Nelson and Anor v Nelson and Ors

[1995] HCATrans 117

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S207 of 1994

B e t w e e n -

BETTIE JUNE NELSON and PETER
JOHN NELSON

Appellants

and

ELIZABETH ANNE NELSON

First Respondent

RUSSELL HODGE, STEPHEN LANCKEN, STEPHEN FULLER, SHARON BOWLES, MICHELE WORNER, ANTHONY HATZIS, trading as OWEN HODGE & SONS WITH FORREST DUFTY & CO

Second Respondents

DEANE J

DAWSON J
TOOHEY J
McHUGH J
GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 10 MAY 1995, AT 10.17 AM

Copyright in the High Court of Australia

___________________________

MR D.F. JACKSON, QC:   If the Court pleases, I appear with my learned friend, MR C.C. WATERSTREET, for the appellants.   (instructed by Lane & Lane)

MR B.A. COLES, QC:   If your Honours please, I appear with my learned friends, MR P.H. BLACKBURN‑HART and MR K. SOLARI for the first respondent.   (instructed by Owen Hodge & Sons)

DEANE J:   Yes, Mr Jackson?

MR JACKSON:   The Court should have a copy of an outline of submissions, together with a chronology which has just been given to the Court.

DEANE J:   If you could just give us a couple of moments, Mr Jackson.

MR JACKSON:   Your Honours, may I move immediately to two matters:  first, the terms of the legislation which give ultimately give rise to the contention of illegality and, secondly, to the findings of fact which are basic to the case.  Your Honours, the legislation is adverted to by the Court of Appeal in volume 2 at page 497 ‑  there are some other provisions and I propose to take your Honours to the provisions which are relevant in the two enactments.

I use the expression, your Honours, “the two enactments” because the Defence Service Homes Act 1918 had been amended between the time when the Bent Street contract ‑ that is the contract which was in question ‑ was entered into and the time when the application for a loan was made, the application for subsidy to be more accurate, to the Defence Services Homes body.

Your Honours, the relevant provisions of Defence Services Homes Act 1918 at the relevant time commenced with section 4B(1)(b)(i) and your Honours will see that the provision was, to the following effect, that:

Where a person applies for assistance under this Act, the ‑

Director ‑

may, at any time after receipt of the application, determine ‑

and then it says ‑

if the provisions of section 19A or 23 are relevant to the application, whether the applicant, or the wife or husband of the applicant ‑ ‑ ‑

DEANE J:   I still have not found it.  Which should we be looking at?

MR JACKSON:   I am sorry, your Honours.  Your Honours should have, I think, the enactment in two forms; one being the Defence Services Homes Act 1918, prior to the 1988 amendment.

TOOHEY J:   Well, we have two prints; one as at 1981 and one at 1991.

MR JACKSON:   Yes, your Honour.  The earlier of the two will have the provision to which I am referring your Honours in section 4B(1)(b).

DAWSON J:   No.  The 4B in the reprint which is at 1991 does not have a ‑ ‑ ‑.

MR JACKSON:   No, I am sorry, your Honour.  That is the second one.  It is the earlier form.

DAWSON J:   What we have reprinted as at 1981 is really only sections .....23.

MR JACKSON:   I am sorry, your Honour.  Could I just say what the provision is and we will give your Honours copies of it.  But, what it simply says is this, that:

Where a person applies for assistance under this Act, the ‑

Director ‑

may, at any time after receipt of the application, determine ‑

and then it says ‑

if the provisions of section ‑19A or 23 ‑

which is the relevant provision ‑

are applicable, whether the applicant, or the wife or husband of the applicant, is the owner of a dwelling‑house other than that in respect of which the application for assistance has been made.

Your Honours, that is an introductory provision to section 23, and section 23 is the provision that says that:

No advance shall be made to any applicant unless the ‑

Director ‑

is satisfied that ‑

and the relevant part of it is then section 23(b) ‑

neither the applicant nor the wife or husband (if any) of that person is the owner of any other dwelling‑house.

Your Honours, section 32A of the same Act - and I suspect that your Honours may not have that also.

TOOHEY J:   We have got the first couple of lines, that is about all.

MR JACKSON:   I am sorry, your Honours.  Could I again say, and I will do so as briefly as possible, what it says.  It provides that - this is subsection (1):

Where

(a) a person had, at the time of.....the making of an advance.....declared that he was not, or that neither he nor his spouse was, the owner of any dwelling-house other than the one to which the sale or advance related; and

(b) it has subsequently (whether before or after the commencement of the section) come to the knowledge of the -

Director -

that the declaration was untrue, the -

Director -

may -

and then there is an exception which does not matter -

call up, by notice in writing given to the person, the whole of the moneys secured under the contract of sale or the mortgage and those moneys -

shall -

become due and payable.

So, your Honours, to put it shortly, it empowers the money to be called up if there has been a statement of the relevant kind which is untrue. 

Your Honours, I should also add that at that time the scheme was one which the Commonwealth itself was funding.  That appears from section 39A(1).  Your Honours, that, as I submitted a moment ago, was the provision which was in force at the time when the Bent Street property was acquired.  It was not the Act in force at the time when the application was made for subsidy.  I use the expression, your Honours, “subsidy”, because the structure of the Act changed completely so that funding was carried out by a private bank at an appropriately low rate of interest.

The Commonwealth certified as to the entitlement of an applicant for that funding and it also then provided an amount to the bank for interest, in effect, foregone by the bank.  The interest foregone being the difference between the low rate provided for and the rate which a bank would ordinarily commercially charge.  So what one had, your Honours, was a situation where a person would apply for a certificate as to the entitlement to subsidy and, in effect, take that to the bank.

If I could go then to the provisions of the Act in its later form, your Honours will see that section 15(1)(b) empowered a person to apply for a certificate of entitlement in relation to the subsidy.  That application was made to the Secretary of the Department.  Then section 17(1) empowered the grant of such a certificate.  Some conditions were placed on the Secretary’s power to grant such certificates.  Your Honours will see those in section 18(1)(b) and 18(1)(e) so far as relevant for present purposes.

Once again, the Secretary was given a power to terminate the arrangement if a false statement had been made.  Your Honours will see that in section 26 and in particular in section 26(1)(a) and section 26(1)(b).  If I could direct your Honours to the last few lines of section 26(1), your Honours will see that the Secretary’s power was expressed in terms which appear to confer on the Secretary a discretion.

Your Honours, the Secretary was also given power to recover the whole or part of the moneys which had been paid as subsidy in the events referred to in section 26(1)(b) or (1)(c).  That power, your Honours, is to be seen in section 29, in particular section 29(1).  Your Honours will see that the Secretary may require the person to in effect repay the Commonwealth the amount of the subsidy and then section 29(2)(b) the whole of the amount of subsidy paid “since the day”, et cetera.

TOOHEY J:   Is that power of recovery the extent of the Secretary’s or the Commonwealth’s rights, Mr Jackson?  Is there a right of sale or anything of that sort?

MR JACKSON:   The answer, your Honour, is no.  In fact, I was just going to add one further thing and it is that the Secretary may waive the right to which I have just been referring.  That appears from section 30(1) and your Honours will see section 30(1)(a), (b) and (c).  If I could just say this, in relation to the current Act, as it were, the situation of course is that the money is not advanced by the Commonwealth and ‑ ‑ ‑

TOOHEY J:   No, I appreciate that.  Would anything appear on the title to indicate that there had been an advance under the Defence Service Homes Act?

MR JACKSON:   Your Honour, I think the answer is no.  I cannot say I have looked that up particularly, but I think the answer is no.  One would simply see a mortgage to, I think at relevant times, Westpac and would be registered on it and one would expect that the Westpac mortgage may contain provisions which enabled the bank to take certain action if the Secretary took action in respect of it.

Your Honours, the arrangements between the Westpac Bank and the Commonwealth were the subject of quite lengthy discussion in a case that ‑perhaps I can give your Honours a reference to.  It arose in relation to a stamp duty question and the judgments of the Queensland Court of Appeal set out a summary of the various arrangements.  I do not have the reference just now, but perhaps I could give it to your Honours later.

I have referred your Honours to the ability of the Secretary to waive the right.  One might perhaps expect that the Secretary might exercise that power in cases where, for example, the disqualifying property was itself being sold or where - I should perhaps say one other thing, and it is this, that there is of course, other things being satisfied, an entitlement subject to there being no other relevant property.  But if one has property but has not applied, one could sell the property and then apply.  It is not as if, having once owned the property, one is disqualified forever.

Your Honours, the Acts do not deal ‑ ‑ ‑

DEANE J:   Was there a means test?

MR JACKSON:   No, your Honour.

DEANE J:   So it was just if you owned another house?

MR JACKSON:   Yes.  The Act deals of course with the position of veterans and their spouses and widows in respect of, in effect, the conflicts in which Australia has been engaged, as your Honours will see from the definitions, but in addition it deals with serving members of the Defence Forces.  Could I say, however, your Honours, that the Act in neither form dealt at all of course with the position of the other, as it were, disqualifying property of which the applicant or spouse was the owner.  The provisions to which I have referred dealt with the courses open in relation to the loan itself but did not touch of course upon anything concerning the situation of the other property.

Could I turn then to the second matter I mentioned earlier, and that is just some very brief references to the relevant findings of fact.  Perhaps I should have mentioned two other provisions in the current Act.  They are sections 43 and 44 which allow decisions of the Secretary under the provisions to which I have referred to be reviewable decisions.

GUMMOW J:   Mr Jackson, would the Crimes Act come into play at any stage?

MR JACKSON:   It is possible, your Honour.

GUMMOW J:   If there were false statements made in the course of obtaining one of these certificates, for example.

MR JACKSON:   Your Honour, it is possible that there are some provisions of the Act which might apply or might be thought to apply, depending on the particular circumstances.

McHUGH J:   People have been prosecuted either under this particular legislation or very similar legislation.  I can remember at the Bar appearing for at least one person who was charged with obtaining money in similar circumstances.  I think it was the first home user legislation.

MR JACKSON:   Yes, your Honour, I am not excluding the possibility of that particular provision.  No doubt my learned friend will try to encourage your Honours to take a view about some of them, that particular provisions of the Crimes Act in particular circumstances might result in there being conviction for, in effect, attempting to impose on the Commonwealth.  But, your Honours, the point I would seek to make about that, if I could just say it in a preliminary way, is that one sees provisions of the most general application in the Crimes Act providing for there to be particular sanctions by way of penalty.

One sees also in the War Service Homes Act, the provisions of which are the ones dealing with the matters directly in issue, that it makes specific but limited provision to deal with the circumstances where there has been an infraction of the requirements for obtaining a subsidy or loan, but, your Honours, what we would seek to say is that if one is looking to see what the public policy that is to be derived from those provisions one would look at least primarily to the War Service Homes Act in view of the fact that it makes provision of a limited kind.  In view, indeed, of the subject matter of the Act and the beneficiaries under it, it is unlikely that the Parliament would intend that it has a larger more condign sanction of a kind that is quite unpredictable at the time in relation to any particular case.

McHUGH J:   You are looking at it from the point of view of the legislation.

MR JACKSON:   So far, your Honour.

McHUGH J:   But does equity look at it from the point of view of its own doctrines and say, “Well, it doesn’t matter what Parliament may have intended to do; from an equitable point of view we are not going to enforce an equitable right”?

MR JACKSON:   Your Honour, that is really what the case in a sense comes down to because the case is one which seeks in a sense to identify what is the boundary line, if there is one, between the two concepts.  Your Honour, I will come a little later, if I may, to deal with this more fully of course, but what we will be submitting in that regard is that the test for the application of the equitable principle is one of identifying whether public policy requires its application.

Now, if one looks to see what is the public policy, one really has to start from the legislation because the legislation is the place where quintessentially, as it were, public policy is to be declared and, your Honours, things such as the subject matter of the legislation, the persons whom it is intended to benefit, the presence of some limited but not full remedies and matters of that kind are indications of the nature of the public policy.  That is essentially what it amounts to.  No doubt the particular point at which one or other will strike may vary from case to case.

Your Honours, could I go to the facts for just one moment?  Your Honours will see in volume 2 at page 493 to 495, there is a summary by Mr Justice Sheller and, in particular, if one goes to page 493 at about line 34, your Honours will see the discussions leading to the purchase of the property in question.  Your Honours will see that as events happened, Mr Nelson died just before the actual settlement.  Your Honours will then see at about line 34 on page 494 that it was expected that the Bent Street property would be sold but, of course, the war service home finance was obtained.  That was only $25,000 of the purchase price, your Honours.

Your Honours will see at page 495 between lines 25 and 30 that the appellant was the person who provided the funds for the Bent Street property and in particular at the bottom of page 495, about line 44, the Master found that the appellant had no intention to confer any beneficial interest in the property or the proceeds of sale on the daughter and your Honours will see his finding as to a purpose of the loan being there set out.  Your Honours, those findings are elaborated upon a little in the primary judge’s findings.  May I give your Honours the references without taking your Honours to the pages?  They are pages 440, 441, 447 to 449 and 457 and 458.

DEANE J:   Where is the clearest finding that the daughter provided nothing of the purchase price, Mr Jackson?

MR JACKSON:   Could I give your Honour a reference to that?

DEANE J:   Certainly.  What I have in mind is that I recall reading somewhere that she over a period paid her salary into a bank account from which the mortgage payments were made.

MR JACKSON:   Your Honour, one of the issues ‑ there was a claim and a cross-claim, in effect ‑ was the nature of the quality of the payments that she made and one of the things that the judge held was that those, I think, were loans and not contributions to be taken into account.  I will endeavour to give your Honours the best of the references.

Your Honours, could I again say that the judge’s findings were specific as to intention.  That is to say the judge found what the intention actually was and that was that the intention was not that the property be held beneficially for the daughter.  So it is not a case, your Honour, where it was just a finding, in a sense, as to a resulting trust from a payment of money, but there was a specific finding that the mother’s intention was that the property would not be held beneficially by the daughter.

Your Honours, the situation which thus obtained, in our submission, was that the mother had provided the purchase price for the Bent Street property and she was thus subject to any presumption of advancement entitled, in the light of the findings, to the resulting trust in her favour and certainly in accordance with the Court’s affirmation of that principle in Calverley v Green (1984) 155 CLR 242.

DEANE J:   Was there an express finding leading to resulting trust circumstances in the sense that, prima facie, one would expect in a case such as this that there would be an express trust rather than a resulting trust?  I mean, was there a finding that nothing was said?

MR JACKSON:   Your Honour, I am sorry to hesitate in that regard.  There was a claim in respect of an express trust and your Honour will see at page 457 the claim for an express trust was one that was being made by the respondent because the property had been sold and what was left, of course, was a sum of money that was held by solicitors.  Your Honours will see at lines 24 to 41 one of the findings to which I referred before, and that is the finding as to the intention. 

Your Honours will also see at page 458, line 19 through to line 35, a further reference in respect of that claim for an express trust and which the Master rejected.

TOOHEY J:   Mr Jackson, on page 457 at line 29 there is a reference to the purpose of putting it into Elizabeth and Peter’s names.  I notice on page 495 the Full Court at line 50 speaks of the Master finding that:

a purpose.....was to preserve Mrs Nelson’s entitlement to.....a loan.

Does anything turn on that? 

MR JACKSON:   No, your Honour.

TOOHEY J:   It was just a choice of language.

MR JACKSON:   It seems nothing more than that, your Honour.

TOOHEY J:   No other purpose suggested?

MR JACKSON:   No, your Honour.  The evidence was that it was expected it would be a relatively temporary home and that another place would be bought.

I was going to refer to Calverley v Green 155 CLR.  The purpose of so doing was to refer to the fact that the Court there recognised that the principle of a resulting trust remained the law, although it would be right to say your Honour the presiding Judge did so with what appears to have been a degree of reluctance.  Can I take your Honours to page 246?  Your Honours will see at point 5 on the page in Chief Justice Gibbs’ reasons for judgment - his Honour refers to it from point 5 to about point 7 and also in his Honour’s reasons at page 251 about point 3 or 4, immediately after the reference to Charles Marshall v Grimsley; in the joint reasons of Justices Mason and Brennan at the bottom of page 255; Justice Murphy at page 264 about point 8 was, to put it mildly, cool to the notion.  Your Honour Justice Deane, at page 266 commencing at about point 2, doubted the propriety of such presumptions but went on to say in the first new paragraph on that page that they were too well entrenched to be discovered by judicial decision.

In the light of the finding at page 457, to which I referred a moment ago that there was no intention that the children have beneficial ownership, it could only have been by reason of illegality, if I could use the term broadly for the moment, that the mother’s claim would fail.  As I submitted a moment ago, the starting point, we would submit, in relation to any case of illegality where the source of the illegality is said to be non‑compliance in one way or another with the provisions of a statute, we would submit the appropriate starting point is the statute itself.

That that is so, in our submission, is made apparent by the leading decision of this Court on the issue of illegality which deals both with direct breaches of statute and also deals in passing with the circumstances where someone seeks to enforce an agreement which has been entered into for a purpose which is in contravention of a statute, that is Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410. The contention in the case, if I can put it shortly, was that securities entered into with a body corporate carrying on banking business which it was not authorised to carry on by virtue of the prohibition in section 8 of the Banking Act which your Honours will see set out in the headnote. 

The contention was that those securities were either void or unenforceable and it was held that that was not the case.  In the course of the case, as I mentioned, the approach taken by members of the Court was to look first at the terms of the statute and then in varying degrees move from that to offer some observations in addition upon the class of illegality where the particular transaction that sought to be enforced is not itself the one that is the subject of the statutory prohibition. 

Could I go first to Acting Chief Justice Gibbs at page 413, towards the bottom of the page in the paragraph commencing about seven lines from the bottom, his Honour referred to the fact that: 

The question whether a statute, on its proper construction, intends to vitiate a contract made in breach of its provisions -

must be determined in accordance with the ordinary provisions of statutory interpretation.  To the same effect, your Honours, is the quotation by his Honour on the next page, page 414, half-way down the page where his Honour is quoting from Justice Devlin in St John Shipping Corporation v Joseph Rank Ltd.

Then if I could go to the reasons for judgment of Justice Mason - and Justice Aickin agreed with his reasons - first at page 423, and your Honours will see in the first new paragraph on page 423 his Honour expresses the principle as being one necessarily subject to any contrary intention manifested by the statute, and he elaborates upon that through that paragraph.  He then at page 424, speaks of, in the first new paragraph:

The next question is whether by implication.....a prohibition can be discovered in the section.

Then at page 425 at the bottom of the page, after referring to a number of cases dealing with, in effect, direct contraventions, said that:

These cases do no more than demonstrate that the question whether a statute prohibits contracts is always a question of construction turning on the particular provisions, the scope and purpose of the statute. 

He referred to the fact that those considerations were not exhaustive or comprehensive. 

If I could invite your Honours to note at page 427, at the bottom of that page, that his Honour moves on to deal with the ex turpi causa notion and his Honour sets out at the bottom of that page a statement of principle by Lord Justice Fry in Cleaver’s Case.  Then, on the next page, page 428, another passage from Beresford v Royal Insurance, and then says:

The suggested application of the principle often involves a conflict between competing policies ‑

which his Honour goes on to discuss.  Then at page 429, if I could take your Honours to the last four or five lines of the paragraph finishing in the middle of the page, his Honour goes on to say:

The main considerations from which the principle ex turpi causa arose can be seen in the reluctance of the courts to be instrumental in offering an inducement to crime or removing a restraint to crime.

Your Honours will see that in discussing the principle, he then in the next paragraph deals with the effect of the statutory provisions and the presence of the statutory provisions in relation to the application of that principle.  Your Honours will see that he is looking to see in effect what is the public policy that is demonstrated by the Act in question in determining whether the principle of the general law is the one that is to be applicable.

TOOHEY J:   In carrying out that exercise, Mr Jackson, has one moved from statutory construction?

MR JACKSON:   Your Honour, in our submission, no.  But one is dealing with it in a slightly different sense, because what one is seeking to do is to identify not quite so much the meaning of a particular term in the statute, but to see whether the provisions of the statute in the context in which they operate are intended to have the effect that other remedies of the general law or other principles of the general law are or are not to be applicable.  I put it that way, your Honour - and I will come to the relevant quotation in just a moment which deals directly with the question of public policy in Justice Jacobs’ reasons - because what one is looking to see is what is the relevant public policy.  The common law or the general law test itself involves that issue as part of it.

In looking at that, one identifies first, in our submission, what is the public policy by looking to see what the statute is directed to.  Of course, your Honours, one is looking at it in a context, but that is the question one is engaged in.  I am not certain if I have answered what your Honour is putting to me, but it is a question of construction.

TOOHEY J:   The difficulty may be my own.  I just have some difficulty with what it involved.  You take as a starting point that the statute prohibits some conduct.  On one possible approach it would seem from Yango you look at the statute itself to see whether from the terms of the statute you can infer some intention to strike down activities that are carried out in breach of the statute.  That does not necessarily, I suppose, involve any invocation of public policy; in a narrow sense it is a question of statutory construction.  The other approach based on public policy clearly has regard to the terms of the statute, but it imports a much broader notion than is involved in construing the Act itself.

MR JACKSON:   Yes.  Your Honour, the situation really, if I can perhaps put it this way, is, in our submission, this.  What your Honour was putting to me is perfectly true in a case where what one is looking to see is whether the particular conduct in question is itself proscribed, either expressly or by implication, by the statute.  It either is or it is not and then it becomes a question whether that conduct is conduct which can give rise to civil rights, in effect.

Now, that is, in effect, if I could put it this way, category 1 is where there is an express prohibition; category 2 is where one implies the prohibition.  But one is really dealing, in the present case, with a sort of third category where, although the particular thing in question in the present case is not a transaction that itself is the subject of any consideration by the statute, a transaction was entered into and completed the purchase of the property before the statutory provisions had any relevant operation.  They could only have any relevant operation once an application was made under that Act and, under that Act, whatever quality they may have had, until the application was made, was one that was purely inchoate, in a sense, because it was simply a transaction.  There was a transaction that was perfectly valid, perfectly capable of enforcement between the parties. 

So, your Honours, one is looking to see what I have called the third category of cases, in effect, and one is looking to see whether a transaction already entered into, not itself being something that is directly dealt with by the Act, is something that is rendered in inefficacious, in one way or another, by the operation of the Act.  And that depends ‑ perhaps I could put it this way ‑ largely on a question of what the public policy is.  Now, the first place one goes to see what it is is, in our submission, the provisions of the Act which is in question.  Now, your Honours, ex hypothesi, it will not provide a direct answer because the conduct is not directly within it but, your Honours, what it will do is, by the nature of the Act, to indicate whether the conclusion as to public policy is of one kind or the other.  Or, your Honours, it may indeed be silent on it, of course.

Your Honours, what I was going to say was ‑ and I will not delay with it ‑ if one looks at the bottom of page 429 and the top of page 430 in his Honour Justice Mason’s reasons, it is apparent that what he is looking to see ‑ I would refer particularly to the paragraph on page 430 commencing “In my opinion” ‑ amongst other things, is what the statute says or indicates is the relevant public policy. 

Your Honours, so far as Justice Jacobs was concerned, your Honours will see that in his reasons at page 430 he deals firstly, at the commencement of them, with express prohibitions, and that goes on to page 431 in the second new paragraph on that page, “If a statute imposes a positive obligation”, and so on.  Then, your Honours, I will pass over implied prohibitions but, if your Honours go then to page 432, and the first new paragraph on that page, what your Honours will see is a discussion of what I have called the third category of case, commencing:

In other cases the prohibition against carrying on a business may not be able to be construed as either an express or implied prohibition against the making of a particular contract.

Now, your Honours will see that he goes on to deal with that class of case.  If I could invite your Honours to read down past the reference to Pearce v Brooks, to where his Honour says;

The refusal of the courts to regard such contracts as enforceable stems not from a legislative prohibition but from the policy of the law, commonly called public policy.  It is of these contracts that Lord Wright said in Vita Food Products Inc v Unus Shipping Co. Ltd:

“Nor must it be forgotten that the rule ‑

and his Honour proceeds to quote the statement.  But your Honours will see that a statement of the rule is expressly stated to include the fact that public policy:

may at times be better served by refusing to nullify a bargain save on serious and sufficient grounds.

TOOHEY J:   But that approach also suggests that public policy can be used to strike down a contract which is not expressly or impliedly prohibited by the statute.

MR JACKSON:   Yes, your Honour.  Your Honours will see that the passage, for example, from Vita Food Products really contains two sides of that coin, and that is that the public policy may be such that the transaction, to put it loosely, although not expressly or impliedly prohibited, may be, by the policy of the law ‑ that is the public policy of the law ‑ one that the courts will not enforce.  But, as his Honour says, adopting that passage, the other side of the coin is that it may be appropriate for the public policy not to adopt that course.  Now, your Honours, what that means is that, inevitably, one must look to see two things:  one is the source of the suggested illegality which, inevitably, takes one back to the statute;  and the second is to see what is the public policy.

Now, the public policy can, in a sense, when one is talking about a statute, really, we would submit, only in the final resort, come from the task that the legislature has sought to make that statute perform.  Unless it be, of course, your Honours, that there is some broad overriding principle that the courts will always refuse to enforce such contracts.  Your Honours, the statement of principle to which I have just referred does not say that because the refusal to enforce is in cases where it would be against public policy to do so.

His Honour proceeds to develop the issue through page 433 and, in particular, your Honours will see, commencing about point 4 on the page, speaking of the last question of public policy, he adopted an enunciation of relevant factors and could I invite your Honours to look at the quotation on page 433 as being an indication of some of the factors germane in cases of that kind.  Now, your Honours, coming back to the question I was mentioning a moment ago where one finds the public policy, your Honours, if one goes to page 434 in his Honour’s reasons at about point 4, his Honour asks:

What public policy of the law would be served?

And then goes on to say:

In this connexion it is proper, as was done in Archbolds (Freightage) Ltd v S. Spanglett Ltd to have regard primarily to the scope and purpose of the statutory provision ‑

et cetera, and your Honours will see how he develops that throughout that paragraph. 

Your Honours, the approach to be taken to provisions of this kind was discussed in the Full Court of the Federal Court in Farrow Mortgage Services Pty Ltd v Edgar (1993) 114 ALR 1, in a passage which commences at page 10. Your Honour Justice Gummow, I think, was a member of that Court.

Could I say, your Honours, there are two passages to which I wish to refer.  One is pages 10 to 13, the other is page 18.  Perhaps if I could mention those initially.  At page 10 your Honours will have seen the heading “The principles as to illegality” commencing at the bottom of page 9.  Then at page 10 after referring to Yango then half-way through the page:

The position, so far as relevant to the issues that arise in the present appeal, may be summarised as follows:

Then your Honours will see the reference in paragraph (1) to “an express statutory prohibition”.  Then in paragraph (2) the cases where what one is dealing with is not the prohibition on:

the formation of a contract, but the doing of a particular act;

Thirdly, your Honours, paragraph (3) towards the bottom of page 10, that:

A contract associated with or in the furtherance of illegal purposes may not itself be directly contrary to the provisions of the statute by reason of any express or implied prohibition.

A few lines further on:

In such a case, the courts may not enforce the contract in two instances.

Your Honours, I emphasise the expression “the courts may not” meaning that they may or may not:

in two instances.  The first is -

and your Honours will see the first case mentioned, which again is not the case here and then, secondly:

The second is where the party seeking to enforce it intended to perform the contact illegally or for an illegal purpose.

Now, your Honours will see at the top of the next page the reference to the fact that in such cases:

the courts act not in response to a legislative prohibition but from the policy of the law.

Then your Honours will see the quotation from that part of Justice Jacobs reasons where he was referring to the fact:

that “public policy . . . may at times be better served -

et cetera.  Your Honours will then see the quotation from Justice Jacobs in Yango set out and at page 12 their Honours said in paragraph (5) that in all those cases:

issues arise as to whether, although direct enforcement is forbidden, other causes of action and remedies may still be available -

and your Honours will then see, if one goes down to paragraph (7), that the second of the two classes then referred to was the operation of the maxim that those seeking equity must do equity.  Now, your Honours, that is discussed then.  So too in the next paragraph in paragraph (8) on page 12 is the discussion of:

regulatory legislation as ousting the operation of collateral equitable doctrines -

and so on.  Then, your Honours, if I could come to paragraph (9) on page 13.  What your Honours will see is the observation that:

Issues concerning the continued availability of restitutionary money claims and the operation of equitable doctrines.....will not appear in the same light where the court is dealing with what we have described as a “third category” case.  There, the making or performance of the contract does not offend an express or implied statutory prohibition.  The contract is not enforced on grounds of public policy, because it is associated with or in the furtherance of illegal purposes.  The courts formulate the appropriate operation of public policy.  This formulation will more readily accommodate what are independently subsisting general law actions, doctrines and remedies -

and so on.  Your Honours, the application of that doctrine was dealt with at page 18.  Your Honours will see at page 18 under the heading “Conclusions as to illegality” there are several reasons set out and if I could go to the third line on that page, the first reason is a consideration of the terms of the statute and, of course, the familiar principle where the legislature has stayed its hand.  Why should the public policy of the common law go further.  Then, your Honours will see for example in the third contention, about line 25 that there would be:

a windfall gain to the respondents and others in similar -

circumstances and, your Honours, the fourth one, line 31, being a case:

where they are lacking the “serious and sufficient grounds” which would indicate -

public policy one way or the other.  What your Honours will see is that the approach taken by the court in that case, correctly in our submission, was one to look at the public policy evidenced by the Act, the steps taken by the legislature in the Act and to see what the practical operation of it would be, including the question whether there would be, to use the expression “windfall gains” on the part of one party by the operation of it, or to indicate on the other hand whether there was any need to have the more serious form of, I use the term “punishment” in inverted commas, brought about by engaging in conduct which falls within the third category.

Your Honours, in the Court of Appeal in this case there was no discussion at all by the Court of Appeal of the question what was the appropriate public policy.  Your Honours will see that that is so from what was said by Mr Justice Sheller who gave the principal judgment at page 499, line 15 in the passage which goes through to page 504, line 30.  I take your Honours to it for a negative really.  The question of what is the right policy is not discussed at all, although it was a matter on which there had been submissions to the court.

Your Honours, it is apparent, in our submission, that in dealing with an issue of this kind, it is appropriate to consider what the public policy requires and, your Honours, if one does go to consider the public policy it is apparent, in our submission, that the Defence Service Homes Act does not suggest that transactions other than those referred to in the Act itself are to be in any way affected by contravention of the relevant provisions.  It also, your Honours, provides its own internal, if I could use that expression, remedies which are discretionary in circumstances where there has been a contravention of it.

Your Honours, when one bears in mind the persons who are to be the beneficiaries, if I could use that word, of the national largesse under that Act, it really seems unlikely, we would submit, that the Commonwealth Parliament intended that related transactions were to be affected, and to be affected adversely.  We would submit that it could hardly be the appropriate view of public policy to take the view that constructive trustees were to be able to enrich themselves at the expense of erring veterans or their erring widows or present serving members of the forces.  It just seems an unlikely view, with respect, of public policy. 

I referred earlier to the reference in Farrow to Lamb v Cotogno and to the availability of the remedies provided for in the Act where Parliament had stayed its hand, but your Honours will see a reference to a similar matter in Orr v Ford (1989) 167 CLR 317 at page 327 in the joint reasons for judgment of Justice Wilson and your Honour Justice Toohey and Justice Gaudron, and if I could refer your Honours simply to about point 4 on the page your Honours will see that ‑ I simply give it as an indication of a case where it was said that:

Secondly, forfeiture - or more accurately, liability to forfeiture - is the sanction by which the policy of the Act is effectuated rather than a penalty imposed by reason of a prohibited transaction.....These considerations militate against any implication of illegality of a trust of a holding.

GUMMOW J:   Perhaps at 333 to 334 as well, I think, Mr Jackson - at the bottom of 333.

MR JACKSON:   Yes.  That is right, your Honour, I am sorry.  I should have given that reference as well.  It is a passage, I think, that goes through to immediately above (ii) on page 334.  To put it shortly, we would submit it could not be, in circumstances of the Act in question, a proper view of public view of public policy to say that not only is a person contravening it liable to have to make the payments and so on provided for by the Act, but also loses the ability to enforce what rights they have in relation to other property in favour of persons who, themselves, have no especial claim to it.

McHUGH J:   In the form in which the Act stood at the time of the purchase, what limitations were there on making applications under the legislation?  Could a person make numerous applications in respect of numerous properties provided the person did not own a place at the time the application was made, or was it a once-off legislation, that you could only do it once?

MR JACKSON:   Your Honour is speaking about the Act at the time the actual application was made?

McHUGH J:   Yes.

MR JACKSON:   Your Honour, it is a once-off thing, as I ‑ ‑ ‑

McHUGH J:   You can only do it once?

MR JACKSON:   That is right, your Honour, yes.  Your Honour, I will check that again, but that was my impression of it, certainly. You could do it once, but having done it the once ‑ but, you could do it at any time, in effect.  If you had been in the First World War, you could apply in 1980.

McHUGH J:   Supposing in this case that the property had been sold to the daughter but the contract contained a clause that your client could call for its re-conveyance at any time, would that be caught by that legislation?

MR JACKSON:   Well, there would be two things:  the Court would be reconsidering, I suspect, the decision in Hall v Busst about whether that would be valid, whether ‑ ‑ ‑

McHUGH J:   Well, let us say, within five years.

MR JACKSON:   But the position would be, your Honour ‑ the question ultimately would turn on the ambit of the concept of owner in the definition in the Act. Now, the way in which that is expressed - and the definition has not, in any relevant respect, changed - was that it was an inclusive definition, your Honour, in the sense that it said that it included every person who purchased land on credit or deferred payment and included any person who had purchased or contracted to purchase.  Now, those terms probably would not cover the situation of the mother in those circumstances. 

But, your Honours, it would then turn on the question whether the mother was, under the general law, to be treated as the owner.  Now, in circumstances of the kind your Honour is positing to me, my submission would be that the answer would be that she would not be.  Maybe she would be getting close, but it would require there to be ‑ all she would be would be a person who had an option to buy.

McHUGH J:   Well, perhaps if she sold it to a which company she controlled, for example, so she could transfer it back at any time.

MR JACKSON:   Yes.  What I was going to say, your Honours, it really would require definition of a kind of revenue act or companies act kind to get a definition, a concept of owner that included cases such as the one to which your Honour was putting to me.  Your Honours, if I could go to what the Court of Appeal did, for just a moment ‑ ‑ ‑

McHUGH J:   Before you move on;  it is plain enough that the fact that you already own a home and sell it does not prohibit you from obtaining a loan under this legislation?

MR JACKSON:   No.  And your Honour will see from that chronology that, in fact, after the second property was acquired, that this property was put on the market, did not sell, took a long time to sell, but it was put on the market.

DEANE J:   Mr Jackson, rightly or wrongly, is this not a case, though, where the intention of the statute is not very relevant really?  I mean, if it were a case where the holder of the legal estate was in no way involved in the planned deception, then I can fully understand why you would look at the statute and see, well, has the statute anything to say as to why the third party should not be obliged to honour the trust.  But, is not the point about these cases that what was involved was a conspiracy on one approach or something akin to a conspiracy and there you do not look at the statute for a statutory intent, you look to see whether there is an applicable policy of the law that parties, plural, involved in that sort of transaction will not be allowed to invoke the assistance of the courts to enforce or rescue them from the consequences of their conduct?  I am not suggesting what I am putting to you is necessarily right, but it is the point that I am having trouble following you to the statute and trying to get the intention of the statute.

MR JACKSON:   Can I say a couple of things in response to that.  The first is this:  issues of this kind are normally issues of the kind to which your Honour has just adverted.  Sometimes you will find illegality on one party only but most often they are cases of this broad kind.  That is the first thing.  That is where the issue usually arises.  The second thing is this:  as your Honour put to me, it is a question of identifying what is the policy of the law.  I accept that.  But the policy of the law is something that, in our submission, has to come from somewhere.  It is not, in our submission ‑ and I referred your Honours to a quotation by Justice Jacobs from the Vita Foods Case ‑ every case where that happens that one will have circumstances where the law will not allow the agreement, whatever it may be, to be enforced. 

The relevant test is what is the relevant public policy?  One then has to see where the public policy comes from.  The public policy ‑ and I do not mean to be offensive in saying so ‑ it has to come from somewhere.  The reason why the issue arises is in cases where a statute is involved because something has been done which contravenes the statute.  The first place, we would submit, one goes to to see what the public policy is is to look to see what may be derived from the terms of the statute and in the context in which it operates.  The very nature of the question is that it arises in circumstances where a provision of the statute is not directly contravened by the particular transaction, the efficacy of which is in issue. 

So, undoubtedly, there are some difficulties but, for example, as one saw the members of the Court doing in the two cases to which I have referred, Farrow and Yango, in dealing with this question, one looks to see what can be derived from the nature of the statute, the possible benefits or disadvantages to be obtained from adopting one course or another, and it endeavours to derive what the public policy is from matters of that kind.  I do not know that I can advance it beyond that but that is, in our submission, what the relevance of the statute is.  Because one does have in the statute at least some declaration by Parliament of something that is at least the foundation for identifying a public policy.

DEANE J:   Except when one goes to Yango - I mean, you can fully understand why when one party was not in any way involved in anything unlawful, one looks to the statute to see what the consequence is.  But this case would be like Yango if in Yango the borrower and the lender had got together and said, “There is the Banking Act and you cannot lend money to me because that will be carrying on banking business, so let us dress it up as a gift to me and I will hold the money on trust.  The result will be that it will not be apparent on the surface that what is involved is banking business”.  It just seems to me that if that had been the facts in Yango the result might have been the same but your inquiry would have a different focus.

MR JACKSON:   One would be looking, your Honour, at the question that is more precisely raised here or it is something akin to it, but, your Honour, that is why in answering that question, if I could put it that, it would be surprising, if I may say so with respect, if one did not find in the reasons some reference to what, in effect, the policy of the Banking Act was to be.

DEANE J:   I was not suggesting the judgments were irrelevant.  It seemed to me they do not focus on ‑ ‑ ‑

MR JACKSON:   No, your Honour, I was not attempting to suggest that everything dealt with in that case was germane to the present proposition.  What I was seeking to say was that if one looks at the classes of case where there is a specific prohibition of a contract or a specific prohibition of particular conduct, then those cases obviously involve deriving an intention from the statute itself.  When one moves on to the third class of case where the conduct is not conduct itself involved in the Act, as in the earlier purchase here, it then becomes a question of seeing what is the policy of the law, meaning public policy, and what I have been seeking to say, your Honours, is that to do that one has to look first of all at the Act and see what one can derive from that. 

That is why, your Honours, one might expect to see - and I do not want to beat the drum about it - if one looks at the classes of people who are the potential beneficiaries of the War Service Homes Act, it just seems, we would submit, a little unlikely that one should identify the public policy as being that any infraction of the scheme for obtaining a subsidy or obtaining a loan in earlier times, simply because one happens not to tell the truth about having an interest in another place at that time, should be visited not just by having the remedies in the Act brought into operation - and, your Honours, we are talking about relatively small sums - but also, have the other transaction itself rendered unenforceable.

McHUGH J:   But is that the proper legal analysis of it, Mr Jackson?  Is this not a case where the question is was this a conveyance for an illegal purpose and, if it was, should the Court lend its aid to enforcing part of the arrangement between the parties which was to, where necessary, have the property conveyed back to the mother?

MR JACKSON:   It is sort of getting out of it, your Honour, not enforcing it really.

McHUGH J:   But do you accept this was a conveyance for an illegal purpose?

MR JACKSON:   It was a conveyance for a purpose that was to achieve an object in contravention of the Defence Service Homes Act.

McHUGH J:   Then the question becomes ‑ ‑ ‑

MR JACKSON:   That was the finding.

McHUGH J:   Yes - will the Court enforce such an arrangement between the parties; one term of which was that the property would be conveyed back?

MR JACKSON:   Your Honours, could I say in relation to that that the determination of that question is - and, your Honour, I have used the expressions before - is one that must depend upon not, we would submit with respect, an a priori view applicable to every case, but a question whether, whatever would be for example the underlying statute, but rather what is the public policy to be derived in relation to the particular statute or statutory provision that has been or is said to be contravened.

McHUGH J:   Yes, but in this case what can be put against you is that the carrying out of the contract does defeat the whole purpose of the legislative prohibition and, therefore, in that sort of case the Court should not assist you, whereas in a case like Yango, to enforce the contract does not defeat the purpose.

MR JACKSON:   The first thing I would seek to say about that, your Honours, is this, that if one looks at the Defence Service Homes Act, what one sees is that the Act recognises the possibility that events of this kind may have occurred.  It then, your Honours, leaves open as a matter of discretion the courses that will be taken in relation to it.  Now, your Honours, that is a feature which we would submit militates against taking the view that the policy of the law requires that not only should the discretion of that kind be able to be exercised adversely to the persons involved, but also that the other property in question is property to which they are no longer to be entitled by virtue of an inability to enforce their rights in relation to it.

Your Honours, in addition to that, of course, one has the situation that the breaches of the statute could occur - or contracts or agreements to be in breach of the statute could occur - in a vast variety of ways involving varying degrees of seriousness, varying degrees of blame and, your Honours, one might imagine if a person were charged with some offence arising in relation to it that the possible range of penalties might be considerable.

McHUGH J:   I appreciate what you are putting but it all seems to me to be relevant if one was asking what is the intention express or implied in the statute and the same with your references to public policy, but I was rather seeing it from the idea that the Court is being asked to enforce a term of a conveyance in effect which was executed for an illegal purpose.

MR JACKSON:   Your Honour, if I could just say this, that is the setting in which these issues will always arise and your Honours will see, for example, in a case which is an English House of Lords case in Tinsley, to which I will come in just a moment, that that was exactly the setting in which it arose and, indeed, one might have thought a rather more serious case than this, but can I come to that in just a moment, your Honours, because if I could just say that will always be how the issue arises and if one looks, for example, at the question of how the issue is to be resolved, then we would say the issue is one that has to be resolved in accordance with the policy of the law and I have no doubt the policy of the law is one that has as an element what your Honour was putting to me.  But it is plain equally, we would submit, that the answer to the question is one which is not always resolved in that way.

If I could just take your Honours back for one moment to what was said in Yango in relation to that, and I am referring to a particular passage in Justice Jacobs’ reasons at page 432, your Honours will see half‑way down the page his Honour says:

One then enters the field of contracts not themselves unlawful but made for an illegal purpose.....The refusal of the courts to regard such contracts as enforceable stems -

as your Honour said -

not from a legislative prohibition but from the policy of the law, commonly called public policy.  It is of these contracts that Lord Wright said -

Your Honours will then see the passage which I shall not read out again, but what it does indicate, in our submission, is that the issue of course is one of public policy, but the resolution of the issue is one that depends on the particular circumstances involved.

To state the issue in that way recognises that one has to see - and I have used the expression excessively perhaps - what the policy is in a particular case.  I do not really want to say that one ties oneself to the wagon of the statute of course and is dragged along by it but, if one is talking about what public policy is, one is inevitably talking about public policy in the context of a statute, the provisions of which have been the subject of some infringement.

TOOHEY J:   Take a fairly straightforward case of someone who wants to buy a home, is eligible for assistance under the Defence Service Homes Act, applies for assistance and falsely states that he or she has no other home.  The contract is entered into, the vendor regrets the bargain, becomes aware that there has been a breach of the Act and seeks to resile from the contract.  What does public policy have to say about that sort of situation?

MR JACKSON:   This is the vendor?

TOOHEY J:   Yes, the vendor.  In other words, the vendor seeking to take advantage of the purchaser’s contravention of the Act.

MR JACKSON:   Your Honour, it would just be a case, in our submission, where the vendor would not be able to take advantage of that because he would simply have a situation where the purchaser was obliged to complete the transaction.  The illegality, as it were, or the conduct of the purchaser was conduct as between the purchaser and the Defence Service Homes Authority and it would not, in our submission, affect the situation at all.

TOOHEY J:   That is really in a sense what you are putting to us in relation to this, is it not?

MR JACKSON:   In a sense, your Honour, in terms of result.

DEANE J:   Of course, one of the strange things - Justice Dawson and I were just talking about it - about the case against you is that if the daughter had been completely uninvolved in the unlawfulness, Yango, prima facie, would apply.  If you fail, it is because the daughter was involved in the unlawfulness and thereby the arrangement itself was tinged with unlawfulness.  It may be the right result.  It is a strange result though.

MR JACKSON:   I was going to take your Honours just to something in the Court of Appeal.  The Court of Appeal appears to have decided the case simply by the application of a notion similar to that your Honour Justice McHugh was asking about a moment ago, that the appellant mother was obliged to rely on the illegality - I am sorry, it is slightly different from what your Honour was putting to me.  The Court of Appeal appears to have decided on the basis that the mother was obliged to rely on the illegality to establish her case and that the court accordingly would not lend its aid to that course.  That that is so, your Honours, appears in volume 2 at page 504, line 25, in a passage that goes through to page 505, line 15.

Now, could I invite your Honours to note, when looking at that passage, the reference at about line 45, to the fact that their Honours say:

The appellants, in seeking to rebut the presumption of advancement ‑

and that reflects two things:  the first is the view that a presumption of advancement applied as between mother and child and, secondly, it reflects also some observations of the majority in the House of Lords, in the case which I mentioned in passing a moment ago, Tinsley v Milligan (1994) 1 AC 340. May I go to that aspect of the case first, your Honours: Tinsley v Milligan. In that case two people provided the funds for property which was put in the name of one only in order to effect social service frauds. They fell out and the relevant issue was whether a claim for a declaration as to joint ownership could be made out. Your Honours, there was a difference of view and the minority said they claim could not because the claim was inevitably based on the illegal purpose. The majority, and the principal judgment is that of Lord Browne-Wilkinson, took the opposite view. And may I take your Honours to his Lordship’s reasons at page 370.

GUMMOW J:   There does not seem to be much analysis, in this case, of the actual statute.

MR JACKSON:   No, your Honour.  That is correct, if I may say so, but what there seems to have been is to have been a discussion concerning the principle under the general law and perhaps the reason why it was done in that way was because what was thought was that, so far as the Court of Appeal was concerned, they had applied a principle which, it was said, was somewhat heterodox and going further than the cases had gone in the past.  What was done in the case was that the approach ultimately taken was one that seems basically to depend upon, somewhat curiously with respect, the form in which proceedings are capable of being brought.

Now, your Honours, probably the reason ‑ it is right, as your Honour says, that there is not much discussion about the terms in the statute, but it is not really very clear why that was not done, and it certainly, in the light of the question of what the policy was, the House of Lords seems, really, to have adopted a rather broad approach, without looking to see what the particular illegality was.  Now that, your Honours, does not seem to sit very well, we would submit, with a number of matters.  It certainly does not sit very well with what had been said in the Vita Products Case, to which I referred earlier.  Your Honours, at page 370C ‑ ‑ ‑

GUMMOW J:   If I could just interrupt again:  they also seem to have been led, I think, by counsel.  There is some view that unclean hands was some determinative principle.

MR JACKSON:   Yes.

GUMMOW J:   One might have thought, if there is public policy involved, that is it ‑ it, generally, throughout the legal system.

MR JACKSON:   Your Honour, could I just say one thing about the clean hands aspect, and I will come back to this in dealing with the presumption of advancement, as it were:  the approach taken in the House of Lords, in a sense, is one that speaks of clean hands, but goes on to say that one cannot use illegality, in effect, to indicate intention contrary to presumption of advancement.  That really seems not just to be clean hands, but tying one side’s hands behind his back, in effect.  But may I come to that when I deal with the presumption of advancement aspect, your Honours?

Your Honours, at page 370C, his Lordship had been dealing with the question of what was the position under the common law as distinct from equity, and your Honours will see the summary of the position in that paragraph and your Honours will see particularly the fact in paragraph (2):

a plaintiff can at law enforce property rights so acquired provided that he does not need to rely on the illegal contract for any purpose other than providing the basis of his claim to a property right -

His Lordship goes on to turn then to the principles in equity and discusses those in the next couple of paragraphs.  Then in the second paragraph on page 371 - your Honours will see it there set out - there is a reference to the resulting trust notion that is developed throughout half the next paragraph.  Then, just before letter G on page 371:

Where the presumption of resulting trust applies, the plaintiff does not have to rely on the illegality.  If he proves that the property is vested in the defendant alone but that the plaintiff provided part of the purchase money -

et cetera.  Your Honours, I will not read that out but may I invite your Honours to read the remainder of that page to the end of that paragraph at the top of page 372.  If I could just observe in relation to it that if one looks at the bottom of page 371, one does seem to be moving away, with respect, from issues of a high principle - the policy of the law - to questions of how you can prove a case by pushing illegality to one side.  It may be a convenient way of doing it but if one is talking about public policy it perhaps has somewhat less than worthy aspects to it as well.

What that passage does seem to demonstrate, however - and this is perhaps not surprising in the light of the much more statutorily regulated society that exists today - what the passage does seem to be recognising is that there is perhaps not to be attributed to breaches of particular statutes such an offensive force as they might have had in past days.  I said breaches of statutes, your Honour; I am talking about contracts and arrangements of the kind presently in question.  So if one could perhaps put it in this way:  in England, at least, public policy on that issue is one which has become or is now perhaps a little more benign than was the case earlier, recognising your Honours, that perhaps the fundamental injustice in people losing by the accident, sometimes of who sues first, a property.

Your Honours, if I could just perhaps pause to say this:  In the passages to which I have been referring, his Lordship was speaking about the presumption of a resulting trust, but the reasons perhaps give an undue attention to the question of a presumption as such when one comes to apply it to the present case, because the presumption is, after all, the legal conclusion from the state of the evidence.  In the present case there was a specific finding as to intention.

In the House of Lords, however, his Lordship went on to say that although one could succeed by not relying on the illegality in cases of the kind to which he is referring, the opposite conclusion would apply in cases where there was a presumption of advancement because in such cases where there was a presumption of advancement it was necessary for the claimant to prove the illegality to establish the intention.  Your Honours will see that dealt with in the next paragraph at page 372 between letters B and C.  Also at the passage commencing at page 374G, the discussion goes on through the remainder of that page and pages 375 and 376 between letters E and F.

What one has, according to that decision, is a situation where one can rely on one presumption, as it were, or take the advantage of it by providing some limited facts.  If a person seeks to raise illegality then that will not matter, so that is not a matter of substance.  One then has a situation that the reverse will apply if there happens to be a presumption of advancement, because that presumption is applied and one then is prevented from leading evidence to show what the true situation is.  The presumption, which we submit elsewhere, plays an equitable presumption, is applied without any regard to what the true situation may be.

Your Honours, Mr Justice Sheller observed upon the somewhat odd nature of this view in his reasons at page 502 at lines 10 to 21 where really what his Honour is doing is simply indicating a slight paradox about it.

GUMMOW J:   But the reference to Martin v Martin perhaps puts the finger on the point.  There has been a conveyance: someone appears to own it on the face of it.  The question is, is there any circumstance which requires one to say that that person is not also the beneficial owner or that the beneficial title is somewhere else?  All sorts of ideas come into play and one is resulting trust, one is presumption of advancement and over the top of it all must be the public policy notions which apply generally throughout the law.

MR JACKSON:   Yes, your Honour, that is why the approach taken in Tinsley is an approach which has a number of deficiencies in a sense; one being that the substance of the matter in the first place appears really ignored.  It tends to become a question of form and the application of presumptions.  The second is that the test is one which is really unrelated to public policy and, your Honour, no matter how much one tries to identify some reason for the existence of the principle at all, it must come down to the view that public policy requires that a particular transaction not be able to be enforced in courts.

Your Honours, that does mean that one has to look to see what the public policy is and in trying to identify that one would think that would not have a public policy which ended up with sanctions, if I could use that expression, which first of all are arbitrary because they would apply in every case by the application of the one side of it or the other side. 

The second thing would be one would not expect public policy to be reflected in results that are far in excess of anything that the circumstances might warrant and the third thing is, your Honours, that one would not expect public policy to apply, for example, to matters seeking to undo not effectuate, an illegal purpose, for example, trying to bring things back to what the true situation is, apart from theillegal purpose.  But, speaking a little more largely about it, your Honours, the central issue, one would think, in the existence of the doctrine is to identify a reason for not enforcing the transaction and the reason, in our submission, must be one that depends on what the policy is.  Your Honours, I will not go over how one arrives at that, which I have perhaps spent too much time on.

Your Honours, the next thing I would wish to deal with in this connection is the notion that if the presumption of advancement is applicable, the person seeking to displace it cannot rely on the true situation.  Your Honours, the presumption of advancement amounts to a procedural - perhaps that is not exactly the correct word - amounts to a procedural advantage to persons who have the benefit of it.  But, your Honours, the existence on that presumption as a matter of equity should not have the effect, in our submission, that it is to be applied rigidly, not just to arrive at a particular result in a particular state of evidence, but also, so that it does not permit an examination of the true facts to see whether the presumption is applicable.

What I mean by that, your Honours, is that the approach taken in Tinsley has the result that if the presumption of advancement applies one cannot by reason of the illegality identify what the true facts are in order to see what the true intention was.  The presumption applies and according to that decision the other side is then prevented from adducing evidence to show that the presumption should not in fact apply.

DEANE J:   But is there not a concealed problem here and that is that all this only applies if the party who gets the benefit is involved in the illegality in that - I mean, assume here that the daughter was not involved and the mother said to the daughter, “For reasons of my own I want this transferred into your name but let it be clear you are going to hold it on trust for me.”  There could be no question of the mother’s ultimate illegal purpose preventing her coming along and giving evidence of that conversation, I would have thought, because all that could be said, “Without relying on or even referring to your illegal purpose, you have proved there was an express trust but you cannot prove that because somewhere down the lane you had an illegal motive for doing what you did.”  On the other hand, if, as I presume was the case here, the assumption is that the mother says to the daughter or the daughter says to the mother, “Let’s do it this way and that way you can get a war service homes loan”, somehow it is all different.

MR JACKSON:   Yes.  Your Honour, that seems to derive I suppose from notions such as that if there is illegality then the loss lies where it falls and so on, but how one gets to that notion in the first place is that the notion itself is, if I could use the express again, one which is intended to reflect what public policy should be or what the courts have decided public policy should be.  Your Honours, that is where, we would say - and I am speaking particularly in relation to the question of the application of the presumption of advancement in the way in which the House of Lords suggested it might be applied.  If it does emerge that the two parties were aware of the true nature of the transaction, what equitable justification could there be for applying a presumption in favour of one rather than seeing what emerges from the true facts?

Your Honours, could I just say then in relation to Tinsley v Milligan finally what we submit in paragraph 12 of our outline of submissions which, in effect, I think, summarises what I was saying a moment ago.  We would then seek to say that if one is to look at the particular circumstances, then the circumstances which favour enforcement of the trust are those which we set out in paragraph 13 and your Honours, I shall not go through the detail of those, but that is our submission in relation to that.

Your Honours, that really takes one then to the question whether the presumption of advancement was applicable at all, that is the question we have foreshadowed and is referred to in paragraph 9(a) of those submissions.  Your Honours, the position in that regard is that in, for example, Calverley v Green 155 CLR 242, at 247, one sees Chief Justice Gibbs referring to the fact that the presumption was thought not to apply as between mother and child. That is about point 4, towards point 5 on the page and immediately before the reference to Bennett v Bennett and Scott v Pauly. 

The Court of Appeal in the present case, of course, followed a decision of the same Court in which it was held that the presumption could apply, although it was held not to be applicable in the particular case, in Brown v Brown (1993) 31 NSWLR 582 and may I take your Honours to that. The principal reasons for judgment were those of Chief Justice Gleeson with whose reasons Mr Justice Cripps agreed and if I could start at page 588, your Honours will see between letters C and D there is a reference to Calverley v Green and the presumptions dealing with beneficial ownership of property purchased in the names of others. Then, your Honours, at page 589 between letters C and D, there is a reference to the presumption of advancement and your Honours will see particularly in the third line, his Honour says:

There are exceptional cases, usually described by reference to a certain relationship between the parties, where equity assumes that the proper inference ‑

and so on.  I refer your Honours to the description of it as an assumption.  There is further discussion then about the presumption of advancement generally and then one comes, your Honours, to page 590 and near letter C, a reference to your Honour Justice Deane in Calverley v Green indicating that the categories of relationships ought not to be closed and recognising the need for adjustment.  Your Honours, I have to say we will be suggesting the adjustment should, perhaps, be the other way, but what is put there may be a view of what your Honour said as distinct from what your Honour intended to convey.  Then, your Honours, about letter E:

The relationship between a mother and child has, in the past, been held not to give rise to the presumption of advancement.

Then there is a quotation from Scott v Pauly.  We come then to page 591, the paragraph commencing between letters B and C.  His Honour says:

In the social and economic conditions which apply at the present time the drawing of a rigid distinction between male and female parents, for the purposes of the application of the presumptions of equity with which we are concerned, may be accepted to be inappropriate.

He went on to say that the same probably applied in 1958.  So, your Honours, that is what was said in relation to the question that it was applicable to mothers as well as to fathers.

The reasons for judgment of the other member of the court, Mr Justice Kirby, commence relevantly at page 596.  Your Honours will see the heading “The presumption of advancement:  a suggested discriminatory rule” and the tone of that reflects essentially the way in which his Honour dealt with the issue.  Your Honours will see about letter D a reference to the assumption that the presumption was not applicable to female parents.  If one goes to page 598 in the paragraph commencing at letter C, there is probably a passage which shortly sets out the substance of what his Honour said, that whilst the presumption of advancement continued it should be applied in a gender‑neutral way, with the result that it was capable of applying to both.

Your Honours, the question whether the presumption of advancement should apply as between a mother and her children is no doubt a matter on which the Court is entitled to take its own view.  The question whether there should be adopted such a view is one which must be looked at in the light of the social circumstances in which people in Australia now find themselves, circumstances significantly different from, whilst bearing some similarities to, those which existed at the time when the notion of a presumption of advancement was brought about.

We would submit, as we do in, I think, paragraph 15 of our outline of submissions, that there is really no compelling reason why there should be an extension of the presumption of advancement to the position as between mothers and their children.  Indeed, the operation of the presumption as between fathers and their children should in modern conditions be not given any extended and, perhaps in cases where it arises as a practical matter, a more limited operation.  One has a situation, as we have put in paragraph 16, where the range of relationships between spouses and their children, former spouses and their children, the position where the workforce and its composition has changed considerably, brings about a situation where it is undesirable, we would submit, to make a prima facie assumption into a presumption applicable in proceedings between the parties.

McHUGH J:   But does that not throw up the whole problem about the so-called presumption of advancement.  It is a misnomer.  It is not a presumption at all, it is rather a reason for rejecting a resulting trust.  So it operates negatively rather than positively.  If a mother puts property in the name of a daughter or son, why would one as a matter of ordinary reasoning and experience infer that there was a resulting trust for the mother?  The ordinary assumption would be that it was a gift.

MR JACKSON:   If the basis for saying that there is the resulting trust is simply that the money was provided by the mother it may simply be that the mother was providing a home, for example, without there being any intention that the beneficial ownership in the home should be in the children.  It may be, for example, that the mother is, as the parents in this case did, going overseas.  Intending to go overseas for years and saying, “We will put the property in your name”, but not contending to convey by that that the property is to be theirs beneficially. 

I would not want to contest the fact that in many cases one would see if money is provided for a purchase by children that it is to be used in a number of ways.  One is by way of gift; very frequently indeed, one might think, by way of loan.  It may be done very informally, but the mere fact that money is provided in order to make the purchase does not inevitably, in our submission, most often even, lead to the conclusion that when the purchase is made in the name of the child it is to the child ‑ and some of the children are pretty big.

McHUGH J:   I know, but you would say the same thing in respect of the same transaction when it is the father.

MR JACKSON:   That is why we really say in paragraph 15 that it is not the case for extending the presumption of advancement, it is a presumption which has a slightly Victorian air about it ‑ and I am not speaking, of course, geographically ‑ and in relation to it, it is something which really has become a little dated.  I do not want to labour the point unduly.  What you have is a situation now where one has many members of families in workforces, one has members of families spread out between three and four households, perhaps because of marriage break‑ups, all sorts of things.

McHUGH J:   I know but what you are relying on is a fact of property being transferred from A to B or property being transferred into the name of B and A providing the money.  Why, in those circumstances, if that is all you know and the relationship is mother and daughter, would you not infer it was a gift?  You can quickly prove that it was not, that it was a loan or something.

MR JACKSON:   Your Honour said I am relying on that.  I am relying on that really only as second best.  There is a finding as to intention in this case based on oral evidence as to what happened.  It is not just a question of paying the money over.  So there was a specific finding that the intention was not that she have - --

McHUGH J:   I know but your problem is that the cases below say that you cannot prove what the real intention was because of illegality or unlawful purpose.

MR JACKSON:   Your Honour, that is the point I am seeking to attack and seeking to attack really in two ways in saying that - perhaps if I could say one starts, although I have been doing it second, at the anterior question:  is there a presumption of advancement?  Your Honour, perhaps I could go back another stage.  We would say that the Court should, to the extent to which it is relevant, treat Calverley v Green as being as entrenched today as it was at the time when the case was heard about 10 years ago I think.  That is the first thing.  Assuming that does not change, one then comes to a situation where the next question is, “Does the presumption of advancement apply?”, and, your Honours, what the Court is being asked to do in relation to the presumption of advancement so far as it applies to mothers is to say that the assumption should be made so that it is applicable as a prima facie rule.

Now, your Honours, whether one says at the end of the day after the evidence or however one says it, what it comes down to is that it is a rule which is the prima facie rule and we would submit that it is undesirable for the Court to do that, to impose an assumption in the circumstances of Australia at the present, some of the aspects of which we referred to in paragraph 16.  But, your Honours, what we would then say is that in any event it is not an appropriate thing to do, to be applying a presumption like that to the advantage of one party - and one is speaking in equitable circumstances.  It is inequitable to do it, we would say, to apply it not merely as a rule which affects the result in terms of the conclusion to be drawn from the evidence, but also as a rule which goes beyond that and prevents evidence being given and that is really the point at which the

decision in the House of Lords gives the presumption of advancement an added twist.  Your Honours, if I could just say one other thing which I said a moment ago and that is that, apart from anything else, we do have the particular finding and it would only be if we were prohibited from relying on that because of the presumption of advancement theory in Tinsley.

Now, your Honours will see, as we submit in paragraph 18, the facts were such that they were inappropriate, we would submit, or they demonstrate how inappropriate it is for presumption of advancement to be applied across the board, as it were, in cases of the present kind.  Your Honour, perhaps I should just say, in response to your Honour Justice McHugh, in Brown v Brown 31 NSWLR 591, between D and E, Chief Justice Gleeson made some observations about circumstances which are germane here.  He said:

Moreover, where a widowed mother, of modest means, makes a payment of substantially the whole of her assets to contribute to the purchase of real estate, and legal title to the real estate is vested in her adult, able‑bodies sons ‑

and your Honours will bear in mind the daughter, in this case, was working and was a person who was earning a salary for the family ‑

the facts seem to me to point against an intention of advancement.

So that, your Honours, if I could just say, the view that your Honour was putting to me is not one, with respect, that might universally be held.  Your Honours, those are our submissions.

DEANE J:   Thank you, Mr Jackson.  Yes, Mr Coles.

MR COLES:   Could I hand to your Honours copies of an outline of the first respondent’s argument.  Could I hand up with it, your Honour, a chronology which our side has prepared.

DEANE J:   Yes, Mr Coles.

MR COLES:   If your Honours please.  Your Honours, the courts below applied a principle of equity which, in our submission, does not depend and did not depend for its application on whether any statute, if a statute were indeed the basis of the illegality, evinced any intention to effect, or otherwise, the creation or operation of a trust.  The Court of Appeal had available to it and, indeed, the principle of equity involved two possible forms of expression:  one, what seems to be now to be known as the wider view; the view which now no longer appears to commend itself to the House of Lords, which is simply the view a court of equity will never enforce an equitable proprietary interest at the suit of a party to an illegality. 

The narrower view, which was sufficient for the disposition of the case in the Court of Appeal, was simply that the claimant, in this case, seeking to establish the resulting trust, and to prove that it was the claimant’s intention that the disponee take as a trustee, if that claimant needed to rebut a presumption of advancement, or, we would say something very much like it, then that rebuttal was precluded in circumstances where it was necessary to reveal the illegality to the court, and the relevant public policy involved, in our respectful submission, is not the public policy discerned from an analysis of the statutory provisions, which can be pointed to as leading to the illegality; rather it is an illegality ‑ or to be more accurate, is a public policy, which simply identifies a purpose that really all statutes should be observed, and that any endeavour to defeat the operation of any statute is against the public policy, and one does not stay or stray to examine the internal content of the statute.  The public policy is sufficiently apparent if one filed ‑ the public policy is sufficiently infringed if one finds an illegal purpose involving an attempt to defeat the operation of any statute.

That is one aspect, in our respectful submission, of the relevant public policy.  The other aspect of the relevant public policy is simply this, that one cannot come before a court in circumstances where one needs to say to that court, I have committed an illegal act and I have found, either by reason of the nature of the cause of action or even if only by reason of the nature of the evidence, requisite to establish the claim, if one comes forward and says, “I found my claim on this illegal act”, then public policy sets itself against that claim and against the foundation of that claim.  That is simply because, in our submission, one cannot thrust in the face of a court of equity one’s own illegality and expect the court to respond without embarrassment or concern and, indeed, to excuse or overlook or to countenance or, at the end of the day, simply to dispense concern with the illegality that has been involved.

In the present case, of course, the Court of Appeal put the matter on the narrower basis, that is to say that it was necessary for the plaintiff in the proceedings to establish that she did not intend a gift to the recipients and to establish that she intended that they should, in fact, hold the property on trust for her.  If that had been all her intention, of course, then that would not matter and she would have had, at any particular time, until she put the purpose into effect, an opportunity to recant but in the events that happened, the unlawful purpose which was clear and the references to the findings of the Master who heard the case at first instance are set out - I will not read them to your Honours but they are set out in paragraph 2 of our outline of submissions and that makes it quite plain that the plaintiffs’ unlawful purpose was carried into execution.

The distinction, in our submission, between those cases where the plaintiff is obliged, on the one hand, and is not obliged, on the other, to lead evidence disclosing that the claimant’s only legal purpose is very well established, in our respectful submission, it fairly follows from quite a number of the passages to which your Honours were taken earlier this morning by my learned friend, that where it is plain that the rebuttal of the presumption or, if one likes to call it inference of gift, necessarily involves a disclosure of the purpose which the transaction was designed to serve, then the plaintiff is simply precluded from relying on that circumstance.

Indeed, that is so, on the authorities, in our respectful submission, is necessarily so even in situations where the Court comes to the conclusion that there was but for the circumstances involving the plaintiffs being required to rebut the presumption, there is finally established to the satisfaction of the Court what otherwise would be the existence of the resulting trust.  For example, in cases where defendants have sworn that they were entitled beneficially to the interest of which they are the registered owner and have been disbelieved, nonetheless the plaintiff has failed in circumstances where the plaintiff has needed to put forward the plaintiff’s own real purpose to explain away what otherwise appears to be a gift. 

One of the cases we referred to - and I do not stay again to take your Honours to it unless necessary - is the Privy Council’s decision in Chettiar, where the circumstances appear to have been that the defendant legal owner did not really turn up at court - was prevented, apparently, from contesting the proceedings, themselves.  In effect, even on the plaintiff’s own case, in effect, without credible contradiction, the plaintiff was obliged to displace the inference that he had made a gift, and therefore failed once it became apparent that his purpose was an unlawful one.

In our respectful submission, that is the principle which the Court of Appeal applied in the present case and, indeed, it is significantly the basis upon which the proceedings appear to have been conducted, both at first instance and on appeal.  The question then, your Honours, whether the statute has anything to say about that principle ‑ the statute itself which is the occasion or the motivation for the illegal purpose is, in our respectful submission, to be answered in the negative.  We put a number of matters, your Honours, as to why one would not, in effect, elide what is essentially a principle of property law by reference to principles of invalidity of contracts, depending on whether they are made expressly or by implication, in contravention of the provisions of a statute.

As I say, in our respectful submission, in the period over several hundred years during which the principle on which the respondent’s case succeeded, nothing indicates that it has ever been thought appropriate or necessary to examine whether the illegality itself was an illegality, either statutory on the one hand, or for that matter, non-statutory;  whether, if statutory, it carried with it significant penalties or slight ones;  whether it exhibited any particular disposition on the part of the legislature to facilitate recoupment;  whether it did any more, in other words, than ‑ unless, of course, the situation were one where the statute, in a most unusual case, actually prohibited the creation of the interest itself.

TOOHEY J:   Well, Orr v Ford would be one exception.

MR COLES:   Exactly.  Orr v Ford and Garrett v L’estrange are the only cases one can readily point to which stand quite apart from the propositions which, in our respectful submission, govern the present appeal because Orr v Ford, after all, is a case where there is a statute which declares legislative intention expressly in connection with the operation of a trust relationship in connection with the acquisition of interests in Crown lands and there it is distinctly held ‑ in Orr v Ford, of course, this Court held that on the true construction of that statute, the express trust created in that case was not defeated. 

Significantly, though, we point out the Court went on to say that that left really unanswered what might have been the case had the parties been relying on a resulting trust because your Honours accepted in Orr v Ford what was said as long before, I think, in 1911 in Garrett v L’estrange to which there is a reference in the notes, that there really cannot be a resulting trust arising in the face of a statute.  That is to say, that is a situation where there is a statutory provision which, in terms, forbids the creation of a statute.  It will apply, in that event, to forbid the creation of a resulting trust.

But, where the statute is absolutely silent, as indeed is the present statute and, as indeed, are virtually all statutes ‑ Orr v Ford being an instance of a quite special case ‑ where the statutes as is ordinarily the case say nothing at all about the creation or performance or execution of trusts, then no occasion arises for regarding statutes as doing more than they say.  That is to say, they are simply silent on the topic of trusts and thereby, there is left to be subsumed under a separate principle, what is a situation ‑ ‑ ‑
GUMMOW J:   They are often silent on the question of contracts, so I do not quite see where this all goes.

MR COLES:   The proposition really is this, your Honour:  when one is looking at a case ‑ and Yango is, of course, a particular instance ‑ one is really looking at the question whether legislation which purports to govern a particular activity applies to render activity in contravention of the provisions prohibited.  Most regulations of activities are, more often than not, directed to contracts, although some are occasionally directed to trusts.  In my submission, it has never been necessary to discern ‑ ‑ ‑

GUMMOW J:   The whole of the Sherman Act is all about mischievous use of trusts. 

MR COLES:   In any event, we say that there are quite a number of areas of distinction between the situation of the trusts, on the one hand, of the present kind and the type of illegality which is discerned from, in effect, finding out what was the intention of Parliament evinced by the legislation.  This case, of course, unlike the typical Yango Case is not a case of disobedience to a statute, it is a case of conduct performed with the intention of defeating or preventing the operation of a statute rather than infringing its actual terms.  The statute contains, of course, nothing that penalises directly the particular type of conduct in the present case, and we set out a number of short reasons why types of distinctions can be drawn. 

We put, your Honours, that the type of principle enunciated in Yango is really concerned with whether a contract is contravening a statute and whether a contract so contravening can be enforced.  On the other hand, the equitable doctrine is concerned with the enforceability of a transaction which is entered into to defeat the law; the latter, as often as not, usually being a consummated transaction, the former, equally as often as not, being very likely the executory one. 

The penalty, as I put to your Honours, that is otherwise reserved by the law for the breach of the statute has never been in the trust law context ever so far as the cases of the present kind are concerned have never been noted as being a relevant consideration.  The type of case, your Honour, that has commonly been looked at, which includes cases where the intention to defeat the operation of a statute is revenue statute, never stays to consider what otherwise is the sanction which Parliament imposes for the purposes of punishing conduct when the actual illegal purpose is achieved. 

In the present case, therefore, your Honours, we summarise our view on the application of the Yango principle in effect quite shortly by saying the public policy consideration relevant in the present case is really a public policy consideration that is already identified and already fixed, that is, that policy is that people should not conduct their affairs or enter into transactions for the purposes of frustrating or defeating the operation of a statute and they cannot recover if they do.  That is one discrete identifiable and specific policy and that policy does not and never has depended on the construction or meaning or effect of the particular statute itself, that is to say it is not a policy to be discerned from the particular legislation.

It was put to your Honours that one has to discern or one has to establish that the relevant policy ultimately comes from somewhere or emanates from some source.  One identifies that policy, in our respectful submission, in the body of law which describes and underpins the principles presently applicable, that is to say the policy is already fixed, it has already been identified and it needs no further elucidation or no further examination in terms of the content of any statute for a discernment of whether the policy consideration has been infringed or not.

While on the topic of the statute, your Honours, it is probably appropriate to put at this stage what we say about certain features of the case put against us.  In our respectful submission, it is hardly surprising that the statute in the present case in any event contains provisions for cancellation of the arrangement or recovery of the moneys or the subsidy advanced.  In our respectful submission, that is no more than a simplifying or enabling power.  It is true, on the other hand, that the legislature has not left contravention of the statute in criminal terms a complete legal vacuum.  The very form which was filled out in the present case itself draws attention to the heavy penalties under the Statutory Declarations Act of the Commonwealth.  In addition, your Honours, there are a number of other ‑ ‑ ‑

DEANE J:   Where is that, Mr Coles?

MR COLES:   I think a copy at page 414 of the appeal book contains a note in the right‑hand column at line 40 to the effect that:

A person who wilfully makes a false statement in a Statutory Declaration.....is guilty of an offence -

and liable to various fines or the prospect of imprisonment, including the prospect of prosecution on indictment.  It would be possible to identify other statutory provisions in the criminal sphere which might be applicable.  Apart from section 11 of the Statutory Declarations Act, they include ‑ ‑ ‑

DEANE J:   Except it is a bit hard to make much of that, is it not, in that unless there was some evidence, one would be inclined to assume that the woman would have had no idea that she would be making a statutory declaration at the time of the transaction.

MR COLES:   One would assume that at the time of the transaction the intention was to do all things necessary to effectuate what they were on about and if that involved the signing of a statutory declaration, that was presumably ‑ ‑ ‑

DEANE J:   That is of limited convincing force in that certainly it did not involve if the manager suspected she had other properties that she was shooting him to get rid of him.

MR COLES:   No, quite right, your Honour.  It is of limited force in this sense, your Honour.  It illustrates firstly that one, of course, does not always find legislative intention in terms of the performance of obligations and the observance of provisions in statutes necessarily within the statute itself.  One may often have to look elsewhere.  Secondly, it shows that, in terms of the present statute, the sanctions for its violation - and this is really the same point - go beyond the mere opportunity on the part of the Secretary or the Department to reclaim the moneys it had advanced.

GUMMOW J:   Are there any other sections you want to give us?

MR COLES:   I was going to refer your Honours to section 29A.

GUMMOW J:   These are of the Crimes Act?

MR COLES:   The Crimes Act, yes.  Section 29B, is probably more accurate, your Honour, of the Crimes Act - I will just give your Honours the sections - and perhaps section 29D.  Section 86 of the Crimes Act creates defences of conspiracy.  They appear to be the principal serious offences, your Honour.

GUMMOW J:   So it is sections 29B, 29D and 86.

MR COLES:   Yes, your Honour, and of course, section 11 of the Statutory Declarations Act itself.

GUMMOW J:   Yes.

MR COLES:   Yes, my attention is drawn to section 29A as well, your Honour, which provides for punishment for obtaining money by false pretences from the Commonwealth.

One is not asserting, I emphasise, your Honours, that any one or more of these offences were necessarily matters to which the parties in these proceedings rendered themselves liable for prosecution under; one merely draws attention to those sections in connection with the wider operation of the legislation itself.

If I can come back then, your Honour, to what we say about the operation of the equitable principle, in our respectful submission, whenever the topic has been considered or touched upon by decisions of this Court or in the UK, its operation has been recognised firstly in the manner in which the Court of Appeal recognised it and, secondly, without any regard to the content of the statute if that was the basis of the illegality.

Is it convenient to take your Honours to some of the decision?

DEANE J:   Perhaps we might do that after the luncheon adjournment, Mr Coles.

MR COLES:   If that is convenient, your Honour, yes.  Thank you, your Honours.

DEANE J:   The Court will adjourn until 2.15.

AT 12.46 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.16 PM:

DEANE J:   Yes, Mr Coles.

MR COLES:   If your Honours please, before the luncheon adjournment I foreshadowed I would give your Honours short references to what I submit are at least three cases, decisions of this Court, where it is implicit that if the relevant unlawful purpose had been carried out then the Court would have denied to the claimant any recovery under a resultant trust.  I mention them shortly, your Honours.  The first is Payne v McDonald (1908) 6 CLR 208, relevantly, your Honours, particularly at page 211 in the judgment of the Chief Justice it was said at about point 5 on the page:

I apprehend the principle is that the Court will not assist a party to carry out an illegal transaction - that, if, in the course of the plaintiff’s story, the relevant facts show an illegal transaction, the Court will not assist him.

And he went on to quote other authority.  That was a case where land was put in the name of the person’s mother for the purposes of defeating creditors.  It did not preclude in that case the reliance on the trust for the simple reason that the only exception which in our submission is acknowledged was made good, that is to say the illegal purpose was not by the time of the claim carried into effect.

The second case to which I would refer is Donaldson v Freeson (1934) 51 CLR 598. That was a case of a man who put property in the name of his wife for the purpose of avoiding tax. Again, the illegal purpose was not carried out. Again, in our submission, it is implicit that if the purpose had been carried out, the result would have been otherwise. The wider view of the topic, that is to say the view now no longer espoused by the majority of the House of Lords and espoused by Lord Goff in the minority, is in some respects apparently supported in the judgment of the Chief Justice and Mr Justice Starke. I simply give your Honours a reference to page 610. So far as the particular proposition in the present case is concerned, can I invite your Honours’ attention to what Mr Justice McTiernan said, particularly at page 616 in the passage commencing:

Donaldson denied that he had the property conveyed to his wife as a dummy for him -

and his view was accepted.  His Honour particularly at 617 said this at about the sixth line on the page:

It is true that, for the purpose of proving that the property was conveyed to the wife with the intention that she should be a trustee and not a beneficial owner, it was necessary for Donaldson to confess that he intended to carry out an illegal purpose.  His statement of this illegal purpose is evidentiary, but is not the foundation of the suit.....although there the plaintiff had to prove as part of his case that he had entered into an illegal contract; he did not, however, seek to recover upon it.  . . . The law is in favour of undoing or defeating an illegal purpose, and is therefore in favour of the recovery of the money before the illegal purpose is fulfilled, not afterwards.”

Again, your Honours, in my submission it is implicit that, had the illegal purpose been effectuated, the recovery would have been denied.  To like effect, in my submission, is the relatively more recent decision of the Court in Martin v Martin (1959) 110 CLR 297. That was a case where, shortly, the husband put into the name of his wife some real property with the purpose of, amongst other things, avoiding liability for land tax. In the end, it can be accepted that most of what was said in connection with the relevant discussion is probably obiter dicta but the statements of principle are, in our respectful submission, in point and again, it can be accepted that, had Mr Martin indeed carried his unlawful purpose into effect, the inevitable result must have been that he would have been denied recovery on the basis of the resulting trust.

Can I invite your Honours’ attention to the last paragraph on page 303:

In the end Martin’s case depends upon the correctness in the foregoing circumstances ‑

a little further down:

It was of course for Martin to make out positively that his wife did not take the land beneficially but as a trustee for him.  As she was his wife the fact that he found the purchase money for the land raised no presumption in his favour of a resulting trust as it would or might have done had she been a stranger.  The presumption is in her case that the beneficial ownership went with the legal title.  It is called a presumption of advancement but it is rather the absence of any reason for assuming that a trust arose or in other words that the equitable right is not at home with the legal title.

GUMMOW J:   Well, that is the passage referred to by the Court of Appeal in this case.

MR COLES:   Yes, indeed.  If I can add one further reference, it is also a passage referred to by the then Chief Justice in Calverley v Green, I think at page 247. That passage is, in our respectful submission, important when one comes to consider the question of presumptions. Whilst I may also give your Honours references elsewhere in Martin v Martin, there is a discussion about the burden of proof as being firmly upon the person asserting the trust to show that the trust was intended. That appears on page 304. Then there is a discussion at page 305 and over the page as to the, in effect, dual or amphibolous ‑ as it is described ‑ nature of the phenomenon arising when a person puts property in the name of another. The statement of principle, however, half-way down page 305, is to this effect:

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 inquiry 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. 

And there are references to earlier decisions of the Court.  

In the present case the purposes by which Martin claims that he was actuated, though involving thoughts of evading land tax if ever he might otherwise become chargeable, and of avoiding the operation of other controls, were all nebulous and in fact lay in future possibilities ‑ - -

McHUGH J:   Does that mean that if the trust, or contract, is designed to carry out an illegal purpose, no matter how trivial the offence is, equity will not lend its aid to enforce the trust?

MR COLES:   Yes.  The reason why one must answer that affirmatively is this, that none of the cases focus upon the gravity or for that matter the proportionality of the offence involved when they are considering the particular principle.  In other words one would really put this, that questions of the significance otherwise of the actual illegality do not appear to enter into the consideration of the operation of the principle, if the illegal purpose,  it being rather more the purpose than the bare fact of illegality that seems significant.  If the purpose is an illegal one and it is not recanted from or resiled from before it is put into effect then recovery is denied.

Again, we would say, your Honours, that it must inevitably flow from Martin’s Case that had the unlawful purpose been actuated, then recovery would have been denied.  Martin’s Case, your Honour, draws attention in the passage noted at page 303 to the proper manner in which one would regard the expression of presumption.  In our respectful submission, in this case the position is really that whether one calls it a presumption of advancement or simply an essential evidential burden for the plaintiff to overcome, the position is identical. 

Even if your Honours were eventually to hold that there is not as such an independent presumption of advancement deriving from the relationship of mother and daughter, in our respectful submission, that would not particularly make any difference in the circumstances of the present case because it is our submission that the plaintiff in any event had to assume a legal burden, a component of which of course required her to deal with the significance of the relationship between herself and her daughter.  She necessarily bore a forensic burden to establish her case and of course a burden to establish that she provided the property intending it to be held on a trust.

A number of features would have told against that as a matter of fair inference, and one may in this context use the words “presumption” and “inference” as virtually interchangeable expressions, in our respectful submission.  Firstly, one would ask why, having regard to the age and relationship of the parties, would one have assumed that it was the intention of the mother to vest property in her daughter and her son upon terms that they would hold it on trust for her.  The more natural inference would be that a gift was intended.  That is so particularly in the case of, as in this case, a widowed mother.

May I remind your Honours, without taking your Honours to the authorities, there is an observation by Mr Justice Isaacs in Scott v Pauly to the effect that whatever considerations may have been apparent to suggest that there is no presumption of advancement as between mother and daughter, those considerations would be of less significance in the case where the father is deceased.  Putting that to one side, in the present case the plaintiffs’ forensic burden involve not merely an explanation of the position so far as the relationship was concerned, but it involved of necessity an explanation from her as to why it was that there was property in the name of other persons - title registered in their names in effect - which the plaintiff claimed.

In the present case, both as a matter of practicality and as a matter of actuality, the plaintiff realised the forensic burden she had and, indeed, her evidence in‑chief - and I think this may have been her first affidavit - is at page 105 of the appeal book, your Honours.  She set out in‑chief her position and this appears in paragraph 18 of her affidavit, about half‑way down the page near line 30.  She said:

It was my belief at the time that I was purchasing the Bent Street Property that it would be my home.  The house was purchased with money which came from an account which my husband and I had at the Westpac Bank at Haberfield.  The reason why I allowed my children’s names to be put on the contract was that my husband and I could then use the war service home loan to buy a permanent residence.

She goes on to describe the terms of the loan.  So it was put and, in our respectful submission, necessarily put by the plaintiff as, in effect, to the forefront of her case as a perceived necessity in point of discharging the forensic burden upon her, a perceived necessity in her very first affidavit.  There is a wave of affidavits of course that ensue, but her very first affidavit puts this matter forward.  It is not a case, as might be perhaps more often encountered in the case of illegality of a statutory kind in relation to a contract, where the matter is raised by the defendant as a defence.  This is a position where the plaintiff puts the matter forward in‑chief, as it were.

Of course, in our submission, the plaintiff needed to explain not only the state of the title in the context of the relationship between the parties, but she had, after all, herself made an admission which necessarily needed to be explained and dealt with.  That was of course the admission in the very document which appears at page 412 of the appeal book and which I have mentioned this morning.  That is in volume 2, your Honours.

She had made a statement capable of attracting the type of analysis that warrants the word “amphibolous” as used in Martin v Martin, that is to say, she had stated ‑ it is very hard to read ‑ but, in page 412 of the book, volume 2, at line 15, one of the questions one is obliged to answer in support of one’s application to the Secretary for the Defence Service Homes subsidy advance, is something to this effect, I think, your Honours:

Do you or your spouse own or have a financial interest in a house or dwelling other than the one for which a subsidy is sought?

And she answered that “no”.  Now, of course, on the Martin v Martin analysis, one might say it would have been a perfectly lawful thing for her to have put the property in her children’s name, intending them to take it beneficially, so that she could give an honest answer to that question, in which case, her claim to recover on a resulting trust is erroneous, misconceived and would be defeated.

Alternatively, she must explain the fact that she has made an admission in a document issued for an advantage to herself to the effect that she has no such interest.

DEANE J:   It is a pretty obvious explanation, though, is it not, that she was telling a lie?

MR COLES:   Exactly.  But, that is the very point why she has to say in her affidavit, “I was telling a lie”, otherwise she does not explain why - as this Court put it in Martin v Martin, she does not explain why it is that the beneficial interest is not at home with the legal title.  So, she needed, as a matter of evidence, to proffer those explanations.  Now, in those circumstances, your Honours, in our respectful submission, it matters very little whether one describes this process as a rebuttal of a presumption of advancement or whether one describes it in more practical terms as simply a reasonable forensic perception of a burden of proof in the circumstances of the case.

Your Honours, that then brings me to the question of the presumption of advancement in its perhaps more strict sense.

DEANE J:   Mr Coles, is there anything that indicates whether, in this category of case, the transferor or the person who has provided the money, can give evidence of intention simpliciter?

MR COLES:   Yes, there is, your Honour.  I think one will find that, if not in Martin, perhaps in Charles Marshall v Grimsley.

DEANE J:   It was implied in one of the passages you showed us where it said you can give evidence but then to, as it were, buttress or explain it.

MR COLES:   Yes, there are a number of passages, your Honours, and perhaps the best collection of them or the latest collection of them is really in Tinsley v Milligan.

DEANE J:   Where does all this stop?  What if there are mixed motives, if in this case the lady’s predominant motive had been to put it in the name of the daughter because she was not strong enough to stand up to the demands of her husband but a subsidiary motive was that it would enable her to mislead the War Service Homes people?

MR COLES:   In my submission there is no reason in principle why one would dilute the significance of the illegitimate motive merely because it was accompanied by a motive of perfectly lawful or common variety.

DEANE J:   I see.  How does it work?  She gives evidence.  She says, “My intention was to retain the beneficial ownership.”  She is then asked, “What was your dominant motive?”, presuming she can understand that, and she answers quite truthfully, “My dominant motive was if the property was in the daughter’s hands I knew she was strong enough to stand up to my husband,” and that is the end of her evidence in‑chief.

MR COLES:   Your Honour, no case of which we are aware has had to grapple with the problem of dominant motives.  It is perhaps just as well in the present case that it does not either because in my submission there is no suggestion of duality or multiplicity of motives, whether one be dominant or subordinate, in the present case.

DEANE J:   But it becomes fairly relevant, does it not, when in a case like this there is nothing illegal in the transaction?  She can give evidence that she intended to retain the beneficial ownership and if she stops there that is that, but it is then brought out in cross‑examination “and your reason was this” or “your motive was this”, where the only illegality on one approach is that she had an illegal motive for doing legal acts .

MR COLES:   Yes, well, whilst of course it is acknowledged that one may give evidence of one’s own intention, the authorities appear to recognise that not very much weight, it may not be a weight question, but not very much weight can be attributed to an uncommunicated intention subjectively retained in the disponer’s mind.  That may be a matter that I can give your Honour some reference to, but in a practical sense one would not ordinarily expect a plaintiff to content himself or herself with a statement as to their uncommunicated subjective intention.

DEANE J:   What if the lady had been a little better advised, assuming her account is accepted, and had got your client to sign an acknowledgement that she had no interest in the property? 

MR COLES:   If the acknowledgment was capable of amounting to an admission of a pre‑existing express trust which involved no illegal purpose and the expression or the content of the express trust was not illegal ‑ ‑ ‑

DEANE J:   No, assume there is nothing else, which means one has to identify beneficial interest from the circumstances, but your client has signed a document saying she has no beneficial interest.  What I am aiming at, of course, is can you prove the document?  And if you can, can your client then come along and say, “But all this flowed out of an illegal scheme we both had”, and thereby rebut the document?

MR COLES:   A lot must depend on the document.  If the document is simply capable of an acknowledgment of an express trust without more then, of course, the question does not ever arise.  If, on the other hand, the document carries with it a revelation of the illegality then the express trust itself may be illegal.  If, on the other hand, and I think Perpetual Trustees v Wright (1917) 23 CLR 185 is a case where there was a written declaration but it did not seem to be regarded ‑ that was a transaction intended to defeat creditors which, again, was not carried into effect. The case, in a sense, typifies the wider view, the Lord Goff view, the traditional view that in the sense that Their Honours were not there or then so much concerned with the presumption of advancement but the purpose was not ultimately carried out.

One thing that does seem to be the case, however, is that the existence of a written declaration does not seem to have been particularly decisive if the circumstances otherwise disclosed that the illegality was present.  I am afraid I am unable to call to mind any other authority where the plaintiff’s basket of proofs, in effect, has been accompanied by some such assistance.  Another important feature, of course, is always the intention of the disponer on the one hand ‑ that is what needs to be proved ‑ this crucial feature is what the disponer donor intended so that in that sense acknowledgments of who, for example, provided the purchase money is not really terribly helpful.  A defendant in such a case may say, “I admit that the plaintiff paid all of the funds for this property”, but that will not get the plaintiff home. 

The a fortiori case where it will not get the plaintiff home, of course, is where without any doubt the presumption of advancement does operate because there is an admission of nothing.  But in the case where the presumption of advancement does operate, then unless one contemplated the somewhat extreme situation where perhaps the defendant admitted that at the relevant time the plaintiff had the intention of constituting the registered proprietor a trustee, it would be difficult to see how acknowledgments, written or oral, unless they proved an express trust which did not itself fail for patent illegality, would eve, in any practical sense impact on the resolution of the problem.

May we make the following short submissions about the presumption of advancement.  Firstly, in our respectful submission, the presumption of advancement in its apparently original form did not seem necessarily to distinguish between sons and daughters or mothers and fathers.  In Charles Marshall v Grimsley (1956) 95 CLR 353, the facts of which will be well known to your Honours, involve the placing by a father of share certificates in the names of various children of his but in circumstances where he retained physical custody of the allotted shares, the shares being allotted in a company under his control, and in circumstances where he had reserved to him the opportunity to take back the shares by filling in a blank transfer form if he wanted to. Those latter circumstances did not displace the presumption of advancement but, in discussing that presumption, particularly at page 364, the Court said at about line 7:

These presumptions were described as landmarks in the law by Eyre CB as far back as 1788 in the leading case of Dyer v Dyer.  In Sidmouth v Sidmouth, decided in 1840, Lord Langdale MR said:  “The law applicable to cases of this nature is subject to so little doubt that it has not been questioned in the argument of this case.  Where property is purchased by a parent in the name of his child, the purchase is prima facie to be deemed an advancement -

and he goes on to describe in familiar terms the content of the principle.  What is significant - and we do not assert any greater significance than this - is the continuous use of the expression “parent”.

DEANE J:   Except if you look at the date ‑ ‑ ‑

MR COLES:   1840.

DEANE J:   - - - one would wonder whether they thought the wife and mother was even worthy of a mention.

MR COLES:   That is a possibility, I suppose.  But we draw attention to that, your Honour, as ‑ ‑ ‑

DEANE J:   It would be a bit different if you point to a “her”.

MR COLES:   Yes.  It is not apparent in any event, your Honours, that in formulations of the English principle which this Court was talking about in 1956, the difference between the gender of the parent was of essential significance.  But be that as it may - and I will not ask your Honours to go back to Calverley v Green - but may we simply draw attention to our reliance upon two features of that case to which Mr Jackson drew your Honours’ attention. The first was that, as I think appears in the judgment of the Chief Justice at 247.

GUMMOW J:   Which page?

MR COLES:   The Chief Justice at page 247.  I will take your Honours to it if appropriate, but I have in mind the passage where his Honour describes the various - he refers to Bennet v Bennet and he says later in the same passage that the principle in those cases, including Bennet v Bennet ‑ ‑ ‑

GUMMOW J:   Bennet v Bennet was just before the Married Women’s Property Act.

MR COLES:   Yes.  The principles, anyway, on which those cases, including Bennet v Bennet and those other cases which appear to deny, or at least not recognise, the relevant presumption his Honour says do not appear to necessarily be founded on any particularly satisfactory basis.  As time has gone by, one could only say that must be all the more so.

Your Honour Justice Deane said at 266, which is the other passage to which we would refer, that the presumptions are, of course, to be regarded these days as entrenched “land‑marks”, but so far as there extinction is concerned, and we do not say this is a case of extinction, merely one of recognition, but so far as, if one prefers to describe it as adding to the list of categories or relationships, so far as that is concerned, Calverley v Green supports, in our submission, the proposition that it is legitimate to add legitimate categories of relationship to the classification of presumptions.  Indeed, the very result of the case was that it was not legitimate to add the particular relationship under consideration in that case, for the very simple reason that it was not regarded as a permanent lifetime relations but of potentially, or necessarily, potentially temporary kind.  But there is nothing temporary, of course, about the relationship of a daughter and an adult mother; that is plainly one of those lifetime relationships which, had it existed in Calverley v Green - were it the type under consideration in Calverley v Green, might well have been recognised as a legitimate addition to the lists of relationships.

Your Honours, we press upon your Honours the adoption of the reasoning of his Honour the Chief Justice in the New South Wales case of Brown v Brown.  Mr Jackson took your Honours to the decision and, in our respectful submission, the reasoning of his Honour is appropriate.  One matter which Mr Justice Gleeson did refer to in Brown v Brown 31 NSWLR, with apparent approval, at page 531 ‑ Mr Justice Gleeson drew attention to the fact that in the Court of Appeal in New South Wales:

Hope JA said that the state of authorities would seem to leave it open for judicial decision to allow the same presumption to be made in the case of a gift by a mother to her child as is made in the case of a gift by a father ‑

and Mr Justice Gleeson referred to Professors -

Ford and Lee, Principles of the Law of Trusts, 2nd ed (1990).

Could I, with your Honours’ permission, hand up photocopies of the relevant pages of Professors Ford and Lee’s book.

GUMMOW J:   What about Scott?  Have you looked at it?

MR COLES:   We have one copy of it, your Honour.  We can certainly make it available during the course of the afternoon.

GUMMOW J:   No, there is no need.  I just wondered if you had looked at it; that is all.

MR COLES:   Yes.  We can certainly furnish your Honour a copy, but we would draw attention, your Honour, to the United States’ position as described in Scott and as referred to on the same page as Mr Justice Gleeson’s decision, that is to say that in the United States the presumption applies in the case of mothers alike, as in the case of fathers.  Mr Justice Gleeson said:

The position in Canada appears to be unresolved.

But may we draw your Honours’ attention, so far as the Canadian position is concerned, to Re Dagle (1990) 70 DLR (4th) 201. I do not stay to take your Honours to the detail of the case, part of which, it should be acknowledged, appears to draw inspiration from a perceived statutory duty on the part of mothers to support their children, though that is, no doubt, a social reason rather than a particular factual instance as to why the presumption of advancement was thought capable of, and thought desirable of being, recognised in Canada.

So, in our respectful submission, there is much to be said in point of policy for the recognition of the relevant presumption and, indeed, to deny its recognition would seem to overlook the historical circumstances which fail to recognise its existence originally; that is to say, the previously reduced role of the mother, so far as head of the family was concerned, so far as bread winner is concerned and so far as property owner is concerned.  Those considerations can scarcely be claimed to have any validity in the present time.

Your Honour, subject to any other matters in relation to which we may be able to assist, those are the submissions of the first respondent.

TOOHEY J:   Mr Coles, could I just ask you this, it is a question perhaps you cannot answer completely until we have heard from Mr Jackson, but if the appeal were to succeed, there is a range of orders sought as appears from page 509 of the appeal book.  Whether the whole range of that relief is being pressed again is not apparent until we have heard from Mr Jackson, but is there anything about any of the orders sought there that you would wish to be heard on?

MR COLES:   Order (i) would follow, order (ii) would not be necessary, order (iii) would seem to follow, order (iv) may need further consideration depending on what exactly is the balance of the fund.

GUMMOW J:   Is the fund in any discrete form at the moment?

MR COLES:   Yes, the reason why the second respondents are joined as parties to the appeal is because they are a firm of solicitors which holds the fund.

TOOHEY J:   What about orders (vi) and (vii)?

MR COLES:   Orders (vi) and (vii) do not we would think, your Honour ‑ have not really being established or at least established in point of quantification and would need, if - one hesitates to be too definitive about this because the concept of damages or breach of trust may need some - not pressed, I am told, your Honour - and the final order would follow.

May I mention one matter, your Honour, which may need some further consideration were your Honours minded to allow the appeal and that is this, that the evidence before the Supreme Court and, indeed, before this Court reveals the first respondent, no doubt amongst other matters, has incurred a personal liability for capital gains tax in connection with this very property, it being, of course, a property which was bought for development purposes and sold at a considerable profit.

We would invite your Honours if minded to allow the appeal to reserve at some appropriate time, perhaps back before the Supreme Court, the accommodation, if any, that would be appropriate to be afforded to the first respondent on account of that liability.  Your Honour will see the assessment appears at page 175 of the appeal book.  There was a $65,150 capital gains liability which seems to have contributed to a fairly substantial liability for the first respondent and, of course, that would accrue interest.

GUMMOW J:   So, what do you seek us do in relation to capital gains?

MR COLES:   It would be our submission, your Honour, that, in principle, if the result of the appeal were to declare the first respondent as, in effect, a trustee against whom a trust could be enforced, then she would have, I

suppose, the usual right of indemnity out of the trust assets to discharge liabilities incurred in connection with the administration of the trust.

GUMMOW J:   As a first charge of this fund?

MR COLES:   As a first charge on the fund, yes, in priority to other claims.

TOOHEY J:   I take it that the equitable charge that the first respondent raised really by way of alternative and which, I appreciate, does not form the subject of any cross-appeal or anything of that sort, but does it have any significance at all if the appeal were to be allowed?

MR COLES:   I am really not sure I have ‑ I think the answer to that is no, your Honour.

TOOHEY J:   Yes, thank you.

DEANE J:   There would need to be a reassessment, would there not, in terms of capital gains tax, because it would be the wrong basic income.

MR COLES:   Yes.  It is not a matter which we would imagine your Honours could conclusively deal with into the disposition of the appeal.

DEANE J:   Thank you, Mr Coles.  Mr Jackson?

MR JACKSON:   Your Honours, your Honour the presiding Judge asked me for some references as to the source of the funds.  Your Honours will see those at page 435, about line 30 and 436, lines 36 to 45 and, in particular, in the latter reference, line 36:

Subject to the question of whether there is any constructive trust affecting the sum of $124,000 ‑

which, of course, was decided the other way ‑

it would seem that Mrs Nelson provided the funds for the purchase.

Your Honours, in relation to the actual finding of there being no intention to benefit absolutely, your Honours will see that at page 441, line 35.

Your Honours, the second matter I would seek to deal with is this, that our learned friend’s contention was that the ex turpi causa rule whether the wider or the narrower view of it be taken, has been applied in the past without regard to examining the question of public policy and, in particular, without looking to see what policy can be derived from the relevant statute.  Your Honours, that seems, with respect, true of some cases but also seemed quite inconsistent with the approach taken by the Full Court of the Federal Court in Farrow, and may I refer your Honours to 114 ALR, at pages 17 and 18. Your Honours will see at page 17 at about line 43, it was said by their Honours:

Accordingly, as suggested above, this is a “third category” case.

And then, one goes over to the next page to deal with how the principles were applied to the case and your Honours will see that at the top of page 18 ‑ and may I invite your Honours to look again to the several criteria applied;  the first one is in line 3:

First, the terms of the statute itself ‑

and your Honours will see that goes on.  Then:

Secondly, it would not assist the pursuit ‑

et cetera.  Thirdly, at line 25, the windfall gain and fourthly, your Honours will see at line 31, the reference to public policy.  And that is a case which is a clear application of the public policy test.

Your Honours, Yango itself refers to and members of the Court apply the question of public policy. Your Honours will see that at 139 CLR 430 in the case of Justice Mason, and as your Honours will recall, Justice Aickin agreed with his reasons, and your Honours will see in the third line on page 430 the class of case to which his Honour is there referring:

Nevertheless, the principle that the court will not enforce a contract at the suit of a party who has entered into it with the object of committing an illegal act does not avail the appellant in this case.

Now, if your Honours read through the remainder of his Honour’s reasons, what your Honours will see is that there is a consideration of legislative intention and in the third last line of his reasons a question of public policy.  Now, your Honours, also in the reasons for judgment of Justice Jacobs your Honours will see at page 433 immediately after the reference to Victorian Daylesford Syndicate his Honour says:

On the other hand it may be that he was dealing only with cases where as a matter of construction there was no express or implied prohibition in the statute and where the only question was whether the enforcement of the contractual rights would be contrary to public policy.  In the context of this last question of public policy -

and then your Honours will see the elements that his Honour proceeds to consider and adopt.  Your Honours, there is a discussion of the question of the appropriateness of taking into account public policy and the reasons why one should in an article that I can give your Honours a copy of by Stowe in 1994 57 Modern Law Review 441.  Your Honours, it is under the heading “The ‘Unruly Horse’ Has Bolted” and discussion of Tinsley v Milligan and what your Honours will see is that it is a discussion of the decision in the House of Lords and the relevant part of it commences at the bottom of page 442 where what is spoken of is the rejection by the House of Lords of what is described as the discretionary in a sense approach which had been adopted by the Court of Appeal in that case.

Now, your Honours, whether the discretionary approach is an exact description of it or correct description of it on the one hand or whether on the other hand the Court of Appeal may have gone too far are separate questions, but the point to which I wish to direct your Honours’ attention is the statement of the considerations which militate in favour of public policy being considered and your Honours will see that at the top of the next page, page 443, in the paragraph commencing “Underlying the discretionary approach”.  Now, your Honours, I shall not read that out but we would invite your Honours to read the several considerations that are set out there which we would adopt as part of our submission and your Honours will see the matters there referred to and could I refer also, your Honours, to page 444 in the passage commencing the new paragraph “Quite apart from the recent line of Court of Appeal authority”, then there is a discussion of some other cases including a reference to the Vita Food Products Case in note 22.

DEANE J:   I do not know if it is relevant, but that balancing approach is somewhat similar to the approach adopted by the majority of this Court in Gala v Preston, or was it Preston v Gala?

MR JACKSON:   The latter, I think, your Honour.

DEANE J:   I do not know to what extent cross‑reference to the law of torts is relevant here.

MR JACKSON:   Your Honour, there is a cross‑reference to be found in a reference which I will give your Honours in just a second.  It is a cross‑reference by reference again.  That is where Mr Justice Hill in the Federal Court in Weston v Beaufils (1994) 122 ALR 240 discusses the history of this area at pages 260 to 267.

GUMMOW J:   This was written after the House of Lords case, was it?

MR JACKSON:   Yes, your Honour.  Your Honours may find it in some respects a helpful summary of some of the cases, including a summary of course of the English case itself, or the House of Lords case itself.  Your Honours will see the heading at page 260, “The defence of illegality”, and it proceeds from there.  Could I invite your Honours, however, to look at two aspects of it.  One is at page 263 where your Honours will see a quotation at about line 10 from Scott on Trusts.  His Honour says:

In what the learned author refers to as “the better reasoned cases”, he says that the issue is whether:

... on all the facts it appears that the conduct of the settlor was so blameworthy that it is against public policy to permit him to recover -

Your Honours, the second thing is that if one goes to the bottom of page 263, there is a reference by his Honour to Perpetual Executors & Trustees Association of Australia Ltd v Wright.  He discusses towards the bottom of the page what happened in the case but then goes on to say in the last line that there are suggestions which suggest that their Honours favoured the narrower approach.  Your Honours will see the nature of the quotation that was approved by those three members of the Court.  Could I just invite your Honours to note that the members of the court in that case, where they did not need to decide the point, seemed to place some significance on the impropriety in a legal sense of a defendant relying on the fraud and seeking to make title of the lands through and by means of it.

The last thing I wish to say about that is that if your Honours look at the bottom of page 264 and the top of page 265, we would submit that his Honour is correct in saying that there is, in effect, in the reasons for judgment of Justice Mason in Yango, an admonition, as it were, that the rule should not be carried further than the protection of the public requires.  Your Honours will see Gala v Preston actually referred to a little down that page.

As matters stand, if one were to apply the argument for which our learned friends would contend, one does get the very strange situation that, for example, the claimant in Tinsley would have failed if the other party had been her daughter.  When one has the presumption of advancement, which turns basically on at least some family relations, no doubt it is always possible to give examples of that kind.  However, it does seem to be a rather bizarre result to which the Court should not stray, we would submit.  I said I would give your Honours a reference to a case in which the reconstruction of the Defence Service Home Benefits Scheme was set out.  That is, Westpac Banking Corporation v Commissioner of Stamp Duties (1994) 2 Qd R 212.

In relation to the question of capital gains tax, the position would simply be, one would think, there would have to be some reassessment of the matter because the situation would be entirely different.  If your Honours were minded to allow the appeal, no doubt the question of the particular form of any order could be worked out by the parties in that regard.  We also indicated that we would give your Honours some copies of the earlier legislation.  May I proceed to do so now?

GUMMOW J:   You mean worked out here rather than sent back?

MR JACKSON:   Well, your Honour, what I meant was that we could give your Honour an appropriate form of order so that the Court could dispose of the matter presumably by sending it away somewhere else.

TOOHEY J:   The first respondent essentially is asking for an indemnity in respect of capital gains tax, I suppose, whatever it ultimately proves to be.

MR JACKSON:   Your Honour, assuming that to be the case that is a matter in respect of which - perhaps if I could put to your Honours a submission in writing.  I had not really expected to have to deal with that aspect of it today.

DEANE J:   Mr Jackson, can I suggest that you and Mr Coles might endeavour to agree on a form of order in the event that the appeal were to succeed.  In the event that you are unable to agree perhaps the parties, you, Mr Coles, might take care to ensure that when judgment is delivered, the matter is not overlooked.  By that I mean we would reserve the position of the parties in that regard.

MR JACKSON:   Yes, your Honour, I hope there may be no difficulty in arriving at agreement.

DEANE J:   One would hope not.  If the parties can reach agreement as to a form of order in the event the appeal does succeed, could they put in a memorandum to that effect within fourteen days?

MR JACKSON:   Yes, your Honour.  I think I have given to your Honours copies of the Act in its first form.  The last thing I wish to say, your Honours, is this, that our learned friends were speaking of the fact that the appellant was a widow; of course she only became so on the day of settlement of the Bent Street transaction.

TOOHEY J:   Mr Jackson, although the relief sought includes an order for costs, I take it no relief is sought against the second respondents by way of costs or otherwise?

MR JACKSON:   No, your Honour.

DEANE J:   Thank you, Mr Jackson.  Mr Coles, Mr Jackson, under my prompting, did depart a little bit from reply.  Is there anything you want to add?

MR COLES:   Only one observation occurs to me, your Honours, inspired, I suppose, by the reference to Gala v Preston.  As we would see it, your Honour, the tort analogy stands, in effect, comparatively with the trust analogy, each being distinct from the Yango proposition in this sense, that I suppose one best illustrates it by this sort of example.  In each case the property law principle of trust position, on the one hand, and the tort law position, the joint illegal activity position- in each case, recovery is denied because it is contrary to public policy.  In that neither case, we would put, does that public policy derive from a consideration of the statutory provisions; it is simply that the law sets its face against recovery in that position. 

The Yango position, on the other hand ,is quite different; one analyses the statute and sees what its content is.  Dealt with this way, one can, for example, test it in these terms:  it would not make any difference if the two occupants of the motor car - the getaway car driver and the co‑conspirator occupant - when they are injured when being pursued by the police, one does not ask were they robbing a bank just before they committed the crime that led them to be pursued by the police; and that is a very serious crime, so you deny the duty of care owed by the driver to the passenger, in the case where they are robbing a bank; but if they were being pursued for littering, where the penalty might only be $5, you do not say there must be a duty of care. 

It is in that respect that one tests the validity of this proposition - that you analyse the statute and discern the public policy from the statute.  In our respectful submission, that misses the point.  You analyse the public policy from the existence of the public policy as it presents itself.  That is to say, in

the case of the Gala v Preston situation, the public policy against persons recovering where they have been involved in a joint illegal enterprise and a property law situation, the principle prevents people recovering because they have to assert or bring to the court’s attention their own illegal conduct.  If your Honours pleases.

DEANE J:   The Court is indebted to counsel for their assistance and will reserve its decision in this matter.

AT 3.18 PM THE MATTER WAS ADJOURNED