Ferguson & Ferguson
[2022] FedCFamC2F 1194
•7 September 2022
Federal Circuit and Family Court of Australia
(DIVISION 2)
Ferguson & Ferguson [2022] FedCFamC2F 1194
File number(s): NCC 1951 of 2020 Judgment of: JUDGE BETTS Date of judgment: 7 September 2022 Catchwords: FAMILY LAW – Property – second marriage - spouses are both elderly - Husband has dementia and is represented by NSW Trustee & Guardian – assets are only modest – Court is asked to determine preliminary claims against Second Respondent (Husband’s adult daughter) – first claim is for repayment of $280,000 advanced to Second Respondent in 2000 and recorded in a Deed of Loan – issue is whether the moneys were a loan or a gift – second claim is brought by Wife against Second Respondent pursuant to s 106B of the Family Law Act1975 – Wife seeks to set aside spouses’ 2001 transfer of the former matrimonial home to Second Respondent – parties happily married at time of transfer but Husband actually anticipated a future order whereby Wife would receive the home – communicated this to Second Respondent but not to Wife – Wife trusted Husband and executed documents not fully understanding them – requirements of s 106B considered and particularly the meaning of an ‘anticipated’ order by reference to s 106B and case law Legislation: Family Law Act1975 (Cth), Pt VIII Cases cited: A.N.Z. Banking Group Ltd v. Harper & Ors (1988) FLC 91-938
Ding & Ding [2017] FamCA 863
Equuscorp Pty Ltd and Anor v Glengallon Investments Pty Ltd (2004) 218 CLR 471
Gelley & Gelley (1992) FLC 92-291
Holley & Holley (1982) FLC 91-257
In the marriage of Hajduk & Hajduk (1993) FLC 92-383
In the marriage of Heath & Heath (No.2) (1984) FLC 91-517
Kennon v Spry (2008) 238 CLR 366
Pflugradt & Pflugradt (1981) FLC 91-052
Toohey & Toohey (1991) FLC 92-244
Whitaker & Whitaker (1980) FLC 90-813
Division: Division 2 Family Law Number of paragraphs: 158 Date of last submission/s: 4 May 2022 Date of hearing: 3 and 4 May 2022 Place: Newcastle Counsel for the Applicant: Mr Mueller Solicitors for the Applicant: Lindeman Lawyers Counsel for the First Respondent: Mr Schroder Solicitors for the First Respondent: NSW Trustee & Guardian Counsel for the Second Respondent: Mr Weightman Solicitors for the Second Respondent: Burke & Mead Lawyers ORDERS
NCC 1951 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MS FERGUSON
Applicant
AND: MR FERGUSON
First Respondent
MS GEORGE
Second Respondent
order made by:
JUDGE BETTS
DATE OF ORDER:
7 September 2022
THE COURT ORDERS THAT:
1.The spouses’ claim that the Second Respondent repay them the sum of $280,000 is dismissed.
2.Pursuant to s 106B of the Family Law Act 1975, the Court sets aside the 2001 disposition of the spouses’ joint interest in and to the real property situated at B Street, Town C to the Second Respondent. The parties are to do all acts and things necessary to give effect to this Order and the Court will hear from the parties as to any further specific Orders or directions that may be required.
3.The costs of each party will be reserved.
4.The proceedings will be listed for further directions on 12 October 2022 at 9.30am.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym Ferguson & Ferguson has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE BETTS
OVERVIEW:
Following the breakdown of their marriage, the Applicant Wife brings these property settlement proceedings against the First Respondent Husband pursuant to the provisions of Part VIII of the Family Law Act 1975 (“the Act”).
Each of the spouses is 83 years old and in compromised health. The Husband suffers from moderate dementia. Since leaving the former matrimonial home at B Street, Town C, he has been required to live in a secure aged care facility with access to nursing support. He has cardiovascular disease (having suffered a number of strokes and heart attacks requiring bypass surgery), diabetes II, chronic hypertension and a history of alcohol abuse. The Wife, who remains living in the former matrimonial home, suffers from orthopaedic issues, hearing issues and requires ongoing medication/s.
At present, the Husband’s net identifiable assets are $219,528 and the Wife’s are somewhere between $337,238 and $386,238 - amounts which appear to be quite inadequate to meet their reasonable needs going forward. In the Husband’s case in particular, his aged care facility requires payment of a refundable accommodation deposit of $550,000 which he cannot afford. If he could pay it, his accommodation fee would be just $4.47 per day. Instead he has to pay an unsustainable $179 per day, which is rapidly dwindling his limited resources. The Wife’s own financial future is also uncertain, particularly if her own care needs increase.
The Second Respondent is the Husband’s adult daughter from his first marriage. The spouses have brought two (2) discrete, significant claims against her which if successful will greatly increase the matrimonial property available for division. The Court is therefore asked to determine these two claims as preliminary issues.
The first is a debt claim in the amount of $280,000. It arises pursuant to a Deed of Loan executed by the Husband and the Second Respondent in 2000 whereby the Husband advanced that sum to her on an interest-free basis, repayable upon twenty-eight (28) days’ written notice. The stated aim was to enable the Second Respondent to buy a home. Written notice requiring repayment was first given in August 2019. No repayments have ever been made.
The Second Respondent contends that the $280,000 was not a true loan but a gift. Her case is that the Deed of Loan was a ‘sham’ entered into between she and her father purely for asset protection purposes. She says that the Deed of Loan is no longer enforceable in any event as the applicable limitation period has long since passed.
The second claim, brought by the Wife pursuant to s 106B of the Act, seeks to set aside the spouses’ 2001 disposition to the Second Respondent of their title to the former matrimonial home. The disposition was affected pursuant to a Transfer document and an accompanying Deed which, amongst other things, conferred a life tenancy upon the spouses. At that time the home was worth $400,000 but it is now worth $1,000,000. Put shortly, the Wife now wants the home back so she can access the equity.
In support of her s 106B claim, the Wife says that the documents were drawn and executed hastily and in circumstances where she did not fully understand what she was signing; English is not her first language. Moreover she says the Husband misled her about the effect of the documents and that she did not know about the transfer of title until she met with her solicitor in 2019. She also asserts that the Husband exercised undue influence over her at the time she signed the documents and that it would be unconscionable for the Second Respondent – a ‘volunteer’ in the eyes of equity – to now retain the benefit of the transfer especially given the spouses’ modest financial positions and future needs.
The Second Respondent says that the s 106B claim is misconceived. She says that the spouses were happily married at the time of the transfer; they did not separate for another eighteen (18) years thereafter. She says that, at the time it was executed, the transfer cannot have had the intent or the effect of defeating an ‘anticipated’ property settlement order in the Wife’s favour. She also says that the Wife well knew what she was doing at the time, that she had the benefit of legal advice and that the disposition was part of an agreed family arrangement. The Second Respondent contends that s 106B does not (or should not) permit a spouse to set aside a transaction in such circumstances, ie. where the applicant spouse is himself/herself a consenting party to the disposition.
The Wife had also brought equitable claims against the Second Respondent in respect of the home transfer. But no pleadings were ever delivered and, citing a lack of procedural fairness, the Second Respondent objected to the Court determining any equitable causes of action against her. That said, she maintained that she herself acted with ‘clean hands’ throughout, that she did not mislead the Wife or apply any undue influence over her, nor did she act unconscionably. The Second Respondent contended that any possible adverse findings against the Husband could not be ‘sheeted home’ to her.
Ultimately the Wife abandoned any equitable claim per se against the Second Respondent, while nonetheless contending that equitable principles still had a role to play in the exercise of the Court’s discretion to grant relief pursuant to s 106B and that relevant findings could still be made in that context.
The Husband joins with the Wife in seeking to enforce the Deed of Loan against the Second Respondent, while contending that the Wife’s s 106B claim should fail. Given his dementia, the Husband has not himself sworn any affidavit material or participated in the proceedings personally. The NSW Trustee and Guardian (“TAG”) represent his interests.
THE HEARING:
The hearing took place on 3 and 4 May 2022. Mr Mueller of counsel appeared for the Wife, Mr Schroder of counsel appeared for TAG on behalf of the Husband and Mr Weightman of counsel appeared for the Second Respondent.
The Wife relied upon the following documents:
(a)Amended Initiating Application filed 12/04/22;
(b)Wife’s Affidavit filed 12/04/22;
(c)Wife’s Financial Statement filed 15/06/20;
(d)Outline of Case Document filed 02/05/22.
The Husband relied upon the following documents:
(a)Amended Response filed 09/06/21;
(b)Affidavit of Jaimi-Lee Gardiner filed 08/04/22. Ms Gardiner is a solicitor in the employ of TAG, with delegated statutory authority to conduct the litigation on the Husband’s behalf;
(c)Financial Statement of Jaimi-Lee Gardiner filed 08/04/22;
(d)Outline of Case Document filed 29/04/22.
The Second Respondent relied upon the following documents:
(a)Response filed 07/05/21;
(b)Second Respondent’s Affidavit filed 08/04/22;
(c)Outline of Case Document filed 02/05/22.
I had the benefit of seeing both the Wife and the Second Respondent in the witness box. Ms Gardiner from TAG was also cross-examined briefly, although her evidence was largely formal and not particularly controversial. She confirmed that the Husband was unable to give lucid instructions and that much of the content of her Affidavit was simply based on instructions he had given at an earlier point in time.
In closing I observe that the relevant Deeds and Transfer documents were put into evidence. They had all been drawn by a Suburb F solicitor, Mr G. He was not called as a witness. Given the passage of time it would not be reasonable to expect him to have had any specific recollection of the transactions or to have retained any file notes.
CHRONOLOGY OF RELEVANT EVENTS:
This was a second marriage for both spouses. Putting the claims against the Second Respondent into their proper context requires traversing the somewhat fractious, and at times tumultuous, family history.
The Husband’s earlier history
The Husband was born in Australia in 1939. He married his first wife in the late 1950s or early 1960s. They had three (3) children together: their son Mr H born in 1966, their son Mr J born in 1968 and the Second Respondent born in 1971. The family lived in a home at Town K, NSW, which the Husband had inherited from his parents.
After his wife died in 1986, the Husband’s relationship with both of his sons soon descended into open conflict. Things were so bad between the Husband and Mr J in particular that, Police ended up taking out an Apprehended Violence Order to protect the Husband from him. The Second Respondent, just fifteen (15) when her mother died, could only watch on while in her words “the family fell apart”.
Although the Second Respondent herself remained close to her father after her mother’s death, she accepted that he was a somewhat dominant and forceful man and that she too fell out with him in later years. Her Affidavit describes the Husband in this way:
17.[Mr Ferguson] was often very opinionated on other people’s decisions, and whether he agreed with them. This has made relationships with [Mr Ferguson] difficult at times. This has affected his relationship with his children, siblings, and extended family.
The weight of the evidence bears out that description.
The Wife’s earlier history
The Wife was born in Country L in 1939.
In 1960 she married her first husband, giving birth to their son Mr M in 1962. In 1968 the family migrated to Australia, purchasing a home at Suburb N in 1970. In 1977 the Wife’s husband was killed in a motor vehicle accident.
Around 1978, the Wife re-partnered with a Mr O who moved into her home. When their relationship broke down in the early 1980s, he brought proceedings against her in which he claimed an interest in the home. The Wife instructed Mr G to defend the claim on her behalf. He was able to resolve it successfully in that Mr O did not acquire any interest in the home, nor did the Wife have to make a cash payment to him.
Cohabitation & early years of marriage
In 1989 the Husband moved out of the Town K property (where he had been living with Mr H and his wife) and into the Wife’s home at Suburb N. The Second Respondent came too, initially living in a granny flat at the rear before moving out. She maintained a good relationship with the Husband; her relationship with the Wife was more ‘respectful’ than intimate.
In 1990 the spouses married when each was aged fifty-one (51). The Husband was working as a transport worker, the Wife in a retail store. Although they operated a joint account, the Husband managed their finances and the Wife trusted him in that role. They purchased their own home at Suburb P around 1991, the Husband using his savings to pay the deposit and arranging a joint mortgage for the balance.
In 1992 the Second Respondent and her then husband moved to Western Australia. The Husband stayed in regular contact with her, telephoning her each week. When in 1994 the Second Respondent and her husband separated, he urged her to return to NSW. But she refused, citing cheaper house prices there. His response – which later became a regular refrain during their conversations – was that he would buy her a house in NSW himself “if he won the lotto”.
Mr H and the Husband end up in litigation over the Town K property:
In 1994, Mr H lodged a caveat over the Town K property, claiming an interest in it. He claimed that the Husband owed him money and that the Husband had gifted Town K to him. The Husband defended his son’s claims.
For the next three (3) years or so, the Husband and his son were embroiled in at least one (and perhaps two) bitter pieces of litigation. Ultimately they resolved their dispute on the basis that:
·Mr H would pay the Husband a sum of $80,000;
·the Husband would gift the Town K property to Mr H;
·the Husband was absolved from any requirement to provide for Mr H in any future Will.
The Husband was quite shaken by this litigation against his own son; afterwards the Second Respondent observed him to become “very cautious about financial agreements.” [1] In my view, the litigation drove home to the Husband, in a very personal way, the importance of asset protection.
Sale of the Wife’s Suburb N property
Around 1997 or early 1998, the Husband arranged the sale of the Suburb N property; he dealt with the net sale proceeds.
The spouses’ KENO win in 2000
In 2000, the spouses won $4,696,940 playing KENO.
No doubt in a state of elation, the Husband telephoned the Second Respondent shortly afterwards:
34.[Mr Ferguson] called me…and said to me words to the effect: “Pack your gear I have won $4 mil on KENO. I want you to book an airline ticket and come home. I have bought you a car.”
35.[Mr Ferguson] also said to me at around the same time words to the effect: “Sell your house in WA for the same price you bought it for, you won’t need any money.”
The Second Respondent flew to NSW soon after, where the Husband had in fact bought her a car. She house-sat their Suburb P home while the spouses travelled away to Town C where they stayed for a while in order to escape the notoriety.
Spouses incorporate “Ferguson Pty Ltd”:
The Husband saw the KENO win as a life-changing opportunity to pursue his dream of owning a hobby farm. I accept the Wife’s evidence that:
16.Immediately after our Keno win [Mr Ferguson] took me to [Town Q] and introduced me to an accountant who one of [Mr Ferguson’s] relatives recommended, [Mr R]. I don’t know what the accountant was meant to do. [Mr Ferguson] did everything for me. I just went along with it. [Mr Ferguson] never asked me anything. We started a company called [Ferguson] Pty Ltd (the Company). [Mr Ferguson] and I was involved [sic]. [Mr Ferguson], [Ms George] and I had a chequebook each.
The spouses were both appointed as directors and the Second Respondent was appointed company secretary. Through the company, the Husband arranged for the spouses to buy two (2) farming properties as referred to later.
2000: Spouses financially benefit all their adult children:
The spouses acted quickly to benefit all of the children.
They purchased Mr J a block of land at Town S for $100,000. They advanced him $30,000 to build a shed there. They paid out his car loan (between $33,000 and $36,000) as well as paying $5,000 to a motorcycle dealer on his behalf. [2] In total, Mr J received $168,000 - $171,000 out of the KENO winnings.
Mr M received $100,000 cash. While Mr H did not receive cash, the Husband did forgive his $80,000 debt.
The contentious $280,000 advance to the Second Respondent:
In early 2000, the Second Respondent and her then-partner Mr T visited the spouses in Town C. The spouses had decided to buy and live there and the Husband told the Second Respondent on this visit that he wanted to use the KENO money to buy her a house there too. She was enthusiastic; together they engaged a real estate agent to locate suitable properties. They soon selected a home at U Street which was purchased in the Second Respondent’s sole name, the Husband providing all of the purchase moneys and meeting all related costs.
But there was a complication. The Second Respondent’s relationship with Mr T was tenuous and the Husband knew it. Mindful of his own past experience with the Town K property, the Husband told her that he was worried about Mr T trying to take half the home if they separated. Not wanting his gift to be squandered in this way, the Husband told her that he wanted to create a “protection document”. He spoke to the Wife, who in turn suggested that they consult Mr G.
The Husband and the Second Respondent hurried off to see Mr G that day after settlement had occurred. On the Husband’s instructions, Mr G prepared the Deed of Loan which they executed the same day. The parties to the Deed were the Husband and the Second Respondent and the Deed was in these terms:
WHEREAS:
A. [Mr Ferguson] is the father of [Ms George];
B.[Ms George] is desirous of purchasing a property at [U Street, Town C], for Two hundred and sixty-nine thousand dollars ($269,000.00);
C.[Mr Ferguson] has agreed to lend [Ms George] the purchase price and to pay all her purchasing expenses including stamp duty and legal costs and disbursements totalling Two hundred and eighty thousand dollars ($280,000.00)
NOW THIS AGREEMENT WITNESSES:
1.[Mr Ferguson] is lending to [Ms George] the sum of Two hundred and eighty thousand dollars ($280,000.00) upon the following terms:
(a) the sum of $280,000.00 is repayable upon twenty-eight (28) days’ written notice;
(b) the advance is to be free of interest.
The Deed ostensibly gave rise to a legally binding arrangement. However, the Second Respondent asserts that the Husband instructed Mr G that these moneys were a gift and not a loan, that no repayment would be required and that the Deed was purely an asset protection device. Put shortly, she contends that as between the parties to it, the Deed was a mere “sham” as that term was defined by the High Court of Australia in Equuscorp Pty Ltd and Anor v Glengallon Investments Pty Ltd (2004) 218 CLR 471:
“Sham” is an expression which has a well-understood legal meaning. It refers to steps which take the form of a legally effective transaction but which the parties intend should not have the apparent, or any, legal consequences.[3]
I have no contrary evidence from the Husband, the Wife (who was not present at the meeting in any event) or from Mr G’s file. But TAG’s counsel Mr Schroder urged me not to accept that these were the Husband’s instructions as this would be tantamount to a finding that a solicitor knowingly participated in a sham.
Weighing the evidence collectively, I am satisfied that the Deed was a sham but it does not follow (and I do not find) that Mr G knowingly participated in it. There can be many subtleties in how solicitors take instructions and in this case I think it most likely that the Husband gave Mr G instructions to protect the moneys; that Mr G suggested the Deed of Loan; that the Husband instructed him that such loan would likely not be enforced and that ultimately the Deed was drawn in such a way as to give the parties maximum flexibility. For instance, repayment of the loan was not required by a specific date. The Deed was not self-executing. Rather, the obligation to repay only arose when - and if - the Husband made a written demand upon the Second Respondent. He was not obliged to make such a demand; indeed he never has. [4]
My finding that the Deed was a sham as between the parties to it is consistent with the Husband’s emphatically stated intention, after winning KENO, to buy the Second Respondent a house. He was rightfully proud of being able to do so. As the Husband told the Second Respondent:
“I am putting you four on even ground. All you kids now own a house and your car. From here, your finances are pretty much your own.”
Subsequent events, to which I will turn, also corroborate that the Deed was a sham.
The 2000 Mutual Wills of the spouses
In late 2000, the spouses executed Mutual Wills [5] which were drafted by Ms D Solicitor of Town C. Each Will specifically devised the former matrimonial home to Ms George. The Wills otherwise divided their estate between Mr H and Ms George. Neither Mr J nor Mr M were beneficiaries. The Deed of Loan was not referred to.
The Husband’s Will was accompanied by a statement explaining why he had not benefitted Mr J. Apparently, they had already returned to being estranged.
The Wife’s Will was accompanied by a statement explaining why she had not benefitted Mr M. It referred to the $100,000 cash gift Mr M had received and asserted that Mr M did not need any money as he was “very well set up financially”. It concluded with this rather sad observation:
“My son is not kind and loving to me. He does not facilitate contact between me and my grandchildren. I do not believe my son treats me as a son should treat his mother.”
Anticipating possible disputes, each of the Wills set aside a “fighting fund” of $200,000 to fund any potential estate litigation.
Farming ventures via “Ferguson Pty Ltd”:
In 2000/2001, the spouses purchased ‘Farm E’, a large property at Town V near Town W, comprising some 228,000 acres. There they conducted cattle farming operations through the proprietary company.
As to the dynamics of how the company operated, it was very much a ‘family affair’ conducted by the Husband and the Second Respondent. I accept the Wife’s evidence when she deposes that:
20.I was not involved in the Company even though I was a director. [Mr Ferguson] made all the decisions in relation to the Company. I know [Mr Ferguson] bought property with money from the Company. [Mr Ferguson] never involved me in the running of the Company.
I accept the Second Respondent’s description that, as company secretary, her role was more akin to that of a “girl Friday.” She collected mail, paid bills, bought items when the Husband asked her to, and did general “running around” for the company as he requested. [6]
Contentious transfer of the former matrimonial home to the Second Respondent in 2001:
In 2001, the Husband, the Wife and the Second Respondent jointly attended upon Mr G’s office where they executed the impugned Deed and a Transfer document.
The Deed itself was in the following terms:
RECITALS
1.[Mr Ferguson] and [Ms Ferguson] are the registered proprietors as joint tenants of a unit situate at and known as [B Street, Town C] being the whole of the land in Folio Identifier … (“the unit”), having a current market value of $410,000.00, together with the furniture and contents contained therein (“the chattels”).
2.[Ms George] is [Mr Ferguson’s] daughter.
3.[Mr Ferguson] and [Ms Ferguson] are desirous of transferring ownership of the unit to [Ms George] upon terms and conditions setforth [sic] hereunder.
OPERATIVE PARTS
1.This Deed shall bind the parties, their heirs, successors, administrators and assigns.
2.In consideration of and subject to [Ms George’s] compliance with the Covenants contained in Clause 3 hereunder, [Mr Ferguson] and [Ms George] shall forthwith transfer all their right, title and interest in and to the unit and the chattels to [Ms George].
3.[Ms George] covenants with [Mr Ferguson] and [Ms Ferguson] to permit them to have exclusive and unfettered possession and occupation of the unit, rent free, for the duration of their lifetimes or until such time as they or the survivor of them in writing elects to earlier vacate the unit.
4.[Mr Ferguson] and [Ms Ferguson] covenant with [Ms George] as follows:-
(i)to meet all legal costs, disbursement, stamp duty and other expenses of and incidental to the transfer of the unit;
(ii)to pay during their occupation of the unit all levies, outgoings and other expenses of and incidental to their occupation of the unit;
(iii)to maintain the unit and the chattels in good order and repair;
(iv)to keep fully insured at their expense the unit and the chattels against loss and damage and public risk.
The Transfer Document, inter alia, described the consideration for the transfer as:
pursuant to the terms and conditions of a deed dated 27.9.01 between the parties hereto.[7]
There is dispute about the circumstances surrounding the execution of the Deed and the Transfer document. According to the Second Respondent, the background to the documents was that:
70.In or about mid 2001, [Mr H] and [Mr J] had said to [Mr Ferguson] that they would contest his Will. [Mr H] and Mr J said that [Mr Ferguson] favoured me.
71.In 2001, [Mr Ferguson] said to me, in [Ms Ferguson’s] presence, words to the effect: “I want to put the house into your name to make sure the house stays with you. I am afraid [Mr H] and [Mr J] will contest the Will.” I recall [Ms Ferguson] agreed and said words to the effect: “This is best”. In [mid] 2001, [Mr Ferguson] approached me and said to me words to the effect: “I am worried that your brothers will try and take your gifts under the Will from you after I pass away”.
The Second Respondent’s evidence is that she, the Husband and the Wife subsequently attended upon Mr G together in order to execute the Deed and Transfer document. On her evidence, the Wife was a willing and informed party to the transaction; indeed she and the Husband instigated it.
The Wife disagrees. Her evidence is that:
18.After living in the [B Street, Town C] property for a little over a year [Mr Ferguson] said to me words to the effect: “[Ms Ferguson] we need to go and see [Mr G] to sign a document. We don’t want the government getting our house.”
[Mr Ferguson], [Ms George] and I travelled to Sydney together and went to [Mr G’s] office. [Ms George] sat in the front passenger seat and I sat in the back. If [Ms George] was with [Mr Ferguson] and I in the car that is always the way we sat. I signed a document that [Mr Ferguson] told me to sign. At the time of signing the document [Mr Ferguson], [Ms George] and I were all in [Mr G’s] office together.
19.At the time of signing the document referred to above I was unaware that I was giving [Ms George] my interest in the [B Street, Town C] property. I was unaware that I was receiving a life interest in the [B Street, Town C] property. At this time I did not know what a life tenancy was. I signed the document because [Mr Ferguson] told me to. I was not shown any documents written in [Country L] nor did anyone present advise me to get advice about the document. I didn’t ask any questions about the document I just did what [Mr Ferguson] told me to do as [Mr Ferguson] was my husband and I trusted he would do what is right. I first realised that [Ms George] owned [Mr Ferguson] and my home when I was in the Solicitors office in [Town C] in or about 2019. [Mr Ferguson] and I had gone to a solicitor called [Mr X] to talk about our wills.
I have no evidence from the Husband or from Mr G to assist me in resolving what instructions and advice were given.
One matter looms large however – what was not said to Mr G. In particular, the Second Respondent’s affidavit admitted that, at the time the documents were executed:
72.[Mr Ferguson] was also concerned that [Ms George] would try and take his property and would leave him homeless. [Mr Ferguson] knew I would have his best interests at heart and that’s why he wanted me to have the unit at [Town C].
When cross-examined about paragraph 72 of her Affidavit, the Second Respondent suggested that the paragraph should not have been written like that; that its inclusion was an error. She was adamant that the spouses were happily married at that time and that paragraph 72 was somehow wrong or taken out of context. By way of context for any such error, she suggested that it had been “a traumatic three years.”
At the same time, she agreed that “maybe” her father had expressed this concern to her albeit not in such specific terms.
The Second Respondent’s evidence challenging paragraph 72 of her own Affidavit was difficult to understand. I did not see how the paragraph was out of context. Quite the contrary, the paragraph made sense as drafted; it flowed logically from, and reads cohesively with, the two preceding paragraphs of the Affidavit.
Ultimately I accept the accuracy of paragraph 72 as drafted and I reject the Second Respondent’s attempt to retract it.
Inferentially, the Husband had privately communicated to the Second Respondent - prior to the disposition - his concern about potentially losing the home to the Wife in a future property settlement. From his perspective, this concern was one of the factors motivating the transfer. That is, the Husband’s intention (at least in part) was to put the home out of the Wife’s reach. The Husband and the Second Respondent were ad idem on this whereas the Wife was blissfully ignorant. To be fair, the spouses were happily married at that time; the Wife was not ‘on notice’ that she needed to guard her property interests from the Husband.
I will return to the Wife’s knowledge and state of mind later.
The 2002 Mutual Wills of the spouses
In 2002, the spouses executed further Mutual Wills drafted by Ms D. This time the Wills made no mention of the former matrimonial home, which was by then registered in the name of the Second Respondent. ‘Farm E” was devised to Mr H. The estates of the spouses were otherwise distributed between Mr H and the Second Respondent. Once again no provision was made for Mr J or Mr M and a sum of $200,000 was set aside to fund potential estate litigation. [8]
The spouses seem to have sold their Suburb P property that same year.
The Second Respondent separates from Mr T and invokes the Deed of Loan against him
The Second Respondent deposes that:
64.In 2003, ]Mr Z] and I separated on a final basis. Around this time, I found out that [Mr Z] had already received legal advice and he was requesting $500,000 and ownership of one of my vehicles at the time. I reminded him of the agreement that [Mr Ferguson] and I had put in place to stop this from occurring. I heard nothing further from [Mr Z] nor his solicitor after this conversation. At this point I was so happy that [Mr Ferguson] had prepared this agreement.
(my emphasis)
In the witness box, it emerged that the Second Respondent initially did not have a copy of the Deed of Loan. Her father apparently did, but as he had little or no access to technology he instead suggested that she obtain a copy from Mr G. She therefore faxed Mr G’s office in 2003 requesting a copy of “my perpetual loan agreement with Dad” – this being her father’s suggested wording.[9]
The Second Respondent’s evidence concerning her use of the Deed of Loan at that time, and what she told Mr T, was unimpressive. She said she had not sent the Deed to Mr T or his solicitor, which seemed rather odd given that she specifically had gone to the trouble of getting a copy for her intended use. Her Affidavit evidence as to what she told him was rather “thin” particularly when compared with the detail she descended into in respect of various other discussions she had been party to over the same timeframe. It was suggested to her that “reminding” Mr T of the Deed was akin to “lying” given her case that it was a mere sham. She initially agreed, before quickly correcting herself and suggesting that her father “probably could have” enforced the Deed against her at that time. But at another point she said that Mr T always knew the moneys were not a loan anyway but a “gift”.
On balance I am satisfied that the Second Respondent did send a copy of the Deed to Mr T or his solicitor, and that she did represent to him/them that the Deed was legitimate. She certainly did not tell him/them that the Deed was a mere sham or that the moneys were a gift. I do not accept her evidence that Mr T positively knew the moneys to be a gift. I consider that she was dissembling in the witness box on these topics because she did not want to admit to acting dishonestly towards Mr T.
Ultimately Mr T did abandon his property claim against the Second Respondent. It is impossible to make any findings about the legal advice he received, or what exactly motivated him to abandon the claim, but on any view the Second Respondent’s decision to invoke the Deed of Loan must have been a relevant consideration. In that sense, the Deed of Loan was used to the Second Respondent’s advantage.
Notably, when the Second Respondent sold her home at U Street soon after, the Second Respondent freely applied the sale proceeds towards the purchase of another home.
‘Farm E’ is sold at a loss; spouses buy a rural property at Town AB
With no prior farming or cattle experience, the Husband was unable to conduct operations at ‘Farm E’ in an economically viable way. Ultimately he invested over $800,000 in the property before selling it at a loss in late 2002 or thereabouts. He then went on to purchase a smaller rural property at Town AB.
Second Respondent marries Mr AC; she and the Husband have a falling-out:
In 2009 the Second Respondent married Mr AC and together they purchased a home at Town AD, NSW. That same year, the Second Respondent resigned as company secretary for Ferguson Pty Ltd. In her view:
99.[Mr Ferguson] was not the most efficient farmer. He invested in an excessively large dam and expensive fencing, he over capitalised [sic] on the properties at [Town V] investing over $800,000 and [Town AB] investing over $500,000. This included the purchase of an additional fifty acres.
The Husband strongly disagreed with the Second Respondent’s decision to leave the company and told her so. But she decided to ‘stand up to him’. The Wife’s counsel Mr Mueller cross-examined the Second Respondent about her decision and its impact on their relationship:
[Ms George], at paragraph 17, that’s 1-7 on page 4, you give evidence about [Mr Ferguson] often being very opinionated on other people’s decisions. Do you see that? ---Yes.
And whether he agreed with them. This has made your relationship with [Mr Ferguson] difficult at times and has affected his relationship with his children, siblings and extended family. Do you see that? --- Yes.
And at paragraph 107, which is on page 13…do you see that? --- Yes.
You say that from 2009 until 2016, you didn’t speak to [Mr Ferguson] following your resignation from the company. He did not agree with my decision to stop working with them and therefore did not speak to me. Do you see that? --- That’s correct.
So would you agree with me that [Mr Ferguson] was a person who didn’t hold back his opinions? ---No. That’s right.
Was forthright? --- That’s right.
And he could be a dominant person, couldn’t he? --- I suppose you can say that.
And he wasn’t a person that you could stand up to easily, was he? --- No, I wouldn’t say that.
Well…he didn’t agree with your decision in 2009 to resign from the company, you would agree? --- That’s correct.
And you made a decision contrary to his wishes? --- That’s correct.
And as a consequence, there was no communication for seven years between you and your father? --- That’s correct.
And that was because he had made the decision not to speak to you any further, did he? --- It was probably a mutual decision because I was standing up to my dad.
(my emphasis)
Meanwhile the KENO winnings were being depleted. The parties sold Town AB at a loss and returned to live in the former matrimonial home. The Husband was consuming expensive alcohol consistent with his newfound lifestyle and driving expensive cars (which he would sell for a loss). Put shortly, the Husband was living in accordance with his phrase that “money was no object”.
The marriage breaks down:
In the later years of the marriage, the Husband was showing signs of dementia. By October 2018 he was only able to score 18/30 on a Mini-Mental State Examination performed by his GP. As his condition progressively deteriorated, his behaviour began to change. He became more moody and aggressive and at times paranoid.
On 12 June 2019, the Wife attended upon AE Solicitors to talk about updating the spouses’ mutual Wills. This is when the Wife says that she first discovered that the spouses no longer held title to the former matrimonial home. She instructed them to write to Mr G’s office to request information as to how that had come about. AE Solicitor’s letter to them was realistic about their expectations:
We appreciate that, given the length of time since the transaction occurred, you will likely no longer hold the file – although if you do have any documents relating to the transaction, would you kindly forward copies to us.
Notwithstanding, we would appreciate it if you would be able to telephone the writer to discuss your recollection of the transaction and, in particular, the circumstances surrounding the consideration for the transfer.[10]
The upshot was that no file remained in existence and Mr G seemingly could not give any other information. AE Solicitors were however able to obtain the relevant documents.
The Wife was clearly upset by what she considered to be the Second Respondent’s duplicity. She also observed the Husband to be very angry with the Second Respondent; he accused her of “stealing from me”. It is unclear whether his anger related to the Deed of Loan or the home transfer (or both) and in all likelihood he was himself confused and took on some of the Wife’s anger.
There followed a flurry of activity. On 9 July 2019 the spouses attended upon AE Solicitors where the Husband executed the following documents:
·an Enduring Power of Attorney in favour of the Wife (replacing the Second Respondent);[11]
·an Appointment of Enduring Guardian in favour of the Wife (replacing the Second Respondent);[12]
·an updated Will.
Given his dementia, the Husband’s capacity to execute these documents seems to have been questionable at best.[13]
Pursuant to the Enduring Power of Attorney, the Wife instructed AE Solicitors to write to the Second Respondent on 8 August 2019 demanding repayment of the $280,000 for the first time in nineteen (19) years. Ominously, the letter concluded with this sentence:
“Our clients have also expressed concerns to us about the use of their funds by you over a lengthy period of time and we are seeking further instructions in this regard.”
The letter enclosed a copy of the 2001 Deed. Referring to the spouses’ right of exclusive possession pursuant to clauses 2 and 3, the letter warned the Second Respondent not to interfere with that or else:
“we anticipate our clients will seek further advice in relation to the possibility of having the unit transferred back to them for your failure to comply with the terms of the Deed.”
Not having spoken with the Husband for a few months, the letter came as a rude shock to the Second Respondent. Seemingly without the benefit of legal advice, she responded in a long and indignant letter on 14 August 2019. In relation to the debt claim she said:
“It was mutually agreed at the time, since I was in an unstable relationship, that to protect my asset for the future benefit of my own children, we would establish an enduring loan agreement to be called in the event that my partner at that time or any future partner made any claims to the property, thus ensuring no benefit of the property could be taken from me. Neither of my brothers were required to enter into any such agreement as they were both married and in secure relationships.
I have been married now for 10 years and my home life and relationships are quite stable so I fail to understand why this Deed is being called for satisfaction. Hence the reason I am perplexed with these actions and the obvious consequences when he should remember the obvious motivation behind the enduring loan agreement in the first place. It was not intended to be called at a whim or what seems to be mischief on his part just to make my life difficult for whatever reason that is not apparent to me. I am not in any position to satisfy this demand to pay $280,000 within 28 days and have no intention of doing so. It was a gift, in the same way as is [sic] was for all the siblings.” [14]
Counsel for the Wife understandably seized upon the reference to the “enduring loan agreement”, suggesting that the letter constituted an admission by the Second Respondent that the moneys were in fact loaned to her and that the timeframe for repayment was open-ended (thus avoiding limitation issues). But the letter does go on to say – quite clearly - that the moneys were a gift. Ultimately nothing turns on the wording of the letter.
As for the transfer of the former matrimonial home, the Second Respondent wrote:
“I am somewhat bewildered at the provocation of my father’s actions in this instance. There have been no “issues” whatever either in the past or recently that would give rise to concerns that my father and his wife have exclusive and unfettered occupation of the premises situated a [B Street, Town C]. This has never been in question. My father’s naturally suspicious nature prompted the ownership structure and he did not wish my brothers to have access to the property at any time, particularly prior to he and [Ms Ferguson’s] deaths where they could have them evicted and the property sold. He decided that the purchase of the property in my name would ensure they always had a place to live and the property would then become my inheritance when they eventually died.
I have done or said nothing that would give them cause to feel this arrangement would as likely change. I would certainly not be prepared to sign transfer of title to my father whilst I have questions regarding his mental capacity.”
(my emphasis)
In the meantime the Husband’s health continued to deteriorate. He started behaving aggressively towards the Wife at home before suffering a stroke and ended up in hospital.
The Second Respondent visited him there where she found him shaken, confused and distraught.
On 9 October 2019, AE Solicitors lodged a caveat over the former matrimonial home to protect the spouses’ life tenancy.[15] That same month, pursuant to the Enduring Power of Attorney the Wife seems to have transferred a Motor Vehicle 1 and a Motor Vehicle 2 out of the Husband’s name and into her own name.
When the Husband was discharged from hospital, his behaviour at home further deteriorated. He was quite aggressive towards the Wife, accusing her of being in a relationship with a family friend, Mr AF. (The Second Respondent believed this also, and likely told him as much.) In November 2019 the Wife had to call Police after the Husband assaulted her; he was taken away by ambulance and hospitalised again which was effectively when the marriage broke down. Thereafter he was placed full-time into an aged care facility; the Wife remained in the home.
On 11 December 2019, TAG obtained a Financial Management Order from NCAT in relation to the Husband. Five (5) days later, the Wife transferred $41,000 from a joint account into an account in her own name.
A family feud was now in full swing, with the Wife accusing the Second Respondent of having stolen the home from them and wrongfully retained the $280,000 and the Second Respondent (and her siblings) accusing the Wife (and Mr AF) of stealing the Husband’s property including the motor vehicles referred to above as well as a safe deposit box the Husband had apparently been keeping at the bank.
On Boxing Day 2019, the Wife was at home when the Second Respondent, her husband and her son Mr AG, Mr J and his wife and children attended the home uninvited. It was a confronting scene. The Second Respondent began rifling through the home looking for paperwork and taking some of it. The Wife went to call Police; Mr J grabbed her hand and took the phone away from her. Amongst other things, he threatened to put the Wife in the boot of the car. A locksmith arrived with the Husband, who accused Mr AF of stealing all his money and threatened the Wife with gaol if he found out they were lying. Afterwards the Wife applied for an AVO to protect herself from both the Second Respondent and Mr J.
On 15 June 2020, the Wife brought these proceedings.
ANALYSIS OF THE DEBT CLAIM FOR $280,000:
The Husband advanced these moneys to the Second Respondent by way of gift. There was no expectation that the moneys were to be repaid. The Deed of Loan was an artifice, a mere sham entered into for asset protection purposes. Accordingly the debt claim must fail. In so finding I do not draw any adverse inferences against the Wife for bringing the claim. She was not knowingly being opportunistic; the transaction occurred a long time ago, she had not been present at Mr G’s office when the Deed of Loan was drawn, and I consider that she acted in good faith in pursuing the claim. (TAG also pursued the debt in good faith.)
In the circumstances the limitation issue falls away. For completeness, equity does not assist the spouses either.
THE WIFE’S SECTION 106B CLAIM:
Relevantly, s 106B of the Family Law Act 1975 provides as follows:
SECTION 106B TRANSACTIONS TO DEFEAT CLAIMS
106B(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 and 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.
…
106B(3)The court must have regard to the interests of, and shall make any order proper for the protection of, a bona fide purchaser or other person interested.
106B(4)A party or a person acting on 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.
…
106B(5) In this section:
disposition includes:
(a) a sale or gift…
Its statutory predecessor, s 85(1) of the Act, is in identical terms to the above. The s 85 jurisprudence therefore remains relevant to s 106B.
The jurisprudence clearly establishes that the applicant, in this case the Wife, carries the onus of proof throughout. The use of the word “may” in s 106B(1) means that relief is discretionary. The Wife must therefore establish all of the necessary elements of s 106B(1) so as to enliven the Court’s jurisdiction and she must then persuade the Court to exercise the discretion in her favour having regard to all relevant circumstances.
JURISDICTIONAL ELEMENTS OF SECTION 106B(1)
“Proceedings under this Act”:
The Wife having commenced Part VIII proceedings, this element is clearly satisfied.
“The making of an instrument or disposition”:
An instrument or disposition may be any one of a series of transactions by which a disposition is carried out: In the marriage of Heath & Heath (No.2) (1984) FLC 91-517, applied by the Full Court in A.N.Z. Banking Group Ltd v. Harper & Ors (1988) FLC 91-938.
The Deed, the Transfer document and any necessary related documents (for instance documents prepared for stamp duty declarations etc) fall within the broad definition of a “disposition” in s106B(5).
“By or on behalf of, or by direction and in the interest of, a party”:
Somewhat unusually, the relevant documents were executed by both spouses, not just one. Is this fatal to the Wife’s case, as the Husband suggested?
In my view the answer is no; this element is satisfied by the fact of the Husband’s actions alone. That both spouses executed the documents may however be relevant to the exercise of the discretion, to which I will turn later.
“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”:
I begin by observing that it is not sufficient to show that the disposition is intended, or likely, to defeat a claim. What the section requires is proof that the instrument or disposition is intended, or likely, to defeat an existing or anticipated order: A.N.Z. Banking Group Ltd v. Harper (supra).
It is common ground that there was no ‘existing order’ at the time of the transfer. The Wife’s argument is that the Husband actually ‘anticipated’ an order being made in future family law proceedings in respect of the home. Indeed on her case this was the basis for the transfer; she therefore contends that the disposition falls within s 106B(1) as it was “made to defeat…an anticipated order”.
The Second Respondent contends that the Husband’s subjective ‘anticipation’ of an order does not make it an ‘anticipated’ order within the meaning of the section. She says that the jurisprudence establishes that the test for an ‘anticipated’ order is an entirely objective one and that the Wife’s case falls well short of satisfying that test. TAG agrees, their counsel colourfully submitting that the Wife’s case “does not come within a bull’s roar” of engaging s 106B(1).
I turn then to the jurisprudence concerning an ‘anticipated’ order.
In Pflugradt & Pflugradt (1981) FLC 91-052, Elliott J was asked to set aside a post-separation trust deed whereby a husband and his father declared that their joint title to a home was now held by them on trust for the child of the marriage. At that time the husband owed the wife substantial maintenance arrears and the home was the husband’s only asset. His Honour expressed the test for an ‘anticipated order’ in these terms:
In the instant matter before me, it is not a question of whether the husband expected or foresaw a subsequent property application by the wife and “anticipated” an order being made, but whether considering all of the circumstances at the time of the disposition such an application by her at some time, with a consequent order, was objectively to be foreseen or to be expected by him as being likely or reasonably probable.
His Honour’s reasoning was that:
As in the law of torts, I consider that the elements of expectation or foreseeability in an ‘anticipated order’ must be considered on an objective rather than a subjective basis – to hold otherwise would be to favour the determinedly ignorant or the blissfully unaware; ‘anticipated’ as used in sec. 85 is an adjective, not a verb. It is therefore descriptive of the order referred to. It requires the order to have the quality of being ‘anticipated’. By whom? The law’s answer must be by a reasonable disponer, at the time of the disposition, properly considering all of the circumstances of the case. [16]
His Honour considered it reasonably foreseeable at the time of the disposition that the wife would bring property proceedings and/or enforcement proceedings against the husband which the trust disposition would likely defeat. Thus the disposition was set aside.
Pflugradt’s case (supra) was referred to with approval by the Full Court of the Family Court in Holley & Holley (1982) FLC 91-257. Referring to an ‘existing or anticipated’ order, Evatt CJ, Marshall & Strauss JJ said:
Where there is an existing order, the disponer is aware of its nature and content. There is a good deal to be said for the view, that “an anticipated order” is one of a kind and relating to matters which, at least on an objective test, a reasonable disponer would have in contemplation or foresee when the disposition is made.[17]
(my emphasis)
In Holley’s case (supra) the relevant dispositions were made pursuant to a Deed of Assignment in the context of bankruptcy proceedings; the wife was knowingly involved in the transactions. There was no evidence that the husband anticipated, much less intended to defeat, any order in the wife’s favour in respect of the relevant property.
In Toohey & Toohey (1991) FLC 92-244, McCall J was asked by the wife to set aside a transaction entered into some six (6) years prior to proceedings and at a time when the parties were happily married. There was no evidence that the Husband actually anticipated an order in respect of the relevant property or that he acted with the intention of defeating it. His Honour applied the objective test and the wife’s case failed.
In Gelley & Gelley (1992) FLC 92-291, the wife asked Treyvaud J to set aside some family trust distributions made to the spouses’ adult children made at a time when the parties were separated and about six (6) months prior to the wife commencing s 79 proceedings. The purpose of the family trusts in that case was not to accumulate income, but rather to distribute income for the beneficiaries in a tax-effective way. The husband therefore argued that the trust distributions were entirely normal transactions. There was no evidence that the husband in that case actually anticipated the relevant order at the time or intended to defeat any such order; interestingly he chose not to give evidence and thus could not be cross-examined as to such matters. Applying an objective test, Treyvaud J concluded that the order was not ‘anticipated’ by the husband. A relevant consideration was that the trust was acting in accordance with its usual modus operandi at the time of the distributions.
In In the marriage of Hajduk & Hajduk (1993) FLC 92-383, the wife sought to set aside pre-separation property dispositions in favour of their adult child, and in favour of the husband’s adult child from an earlier marriage. Hannon J applied an objective test, holding that the applicant wife needed to establish that at the time of the transaction a reasonable man with the knowledge that the husband had at the time of the disposition would anticipate that it was likely that the wife would initiate proceedings and that the reasonable man would foresee it as likely that an order may have been made in those proceedings which was defeated by the transaction. In applying that objective test, his Honour said that the Court should consider the nature of the relationship between the spouses at the time of the impugned transaction. Again there was no evidence that the husband in that case actually anticipated an order being made in respect of the relevant properties and that he intended to defeat any such order. It was also relevant that the transfers were motivated by the spouses’ joint desire to qualify for social security benefits.
Referring to s 85(1), his Honour did however go on to say at 79,961:
In proceedings under the Act in which it is sought to set aside a transaction on the ground that the instrument or disposition in question which is made or proposed to be made, the court may set aside that transaction if it is satisfied that it is likely to defeat an existing or anticipated order, irrespective of the intention of the disponer. Of course if there was established an actual intent to defeat an existing or anticipated order that would be the end of the matter.
(my emphasis)
In Kennon v Spry (2008) 238 CLR 366, the relevant dispositions occurred some four (4) years before separation – but at a time when the marriage was in difficulty and where the Husband positively intended by the transfer to prevent the wife from accessing the relevant assets in the event of separation. The trial Judge, Strickland J, applied an objective test, setting the dispositions aside.
In Ding & Ding [2017] FamCA 863, the trial Judge (Cronin J) applied an objective test for an ‘anticipated order’ and in that context considered the state of the marriage at the time of the disposition. His Honour observed that “when a marriage is in difficulty, it is at least reasonable to contemplate the possibility of its ending.” His Honour observed that while marital happiness or otherwise is not the test for an ‘anticipated’ order under s 106B(1), it “usually sheds light on whether one party (in this case the husband) was taking steps to avoid an anticipated order.” The Wife failed in that case because nothing in the evidence supported Cronin J drawing such a conclusion.[18]
His Honour’s decision was later reversed by the Full Court[19] on the basis of an error concerning the application of legal professional privilege to some of the evidence. In the circumstances the Full Court made only limited observations about the Wife’s s 106B claim (footnotes omitted):
[11]Fundamental to the wife’s claims was her assertion that, despite the subsistence of the parties’ relationship for over two years subsequent to the transactions, the marriage had been unhappy since [2 or 3 years earlier]. That assertion was denied by the husband. The resolution of that issue was central to the wife’s s 106B case. That case turned on her assertion that the husband alienated property interests to members of his family in anticipation of the proceedings for property settlement, and orders within those proceeding, with the intention of defeating any claim she may have or, irrespective of that intention, which had that effect.
[69]... The wife apparently asserted within that claim an intention on the part of the husband, and perhaps members of his family acting in conjunction with him, to defeat what she asserted was an anticipated s 79 order. However, it was not necessary for her to prove that intention; it was sufficient if the impugned transactions had that effect. While the wife confronted, on the s 106B case she apparently sought to adduce, forensic difficulties in proving the husband’s intention behind the impugned transactions, her claim did not depend upon the same. However, her claim would fail if she could not prove that, irrespective of any such intention, the impugned transactions were made in anticipationof relevant orders in her favour.
[82]As we have said, the wife did not need to prove any intention on the part of the husband to sustain her s 106B claim, much less any fraudulent intention. She did, though, need to prove that orders in relevant proceedings were “anticipated” notwithstanding the time gap between the impugned transactions and separation…
The Second Respondent suggested that the last sentence of paragraph [69] of the Full Court’s decision in Ding’s case (supra) meant that even where an applicant could prove that a disponer had an actual intention to defeat an anticipated order, the Court still had to decide whether or not the order was ‘anticipated’ by reference to the objective test. I respectfully disagree that this is what the Full Court meant. In my view their Honours were not addressing the wife’s primary case (intentional defeat of an order) but rather her alternative case (whether the disposition was likely to defeat an anticipated order “irrespective of intention”).
In my respectful view, nothing in the authorities requires me to apply the objective test for an ‘anticipated’ order where as in this case the Husband actually ‘anticipated’ an order and where from his perspective the transfer was intended (at least in part) to defeat such an order. In my view, where the disponer actually anticipated an order at the relevant time, there is no need to deploy a further objective test as to whether or not it was an ‘anticipated’ order from the perspective of the hypothetical reasonable disponer. In my respectful view, a plain reading of s 106B(1) does not require the addition of this further objective layer.
The facts of this case are somewhat unusual in that, as the Second Respondent said, the Husband was suspicious by nature. He had also had an unhappy past experience with Town K. Put shortly, he was the very opposite of the “determinedly ignorant” or “blissfully unaware” disponer referred to by Elliott in Pflugradt’s case (supra). The objective test rightly holds that category of disponer to a higher standard. But it would be a curious result if a disponer who actually ‘anticipated’ an order being made, and acted intentionally so as to defeat it, could then evade s 106B(1) by pointing not to their own state of mind but the state of mind of the so-called reasonable disponer. I do not consider such a result to be mandated by the jurisprudence, properly considered.
In my view, the Wife has established that an order for the transfer of the home to her was an ‘anticipated’ order at the time of the disposition in the sense that the Husband actually ‘anticipated’ it.
Did the disposition “defeat” the anticipated order as required by s 106B(1)?
I am satisfied that it did. It placed the home entirely out of the reach of the Wife. It did so in circumstances where that the Wife has a legitimate s 79 claim in respect of the home having regard to the totality of her contributions during the marriage and relevant s 75(2) considerations. (So too does the Husband.) Moreover, the home has a value of $1,000,000 in circumstances where the combined total of all the other identifiable matrimonial assets is in the range of $556,766 - $605,766 calculated as follows:
Husband
·OPC trust account $ 16,911
·Super Fund AH Allocated Super $ 230,587
·Super Fund AJ Limited Annuity $ 68,820
·CBA account (H) $ 3,922
·Sub-total: $ 320,240
·Liability – nursing home accommodation fees $ 100,712
Net assets $ 219,528
(NB - The figure for the nursing home accommodation fees is as at 8 April 2022. It increases by $179 per day.)
Wife
·Super Fund AJ Limited Annuity $ 61,057
·Super Fund AH State Pension $ 201,181
·Motor Vehicle 1 $ 15,000 - $ 24,000
·Motor Vehicle 2 $ 60,000 - $100,000
Net assets $ 337,238 - $386,238
(NB - The Wife offers the lower range of vehicle estimates; the Husband offers the higher range.)
Joint assets
·Ferguson Pty Ltd $ Unknown but seemingly nominal (?)
Given the value of the home, its disposition therefore defeats, or is likely to defeat, the order that would otherwise be made in the Wife’s favour.
EXERCISING THE DISCRETION IN SECTION 106B
The Wife having satisfied the various jurisdictional elements of s 106B(1), I turn now to the competing discretionary considerations.
A strong factor militating against the granting of relief is the fact that the transfer took place in 2001, a long time ago. In Whitaker & Whitaker (1980) FLC 90-813, Nygh J said that the former s 85:
is not a provision which enables a party long after the event to upset past transactions because the present funds or resources of the respondent turn out to be insufficient. Such an interpretation would mean that any transaction made at the time by the respondent could subsequently be set aside if at any future time the assets of the respondent were insufficient to meet the demands of an order. A more reasonable interpretation is that the disposition must be shown to have the direct effect or the likely direct effect of defeating an existing or anticipated order in the sense that if the disposition had not taken place the order would have been effective.
Delay by and of itself is a significant consideration here, but in my view the weight to be attached to that delay must depend upon the Court’s findings as to the Wife’s state of mind at the time of the disposition – particularly her knowledge and understanding of what she was executing and her intentions. It is convenient at this juncture to address those factual disputes.
The evidence points in opposing directions. As to the Second Respondent’s contention that the transfer was deliberate and designed to protect against estate claims, it is true that the spouses had somewhat difficult relationships with the other adult children. Their mutual Wills clearly anticipated, and made provision to defend, future litigation which the children may have brought against their estate/s. Superficially, transferring the home to the Second Respondent inter vivos may look like a logical decision.
But to do so would in fact have been quite illogical, even inexplicable. If it was true that the Husband’s (and Wife’s) intention was to avoid estate claims, then the transfer was a blunt and self-defeating way to go about it. It left them with a greatly reduced interest in their own home, effectively vesting its equity in the Second Respondent and thus potentially leaving them vulnerable and beholden to the Second Respondent during their lifetimes. Moreover, the Wills had already set aside an estate “fighting fund” so there was no objective need for the spouses to put themselves into that greatly disadvantaged position just to protect the Second Respondent’s entitlements after the spouses died.
In her letter to AE Solicitors, the Second Respondent separately asserted that the transfer was to prevent her brothers from “evicting” the spouses from their home during their lifetimes. Yet the spouses had indefeasible legal title to the home. How could they possibly have been evicted by the other adult children? How could their ‘sense of security’ over their own home be improved by reducing their legal and equitable interest in the home to a life tenancy?
Even making allowances for the Husband’s naturally suspicious nature, the transfer to the Second Respondent made no sense if its goal was to protect against estate claims or possible eviction at the suit of the adult children. It does however make sense in the context of defeating an anticipated order in the Wife’s favour at a future time.
Was the Wife aware that the home had been transferred? According to the Second Respondent, the Wife openly acknowledged it in the presence of friends of hers:
74.Sometime after the deed was signed, [Ms Ferguson] spoke to me of the [B Street, Town C] property using words to the effect: “This is your house when we die. This is your house, [Ms George]. But you cannot have the red car.” I also recall my friend [Ms AK] going to the [B Street, Town C] property and [Ms Ferguson] saying to her words to the effect: “All of this will be [Ms George’s] she will get all this.” Just about every one of my friends who went to the [B Street, Town C] property were told the same thing by [Ms Ferguson], that the property was mine and it would go to me after [Mr Ferguson] and [Ms Ferguson] died.
The Wife denied ever making such statements and the Second Respondent failed to call a single alleged witness to corroborate it. This was despite the fact that such witnesses were apparently her “friends” and presumably readily available to give evidence. When asked why she had failed to produce a single witness, the Second Respondent said she had been told “it wasn’t needed”. I do not accept the Second Respondent’s evidence and prefer the Wife’s evidence that no such conversations ever occurred.
I accept the Wife’s evidence as to the events surrounding the execution of the Deed and related documents. I accept her evidence that the Husband had always managed their finances and that she trusted him implicitly. I accept her evidence that he told her that the documents were to “prevent the Government getting the house” and that she signed the documents because the Husband asked her to do so. She did not understand the true effect of the documents.
Country L is the Wife’s first language, English her second. Although the Second Respondent said that the Wife “speaks English well” [20] I accept the Wife’s evidence that:
2.I am not good at English. I have difficulty with English. I learnt English from a little dictionary and have never had any significant instruction in the English language. I comprehend spoken English quite well now but when I have a written document in front of me I often refer to my [Country L]/English dictionary if there is a word I don’t understand. I still use my [Country L] /English dictionary. My solicitor read this affidavit to me.
In the witness box the Wife spoke with a heavy Country L accent throughout. While she was able to answer responsively to questions asked of her, I accept that her capacity to comprehend written English is inferior. Moreover, on any reasonable view the Deed contained substantial “legalese”. Put shortly, she was at a considerable disadvantage compared to the Husband.
Does this mean that Mr G seemingly failed to give the Wife appropriate advice about the effect of the documents she was signing?
Context is important. The Husband had always managed the spouses’ finances and the Wife trusted him implicitly. He made the arrangements to attend upon Mr G and provided the instructions. He had misled the Wife about the purpose of the documents.
The Husband, the Wife and the Second Respondent presented to Mr G as a ‘united front’ and the documents appeared to give effect to an agreed arrangement. Unlike the Husband and the Second Respondent, the Wife had not turned her mind to the possibility of a marital separation. This was not a topic that would have been raised with Mr G. There is no suggestion that Mr G told any of them to seek independent advice about the documents. He would surely have done so had he known that the Husband and the Second Respondent were intending by the documents to place the home out of the Wife’s reach in the event of a marital separation.
In the end I am satisfied that Mr G would have given advice to the Wife about the effect of the documents but that the Wife did not properly comprehend that advice and in any event the advice was insufficient to properly protect her interests in the situation the Wife was in. In saying so, I do not want to be seen as unduly critical of Mr G; he was apparently acting on joint instructions and the Wife admitted that she did not ask him any specific questions. Given the context, Mr G was not “on notice” that the Wife was anything other than a consenting party or that there was any ulterior purpose to the documents.
Even if the Wife genuinely understood that the property was being transferred to the Second Respondent in return for a life interest - which I do not accept - she certainly did not know that the home was being moved out of her reach in the event of a marital separation. Such a thought would not have occurred to her.
While the Wife ultimately abandoned any equitable claim/s pursuant to the Court’s accrued jurisdiction, and while the Second Respondent’s counsel understandably did not want to be drawn into such arguments, I am nonetheless satisfied that in all the circumstances the Husband exercised undue influence over the Wife who did not fully understand the effect of the documents. Moreover, the disposition was unconscionable in that the Wife was at a special disadvantage.[21]
In the circumstances, the omission of the home from the 2002 Mutual Wills does not satisfy me that the Wife was aware of, or on notice of, the transfer. I accept her evidence that the Husband told her to sign the Will as “there is nothing wrong with it.” Upon seeking legal advice from Mr X in August 2019, the Wife certainly acted as though she had not understood, or consented to, the transfer of the home. It was evident in the witness box that she fervently believed that she had been misled.
These discretionary considerations weigh heavily in favour of granting relief notwithstanding the delay.
Section 106B(3) requires the Court to have regard to the interests of a bona fide purchaser or other person interested. While the Second Respondent is clearly an interested party, she received title to the home for no consideration. She was not required to even pay the stamp duty. Moreover, the Deed required the spouses to indemnify her in respect of liabilities for the property and there is no suggestion that she has ever had to meet such expenses.
In short, the Second Respondent is not a “bona fide” purchaser whose interests s 106B requires a Court to consider. From an equitable perspective, she is no more than a volunteer. Acquisition of title to the home was a windfall gain for her and was manifestly contrary to the interests of both spouses.
Weighing all these considerations collectively, I am persuaded that the discretion in s 106B(1) should be exercised in the Wife’s favour.
CONCLUSION & ORDERS:
Curiously, the Wife’s formal application sought the transfer of the home to the Wife. Such an outcome is not authorised by s 106B; if a disposition is set aside it follows that the parties must (as far as possible) be placed in the positions that they would have been in but for the disposition. In short, the Wife’s success means that title will revert to the spouses jointly. What adjustments (if any) should then be made to their respective interests must be determined in the s 79 proceedings.
For these Reasons, I make the Orders set out at the commencement herein.
I certify that the preceding one hundred and fifty-eight (158) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Betts. Associate:
Dated: 7 September 2022
[1] Second Respondent’s Affidavit, paragraph 16
[2] See the Husband’s Will of 22/12/2000 which is part of exhibit 3
[3] At page 486
[4] The August 2019 demand was made by the Wife on his behalf pursuant to an Enduring Power of Attorney.
[5] Exhibit 3
[6] Second Respondent’s Affidavit, paragraph 98
[7] Exhibit 8
[8] Exhibit 4
[9] Exhibit 1
[10] Exhibit 2
[11] Exhibit 5
[12] Exhibit 6
[13] See the Geriatrician’s report which is annexure “F” to the Affidavit of Jaimi-Lee Gardiner
[14] Exhibit 10
[15] Exhibit 7
[16] At 76,429
[17] At 77,440
[18] See [195] and [199] of the Reasons for Judgment
[19] Ding & Ding [2018] FAMCAFC 35 (Murphy, Kent & O’Brien JJ)
[20] Second Respondent’s Affidavit, paragraph 3
[21] See the High Court’s decision in Thorne & Kennedy (2017) 263 CLR 85
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