Jenkins v Naidoo
[1991] TASSC 120
•1 March 1991
Serial No B6/1991
List "B"
COURT: SUPREME COURT OF TASMANIA
CITATION: Jenkins v Naidoo [1991] TASSC 120; B6/1991
PARTIES: JENKINS, David Clive
v
NAIDOO, Sherie
FILE NO/S: 121/1991
DELIVERED ON: 1 March 1991
JUDGMENT OF: Zeeman J
Judgment Number: B6/1991
Number of paragraphs: 23
Serial No B6/1991
List "B"
File No 121/1991
DAVID CLIVE JENKINS v SHERIE NAIDOO
REASONS FOR JUDGMENT ZEEMAN J
1 March 1991
On 29 January 1991 the applicant filed a writ whereby he sought a declaration that the respondent holds the land comprised in folio of the Register Volume 2958 Folio 26 on trust for him and an order that the respondent transfer that land to him free from all encumbrances. On the same day, the applicant filed an application seeking an order that until further order, the respondent be restrained from offering that land for sale and from selling it.
That application was supported by an affidavit of the applicant. In that affidavit he deposed to the following facts: he purchased the subject land (which is known as "Villa de L'est") in or about May 1987; consequently he became the registered proprietor of an estate in fee simple in that land on 18 May 1987; subsequently he transferred his estate in the land to the respondent; consequently she became the registered proprietor thereof on 14 September 1987; that transfer was effected in circumstances where no consideration passed from the respondent to the applicant; and at the time of the transfer to her the applicant expressly agreed that she would hold the land "for" the applicant.
Were it not for one matter, the affidavit contained material upon the basis of which it would have been proper to grant the interim injunction sought by the applicant. However, the applicant deposed in his affidavit to the fact that some time after having purchased the property, his then wife instituted divorce proceedings in the United Kingdom, he having been served with that petition whilst he was in London on business. The events which followed, and which resulted in the transfer to the respondent, were deposed to by the applicant in his affidavit in the following terms:
"11As a result of my wife's proceedings in the United Kingdom I was concerned about assets which I had acquired in Tasmania and whilst in England I was living at a home I owned 'Mutton Row', Hobscross Road, Old Harlow, Essex.
12The defendant suggested to me that I ought to transfer the Villa de L'est which I owned at Bicheno to her for the purposes of not listing it in any assets I may own in Australia. I was concerned at the time of protecting my base in Tasmania from which I was living and the Defendant said to me words 'Well, if you really trust me transfer it to me and I will hold it for you'.
13I thought it was a good idea at the time and as a result I caused Villa de L'est some time in September, 1987, to be transferred to the Defendant."
In the light of that material, I raised with counsel the question as to whether it would be appropriate to grant the relief sought, and referred counsel to ThePerpetual Executors & Trustees Association of Australia Ltd v Wright (1917) 23 CLR 185 and Donaldson v Freeson (1934) 51 CLR 598. Subsequently, a further affidavit of the applicant was filed. Omitting formal parts, it was in the following terms:
"2I say that I am divorced from my former wife Moira Jenkins and all property matters between her and myself are settled.
3My action in transferring the property at 11 Gordon Street, Bicheno in Tasmania from my name to that of the Defendant did not result in Moira Jenkins being disadvantaged in the property settlement effected between us or was any purpose for so transferring the property carried into effect."
Upon the resumed hearing of the application, I raised with counsel the sufficiency of the material deposed to in the further affidavit and afforded the applicant the opportunity of filing further affidavit material as to the basis upon which the applicant had expressed the opinion that his former wife was not disadvantaged and as to the basis upon which he had concluded that no purpose for which the transfer to the respondent occurred had been carried into effect. I was subsequently told by counsel for the applicant that no further affidavit would be filed.
The plain inference to be drawn from the applicant's initial affidavit is that he effected a transfer of his interest in the property to the respondent so that, contrary to the facts, it would be made to appear as though the respondent owned that property. No doubt the applicant then considered himself as being able to not mention the existence of that property in any circumstances where he was required to state the nature and extent of his property for purposes relevant to his former wife's application for a property settlement. It matters not that any obligation to disclose the applicant's beneficial ownership of this property was not affected by the transfer. The applicant's purpose was plain. He wished to avoid disclosing the fact that he owned the land in the proceedings instituted by his former wife. He considered that purpose to be more readily attainable by removing his name as a registered proprietor. Undoubtedly the property and financial resources of the applicant were relevant in the proceedings instituted by the applicant's former wife. A failure by the applicant to disclose his beneficial ownership of the subject land on any occasion when he purported to disclose the nature and/or extent of his property would have the effect of constituting a non–disclosure on his part of property actually beneficially owned by him. The purposes for which the transfer was effected were to hide the true position and to make it less likely that any non–disclosure would be discovered.
The applicant's assertion that his former wife was not "disadvantaged in the property settlement effected between us" is of no value. It represents a subjective value judgment on the part of the applicant. It does not address the fundamental question, namely, whether the applicant was guilty of a relevant mis–statement or non–disclosure upon the basis of which his former wife's proceedings were judicially determined, settled or otherwise disposed of. It may well be that the applicant holds the view that notwithstanding his failure to disclose the existence of his beneficial interest in the subject land, the ultimate disposition of his former wife's proceedings was such that had there been disclosure, she would not have achieved a more advantageous result. It is not for the applicant to say whether or not his former wife was disadvantaged. If that matter is relevant for the determination of the present application, then it is a matter for me to determine upon the basis of primary evidence. It might be said that if the proceedings were disposed of upon the basis of an incomplete statement of the applicant's property, then that in itself disadvantaged the applicant's former wife. The assertion that the applicant's former wife was not disadvantaged mis–identifies the applicant's purpose. Whilst his ultimate purpose might have been to disadvantage his former wife, his relevant purposes were directed to the creation of a situation where her application would be disposed of upon the basis that the extent of his property was significantly less than in fact it was.
The applicant's assertion that no purpose for transferring the property was carried into effect has no evidentiary value. The affidavit identified no particular purpose to which the assertion related. If the applicant's purpose and the extent (if any) to which such purpose was carried into effect are relevant for the purpose of determining this application, then it is for me to determine upon the basis of primary evidence what the applicant's purpose was and whether or not any such purpose was carried into effect.
I have already expressed my view as to what I consider the applicant's purposes to have been. The evidence before me does not enable me to say that there is any material upon which it could be found that the applicant's purpose was carried into effect or was not carried into effect. Upon that state of the evidence is it appropriate to grant the applicant the interlocutory relief which he now seeks?
In considering the answer to that question the nature of the relevant trust must be identified. It is not possible to identify the nature of the relevant trust with any degree of confidence, except that it seems to me that it was either a resulting trust arising by reason of the transfer to the respondent or an express trust orally acknowledged by the respondent.
This is not a case where the applicant purchased land and at the same time procured that the legal title to that land was registered in the name of the respondent. It is a case where there was a transfer of the title to the applicant's estate in the land by the applicant to the respondent. It may be that a mere voluntary transfer from the applicant to the respondent is sufficient to give rise to a prima facie presumption that the respondent holds the land upon resulting trust for the applicant. I observe that the statement appearing in Jacobs' Law of Trusts in Australia 5th ed, at para1220 that "no resulting trust arose from a voluntary conveyance of Torrens system land" does not appear to be supported by authority, and in particular it is not supported by the cases cited there for that proposition, namely House v Caffyn [1922] VLR 67 and Wirth v Wirth (1956) 98 CLR 228. If the transfer operated to create a resulting trust, the applicant may not need to rely on any of the reasons for the transaction and therefore not rely upon any illegality. There is substantial authority for the proposition that if that is the position, any illegal purpose on the part of the applicant in carrying through the transaction is irrelevant (see Blackburn v YV Properties Pty Ltd [1980] VR 290, and in particular the judgment of O'Bryan J and the authorities therein discussed).
It follows, as appears from the judgment of Dixon CJ in Wirth v Wirth (supra) at p237, that the terms of the Memorandum of Transfer from the applicant to the respondent may be of critical importance in this case. The transfer is not in evidence, and therefore I do not know what consideration, if any, was expressed in that transfer. If the transfer acknowledged, albeit falsely, that a sum of money, at least other than a nominal sum, had been paid in consideration for the transfer, then the applicant would need to rely upon his illegal purposes and the circumstances surrounding them because he would need to rely upon the express trust orally expressed to the effect that the transfer was intended as a voluntary assurance and upon the fact that the expression of consideration was false. If the applicant is required to establish an express oral trust then its purpose must necessarily be established.
The general rule is that a trust for an illegal purpose is void. In England it appears as though that rule applies regardless of whether the illegal purpose was accomplished to any degree (see Gascoigne v Gascoigne [1918] 1 KB 223). That does not appear to be the law in Australia. In Martin v Martin (1959) 110 CLR 297 the court said, at p305:
"The argument that the reason or motive for causing the property to be purchased in the name of the wife was to make it possible to avoid tax or to escape some provision of the law must often be amphibolous. For it may be relied upon as a ground for saying that since tax could not lawfully be avoided or the provision of the law escaped lawfully unless the beneficial ownership was conferred with the legal property, the presumption is strengthened that it was so intended. On the other hand, it may be pressed further and used to show that the legal title was placed in the name of the wife or child as a nominee for no reason except to cloak the truth. When that is the case there must, under Australian case law, be further enquiry and it must be ascertained whether the unlawful purpose was in any degree carried out or, on the other hand, the intending law breaker recanted before any necessity arose of using the cover he had thus provided or else virtuously refrained from using it."
For the last–mentioned proposition, the court referred to Payne v McDonald (1908) 6 CLR 208, The Perpetual Executors and Trustees Association of Australia Ltd v Wright (supra), Donaldson v Freeson (supra) and Drever v Drever [1936] ALR 446. Citing as authority three of those cases as well as The Commissioner of Stamp Duties (Queensland) v Jolliffe (1920) 28 CLR 178, the learned authors of Jacobs' Law of Trusts in Australia 5th ed, at para904, state the law to be as follows:
"It therefore appears that it is not sufficient that there was an illegal purpose at the time the trust was intended to be created. The defendant must also prove that the unlawful purpose was wholly or partly accomplished."
If that passage accurately reflects the law as to who carries the burden of proof, then the material before me establishes a prima facie case on the part of the applicant even if he cannot establish a resulting trust but needs to rely upon an express trust. If a defendant carries such a burden, then the respondent in the present case has not put before me material upon which it could be found that she has discharged it. Indeed she has not put any evidence before me. If, on the other hand, an illegal purpose having been necessarily relied upon by the applicant, he carries the onus of establishing at the trial that it was not wholly or partly accomplished, there is no evidence before me upon which the trial judge could ultimately so conclude.
Payne v McDonald (supra) was a case where the plaintiff alleged that the deceased (of whom the defendant was the personal representative) in the name of the deceased but with the money of the plaintiff purchased certain land. Upon that basis, the plaintiff asserted that the deceased came to hold the property as trustee for the plaintiff. The defendant alleged that the transaction had been carried through for the purpose of defeating or delaying the plaintiff's creditors. It was argued before the High Court (although apparently not before the trial judge) that as the property was purchased in the name of the deceased with a view to defeating the plaintiff's creditors, the plaintiff could not get the property back on the basis of the principle that the court would not assist a party to carry out an illegal transaction.
Griffiths CJ said, at p212:
"Again, another well known doctrine is that, if there is any illegal intention, and property is conveyed to give effect to it, and before the purpose is carried out the contract is rescinded, the parties will be restored to their original position. It is not sufficient to allege the illegal intention without showing that the intention has been carried out. In the present case there is nothing in the pleadings or in the evidence beyond an allegation and proof of an illegal intention: there is nothing to suggest that effect has been given to that intention. So that the defence set up by the defendant fails on every ground."
The Commissioner of Stamp Duties (Queensland) v Jolliffe (supra) was a case where the respondent, who had an account in his own name with the Queensland Government Savings Bank, opened another account declared by him to be an account held by him as trustee for his wife. Into that account he paid his own moneys, without intending to make a gift thereof to his wife, but for the sole purpose of procuring interest on those moneys, being interest which he believed would not be paid by the bank if the moneys had been deposited to the credit of his own account. The question for determination was whether the moneys formed part of the estate of the wife for the purpose of assessing probate duty. It was not a case where the alleged beneficial owner of property sought to set up the existence of a trust in aid of his claim. The judgment of the majority, Knox CJ and Gavan Duffy J, does not refer to an illegality of purpose, no doubt because of the limited basis upon which special leave to appeal had been granted in that case. The question was dealt with in the dissenting judgment of Isaacs J at p191, in the following terms:
"No man can protect himself from the consequences of his own acts, intentional and deliberate, including the natural conclusions to be drawn from them, by afterwards setting up his secret intention to defraud or break the law. Where he is not prosecuting a claim, he may not be made liable on the mere ground of illegality inter alios, but I unfortunately differ from my learned brethren in this, that I am of opinion that if his own words and acts, properly interpreted, assuming them honest, would establish his liability, he cannot escape that liability by relying on his own mental turpitude. 'No man shall set up his own iniquity as a defence, any more than as a cause of action,' said Lord Mansfield in Montefiori v Montefiori 1 WBl, 363 at p364 – a dictum approved by Lord Cranworth LC in Jorden v Money 5 HLC, 185 at p212."
Drever v Drever (supra) was a case where a husband had transferred land to his wife without pecuniary consideration, the husband retaining the relevant Certificates of Title. In an action by the wife to recover possession of those Certificates of Title, she alleged that the transfer was made for the unlawful purpose of evading income tax. The trial judge was not prepared to find that the transfer had been effected for that purpose. In the High Court, the majority of the members of the court were of the view that that finding ought not to be disturbed, and on that basis they did not consider it necessary to consider any of the arguments addressed to the court which depended upon the effect of the suggested illegality affecting the transaction. Dixon and Evatt JJ dissented, but upon the basis that the husband had not rebutted the presumption of advancement.
In Donaldson v Freeson (supra) a husband had purchased land in the name of his wife, using his own money but intending that the wife hold it as trustee for him. The proceedings arose when a judgment creditor of the wife purported to have the land sold pursuant to a Writ of fi fa. The trial judge found as a fact that the husband caused the land to be transferred into the name of the wife so as to enable him to evade the payment of income tax. In dealing with this question, Gavan Duffy CJ and Starke J, giving the judgment of the majority of the court, said (at p610):
"Another contention insisted upon before us was that the transfer from the husband to the wife was for an illegal purpose, namely for the purpose of defeating the husband's creditors, or, as the learned Judges in the Supreme Court said, 'so that, if he were attacked by creditors he could say it was hers, whilst if she became the object of attack he would claim that there was a trust for himself'. The trial Judge found that the property was put in the name of the wife for the purpose of deceiving the Commissioner of Taxation and evading payment of income tax. But which ever intention be attributed to [the husband], he is not, in seeking to protect or recover his property, carrying out any illegal transaction. No creditors have been defrauded, and no illegal purpose has ever been carried into effect."
This review of the authorities suggests that only Payne v McDonald (supra) can be said to lend some support to the proposition that the onus is upon the respondent to establish that the unlawful purpose was wholly or partly accomplished, although it may be doubted whether the members of the court were clearly directing their minds to the question as to where the burden of proof might lie. I do not consider that any of the other cases cited by the learned authors of Jacobs' Law of Trusts in Australia lend any support to that proposition. It is, however, appropriate to examine one other case. The Perpetual Executors & Trustees Association of Australia Ltd v Wright (supra) was a case where a husband had purchased property but had put it into the name of his wife. It was not a case of a resulting trust. The husband alleged that the title to the property was placed in the name of his wife with her consent so that the property would not fall into the hands of his creditors in the event that he should fail in his business. There was no evidence that the husband had any creditors at the time that he carried out the transaction with his wife, or at any time afterwards during her lifetime. In their joint judgment, Isaacs, Gavan Duffy and Rich JJ said, at p196:
"The test appears to be, not whether the plaintiff in such a case relies on the illegal agreement, because in one sense he always does so, but whether the illegal purpose from which the plaintiff insists on retiring still rests in intention only. If either he is seeking to carry out the illegal purpose, or has already carried it out in whole or in part, then he fails."
After referring, with approval, to Payne v McDonald (supra) their Honours then said (at p198):
"In this case no creditors have been defrauded. The illegal purpose has never been in any respect carried into effect, and therefore the respondent was entitled to succeed, and is now entitled to a dismissal of this appeal."
As to the duty of the court where a matter of illegality is raised in a plaintiff's case, I refer to the dictum of Helsham J in Maurice v Lyons (1968) 13 FLR 475 at p480:
"It was argued by counsel for the plaintiff that the matter of illegality had been pleaded and was not relied upon by the antagonistic defendant. He submitted that it was not there for a matter for the court to concern itself about the circumstances. While it is not quite correct to say that illegality was not raised by the defendant, I do not think this matters. For the position at law is discussed in the authorities reviewed in Snell v Unity Finance Co Ltd [1964] 2 QB 203 at p213, where the following statement by Lindley LJ in Scott v Brown Doering McNab & Co [1892] 2 QB 724 at p728 is cited with approval. His Lordship said: 'No court ought to enforce any legal contract or allow itself to be made the instrument of enforcing obligations alleged to arise out of a contract or transaction which is illegal, if the illegality is duly brought to the notice of the court, and if the person invoking the aid of the court is himself implicated in the illegality. It matters not whether the defendant has pleaded the illegality or whether he has not. If the evidence adduced by the plaintiff proves the illegality, the court ought not to assist him. If authority is wanted for this proposition, it will be found in the well known judgment of Lord Mansfield in Holman v Johnson [1775] 1 Cowp 341 at p343; 98 ER 1120 at p1121.' I do not think that a court of equity should be less astute to ensure that where a matter of illegality is raised in a plaintiff's case, it should be properly scrutinized, notwithstanding it has not been made an issue between the litigants."
I summarise my conclusions as follows:
1The applicant may be able to establish a resulting trust. It is certainly arguable, with a considerable prospect of success, that a voluntary transfer of land held under the provisions of the Land Titles Act 1980 is capable of giving rise to a resulting trust so that if the form of transfer in the present case is in the form of a voluntary transfer the applicant does not need to do more than prove the transfer to establish a prima facie case for obtaining the relief which he seeks in the action. The form of transfer is critical. If the transfer expressed a monetary consideration (other than a nominal consideration) as having been paid, then the applicant could not establish a resulting trust merely by reference to the transfer and he would need to establish the reasons for the transfer. I have not seen the transfer so as to be able to express a view as to its nature.
2If the transfer was not a voluntary transfer the applicant would need to establish the terms upon which he says an express trust was created and acknowledged by the respondent. In order to do so, the applicant would necessarily need to establish his purpose which appears to be an illegal purpose.
3If the applicant is required to establish his illegal purpose, then he would not obtain the relief sought if that illegal purpose was accomplished either wholly or in part in the manner I have described. I do not consider it to be clearly established as to what onus rests upon the parties on this issue if it becomes an issue. There are expressions of opinion in Payne v McDonald (supra) indicative upon the onus resting upon the respondent. On the other hand, it might be argued upon the basis of dicta in Martin v Martin (supra) and Maurice v Lyons (supra) that once the illegality of purpose has been necessarily established, then the court has a duty, independent of what the respondent may wish to raise, to investigate the matter. The existence of such a duty might be indicative of there being an onus upon the applicant to put some evidence before the court showing that the illegal purpose has not been carried out to any extent. It is inappropriate for me in the present interlocutory proceedings to determine this question (which may need to be determined at trial), particularly in the absence of any argument from counsel. I observe that I expressly indicated to counsel that I desired to hear them further on the question as to whether or not the applicant's conduct precluded him from obtaining the relief sought but neither counsel acceded to that request.
The present application falls to be determined essentially upon an assessment of the evidentiary material placed before me on behalf of the applicant to show a probable prima facie case (see Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at p622). In applying what was said in that case, I adopt the view expressed by the learned authors of Meagher, Gummon and Lehane: Equity Doctrines and Remedies 2nd ed that the expression "probability" as used by the court in that case was used in a sense "less exact than its normal usage; it was saying that a plaintiff must show a strong possibility of ultimate success, something more than an outside chance but not necessarily as strong as an odds on prospect." In my view, the applicant has established a probable prima facie case in that sense. The evidence discloses the existence of either a resulting trust or an express trust. If it is the former then the applicant has a very strong case. If it is the latter then there is a strong argument that in the absence of evidence from the respondent the applicant would succeed in the action. There are no other matters relevant to the exercise of my discretion which would mitigate against granting the applicant the relief which he seeks. Accordingly, I conclude that it is appropriate to accede to the applicant's application. I will hear counsel as to the precise form of the orders.
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