|
|
Home
| Databases
| WorldLII
| Search
| Feedback
High Court of Australia Transcripts |
Last Updated: 26 June 2006
IN THE HIGH COURT OF AUSTRALIA
Office of the
Registry
Brisbane No B110 of 2005
B e t w e e n -
MICHAEL PELDAN (AS TRUSTEE OF THE BANKRUPT ESTATE OF RAYMOND KENNETH PINNA)
First Appellant
MORGAN LANE (AS TRUSTEE OF THE BANKRUPT ESTATE OF RAYMOND KENNITH PINNA)
Second Appellant
and
BERNADETTE ANDERSON (AS EXECUTOR OF THE ESTATE OF THE LATE DOROTHY RUTH PINNA)
First Respondent
ROBYN MOLLEE (AS EXECUTOR OF THE ESTATE OF THE LATE DOROTHY RUTH PINNA)
Second Respondent
GUMMOW ACJ
KIRBY J
HAYNE J
CALLINAN
J
CRENNAN J
TRANSCRIPT OF PROCEEDINGS
AT BRISBANE ON TUESDAY, 20 JUNE 2006, AT 2.12 PM
Copyright in the High Court of Australia
__________________
MR D.R. COOPER, SC: If the Court pleases, I appear with MR M.D. MARTIN for the appellants. (instructed by Quinn & Scattini)
MR A.J.H. MORRIS, QC: May it please the Court, I appear with my learned friend, MR L.A. JURTH, for the respondents. (instructed by Bennett Carroll)
GUMMOW ACJ: Yes, Mr Cooper.
MR COOPER: Your Honour, if I could turn to the first ground of appeal. The evidence at trial disclosed that as at 11 September 2003 Mr Pinna was insolvent. He owed creditors in excess of $1.474 million and his only asset at the time was his equal joint interest in the matrimonial home at Carindale. On that day Mr and Mrs Pinna executed a transfer of the title to the house with each of them being described in the document as transferor and transferee.
GUMMOW ACJ: What is the relevant – I thought the relevant instrument was at page 56. First of all, you have to find the transaction which is void against the trustee.
MR COOPER: Your Honour, that is the relevant instrument so far as the appellants are concerned but the respondents seek to contend that that document when registered had no effect because they say there was a prior agreement to sever made in equity on 11 September 2003.
GUMMOW ACJ: But it is an instrument registered under your Torrens system.
MR COOPER: Yes, your Honour, and that is why we place so much emphasis on it.
GUMMOW ACJ: What is the relevant date of this instrument? The date of execution is 11 September, is it not?
MR COOPER: Yes, your Honour, 11 September and then it was amended on 17 September and registered on 5 November.
GUMMOW ACJ: Where do we see the amendment?
MR COOPER: The amendment is the striking out of the name of Mrs Pinna as transferor, the striking out of her name as transferee, the striking out of her execution of it. Your Honour sees the word “deleted” where her signature was on two occasions.
GUMMOW ACJ: Was this in response to some requisition?
MR COOPER: Yes.
GUMMOW ACJ: Where do we see the requisition?
MR COOPER: It is not in the evidence, your Honour. There was no evidence. The solicitor who prepared this gave evidence that he was not experienced in doing conveyancing matters, that he did this on the run and he showed it to his conveyancing partner or clerk who told him that there were problems with it and then it was requisitioned, but unfortunately there was no evidence as to why it was requisitioned. I can only hazard a guess, your Honour, that it was requisitioned because the consideration is expressed to be “THE UNILATERAL SEVERANCE OF A JOINT TENANCY PURSUANT TO SECTION 59(1) OF THE LAND TITLE ACT”.
GUMMOW ACJ: Was (1) written in later?
MR COOPER: Yes, it is, your Honour. It was 59(2) initially and it has been changed to (1) obviously.
GUMMOW ACJ: Do we have to look at that section first?
MR COOPER: Yes, your Honour. That is
in the Land Title Act. Section 59(1) says:
A registered owner of a lot subject to a joint tenancy may unilaterally sever the joint tenancy by registration of a transfer executed by the registered owner.
KIRBY J: Is this the real place to start or is the real place to start the solvency position of Mr Pinna?
GUMMOW ACJ: We have to know the date first, so we have to know the transaction.
MR COOPER: The real place to start, in my submission, was, I think, with respect, where I was going before to demonstrate the background to this document and how it came to be registered. I was going to trace through how the document was prepared and how it changed and how it was registered in that order.
GUMMOW ACJ: Why does that matter?
MR COOPER: Because it is put against us, your Honour, that notwithstanding what your Honour says about the document being registered – and I take the force of it and that is why we are relying upon the document.
GUMMOW ACJ: If you want to take the force of it, you can, but you do not have to. But if you do not observe the Torrens system up here, you have a problem.
MR COOPER: The other side are putting against us, as I understand their submission, your Honour, that you ignore the registered document – the instrument that we are relying upon, that you go back to some earlier imprecise oral arrangement.
GUMMOW ACJ: That is their case.
MR COOPER: Yes.
GUMMOW ACJ: It is a good idea to tell us what your case is. You are an appellant.
MR COOPER: All right. My case is very direct, your Honour. It is simply this, that the document that your Honour sees was registered and effected a severance of the joint tenancy in law so that the tenants became tenants in common in equal shares at law.
KIRBY J: As at 11 September 2003.
MR COOPER: As at 5 November 2003 when it was registered, your Honour.
GUMMOW ACJ: Is that the date of registration?
MR COOPER: Yes, your Honour, that is the evidence. It takes effect under section 181 of the Land Title Act as from date of registration. That is effective in law. The evidence disclosed that - - -
GUMMOW ACJ: The notion of “at law” and “equity” is a misdescription. I understand how it is done, but these are registered interests. That is statutory. It is a question of title by registration, as 181 indicates.
MR COOPER: Yes, exactly, but even if there was a prior equitable interest, it would have merged in the legal interests upon the registration of the instrument as a deed and the effect of the severance in law, so there cannot be some antecedent continuing equitable estate, given the circumstance your Honour has just pointed to. Your Honour, the appellants’ case is that under section 121 of the Bankruptcy Act - - -
GUMMOW ACJ: Sorry, just tell us that critical date again, the date of registration?
MR COOPER: It is 5 November 2003.
GUMMOW ACJ: Thank you. Then you have to read the Bankruptcy Act into that state of affairs.
MR COOPER:
Yes, your Honour. Just before I go to that, your Honour, could I just
tell you a couple of other things. Mr Pinna was adjudged
bankrupt on
21 April 2004 and his wife died on 12 January 2004. Going to
section 121 of the Act, the primary section says:
A transfer of property by a person who later becomes a bankrupt (the transferor) to another person (the transferee) is void against the trustee in the transferor’s bankruptcy if:
(a) the property would probably have become part of the transferor’s estate or would probably have been available to creditors if the property had not been transferred; and
(b) the transferor’s main purpose in making the transfer was:
(i) to prevent the transferred property from becoming divisible among the transferor’s creditors; or
(ii) to hinder or delay the process of making property available –
The seminal phrase “transfer of property” is defined
in subsection (9), as your Honours know, and relevantly in (9)(b)
as:
a person who does something that results in another person becoming the owner of property that did not previously exist is taken to have transferred the property to the other person –
Our case is that when the legal joint tenancy was severed it had the result of creating in Mrs Pinna’s favour an interest as a tenant in common which was significantly different in nature from the interests that she had beforehand. That different interest related from the act of severance and it created a right in respect of the land which did not previously exist. That comes in part from the broad definition of “property” in section 5 which extends to - - -
GUMMOW ACJ: Can you just back to 121(1) itself, “A transfer . . . by a person . . . to another person”. Who are the two persons?
MR COOPER:
Mr and Mrs Pinna, and that results because of the statutory fiction
which is implicit in subsection (9)(b), your Honour. It says:
a person who does something that results in another person becoming the owner of property that did not previously exist is taken to have transferred the property to the other person –
So what the definition is saying is that it is extending the natural usage of the word “transfer” to a situation where the creation of an interest in property is deemed to be, by virtue of this section, a transfer, which I concede is a normally unnatural meaning of the words, but the explanatory memorandum makes clear that the intention of this amendment in 1996 was to give this section a much broader application than it had previously.
So it is our case, your Honour, that when the joint tenancy was severed, Mr Pinna did an act which is deemed or taken to have had the consequence of giving to his wife an interest in the land which did not previously exist. The difference obviously between the two interests is significant. As a tenant in common, she then had an estate in land for which she was entitled to receive a certificate of title under the Land Title Act and was capable of alienating with her interest as a tenant in common.
Prior to that happening, of course, her interest was subject to extinguishment by the rule of survivorship so that any attempt to alienate during her lifetime would be of no effect. So there was a significantly different change in her rights with respect to the land as a result of what the husband did and he is taken then to have created in her favour property which did not exist, again because of the extensive definition of “property” in section 5.
GUMMOW ACJ: Just take us through the definition of “property”, if you would. It seems to have various senses. It seems to be talking about Blackacre in one sense, then in another sense it includes estates or interests in Blackacre.
MR
COOPER: Yes, it does, your Honour. It is, in my submission, as wide
as this Court said in the Claremont Case that it is particularly
broad definition because it really means, as your Honour says, not just
Blackacre but all the incidents of
ownership or tenure arising out of the
ownership of Blackacre. The words that I would particularly put emphasis upon,
your Honour,
are the words at the end:
includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real or personal property.
The interest of a tenant in common is an interest arising out of the interest of ownership of the real property.
KIRBY J: Assume you can get over that hurdle of the definition of “property”, what about paragraph (a), “the property would probably have become part of the transferor’s estate”?
MR COOPER: Yes, I was just going to come to that, your Honour.
KIRBY J: With the benefit of hindsight we know that that would have happened, but is that a proper way to approach the paragraph?
MR COOPER: It is, your Honour. I was about to come to that now. There is only, so far as I am aware, one authority directly in point on this issue and it is a decision of Mr Justice Hill in a case which has been provided to your Honours called Ashton v Prentice.
GUMMOW ACJ: Before you take us to that case, how do you say the words in section 121(1)(a) work, “the property would probably have become part of the transferor’s estate”?
MR COOPER: The property spoken of in (a) is the property prior to the occurrence of the act which is said to cause the creation of the new interest in the property or the new property which is the subject of the expression “transfer of property”.
HAYNE J: Why? Why should you read that as Blackacre rather than the interest in Blackacre?
MR COOPER: Because otherwise, if property is created in subsection (1) – your Honour may be correct. It may not be necessary to read it differently at all.
HAYNE J: Well, (9)(b), the deemed transfer “is taken to have transferred the property to the other person”. The property in (9)(b) is the new estate or interest in the land being the joint tenancy interest of the wife, is it not?
MR COOPER: The tenancy in common, your Honour.
HAYNE J: The common interest of the wife, correct?
MR COOPER: Yes.
HAYNE J: When you come back to (1)(a), what is the property? Is it the common interest of the wife or is it Blackacre?
MR COOPER: No, in my submission, it is the common interest of the wife, your Honour – I am sorry, no, it is Blackacre.
HAYNE J: Why?
MR COOPER: The property referred to in the “transfer of property” is, in my submission, the property which answers the description in subsection (9) and that is - - -
HAYNE J: You may be right, but just take me through it very slowly because at the moment it seems to me the answer is the other way and I know I am being slow but - - -
MR COOPER: I am sorry, the reason I am saying that is because the only decision of which I am aware on the point - - -
HAYNE J: Forget the decision for the moment. Just grapple with the words.
GUMMOW ACJ: Forget the decision. It does not bind us.
MR COOPER: No, I accept that. I was just answering a question before we go on about whether it would probably be part of the estate and I was referring your Honour Justice Kirby to the decision of Justice Hill.
KIRBY J: Yes, but before you get there you have to identify what the property is.
MR COOPER: Yes.
KIRBY J: Then you come to “would probably”.
HAYNE J: Tell me if I am wrong, but we begin
with 121(1), first line:
A transfer of property . . . is void . . . if:
(a) the property –
pause there. There is no shift, is there, in the application of the words “the property” from the application it has in line 1 “property”, is there?
MR COOPER: No, with respect, I think your Honour is correct on that.
HAYNE J: Then read 121(1) in the light of (9)(b).
MR COOPER: That would contemplate the status as tenants in common, your Honour.
HAYNE J: And the wife’s estate as tenant in common which is what – because it is created by the severance is what (9)(b) is talking about.
MR COOPER: Yes, it is taken to be the creation of a new interest in the land.
HAYNE J: So is the position to which you get that personalising the operation of 121(1) the creation of an interest in common in favour of the wife is void against the trustee if the wife’s interest in common would probably have become part of the estate, is that it?
MR COOPER: Yes, your Honour, but for the transfer to her.
HAYNE J: Yes.
GUMMOW ACJ: But the wife’s interest in common did not exist, so we are back into this definition of “transfer”.
MR COOPER: Yes, it all turns very much on the breadth of the transfer and the deeming effect of the definition about “transfer of property”.
GUMMOW ACJ: This expression “transfer of property” appears in section 120 as well, does it not?
MR COOPER: Yes, your Honour. It was introduced into 120 and 121 in the 1996 amendments.
GUMMOW ACJ: Is there any explanation of what they thought they were doing?
MR COOPER: Your Honour, other than they deliberately intended to extend the natural meaning of the word “transfer” to contemplate situations where property was not being held permanently or held in a transient way or something of that nature. It was to make the application much broader than it otherwise had in respect of the earlier section. In my outline I set out the relevant part of the explanatory memorandum, but it does not really seem to tell us very much so far as cases of this sort of factual situation are concerned, your Honour. Your Honour, I was asked about whether it was right to - - -
KIRBY J: There would be two theories about “would probably”. One theory would be you just look at what happened in the events and then you say it would probably have become part of the transfer of the estate in those events that we now know happened. The other would be that you take your mind back to the earlier time and ask, looked at from that time has it probably become. Relevant to that was the question the Chief Justice asked on the special leave, what was known about the state of health of Mrs Pinna, and it was known that she was operating for many years on one kidney but not very much was revealed about that.
MR COOPER: No, not at all, your Honour.
KIRBY J: So it may be important for your case to have the prospective in fact rather than prospective in theory.
MR COOPER: I would submit not, your Honour, because the matter, as I say, was touched on in one case which - - -
KIRBY J: Just before you get to the case. Barristers love cases but we love principle up here.
MR COOPER: I am coming to a decision of this Court which - - -
KIRBY J: Yes, but just tell us why in principle and in the text and the purpose of the Act it is in the events that have actually happened. Why is that the correct way?
MR COOPER: Because the authorities say that when one knows what has happened one uses the actual facts rather than speculating about what might have happened, so that if one can look back with hindsight and see with certainty what has happened one can give a more accurate result than if one goes back to the relevant time and looks forward with all the uncertainties inherent in that.
KIRBY J: That is like in cases where a widow remarries and then the law grasps at what has happened rather than asking itself theoretically does she have a big chance of getting married again, when that used to be a relevant question.
MR COOPER: Yes, your Honour.
KIRBY J: That is the principle, is it?
MR COOPER: Yes, your Honour. The first case to which I would like to take the Court is Willis v The Commonwealth [1946] HCA 22; 73 CLR 105. That was a case of the type your Honour has just postulated where a widow sued for damages for the wrongful death of her husband.
GUMMOW ACJ: This is a well-known case on that proposition that Justice Kirby was just putting to you.
MR COOPER: Yes, your Honour, but the point I wish to
make is that the Chief Justice said at 109:
The first objection to the judgment is that the learned judge should not have taken into account the fact that the widow had remarried. It is not disputed that the chances of remarriage of a widow are relevant to the assessment of damages under the Fatal Accidents Act, but it is said that this matter should be looked at by way of estimate as at the time of the death of the person which is the foundation of the claim, and that the circumstance that the widow has in fact subsequently remarried should not be taken into account. But, where actual facts are known, speculation as to the probability of those facts occurring is surely an unnecessary second-best. Damages are awarded for injury actually suffered and for prospective injury. Prospective injury can only be estimated with more or less probability. But where the extent and character of what would at one time be described as prospective injury depends upon the happening or non-happening of a particular event and that event has in fact happened, it is unnecessary to speculate as to whether or not this event might happen and, if so, when.
That, with respect, is the approach that should be taken here, in my submission.
HAYNE J: All that is driven in Willis’ Case by the nature of an action for damages under Lord Campbell’s Act. Why are those principles to be engaged in a bankruptcy statute where hovering around in the background is the question of whether the joint tenancy would in any event have been severed on bankruptcy?
MR COOPER: It has not been applied in such a narrow
way. It was in fact followed by three members of this Court in the case of
Johnson v Perez [1988] HCA 64; 166 CLR 351 at 368 to 369. Their Honours
Justices Wilson, Toohey and Gaudron said this at 368 and going over the
page:
Again, the fact that the respondent’s damages are to be assessed as at the time each action was dismissed for want of prosecution does not mean that evidence is excluded of events occurring since the dismissal. Such evidence may be relevant in a number of ways. In the first place, it may assist the court in placing itself in the position of the trial judge at the notional trial when a judgment was to be made of the likely losses that would be suffered by the respondent in the future and for which the employer was to be held responsible.
Then they refer to this case. Then they continue:
Secondly, in a case where witnesses have died or there is a paucity of evidence . . . touching the condition of a plaintiff at the time of a notional trial, the evidence relating to subsequent events (including, for example, later medical reports on a plaintiff) may assist a court in piecing together the case that could, but for the negligence of the solicitor, have been made out in the trial –
So what their Honours seem to be saying, with respect, is that why speculate about things that we can actually know about with certainty if we approach the matter by looking back at what happened.
KIRBY J: Can I try to give an answer to that? You speculate, because that is what the statute says. It is striking at particular transfers and its purpose is to strike at transfers to defeat creditors, that being the heading but that being the purpose, and therefore you have to look at it as at the moment of the transfer and ask, “As at that moment can you say that the property would probably have become part of the transfer of this estate?”
MR COOPER: But the transfer was not void at the time it occurred. It is only voidable when the trustee seeks to set it aside, your Honour, and that will often be some considerable time after the transaction in fact occurred.
KIRBY J: It says “is void against the trustee”.
MR COOPER: Yes, but, in my submission, “void” means voidable. It has always been interpreted in this legislation as meaning voidable, not void. If it is voidable, then it is an effective disposition unless and until the trustee seeks to set it aside, and when he does, surely, with respect, the question posed to the court must be decided on his application looking back to the facts that have in fact occurred.
GUMMOW ACJ: We know that Mrs Pinna died on 12 January.
MR COOPER: Yes, your Honour.
GUMMOW ACJ: If nothing had happened before - - -
MR COOPER: The fee simple would have passed to the husband.
GUMMOW ACJ: - - - there would have been an accretion of the right of the husband. He would have become the full owner.
MR COOPER: Yes, and all the property would have been available to his creditors on his bankruptcy.
GUMMOW ACJ: Yes.
MR COOPER: If we go back and assess the matter as at the time of the registration of the severance, then there are all these vagaries about what may or may not have happened. Mrs Pinna was obviously unwell at the time, but she had been unwell for a very, very long period of time. There was no evidence she was about to die.
GUMMOW ACJ: But the death is on 12 January and the sequestration on 21 April.
MR COOPER: April, yes, but - - -
HAYNE J: But the balance of 121 is directed to inquiry about states of affairs as at the date of transfer, is it not?
MR COOPER: It is, but my submission - - -
HAYNE J: As at the date of transfer had he gone bankrupt at that time - - -
MR COOPER: There would have been a severance of the title.
HAYNE J: Just so, and the property which went to her would not have been available.
MR COOPER: No, that is right.
HAYNE J: Thus, the temporal element is of critical importance, is it not? That is the time at which the prediction required by (1)(a) is to be made.
MR COOPER: But, your Honour, if the matter is looked at at that point in time, everything is just so uncertain. Although Mrs Pinna, for example, was not well, Mr Pinna could have been knocked over by a car the following day and killed. There are any number of possibilities that may have happened.
HAYNE J: Exactly so, but can you point to any other provision of 121 that requires judgment of a fact or set of circumstances as at the date of sequestration as distinct from as at the date of transfer?
MR COOPER: Not at the date of sequestration, but the definition of “transfer of property” in (9)(b) looks at a situation after transfer because it says what is the effect of the transfer and looks back.
HAYNE J: It looks to the moment after the transfer, yes, I accept that, but is not 121 focused upon what is being done at the time of the impugned transaction both as to purposes and effects? You would have the effects of the transaction judged at a subsequent time.
MR COOPER: The short answer to that question is this Court in Cummins’ Case looked at events after the date of the relevant event to find the Cummins’ motivation back in 1987 was for a certain effect. Your Honour might recall tax returns were prepared after he was sequestrated for the period 1992 to 1997 and the court used the evidence that was obtained in that analysis of his income up to 1992 as a fact relevant to ascertaining what his aim was in severing the title back in 1987. So this Court has done exactly the same exercise that I am promoting to your Honour in Cummins’ Case.
KIRBY J: There is a bit of a problem, apart from the problems Justice Hayne has raised, because the search is for if “the property would probably have become part”, whereas if you look at the actual facts that have unfolded, you are not really inquiring into probabilities, you are inquiring into certainties.
MR COOPER: Yes.
KIRBY J: Whereas the search for probability is a search for a hypothesis, whereas the search for the facts is just a search for what empirically has happened.
MR COOPER: It does not follow, I submit, that because one is instructed to search for probabilities that one must close one’s mind to certainties, because obviously certainties outweigh probabilities on any argument. That is the point being made in Willis’ Case and Perez’s Case and the English cases.
KIRBY J: I can see why you quoted Willis. Your theory is, yes, normally you do only look at what would probably have happened, but if probability has fallen in - - -
MR COOPER: Into certainty.
KIRBY J: - - - and if events that have occurred that are certain and are known, then it would be a folly for the law to be looking at probability when it knows exactly what has happened and, therefore, it looks at what happened. Now, did Justice Hill deal with that issue at all?
MR COOPER: In a way he dealt with it, yes, he did, your Honour, because what he said in the case at page 22 of the judgment which is – this is an unreported judgment, your Honour, so if your Honour goes to page 15 of the 20 pages and at the bottom of the page your Honour will see a heading “Would the property have been available or probably available to creditors if not transferred?” So really it is page 16 your Honours should go to.
KIRBY J: Just tell us what - - -
MR COOPER:
His Honour said:
The section requires the hypothesis to be made that the property in question was not transferred (contrary to the actual facts) and for a conclusion to be formed, inter alia - - -
GUMMOW ACJ: Which paragraph is this, Mr Cooper?
MR COOPER: If your Honour goes to
page 16 of the pages – I am sorry, it is not very well numbered.
There are 20 pages, so it should
be the fourth from the back, and about halfway
down the page it says 23 at the side. His Honour said:
The section requires the hypothesis to be made that the property in question was not transferred (contrary to the actual facts) and for a conclusion to be formed, inter alia, as to what probably would then have happened.
I think that on the facts of the present case no conclusion could be drawn other than that Mr Jury would have continued to own the home.
I should just interpolate the facts here. Mr Jury entered into a transaction with his accountant whereby he purported to sell his house to the accountant who purported to raise a mortgage and whatever, but Mr Jury after the transaction continued to reside in the house with his family subject to a lease, to spasmodically pay some rent and to all intents and purposes he continued to own the house with his family - - -
GUMMOW ACJ: What paragraph are you reading from in this judgment?
MR COOPER: Your Honour, I was just giving a summary of what the facts were in the case.
GUMMOW ACJ: I know that. Which paragraph? I cannot find the text at the moment.
MR COOPER: The summary starts on page 3, your Honour.
GUMMOW ACJ: I see.
MR COOPER: Under the heading “The Cross Claim”.
It sets out what the nature of the relief was of the trustee:
the Trustee sought a declaration that the transfer by Mr Jury, pursuant to a contract of sale, of the home to Mr Ashton –
that is his accountant –
was void as against the Trustee. It sought consequential relief in the form of an order to transfer the home to the Trustee. An alternative claim was made that a lease which was said to have been granted by Mr Ashton to Mr Jury, his wife and son was void –
and that is the lease pursuant to which they continued to occupy the house after settlement, your Honour.
KIRBY J: This case went on appeal to the Full Court of the Federal Court.
MR COOPER: Yes, your Honour.
KIRBY J: It is [1999] FCA 671; 92 FCR 68. Was this passage in Justice Hill’s reason disapproved or approved, do you know?
MR COOPER:
Your Honour, with respect, I do not think it was dealt with from memory.
The main issue in the Court of Appeal decision was the
question of onus of
proof. Just going back to the passage I was reading before:
I think that on the facts of the present case no conclusion could be drawn other than - - -
GUMMOW ACJ: You are reading from where, from which paragraph?
MR COOPER: I am sorry, page 16 again, your Honour.
GUMMOW ACJ: What paragraph of the judgment?
MR COOPER: Your Honour, it is the second paragraph on page 16.
GUMMOW ACJ: Down the side of the print we have it has the paragraph numbers.
MR COOPER: I am sorry, mine has not. Your Honour, it would be probably 2, 5, somewhere around there.
GUMMOW ACJ: I will give up in a minute.
MR COOPER: Does your Honour have a paragraph saying - - -
GUMMOW ACJ: What is the heading?
MR COOPER: “Would the property have been available or probably available to creditors if not transferred?” The heading starts at the bottom of the previous page, at page 15, your Honour.
GUMMOW ACJ: Yes.
MR COOPER: Does your Honour have the page and the paragraph, the second one on the page, saying - - -
KIRBY J: That seems to be against you. His Honour is looking not at what the actual facts were, but on a hypothesis that the property was not transferred.
MR COOPER: No, his Honour is saying – yes, he is, but he is also looking at the fact that the family continued to reside in the house continually after settlement and he looked at - - -
KIRBY J: No, he says that looked at at that point of time they probably would have because it was a family home and the arrangement that he entered reinforces the conclusion that that was significant for them, therefore he probably would have kept living in the family home, but the search is for probabilities looked at at that point of time. It is not at what they actually did.
MR COOPER: Yes, your Honour, but the case before you is somewhat different because we know exactly what has happened now because of the order of deaths. Mrs Pinna having died first, we can say with certainty what would have happened with - - -
KIRBY J: But that is the question: can we take that into account or do we have to go back in time and ask ourselves, “Looked at at the point of the suggested transfer, was that something that probably would have occurred?” On the material as to Mrs Pinna’s state of health revealed to the Chief Justice from the record, all that was known was that she had lost one kidney, that she was a woman of nearly 80 or - - -
MR COOPER: Yes, 78.
KIRBY J: - - - 77 and that was it. There was not really anything else. She had lived for many years on the single kidney.
MR COOPER: Yes, your Honour.
KIRBY J: So looked at at that point of time, if that is the correct way to do it, you would not have been certain that she was probably going to die. It is not as if they got together in the family and cooked up this scheme to defeat the creditors by - - -
MR COOPER: The only thing I can say in respect of that is that at least there was evidence of her health being not good. There was, so far as I recall, no evidence that Mr Pinna was in poor health. So just on the fact that they were both elderly but she had a history of kidney conditions and the husband had no apparent evidence of any ill health, there is still the probability on those facts that she would have died first.
KIRBY J: Yes.
CRENNAN J: Had she not had a kidney condition for 40 years?
MR COOPER: Yes, but she had other problems as well, your Honour. The death certificate is in the material at page 44, your Honour. She had chronic renal failure, chronic glomerulonephritis and cerebrovascular disease. She had the first for eight years, the second for more than 10 years and the third for only two weeks. So obviously it must have been the cerebrovascular disease which was the cause of death.
GUMMOW ACJ: Can we just go back to the section, Mr Cooper.
MR COOPER: Sorry, your Honour.
GUMMOW ACJ: The transfer of property spoken of in 121(1) has to be for your case, does it not, the tenancy in common?
MR COOPER: Yes, your Honour, that is right.
GUMMOW ACJ: That is deemed as having been transferred.
MR COOPER: Transferred, yes.
GUMMOW ACJ: You take the situation as if there had been an anterior tenancy in common.
MR COOPER: Yes, your Honour, that is correct.
GUMMOW ACJ: And you would treat it as if a one half share as tenant in common been transferred to the wife, then you say that is void against the trustee in bankruptcy if – is it that tenancy in common – that tenancy in common would probably have become part of the transferor’s estate. It could never have become part of the transferor’s estate on this hypothesis - - -
MR COOPER: No, because it did not exist.
GUMMOW ACJ: - - - because it was a tenancy in common. So how do you make the words work to – I think it comes down to what work you give to the phrase “the property” in 121(1)(a).
MR COOPER: Well, your Honour, I have to read it as being the tenancy in common is void if the property in its original form, that is the joint tenancy, would probably have become part of the transferor’s estate and the transferor’s main purpose in making the transfer was to prevent the transferred property, which is the property in common – no, sorry, it would have to be the same meaning there.
CALLINAN J: Does anything turn on the fact that there would have been a right to sever up until the moment before death?
MR COOPER: I do not think so, your Honour.
CALLINAN J: Assuming there had been no severance before.
MR COOPER: I do not think so, your Honour.
GUMMOW ACJ: I think you have to give the words “the property” in paragraph (a) some different meaning to what comes out of the transfer provision in subsection (9).
MR
COOPER: That is what I am saying, your Honour. I am trying to work
out the way to do it, because obviously “property” in (a)
has a
consistent meaning:
the property would probably have become part of the transferor’s estate or would probably have been available to creditors if the property had not been transferred - - -
HAYNE J: In the
course of doing that you have to accommodate the main purpose provision of
(b).
MR COOPER: Yes, your Honour, although perhaps the answer is this. The word “transfer” I think, with respect, I am reading too narrowly here because “transfer” does not mean just “transfer”. It means in the context of this “creation”.
GUMMOW ACJ: Yes.
MR COOPER: So the creation of a property is void if the transferor’s main purpose in not making the transfer but in creating the property was to prevent the created property from becoming divisible amongst his creditors. So that would make (1) and (b) work together.
GUMMOW ACJ: The created property from becoming divisible.
MR COOPER: Yes, your Honour.
GUMMOW ACJ: Because, if it were not for this - - -
MR COOPER: The property in its original form would have gone to his creditors because of the accretion based on the principle of survivorship.
HAYNE J: But the temporal element is that at the time of creating the common interest he has to be assuming that he will be survivor. Without injecting his knowledge/prediction probability of survivorship you cannot get (b) working in your favour, can you? In the events that happened it was his surviving which gives you a leg to stand on. I think, but I am by far from certain, that there is a point to grapple with about the time that is the premise underlying paragraph (b). Paragraph (b) is requiring you to make a judgment at one time and paragraph (a), I think, may be requiring you to make a judgment at the same time. That is at the moment I cannot see that (a) and (b) are speaking of different times with different factual bases. Now, that may be quite wrong, but there is a problem in there.
MR COOPER: Your Honour, in my submission, the words “in making the transfer” should be understood in this case as in creating property, because if one focuses on transfer, it is unnatural.
HAYNE J: I understand that, yes.
MR COOPER: So dealing with (b), the transferor’s main purpose in creating the property was to prevent the property created from becoming – so that goes to the time at which he does the act. In (a) - - -
GUMMOW ACJ: But the created property could never have become divisible among creditors.
MR COOPER: No, and that is why (a) must be referring to the property prior to the creation of the interest, in my submission, which is what Justice Hill was saying. You ignore the actual facts, that is, the creation of the interest, and you look at the property in the form prior to its transmogrification or change.
CRENNAN J: That will not work, will it, because of the severance of a joint tenancy upon a bankruptcy?
MR COOPER: No, this all happened long before he went bankrupt.
CRENNAN J: No, but I am saying the construction you are trying to give to “the property” in (a) would have to be the joint tenancy, would it not? I think you said that just before.
MR COOPER: Yes.
CRENNAN J: What I am saying is, but that will not work because on a bankruptcy the joint tenancy will be severed.
MR COOPER: The joint tenancy was severed here back in November when the instrument was registered.
GUMMOW ACJ: Yes, but that is the problem Justice Hayne has been putting to you. It is a gamble on the tontine of who dies first.
MR COOPER: Yes. Well, this Court said - - -
HAYNE J: But if he had gone bankrupt the day before he made this transaction or the day after he made this transaction, would different circumstances have obtained? What is injected into it is his surviving his co-tenant.
MR COOPER: Yes, and that is why I submit to your Honour that the matter should be looked at with the wisdom of hindsight, not with the uncertainty that you sit here and you are looking at this - - -
HAYNE J: I know, because that is forensically convenient, Mr Cooper. That is the most powerful reason for it.
MR COOPER: I do not wish to seem uncharitable, your Honour, but I do rely upon those cases in this Court. We are in the same sort of situation. The Court has opted for certainty rather than speculation. I fully concede this is a difficult section because the explanatory memorandum really does not give us any guidance at all as to what was being intended here, other than it was to be interpreted in a much broader way than it was before.
GUMMOW ACJ: I think you say when it says “is void against the trustee” - - -
MR COOPER: Means is voidable, your Honour.
GUMMOW ACJ: Yes, is voidable against the trustee in the – one is looking to a state of affairs. One is looking at it in the course of a bankruptcy administration.
MR COOPER: Yes, and that is why, with respect, the inquiry will be axiomatically often some years after the transaction has occurred because it is only at that stage that the trustee seeks to undo something which until that time is a valid transaction.
GUMMOW ACJ: But you still have to look at “main purpose in making the transfer”.
MR COOPER: Yes, your Honour.
HAYNE J: At time of transfer, do you not?
MR COOPER: Yes, your Honour.
GUMMOW ACJ: But then it comes down to, is there a different temporal perspective for (a)?
MR COOPER: That is what Justice Hayne was putting to me and I think, with respect, there has to be, your Honour.
GUMMOW ACJ: Yes.
KIRBY J: That is a problem because, if you look at the structure of section 121(1), it starts with a transfer of property. That is at a definite time in the past. It then comes down in (b) to “the transferor’s main purpose in making the transfer”. That is at that definite time in the past.
MR COOPER: Yes.
KIRBY J: But your theory is that when you come to (a) you are not looking at the same time if events have fallen in, and that seems to be a disharmony in the structure of the whole thing. You are looking at the definite time in the past in the opening umbrella. You are looking at that time in (b) but not in (a), and that seems disharmonious. Your theory is you look at (a) at a much later time when events have fallen in.
MR COOPER: No, my theory is that you look back. Obviously you are looking at the time before the property was created.
KIRBY J: But with the hindsight and knowledge of what happened much later.
MR COOPER: Yes, but my point is not that (1)(a) is looking at a time after the creation of the interest, it is looking at a time before the creation of the interest.
KIRBY J: What works best for the administration of bankruptcy, because that is what the purpose of the Act is and one should try to interpret the Act in a very practical area of operations in a way that facilitates the objects of bankruptcy law.
MR COOPER: Well, the object is to prevent bankrupts from dealing with their property in a way which hinders or delays the fair distribution of their estate to their creditors.
GUMMOW ACJ: And in respect of a joint tenancy it would, what, prevent a joint tenant from escaping the possibility of survivorship in the joint tenant’s favour and, hence, ultimately in favour of the administration of the bankrupt’s estate by severing?
MR COOPER: Yes. You see, generally the - - -
GUMMOW ACJ: If you can say that without severance it would probably have become part of the transferor’s estate.
MR COOPER: Yes.
GUMMOW ACJ: What you have in your favour is the words “would probably have become”.
MR COOPER: Yes, your Honour.
GUMMOW ACJ: And you can never really work that out until you know there is a transferor’s estate.
MR COOPER: That is why I say, your Honour, if you try and decide what probably would have happened looking at the time of the events with all the inherent uncertainty of the future, it really is just going to be a bald guess as to what might have happened. The only way that one can authoritatively decide what probably would have happened and, in fact, what certainly would have happened is to look back.
CALLINAN J: Mr Cooper, is the fact that you have a right unilaterally, as I understand it is, to severe a joint tenancy up until the moment of death, is that itself a proprietary right? Is that something that could be valued?
MR COOPER: Yes, it is an incident of the joint tenancy, your Honour, because each joint tenant can - - -
CALLINAN J: It might be a halfway house then. That might be what you are deprived of.
MR COOPER: Each joint tenant has the right to deal with the - - -
CALLINAN J: Unilaterally.
MR COOPER: Yes. I may, for example, alienate the land by creating a lease or granting a mortgage or something of that nature. So a joint tenant can, up until the moment of severance – and not all dealings will create a severance. There can be, for example, the creation of a leasehold which is a temporary suspension of the joint tenancy or a temporary severance which ceases to have effect once the lease has expired and the position reversed to its - - -
CALLINAN J: Is that under the statute or just a - - -
MR COOPER: In the legal position, your Honour, common law position.
CALLINAN J: Yes. Well, is this not all governed by the Land Title Act?
MR COOPER: Yes.
CALLINAN J: But under the Land Title Act there is a right unilaterally to sever, is there not?
MR COOPER: Yes, your Honour.
CALLINAN J: Treating all the rights as being statutory, as I think is the right way to do it.
MR COOPER: Yes, your Honour.
GUMMOW ACJ: Just going back to paragraph (a) again. What is the dichotomy between “part of the transferor’s estate” and “available to creditors”? They are seen as not the same.
MR COOPER: Your Honour, I looked at that and, with respect, I cannot give you an answer to that because I could not think of any reason for the dichotomy being drawn, because if they fall into - - -
GUMMOW ACJ: Well, 116 talks about property divisible among creditors.
MR COOPER: Yes, your Honour. If it falls into his estate though, with respect, your Honour, it would be divisible amongst creditors. So it would seem that one of the phrases is perhaps tautologous, your Honour, because they are really looking at the same situation.
HAYNE J: Now, could I
go back a moment behind the Act. Can I go to Wright v Gibbons
[1949] HCA 3; 78 CLR 313 particularly at 330 to 331 and
Mr Justice Dixon’s discussion of joint tenancies. What I want
to focus on for the moment is
what appears at 331 at about lines 12 or
so:
For all purposes of alienation, each –
that is each joint tenant –
is seised of, and has a power of alienation over that share only which is his aliquot part”: Essay on Abstracts of Title, (1824), vol. 2, p. 62. “The real distinction is, joint tenants have the whole for the purpose of tenure and survivorship, while, for the purpose of immediate alienation, each has only a particular part” –
Now, had there been no transaction by way of creation of an estate, the only property that would have fallen into the estate of the bankrupt or would have been available to creditors would have been his aliquot share, would it not?
MR COOPER: Yes, your Honour, although, sorry, on his bankruptcy there would have been a severance of the joint title. There would have been a tenancy in common created. So his identifiable interest as a joint tenant in common would have fallen in.
HAYNE J: Yes, severance would have been worked by the bankruptcy.
MR COOPER: By the operation of law.
HAYNE J: Yes, of course. But it is the intervention of the death of the co-owner between transaction and bankruptcy upon which your proposition of probability depends, is it not?
MR COOPER: Yes, your Honour.
HAYNE J: Thus the probability that you require to be determined is a probability that looks backwards from date of bankruptcy taking account of the event after the transaction.
MR COOPER: Event that in fact occurred, yes.
HAYNE J: Yes.
MR COOPER: Yes, and, as I said to your Honours before, I am reminded that in Cummins’ Case this Court did in fact undertake that very purpose of looking back to the facts after sequestration for the purposes of determining what Mr Cummins’ intention was at the time that he severed the joint tenancy in 1987.
KIRBY J: I was not part of the Court in Cummins. Is there any passage in Cummins you want to particularly refer to?
MR COOPER: Your Honour, the paragraph we are relying upon is at - - -
CALLINAN J: 224 ALR 280.
MR COOPER: Yes, at paragraph [38]
they say that the:
records later assembled by an accountant, Mr Morelli, in connection with preparation of the income tax returns for 1992-99, showed items of significant expenditure in betting and the maintenance of race horses. It may be, though the reasoning of Sackville J did not rely upon the point, that it was to be inferred that the expenditure on turf interests pre-dated 1992, and was an element in the manner of living enjoyed by Mr Cummins at the time of the August transactions.
That is the severance. So what they are saying is it showed in 1992 how he was living, so we can assume, looking at that and looking back, inferring backwards, that he was living - - -
GUMMOW ACJ: But it was not a controversial point.
MR COOPER: No, not in that sense, but I am really just saying what the Court did, with respect, to the evidence before them in that case.
GUMMOW ACJ: It was such a striking set of circumstances.
MR COOPER: Yes.
Your Honours, I do not think there is too much more I can say on the first
ground of appeal. The second ground of appeal
relates to
her Honour’s finding that the trustee had not shown proof of an
intention to defraud creditors. My submission on
that is that her Honour
really misdirected herself on the law in this regard. In the relevant
paragraphs of her judgment, paragraphs
16 and 17, which appear at
page 157 and 158, her Honour says at about line 46:
The purpose of the section is to prevent fraudulent dispositions of property. The question it poses focuses upon the effect of the disposition on the property the subject of it. It is intended to protect creditors from such a dealing . . .
The phrase ‘an intention to defraud creditors’ implies that the intention is put into effect.
So her Honour, with respect, seems to have treated this matter as though the amendments had not been made in 1996 because it was quite clear, in my submission, that the question now is a different one: whether the aim of the bankrupt in doing what he did was to hinder, delay or prejudice the rights of his creditors.
Your Honour, in that regard I rely upon the analysis of Justice Sackville about the background to the amendment and the way that the two sections are different because this Court accepted in Cummins’ Case at paragraph [23] that Justice Sackville’s analysis of the genesis of the changes and how they differed was an accurate description of the way they worked. The other reason, in my submission, why her Honour has overlooked the changes is one of the significant reasons for the change to this section in 1996 was a perception that the word “fraud” connoted criminality and it was the intention of the legislature to take away that connotation and replace it by a more neutral expression, which is what, in my submission, they did.
Your Honour, that leaves, in my submission, the notice of contention which is my friend’s notice. I was proposing not to deal with that now, if that is suitable, and respond to his submissions when he addresses on that point.
GUMMOW ACJ: Yes, thank you.
MR COOPER: Thank you, your Honour.
KIRBY J: Yes. Could I just ask you, it has been said, and I assume it is correct, that Justice Kiefel was exercising the functions of the Full Court of the Federal Court of Australia.
MR COOPER: That is correct, your Honour.
KIRBY J: But that is not how her reasons or the orders are intituled. In my experience, at least in refugee cases, it was not unusual where a single judge was exercising that jurisdiction to recite that they were doing so under delegation from the Chief Justice of that court. There is no doubt that that is what Justice Kiefel was doing.
MR COOPER: Yes, no doubt about that, your Honour. The Chief Justice made a direction that she hear it as the Full Court. Can I just mention one housekeeping matter? In my submissions in reply, your Honour, I have referred to the agreement put forward by the other side as being an agreement made on 16 September. That date should be 11 September. I would ask your Honours to - - -
GUMMOW ACJ: In your reply, which paragraph?
MR COOPER: It is in a number of paragraphs, your Honour. I think wherever it is referred to as 16 September it should read as 11 September. It is in paragraph 2(a) - - -
GUMMOW ACJ: Paragraph 2(a) should be the 11th?
MR COOPER: Yes, your Honour, and the same in 12, 13, 25 and 26. That is all, thank you, your Honour.
KIRBY J: Just one question, Justice Kiefel in her reasons in paragraph 7 and paragraph 8 sets out certain evidence concerning the circumstances in which the transaction for the severance of the joint tenancy occurred, and that was done. Mrs Pinna, herself, had been I think a director of the company which was the source of the Pinna’s insolvency. The circumstances suggest that the conversation with Mrs Pinna was a very natural sort of conversation with a mother in such a predicament and was designed and she concurred in the steps being taken so that her half in the family home would pass to her daughters and not get caught up in the obligations to the creditors. Now, all of that is humanly understandable, but is any of that evidence relevant to appreciating how the Bankruptcy Act is intended to operate in these circumstances?
MR COOPER: No, because the evidence related to a conversation, I think, much earlier in the year, but in any event, as Justice Gummow has said, we are concerned here with an instrument that has been registered. What was being spoken of there was a unilateral willingness on her part to want to sever which does not have any effect at all as a severance.
The evidence that is relied upon really is of the solicitor, Mr Klar, that on 11 September both the Pinnas and another family member came to see him. He was drawing wills and other documents for both Mr and Mrs Pinna that day. For some reason Mrs Pinna was sitting in her car out in the car park and Mr Pinna was in his office, and he was moving between the two of them and taking instructions from them as he went. The highest, in my submission, the evidence goes is that Mrs Pinna said she wanted to sever the joint tenancy and then Mr Klar told Mr Pinna of his wife’s intention and then Mr Pinna answered, “Well, I suppose I have got no choice but to do the same thing”. There was no evidence of the two Pinnas coming together and agreeing to sever and on what terms, et cetera.
KIRBY J: But, at least as I read the evidence, it is not as if Mrs Pinna emerges – or her daughters for that matter – as very canny people who are trying to ensure that Mrs Pinna’s interest became separate and was protected. But if you look at it from the point of view of creditors, this is the very type of transaction which does not come out of the blue; it comes in a particular environment of debt, and presumably in order to make sure that Mrs Pinna’s interest does not go to creditors, which is normally what should happen.
MR COOPER: Mr Klar said in
evidence that he had spoken to these people before about the issues of severance
and about what would happen to creditors
if the title was severed. While he was
reluctant to say that he had given any advice to that effect, he did come as far
as to say
they were very intelligent people, and he understood that they knew
what he was talking about, that if there was a severance all
the land would not
go to the creditors. There is a passage, your Honour, at page 109 at
about line 31:
It also meant, didn’t it, that if Mrs Pinna did not survive the bankrupt that her share in the house would not vest in the bankrupt and then not become available to his various creditors. That was the other effect of this transaction, wasn’t it? --- That was – that was a consequence, yes.
And did you consider that at the time? --- Yes, I would have.
All right. And did you discuss that with either the bankrupt or Mrs Pinna? --- Not – probably not expressly, but I think that I had on the previous occasion when discussing the concept of survivorship. I don’t recall getting right down to that sort of nitty-gritty that you’re referring to. I would expect that that was – you know, I was dealing with intelligent people; that that – I expect that that was quite clear and implicit that that would be a consequence.
KIRBY J: I mean, they did not do this in order to end up in the High Court to clarify a section of the Bankruptcy Act. They did it in an attempt, one would think – and this may be completely irrelevant – to stave up the separate position of Mrs Pinna in certain circumstances so that her interest in the family home did not go to the benefit of the creditors which it otherwise would have.
MR COOPER: Yes, they were doing what they could to sacrifice the possible claims of the creditors by severing the title and - - -
KIRBY J: It may be irrelevant and it may be that all we have to do is to decide whether that succeeded, but if you are looking at the purpose of the Bankruptcy Act to protect creditors, it may be relevant.
MR COOPER: The purpose we are concerned about here though is the purpose of the bankrupt in doing what he did, not Mrs Pinna. Her purpose has nothing to do with this, because only Mr Pinna went bankrupt, and we are focusing on the fact that he was insolvent, he was deemed to have had - - -
KIRBY J: Yes, but if this transaction had not occurred then - - -
MR COOPER: Then he would have got the fee simple and all the land would have gone to the creditors. There is no doubt these people were mindful of the fact that this man then owed almost $1.5 million in debts. It was obvious that he was going to go bankrupt. It was just a question of when. Quite clearly, your Honour, these people are intelligent enough to know, “If we sever the tenancy, then hopefully the creditors will only get half and we will keep half, but if we don’t sever the tenancy and Mrs Pinna dies first, they will get the whole lot”, and on the - - -
GUMMOW ACJ: As early as 16 April 2003 we know that there was an agreement with the Tax Commissioner and there was a large debt - - -
MR COOPER: Yes, which he dishonoured from day one.
GUMMOW ACJ: - - - which was dishonoured.
MR COOPER: It is a litany of demands for payment not being met and an ever-increasing debt arising. He also had substantial guarantees for the company’s debts. When the matter initially started his debt position was perceived to be about $470,000-odd. By the time the trial came round it had been worked out his position was $1.47 million. So his position was parlous for the whole of the year beforehand.
GUMMOW ACJ: Yes. So he was in a parlous financial position and he had this prospect of survivorship in his favour if his wife predeceased him. That is the factual setting.
MR COOPER: Yes, your Honour, and this was the only asset that they had.
GUMMOW ACJ: And the asset the subject of the restrictive survivorship was the only substantial asset.
MR COOPER: This is all they could hope to drag out of the debacle.
KIRBY J: I would only add to what the Acting Chief Justice has said that the only explanation that intuitively comes as to why anything was done at that stage was against a contingency to take advantage of a way of preserving part of the funds to the family and defeating the creditors.
MR COOPER: Yes, your Honour.
GUMMOW ACJ: Now, you seek the restoration of the Federal Magistrates Court order, do you?
MR COOPER: Yes, your Honour.
GUMMOW ACJ: You do not actually do it in your notice of appeal on page 164. You want to set aside Justice Kiefel’s orders?
MR COOPER: Yes, your Honour, and reinstate the orders of the - - -
GUMMOW ACJ: And the reinstatement of page 141, which is the Federal Magistrates Court order which set aside this particular transfer registered on 5 November and ordered payment.
MR COOPER: That is correct, your Honour.
GUMMOW ACJ: What is the present situation of these moneys?
MR COOPER: They are in the solicitor’s trust account, your Honour.
GUMMOW ACJ: So it would not be that sum now, would it?
MR COOPER: No, there would be accretions on it.
GUMMOW ACJ: Yes.
KIRBY J: Do we have to specify the sum in the event that you succeed?
MR COOPER: No, your Honour.
KIRBY J: We simply order that the sum - - -
MR COOPER: Just the amount plus accretions.
GUMMOW ACJ: With interest?
MR COOPER: Yes, your Honour. Your Honour, can I just mention one matter? I am sorry, it passed my attention when I was making my submissions. A submission is made by the other side that this appeal has no utility because if we were to succeed the trustees would have to pay the money back to the estate in any event under section 121(5). That, in my submission, is an irrelevant proposition for two reasons.
When this matter came before the registrar, the application filed by the other side sought solely a declaration of ownership based upon there being a valid severance and because Mrs Pinna had contributed to the overall asset being the matrimonial home and for those reasons there should be a declaration of ownership. No claim was made for relief under subsection (5). They filed an affidavit in support of that application, which is at page 50 to 52, but only read three paragraphs of that affidavit which were very formal. So they never sought to try and lead evidence to satisfy section 121(4) before the learned magistrate and, in my submission, given the way in which they chose to run their case on this basis of all or nothing, they should not, with respect, be allowed to argue it differently now, your Honour.
GUMMOW ACJ: But there is another point, is there not? It is a unilateral right of severance, is it not?
MR COOPER: Yes. I am sorry, I keep coming back to this argument the other side is putting up that there was this antecedent mutual severance and they say it is because of that that all these things flowed, but this is not the way they ran the case on that point anyway before the learned magistrate.
GUMMOW ACJ: But what they got set aside by the declaration in their favour was the registered transfer.
MR COOPER: Yes, that had to be.
GUMMOW ACJ: That does not require consideration because section 59, in pursuance of which it is expressed to be done, is a unilateral right.
MR COOPER: Yes, and, as I made the point before, your Honour, even if this argument about a prior equitable interest arose, it must have merged in the legal estate when they were both identical and held by the same partners.
CALLINAN J: Did not Justice Kiefel say there was consideration her giving up - - -
MR COOPER: No, the learned magistrate said that, your Honour, but if you read his judgment, he really misunderstood what Justice Deane was saying. In Corin’s Case Justice Deane was saying, if two joint tenants agree to sever, there is valuable consideration for the contract underlying their bargain, but his Honour was not dealing with section 121(4) of the Bankruptcy Act.
GUMMOW ACJ: Justice Deane was talking about rights in contract.
MR COOPER: Yes.
GUMMOW ACJ: This is rights flowing from a registered conveyance.
MR COOPER: Exactly, and that is the point. The learned magistrate then moved on to deal with the Property Law Act which talks about valuable consideration and said the same consideration applies because Justice Deane said there was consideration and then he moved into the bankruptcy and said, “As I previously found, there was consideration”, and then quoted the terms of the section. But, quite clearly, he could not have found in terms of the section because there was no evidence – and Justice Deane was not even talking about that very issue. So, in my submission, that is the only - - -
GUMMOW ACJ: Well Corin v Patton is all about when equity regards something to be treated as having been done.
MR COOPER: It is a situation between one joint tenant trying to deal with a third party, ineffectually, because it was a voluntary disposition capable of being withdrawn. It is a totally different fact situation than here, your Honour. Thank you, your Honour.
GUMMOW ACJ: Thank you. Yes, Mr Morris.
MR MORRIS: Thank you, your Honours. May we begin by taking up
Justice Kirby’s invitation to examine the matter from the point of
view
of principle rather than going to the authorities from the outset. In our
submission, when one looks at section 121 its plain intention
is to
defeat - - -
GUMMOW ACJ: “Plain”?
MR MORRIS: Its plain intention, as opposed to the plain mechanism by which it achieves that intention, is to set aside transactions which in broad terms can be described as naughty or wicked or underhand or are as such to defeat creditors.
KIRBY J: So that might have been the general purpose of your client’s activities here? I am not saying that it is not understandable what Mrs Pinna did, but it was to keep it within the family and to prevent it going to the creditors.
MR MORRIS: Your Honour, one of the ultimate ironies about this case is that if that were their intention, they did the worst thing possible to achieve it. There is no question but that Mrs Pinna could have unilaterally severed the joint tenancy and that could never be challenged. No one could ever challenge the fact that Mrs Pinna on 11 September 2003, or any other date, executed an instrument under the Land Title Act to sever the tenancy and convert it into a tenancy in common.
The extraordinary thing superimposed on that is that we get to the point we are now due to the entirely fortuitous confluence of three different circumstances. Your Honour Justice Hayne noted two of them. One is the fact of death having occurred on the part of the wife before the husband, so the husband had to survive; secondly, bankruptcy had to occur after the death, not before; and the third is the one that your Honour Justice Callinan noted: there had to be no other unilateral severance by the wife in the period between September and the death.
But for that combination of circumstances, we would not be in this situation. We would either be in a situation where he died first, so she received on survivorship, or received her half share as a tenant in common, or a situation where he became bankrupt while she was still alive and there was an automatic severance on bankruptcy, or a situation where she severed unilaterally. The worst thing they could have done, if their intention was to defraud creditors, was to enter into the transaction the way it was. But that is by the by.
In this case your Honours need not focus on whether there was an actual intention to defraud creditors because under the legislation there is a deemed intention to defraud creditors when one enters into a transaction other than for full value whilst one is insolvent, and we cannot dispute that on the evidence in this case Mr Pinna was insolvent at the time of the relevant transaction and, therefore, he is deemed under the statute to have that intention.
So may I come back then to the way in which the section deals with those sorts of problems. There are two, we suggest, fundamental interpretative problems with the section that the Court has identified already. One is how you reconcile the language of subsection (1) with the language of subsection (9) and the other is the question whether the issues in subsection (1)(a) have to be looked at prospectively or retrospectively.
The first of those is, we accept, a real difficulty because the language of section 121 taken as a whole simply does not work. One cannot substitute from subsection (9) the words “a person who does something that results in another person becoming the owner of property” and, as it were, import those words back into subsection (1) and talk about that property being property which “would probably have become” - - -
GUMMOW ACJ: Subsection (9)(b) really deems several things: “is taken to have transferred the property” and that property is taken to have previously existed.
MR MORRIS: Yes, that is right. It is the property that is taken to have been transferred that one then has to read into (1)(a) as to whether the property that is taken to have been transferred would have become part of the transferor’s estate or available to creditors, and that is just a nonsense. If the property that was created was the wife’s interest as tenant in common - - -
GUMMOW ACJ: It could never.
MR MORRIS: - - - it could never have. Justice Kiefel, with respect to her Honour, found a clever way around this by saying that one looks at it in terms of what has been subtracted from the estate of the bankrupt. So to take the common or the simpler case of a registered freeholder who grants a lease, what one looks at is not the value of the lease but how much the granting of the lease has subtracted from the value of the freehold. That is her Honour’s, sort of, via medium approach to it of saying you do not look at the interest in Blackacre that was created, you look at the extent to which the value of Blackacre has been diminished by the transaction. The difficulty with that approach is that there is not a word in the section to support it. With the utmost respect to her Honour, it is a very sensible way that Parliament might have provided for the situation but it is just not there in the words of the section.
GUMMOW ACJ: So looking at (a) that way, one does not have to solve the other question of when you are looking at it because it could never have worked.
MR MORRIS: Exactly.
KIRBY J: But that does not seem to be what the purpose of this section is in the context of protecting creditors.
MR MORRIS: It does not achieve the obvious purpose of Parliament, I accept that, your Honour.
KIRBY J: That being the case, the Court would normally not actually struggle to give effect to the purpose of Parliament, but if there were a reading that would give effect to the obvious purpose of Parliament that is the one one would try to give the section. That is the modern way to interpret legislation purposively.
MR MORRIS: Indeed, your Honour. The difficulty here is that it takes more than a struggle. It would be a Herculean effort to - - -
GUMMOW ACJ: You have to read the phrase “the property” in (a) differently, would you not?
MR MORRIS: Indeed.
GUMMOW ACJ: How would you have to read it?
MR MORRIS: One would have to say in (1)(a) where it says “the property would probably have become part of the transferor’s estate” as really meaning the original property unaffected by the transaction would have remained part of the transferor’s estate.
HAYNE J: It would have remained rather than would have become, which is the key to that transliteration.
GUMMOW ACJ: Yes.
MR MORRIS: Perhaps I should give your Honours the reference to where Justice Kiefel dealt with this. It is at page 157 in the record - - -
GUMMOW ACJ: Just before you do that, do you have any suggestion, Mr Morris, as to this distinction between “part of the estate” and “available to creditors”?
MR MORRIS: Your Honours, the only thought that comes to me is that it may refer to property that falls in after the commencement of the bankruptcy such as the modern provisions requiring a bankrupt to make a contribution out of his or her post-bankruptcy earnings. It is hard to see how it could otherwise apply to something that is not part of the estate but would still be available to creditors.
GUMMOW ACJ: Yes, thank you.
KIRBY J: Notice that paragraph (a) is really of two parts. The first is “would probably have become part of the transferor’s estate” and then there is the second part “or would probably have been available to creditors if the property had not been transferred”, and it is enough if the second is fulfilled.
MR MORRIS: Yes.
KIRBY J: Why would that not be applicable here? Forget about the first part about becoming part of the transferor’s estate. “[T]he property . . . would probably have been available to creditors if the property had not been transferred”.
MR MORRIS: Your Honours, if one assumes that “the property” means the estate or interest in Blackacre which is created by the transaction, that is the tenancy in common with the wife, that again is not something which would ever have been available to the creditors.
HAYNE J: But what may be driving this is a rather loose thought about value in cases of excision of interests, so that what may be the thought driving 121(1)(a) is that where the property is excised out of a larger bundle of rights, the value of that which has been excised would have been available, “Well, then the property would have been available to creditors in the sense of the value of that which has been taken away would have been available”. Now, the thought is loose.
MR MORRIS: Yes.
HAYNE J: The thought is very loose, but the combination “would probably have become part of the transferor’s estate or would probably have been available” may be thought as belt and braces to cover the whole available possibilities.
MR MORRIS: May I again say, with the deepest respect to Justice Kiefel, that her Honour’s solution, if one has to struggle to find a solution, is the most rationally effective way of looking at it in the terms your Honour just put to me of, “What is the value of the excision? What is the value of the property that was excised from the original property?” or, as her Honour said, which is subtracted from the property.
HAYNE J: But take the case of the insolvent who creates the 99-year lease over Blackacre in favour of the associate. How do the words grapple with that kind of case? The value of the freehold is largely leached out by the transaction.
MR MORRIS: Yes, and one would therefore have to say that the property is that part of the original estate which has disappeared as a result of the creation of a new interest. In that case, how much has the value of the freehold diminished as a result of creating a 99-year lease? I do not say there is anything in the words of the section that easily achieves that result but that seems to be the parliamentary intention and one has to give credit to her Honour’s approach as at least a logical solution to the impasse. The only other solution is to say that this section is meaningless and therefore subsection (9) can never apply. There can be no transaction where you create an interest which would have been available to creditors - - -
KIRBY J: Now, that just cannot have been the purpose of Parliament, so we would need to do a little bit of Herculean at that stage, once you come to that conclusion.
MR MORRIS: Well, we are in the right place for it.
KIRBY J: Hercules, whether he is a Dworkin Hercules or one of our own home-grown ones, is brought out of the cupboard.
MR MORRIS: Yes. Your Honours, may I move onto the other deep conceptual problem and that is the problem as to whether paragraph (a) is dealt with prospectively or retrospectively, and we really want to make a number of points about that. Firstly, our learned friend, Mr Cooper, says look at what this Court did in Cummins. It looked at events over the intervening period to determine what Mr Cummins’ intention was at the time of the transaction.
May I say that no one for a moment disputes that one can look at evidence of things that have happened in the meantime to determine what the probabilities were or what the intention was at the time of the transaction. If I were in Mr Cummins’ position, which, thank goodness, I am not, and after entering into a transaction I were to say at a public examination, “Of course, I did that with the intention of defrauding my creditors”, then that admission would be evidence of something that happened after the transaction but it could be relied on to prove the intention at the time of the transaction. So the Cummins’ analogy just does not help. Cummins is really just an illustration of using evidence of what has happened since the transaction to determine the state of facts at the time of the transaction.
KIRBY J: Why cannot one take into account that known at the time of the transaction was that Mrs Pinna had not been well, that she had lost a kidney and that if you were looking at who was likely to survive, it was more likely to be Mr Pinna than Mrs Pinna.
MR MORRIS: Well, your Honour, I have to answer that in two ways – and I am sorry to take up the Court’s time. One is to say, with respect, that is factually wrong. The evidence is that of the two of them – and the only evidence of this is Mr Klar, the solicitor, but his evidence suggests that there was a greater fear of Mr Pinna’s death than Mrs Pinna’s death, and I will take your Honours to those passages in a moment. That is part of it, but the other answer is to say one can only look at it from the standpoint at the time of the transaction because it is at the standpoint at the time of the transaction Parliament has said that if you intend to defeat creditors or if you have that deemed intention the transaction is set aside. Otherwise you turn the section into a lottery. Otherwise you say that this transaction is set aside because of this highly unlikely combination of circumstances: Mrs Pinna dies first, then he becomes a bankrupt, and she has not unilaterally severed in the meantime.
The section cannot, we respectfully submit, be intended to make the avoidance of transactions dependent on that sort of happenstance or chance anymore than, as we have said in our written submissions - - -
CALLINAN J: It is one thing to look at the subsequent events to identify a state of mind earlier.
MR MORRIS: Exactly.
CALLINAN J: It is an entirely different matter to look at something that happened later in order to try and say that everybody must have foreseen that that would happen.
MR MORRIS: Yes, and we think, with respect, that the words of the section strongly favour the view that one looks at it from the viewpoint of the time of the transaction. We adopt what your Honour Justice Hayne said about every other inquiry required by the section being an inquiry as to the state of affairs at the time of the transaction rather than at the time of sequestration or at the time of trial or at some other later point. May I say on that subject, I think your Honour asked our learned friend, perhaps rhetorically, why it should be the time of sequestration. It is actually our learned friend’s submission that it should be at the time of trial which just adds to the fortuitous nature of it. Why on earth would one make the inquiry at the time of trial?
KIRBY J: Time of trial or time of order?
MR MORRIS: Time of hearing, I suppose, yes.
GUMMOW ACJ: How do you make (a) work? You have to postulate a bankruptcy, do you?
MR MORRIS: Yes. Whether on the facts as they existed at the time of the transaction, had the bankrupt subsequently become bankrupt - - -
GUMMOW ACJ: What do you mean by “subsequently”?
MR MORRIS: At any subsequent time.
GUMMOW ACJ: I do not think that is all that easy.
MR MORRIS: Again, there is no easy solution to it, but when one looks at the words of it, it talks about “the property would probably have become part”. If the legislature intended the court - - -
GUMMOW ACJ: Now, “have become part”, you see, “have become part”; not “would become part”.
MR MORRIS: Yes. If the legislature was asking the court to inquire as at the time of the proceedings what would have happened, then it would be expressed in the same way as legislation always is, that if the property would have become part, the probability – it is, if I may say so, a bit like what this Court said in Malec v Hutton, that when a court determines past or present facts it does not determine percentage probabilities, it determines whether or not something is higher than 50 percent and, if so, that is a finding of fact for all purposes. If that is what Parliament intended, it would not have been “if the property would probably have become part of the transferor’s estate”, it would have simply read “if the property would have become part of the transferor’s estate”.
KIRBY J: Now, if the couple had not severed the joint tenancy and if it had been held in joint ownership at the time of the – what would have been the position? What if there had never been a transfer? What that have been available to the creditors?
MR MORRIS: Only if she died before him and before he became bankruptcy and, to add Justice Callinan’s qualification, if she had not exercised her undoubted right to sever the joint tenancy at any moment up to the moment of her death. So that the probability depends on, as I say, that combination of three circumstances: him outliving her, him becoming bankrupt after her death and her not severing the joint tenancy before her death. That is the probability one has to focus on.
May I say, again at an evidentiary level, it is sufficient to focus just on the third one: would she have severed in any event? The evidence on that point is all one way. The evidence from the solicitor is that the severance came about because she said she would sever if he did not agree to do it mutually.
HAYNE J: Just before you develop this point, can I take you back a stage because I think that the argument you are putting is one which implicitly is proffering two possible constructions and saying that yours is to be preferred. Yes, that is what counsel are paid to do. But the two constructions you seem to be proffering are a construction which I think you are attributing to your opponent which would read the words as though they were “A transfer of property by a person who later becomes a bankrupt is void if, but for the transfer, the property would have been part”.
MR MORRIS: Yes.
HAYNE J: If those were the words – and they are not – it would be clear, would it not, that you assess the position as at perhaps date of bankruptcy or date of trial.
MR MORRIS: Yes.
HAYNE J: Whereas you are, I think, implicitly contrasting that formulation “if, but for the transfer, the property would have been part” with “if the property would probably have become part if not transferred”. That is a construction that fastens on “probably”, fastens on “would have become . . . if not transferred”, but is it setting up a false dichotomy?
MR MORRIS: In our submission, it is setting up a false dichotomy. May I just take the example put in our written submissions of the sale of a half interest in a lottery ticket. The lottery ticket has a face value of $10. I sell a half interest to my learned junior for $5. I have done nothing that one would think that section 121 was intended to avoid. The ticket then wins the lottery, I go bankrupt and the trustee in bankruptcy says to my learned junior, “Well, I want your half share because that money is money which, but for the transfer, would have been available to creditors”.
That is why we say that a construction that looks at the matters with the benefit of hindsight really does make the section itself a lottery. It makes the section depend on an outcome which may be a one in a million outcome and yet that is the outcome which has in fact developed. It would have the effect that the section avoids a transaction because when the parties entered into that transaction it had a one in a million chance of defeating creditors. With respect, we do not think that is what Parliament intended. We submit that the Parliament’s intention was to protect creditors against potential bankrupts, against people who were insolvent or likely to become insolvent, entering into transactions which, having regard to the state of affairs at that point in time, have a real likelihood of defrauding the creditors.
Your Honours, I did promise to give the transcript references and I should do so. Can I begin at page 72 of the record. This concerns the health of - - -
KIRBY J: This is on the health of the two tenants?
MR MORRIS: Yes. At page 72 – this is in the evidence of Mr Klar, the solicitor - - -
KIRBY J: Well, if you just give us the page references unless you want to - - -
MR MORRIS: I am happy to do that. Page 72, line 7 to line 21, and more specifically page 101 of the appeal book at lines 16 to 31. Those are the references relating to the state of health of the parties. There are also references relevant as to the probabilities of what would have happened if this transaction had not occurred. The only evidence is that if this transaction had not occurred, Mrs Pinna would have unilaterally severed the tenancy. That is at page 79, lines 38 to 43; at 99, line 29, through to 100, line 34; page 101, line 16 to 32; at 102, line 38, to 103, line 34. Those are the relevant references, your Honours. Your Honours, the next point that we wanted to address is - - -
GUMMOW ACJ: It does not look as if either was in particularly good shape.
MR MORRIS: No, that is true, your Honour, but - - -
KIRBY J: Mr Pinna had had a heart bypass, which usually fixes people up.
MR MORRIS: Not necessarily 80 year olds, with respect. Indeed, my understanding is it is very rare for surgeons to embark on such surgery on a person of that age. But your Honour may well be right, maybe if the surgeons thought he was a good enough candidate for bypass surgery then - - -
KIRBY J: Anyway, this is speculation.
MR MORRIS: Indeed, and if we are right, it is nor merely a matter of speculating as to who would outlive the other but speculating as to whether Mr Pinna would be able to hold off the inevitable bankruptcy until his wife was in the grave – not deliberately of course, but whether that would be the effect – and whether he would have been able to persuade her not to unilaterally sever the joint tenancy at any time prior to her death and - - -
GUMMOW ACJ: Can you give us an example of a subsection (9)(b) dealing which then does fit in and operate harmoniously with 121(1)? It has to have some meaning, some operation.
MR MORRIS: It has to have some meaning and unless one reads it the way Justice Kiefel’s done, it cannot have any effect at all.
GUMMOW ACJ: Why is that?
MR MORRIS: Because essentially by definition subsection (9)(b) talks about something that did not previously exist.
GUMMOW ACJ: Yes.
MR MORRIS: If the thing that did not previously exist had never been created, which is the assumption that subsection (1)(a) calls for, then it would never have become part of the transferor’s estate. So if you give the words their literal meaning - - -
GUMMOW ACJ: That then suggests you have to give the phrase “the property” in 121(1)(b) some other meaning.
MR MORRIS: Yes. The only alternatives are what I will call the Kiefel alternative, which is the diminution or subtraction from the value of the original property, or the alternative that the Court canvassed with our learned friend earlier, and that is the value of the interest in Blackacre rather than Blackacre itself. Those are the only logical possibilities to give the section some work to do, otherwise I accept that it just - - -
HAYNE J: Do you accept that the evident intention of the section is to deal with the insolvent who creates a 99-year lease over his freehold in favour of a child or an associated entity?
MR MORRIS: I have to accept that. I would say – and I am really moving onto another point – it is not intended to do that where full consideration is given for the interest.
HAYNE J: No, I understand.
MR MORRIS: That is the next problem we have here. The finding was and the evidence was and there is no dispute that Mrs Pinna gave full and fair consideration for what she received. She gave up a half interest and she received a different type of half interest. What she gave up was worth 300,000 - - -
GUMMOW ACJ: She did not have to give up anything. Section 59 operated whether or not she gave up anything.
MR MORRIS: I am sorry, your Honour, the words “give up” imply a voluntary payment of consideration.
GUMMOW ACJ: Yes.
MR MORRIS: She lost a joint interest worth 300,000 and she got an interest in common worth 300,000.
GUMMOW ACJ: But, no, wait a minute. But she was always liable to suffer that. It is in the nature of things.
MR MORRIS: Yes.
GUMMOW ACJ: It is in the nature of her estate that this could happen to her.
MR MORRIS: Your Honours, there are two ways one can look at this - - -
CALLINAN J: She exchanged two interests of equal value for each other, is that what you are - - -
MR MORRIS: Yes. One may say that what she lost was worth nothing and what she put in was worth nothing because she got the same outcome.
GUMMOW ACJ: But it is not a consensual transaction, Mr Morris.
MR MORRIS: Well, the finding here is plainly that it was a consensual transaction.
GUMMOW ACJ: What is the “it”? The transfer you got set aside?
MR MORRIS: The agreement to sever the joint tenancy.
GUMMOW ACJ: Well, that is not what you got set aside.
MR MORRIS: Your Honours, there is a problem with - - -
GUMMOW ACJ: What you got set aside – what you got treated as void, I should say, was this registered instrument.
MR MORRIS: Yes, and it is not us who applied for it to be set aside, it is our learned friend.
GUMMOW ACJ: No, I understand that.
MR MORRIS: That is a fundamental error because the registration of the transfer merely perfected rights that already existed in equity. I accept what your Honour the presiding Judge said about this being a Torrens system and being a Torrens transaction, but there is, with respect, no question that one can have an equitable interest in Torrens land – an unregistered interest.
GUMMOW ACJ: Yes, of course you can.
MR MORRIS: As of 11 September 2004, each of these parties had an equitable interest as tenants in common whilst there was a registered joint tenancy.
HAYNE J: Is this a submission about the operation of subsection (4)(a) or is this a submission about some other provision of 121?
MR MORRIS: No, this is a submission about the legal consequences under the general law of the facts as found here. The facts as found here were that on 11 September the parties agreed to sever the joint tenancy and signed a document to give effect to that intention and under the general law that has the result that whilst they remained on the title as joint tenants with legal interests as joint tenants, nonetheless, in equity the parties collectively held their rights as joint tenants on trust for one another as tenants in common.
GUMMOW ACJ: Did Justice Kiefel make any finding about this?
MR MORRIS: Yes, she did. On
page 153 at line 35 her Honour refers to the findings of the
learned magistrate at first instance:
His Honour found that there had been an equitable disposition of Mr Pinna’s interest as a joint tenant on 11 September 2003 when he and his wife mutually agreed to sever the joint tenancy.
GUMMOW ACJ: Okay. Is there any declaration
that that was a transaction that was void against the trustee?
MR MORRIS: No, nor any application for a declaration that it was void as against the trustee.
GUMMOW ACJ: It would have been pointless.
MR MORRIS: Well, with respect, no, your Honour, because if that was their position in equity from 11 September - - -
GUMMOW ACJ: It would have been pointless without attacking the registration.
MR MORRIS: Your Honour, it would have been pointless without also attacking the registration, I accept that, but registration merely perfected legal title to the parties’ existing interests and therefore could not, on any view, be a transaction which in itself was voidable or void under section 121. The parties had those rights already in equity registering a memorandum of transfer or a transfer document.
GUMMOW ACJ: Rights to achieve what?
MR MORRIS: Right in equity - - -
GUMMOW ACJ: Not this transfer expressed as it is in section 59.
MR MORRIS: Yes, rights by way of - - -
GUMMOW ACJ: Specific performance of some sort of agreement.
MR MORRIS: Well, more fundamentally, your Honours, had Mrs Pinna died after the agreement but before the transfer was registered, her estate would have been entitled to say the legal title passes to the husband on survivorship but he holds that in equity for her.
GUMMOW ACJ: But that never happened.
MR MORRIS: That never happened, and that is why I am saying - - -
GUMMOW ACJ: No need to worry about it.
MR MORRIS: Well, there is a need to worry about it, with respect, when your Honour puts to me quite specifically that the registration of the transfer is the relevant transaction to set aside.
GUMMOW ACJ: All I am saying to you is that is what the declaration says.
MR MORRIS: That is what was sought, yes.
CALLINAN J: Mr Morris, would you have needed a written memorandum to enforce that agreement?
MR MORRIS: No, your Honours. It is perfectly clear from the case law that one does not need a contract that is enforceable under general law principles; it is sufficient for there to be an agreement between the parties or even a course of conduct which demonstrates their common intention. The point was dealt with sufficiently in Corin 169 CLR 540 which has already been referred to in the joint judgment of Chief Justice Mason and Justice McHugh at page 546, about point 8, to 547, point 3.
CALLINAN J: What did they say, Mr Morris?
MR MORRIS: They said:
It is convenient to begin by considering the various ways in which a joint tenancy can be severed. The starting - - -
GUMMOW ACJ: This is a
joint tenancy at common law, is it, under common law title?
MR MORRIS: Yes.
GUMMOW ACJ: Well, that is not this land.
MR MORRIS: Their Honours were referring there to the decision of Vice-Chancellor Page Wood.
GUMMOW ACJ: Well, exactly.
MR MORRIS: But then applied it in the context of Torrens title land. Corin v Patton was itself a Torrens title case.
GUMMOW ACJ: Yes, I realise that.
MR MORRIS:
The same point was made by Justice Deane at page 575, in particular,
where his Honour said:
it has long been settled that one joint tenant can, by an appropriate instrument or act of legal transfer and in the absence of applicable statutory restraint, alienate his legal interest in the relevant property. Involved in such an alienation are two steps which occur simultaneously: the creation of - - -
GUMMOW ACJ:
Justice Hayne invites attention to Justice Rich’s judgment
in Wright v Gibbons [1949] HCA 3; 78 CLR 313 at 326, “I think that some
confusion”, and Sir George, as we know, was a former Challis Lecturer
in Equity. It is a
point Sir Garfield Barwick never tired of making
too.
MR MORRIS: Well, I am not sure that that in any way detracts from the proposition though that there can be a prior severance in equity. I must say out of habit I have - - -
HAYNE J: At the end of the day, the register book was altered and you have to get around that and you have to deal with that. It has all happened, it has all been registered, and you have to cope with that set of circumstances, have you not, Mr Morris?
MR MORRIS: No, your Honour, with respect. If it were the usual situation of an equitable interest, an interest that had been created between parties at arm’s length and so on, and it was registered within a relation back period, it has long been the law that one looks at the underlying transaction where the equitable interest was created rather than its mere registration as the relevant time of transaction. Merely perfecting an equitable interest or - - -
HAYNE J: The difficulty is you are attempting to overlay what the Land Title Act permits to occur as a unilateral act which here is registered in the form of a unilateral act. You are overlaying that with notions of a consensual arrangement which you say predates those unilateral acts. Now, is that then in aid of 121(4) or is it in aid of some other proposition?
MR MORRIS: Your Honour, ultimately it is in aid of section 121(5), which is my client’s right to recover back the amount of the consideration. That is why we have said from the outset that the issues in this appeal are entirely hypothetical, because if my client - - -
GUMMOW ACJ: Was there any 121(5) point taken before Justice Kiefel?
MR MORRIS: Yes, it was.
GUMMOW ACJ: Where do we see that?
MR MORRIS: I am not sure that it appears in the reasons.
GUMMOW ACJ: I could not find it. It may be there.
MR MORRIS: Yes, if
your Honours go to page 155 of the record, the last item on the
page:
The following contentions are raised on the appeal.
. . .
3. His Honour should have ordered a refund of consideration pursuant to s 121(5) of the Act.
Then on page 158
at line 23 her Honour said:
It is therefore not necessary for me to deal with the remaining issue, but I shall say something about good faith.
Your Honours, our
learned friend’s great answer to this proposition is to say we did not
counter-claim for such relief. The
answer is we do not have to. The section
makes the trustee’s right to set aside a transaction subject to repayment
of an amount
equal to the value of the consideration given. It is a bit like
saying, with respect, that when a plaintiff sues for specific performance
of a
contract to sell land, the defendant would have to counter-claim for the
purchase price. It is part of the remedy, is that
if you set aside a
transaction you get back the money or the value that went out for the purposes
of the transaction. Here, on our
learned friend’s own material, there is
just no doubt as to that value. It is 300,000. It is sworn to by our learned
friend’s
client in his affidavit. It is at page 5 of the record,
paragraph 21, about line 47:
The value of Mr Pinna’s interest in the property was $300,000.00.
That is as at 11 September
2003.
KIRBY J: Yes, but if the position is – it may be subject to the obligation to pay the sum, but if the position is that the trustees will not pay it, you have to counter-claim. You cannot just expect it to come out of thin air.
MR MORRIS: Well, no, with respect. The
subsection (5) says:
The trustee must pay to the transferee an amount equal to the value of any consideration that the transferee gave for a transfer –
It is the other side of the coin. It
is part of the structure of the section
that - - -
KIRBY J: Yes, but in the law of remedies if the trustee is not volunteering it, you have to bring process. Process is a counter-claim or cross-claim.
MR MORRIS: Well, we would say not, with respect. We would say the analogy of specific performance is a perfect one. If you sue for specific performance for the transfer of a property to yourself, the other side does not have to counter-claim for the unpaid purchase price. The very fact that you are suing for specific performance means that you get that relief if you are prepared to pay the price and not otherwise.
In terms of justice, if one put aside all the technical arguments that we have been through about the operation of section 121, it makes perfect sense in this case that where this lady loses the rights of a joint tenant and acquires the rights of a tenant in common, the creditors are no worse off. They are no worse off. It is an exchange of like for like. It is an exchange of the same for the same. If our learned friend is technically correct in saying it is a transfer within the meaning of the section because a new estate or interest was created, then the section itself has the remedy for that in saying the transaction is set aside but you get back what you put in.
There is no doubt that this lady put in her rights as a tenant
under a joint tenancy, including the right, as Justice Callinan reminded
us, to sever that joint tenancy at any time up to her death, and she cannot, in
our submission, be deprived of what she received
from the transaction without
being compensated for what she lost. Unless we can otherwise assist
your Honours, those are our submissions.
GUMMOW ACJ: Yes,
thank you, Mr Morris. We will take your reply at 10.15 tomorrow morning,
Mr Cooper. You have a bit to think about I think.
MR COOPER: Thank you, your Honour.
GUMMOW ACJ: We will adjourn until 10.15 tomorrow morning.
AT 4.13 PM THE MATTER WAS
ADJOURNED
UNTIL WEDNESDAY, 21 JUNE 2006
AustLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.austlii.edu.au/au/cases/cth/HCATrans/2006/341.html