Balnaves, C.J. and Balnaves, P.J.; Cummings, J.T. (Intervener).

[1988] FamCA 6

In the marriage of BALNAVES, C.J. and BALNAVES, P.J.; CUMMINGS, J.T. (Intervener).

(1988) FLC ¶91-952

Other publishers' citations: (1988) 12 FamLR 488

Full Court of the Family Court of Australia at Adelaide.

Judgment delivered 8 August 1988.

Before: Nicholson C.J., Fogarty and McCall JJ.

Nicholson C.J., Fogarty and McCall JJ.: On 9 November 1987 a number of orders were made by Gun J. following a trial of 35 days between February and September, 1987.

Appeals were filed against some of those orders by the wife, Christine Joan Balnaves, by Jane Teresa Cummings (an intervener), in respect of which the wife filed a cross-appeal, and by the Official Trustee in Bankruptcy of the husband.

These proceedings have had a very long history. The judgment dealt with the facts in detail. The appeals raised specific issues; consequently it is unnecessary to set out the background facts as fully as the trial Judge did. It is sufficient for the purpose of dealing with these appeals to summarise the relevant facts and then turn to the specific issues which the appeals raised.

The parties married on 31 May 1968 (at which time they were aged approximately 25 and 20). They separated on 11 October 1985 and were divorced by this Court on 3 August 1987. There were three children of the parties' marriage namely, M. who was born in 1971 and is aged 16, L, born 1973 and aged 15, and R, born in 1976 and aged 12. The husband is now aged 47 and the wife 41.

At the time of their marriage the husband was employed as an accountant and the wife as a secretary. The trial Judge in his careful history of the matter set out the details of the assets of the parties at the time of their marriage, the various properties which they acquired and in some instances sold during their marriage, the work history of each party and their contribution (in the sense in which that term is understood under sec. 79) to both the property of the parties and to the marriage and family. For the purposes of dealing with these appeals it is unnecessary to repeat those matters.

As we have previously indicated, the parties separated in October 1985. Proceedings in this Court commenced on 5 November 1985 when the wife filed an application in which she sought the custody of the children, maintenance for herself and the children, an order for settlement of property under sec. 79 and lump sum maintenance.

On 20 November 1985 McGovern J. made orders by way of interim maintenance for the wife and three children (who were in the custody of the wife) and also certain restraining orders relating to companies and trusts in which the parties were interested and in respect of some of which it will be necessary to refer hereafter.

The husband appealed against those orders but that appeal was abandoned. In early 1986 the husband commenced to live in a de facto relationship with Jane Teresa Cummings and they continued to live together until the trial and judgment. Ms Cummings was, as hereafter appears, granted leave to intervene in these proceedings.

In June 1986 the wife issued proceedings against the husband for contempt arising out of his failure to comply with the maintenance order, and on 17 June 1986 the husband was found guilty of contempt of court and sentenced to 21 days' imprisonment and was ordered to pay costs. The husband lodged an appeal against those orders and a stay was granted. Subsequently the imprisonment order was discharged by consent.

In July 1986 the wife filed an application in which she sought certain orders under sec. 85 and 85A and that application became important both in the trial and in respect of some aspects of the appeals with which we are concerned, and we will refer to the detail of that subsequently.

On 8 September 1986 the proceedings under sec. 79 came on for hearing before McGovern J. After several days of negotiations it appeared that the parties had settled the litigation and they entered into an agreement on 10 September 1986. It will be necessary to refer to one aspect of that agreement at a later point. Unfortunately the settlement fell through. Shortly after that, namely 3 October 1986, the wife filed an application in which she sought a number of injunctions relating to properties said to be under control of the husband and also orders for the sale of certain properties, and on 8 and 10 October 1986 certain injunctions and orders for the sale were made. The husband appealed against those orders. That appeal was dismissed by the Full Court on 10 March 1987 and the husband was ordered to pay the wife's costs.

In the meantime on 10 October 1986 Ms Cummings lodged caveats on certain properties alleging that she was a trustee of the Balnaves Family Trust (an issue which assumed some significance in these appeals).

That and other events led to a number of injunctive and other orders being made on 23 October 1986 but more importantly for present purposes, led to orders being made on 7 November 1986 under which Ms Cummings was granted leave to intervene but was ordered to withdraw certain caveats.

In turn that led to an application by the husband in November 1986 in which he sought the discharge of certain of the orders for sale of properties on the basis of a series of contracts and transfers to Ms Cummings. That application was dismissed with costs on 20 November 1986. The discharge of that application in turn led in November 1986 to the sale of a property at Stirling by the National Bank as mortgagee for $ 550,000, and the removal and storage of furniture and chattels of the parties, both of those events being significant to the appeals with which we are concerned.

After further procedural skirmishing the hearing of the wife's sec. 79 application commenced before Gun J. on 2 February 1987. Unfortunately it was not able to proceed as an uninterrupted hearing and it occupied 35 sitting days between February and September 1987. That in turn meant that there were a number of other events and applications which occurred or which were filed during that seven month period. Many of those events are not relevant for the purposes of these appeals and it is unnecessary to refer to them. Some however should be briefly referred to at this point.

In April 1987 a unit at North Haven was sold for $ 80,000. On 13 April 1987 the wife filed an application in which she sought, inter alia, that a purported mortgage by the husband to his parents be set aside under sec. 85, similar orders in respect of a share transfer and a bill of sale to his parents and in respect of a purported gift of a ``burr walnut wardrobe'' to Ms Cummings, an order for the transfer of certain shares, an order in respect of a Ferrari motor car, an order under sec. 85 in respect of a painting known as ``The Artist's Sister, 1936'' by Grace Cossington-Smith (a matter of significance in these appeals) and an order under sec. 85 in respect of a yacht, said to be owned by Ms Cummings.

On 12 May, 25 May and 17 June various applications were filed by the wife relating to both the husband, his parents and others. It is unnecessary for present purposes to set out the detail of those applications or the events which gave rise to them.

The critical matter in these proceedings occurred on 24 June 1987. On that morning, pursuant to an application which the wife had filed, the trial Judge granted an injunction restraining the husband from executing a deed of assignment pursuant to Pt X of the Bankruptcy Act.

On the afternoon of that day the husband attended at the Registry of the Federal Court in Adelaide and filed his petition in bankruptcy. The upshot of that was that the husband thereupon became a bankrupt and his estate vested in the Official Trustee in Bankruptcy.

That also led to the temporary adjournment of the proceedings in the Family Court, but they recommenced in early July.

It is not relevant for present purposes to speculate whether an application to the Federal Court to set aside the husband's petition may have been successful and may have been an alternative to the course which in fact ensued thereafter (as to which see generally Clyne v. D.F.C. of T. (1984) 154 C.L.R. 589; Re Caruana, Caruana and Fenech; Ex parte D.F.C. of T. (1988) FLC ¶91-903; and Chemaisse and Chemaisse (1988) FLC ¶91-915 at p. 76,641).

On 15 July 1987 the trial Judge granted leave to the Official Trustee in Bankruptcy to intervene in the proceedings.

On 3 August 1987 the wife and the husband's parents settled the matters in dispute between them. It is unnecessary to refer to the terms of that agreement. The trial then continued through to its conclusion in September 1987.

A critical aspect is the impact upon the previously existing proceedings under sec. 79 of the husband's bankruptcy in July 1987. It was the submission on behalf of the wife that the effect of the bankruptcy was to vest the property of the husband in the Official Trustee and that consequently, so long as the bankruptcy continued, there was no property of the husband to which an order under sec. 79 could relate. That seems clearly to be correct. The further submission of the wife was that her applications under sec. 79 and 85 still remained as valid applications which could be renewed upon the discharge from bankruptcy of the husband and, more importantly, that in any event the jurisdiction of the Family Court under sec. 78 continued quite independently of the husband's bankruptcy — see generally. Re Twigg:ex parte Twigg and Official Receiver (1979) 25 A.L.R. 207; Wallmann and Wallmann (1982) FLC ¶91-204; Holley and Holley (1982) FLC ¶91-257; cf. Page and Page (No. 2) (1982) FLC ¶91-241.

The trial Judge accepted those submissions. That was not challenged before us and we have no reason to doubt that correctness of that view.

However it is important to note that the significant consequence of that conclusion was that the proceedings before the trial Judge, which commenced substantially as a proceeding under sec. 79, continued after July 1987 and to judgment as a proceeding under sec. 78, 85 and 85A of the Family Law Act.

As the terms of sec. 78 and 85 are important to the matters to which we are about to refer, it is desirable to set them out at this stage:

``78(1) In proceedings between the parties to a marriage with respect to existing title or rights in respect of property, the court may declare the title or rights, if any, that a party has in respect of the property.

78(2) Where a court makes a declaration under sub-section (1), it may make consequential orders to give effect to the declaration, including orders as to sale or partition and interim or permanent orders as to possession.

78(3) An order under this section is binding on the parties to the marriage but not on any other person.''

and:

``85(1) In proceedings under this Act, the court may set aside or restrain the making of an instrument or disposition by or on behalf of, or by direction or in the interest of, a party, which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.

85(2) The court may order that any money or real or personal property dealt with by any such instrument or disposition may be taken in execution or charged with the payment of such sums for costs or maintenance as the court directs, or that the proceeds of a sale shall be paid into court to abide its order.

85(3) The court shall have regard to the interests of, and shall make any order proper for the protection of, a bona fide purchaser or other person interested.

85(4) A party or a person acting in collusion with a party may be ordered to pay the costs of any other party or of a bona fide purchaser or other person interested of and incidental to any such instrument or disposition and the setting aside or restraining of the instrument or disposition.

85(5) In this section, `disposition' includes a sale and a gift.''

It is also desirable, in order to understand the framework of the grounds of appeal, to set out in summary form the orders which were made by the trial Judge on 9 November 1987. Those orders were prefaced by undertakings by the wife to indemnify Mercantile Credits Ltd. and Trade Credits Ltd. in respect of the transactions referred to in order 9 (the relevance of which will appear more clearly hereafter). Subject to those undertakings and in summary form the orders were as follows:

1. A declaration under sec. 78 that the wife was the legal and beneficial owner of one of the two issued shares in P.B. Nominees Pty. Ltd. and the husband the legal and beneficial owner of the other share.
2. The continuance of an injunction requiring the proceeds of the sale by Moriden Nominees Pty. Ltd. of its interest in a house at Port Adelaide, be held on trust by the solicitors for the wife ``to abide the further order of this Court''.
3. An order under sec. 85 setting aside the purported disposition of the husband by any interest which he had in the business known as Balnaves Stevenson and Co. and in other specified bodies.
4. An order under sec. 85 setting aside a purported bill of sale by the husband to his father in respect of certain furniture.
5. A declaration under sec. 78 that the parents of the husband had no interest in the furniture of the parties.
6. An order under sec. 78 that, in effect, the furniture of the parties was the sole property of the husband.
7. An injunction restraining the husband from disposing of that property other than by delivery to the Official Trustee.
8. The discharge of previously granted injunctions so as to enable the Official Trustee to sell the furniture.
9. An order under sec. 85 setting aside transactions relating to the painting known as ``The Artist's Sister, 1936''.
10. An order directed to the Art Gallery Board to release the painting to the Official Trustee for the purposes of its sale and a direction to the Official Trustee to pay out of the proceeds amounts to certain persons including Ms Cummings.
11. A declaration under sec. 78 that a yacht registered in the name of Ms Cummings was the property of the husband.
12. A declaration under sec. 78 that certain jewellery was the property of the wife.
13. A declaration under sec. 78 that certain rugs were the sole property of the husband.
14. Orders under sec. 114 against the husband in respect of a life insurance policy in favour of the wife.
15. Orders under sec. 85 setting aside certain mortgages.
16. The discharge of the maintenance orders previously made.
17. An order that the husband pay to the wife maintenance for each of the three children at the rate of $30 per week.
18. A general injunction restraining the husband from ``defeating or delaying or frustrating the operation of any of the within orders''.
19. An order that the husband pay the wife's costs of certain applications.
20. An order that Ms Cummings pay the wife's costs of her (Cummings') application of 13 April 1987 in so far as is related to the Cossington-Smith painting.
21. That ``in the event of a surplus arising in the bankrupt estate of the husband'' the husband was restrained from seeking payment of that surplus from the Official Trustee and the Official Trustee was restrained from paying that surplus to the husband pending any further order of the Court.
22. The wife's applications under sec. 79 and 85A were adjourned to a date to be fixed.
23. Certain of the orders sought by the wife in her application of 3 July 1987 were adjourned to a date to be fixed.
24. That ``all other applications made by the parties to these proceedings'' be dismissed.

Before turning to the actual notices of appeal we should mention two other matters.

The husband was named as a respondent in these appeals. Counsel for the Official Trustee objected to the husband making independent submissions. We granted to the husband whatever leave was necessary to enable him to put such submissions as he considered appropriate.

During the trial the wife's counsel tendered detailed draft orders. They represented a convenient source of the orders sought by the wife both as to their form and substance, and in so far as the trial Judge either accepted or rejected the wife's case, he generally followed those draft orders. It is convenient for us to follow a similar course, at least in so far as it relates to the wife's appeal and cross-appeal.

We turn to the notices of appeal.

Notice of appeal of the wife of 14 December 1987

This notice of appeal raised six specific issues in the six grounds which it set out. It is convenient to follow the order of the grounds of appeal as set out in that notice.

Ground 1

This ground asserts that the trial Judge was in error ``in declining to set aside an appointment by the husband of some other person or company as trustee of the Balnaves Family Trust in lieu of Moriden Nominees Pty. Ltd. pursuant to section 85(1)... or alternatively to exercise his powers under section 80... to appoint Moriden Nominees Pty. Ltd. as the trustee of the Balnaves Family Trust''.

This is an important matter because of the significance which attaches to the person or body which is the trustee of the Balnaves Family Trust.

This trust was established by a deed dated 15 December 1978. The husband was both the settlor and the appointor and Moriden Nominees was the trustee. The specified beneficiaries were the three children of the marriage. The appointor had the power to appoint new or additional trustees and to remove any trustee. However any such appointment, to be valid, was required to be in writing and by a document ``endorsed on or attached to'' the deed itself (see cl. 19(c)).

In 1984 the husband was concerned in a number of transactions relating to shares in a company known as Tantalite Pty. Ltd., he having first become the owner of a parcel of shares in that company in July 1978. In 1984 the husband decided, in the words of the trial Judge:

``that it would be `wise' to put these shares into the Balnaves Family Trust. As the Balnaves Family Trust was not formed until 15 December 1978, he prepared another deed (by copying the deed dated 15 December 1978) and back-dated it to 1 July 1978.''

The trial Judge had no difficulty in concluding that this back-dated deed was a sham and no challenge was made to that conclusion.

By a letter dated 9 April 1986 the husband apparently wrote to Moriden Nominees terminating its appointment as the trustee and by another letter of the same date purported to appoint Ms Cummings as a trustee. By another letter the husband also purported to resign as the appointor and requested his father to accept that position. The father, by a letter of the same day, purported to accept. However, all of those letters were, in the only evidence before the trial Judge, attached to the sham agreement of July 1978. It appears clear to us that they had no effect in relation to the position of trustee, and possibly in relation to the appointor. In addition, the wife's case that Ms Cummings was not at any relevant time a trustee of that trust gains strength from the recitals to the agreement of 10 September 1986. In particular, recitals (b) and (c) were in the following terms:

``(b) The wife asserts that Moriden is the trustee of the Balnaves Family Trust:

(c) The husband has asserted at various times that B.P. Nominees, B.F.T. Nominees and Tantalite and no other person or body are the trustees of the Balnaves Family Trust.''

What is significant about recital (c) is the absence of any reference to Ms Cummings.

The conclusion which we draw from this material is that Moriden Nominees had been validly appointed as the trustee of the Family Trust by the deed of December 1978 and the purported discharge of Moriden Nominees and its replacement by Ms Cummings in April 1986 was not valid. It may be that the purported resignation of the husband as the appointor and his replacement by his father was, for much the same reason, also ineffective, but it is not necessary for us to finally determine that issue Consequently on the evidence before the trial Judge it appears to us that Moriden Nominees was still the trustee of the Balnaves Family Trust.

His Honour seems to have reached much the same conclusion. He referred to the facts which we have summarised above and then concluded:

``It may well be therefore that Jane Cummings was never properly appointed a trustee of the Balnaves Family Trust.''

The orders which the wife sought were orders 1 and 2 of the draft orders referred to above and were in the following terms:

``1. That the Court set aside a purported appointment by the husband of some other person or company as the trustee of the Balnaves Family Trust in lieu of Moriden Nominees Pty. Ltd. pursuant to sec. 85(1) of the Family Law Act (`the Act') as amended. (See order 3 of application of wife dated the 15th of July 1986.)

2. Alternatively an order pursuant to sec. 80(e) of the Act appointing Moriden Nominees Pty. Ltd. to be the sole trustee of the Balnaves Family Trust.''

It will be seen from the structure of those orders that what the wife was seeking was either that the Court set aside any appointment by the husband of any person other than Moriden Nominees as the trustee of the trust, or an order under sec. 80(e) of the Family Law Act appointing Moriden Nominees as the sole trustee.

However, his Honour in the immediately succeeding sentence after the passage referred to above said this:

``I propose however to proceed on the basis that she (Ms Cummings) was duly appointed by the deed dated 11 April 1986.''

His Honour then went on to consider whether on that basis he should set aside that appointment under sec. 85. For reasons which we need not canvass, his Honour reached the conclusion that he ought not to do so.

However the passage last quoted from the trial Judge may give rise to some misunderstanding. It appears to us that his Honour was not concluding that Ms Cummings has been duly appointed as trustee but that for the purposes of the argument under sec. 85 he proceeded upon that premise.

Before us counsel for the wife did not seek to challenge the conclusion of the trial Judge that no order should be made under sec. 85. He concentrated his submissions upon draft order 2, namely that Moriden Nominees should be appointed as the sole trustee of the Balnaves Family Trust under sec. 80(e).

His Honour rejected that latter argument in the following terms:

``In my opinion the application for order no. 2 must also fail. Section 80 of the Family Law Act only provides the court with power to make orders to carry into effect any orders it may make in exercising its powers under the other sections of Pt VIII of the Act. The court is not empowered by sec. 80(e) to appoint a Trustee unless such an appointment is in aid of the execution of an order made under the other provisions of Pt VIII. The wife's counsel submitted that order no. 2 could attach to the wife's application under sec. 85A. As the wife is not pressing that application and has not in the `Draft Orders' sought any orders pursuant to sec. 85A I do not consider that this order should be made.''

Counsel for the wife submitted that the trial Judge had not given proper consideration to the consequences in this case of his not reaching more positive findings and making a positive order under sec. 80(e). He submitted that his Honour should have made a positive finding that on the evidence Moriden Nominees was still the trustee. We agree with that view for the reasons indicated above. However the same reasoning may lead to the conclusion that the husband is still the appointor and therefore able at any point, either since the trial to now, or subsequent to delivery of judgment on these appeals to replace Moriden Nominees with a trustee of his choosing or, if his father is the appointor, he may do so at the behest of the husband.

For reasons that appear partly in the matters to which we will refer hereafter and partly from the other matters canvassed by the trial Judge in his judgment, stability in the identify of the trustee of the Balnaves Family Trust, at least for the time being until the sec. 79 and 85A applications have finally been disposed of, is important in the interests of the parties, their children and the Court.

The power under sec. 80 may only be employed by the Court ``in exercising its powers under this Part'', that is under Pt VIII. His Honour felt that there was no such connection and consequently refused to make the order. However it appears to us that order 22 (summarised above) which adjourned the proceedings under sec. 79 and 85A to a date to be fixed, constitutes a sufficient connection.

Before us counsel for the Official Trustee opposed the making of order 2 because of its significance in considering the issue raised in ground 6 of the wife's appeal. The husband submitted that the question of who is or should be the trustee should be left to the appropriate State Court.

Having regard to the manner in which the trial was conducted and to the course of the submissions before us, it appears to us highly desirable that until the proceedings in this Court are finalised, the status quo in relation to the trust should be preserved, that is, that Moriden Nominees continue to be the trustee.

It is possible that this could be done by injunctive orders directed to the husband as appointor. However we consider that in the circumstances of this case the preferable course is to grant such an injunction and in addition make a positive order under sec. 80(e) appointing Moriden Nominees Pty. Ltd. as the sole trustee until further order. Such an order under sec. 80(e) will have the effect of negating any purported appointment of trustee by the husband or otherwise in the intervening period between trial and appeal and for the future whilst the husband's bankruptcy continues. It will produce an orderly result in relation to assets of some value. Our general intention is that such appointment should continue until after the husband is discharged from bankruptcy and the position of his personal estate can be reconsidered by this Court.

Consequently we will add to the orders made by the trial Judge an order pursuant to sec. 80(e) of the Family Law Act that until further order Moriden Nominees Pty. Ltd. be the sole trustee of the Balnaves Family Trust, together with an injunction restraining the husband until further order from appointing or causing to be appointed any person or body as a trustee of the Balnaves Family Trust.

Ground 2

Ground 2 of the wife's notice of appeal asserts that the trial Judge was in error in ``failing to make orders in relation to the assets held by P.B. Nominees Pty. Ltd. and in particular that the proceeds of sale of the unit at North Haven be divided equally between the wife and the Official Trustee on behalf of the husband''.

This ground relates to the same issue as that raised in the grounds of appeal of the Official Trustee. The Official Trustee, by its notice of appeal of 8 December 1987, challenged the findings by the trial Judge that Unit 2 North Haven Pty. Ltd. did not hold its interest in this property and the proceeds of its sale ``upon a resulting trust to the husband'' and the finding by the trial Judge that the proceeds belong to Unit 2 North Haven Pty. Ltd. The Official Trustee contended that the trial Judge was in error in making order I referred to above.

When the appeals commenced we were informed by counsel for the wife and for the Official Trustee that they had entered into a deed of arrangement in relation to the above matters but that it required the approval of the Federal Court and that there had not been sufficient time to carry out that procedure prior to the commencement of these appeals.

Consequently we were invited not to consider these aspects at this point, it being indicated to us that upon the approval by the Federal Court the Official Trustee would either withdraw his appeal or consent to its dismissal and the wife would adopt a similar course in so far as it related to this issue.

We accepted this invitation. Consequently it is not necessary for us to consider these matters.

Accordingly we order that the wife's notice of appeal in so far as it relates to ground 2 and the notice of appeal of the Official Trustee be adjourned to a date to be fixed.

Ground 3

Ground 3 of the wife's notice of appeal is that the trial Judge erred ``in declining to make orders sought by the wife relating to the property at North Adelaide and in particular in determining that he lacked jurisdiction to make the orders sought''.

The orders sought by the wife were draft orders 9 and 10 in the following terms:

``9. A declaration pursuant to sec. 78(1) or sec. 80 of the Act or pursuant to the accrued or pendent jurisdiction of the Court that R.W.B. Nominees Pty. Ltd. does hold its right and title to one undivided third part of the whole of the land comprised in and described in Certificate of Title Register Book Volume 4168 Folio 91 (hereinafter called [the North Adelaide property]) in trust for the Balnaves Family Trust.

10. An order pursuant to sec. 80 of the Act or pursuant to the accrued or pendent jurisdiction of the Court that R.W.B. Nominees Pty. Ltd. do transfer its right and title in [the North Adelaide property] to Moriden Nominees Pty. Ltd.''

The facts giving rise to this issue are somewhat complex but in the light of the views which we have formed they may be summarised as follows:

The property at North Adelaide was the property at which in earlier times the husband had carried on his practice as an accountant. In 1980 he purchased this property in the name of Moriden Nominees. In 1981 Moriden Nominees transferred the property to the husband as to one-third, to a Mr and Mrs S as to one-third, and to R.W.B. Nominees Pty. Ltd. as to the remaining one-third as tenants in common. R.W.B. Nominees Pty. Ltd. was the trustee of the family trust of the husband's brother. Subsequently the property was subdivided and town houses built on a portion of it and sold. In 1984 the husband's brother executed a document acknowledging that the one-third share of the property held by R.W.B. Nominees was ``held on behalf of'' the husband. The husband's evidence at the trial was that this document was executed at a time when the brother was the subject of property proceedings in this Court by his wife. At trial the husband produced a further document executed in 1987 by R.W.B. Nominees in which it was declared that it held its one-third interest ``on behalf of the Balnaves Family Trust as a constructive trustee of the trust'' and purported to negative the effect of the 1984 declaration. The 1987 document was, as the trial Judge pointed out, executed at a time when the husband was attempting to show that this one-third interest in the property belonged to the Balnaves Family Trust and was not property of the husband and therefore may not be subject to the then proceedings under sec. 79.

There was also evidence before the trial Judge as to the source of the original purchase price and the dispersal between the owners of the moneys which came from the sale of the town houses but it is unnecessary to set out that evidence.

R.W.B. Nominees was served with the wife's application and in that application the company was described as a respondent, but it did not intervene or take any part in the proceedings. On the other hand it would appear that the husband was the secretary of that company.

The trial Judge rejected the wife's application taking the view that the Court did not have jurisdiction. His Honour summarised his view in the following passage:

``In my view, it is clear that the Court has jurisdiction only to make declarations with respect to the title of parties to a marriage. In order 9 the Court is being asked to make a declaration pursuant to sec. 78 in respect of property registered in the name of R.W.B. Nominees Pty. Ltd. and allegedly held upon trust by that company for the Balnaves Family Trust. In my opinion, the Court has not got the power under sec. 78(1) to make the order sought.''

The effect of his Honour's conclusion was that the application for these orders was dismissed (see order 24).

Before us counsel for the wife submitted that there were only two possibilities, that is that R.W.B. Nominees held the one third interest as trustee for the husband or for the Balnaves Family Trust. He submitted that it was important in the interests of all the parties that this issue be determined and the trial Judge should have made the appropriate findings of fact in relation to these issues. He submitted that the trail Judge having failed to do so, it was open to this Court to reach its own conclusions on the matter and that the evidence on balance supported the view that the interest was held on trust for the Balnaves Family Trust.

Counsel for the Official Trustee submitted that the Court lacked jurisdiction to make the orders sought, that the evidence before the trial Judge made it virtually impossible to determine the issue, and that the matter would be more appropriately determined by another court. The husband's position was that he was not opposed to order 9 but was opposed to order 10 for reasons that are apparent from the discussion under ground 1 above.

The critical issue is the question of power. Counsel for the wife submitted that the Court had power either under sec. 78 or under the accrued or pendent jurisdiction of the Court.

The difficulty about the former submission is the terms of sec. 78 itself. Subsection (1) empowers the Court to make a declaration as to the title or rights ``that a party has in respect of the property'', and subsec. (3) underlines this by providing that an order under the section ``is binding on the parties to the marriage but not on any other person''.

The orders sought seek declarations and consequential orders in relation to the rights of the two third parties. It appears to us that not only does sec. 78 not provide a source of power for such orders but presents an insuperable obstacle to that course.

As to the alternative submission, whatever may be the extent, if any, of the accrued or pendent jurisdiction of this Court (as to which see cases such as Prince and Prince (1984) FLC ¶91-501; McKay and McKay (1984) FLC ¶91-573 and Smith and Smith (No. 2) (1985) FLC ¶91-604 (Full Court); Smith v. Smith (No. 3) (1986) FLC ¶91-732 (High Court)), it clearly could not have application here. Not the least of the difficulties in the way of this argument is that the necessary connection, namely that the federal and non-federal issues be ``aspects of a single matter'' or arise ``out of a common sub-stratum of facts'' (see PhilipMorris Inc. & Anor v. Adam P. Brown Male Fashions Pty. Ltd. (1981) ATPR ¶40-197; (1981) 148 C.L.R. 457 and Fencott & Ors v. Muller & Anor (1983) ATPR ¶40-350; (1983) 57 A.L.J.R. 317) is lacking here. It is also unnecessary for us to consider the extent to which any accrued or pendent jurisdiction attaching to this Court is curtailed by the express words of sec. 78 or whether the cross-vesting legislation will, for the future, make any difference.

The final submission of counsel for the wife was that in any event these applications ought to have been adjourned rather than dismissed. However for the reasons which we have indicated we think his Honour was correct in dismissing the applications (see order 24).

Ground 4

By ground 4 the wife contends that the trial Judge erred ``in declaring that ownership of the furniture particularised in orders 6(a), (b) (save and except that stated to be claimed by Ms Jane Cummings). (c), (d) and (e) and 13 rests with the husband to the exclusion of the wife''.

Order 6(a)-(e) made a declaration under sec. 78 that the following property ``has since its purchase (been) the sole property of the husband'' namely:

(a) Furniture removed from the property at Stirling in October 1985 and held by the wife:
(b) ``Furniture, wine and other items'' removed from the premises at Stirling in December 1986 by the National Bank and placed in storage;
(c) Furniture removed by the wife from the North Haven property and held by her;
(d) Furniture ``made available by the husband to the lessee of the property known as Lipson House Restaurant, Lipson Street, Port Adelaide'' and retained on those premises until May 1987, thereafter held by the wife;
(e) Furniture held by the husband at the North Adelaide property or at an Adelaide property.

Order 13 was the order under which a declaration was made that certain rugs held by the Commissioner of Police (being rugs removed from the premises at Malvern in June 1986 by the husband) were the ``sole property of the husband''.

This ground of appeal gives rise to an issue of some importance to the parties and generally. It appears that at the time the parties married neither of them had any furniture of significance. At the time of their separation in 1985 they had substantial furniture and other like items. Since the separation that has been dispersed so that some of it is in the possession of each of the parties and some of it in the possession of third parties.

The importance of the issue to the parties is the value of the furniture. The evidence was that its value was approximately $100,000. That was largely because many of the items were antique or otherwise were individually of significant value.

In many cases a precise determination of the actual ownership of individual items of furniture would not be important in financial proceedings in this Court because of the power under sec. 79 to make a settlement of property including items of this type between the parties if the Court considers it to be just and equitable to do so. The critical aspect of this case is that for the reasons previously explained, the proceedings with which the trial Judge and we are concerned are proceedings under sec. 78(1) which empowers the Court in proceedings between the parties to a marriage ``with respect to existing title or rights in respect of property'' to ``declare the title or rights, if any, that a party has in respect of the property''. Consequently it is a question of determining the actual legal and beneficial interest of the parties to the property in question.

The facts can be simply stated. All of the property was purchased by the husband in his name and with his money. The wife made no direct financial contribution to the purchase of any of the items in contention. The wife worked for part of the marriage but otherwise was engaged within the home and in caring for the children. All of the items were delivered into the joint possession of the two parties and were used by them (together with the members of their family) conjointly during the period of cohabitation of some 17 years. It is not a case where it is suggested that any of the items came to the parties by way of gift from members of either party's family (as to which see Gosper and Gosper (1987) FLC ¶91-818).

Specifically the wife's case confined itself to items of furniture which were used conjointly by the parties during their marriage and excluded items acquired and used solely by the husband in his business or in the Lipson House restaurant business.

For the wife it was the submission of counsel that furniture and other like items purchased by one or both parties to the marriage for the joint use of the parties in their marriage and which are in fact used by them (and the family) for that purpose become, by operation of law, the joint property of the parties or at least that there is a presumption that that be so.

In support of this proposition counsel took us to a line of English cases including Rimmer v. Rimmer (1953) 1 Q.B. 63 esp. at p. 74: Fribance v. Fribance (1957) I All E.R. 357 esp. at p. 359; Silver v. Silver (1958) I All E.R. 523; Pettit v. Pettit (1970) A.C. 777; and also to cases including Hohol v. Hohol (1980) FLC ¶90-824 at p. 75,206; Wood v. Wood (1956) V.L.R. 478 at p. 487, and Blair (1956) Tas. S.R. 146.

Counsel for the wife further submitted that the intention of the husband to make a gift of the chattels to the wife jointly may be inferred not only from the facts referred to above, namely their purchase for joint use and their actual joint use over a number of years, but in this particular case from three further circumstances which he said should have led the trial Judge to conclude that the property was jointly owned and was treated by the parties as jointly owned. Counsel referred us to the circumstance that the husband had caused the chattels to be insured in the joint names of the parties (to be contrasted with other items of value which were not jointly insured), that the husband had during the course of the marriage, in making representations to financiers in order to obtain finance for purchases of property, submitted schedules of assets and liabilities indicating the furniture as the joint property of the two parties and that he had prepared a schedule of antique furniture in the joint names of the parties during 1981. Counsel further submitted that the circumstance that the furniture was antique or of greater than ordinary value did not alter the situation in this case. The fact was that the furniture, although of unusual value, was used by the parties as part of their household and style of living.

Counsel for the Official Trustee submitted that the trial Judge was correct in rejecting the wife's case on this issue and submitted that there was no principle of a joint gift and no evidence to justify that conclusion in this case. The husband in his submissions relied in particular on the circumstance that it was not what he described as ``normal household furniture'' but were items purchased by him as a collector because of their aesthetics and potential future value. Both he and counsel for the Official Trustee relied upon the circumstance that there was no direct evidence of intention by the husband to confer a beneficial interest upon the wife and indeed the husband's evidence on that aspect was in effect to the contrary. It was also the husband's case that the joint list of assets was really a combined list of items owned by them individually.

The trial Judge rejected the claim of the wife in the following terms:

``Unless, therefore, the evidence discloses that the wife made some financial contribution towards the acquisition of these items of property or that the husband made a gift to the wife of any such item or items, the Court must, under sec. 78, declare that ownership of the property rests in the hands of the person who paid for it. In this case, there is no doubt that the husband paid for the property. There is no evidence that he made a gift to the wife of any of the items of property referred to in these draft orders and I am not prepared to make the declarations sought.''

His Honour went on to say that he did not regard the fact that the property was insured in joint names as constituting in this case ``evidence of a gift from the husband to the wife of a share or interest in the furniture''.

We agree with the trial Judge that there is no evidence to suggest that the wife made any financial contribution towards the acquisition of the property. Consequently the principles in cases such as Muschinski v. Dodds (1986) 60 A.L.J.R. 52 and Baumgartner v. Baumgartner (1987) 62 A.L.J.R. 29, although they may be important in many other cases in this Court where the parties have made direct although not necessarily equal contributions to the purchase of such items, have no application in this case.

Nor is it the law in this country that the relationship of husband and wife by itself gives rise to a rule or presumption of joint ownership of furniture and other like items. In our view the English cases to which counsel for the wife referred, properly understood, do not support this proposition; however to the extent that it might be thought that they do, they are not consistent with established authority in this country: see for example Wirth v. Wirth (1957-1958) 98 C.L.R. 228 and Hepworth v. Hepworth (1963-1964) 110 C.L.R. 309.

The question of the legal and beneficial ownership of these chattels must be determined within the established legal framework.

In Hepworth v. Hepworth, supra, at pp. 317-318 Windeyer J. said:

``Community of ownership arising from marriage has no place in the common law... Questions arising between husband and wife as to the ownership in law of property that they have enjoyed, or are enjoying, in common thus fall to be determined according to the same scheme of legal titles and equitable principles as govern the rights of any two persons who are not spouses. But there are some qualifications... An intention, proved or presumed, that a trust shall exist is at the base of every trust: and spouses, living together, may express their intention clearly enough one to another without resorting to the language of conveyancers. Thus it sometimes happens that property which is held in the name of one spouse but which they enjoy together, belong beneficially to both jointly or in common. Nevertheless if after a husband and wife have quarrelled disputed rights to property have to be decided, they must be decided according to the interests, legal and equitable, already created, not according to what may seem to be fair in a situation of discord that, quite probably, was not contemplated by either when the property was acquired. I say this because of some of the observations in some of the English cases that were cited, observations that may suggest that the statutory jurisdiction that was invoked in this case gives a Court a discretion to disregard existing legal and equitable rights and to make such order as may seem to it fair in the circumstances existing when it is considering the case. This has not been the view of this Court.''

As the trial Judge correctly pointed out, once one excluded the question of any financial contribution by the wife towards the acquisition of the furniture, the wife's case depended upon it being established that the husband had made a gift of a half interest to her, and this was really the substance of the wife's case on this issue.

To establish such gift it is necessary for the wife to satisfy the Court that there has been both a delivery of the relevant items and an intention to make such a gift. There is no difficulty about the former of these requirements: indeed the wife's case was prepared with a close eye to this circumstance and the orders which the wife sought excluded items which did not satisfy this requirement Nor do we think that the circumstance that the items were of unusual value and that some of them were acquired in anticipation of a subsequent increase in value alters that circumstance. The evidence appears to establish that the items were in fact used in a day-to-day sense by the parties during and as part of their married relationship.

The critical question is whether the wife has established an intention by the husband to pass a beneficial interest to her. The husband's evidence was to the contrary, that is, that he had no such intention. However the husband was, in the view of the trial Judge, completely discredited as a witness of any credibility for reasons which appear to us to be more than justified. Accordingly we do not think that this is a case where one can attach any significance to an ex post facto assertion of state of mind by the husband.

Consequently the wife's case is that an intention to benefit the wife should be inferred from the conduct of the husband (and indeed both parties) from the time of the acquisition of the relevant items up to the time the marriage broke down.

Put at its highest, counsel for the wife's argument was that such an intention should be inferred from the relationship of married persons and the joint use of the items as part of that domestic relationship, or putting counsel's submissions in another way, it was that there was a presumption of an intention to jointly benefit arising from those circumstances alone. We do not consider that this correctly states the legal position. The onus rests upon the applicant to establish a gift. We do not consider that those circumstances, taken in isolation, would do so.

But in this case there were other factors which we think the wife was entitled to rely upon. Those are the three factors which we have previously listed, namely the joint insurance, the representation of joint ownership and the schedule of antiques in joint names. These are in our view strong indicia of a representation by the husband to the outside world that these jointly used items were treated by the parties as jointly owned. That combined with the more general circumstances, namely the acquisition for joint use and the fact of joint use in the domestic relationship over a number of years in our view should have led the trial Judge to conclude that the wife established joint ownership with the husband of the furniture and other items. The trial Judge in his reasons for judgment referred to the circumstance that the property was insured in both names but rejected that as a basis for concluding favourably to the wife on this issue. His Honour did not state his reasons for rejecting that as a factor and we ourselves regard it as a circumstance of significance. His Honour may have been right in treating that, if considered in isolation, as insufficient, but his Honour did not refer to the other facts which we have summarised above.

Ordinarily an Appeal Court would be slow to interfere with the conclusions of a trial Judge on an issue of fact of this sort. However, the facts themselves are not in contention. It is the appropriate inferences which one should draw from those facts which is the critical aspect, and in the circumstances of this case we consider that we are in as satisfactory a position as the trial Judge to draw the necessary inferences from the facts.

We are conscious of the remarks of Gibbs C.J. in Muschinski v. Dodds, supra, at p. 55 when he said:

``We are concerned to discover the actual intention which the appellant had when the land was put in the names of the parties as tenants in common, and not to impute to her an intention which she did not possess but which we might regard as leading to a fair result.''

Nevertheless we conclude that the trial Judge was in error in not making the orders which were sought in relation to these items and we would allow the appeal and vary his Honour's orders accordingly.

The actual orders which the wife sought were set out in the draft orders and in orders 8-14 of the orders sought in the notice of appeal. No challenge was made to us as to the appropriateness of the form of those orders if the wife established her case to that relief. Accordingly we will make orders in accordance with those paragraphs and will set them out in full at the conclusion of this judgment.

Ground 5

By this ground the wife alleges that the trial Judge was in error ``in declining to make the orders sought by the wife relating to the proceeds of sale of the property at Port Adelaide but making instead order numbered 2''.

In 1987 the Port Adelaide property was sold for approximately $200,000. Moriden Nominees had a one-quarter interest. On 19 May 1987 Gun J. made a number of orders including an order directing that the amount which represented that one-quarter share be held in an interest bearing account in the name of the solicitors for the husband and the wife to abide the further order of the Court.

The wife by draft order 11 sought the removal of that restriction, the consequence of which would be that Moriden Nominees would become entitled to the receipt of that sum.

The trial Judge rejected that application. In doing so he said that he agreed with the submission of the Official Receiver that ``before I could make the order contemplated in this draft order, it will be necessary for the Court to determine who is entitled to the proceeds under sec. 78''.

The rival contentions before his Honour were on the one side the claim by the wife that Moriden Nominees was entitled to the proceeds in its capacity as trustee for the Balnaves Family Trust, and on the other the position of the Official Receiver that neither the wife nor Moriden Nominees had a beneficial interest as the proceeds were subject to a resulting trust in favour of the husband because (it was alleged) the husband had made the sole financial contribution to the one quarter share of the property held by Moriden Nominees.

Faced with those contentions his Honour concluded:

``It seems to me that, once again, the Court is being asked to make a declaration under sec. 78(1) in respect of the title or rights in respect of property which is not or may not be the property of one of the parties.''

His Honour declined therefore to make the orders sought. The result of that is that the proceeds remain invested under the orders of May 1987.

Before us counsel for the wife submitted that his Honour's determination left the matter in a most unsatisfactory position. He submitted that the proper course for the trial Judge was to remove the restriction. The effect of that would be that the proceeds would pass to Moriden Nominees but it would be open to any party, including the Official Trustee, to take proceedings in an appropriate court if it sought to challenge Moriden Nominees' beneficial entitlement to that fund.

We think this contention is correct. It is unsatisfactory for this substantial sum to be held for an indefinite period on investment pursuant to an order of this Court, and in the circumstances the proper course, if the power exists, would be to remove the restriction, leaving all parties interested with whatever rights they have in other jurisdictions.

The concern of the trial Judge was that he did not have the power to make that order, his Honour's view being that the power relied upon was sec. 78. However the order of May 1987 was an injunctive order made under powers given by sec. 114 and that section can be relied upon to vary or discharge that order.

Accordingly we think it appropriate to make an order in accordance with draft order 11.

Ground 6 — The ``marshalling'' orders

This ground is that the trial Judge erred in ``declining to make orders sought by the wife in para. 9-14 inclusive of the wife's application of 9 July 1987 and in particular in holding that he lacked the power to make the orders sought''.

The facts giving rise to this issue were not the subject of dispute and can briefly be summarised as follows: In 1985 Mr Balnaves borrowed an amount in excess of $420,000 from the National Australia Bank. The bank took as security a first mortgage over certain properties of Mr Balnaves (the Harrowgate properties) and also guarantees from Moriden Nominees Pty. Ltd. and P.B. Nominees Pty. Ltd. Those guarantees were supported by first mortgages given by Moriden Nominees over a property at Stirling and by P.B. Nominees over a unit at North Haven.

Subsequently Mr Balnaves defaulted under the loan and the National Bank exercised its powers as mortgagee. In doing so it sold the property at Stirling (owned by Moriden Nominees). From that sale it received approximately $511,000 which was applied to reduce the amount then owed by Mr Balnaves but which was not sufficient to pay out the debt in full (approximately $572,000). Subsequently to that the wife was able to effect sales of the Harrowgate properties and the unit at North Haven. The Harrowgate properties were sold first. The National Bank took from the proceeds of that sale approximately $61,000 which cleared Mr Balnaves' indebtedness to it. The balance, approximately $65,000, was placed in a joint account of the solicitors for the parties to these proceedings. The proceeds of the sale of the unit at North Haven (approximately $77,000) were paid into a similar account.

It was the contention of the wife and Moriden Nominees that the equitable doctrine of marshalling entitled Moriden Nominees to be subrogated to the rights of the National Bank vis-a-vis the security of the husband, namely the Harrowgate properties. It was in effect the contention of Moriden Nominees that the Harrowgate properties should have been used first in the repayment of the loan. Had that occurred the National Bank would have firstly received approximately $127,000 from the sale of that property. The bank would then have been entitled to look to the two guarantors for the payment of the balance. It was the second contention of Moriden Nominees that those guarantors were required to contribute to that rateably between their respective securities.

On 9 July 1987 the wife filed an application on behalf of herself and Moriden Nominees in which she sought orders to give effect to these contentions. In particular that would have meant that the sums of $65,000 and $77,000 (or on another view approximately $58,000) would become payable to Moriden Nominees out of the accounts in which they are presently held.

Neither the Official Trustee nor the husband disputed the general applicability of the principles relied upon by the wife and Moriden Nominees (as to which see generally Meagher, Gummow and Lehane Equity — Doctrines and Remedies, para. 941 et seq.). The orders would of course have an impact upon the size of the husband's estate in bankruptcy. It was the contention of the Official Trustee and the husband that this Court did not have power to make the orders sought as they were really orders being sought in favour of a third party who is not a party to the marriage (or to the proceedings). The husband in his submissions before us also contended that such an order may be void as a preference. We think there is nothing in that latter submission as Moriden Nominees is seeking to stand in the position of the bank (a secured creditor).

The trial Judge concluded that as he was not prepared to make draft orders 1 or 2, it followed that he could not make these further orders. Orders 1 and 2 related to the first ground of appeal. Had his Honour been correct in that view, then that would clearly have been the end of the argument under this ground. However, for reasons which we have indicated above, we think it was proper for his Honour to have made order 2. Consequently the issues under ground 6 come more directly into focus.

His Honour anticipated that because he went on to say:

``Although it is not necessary for me to say so, I am satisfied that I could not make the orders sought under sec. 78 of the Family Law Act because, as the wife's counsel says, the applicant in this instance is Moriden Nominees Pty. Ltd. which is not a party to the marriage. Further, I am doubtful whether the Court has, in the circumstances, an accrued or pendent jurisdiction to determine the matters raised in the wife's application filed on 9 July 1987.''

We think his Honour was clearly right in these latter views. The orders which were sought were really orders in favour of Moriden Nominees and in one of the two instances were orders against another third party namely P.B. Nominees. For reasons which we have already referred to we do not consider that sec. 78 permits such a course. Nor do we consider that any doctrine of accrued or pendent jurisdiction has any useful application to these circumstances.

Appeal by the Official Trustee in Bankruptcy — filed I December 1987

As we outlined when we dealt with ground 2 of the wife's appeal, counsel for the Official Trustee indicated that he did not desire to proceed at this stage with this appeal and that upon the approval of the deed of arrangement it would be withdrawn or dismissed.

Accordingly it is unnecessary for us to consider, at least at this stage, the matters raised in that notice of appeal.

Notice of appeal of Ms Jane Teresa Cummings — filed 8 December 1987 and cross-appeal of the wife thereto — field 16 December 1987

The appeal by Ms Cummings raised three separate issues, namely:

(a) Orders 9 and 10. These are orders under sec. 85 relating to transactions connected with the painting known as ``The Artist's Sister, 1936''.
(b) Costs.
(c) The dismissal of other outstanding applications (order 24).

The cross-appeal of the wife related to two of those issues, namely (a) and (c).

The major issue raised by each of the notices concerns (a) above, that is orders 9 and 10 and we turn to that aspect first.

Order 9 set aside transactions involving the husband. Mercantile Credits Ltd., Trade Credits Ltd. and Ms Cummings, relating to the painting. Order 10 directed the Art Gallery Board of South Australia to release the painting to the Official Trustee for the purposes of sale, the trustee to pay from the sale price the surrender value of the painting due to Trade Credits, the legal costs of Mercantile Credits and the reimbursement of amounts paid by Ms Cummings to Trade Credits. Those orders were made upon the wife giving undertakings to the Court to indemnify Mercantile Credits and Trade Credits in respect of those matters and any losses which they may incur by reason of those orders.

As there was no challenge to the form in which the orders were made it is unnecessary to set out the precise terms of them or the undertakings. In effect the contention on behalf of Ms Cummings was that the Court ought not to have made any order under sec. 85 relating to the painting, and the contention by the wife in her cross-appeal was that the trial Judge ought not to have made provision for reimbursement to Ms Cummings of moneys expended by her in the transaction.

As we previously indicated, leave to intervene in these proceedings was granted to Ms Cummings on 11 November 1986. In addition it appears that Mercantile Credits, Trade Credits and the Art Gallery were all served with the relevant applications. Mercantile Credits appeared in the proceedings and did not object to the proposed orders and Trade Credits and the Art Gallery took no part in the proceedings.

The relevant facts are these. On 24 June 1985 (that is some months prior to the separation of the parties in October 1985) the husband entered into a consumer lease with Alliance Acceptance Co. Ltd. (which subsequently became Mercantile Credits Ltd. and which will be referred to hereafter by that name) in respect of the painting by Grace Cossington-Smith entitled ``The Artist's Sister, 1936''. The total amount payable under the lease was $17,347,20, by 48 monthly rent instalments of $361.40. Clause 5 provided that the lease shall not confer ``on the lessee any property or interest in or to the goods and the lessee shall be a bailee thereof only''. On the other hand the schedule included what was described as ``Residual value $4,500 (being a pre-estimate of the value of the goods at termination of the lease)''. The ``purpose of use of goods'' was described in the lease as ``business''.

The evidence of the husband was that he acquired the painting with the intention of subsequently donating it to the Art Gallery and thereby becoming entitled to set off the gift against his income and minimise the incidence of taxation. By arrangement with the gallery the painting remained there throughout. The advantages to the husband were apparently that he was able to treat the monthly lease payments as taxation deductions and intended subsequently to donate the painting at what was expected to be, and turned out to be, a substantially increased value, thus giving him a further taxation benefit.

On 15 January 1987 an invoice recorded the sale from Mercantile Credits to Trade Credits of the painting for $13,541,92. It will be recalled that the hearing commenced before Gun J. in February 1987. It was accepted before us that the figure of $13,541.92 was the one at which the husband could have bought out the interest in the painting from Mercantile Credits had he done so directly. It was also accepted that although the only document evidencing the transaction was an invoice, what must have occurred was that the husband assigned his interest in the lease to Trade Credits which then paid out Mercantile Credits. On 20 January 1987 Trade Credits and Ms Cummings entered into a hire purchase agreement for this painting. The evidence established that the husband had approached Ms Cummings to take over the painting and had made the arrangements for the transaction himself with Trade Credits. Thereafter until trial the painting has remained in the possession of the gallery and Ms Cummings has paid the instalments under her agreement with Trade Credits. The total amount payable under that agreement, including interest, was $18,632 and Ms Cummings' obligations were guaranteed by the husband. The evidence before the trial Judge satisfied him that at the trial the painting had a value of $30,000.

The trial Judge after reciting these facts concluded:

``I am satisfied that the husband organised and arranged all relevant transactions with a view to ensuring that any equitable or legal interest that he may have had in the painting was put beyond the reach of his wife. I agree with the submission made by the wife's counsel that at all relevant times Ms Cummings was acting only as a puppet on behalf of the husband.''

His Honour then went on to say:

``It is enough for me to say that I am satisfied that the husband did have an equitable interest in the painting at the time that Mercantile Credits was paid out and the legal ownership transferred to Trade Credits Ltd. In my view, an equitable interest in the painting would have arisen if the legal owner (or lessor) has sold the painting and there had been a surplus upon such sale. In my opinion the surplus must belong to the hirer/lessee, in this case the husband. In my view sec. 85(1) applies to this transaction, particularly when one has regard to the present value of the painting.''

His Honour qualified that to some extent by saying:

``I therefore propose to make the order sought by the wife save and accept that part of the order which provides that the nett proceeds of the sale of the painting be paid into an account in the name of the wife's solicitors. In my opinion, the equitable interest in the painting, once the transaction is set aside, reverts to the husband and accordingly vests in the Official Trustee. I am unable to see how the wife can become entitled to any share or interest in the painting unless it is pursuant to sec. 79 of the Family Law Act.''

That latter view by his Honour was not challenged. Consequently the effect of the order under sec. 85 is to vest any interest the husband had in the painting in his estate in bankruptcy.

Counsel for Ms Cummings submitted that the trial Judge had no power to make an order under sec. 85 or ought not in his discretion to have done so. His major submission was that the husband had no ``equitable interest'' as the trial Judge described it or no ``property'' in the painting which could be relevant in any subsequent hearing under sec. 79. Counsel for Ms Cummings submitted that there was nothing in the lease to indicate who was entitled to the surplus if there was a sale upon default by the husband and in those circumstances the proper conclusion was that the lessor was entitled to any surplus. Counsel submitted that the husband had no right in property under his agreement, that it was a contract of bailment and that the only right that he had was a right to possession of the painting provided he was not in breach of the agreement and in particular that he had no right to acquire the painting at the end of the term of the agreement. He submitted that if the husband defaulted he would have ceased to have any interest in the painting, and that at the expiration of the lease the full ownership of the property would continue in the company. He submitted that at best the husband had a chose in action to protect his right to possession during the continuance of the lease.

Initially counsel for Ms Cummings made this submission in the context of his submission that unless the husband had a ``property'' interest under the lease there was no transaction which may be set aside under sec. 85. Clearly however that is not so. Section 85 relates to the setting aside of any ``instrument or disposition''. In the final analysis counsel's submission was that it would be pointless to set aside these transactions because if the effect was to put the husband back into the original position he would not then have any ``property'' in the painting to which sec. 79 could relate. Consequently he submitted that the transaction was not one which had the effect or intention of defeating any existing or anticipated order under sec. 79. He referred us to Public Trustee (S.A.) and Keays (1985) FLC ¶91-651 where the Full Court said at p. 80,245:

``In deciding the appeal the first issue which has to be considered is whether the indenture of 2 February 1983 disposed of `property' of the husband within the meaning of sec. 4(1). If it did not, the basis for applying sec. 85(1) would disappear since its exercise will not re-vest any assets or entitlement in the husband.''

Alternatively he submitted that as a matter of discretion it would be futile to embark upon the involved course of setting aside these transactions to no useful purpose. In addition counsel for Ms Cummings submitted that as a matter of discretion the trial Judge should not have made an order because the probable net return to the estate of the husband would be small. The evidence at the trial was that the value of the painting was approximately $30,000. After payment out of the amount owing to Trade Credits and commission (which was said to be approximately $2,500, if applicable) the amount may be so small that it was an inappropriate case to exercise the discretion under sec. 85 to set aside these series of transactions. (See generally Whitaker and Whitaker (1980) FLC ¶90-813 at p. 75,129; Holley and Holley (1982) ¶91-257; D and D [Section 85 application] (1984) FLC ¶91-593; and Aldred and Aldred v. Westpac Banking Corp. (1986) FLC ¶91-753.)

Counsel for the wife firstly submitted that the agreement was a ``credit contract'' within the Consumer Credit Act 1972 of South Australia as amended and that gave the husband a right to the surplus upon sale. However it appears to us that this document does not fall within the definition of a ``credit contract'' and that the Act does not apply to it.

He further submitted that even if the only rights of the husband were that of a bailee at law that was nevertheless a right which could be the subject of an order under sec. 79 or would constitute a ``financial resource'' of the husband which may influence the Court's determination in respect of orders against other property of the husband under sec. 79.

However the major submission of counsel for the wife was that the true commercial transaction between the parties was wider than that which was evidenced by the original lease with Mercantile Credits. We have already referred to the terms of that agreement and the purpose for which it was entered into, a purpose understood by all parties, namely an artificial scheme of tax avoidance. The evidence of the Credit Manager of Mercantile Credits appears to us to establish beyond controversy that the understanding between all the relevant parties and the true commercial nature of the transaction was that in any event the husband would become entitled to the painting or the surplus. That is, if there was a default during the lease and the painting was sold, Mercantile Credits would retain the balance due under the agreement and the surplus would go to the husband, and if the husband completed the terms of the lease then upon payment of the ``residual'' referred to he would become entitled to the property in the painting. Indeed it was that very right which Trade Credits as the agent of the husband exercised when it bought out Mercantile Credits and thus became the owner of the painting and able to hire purchase it to Ms Cummings, who was no more than a puppet for the husband.

We think it proper to look at the commercial realities of this transaction, rather than the documentary form which the parties chose in order to impose upon the revenue. Looked at in that way the commercial agreement between the husband and Mercantile Credits was an agreement under which the husband had an interest in property. In the circumstances we consider that the trial Judge properly exercised his discretion in making an order under sec. 85. It was a blatant sham transaction aimed specifically at defeating then existing proceedings in this Court, and the rights of the third parties — Mercantile Credits and Trade Credits — are protected by the orders and undertakings. The impact upon the husband's estate is not we think inconsiderable and that may ultimately be to the advantage of the wife.

In those circumstances it is unnecessary for us to consider the further arguments put to us by counsel for the wife, namely that any assertion by Mercantile Credits that it was entitled to the surplus or the painting may amount to ``unconscionable conduct'' within sec. 52A of the Trade Practices Act or would attract equitable relief as ``unconscionable conduct''.

Turning to the cross-appeal it was the contention of counsel for the wife that the trial Judge ought not to have made the order the effect of which was that Ms Cummings should be reimbursed for the instalments which she paid under her hire purchase agreement with Trade Credits.

As the first step in that argument counsel for the wife drew our attention to sec. 85(3) which provides that the court shall have regard to and make orders proper for the protection of ``a bona fide purchaser or other person interested''. He submitted that ``bona fide'' qualified both ``purchaser'' and ``other person interested'' and that as Ms Cummings was not bona fide she was not entitled to the protection of that subsection. In our view however that phrase is to be read disjunctively. The subsection refers to two categories, the well known category of bona fide purchaser (for value) which is traditionally accorded a high level of protection in proceedings under sec. 85 or analogous provisions, and a second category of ``persons interested''. A person may still be ``interested'' whether they acted bona fide or not, although of course the presence or absence of bona fides (or negligence or other conduct of a like kind) no doubt will have an impact upon the extent to which, if at all, a court will extend to that person the protection which subsec. (3) allows: see Heath and Heath; Westpac Banking Corporation (1983) FLC ¶91-362 and also reported in (1984) FLC ¶91-517 (Full Court).

In that case Nygh J. at first instance pointed out that a sham transaction may not create an ``interest''. In this case Ms Cummings was the puppet of the husband but the moneys which she paid to Trade Credits were apparently paid by her from her own moneys. The trial Judge included this provision in favour of Ms Cummings in these orders but in his judgment did not specifically state his reasons for doing so. Whether or not she was a ``person interested'' it should not be thought that the only restrictions on the power under sec. 85(1) is entitled to attach any appropriate qualifications or conditions. What subsec. (3) does is to draw the Court's attention to the classes of person referred to therein and specifically require the Court to have regard to those interests.

We conclude that the trial Judge was entitled, within the discretion provided under sec. 85, to make the order under sec. 85 subject to this condition in favour of Ms Cummings.

Ms Cummings also appealed against the order for costs (order 20). This depended upon her being successful in her challenge to orders 9 and 10. In any event it appears to us that the order was well within the exercise of discretion and counsel for Ms Cummings did not seriously contend to the contrary.

The last ground of this appeal and cross-appeal relates to a burr walnut wardrobe.

Order 21 of the draft orders sought an order under sec. 85 that a purported gift by the husband to Ms Cummings in December 1985 of a burr walnut wardrobe be set aside.

The trial Judge refused that application but also refused to make an order in favour of Ms Cummings for the costs of that application. The wife has appealed against the failure of the trial Judge to make the order under sec. 85 and Ms Cummings has appealed against the failure to grant her the costs relevant to that application.

The facts are that shortly prior to the separation in 1985 the husband purchased, but did not pay for, this wardrobe. The trial Judge found that the husband had purchased it with the intention of giving it to his wife as a birthday present. However the wife left the matrimonial home in October 1985 before the wardrobe was delivered. The husband paid for the wardrobe ($1,400) about Christmas 1985 and then gave it to Ms Cummings (apparently in breach of an injunction granted by the Court on 20 November 1985).

The trial Judge's conclusions were as follows:

``While I have no doubt that the intention of the husband was to deprive the wife of this wardrobe, I am unable to see how the gift to Ms Cummings can be said to be a disposition which was made to `defeat an existing or anticipated order in these proceedings or which, irrespective of intention, is likely to defeat any such order'.

I agree with the submissions made by Ms Cummings's counsel that the only possible orders which could have been defeated would have been orders that the wardrobe be given to the wife or that all of the property of the marriage be awarded to the wife or that all of the furniture be awarded to the wife, and that no party could objectively have expected at the time of the disposition that any such order would be made. For these reasons I intimate that I propose to dismiss this application.''

Counsel for the wife submitted that the approach adopted by his Honour in the above passage reduces sec. 85 to absurdity because one could apply that approach to each individual asset so as to produce the same logical consequence. He submitted that the overall effect of the transaction was to reduce the asset pool available although, in view of the husband's bankruptcy, the actual result will be to return that wardrobe to the Official Trustee and increase the husband's estate by the modest amount involved.

Counsel for Ms Cummings argued that there must be a ``realistic connection'' between the transaction and the claim under sec. 79 (see Whitaker, supra, at p. 75,129).

Although we think there may be substance in counsel for the wife's argument about the trial Judge's approach, nevertheless the amount involved is very small in the context of this case and we do not think that we should interfere.

In relation to costs, his Honour said that he did not consider it appropriate ``having regard to Ms Cummings' conduct in relation to these proceedings'' to make an order for costs against the wife. We think that was a proper exercise of his Honour's discretion.

In those circumstances the proper order to make is that both the appeal of Ms Cummings and the cross-appeal of the wife be dismissed.

The orders of the Court are as follows:

1. The appeal of Ms Jane Cummings and the cross-appeal of the wife are dismissed.
2. The appeal of the Official Trustee and ground 2 of the appeal of the wife are adjourned to a date to be fixed.
3. The appeal of the wife is allowed.
4. Order pursuant to sec. 80(e) of the Family Law Act that until further order Moriden Nominees Pty. Ltd. be the sole trustee of the Balnaves Family Trust.
5. Until further order Peter John Balnaves is restrained from appointing or causing to be appointed any person or body as a trustee of the Balnaves Family Trust.
6. Paragraphs 6(a)-(d) and (f), and 13 of the orders made on 9 November 1987 are discharged.
7. So much of order 1 of the orders of 19 May 1987 which requires the proceeds of sale by Moriden Nominees Pty. Ltd. of its interest in the property at Port Adelaide to be held in an interest bearing account in the name of the solicitors for the husband and the wife to abide the further order of this Court be set aside with the intention that the said moneys be forthwith released to Moriden Nominees Pty. Ltd.
8. That pursuant to sec. 78(1) of the Act it is ordered that that furniture removed from a property at Stirling in or about October 1985 and held by the wife at Malvern and subsequently at Kensington Park is and was and has been since its purchase by either the husband or the wife the joint property of the husband and the wife.
9. That pursuant to sec. 78(1) of the Act it is ordered that that furniture, wine and any other items removed from a property at Stirling in or about December 1986 by the National Australia Bank and placed in storage in the premises of Theodore Bruce Real Estate is and was and has been since its purchase by either the husband or the wife the joint property of the husband and the wife.
10. That pursuant to sec. 78(1) of the Act it is ordered that that furniture removed by the wife from North Haven and held by the wife thereafter at Kensington Park is and was and has been since its purchase by either the husband or the wife the joint property of the husband and the wife.
11. That pursuant to sec. 78(1) of the Act it is ordered:

(a) that the furniture made available by the husband to the lessee of the property at Port Adelaide (save and except a board room extension table, a print entitled ``Birdseye View of Port Adelaide'' and a ship's bell) and retained on those premises until May 1987 and thereafter held by the wife at Kensington Park is and was and has been since its purchase by either the husband or the wife the joint property of the husband and the wife;

(b) that the three items excluded from (a) hereof are and were and have been since their purchase by the husband the sole property of the husband.

12. That pursuant to sec. 78(1) of the Act it is ordered that the billiard table and accessories on the property at Stirling at the date of the sale of that property by the National Australia Bank, which billiard table remains on the said Stirling property, is and was and has been since its purchase the joint property of the husband and the wife.
13. That pursuant to sec. 78(1) of the Act it is ordered that those rugs presently held by the Commissioner of Police being those rugs removed from the Malvern property by the husband on or about 11 June 1986 are and were and have been since their purchase by either the husband or the wife the joint property of the husband and the wife.
14. That so much of the orders of McGovern and Bulbeck JJ. of 20 November 1985 and 12 December 1985 respectively restraining the husband and wife from disposing of any furniture and effects is hereby set aside so as to allow the wife and the Official Trustee to sell such of the furniture and effects dealt with pursuant to orders 8 to 13 hereof with the intention of dividing the proceeds thereof equally between the wife and the Official Trustee.