Grange & Grange and Ors

[2019] FamCAFC 205

FAMILY COURT OF AUSTRALIA

GRANGE & GRANGE AND ORS [2019] FamCAFC 205

FAMILY LAW – APPEAL – PROPERTY – Whether the circumstances justify a finding that the third respondent held on trust the proceeds of sale of the only item of property held by the husband and wife – Whether the retention of the proceeds of sale by the third respondent was unconscionable – Whether the wife was suffering under a special disadvantage which seriously affected her ability to make a judgment as to her interests – Where the evidence does not support a finding of unconscionability – Where not being fully informed is insufficient to meet the standard of special disadvantage – Where an apparent lack of benefit is insufficient to establish unconscionability – Where there was no basis for the imposition of a constructive trust – Where there has been a completed gift of the proceeds of sale to the third respondent – Where the outcome is not the outcome contended for at the hearing by the husband but it is the inevitable legal effect – Where the third respondent will retain the proceeds of sale – Where there is then no property to be divided – Where the proceedings for property division under s 79 of the Family Law Act 1975 (Cth) must be dismissed – Appeal allowed.

FAMILY LAW – APPEAL – PROPERTY – Whether the primary judge should have considered the appellant’s claim for spousal maintenance – Where the application was recorded by the primary judge but not dealt with – Where the matter will be remitted to the Family Court of Australia for rehearing in respect to spousal maintenance.

FAMILY LAW – APPEAL – COSTS – Orders made for the provision of written submissions as to costs – If submissions are not received, then there will be no order as to costs.

Corporations Act 2001 (Cth) ch 2D, ss 181, 182
Family Law Act 1975 (Cth) s 79
Federal Proceedings (Costs) Act 1981 (Cth)

Barnes v Addy (1873) 28 LT (NS) 398
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; [1983] HCA 14
Corin v Patton (1990) 169 CLR 540; [1990] HCA 12
Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392; [2013] HCA 25
Lewis v Condon; Condon v Lewis (2013) 85 NSWLR 99; [2013] NSWCA 204
Metwally v University of Wollongong (1985) 60 ALR 68; [1985] HCA 28
Muschinski v Dodds (1985) 160 CLR 583; [1985] HCA 78
Thorne v Kennedy (2017) 263 CLR 85; [2017] HCA 49
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52
Wilton v Farnworth (1948) 76 CLR 646; [1948] HCA 20

APPELLANT: Mr Grange

FIRST RESPONDENT: Ms Grange

SECOND RESPONDENT: Ms A Grange

THIRD RESPONDENT: Ms B Grange

FILE NUMBER: ROC 580 of 2011

APPEAL NUMBER: NOA 19 of 2018

DATE DELIVERED: 7 November 2019

PLACE DELIVERED: Sydney

PLACE HEARD: Brisbane

JUDGMENT OF: Strickland, Ainslie-Wallace & Aldridge JJ

HEARING DATE: 19 June 2019

LOWER COURT JURISDICTION: Family Court of Australia

LOWER COURT JUDGMENT DATE: 30 January 2018

LOWER COURT MNC: [2018] FamCA 30

REPRESENTATION

COUNSEL FOR THE APPELLANT: Mr Fisher

COUNSEL FOR THE FIRST RESPONDENT: Mr Shoebridge

SOLICITOR FOR THE FIRST RESPONDENT: Madden Solicitors

THE SECOND RESPONDENT: In person

THE THIRD RESPONDENT: No appearance

Orders

1. The appeal be allowed.

2. The orders made on 30 January 2018 be set aside.

3. The application for property settlement orders under s 79 of the Family Law Act 1975 (Cth) be dismissed.

4. The appellant’s application for spousal maintenance be remitted to the Family Court of Australia for rehearing.

5. Any party seeking an order for the costs of the appeal is to file and serve written submissions within twenty-eight (28) days, with the opposing party to file and serve any written submissions in reply within a further fourteen (14) days. The party seeking the costs may file and serve submissions in response within a further seven (7) days.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Grange & Grange and Ors has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE

Appeal Number: NOA 19 of 2018
File Number: ROC 580 of 2011

Mr Grange

Appellant

And

Ms Grange

First Respondent

And

Ms A Grange

Second Respondent

And

Ms B Grange

Third Respondent

REASONS FOR JUDGMENT

Introduction

1. This is an appeal from final property settlement orders made by a judge of the Family Court of Australia on 30 January 2018 in proceedings between Mr Grange (“the husband”), Ms Grange (“the wife”), Ms B Grange, the husband’s mother, who we shall refer to as “Ms B” and other parties who are now not relevant.

2. Although the proceedings before the primary judge involved many complicated issues of fact, this appeal concerns just one.

3. It is relevant to record here, that of the various parties, only the wife was legally represented at trial. The parties acting for themselves, and in particular the husband, raised those many complicated issues of fact in a way that tended to obscure them, thus making the primary judge’s task very difficult.

4. The primary judge found that the only item of property held by the husband and the wife was the proceeds of sale of a business licence in the sum of at least $1,024,600 received by Ms B on or about 8 November 2008.

5. The primary judge found that Ms B held those funds on trust for the husband and the wife and made a declaration to that effect. Pursuant to s 79 of the Family Law Act1975 (Cth) (“the Act”) those funds were then ordered to be divided equally between the husband and the wife.

6. The appeal, as originally constituted, did not include Ms B as a party. On 9 July 2018, an order was made adding her as a party. She was informed of that order on 12 July 2018 (Husband’s Affidavit of Service filed 18 July 2018).

7. Ms B took the same attitude towards the appeal as she did to the primary proceedings, in that she filed no documents and did not appear at the hearing.

Background

1. The following emerges from his Honour’s reasons and would not appear to be controversial.

2. The husband’s parents owned and operated a business located on a block of land that had been acquired by G Pty Ltd in about 1965. The shareholders and directors of that company were the husband’s parents, although the husband’s father, Mr Grange Snr, held a controlling interest.

3. The property on which the business was located had a number of houses on it and various members of the extended Grange family lived there for various periods of time. This included the husband and the wife and their children.

4. Mr Grange Snr became ill and, at some time between 1995 and 1998, the husband and the wife took over the operation of the business. The owner of the business, G Pty Ltd, was voluntarily wound up in September 1998 and deregistered in March 1999, although at the time of the hearing, it was still recorded as the registered proprietor of the land on which the business was operated.

5. Mr Grange Snr died in late 1999.

6. A significant part of the dispute before the primary judge was whether the husband and the wife had acquired any interest in the business or the land on which it was operated. The wife asserted that they did and the husband denied it. Ultimately, the husband’s contentions were accepted by the primary judge and there is no challenge to that finding.

7. Be that as it may, a significant aspect of the business was a licence agreement from the State Government, which permitted it to purchase logs from the State. At least up until 1999, when it was deregistered, G Pty Ltd was the holder of the licence.

8. On 26 September 2000, G (Qld) Pty Ltd (“the company”) entered into an agreement described as “Sales Permit with the State of Queensland” (“the Sales Permit”) for the purchase of raw materials.

9. The company had been in operation since at least 2000 and was owned and controlled by the husband and the wife. It appears that this company was the vehicle through which the husband and the wife had been conducting the business from the date of its incorporation.

10. Although the husband argued that there was a mistake in the Sales Permit, in that the relevant contracting entity should have been G Pty Ltd and not the company, that contention was rejected by the primary judge. No challenge is made to that finding. Thus, the Sales Permit was owned by the company at all material times.

11. On 8 September 2008, the company entered into a contract of sale of the Sales Permit to an independent third party for the purchase price of $1,044,600 plus GST. The sale was due to settle in early November 2008. The husband, however, did not wish for the purchase price to be paid to the company but wanted the cheque for the purchase price made out to him personally. The purchaser, quite understandably, required a written authority directing the payment to someone other than the company and for that authority to be signed by both the husband and the wife (presumably because they were the directors and the only shareholders of the company).

12. On 8 November 2008, the husband and the wife each executed a document headed “Authority” and directed to their solicitors stating:

    We, [Mr Grange] and [Ms Grange], Directors of [G] (Qld) Pty Ltd, hereby authorise and request you to arrange for the proceeds of the sale from [G] (Qld) Pty Ltd to [F] Pty Ltd to be paid as follows:

    …

    (Annexure “Gfa9” to the husband’s affidavit filed 21 January 2015) (As per the original)

13. The cheques for the purchase price, which totalled $1,129,060, were directed to be paid to Ms B.

14. In addition, on the same day, the wife signed another document which said:

    I, [MS GRANGE], a Director of [G] (Qld) Pty Ltd, hereby acknowledge that I am aware of and have agreed to [G] (Qld) Pty Ltd selling its interest in [the Sales Permit] to [F] Pty Ltd under Sale Agreement dated 8 September 2008.

    (Annexure “Gfa9” to the husband’s affidavit filed 21 January 2015) (As per the original)

15. At the hearing, the parties made competing claims in respect of these documents. The husband’s contention was that at all times the ownership of the business and the land on which it was operated had been held by his parents and that on his father’s death it was held solely for the benefit of Ms B. This ownership was said to extend to the Sales Permit, which he asserted was held on trust by the company for Ms B so that when the proceeds of sale of the Sales Permit were received by her, she received them as the beneficial owner.

16. That contention was not accepted by the primary judge and again there is no challenge to that finding.

17. The wife’s contentions were that she did not know anything about the documents that she signed and that, whatever they may have been, they were signed under duress and coercion. At one stage she alleged forgery. Each of these contentions was also rejected by the primary judge and, once again, there is no challenge to those findings.

18. However, his Honour found that the wife did not have full knowledge of the facts or her legal position, and thus the transfer of the proceeds of sale of the Sales Permit to Ms B did not occur with the wife’s fully informed consent. It followed that the funds should be regarded as held by the company and as such were available for division between the husband and the wife.

19. It is not entirely clear on what legal principle his Honour acted. The wife’s claim was principally made in duress and coercion, which were rejected by the primary judge.

20. Thus, it was, that his Honour made the orders that we have described earlier.

The Appeal

1. The original Notice of Appeal filed 27 February 2018 was prepared by the husband himself and was beset with a number of obvious difficulties.

2. Shortly before the hearing of the appeal, the husband consulted a lawyer and on 11 June 2019 an Application in an Appeal was filed seeking leave to rely upon an Amended Notice of Appeal dated 11 June 2019, which raised two grounds of appeal in lieu of the 12 grounds earlier relied upon. Leave was also sought by the husband to rely on an amended Summary of Argument dated 11 June 2019.

3. When the appeal came on for hearing on 19 June 2019, counsel for the wife indicated that he was not in a position to deal with the new grounds of appeal which, admittedly, raised entirely different matters to those raised in the original Notice of Appeal filed 27 February 2018.

4. The course that followed was to permit the husband to rely on the Amended Notice of Appeal dated 11 June 2019, and the amended Summary of Argument of the same date, and to hear oral submissions from the husband’s counsel. Orders were also made on 19 June 2019 for the provision of written submissions from the wife in response together with a schedule of any costs thrown away, and written submissions from the husband in reply.

5. On 3 July 2019, the wife filed written submissions in response to the husband’s Amended Notice of Appeal and the amended Summary of Argument, together with a schedule of the costs incurred as a consequence of the receipt by this Court of the husband’s amended documents. The amount sought is $3,917.07.

6. On 9 July 2019, the husband filed written submissions in reply. We note that the husband did not respond to the schedule of costs thrown away.

Did the circumstances justify a finding that Ms B held the proceeds of sale of the Sales Permit on trust for the husband and the wife? (Ground 1)

1. The essence of the husband’s submissions was that there were no circumstances which justified the finding that it was unconscionable for Ms B to retain the proceeds of sale of the Sales Permit and that therefore she was holding them on trust for the company. His position was that the effect of the documents outlined above at [19] and [21] was that there had been a gift by the company to Ms B of the proceeds of sale of the Sales Permit.

2. We turn then to the primary judge’s reasons. After finding that the wife’s contentions had not been made out (largely because her evidence, like that of the husband, had not been accepted), his Honour continued:

   177.Whilst I have recorded in the foregoing some criticisms of the wife’s evidence and her version of events it need be noted that the wife, with all due respect to her, presents as not a particularly sophisticated or well educated person. Her understanding, in terms of the legal effect of matters as events unfolded, is unlikely to have been complete. There is no evidence to suggest that with knowledge that the Sales Permit had actually been issued to the company owned and controlled by the husband and wife ([G] (Qld) Pty Ltd) that the wife nevertheless was directing sales proceeds of the relevant permit to be paid to, and retained absolutely by, the husband’s mother. That is, I do not accept that this was done with full knowledge by the wife of the facts or her legal position, and thus did not occur with her fully informed consent. As but one example to illustrate this, there is no suggestion that the husband shared with the wife the letter of advice he received from [CC Lawyers] of 4 November 2008 in which it was emphasised that the sale would need to be accounted for in the books of [G] (Qld) Pty Ltd so that tax liabilities could be met. As already noted, at all material times the wife was a co-director with the husband and a co-shareholder of the company.

3. His Honour later returned to this issue and said:

   308.On my findings the funds belonged to [G] (Qld) Pty Ltd but the feature, as already referred to, that the company can reasonably be regarded as the alter ego of the husband and the wife with respect to the sales proceeds, permits the subject asset to be dealt with as an asset of the parties to the marriage…

4. This led his Honour to make the orders that we have already described above.

5. His Honour does not describe the type of trust that he found to exist, but from the declaration that it was a bare trust, and in the absence of any evidence that would support the finding of an express trust, it may be safely inferred that his Honour imposed a constructive trust.

6. In Muschinski v Dodds (1985) 160 CLR 583, Deane J (with whom Mason J agreed) said at 614:

   Viewed in its modern context, the constructive trust can properly be described as a remedial institution which equity imposes regardless of actual or presumed agreement or intention (and subsequently protects) to preclude the retention or assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principle.

7. It is necessary then to look at the findings of the primary judge to see what principle of equity or obligation was identified that led to the finding that Ms B was holding the proceeds of sale of the Sales Permit on trust for the husband and the wife. That is to say, on what basis could the retention of the proceeds of sale by Ms B be said to be unconscionable.

8. The evident basis for the primary judge’s finding was that the wife’s understanding “in terms of the legal effect of matters as events unfolded, is unlikely to have been complete”, that the documents that were signed by the wife on 8 November 2008 were not signed with “full knowledge… of the facts or her legal position” and that the direction of the funds to Ms B “did not occur with her fully informed consent” (at [177]).

9. This does not, in our opinion, establish a basis for a finding of unconscionability.

10. The starting point for discussion is that a person is ordinarily bound by the documents that they sign (Wilton v Farnworth (1948) 76 CLR 646 (“Wilton v Farnworth”). There, Latham CJ, however, accepted that gifts may take a different course saying at 649:

    A gift is not a business transaction. More particularly a gift of all or most of a man’s property is not a business transaction. Further, if a donee is the moving spirit in the transaction of gift, and the donor is of weak will or of poor mentality, a court of equity will set aside the gift unless it is shown that the donor understood the substance of what he was doing.

    (Citations omitted)

11. Nonetheless, as Latham CJ also said at 649:

    A court of equity can set aside a transaction and cancel a document on various grounds, such as fraud, undue influence, mistake, lunacy, duress, non-disclosure of material facts when there is a duty to disclose, abuse of confidential relationship, or, in some cases, failure to show that there has been no such abuse.

12. In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 (“Toll”), the High Court (Gleeson CJ, Gummow, Hayne, Callinan & Heydon JJ) said:

    45.It should not be overlooked that to sign a document known and intended to affect legal relations is an act which itself ordinarily conveys a representation to a reasonable reader of the document. The representation is that the person who signs either has read and approved the contents of the document or is willing to take the chance of being bound by those contents, as Latham CJ put it, whatever they might be. That representation is even stronger where the signature appears below a perfectly legible written request to read the document before signing it.

    46.The statements in the above authorities accord with the well-known principle stated by Scrutton LJ in L'Estrange v F Graucob Ltd ("L'Estrange v Graucob") that “[w]hen a document containing contractual terms is signed, then, in the absence of fraud, or, I will add, misrepresentation, the party signing it is bound, and it is wholly immaterial whether he has read the document or not”…

    47.The importance which, for a very long time, the common law has assigned to the act of signing is not limited to contractual documents. Wilton v Farnworth was not a contract case. The passage from the judgment of Latham CJ quoted above is preceded by a general statement that, where a man signs a document knowing that it is a legal document relating to an interest in property, he is in general bound by the act of signature. Legal instruments of various kinds take their efficacy from signature or execution. Such instruments are often signed by people who have not read and understood all their terms, but who are nevertheless committed to those terms by the act of signature or execution. It is that commitment which enables third parties to assume the legal efficacy of the instrument. To undermine that assumption would cause serious mischief.

    (Footnotes omitted)

1. There was no finding that the wife was of weak will or poor mentality. To the contrary, in the course of describing the wife’s evidence, the primary judge said:

   165.I found the wife’s evidence implying that she did not know what, if any, documents she actually signed at the time and whether she signed, unpersuasive. Likewise, I found the wife’s evidence to the effect that she attended the arranged meeting under duress or coercion unconvincing. It can safely be assumed that the wife had little enthusiasm for any interaction or meetings with the husband, but having observed the wife give evidence, I do not accept that such reservations extended to the wife signing anything at all the husband asked her to sign without the wife paying any regard to its subject matter, subsequent to her having effected a separation and putting significant distance, geographically, between herself and the husband. I am fortified in this conclusion when regard is had to the nature and content of transcripts of telephone conversations, referred to below, between the husband and the wife. The wife’s robust and forthright presentation in that setting is far removed from her portrayal of being overborne by the husband.

2. The same findings preclude setting the documents aside on the grounds of duress or coercion.

Was there another basis on which a constructive trust could be imposed?

1. A court will set aside a transaction where the person entering it was under a special disadvantage which was known or ought to have been known to the other party.

2. Mason J in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 (“Amadio”) at 462 described the principle in these terms:

   …whenever one party by reason of some condition of circumstance is placed at a special disadvantage vis-a-vis another and unfair or unconscientious advantage is then taken of the opportunity thereby created. I qualify the word "disadvantage" by the adjective "special" in order to disavow any suggestion that the principle applies whenever there is some difference in the bargaining power of the parties and in order to emphasize that the disabling condition or circumstance is one which seriously affects the ability of the innocent party to make a judgment as to his own best interests, when the other party knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party.

3. In Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392, the High Court (French CJ, Hayne, Crennan, Kiefel, Bell, Gageler & Keane JJ) at [17]–[19] spoke of a party taking “surreptitious advantage of the weakness or necessity of another” party but pointed out that evidence of loss alone is insufficient. There must be a “‘scrutiny of the exact relations… between the parties’ to determine ‘the real justice of the case’” (Citations omitted) (See also Thorne v Kennedy (2017) 263 CLR 85 (“Thorne”) at [38] per Kiefel CJ, Bell, Gageler, Keane & Edelman JJ).

4. The question is, therefore, was the wife suffering under a special disadvantage which seriously affected her ability to make a judgment as to her interests?

5. We do not consider that not being “fully informed” as described by the primary judge at [177] is sufficient to meet the standard of special disadvantage.

6. In addition to the above, the primary judge also made the following findings:

   165.I found the wife’s evidence implying that she did not know what, if any, documents she actually signed at the time and whether she signed, unpersuasive. Likewise, I found the wife’s evidence to the effect that she attended the arranged meeting under duress or coercion unconvincing. It can safely be assumed that the wife had little enthusiasm for any interaction or meetings with the husband, but having observed the wife give evidence, I do not accept that such reservations extended to the wife signing anything at all the husband asked her to sign without the wife paying any regard to its subject matter, subsequent to her having effected a separation and putting significant distance, geographically, between herself and the husband. I am fortified in this conclusion when regard is had to the nature and content of transcripts of telephone conversations, referred to below, between the husband and the wife. The wife’s robust and forthright presentation in that setting is far removed from her portrayal of being overborne by the husband.

   166.In her affidavit filed during the course of the hearing, the wife deposes to recollections, for the first time, of earlier conversations with the husband about the sale of the allocation and an attendance upon an accountant for the purpose of obtaining advice about “the best way to deal with the proceeds of sale”. She says this advice included the option to simply halve the proceeds of sale between her and the husband which would mean that the parties would only be liable to pay tax on half each. This seems highly improbable advice, given that the Sales Permit was owned by a corporate entity and any tax liability would have been that of the company. The wife says that the possibility that the proceeds of sale might be paid to [Ms B] was never raised during the meeting with the accountant.

   167.In relation to the meeting at which the documents were signed, the wife asserts that the husband contacted her and said that he was in [Z Town] (where she was then living) and wanted to take the children who were then in the wife’s care. She says she agreed to meet at a coffee shop but did not take the children with her. She says while at the coffee shop, the husband “required” her to sign documents relating to the sale of the allotment and told her that there would be serious financial consequences if she did not sign the documents. She continues that there were no other adults at the table when she signed the documents and no justice of the peace. She asserts she signed the document without reading it for fear of angering the husband. She positively asserts that the signature on the document authorising the sale of the Sales Permit is not hers and expresses doubt about the signature on the document authorising the distribution of the proceeds of sale.

   168.The wife conceded during cross-examination that:

   a)The possibility of selling the allocation had been raised prior to the parties’ separation;

   b)She gave variable evidence concerning whether the husband gave her advance notice of the meeting or whether he simply showed up;

   c)The signature on the second document authorising the sale “could be” her signature;

   d)It is possible she signed the documents in the presence of a justice of the peace but doesn’t remember;

   e)During a telephone call prior to the husband travelling to [Z Town] to have the documents signed, the wife asked the husband to bring her a car and various other personal items from the [S] property; (unlike in her trial affidavit where it is implied this was an incentive);

   f)That when she records that “[Mr Grange] contacted me and said that he was in [Z Town] and was wanting to take the children…” was the husband “asking in … the way [he] ask[s]”;

   g)It was “quite possible” she had forgotten that [Ms A] was also in attendance on the visit to [Z Town];

   h)It was also “quite possible” that she had signed the documents in front of a justice of the peace in the presence of the husband, [Ms A] and [Ms B];

   i)The wife’s reference to signing the documents under duress was intended to be a reference to the husband telling her of a potential risk of breach of contract.

   169. I do not accept the wife’s evidence that the first she learned that these proceeds of sale had been paid to [Ms B] was when her solicitors obtained the file from [CC Lawyers], because of the content of a number of transcripts of telephone calls the husband had with the wife and children post-separation as annexed to the husband’s material. In a conversation as early after the sale of the Sales Permit as 20 May 2009, the wife makes specific reference to the money “Nana” got from the allocation and that those funds would be “quite sufficient” to pay for a house for each of the remaining children.

   (Footnotes omitted)

7. It is difficult to see how these findings can establish a claim of unconscionable conduct. The wife did not establish that she was overborne by the husband. Further, an admission by the wife that she intended or, at least, accepted that Ms B was to receive the proceeds of sale of the Sales Permit was recorded at [169].

8. It follows that, although it can be accepted that the wife effectively gave away half of the proceeds of sale of the Sales Permit with no apparent benefit to her (other than perhaps each of the children getting a house, which, of course may be a sufficient benefit in itself), she was entitled to do so. The apparent lack of benefit is, of itself, insufficient to establish unconscionability.

9. We are conscious that in Thorne the plurality said:

   41.In any case where a transaction is sought to be impugned by the operation of vitiating factors such as duress, undue influence, or unconscionable conduct, it is necessary for a trial judge to conduct a “close consideration of the facts ... in order to determine whether a claim to relief has been established”. On appeal, it is also essential for the appellate court to scrutinise the trial judge's findings and assess any challenge to the trial judge's conclusions in light of the advantages enjoyed by that judge.

   (Footnote omitted)

10. Taking these matters into account, and applying the caution described above, we conclude that the evidence cannot support a finding of unconscionability.

11. The only illustration of material not being received by the wife identified by the primary judge, was the letter of advice from CC Lawyers dated 4 November 2008, which emphasised that whatever occurred, the sale would need to be recognised in the books of the company for the purpose of meeting any tax liabilities. There is no evidence to suggest that this information would have been material to the wife’s decision to sign the documents. The wife did not suggest that she should have been given any other material or information.

12. It was for the wife to demonstrate that there were circumstances which vitiated her signing of the documents. The fact that she lacked full knowledge of the facts or her legal position and that she agreed to sign the documents but did not give “her fully informed consent” (at [177]) is insufficient, particularly in the light of the other matters noted. There was no evidence that the wife was subject to a special disadvantage of which the husband knew or ought to have known. It follows that there was no basis for the imposition of a constructive trust.

13. The wife submitted that “it is not the intention of the High Court through decisions such as Toll to impose upon parties to personal arrangements the same strict rules that it has applied in business contracts” (Wife’s written submissions filed 3 July 2019, paragraph 43). An immediate difficulty with this submission is that the reasoning in Wilton v Farnworth extends beyond business contracts and was adopted in an unqualified manner in Toll. Another difficulty is that the submissions do not identify what principles apply to personal arrangements, as opposed to business arrangements, or where those principles might be found.

14. Finally, this was not a personal arrangement. The independent purchaser of the Sales Permit required a written authority signed by the husband and the wife, with their signatures independently witnessed by a Justice of the Peace, before it would pay the purchase price to anyone other than the company. It was therefore in significant respects a business document drafted by, and for the benefit of, the purchaser and one which was attended with some formality.

15. It follows that there was no basis for the primary judge’s conclusion that the proceeds of sale were held by Ms B on constructive trust for the husband and wife.

What was the effect of the written authority?

1. Counsel for the wife submitted that unconscionability was not the only basis on which the transfer could be set aside and that the written authority did not have the effect of giving Ms B the proceeds of sale of the Sales Permit.

2. The wife contended that we should find that the written authority directing the purchaser to pay Ms B, did not vest the beneficial ownership of the funds in Ms B, because it does not expressly say so. That submission is rejected because property does not consist of two separate bundles of property – the legal title and the beneficial title, which must be separately transferred. In the absence of an agreement or circumstances that indicate differently, a transfer of the legal title effects a transfer of the complete title.

Was the written authority a sham?

1. The wife submitted that we should find that the arrangement was a sham and that it was the husband’s intention that Ms B would hold the proceeds of sale of the Sales Permit for him.

2. A sham is found only in exceptional circumstances. In Lewis v Condon; Condon v Lewis (2013) 85 NSWLR 99, Leeming J (with whom McColl JA and Sackville AJA agreed) said:

   60.Basic to the legal notion of sham is that it is a confined and exceptional aspect of the process of giving legal meaning to a document, as Professor Conaglen has pointed out (“Sham Trusts” (2008) 67 Cambridge Law Journal 176 at 206):

   “The relevance of the sham doctrine, and the difference between it and normal processes of construction, lies in the fact that it justifies the court in ignoring (as opposed to construing) the usual primary material regarding that transaction, and focusing its attention instead on all other material factors which indicate the arrangement that the parties in fact intended.”

   61.That echoes the words of Windeyer J in Scott v Commissioner of Taxation (Cth) (No 2)(1966) 40 ALJR 265 at 279:

   “The difficult and debatable philosophic questions of the meaning and relationship of reality, substance and form are for the purposes of our law generally resolved by asking did the parties who entered into the ostensible transaction mean it to be in truth their transaction, or did they mean it to be, and in fact use it as, merely a disguise, a facade, a sham, a false front ... concealing their real transaction.”

   62.The sham doctrine is thus one of those relatively rare doctrines in the law where legal meaning is given to a document by reference to a subjective intention. Other examples are a plea of non est factum at law and a claim for rectification in equity. All these doctrines “must necessarily be kept within narrow limits”, for all subtract from the objective theory of contractual obligation, and if unchecked would cause “serious mischief”: see Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at [46]-[47]. This has long been the law: see for example Jordan CJ’s reasons in Perpetual Trustee Co (Ltd) v Bligh(1940) 38 SR NSW 33 at 39-40. In all these areas, strong evidence is required in order to displace the orthodox approach to construction. Hence the “heavy onus” that must be discharged by the plaintiff in a non est factum case (Petelin v Cullen(1975) 132 CLR 355 at 360) and the need for “clear and convincing proof” in a rectification suit (Franklins Pty Ltd v Metcash Pty Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603 at [451]-[460]).

   63.Because a finding of sham requires a finding of an intent to deceive, considerations associated with Briginshaw v Briginshaw(1938) 60 CLR 336 require a cautious approach: Raftland Pty Ltd v Commission of Taxation at [36]. Thus there is a “strong and natural presumption against holding a provision or a document a sham”: National Westminster Bank plc v Jones[2001] 1 BCLC 98 at [59] (Neuberger J). “A court will only look behind a transaction’s ostensible validity if there is a good reason to do so, and ‘good reason’ is a high threshold, since a premium is placed on commercial certainty”: Official Assignee v Wilson[2007] NZCA 122; [2008] 3 NZLR 45 at [52] (Robertson and O’Regan JJ). Lockhart J referred to “a strong finding, and one which cannot be made if another inference is at least equally open” in Sharrment Pty Ltd v Official Trustee in Bankruptcy at 461.

3. Of course, the wife was party to the written authority directing the payment of the proceeds of sale of the Sales Permit to Ms B, and it was not apparently her intention that the funds would end up solely in the hands of the husband. The argument that the parties to the transaction intended it to be something other than that shown in the documents thus falls at the first hurdle. The argument also lacks any support from the evidence or the findings of the primary judge.

Was the giving of the authority in breach of the parties’ duty to the company?

1. Finally, the wife submitted that the actions of the husband and the wife in directing the company’s funds to Ms B was in breach of their duty as directors of the company under ch 2D of the Corporations Act 2001 (Cth) (“the Corporations Act”) and that, therefore, the funds remained with it.

2. Let it be assumed for the moment that the husband, at least, improperly discharged his duty as a director by directing the proceeds of sale of the Sales Permit to Ms B, in that he did not act in good faith and for a proper purpose, or improperly used his position to gain an advantage for someone other than the company (therefore, in breach of s 181 and s 182 of the Corporations Act respectively).

3. That breach, if it be established, could expose the husband and, possibly, Ms B as the receiver of those funds, to proceedings taken by the company for breach of that duty. It is here that the first limb of Barnes v Addy (1873) 28 LT (NS) 398 (the knowing receipt of trust funds), referred to by the wife, has a role to play. If the funds were then returned to the company they could be divided between the parties.

4. The insuperable difficulty faced by the wife in succeeding with this submission is that this contention was not pursued at the hearing. The evidence may well have taken a different course if it had (Metwally v University of Wollongong (1985) 60 ALR 68).

5. The submission also overlooks the fact that the husband and the wife, as shareholders, implicitly approved their actions as directors.

Conclusion as to Ground 1

1. What then remains? Having regard to the primary judge’s findings, the only possible construction that can be given to the documents and the above facts, is that there has been a completed gift of the proceeds of sale of the Sales Permit to Ms B (Corin v Patton (1990) 169 CLR 540). We accept that this was not the outcome contended for at the hearing by the husband but it is the inevitable legal effect. It follows that this ground succeeds and the relevant orders should be set aside.

2. The failure of the wife’s case has the effect that Ms B will retain the proceeds of sale of the Sales Permit. As it was the only property that the primary judge found to be held by the parties, it follows that there is no property to be divided. Thus, the inevitable consequence is that the proceedings for property division under s 79 of the Act must be dismissed.

Should the primary judge have considered the husband’s claim for spousal maintenance? (Ground 2)

1. There is no doubt that in his Further Amended Response to Initiating Application filed 16 October 2015, the husband sought the following order:

   That [Ms Grange] incur spousal maintenance payment to assist the [Mr Grange] and their children.

   (Husband’s Further Amended Response to Initiating Application filed 16 October 2015, paragraph 8)

2. The primary judge recorded the husband as seeking this order at [21] of his reasons. The application was thereafter not referred to or dealt with. It might reasonably be thought that as the husband was to receive in excess of $500,000 in cash as a result of the property orders, his need for maintenance would be limited.

1. Nonetheless, his Honour should still have dealt with the application.

2. The application derives more force given that the orders that see the husband receiving $500,000 will be set aside.

Conclusion

1. It follows that the appeal must be allowed, the orders made on 30 January 2018 will be set aside and the property proceedings will be dismissed.

2. The matter will be remitted to the Family Court of Australia for rehearing in respect of spousal maintenance.

Costs

1. The parties made no submissions as to costs other than to seek costs certificates under the Federal Proceedings (Costs) Act1981 (Cth) (the husband in his Amended Notice of Appeal filed 11 June 2019 and the wife in her written submissions filed 3 July 2019). Having regard to the fact that an error of law has been identified and that neither party owns any assets, our initial reaction is that the appropriate course is to make no order as to costs, and to issue costs certificates for the appeal and the rehearing on the issue of spousal maintenance.

2. However, the husband was given leave to rely on a late filed Amended Notice of Appeal and amended Summary of Argument which completely changed his grounds of appeal. Obviously, the wife was put to an unnecessary expense in dealing with the appeal as originally framed by the husband. The costs thrown away were said to be $3,917.07. Our preliminary view, therefore, is that this sum, less the costs of preparing the wife’s first supplementary written submissions (which were $823.70), should be paid by the appellant as its contents were essentially repeated in the wife’s subsequent written submissions filed 3 July 2019.

3. Such an order would preclude costs certificates being issued as they are predicated on there being no order for costs.

4. Orders will be made for the provision of written submissions as to costs.

5. If no written submissions are received in the time set out in the orders, then there will be an order that the husband pay the wife’s costs fixed in the sum of $3,093.37.

I certify that the preceding eighty-five (85) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Strickland, Ainslie-Wallace & Aldridge JJ) delivered on 7 November 2019.

Associate:

Date: 7 November 2019