Nelson & Anor v Nelson

[1995] HCATrans 322

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

For Judgment

DEANE J

DAWSON J
TOOHEY J
McHUGH J
GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON THURSDAY, 11 NOVEMBER 1995, AT 2.15 PM

(Continued from 10/5/95)

Copyright in the High Court of Australia

___________________________

(Reasons for judgment were delivered)

McHUGH J:   The order of the Court is:

1.  Appeal allowed.

2.  Orders of the Court of Appeal set aside and in place thereof order that:

(i)  the appeal be allowed;

(ii)  declarations 1, 2 and 3 made by Master Macready be set aside;

(iii)  it be declared that if on or before 9 January 1996 the first appellant shall have paid to the Commonwealth of Australia the amount (“the Benefit Sum”) agreed by the solicitors for the first appellant and for the first respondent to be the present value, over the term of the loan agreement dated 30 August 1989 and for the advance by Westpac Banking Corporation (“the Bank”) to the first appellant of $25,000, of the difference between the subsidised rate which applied pursuant to the Defence Service Homes Act 1918 (Cth) and that rate which, upon its usual terms, the Bank would have charged the first appellant on an advance of $25,000 over the same period and for the same purpose, the second respondents then hold the balance of the proceeds of the sale of property known as 5 Bent Street, Petersham, New South Wales, together with any interest earned thereon, upon trust for the first appellant;

(iv)  moneys which become held by the second respondents upon trust for the first appellant as provided in the declaration in order (iii) be paid by the second respondents to the first appellant or as she may direct;

(v)  it be declared that if the Benefit Sum has been ascertained as aforesaid but the first appellant has not paid it to the Commonwealth, as provided in order (iii) hereof, on or before 9 January 1996, the second respondents then hold the balance of the proceeds of the sale specified in that declaration, as to the benefit sum upon trust for the first respondent and as to the remainder (including interest earned upon the whole of the said balance) upon trust for the first appellant;

(vi)  any moneys which become held by the second respondents upon trust for the first respondent and the first appellant respectively as provided in the declaration in order (v) be paid by the second respondents to those parties or as respectively directed;

(vii)  the first respondent pay the costs of the appellants and the second respondents of the proceedings at first instance and in the Court of Appeal.

3.  There be liberty to any party to apply to this Court if, on or before 30 November 1995, the solicitors for the first appellant and for the first respondent shall not have agreed the amount of the Benefit Sum as provided in order 2 hereof.

4.  The first respondent pay the costs of the appeal of the appellants and the second respondents.

I would think you would have had some difficulty digesting the order but the - - -

MR M. MACKRELL:   I think the gist of it, your Honour, is clear.

McHUGH J:   Yes, the general gist of it is that the appellant succeeds in respect of the proceeds of the sale upon condition that the differential between the rate of interest which she obtained and the prevailing bank rate of interest at the time be paid to the Commonwealth and if the solicitors cannot agree upon that, then - - -

GUMMOW J:   The curse will be upon you.

MR MACKRELL:   I think the banker’s affidavit might be a simple solution, your Honour.

MR C. McEWEN:   Your Honour, there is one matter which may still be outstanding.  I am instructed that when the matter was argued before the High Court the issue arose as to what should occur in the event that the appellant succeeded on the question of an outstanding capital gains tax - - -

McHUGH J:   Capital gains tax, yes.

MR McEWEN:   On behalf of the first and second respondents, your Honour, I could indicate to the Court that there has been no agreement, as I understand the Court requested that there be, as to what should happen to those funds.  Whilst the appellant has provided a personal undertaking in respect of that liability, my instructions - - -

GUMMOW J:   There was a deed poll, was there not?

MR McEWEN:   I am sorry, your Honour, it is, quite so.

GUMMOW J:   It is more than personal ‑ ‑ ‑

MR McEWEN:   Yes, your Honour, it is.  My instructions are to request that the matter be remitted to the Supreme Court so as to determine whether or not the balance of the funds in accordance with your Honours’ judgments are permitted to be retained by the trustees pending the determination of that matter because that obligation to pay the capital gains tax is still a personal obligation on the first respondent which it will have to meet without having had the benefit of the proceeds.

McHUGH J:   We have made our orders.  What do you have to say about that, Mr Makrell?

MR MACKRELL:   Your Honours, the amount involved is not great because the first respondent has in fact been paid $20,000 out of the trust funds.  The balance - and I do not know the precise figure - is a figure which is probably in the range of about 20,000.  We would probably wish to say something against the need to provide security but, on the other hand, I do not know that we are entitled to deprive the first respondent of the opportunity of making any application that she may wish to make and it would probably be more appropriate that application be made to the Supreme Court rather than taking the time of this Court.

GUMMOW J:   Can it not be resolved consensually in any way and resolved quickly?

MR MACKRELL:   We can certainly endeavour to do that. 

GUMMOW J:   Our main concern is to save further consumption in costs.

MR MACKRELL:   Yes, that is certainly a matter of great priority now.  Your Honours, perhaps it could be dealt with in this way:  the first respondent should be entitled to make an application if appropriate but perhaps that could be done by granting leave to apply either to Master Macready or to the Court of Appeal if the parties cannot resolve the question of security.  In view of the amount involved, perhaps that can be resolved by agreement quickly.  The appellants’ position was initially that the provision of a deed poll should provide, in the circumstances, sufficient comfort to the first respondent.  If that is not the case, then we will have to deal with that matter either by agreement - but if it is to be dealt with by argument, then it probably should be dealt with in the Supreme Court rather than taking your Honours’ time.

McHUGH J:   Yes.

MR MACKRELL:   It could probably be dealt with by the Master.

GUMMOW J:   What is going to be the position with this payment to the Commonwealth of that sum?  Can that be agreed and sorted out quickly?

MR MACKRELL:   I cannot see any reason why it cannot be resolved very quickly because the determination, really, is simply a mathematical calculation upon receipt of information from Westpac.  The amount of the subsidy should be readily ascertainable since the Commonwealth has paid it and I would assume that could be resolved fairly quickly.

McHUGH J:   One of the problems is that the order that the Court has made is, as you will see from the judgment, a majority order.  Justices Dawson and Toohey would have allowed your client to have the money without any condition imposed upon her, and Justice Deane is now out of the country.  I am not sure we have authority to change these orders now and remit it but I see no reason why we would not be able to give you general liberty to apply.

MR McEWEN:      We would be content with that, your Honour.  We would be content if your Honours were prepared to grant general liberty to apply to the Master in respect of that.

GUMMOW J:   General liberty to apply to us.

MR McEWEN:   If your Honour pleases.

McHUGH J:   In addition to the orders that have been made, we will grant general liberty to apply in respect of the issue concerning the payment of capital gains tax, if any.  How long do you think it will take to clarify this particular issue?

MR MACKRELL:   In respect of the capital gains tax, your Honour?

McHUGH J:   Yes.

MR MACKRELL:   It should be crystallised one way or another within a week, probably even sooner.  It is simply a matter, I assume, of discussing it with the first respondent’s solicitors and then taking some instructions.

McHUGH J:   Yes.

MR MACKRELL:   Your Honours might also take into account that if orders for costs are to be made in favour of the appellant then, arguably, the appellant is entitled to set off against any amount by way of capital gains tax the amount of those orders for costs and in view of the amount of the capital gains tax liability and the fact that the first respondent has already been paid $20,000 out of the fund, I suspect that we are really arguing over absolutely nothing.

McHUGH J:   Yes, that may well be the case but order 3 of the Court’s orders gives liberty to any party to apply on or before 30 November 1995, if they have not been able to agree upon the quantum of the Benefit Sum and I think we will limit the general liberty to apply in respect of the capital gains tax to the same date, so that gives you to 30 November.

MR MACKRELL:   Yes.  We will endeavour to resolve the matter in that time, your Honours.

GUMMOW J:   We hope so.

McHUGH J:   It is to be hoped this rather tragic piece of litigation can be finalised without the need to come back before - - -

MR MACKRELL:   Your Honours, it will be taken to heart.

McHUGH J:   Anything further?  Adjourn the Court.

AT 2.28 PM THE MATTER WAS CONCLUDED