursuant to the Finance Act 1975 (UK) which was later replaced by the Capital Transfer Tax Act 1984. Mr Bayer made no bones about the fact that he had been careless in overlooking the question of CTT both before and after distributing the net proceeds of sale of the flat to the remaindermen. BC9803370 at 8 It was in 1989 that Mr Bayer's attention was drawn to this oversight. His entreaties to the British Internal Revenue that he and his fellow trustee should be relieved of their personal liability f6r tax fell upon deaf ears. ISSUES IN THE APPEAL Neither at trial nor on appeal did the trustees base their claim upon the principles relating to payment of money under mistake. Such a claim would have focussed upon the beneficiaries' receipt of what would be regarded prima facie as an unjust enrichment, at least according to Australian law since David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353. Rather, the case was conducted on the basis that any right of reimbursement to the trustees stemmed from the payment which they later made to the Inland Revenue (UK). The trustees argued that, since this payment had been properly made in response to a lawful demand and since it related to the trust, the trustees had a right of personal indemnity from the appellants. A trustee has an established right of indemnity in respect of liabilities incurred in favour of third parties provided that these liabilities are properly incurred. This right of indemnity is of two types: a right of

Page 61 indemnity out of the trust property itself, and an additional right to proceed against a beneficiary personally for recoupment. (I have stated BC9803370 at 9 these propositions baldly.) When the trustees exhausted the trust assets by distributing them to the three sisters in October 1986 there ceased to be any trust property against which the former right could be exercised. Hence reliance upon the latter. The authority usually cited in support of the right of personal indemnity is the Privy Council decision in Hardoon v Belilios [1901] AC 118. Hardoon was an appeal to the Privy Council from a judgment of the Full Court of the Supreme Court of Hong Kong which affirmed a judgment of non-suit in favour of the respondent. The appellant was the registered holder of shares in a company. He held them on trust for the respondent, who was the sole beneficial owner of the shares. The circumstances giving rise to the trust relationship were complicated, but it is sufficient for present purposes to note that they did not arise out of any dealings between the appellant and the respondent and that the respondent had not been the party who had initiated the steps which led to the creation of the trust. The shares were not fully paid up when the company went into liquidation. Judgment had been entered in favour of the liquidator against the appellant for calls made on him in respect of the shares. It was against this judgment that the appellant sought indemnity. His claim had failed in the courts below because there was no evidence of any contract BC9803370 at 10 by the respondent to indemnify. However, the appellant succeeded in the Privy Council. It will be necessary to consider exactly what Hardoon decided and the principles lying behind it. For the moment it is appropriate to note that the appellants contended that personal indemnity was unavailable for one or more of the following reasons: 1. Indemnity was sought from more than one beneficiary. 2. The beneficiaries against whom indemnity was sought had not "requested" the trustees to make the payment in question. (The appellants were not the Settlor of the trust and were ignorant of the tax payment by the trustees before it was made.) 3. There were successive interests in the trust, being a life interest followed by a remainder interest. 4. The tax liability in question was not a trust expenditure in the sense required by the principle in Hardoon. 5. The trust had come to an end when the net proceeds of sale of the flat were distributed in October 1986. 6. The appellants had special defences to the trustees' claim, based upon the trustees' failure: BC9803370 at 11 (a) to "take the Trust offshore" before the death of the life tenant, thereby avoiding the tax liability which fell due on the deceased's death; and (b) to advise the appellants of the tax liability at the time when the trust assets were distributed. (There was no suggestion on the evidence that either appellant had acted to her detriment on the faith of the payment to her. Such a defence had been pleaded but it was not pressed.) The appellants also challenged the trial judge's dismissal of the Cross Claim against the solicitors. And, by a Supplementary Notice of Appeal they disputed the costs order made below. The concept underlying Hardoon Lord Lindley commenced his analysis of the legal issues in Hardoon by considering "on what principle an absolute beneficial owner of Trust property can throw upon his trustee the burdens incidental to its ownership". His response (at 123) was that: "the plainest principles of justice require that the cestui que trust who gets all the benefit of the property should bear its burden unless he can shew some good reason why his trustee should bear them himself The

Page 62 obligation is equitable and not legal, and the legal decisions negativing it, unless there is some contract or BC9803370 at 12 custom imposing the obligation, are wholly irrelevant and beside the mark. Even where trust property is settled on tenants for life and children, the right of their trustee to be indemnified out of the whole trust estate against any liabilities arising out of any part of it is clear and indisputable; although, if that which was once one large trust estate has been converted b the trustees into several smaller distinct trust estates, the liabilities incidental to one of them cannot be thrown on the beneficial owners of the others. This was decided in Fraser v Murdoch (6 App Cas 855), which was referred to in argument. But where the only cestui que trust is a person sui juris, the right of the trustee to indemnity by him against liabilities incurred by the trustee by his retention of the trust property has never been limited to the trust property; it extends further, and imposes upon the cestui que trust a personal obligation enforceable in equity to indemnify his trustee. This is no new principle, but is as old as trusts themselves." It was considered "quite immaterial " that there was no contractual relationship or that the respondent had never requested the appellant to become his trustee (ibid). It is understandable why Lord Lindley emphasised the equitable basis of the right in a trustee context. However, the notion of a right to contribution, recoupment or indemnity is not peculiar to equitable relationships. Such rights, unless grounded in contract or statute, derive from the unfairness of a person who gets all or part of the benefit of property or a legal transaction not bearing all or the proportionate part of the burden associated with it. Lord Lindley described this concept of correlative benefit/burden as "the plainest principle of justice" in BC9803370 at 13 Hardoon (at 123). In Causly v Countryside (No 3) Pty Ltd, Court of Appeal, unreported, 2 September 1996 this Court approved the statement of McGarvie J in J W Broomhead (Vic) Pty Ltd v J W Broomhead Pty Ltd [1985] VR 891 at 936 that "the basis of the principle is that the beneficiary who gets the benefit of the trust should bear its burdens unless he can show some good reasons why the trustee should bear the burdens himself". See also Mahoney v McManus (1981) 180 CLR 370 at 388; Paul A Davies (Australia) Pty Ltd v Davies [1983] 1 NSWLR 440 at 450. Many later authorities have preferred to use the concept of unjust enrichment to describe the same basal principle: cf Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 at 256-7. Whatever its label, it is a concept that informs doctrines of equitable and legal contribution (Dering v Earl of Winchelsea (1787) 1 Cox 318, 29 ER 1184; Albion Insurance Co Ltd v Government Insurance Office (NSW), (1969) 121 CLR 342 at 350-2, marshalling (Ramsay v Lowther (1912) 16 CLR 1 at 23-4) and recoupment by varieties of sureties against those principally liable (Moule v Garrett (1872) LR 7 Ex 101 at 104). This concept has been applied to tax liabilities, where the person made liable to pay the impost did not enjoy any or all of the beneficial interest in the property attracting the tax: Brook's Wharf and Bull Wharf Ltd v Goodman Brothers [1937] 1 KB 534; Armstrong v Commissioner of BC9803370 at 14 Stamp Duties (1967) 69 SR (NSW) 38. In Armstrong (which involved contribution) Walsh JA applied the principle deriving from Brook's Wharf (an indemnity case), which he stated (at 45) as: "Where complete indemnity is sought on the ground that, although both plaintiff and defendant were liable to pay the debt, the defendant was, as between himself and the plaintiff, primarily liable, such a claim can be sustained where the debt is created by a revenue law." This principle has direct application in the present appeal, insofar as the liability to pay United Kingdom capital transfer tax was imposed upon both the trustees and remaindermen of the Trust by s200(1)(b) and s200(1)(d) of the Capital, Transfer Tax Act (UK) (supra). THE APPELLANTS' SUGGESTED LIMITATIONS ON HARDOON v BELILIOS I return to the way in which the case was argued here and below, by reference to Hardoon as a principle of the law of trusts. I have endeavoured to demonstrate the underlying rationale for the specific right declared

Page 63 by Lord Lindley. To understand that rationale is to reject the appellants' attempt to preclude application of Hardoon to multiple beneficiaries, beneficiaries who had not requested the payment in question, or beneficiaries who are remaindermen: see generally Hughes, "The Right of a Trustee to a Personal Indemnity from Beneficiaries" (1990) 64 ALJ 567. BC9803370 at 15 The principle in Hardoon has been applied to multiple beneficiaries on several occasions: see Re German Mining Co; Ex parte Chippendale (1853) 4 D M & G 19, 43 ER 4 15 (cited in Hardoon at 125); Matthews v Ruggles-Brise [1911] 1 Ch 194; J W Broomhead; Metcalfe v NZI Securities Australia Ltd, Federal Court of Australia, Full Court, unreported, 5 March 1996; Causley v Countryside (No 3) Pty Ltd, Court of Appeal, unreported, 2 September 1996. The requirement of a requested payment was rejected as long ago as Dering v Earl of Winchelsea (1787) 1 Cox 318, 29 ER 1184 and was regarded as "quite immaterial" in Hardoon (at 123). And there is an express statement justifying the application of the principle in relation to property settled on tenants for life and children in the passage set out above from Hardoon (at 123-4). The present case does not involve beneficiaries who are not sui juris, or entitled to a limited interest in the trust property, such as a life estate. (Whether that should be determinative can be left until a proper case arises.) It is true that a statement of Lord Lindley (at 127) reserves the situation touching shares held "for tenants for life", but I read this as addressing the issue of indemnity against life tenants; and certainly not casting doubt upon the application of Hardoon to a situation such as the present where the remainder interest has vested in possession by the very act giving rise to the liability sought to be recouped. BC9803370 at 16 The submission that the CTT tax liability incurred by the trustees fell outside Hardoon must also be rejected. It was argued that Hardoon only applies to trustee liabilities arising from the "mere fact of ownership" (per Lord Lindley at 125); and that the tax liability here arose as a consequence of the trustee's relationship with the life tenant imposed by the settlor. I confess to having difficulty in reading this expression of Lord Lindley as indicating some limitation on the right earlier expounded as deriving from the benefit/burden (or unjust enrichment) concept. See also Armstrong. Be that as it may, the liability imposed on the trustees here was a direct incident of an inevitable aspect of the settled property vested in them, ie the death of the life tenant. And an "ownership-based" liability is underscored by the statutory charge over the property for the unpaid tax (s237). Similar reasoning disposes of the submission that the liability was not incurred for the appellants' benefit. It is difficult to pinpoint the nub of the submission. After all, the property was at all times held on trust for the appellants. And it was the very transfer of "value" to the remaindermen, consequent upon the death of the life tenant, that attracted the tax liability. Had the tax not been paid, the statutory charge would have subsisted, as would the beneficiaries' personal liability to pay the tax. The fact that the appellants did not request the trustees to pay the tax BC9803370 at 17 is quite irrelevant, so long as the liability is a proper trust expense. A trustee's right of personal indemnity is not confined to cases where there is request or implied contract. Nor is it to the point that the flat was sold and the net assets distributed in late 1986. The trustee's liability to pay the tax arose earlier, upon the death of the life tenant. In July 1989 the appellants were approached by the trustees seeking indemnity, but were met with a prompt refusal based upon denial of any tax liability. But it is no longer in dispute that the trustees were obliged to pay the tax if the British revenue authorities pressed them to meet it. It is interesting that, while United States trust law does not recognise a general right equivalent to that established in Hardoon, a trustee there will have a claim to indemnity from a beneficiary personally if the trust estate has been conveyed to that beneficiary overlooking an obligation (such as a tax obligation) which the trustee was later required to pay: see Scott on Trusts 4th ed 249, 249.1; Equitable Trust Co v Kingsley 197 NY Supp 267 (1922), affd 201 NY Supp 900 (1923), affd 144 NE 903 (1924). It is no answer to the trustees' personal right of indemnity with respect to a proper trust expense to say that the trustees could have or even should have recouped the liability out of the trust property when it was in

Page 64 their BC9803370 at 18 hands. The personal right is distinct from the right of indemnity out of trust assets. It is not necessary to list all of the special defences to the right of indemnity to be able to say that nothing in the present case attracts any such special defence. The trustees might have pursued the beneficiaries before settling with the British revenue authorities: cf Rankin v Palmer (1912) 16 CLR 285 at 290-1; Wren v Mahony (1972) 126 CLR 212 at 225-6. But they were not bound to do so on pain of loss of their right. There was demand before proceedings were commenced, and absence of change of position. The distribution of what were believed to be the net trust assets in 1986 involved, in all probability, a payment made under mistake of law which was received by the appellants in Australia. However the law in Australia or England is to be regarded in the period prior to the High Court's decision in David Securities in 1992, the distribution certainly raised no equity against the trustees. It did not represent a breach of trust. Nor did it represent an accord and satisfaction. The alleged failure of the trustees to "take the trust offshore" before the death of the life tenant, thereby avoiding the tax liability which fell due on the deceased's death, represented no breach of trust causative of loss to the trust estate or the appellants. I strongly doubt whether it involved any breach of trust, in the light of the "absolute and uncontrolled discretion" BC9803370 at 19 vested in the trustees as to retention of trust investments in their original form: see cl4(a) and cl5 of Settlement. It certainly was not causative of any loss in the light of the findings on causation referred to below. Indeed it was entirely appropriate conduct on the trustees' part, for reasons addressed in the next portion of this judgment. It cannot operate to preclude the trustees' right of indemnity otherwise arising. THE APPELLANTS' CROSS CLAIM FOR DAMAGES AGAINST THE SOLICITORS The Settlor was domiciled outside the United Kingdom, which meant that, had the property in the settlement been situated outside the United Kingdom, no capital transfer tax would have been payable. However, the settlor's original instructions were to establish the trust in England. Evidence was given by a tax expert that, following the Finance Act 1975 (UK), it would have been possible to avoid ultimate CTT liability on the death of the life tenant by transferring the flat to the ownership of a company incorporated in, say, one of the Channel Islands or the Isle of Man. On the basis of this evidence the appellants claimed that the solicitors were in breach of their duty of care and were liable in damages for the amount of tax for which they sought recoupment. BC9803370 at 20 I am in entire agreement with what Cohen J has written on the issue of the appellants' Cross Claim against the trustees in their capacity as solicitors. I respectfully adopt it. It may be summarised as follows. Cohen J assumed that the solicitors owed a duty of care to the beneficiaries of the trust and that this duty extended to one of advice as to benefits and possible disadvantages, if any, which might arise from transferring ownership of the flat to an offshore company. Reference was made to Ross v Caunters [1980] Ch 297 and White v Jones [1995] 2 AC 207. The learned judge posed the question whether the failure to tell the beneficiaries of the effect of the statutory changes in 1975 or thereafter could amount to negligence from which any damages could flow. This question was answered in the negative, having regard to (1) expert evidence about the doubtful effectiveness of the proposed tax-avoidance scheme, including problems for the trustees in relation to their obligation to maintain ultimate control over trust assets; and (2) the serious risk that the scheme would have provoked close scrutiny by the United Kingdom revenue authorities of the increasingly debatable proposition that the life tenant retained a domicile outside the United Kingdom. Mr Bayer had actually turned his mind to this risk, and it was a real one. If the revenue BC9803370 at 21 authorities had determined that the life tenant acquired an English domicile, there would have been very

Page 65 serious adverse consequences to the life tenant's income tax position and in relation to the tax or duty payable upon her death. Had these risks come home, the appellants and their sister would have suffered. because they were the ultimate beneficiaries of the life tenant's estate. These risks meant that it was highly improbable that the beneficiaries and the life tenant would have opted to take the trust offshore had they been offered the prospect of doing so. Indeed it was held likely that the life tenant would have opposed this, with the probable consequence (whatever the views of the nieces) that the trustees would have exercised their very broad discretions under the trust instrument by adhering to the status quo. The solicitor trustees had to act impartially in considering whether to exercise any power to restructure the Settlement: see Re Zimpel [1963] WAR 171 at 174; Re Campbell [1973] 2 NSWLR 146. Of necessity, this meant that they did not have to prefer the interests of the residuary beneficiaries over that of the life tenant. And they were entitled to have regard to their express powers. It was also highly relevant that the three sisters were the residuary beneficiaries of the life tenant and, as such, their financial interests were vitally linked with those of the life tenant. BC9803370 at 22 COSTS BELOW The trial judge ordered the defendants to pay the costs of the plaintiffs of the claim and the cross-claim. I see no error in this. The appellants submit that some offset should have been made in relation to their success in limiting the trustees' claim to interest. Given the comparatively small amount of time apparently devoted to this issue, no appealable error is shown. ORDERS During the argument in the appeal it was noticed that the judgment entered does not reflect the trial judge's reasons in one obvious respect. The parties agreed that it should be amended by adding "each of" before the words "the defendants" in para1 of the judgment. I would therefore propose the following orders: 1. (By consent) amend the Minute of Judgment by adding "each of' before "the defendants " in para1. 2. Appeal dismissed with costs.

Priestley JA
For the reasons given by Mason P I agree that the facts of the present case fall in the area of trust law and equitable concepts of which Hardoon v Belilios [1901] AC 118 is a leading example. That means that the appeal against the order made by Cohen J in the proceedings commenced by the trustees must fail. I also agree, again for the reasons given by Mason P that Cohen J was right in dismissing the appellant's cross claim against the trustees. I agree with the orders proposed by Mason P.

Sheppard AJA
In this matter I have had the advantage of reading the judgment to be delivered by Mason P. I am in agreement with his Honour's reasons and conclusions, and with the order which he proposes. Order 1. Amend the Minute of Judgment by adding "each of" before "the defendants" in para1.

Page 66 2. Appeal dismissed with costs. Counsel for the appellant: D J Hammerschlag; H S Packer Solicitors for the appellant: Rosenblum & Partners Counsel for the respondent: M A Pembroke SC; A Leopold Solicitors for the respondent: Malleson Stephen Jaques

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Page 68 9 of 10 DOCUMENTS: CaseBase Cases

Clay v Biddle
BC9803329 Court: WASC Judges: Sanderson Judgment Date: 22/7/1998

Catchwords & Digest

Succession -- Family provision -- Application by widow -- Whether adequate provision Application for family provision by wife of deceased who received no provision in will of deceased. Where deceased and wife owned unit, with wife owner of 3/10th of unit and deceased owner of 7/10th. Where deed of gift entered into between wife and deceased which was vague and uncertain but purported to give wife life interest in husband's share of unit. Where wife had made contribution to marriage by working part-time for many years and wife entitled to receive two-thirds of deceased's pension for remainder of her life. Whether wife left without adequate provision for her proper maintenance, education and advancement in life. Held: Adequate provision not made for wife. Wife to receive two-thirds interest in unit together with life interest. Cases considered by this case Annotations: All Cases Sort by: Judgment Date (Latest First) Annotation Case Name Citations (1994) 181 CLR 201; (1994) 123 ALR 481; (1994) 68 ALJR 653; Applied Singer v Berghouse (No 2) (1994) 18 Fam LR 94; [1994] HCA 40; BC9404642 Allen (decd), In re; Allen v [1921] GLR 613; Applied Manchester [1922] NZLR 218 Legislation considered by this case Legislation Name & Jurisdiction Inheritance (Family and Dependants Provision) Act 1972 (WA)

Court

Date

Signal

HCA

14/9/1994

SCNZ

22/8/1921

Provisions s 6(1)

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10 of 10 DOCUMENTS: Unreported Judgments WA 16 Pages

CLAY v BIDDLE (in her capacity as the Executrix of the Estate of CLAY) and ORS - BC9803329
SUPREME COURT OF WESTERN AUSTRALIA IN CHAMBERS SANDERSON M CIV 1183 of 1998 14 July 1998, 22 July 1998 980403
BC9803329 at 2 Inheritance Act -- Claim by wife -- Life interest uncertain -- Wife's future needs -- Turns on own facts In the matter of Inheritance (Family & Dependants' Provision) Act 1972 and Estate of EDWARD BARRY CLAY (DEC) Case(s) referred to in judgment(s):

46 47 48 49

Bondelmonte v Blanckensee [1989] WAR 305 In Re Allen; Allen v Manchester [1921] 41 NZLR 218 Lacey v Lacey, unreported; FCt SCt of WA; Library No 980359; 25 June 1998 Singer v Berghouse (1994) 181 CLR 201 BC9803329 at 3

Case(s) also cited:

50 51 52 53 54 55 56 57 58

Alford v Public Trustee & Anor, unreported, SCt of WA; Library No 970151; 10 April 1997 Anderson v Teboneras [1990] VR 527 Borthwick (deceased); Borthwick v Beauvis [1949] Ch 395 Bosch v Perpetual Trustee Co Ltd [1938] AC 463 Goodman v Windeyer (1980) 144 CLR 490 Grainger v Public Trustee, unreported, SCt of WA (Steytler J); Library No 950670; 6 December 1995 Hunter v Hunter (1987) 8 NSWLR 573 Re Lenehan (deceased) (1950) 50 SR (NSW) 318 White v Barron (1980) 144 CLR 431

Sanderson M

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BC9803329 at 4 This is an application by Olga Patricia Clay brought under the provisions of the Inheritance (Family and Dependants' Provision) Act 1972. The plaintiff is the widow of Edward Barry Clay ("the deceased") who died on 9 April 1997. Probate of the will of the deceased was granted on 15 September 1997 to Laurie Biddle ("the first defendant"). The estate of the deceased was modest. The schedule of assets and liabilities annexed to the grant of probate shows moveable property to the value of $25,281.87. At the date of his death the deceased was the owner of a 70 per cent share of a property at 34B Planet Street, Carlisle ("the Carlisle property"). That property is valued in the statement of assets at $170,000 meaning that the deceased's interest in the property is valued at $119,000. There were debts including funeral expenses of some $7,000 leaving a net value of the estate in the region of $137,000. As this matter was argued the precise value of the estate was not an issue and was not in dispute between the parties. The remaining 30 per cent of the Carlisle property is owned by the Plaintiff. On 29 September 1994 the plaintiff and the deceased entered into a "Deed of Gift of Life Interest". This document which appears as annexure OPC4 to the affidavit of the plaintiff sworn 23 February 1998 was not prepared by a solicitor. What it purports to do is grant to the plaintiff a life interest in the Carlisle property. However, it contains the following clause: "If the donee (the plaintiff) decides to retire to Bunbury and her family. The 30% share plus loan from the donor shall be lent at ruling bank interest rates an (sic) shall be prepaid to the donors estate upon the donees death or upon the sale of the Bunbury property." It is not entirely clear what is meant by that paragraph. For the purposes of this application all parties accepted that the plaintiff could remain in the Carlisle property as long as she wished to do so. If she decided she BC9803329 at 5 wished to move to Bunbury then the Carlisle property would be sold and the proceeds of the sale could be used by the plaintiff to purchase a property in Bunbury. Upon her death, an amount equal to 70 per cent of the sale price of the Carlisle property together with interest at ruling bank interest rates would then be paid to the beneficiaries of the deceased's estate. I will have more to say about this deed of gift later in these reasons. The second defendant is the sister of the deceased. The third, fourth and fifth defendants are the children of the deceased by an earlier marriage. The plaintiff and the deceased had no children of their own. By the terms of the deceased's will the second defendant receives $5,000. The remaining defendants share equally in the residuary estate, the main asset of which is the Carlisle property. No provision is made in the will for the plaintiff although reference is made to the deed of gift with the clear intention that the terms of the deed should be honoured. I should emphasise that there is no suggestion in any of the material put before the Court that this deed, or at least the intentions that it embodies, will not be honoured. The plaintiff filed three affidavits the first, as I have mentioned, being dated 23 February 1998, the second being dated 2 June 1998 and the last being dated 18 June 1998. There is an affidavit filed by the first defendant dated 12 June 1998 setting out the grant of probate and annexing a statement of the assets and liabilities. On behalf of the defendants there was filed an affidavit, of Thomas Peter Clay dated 12 June 1998. Taken together these affidavits comprised the evidence on the hearing of the application. Notice of intention to cross-examine was given by the defendants to the plaintiff and cross-examination of the plaintiff took place. The plaintiff did not seek to cross-examine the defendants. BC9803329 at 6 The plaintiff is 63 years of age, having being born on 25 November 1934. She was educated in Bunbury leaving school at the age of 14. Throughout her life she has worked at a variety of jobs mainly as a shop assistant but also as a cleaner, a nursing assistant and various other unskilled pursuits. She has no formal qualifications of any kind.

Page 72 She first married at the age of 22. She had two children in that union who are now aged 40 and 37. Both of these children are financially independent and neither provides her with any financial support. This first marriage lasted about four years. Upon separation there was no property settlement. The plaintiff received spasmodic child maintenance but no spousal maintenance. In 1965 she remarried. This union produced one child, a daughter who is now aged 31. This marriage broke down in 1979 and the plaintiff was divorced in 1980. Once again there was no property settlement. The plaintiff was left with a motor vehicle and her clothing and personal effects. Shortly after her separation from her second husband the plaintiff commenced a relationship with the deceased. They lived together in a de facto relationship for approximately one year before marrying in 1981. At the date of the marriage the plaintiff had no assets of any substance other than her car. The deceased owned a duplex half at 9 O'Dea Street, Carlisle ("the O'Dea Street duplex"). At the time the plaintiff married the deceased the O'Dea Street duplex was unencumbered. At the time the plaintiff and the deceased were married the deceased was the Officer in Charge of the Mount Hawthorn Police Station. The plaintiff worked part-time cleaning the police station and the adjoining CIB office. It would appear that this was a common practice at this time and provided an income to the wives of the officers in charge. The money earned by both the BC9803329 at 7 deceased and the plaintiff was used for their common needs. There is no suggestion that there was any separate fund held by either party. Some short time after the plaintiff and the deceased were married the deceased was posted to Tom Price as Officer in Charge of the police station. The plaintiff continued to do part-time cleaning work of the Tom Price Police Station and the parties continued to pool their resources. It appears that the deceased had a problem with drink. When he did drink he became violent and he periodically assaulted the plaintiff. One such assault which occurred some 10 months after the deceased was posted to Tom Price led to an internal police enquiry and eventually to the deceased being disciplined and transferred back to Perth. The O'Dea Street duplex had been leased while the plaintiff and the deceased were in Tom Price and upon their return to Perth they had to live with the plaintiff's sister for a short period before moving back into the O'Dea Street duplex. The deceased was posted to the Central Police Station. The plaintiff obtained a part-time job cleaning a floor of the police station between 4pm and 9pm daily. About a month after returning to Perth the plaintiff obtained a position as a domestic at the Lathlain Nursing Home. She held this position for about 8 years from 1983 until she retired in 1990. During that period the deceased continued to work as a police officer holding the rank of Sergeant, then Senior Sergeant, then Inspector, then Superintendent. The evidence indicates that the plaintiff and the deceased enjoyed many good times during this period. However, the deceased continued to drink with the result that the plaintiff was intermittently subjected to domestic violence. In 1990 both the plaintiff and the deceased retired. Upon her retirement the plaintiff received a superannuation payment of approximately $2,000. The deceased received a lump sum payment of $60,000. He was also BC9803329 at 8 entitled to a fortnightly pension which he received until his death. Upon his death the plaintiff was entitled to receive two-thirds of that pension. She is still presently receiving that pension. I will deal with this pension entitlement in more detail below. Upon the retirement of the plaintiff and the deceased they purchased a caravan and travelled around Australia together. They also purchased a landcruiser. Their trip lasted for some five months and it appears to have been a particularly happy time. Upon their return to Perth the deceased began drinking more and the domestic violence became more pronounced. In 1992 the plaintiff and the deceased separated. Proceedings were commenced in the Family Court and in November 1992 a property settlement was concluded. Under the terms of the settlement the deceased kept the O'Dea Street duplex and his superannuation. The plaintiff received the caravan and $45,000. The deceased and the plaintiff split the household furniture between them. The settlement was recorded in a minute of consent orders dated 9

Page 73 November 1992. It appears as annexure OPC1 to the affidavit of the plaintiff sworn 23 February 1998. After the settlement the plaintiff moved to Bunbury and lived in a caravan at the rear of her sister's property. She stayed there for two months then returned to Perth and commenced a job with her previous employer, the Lathlain Nursing Home as a nursing aid. In January 1993 she bought a unit at 5/1177 Albany Highway ("the Albany Highway unit"). For this unit she paid $72,000. She put the $45,000 from the property settlement towards the purchase price, she sold the caravan for $15,000 and put that towards the purchase price together with $5,000 she had saved and the rest she borrowed from her family. She repaid her family over the next 12 months or so. BC9803329 at 9 The plaintiff lived in the Albany Highway unit for about 20 months while continuing to work as a nursing aid at the Lathlain Nursing Home. The deceased made contact with her and they resumed a relationship. It appears there was a courtship over again. The plaintiff retired again in December 1996. For some time prior to her retirement she had been living between her property and the O'Dea Street duplex. The plaintiff and the deceased then decided that they would make a fresh start and commence to live together as husband and wife. The marriage had never been dissolved. As part of this fresh start the deceased and the plaintiff decided that they would sell both the Albany Highway unit and the O'Dea Street duplex and they would buy a property which they would jointly own. During cross-examination of the plaintiff it was suggested that it was the plaintiff's idea that the two properties should be sold and a new property purchased. The plaintiff indicated that it was an idea that arose out of discussions between her and the deceased and reflected a desire to start afresh in new surroundings unencumbered by unhappy memories. I accept the plaintiff's evidence in this respect. In no way could it be suggested that the sale of the Albany Highway unit and the O'Dea Street duplex was a sinister plot by the plaintiff to improve her position. On 13 October 1994 the plaintiff and the deceased offered to purchase the Carlisle property. The offer was conditional upon the sale of the O'Dea Street duplex. The O'Dea Street duplex was sold for $108,000. It was mortgaged in the sum of $36,358.60. It would appear that this mortgage was taken out by the deceased to allow him to settle the Family Court proceedings. The plaintiff and the deceased borrowed $105,000 to allow them to complete the purchase of the Carlisle property. On 16 December 1994 the Albany Highway unit was sold for $85,000 and the net proceeds of this sale, a sum of BC9803329 at 10 around $81,000 was used to reduce the mortgage on the Carlisle property. At the time it was acquired the Carlisle property was registered in the joint names of the plaintiff and the deceased with the plaintiff having a three-tenth interest and the deceased having a seven-tenth interest. As to why the parties held these respective interests is not clear from the affidavit evidence of the plaintiff and was not clarified by crossexamination. It is clear that this is what the deceased wanted. There is little to be gained by speculating on his motives for such a division but it may be that he felt that taking into account the Family Court settlement, he had contributed more by way of assets to the matrimonial property than had the plaintiff. The plaintiff maintains that from the first she was unhappy with division of the property. She says that she was assured by the deceased that her concerns were accommodated by the deed of gift which was entered into soon after the Carlisle property was acquired. During cross-examination the plaintiff maintained that she had always been unhappy with the division of the property and she had repeatedly made this plain to the deceased. In his affidavit the third defendant says that on at least one occasion he discussed the disposition of the property with the deceased in the presence of the plaintiff. He says that the plaintiff indicated she was quite happy with this arrangement. The plaintiff said she could not remember such a discussion but was quite sure that she would never have indicated she was happy with the arrangement. In the end it probably does not matter to any extent whether the plaintiff was or was not happy with the way in which the property was divided between her and the deceased. The fact is that it was registered as to seven-tenths to the deceased and three-tenths to the plaintiff and that was the position as at the date of the death of the deceased. This version of the relationship between the plaintiff and the deceased is largely drawn from the first

Page 74 affidavit of the plaintiff. The subsequent BC9803329 at 11 affidavits filed by the plaintiff are, in essence, responsive to the affidavit of the third defendant. There is not much in this affidavit material that is relevant to the present application. It is apparent that there was ill feeling between the deceased and the plaintiff's son, Bradley Robinson. It also seems clear that on at least one occasion Mr Robinson assaulted the deceased. It is perhaps fair to say that neither the deceased nor the plaintiff cared for the other's children. There is nothing in this material which is of any weight in assessing the totality of the relationship between the plaintiff and the deceased. This application is brought under the provisions of s6(1) of the Act. That section reads as follows: If any person (in this Act called 'the deceased') dies, then, if the Court is of the opinion that the disposition of the deceased's estate effected by his will, or the law relating to intestacy, or the combination of his will and that law, is not such as to make adequate provision from his estate for the proper maintenance, support, education or advancement in fife of any of the persons mentioned in s7 of this Act as being persons by whom or on whose behalf application may be made under this Act, the Court may, at its discretion, on application made by or on behalf of any such person, order that such provision as the Court thinks fit is made out of the estate of the deceased for that purpose." The plaintiff is entitled to bring this claim under the provisions of s7(1)(a). She is the widow of the deceased. The approach to be adopted in a case such as this was considered by the High Court in Singer v Berghouse (1994) 181 CLR 201. With the majority Mason CJ, Deane and McHugh JJ (at 208-210) put the position as follows: "It is clear that, under these provisions, the court is required to carry out a two-stage process. The first stage calls for a determination of whether the applicant has been left without adequate provision for his her proper maintenance, education, and advancement in life. The second stage, which only arises if that determination be made in favour of the applicant, requires the court to decide what provision ought to be made out of the BC9803329 at 12 deceased's estate for the applicant. The first stage has been described as the 'jurisdictional question'. That description means no more than that the court's power to make an order in favour of an applicant under s7 (of a NSW legislation) is conditioned upon the court being satisfied of the state of affairs predicated in s9(2)(a). ... In Australia, it has been accepted that the correct approach to be taken by a court invested with jurisdiction under legislation of which the Act is an example was stated by Salmond J in In Re Allen; Allen v Manchester. In that case his Honour said: 'The provision which the Court may properly make in default of testamentary provision is that which a just and wise father would have thought it his moral duty to make in the interests of his widow and children had he been fully aware of all the relevant circumstances.' For our part, we doubt that this statement provides useful assistance in elucidating the statutory provisions. Indeed, references to 'moral duty' or 'moral obligation' may well be understood as amounting to a gloss on the statutory language. ... The determination of the first stage in the two-stage process calls for an assessment of whether the provision (if any) made was inadequate for what, in all the circumstances, was the proper level of maintenance etc appropriate for the applicant having regard, amongst other things, to the applicant's financial position, the size and nature of the deceased's estate, the totality of the, relationship between the applicant and the deceased, and the relationship between the deceased and other persons who have legitimate claims upon his or her bounty.

Page 75 The determination of the second stage, should it arise, involves similar considerations. Indeed, in the first stage of the process, the court may need to arrive an assessment of what is the proper level of maintenance and what is adequate provision, in which event, if it becomes necessary to embark upon the second stage of BC9803329 at 13 the process, that assessment will largely determine the order which should be made in favour of the applicant. ... Although the precise nature of the jurisdictional question has been the subject of some debate, the correct view is that the question is strictly one of fact, notwithstanding that it involves the exercise of value judgments. The evaluative character of the decision stems from the fact that the court must determine whether the applicant has been left without adequate provision for his or her propermaintenance, education and advancement in life." Although this is a statement of principle it is important to note that the New South Wales legislation requires that the first stage of the process, or the "jurisdictional question" be considered as at the date of the hearing. In Western Australia this jurisdictional question must be considered as at the date of the death of the deceased: see Bondelmonte v Blanckensee [1989] WAR 305 at 307; Lacey v Lacey, unreported; FCt SCt of WA; Library No 980359; 25 June 1998. It is perhaps worthy of note that although the majority in Singer v Berghouse disapproved of the "moral obligation" test applied in In Re Allen; Allen v Manchester [1921] 41 NZLR 218 it received support from Toohey J: see 220-221. It is also worthy of note that Gaudron J paid special attention to the contribution of a wife to a marriage and the effect that may have upon an entitlement when a claim is made under the Act. In Singer v Berghouse the appellant, Mrs Singer, gave up her employment to look after the deceased. That fact undoubtedly colours what her Honour had to say. Nonetheless her Honour's comments with respect to the contribution of a wife are worthy of note (at p228): "The tendency of the courts to overlook or undervalue women's work, whether in the home or in the paid work force, has often been remarked upon. To my mind, that is what is involved in the failure to acknowledge the significant contribution involved when a wife gives up paid employment to be with and look after her BC9803329 at 14 husband. To put the present matter in terms appropriate to appellate review, the failure to acknowledge that by giving up her paid employment Mrs Singer made a significant contribution to her husband's welfare amounted to a failure to have regard to a relevant circumstance - indeed, a very relevant circumstance." Of course, the plaintiff in this case did not give up paid employment to look after her husband. She and her husband both worked and when the plaintiff gave up work so did the deceased. But it is apparent from what Justice Gaudron had to say that the fact that the plaintiff did work and consequently contributed to the assets of the couple is a relevant consideration to be taken into account. See also Lacey v Lacey (supra) per Franklyn J. As at the date of the death of the deceased the assets of the plaintiff amounted to a three-tenth interest in the Carlisle property. She was entitled to a fortnightly pension which amounted to something over $350 per fortnight. (The plaintiff subsequently commuted part of this pension entitlement to a lump sum. However, the relevant date is the date of death of the deceased. At the date of the death of the deceased her entitlement was to two-thirds of the pension paid to the deceased immediately prior to his death). She had a car which was of nominal value and some other personal effects. It appears she had available in a cheque account approximately $1,500. She also had an interest in the property under the terms of the deed of gift. The will of the deceased made no provision for her at all. I have some doubts as to whether or not this deed of gift conveys any benefit on the plaintiff. The agreement is so vague it might well be void for uncertainty. For instance, it is not entirely clear what is to happen if the plaintiff was to move out of the Carlisle property but move to somewhere other than Bunbury. Equally it is not clear what would happen if the defendants when their interests in the property was registered were to apply under s126 of the Property Law Act for a sale in lieu of petition. Could this deed

Page 76 prevail BC9803329 at 15 against such an application? These are not matters which it is for me to determine in this present application. However, what it does mean is that the entitlement of the plaintiff with respect to the Carlisle property is vague and uncertain. In all the circumstances it does not seem to me that the deceased made adequate provision for the maintenance of the plaintiff. I have reached that conclusion by taking into account all relevant matters. In particular a woman of advancing years needs to be assured that she will in the future have a roof over her head. In my view, the uncertainty surrounding the Carlisle property is such that she cannot feel confident as to her future accommodation. Looked at another way a wise and just testator would have taken steps to ensure that his wife's future accommodation needs were provided for. As that has not been done the jurisdiction has been enlivened and it is then necessary to embark upon the second stage of this two stage process. What then is the appropriate order to be made to adequately provide for the plaintiff's needs? The plaintiff's counsel submitted that the will should be varied so that the plaintiff had a true life interest in the Carlisle property and further that she had a total interest in the property of two-thirds. This counsel submitted would achieve two things. First, it would secure the plaintiff's position so that she could continue to reside in the Carlisle property for as long as she wished, or was able, to do so. If she was then forced to move to alternative accommodation or, indeed, if she chose to move she could rent the Carlisle property and make use of the income. Secondly, if she found that the Carlisle Street property was too much of a burden and she wished to move to alternative accommodation a sale of that property would leave her with sufficient capital to acquire adequate retirement accommodation. There was no evidence as to what adequate retirement accommodation might be or how BC9803329 at 16 much it would cost. But counsel made the point that if the property was valued at $170,000 upon sale the plaintiff would receive approximately $110,000. It was submitted that such a sum would be sufficient for the plaintiff's needs. The defendants on the other hand submitted that if any adjustment was to be made to the will it should be only to the extent of granting to the plaintiff a life interest in the property. Counsel for the defendants made the point that the defendant was anxious to pass on to his family his share in the Carlisle property. It was submitted that the plaintiff had the pension entitlement and this would continue for the rest of her life. It was submitted that with a life interest together with this pension entitlement the plaintiff was secure and would always have an income stream which would allow her to take up suitable accommodation if and when she decided to move from the Carlisle property. In my view, the better approach is to adopt the course suggested by the plaintiff. It is understandably important to the plaintiff that she should have available a capital sum to provide for her accommodation needs in later life. That can only be done by adjusting the respective interests in the Carlisle property. In my view, the proper split is to alter the will so as to give the plaintiff a two-third's interest in the Carlisle property together with a life interest. Order I will hear counsel as to the appropriate form of orders. Counsel for the plaintiff: Mr C E Chenu Solicitors for the plaintiff: Durack & Zilko Counsel for the first, second, third, fourth and fifth defendants: Mr T Darbyshire

Page 77 Solicitors for the first, second, third, fourth and fifth defendants: Kott Gunning

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