Re Pearson, D.J

[1993] FCA 795

Re DEREK JOHN PEARSON Ex parte MICHAEL IRVINE WANSLEY (as trustee of the
estate of Derek John Pearson) and ROBYN PEARSON
Ex parte ROBYN PEARSON and ANTHONY JOHN KELLY, ACTING OFFICIAL RECEIVER FOR
THE BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA; MICHAEL JASON MANN, ACTING
OFFICIAL RECEIVER IN AND FOR THE BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA
and MICHAEL IRVINE WANSLEY
No. VX484 of 1991
FED No.795
Number of pages - 12
Bankruptcy - Practice and Procedure
(1993) 46 FCR 55

COURT

IN THE FEDERAL COURT OF AUSTRALIA

BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA
WILCOX J

CATCHWORDS

Bankruptcy - Settlement - Transfer by debtor to wife of his interest in former matrimonial home - Transfer pursuant to agreement between spouses as to division of their property - Whether the transfer was made pursuant to a "maintenance agreement" or "maintenance order" - Meaning of these terms - Whether valuable consideration given by wife in return for transfer.

Practice and Procedure - Comments concerning operation and utility of the new procedure provided by Subdivision J of Div. 4B of Part VI of Bankruptcy Act.

Bankruptcy Act 1966, ss.5, 120, 123, 139ZQ, 139ZR, 139ZS, 139ZT and 232.

Family Law Act 1975, ss.4, 72, 74, 75, 79, 79A, 86 and 87.

HEARING

SYDNEY, 19 October 1993

#DATE 5:11:1993

Counsel for the Trustee: M R Ellicott

Solicitors for the Trustee: J M Smith and Emmerton

Counsel for Mrs Pearson: J K Chippindall

Solicitors for Mrs Pearson: Kemp Strang and Chippindall

ORDER

The Court declares that:

1. Neither the agreement between Derek John Pearson and Robyn Pearson whereby Derek John Pearson agreed to transfer to Robyn Pearson all his right, title and interest in the property known as 2 The Crescent, Linley Point, (being the land described in Certificate of Title Volume 4465 Folio 23) nor the transfer made pursuant to that agreement, is void as against Michael Irvine Wansley, the trustee of the estate of the said Derek John Pearson.

And the Court orders that:

2. Michael Irvine Wansley pay to Robyn Pearson the costs incurred by her in connection with the Applications filed herein on 13 May 1993 and 28 July 1993 (these costs being taxed upon the basis of a single matter).

3. Within 28 days Michael Irvine Wansley withdraw the caveat lodged by him on the title of the said property.

4. Otherwise both Applications be dismissed.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

WILCOX J There are two applications before the Court. They both involve the same ultimate question: whether Michael Irvine Wansley, the trustee of the assigned estate of Derek John Pearson, is entitled to a one-half interest in Mr Pearson's former matrimonial home. Mr Wansley's opponent in each proceeding is Robyn Pearson, the former wife of the debtor.

The background facts
2. The facts underlying the two cases are not controversial. Mr and Mrs Pearson were married on 7 June 1981. On 29 July 1982, they became registered proprietors, as joint tenants, of the land contained in Certificate of Title, Volume 4465 Folio 23. This land contained a house known as 2 The Crescent, Linley Point. The house became the Pearsons' matrimonial home. Apart from some short periods when Mr Pearson resided elsewhere, Mr and Mrs Pearson lived together in this home until 28 March 1990. During that time they had two children. In May 1980, Mr Pearson commenced an association with a group of companies engaged in building, construction and property development. This group was known as the Consulere group of companies. Mr Pearson became a director of Consulere Limited and other members of the group. He caused a family company, Chapel Manor Pty Limited, to acquire shares in companies within the Consulere group. Mr and Mrs Pearson were directors of, and the only shareholders in, Chapel Manor. They each held six one-dollar shares. At some stage, Mr and Mrs Pearson acquired a motor cruiser. It was estimated to be worth about $140,000 at the date of separation. The car that Mrs Pearson drove was registered in her name, although apparently purchased out of funds provided by her husband. The couple also had household effects including some art works of modest value.

1. In early April 1990, a few days after the couple's final separation, they met to discuss custody and property issues. They agreed that the children should continue to live with Mrs Pearson in the Linley Point home, with Mr Pearson having access rights. Mr Pearson promised to transfer to Mrs Pearson his one-half interest in the home and to maintain payments in respect of two debts secured by mortgages over the property - a small amount owing to the Commonwealth Savings Bank in respect of a home loan granted in 1982 and a debt of about $100,000 to Westpac Banking Corporation in respect of a business loan taken in 1989. Mr Pearson also agreed to pay some unsecured debts and that Mrs Pearson should keep for her own benefit the car registered in her name. He promised to pay her $2,000 per month for the maintenance of herself and the two children. In return, Mrs Pearson agreed that Mr Pearson should have the boat, full ownership of the Consulere shares and sole entitlement to a superannuation benefit. The couple agreed to share the household effects.

2. At the conclusion of the meeting, Mr Pearson asked Mrs Pearson to have her solicitor draw up an agreement. She did so. The draft was sent to Mr Pearson's solicitor. There were negotiations about some points of detail but these were amicable. On or about 18 June 1990, both parties signed a document entitled "Minutes of Notations and Consent Orders". The document made a reference to the Family Law Act 1975. It contained a series of notations reciting facts regarding the marriage and its breakdown. It made a series of statements concerning the parties' assets. These included the statement that "(t)he parties jointly hold 7% of the issued share capital of Consulere Pty Limited", the value of which "is approximately $280,000". The statement that "the parties" jointly held the Consulere shares was correct, of course, only if this was understood as embracing a holding through their joint ownership of Chapel Manor.

3. The document concluded with a series of proposed orders. The first of these orders was in the following form:
   

"1. That by way of property settlement the Husband do all acts and things including but not limited to executing all documents necessary to procure the transfer to the Wife of all his right title and interest in the Home subject to any encumbrances."

1. The subsequent orders dealt with other assets. The order relating to the Consulere shares stated:
   

"4. That the Wife do all acts and things, including but not limited to executing all documents, necessary to procure the transfer all (sic) her right title and interest in the Consulere Shares to the Husband or his nominee subject to any encumbrances thereon."

1. Mrs Pearson's solicitors promptly filed an Application in the Family Court of Australia. On 25 June, a Registrar of that Court ordered:
   

"1. That by consent orders declarations and notations be made in terms of document titled 'Minutes of Notations and Consent Orders' dated the 18th day of June 1990 filed herein and attached hereto."

A copy of the signed document was attached to the Registrar's order.

1. By a Memorandum of Transfer registered at the Land Titles Office on 6 August 1990, Mr and Mrs Pearson transferred the Linley Point property to Mrs Pearson. The transfer was stated to be "pursuant to orders of the Family Court made on 25.6.90". After registration of the transfer the old Certificate of Title was replaced by Folio Identifier 9/12774.

2. The estimate of value of Consulere shares contained in the Minutes of Notations and Consent Orders was apparently supplied by Mr Pearson. According to an affidavit read in these proceedings, the estimate was conservative. Mr Pearson says in the affidavit that his June 1990 estimate of the value of the shares was between $280,000 and $560,000. At the time, he says, he had no "major concern" about the trading or financial position of the Consulere companies, although they were adversely affected by the downturn in building activity. He thought that the companies were in a relatively strong trading position; he was "cautiously optimistic" and expected the companies to survive, with the continued support of their bankers.

3. This expectation was disappointed. In late May/early June, the group sought extra finance from Westpac. According to Mr Pearson, the first intimations (in June) were that the application would be granted. However, in mid-July it was refused. The group requested the bank to appoint a receiver. Even then, according to Mr Pearson, he thought the companies in the group had more than sufficient assets to meet their liabilities. Although he had guaranteed substantial Consulere liabilities, he had no fear for his personal position. He says he developed some concern in October 1990 when the companies went into liquidation; but he still thought the group's assets sufficient to cover its liabilities. They turned out not to be. A major Consulere asset, a joint venture interest in a shopping centre development, was sold at a price much lower than expected, leading to a substantial deficiency. The group's financiers demanded payment by Mr Pearson under his guarantees. On 29 October 1991, he executed an authority, pursuant to s.188 of the Bankruptcy Act 1966, authorising Mr Wansley to call a meeting of his creditors for the purpose of considering a proposal that his affairs be dealt with under Part X of the Bankruptcy Act. The meeting was held on 21 November 1991. The creditors resolved that Mr Pearson enter into a deed of assignment under Part X and that Mr Wansley be appointed trustee of his estate. Mr Pearson immediately executed a deed of assignment whereby he assigned to Mr Wansley, as trustee, all his divisible property, within the meaning of Part X.

The proceedings
11. On 12 August 1992, Mr Wansley lodged a caveat against Mrs Pearson's title to the Linley Point property. There was correspondence between his solicitors and those acting for Mrs Pearson. On 17 February 1993, Mr Wansley's solicitors claimed that the transfer of Mr Pearson's interest to Mrs Pearson was void against Mr Wansley pursuant to s.120 of the Bankruptcy Act. They demanded a re-transfer of that interest; alternatively, payment of the estimated value of the interest ($272,500).

1. Mrs Pearson did not accede to this demand. So Mr Wansley applied to the Official Receiver for the issue of a notice under s.139ZQ of the Bankruptcy Act. On 5 April 1993, the Acting Official Receiver for the Bankruptcy District of Victoria issued a s.139ZQ notice. The notice was amended ten days later. In its amended form, the notice alleged that the transfer to Mrs Pearson was void as against the trustee by virtue of s.120 of the Bankruptcy Act and required her to pay the sum of $272,500 to the trustee by 31 May 1993. Mrs Pearson did not comply with this notice. Instead, on 13 May 1993, she filed an Application in this Court seeking a number of orders and declarations; including an order that the notice be set aside, a declaration that the transfer was not void as against the trustee and an order that he forthwith withdraw his caveat.

2. Section 139ZQ is contained in Subdivision J of Division 4B of Part VI of the Bankruptcy Act, a Subdivision added to the Act in 1992 in an attempt to simplify proceedings regarding settlements and preferences. Section 139ZQ authorises the Official Receiver, by written notice, to require a person who has received any money or property as a result of a transaction void against the trustee of a bankrupt to pay to the trustee an amount equal to the money or the value of the property received. It makes stipulations about the content and service of the notice. The effect of a s.139ZQ notice concerning property is that the property becomes charged with the liability of the person to make payments to the trustee as required by the notice (s.139ZR). If satisfied that the Subdivision does not apply to the person "on the basis of the alleged facts and circumstances set out in the notice", this Court may set aside the notice (s.139ZS). A person who refuses or fails to comply with a s.139ZQ notice is guilty of an offence punishable by imprisonment for a period not exceeding six months (139ZT). This is so, apparently, even if the person does not have the funds necessary to comply with the notice and the stipulated time is insufficient to enable the recipient to raise the money by selling or mortgaging the property.

3. I question the value of Subdivision J, at least in its present form. As soon as the notice was served, Mrs Pearson's solicitors asserted that it failed to satisfy the requirements of s.139ZQ. When the matter first came before me for directions, it appeared that this would be the question for determination. Yet the real issue between the parties was whether the transfer to Mrs Pearson was void against the trustee. There seems to be a danger that the new procedure will lure parties into litigation about formal matters, irrelevant to the issue they really need to have determined.

4. When the present parties turned to the question how they could resolve their fundamental dispute, a second difficulty emerged. Section 139ZS empowers the Court to set aside a s.139ZQ notice if it is satisfied that the "Subdivision does not apply to the person on the basis of the alleged facts and circumstances set out in the notice". Clearly, the Court can set aside the notice if the stated facts and circumstances do not lead, in law, to the transaction being void against the trustee. But can the Court go behind the stated facts and investigate their truth? If the Court finds that the true facts are different from those stated in the notice, and do not justify its issue, may the Court set aside the notice? The stated (or true) facts and circumstances may provide prima facie support for the notice, but the recipient be under no liability to the trustee because of defences arising out of additional facts needing to be proved by the recipient. Does Subdivision J accommodate this situation? If so, how?

5. The parties perceived the problems I have mentioned. They wished to avoid becoming bogged down in difficulties arising out of the form of Subdivision J and the terms of the notice. So they sensibly agreed to resort to the old-fashioned way of determining the matter. Mr Wansley filed a second Application, in which he sought a declaration that the transfer to Mrs Pearson was void and a consequential order directing her to transfer to him a one-half interest in the property. By agreement, the two matters were heard together.

6. Although the Official Receiver is a respondent to Mrs Pearson's Application, the only active parties to the litigation are Mr Wansley and Mrs Pearson. Each adduced evidence directed to the substance of the dispute. Their counsel argued the case by reference to matters of substance; neither counsel made submissions about the form of the notice. Both counsel adopted the attitude that the Court should determine whether or not the transfer was void against Mr Wansley, and make declarations and consequential orders accordingly.

The trustee's claim
18. Mr Wansley makes his claim under s.120(1) of the Bankruptcy Act. That subsection provides:

"120.(1) A settlement of property, whether made before or after the commencement of this Act, not being -

(a) a settlement made before and in consideration of marriage, or made in favour of a purchaser or encumbrancer in good faith and for valuable consideration; or

(b) a settlement made on or for the spouse or children of the settlor of property that has accrued to the settlor after marriage in right of the spouse of the settlor,

is, if the settlor becomes a bankrupt and the settlement came into operation after, or within 2 years before, the commencement of the bankruptcy, void as against the trustee in the bankruptcy."

1. Subsection (8) says that, in s.120, the term "settlement of property" includes any disposition of property. Counsel for Mrs Pearson, Mr J K Chippindall, does not dispute that the transfer to his client constituted a "settlement", within the meaning of s.120(1).

2. Mr Pearson has not become bankrupt. For present purposes, that does not matter. Section 232(2) of the Act applies s.120 in relation to a deed of assignment as if a sequestration order was made against the debtor on the day he/she executed the deed and the trustee of the deed was the trustee in the debtor's bankruptcy. The transfer to Mrs Pearson took effect less than two years before Mr Pearson executed the deed of assignment. Consequently, as Mr Chippindall concedes, the trustee has made out a prima facie case. However, counsel raises two defences to that case. First, he relies on the defence provided by s.123(6) of the Act. Secondly, he says that the transfer was made in favour of a purchaser in good faith and for valuable consideration: see s.120(1)(a). These are alternative defences. I will deal with them separately.

The s.123(6) defence
21. The function of s.123 is to limit the application of those sections of the Bankruptcy Act that invalidate transactions. Subsection (6) operates independently of the other parts of the section, except subs.(7) which defines the words "payment" and "transaction". Subsection (6) reads:

"(6) Subject to s.121, nothing in this Act invalidates, in any case where a debtor becomes a bankrupt, a conveyance, transfer, charge, disposition, assignment, payment or obligation executed, made or incurred by the debtor, before the day on which the debtor became a bankrupt, under or in pursuance of a maintenance agreement or maintenance order."

1. Section 121 relates to fraudulent dispositions. Mr M Ellicott, counsel for the trustee, concedes that s.121 does not apply to this case. There is no suggestion of fraud. The question, then, is whether or not the transfer to Mrs Pearson was made "under or in pursuance of a maintenance agreement or maintenance order". Both these terms are defined by s.5 of the Bankruptcy Act:
   

"'maintenance agreement' means a maintenance agreement, within the meaning of the Family Law Act 1975, that has been registered in or approved by a court in Australia or an external Territory or any other agreement with respect to the maintenance of a person that has been so registered or approved;

'maintenance order' means an order with respect to the maintenance of a person, including an order with respect to the payment of arrears of maintenance, being an order made or registered under a law of the Commonwealth or of a State or Territory of the Commonwealth;"

1. Mr Chippindall accepts that the transfer was not made under or in pursuance of a maintenance order. I think this is correct. The order requiring Mr Pearson to transfer his interest in the Linley Point property to his wife was a property order, not a maintenance order.

2. The term "maintenance order" is not defined by the Family Law Act. But that Act makes a distinction between an order for spousal maintenance and a property order. The distinction is relevant to this case, because the Family Court acted under the Family Law Act in making its orders of 25 June 1990. A maintenance order is made under s.74 of the Family Law Act by way of enforcement of the limited liability to maintain the other party that is imposed by s.72 of the Act. The criteria which the court must consider in exercising jurisdiction under s.74 are listed in s.75(2). Although the property resources of each party are relevant (see para.(b)), the emphasis in the list is on the parties' recurring needs and the resources available to meet them. This is consistent with the policy enshrined in s.72, imposing maintenance liability on a party to a marriage only where the "other party is unable to support herself or himself adequately" for a specified reason. These provisions contrast with ss.78-79A which deal with property interests. Section 78 authorises the court to declare the title or rights of a party in respect of property. Section 79(1) empowers the court, in proceedings with respect to the property of one or both marriage partners, to "make such order as it considers appropriate altering the interests of the parties in the property", including a settlement order. The balance of the section deals with ancillary and procedural matters. Subsection (4) sets out the criteria to be taken into account in considering what order (if any) should be made under the section. Those matters include the contributions (financial and otherwise) made by each of the parties, the effect of any proposed order upon the earning capacity of a party and the matters referred to in s.75(2) so far as they are relevant. The evident object is to have the court address the parties' capital needs and entitlements.

1. Section 79A empowers the court to vary or set aside a s.79 order, but only in limited circumstances. As the width of those circumstances is material to Mr Chippindall's second defence I should set them out. The court must be -
   

"satisfied that:

(a) there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence, the giving of false evidence or any other circumstance;

(b) in the circumstances that have arisen since the order was made it is impracticable for the order to be carried out or impracticable for a part of the order to be carried out;

(c) a person has defaulted in carrying out an obligation imposed on the person by the order and, in the circumstances that have arisen as a result of that default, it is just and equitable to vary the order or to set the order aside and make another order in substitution for the order; or

(d) in the circumstances that have arisen since the making of the order, being circumstances of an exceptional nature relating to the welfare of a child of the marriage, the child or, where the applicant has the custody of the child, the applicant, will suffer hardship if the court does not vary the order or set the order aside and make another order in substitution for the order;"

1. Although Mr Chippindall accepts that he cannot succeed under s.123(6) of the Bankruptcy Act by virtue of its reference to a maintenance order, he presses the submission that Mr Pearson transferred his interest in the home to his wife pursuant to a "maintenance agreement". He points out that there was in fact an agreement between the parties, negotiated in principle in early April, refined by the parties' solicitors and reduced to writing in the Minutes of Notations and Consent Orders they signed. He says that it is immaterial that the relevant part of the agreement concerned property adjustments; (the agreement did also deal with spousal maintenance). Mr Chippindall points out that the definition in s.5 of the Bankruptcy Act refers to a "maintenance agreement" within the meaning of the Family Law Act. The definition in s.4 of the Family Law Act does not distinguish between an agreement concerning recurring spousal maintenance and property adjustments. The definition reads:
   

"'maintenance agreement' means an agreement in writing made, whether before or after the commencement of this Act and whether within or outside Australia, between the parties to a marriage, being an agreement that makes provision with respect to financial matters, whether or not there are other parties to the agreement and whether or not it also makes provision with respect to other matters, and includes such an agreement that varies an earlier maintenance agreement;"

1. The term "financial matters", used in this definition, is itself defined by s.4 as meaning, in relation to the parties to a marriage -
   

"matters with respect to:

(a) the maintenance of one of the parties;

(b) the property of those parties or of either of them; or

(c) the maintenance of children of the marriage;"

1. I accept that the agreement signed by Mr and Mrs Pearson on 18 June 1990 was a "maintenance agreement" within the definition of that term in the Family Law Act. Although the relevant part of the agreement deals with the adjustment of property interests, rather than spousal maintenance, it is an "agreement that makes provision with respect to financial matters"; "financial matters" include property matters. However, to fall within s.123(6) of the Bankruptcy Act, a "maintenance agreement" must also fit the Bankruptcy Act definition. It will be recalled that this definition not only requires that an agreement meet the Family Law Act definition; the agreement must have been "registered in or approved by a court in Australia or an external Territory".

2. At first sight, it might appear that the agreement made between Mr and Mrs Pearson meets this requirement; after all, the agreement provided the basis for the consent orders made by the Family Court Registrar on 25 June 1990. Mr Chippindall so argues. But there is a problem about the argument. It seems that the words "registered in" and "approved by" are used in the technical sense used in the Family Law Act.

3. I have already referred to the making of property orders under s.79 of the Family Law Act. A property order may be made by consent of the parties; nonetheless, it takes its force from the fact that it is a court order, not because it is the result of an agreement. An alternative course is for the parties to negotiate an agreement about property matters and to take steps to make this agreement enforceable. Where this course is taken, the agreement is not enforceable as an order of the court, but because it is made enforceable, as an agreement, by the statute. The Act specifies two ways in which this may be done. One method is to have the agreement registered under s.86 of the Family Law Act. Section 86(1) provides that a "maintenance agreement" (as defined, of course, by the Family Law Act and including an agreement dealing with property matters) "may be registered in any court having jurisdiction under this Act". Subsections (2) and (2A) permit variation of a registered maintenance agreement in connection with child and spousal maintenance, respectively. But, otherwise, the principle behind s.86 is that set out in subs.(3):
   

"(3) The court in which a maintenance agreement is registered under subsection (1) may set aside the agreement if, and only if, the court is satisfied that the concurrence of a party was obtained by fraud or undue influence or that the parties desire the agreement to be set aside."

1. The second method is under s.87 of the Family Law Act. Section 87 contemplates an agreement providing, in effect, that it shall operate, in relation to the financial matters it covers, in substitution for the parties' maintenance and property rights. No doubt because of the drastic consequences of such a term, s.87(2) provides that an agreement that so provides "has no effect, and is not enforceable in any way, unless it has been approved by the court". In order to approve the agreement, the court must be "satisfied that the provisions of the agreement with respect to financial matters are proper". Once again, there are some exceptions from irreversibility: see ss.(4A) - (4D). But the general principle is that an approval may be revoked only if the court is satisfied of one of the following matters: that the approval was obtained by fraud; that the parties desire revocation; that the agreement is void, voidable or unenforceable; or that new circumstances make it impracticable to carry out the agreement or part of it.

2. It is not necessary to go any further into the detail of ss.86 and 87 of the Family Law Act. It is enough to note that they respectively embody the concepts (registration and approval) referred to in the Bankruptcy Act definition of "maintenance agreement". Evidently, it was intended to limit relevant maintenance agreements to those dealt with under s.86 or s.87 of the Family Law Act. The agreement between Mr and Mrs Pearson was not registered under s.86 or approved under s.87. It was used as the basis of a consent property order under s.79. Consequently, it does not fall within the Bankruptcy Act definition of "maintenance agreement". Section 123(6) does not apply.

3. It is difficult to discern the policy reasons behind Parliament's decision to confine s.123(6) maintenance agreements to those registered or approved under the Family Law Act. The decision could hardly have stemmed from a concern to protect creditors from undue disadvantage. Registration under s.86 does not involve the exercise of any judicial judgment or discretion. A person may make extremely generous provision for his/her spouse in a registered agreement, to the later disadvantage of the person's creditors. A court does make a judgment under s.87, but the judgment is directed to an entirely different matter: the propriety of the agreement from the parties' point of view. The more generous the provision for a debtor's spouse, the greater the chance of approval under s.87.

4. However, the fact remains that s.123(6) applies only to maintenance agreements processed under s.86 and s.87 of the Family Law Act. The subject agreement was not treated in this way. Section 123(6) affords no answer to Mr Wansley's claim.

The s.120(1) defence
35. The avoidance effect of s.120(1) does not apply to a "settlement ... made in favour of a purchaser ... in good faith and for valuable consideration"; see para.(a). The word "purchaser" is used in a technical sense; the person need not have paid money for the property. In Re Pope; ex parte Dicksee (1908) 2 KB 169 Cozens-Hardy MR, with whom Fletcher Moulton LJ agreed, said at 172 that, in this context, "purchaser" means "a person who has given something in consideration of the settlement". In that case it was held sufficient that a wife had agreed not to sue her husband for a decree of judicial separation and maintenance. So understood, the word "purchaser" adds little to the requirement of valuable consideration - a point made by Buckley LJ in dissent.

1. In the present case, good faith is conceded. So the application of s.120(1)(a) turns on the question whether the transfer made by Mr Pearson was made for valuable consideration. Mr Ellicott says that it was not. He puts two arguments. In my opinion neither is tenable.

2. Mr Ellicott's first submission is that there was no valuable consideration because, when she struck her bargain with her husband, Mrs Pearson got what she wanted. Mr Ellicott listed these items: custody of the children, full ownership of the family home, her car, maintenance and a share of the household effects. She was not interested, he says, in the Consulere shares or the motor cruiser; therefore, she gave no consideration when she surrendered her rights to them.

3. It seems to me that counsel's argument mis-states Mrs Pearson's attitude to the Consulere shares and the motor cruiser. It was not that she lacked interest in those items per se; just that she realised that any sensible division of property between herself and her husband would allocate these items to him. As counsel says, she was much more interested in the house, the car and a maintenance order.

4. However, even if Mrs Pearson had been anxious to get rid of her interest in the Consulere shares and the motor cruiser, that fact would not prevent her promise to do so constituting valuable consideration for Mr Pearson's agreement to transfer to her his interest in the house. The doctrine of consideration is complex enough without importing a necessity to consider each party's state of mind at the moment when the bargain was made. A party may be delighted to dispose of an item of property; nonetheless, the transfer of that property to the other party constitutes valuable consideration because it derogates from the first party's legal rights.

5. Mr Ellicott's second argument is that the property surrendered by Mrs Pearson, in return for her husband's promises, did not meet the test of sufficiency stipulated by the High Court of Australia in Barton v Official Receiver (1986) 161 CLR 75 at 81; that is, that what is given in return for the purchase "has a real and substantial value, and not one which is merely nominal or trivial or colourable". Mr Ellicott's argument is that Mrs Pearson had no interest in the Consulere shares; consequently, her promise to transfer her interest in those shares to her husband had no value; her remaining promises had only nominal or trivial value.

6. I see difficulty in describing Mrs Pearson's promise to surrender her claim to a matrimonial asset worth $140,000 (the motor cruiser) as a promise having only a nominal or trivial value. It does not matter who was the legal owner of the boat; it was an asset that the Family Court would be bound to take into account in considering any application that Mrs Pearson might make under s.79 of the Family Law Act. The effect of the agreement, and the consent order giving effect to it, was to put this asset beyond Mrs Pearson's reach. She was precluded from making a s.79 application except in the limited circumstances set out in s.79A. The value of the consideration given by a purchaser, under s.120(1)(a), does not have to be equal, or even nearly equal, to the value of the settled property; see Official Trustee v Mitchell (1992) 110 ALR 484 at 490.

7. In any event, it is wrong to say that Mrs Pearson gave nothing away when she agreed to "transfer all her right, title and interest in the Consulere shares" to her husband or his nominee. It is true that she was not the registered owner of any Consulere shares. The shares were held by Chapel Manor. But Mrs Pearson was a one-half owner of Chapel Manor. The intention of the parties was that the Consulere shares would be vested in Mr Pearson, or his nominee, to the exclusion of Mrs Pearson. Any court would interpret Mrs Pearson's promise as one requiring her to do everything necessary to cause Chapel Manor to vest the Consulere shares in Mr Pearson, or his nominee, to the exclusion of herself. If the point had been taken, it might have been necessary for Mr Pearson to obtain a formal rectification order before obtaining an order compelling Mrs Pearson to sign documents addressed to Chapel Manor. But she would have had no answer to a rectification application. She clearly intended to surrender to her husband a one-half beneficial interest in the shares. Of course, the shares turned out to be worth nothing. But Mr Ellicott acknowledges that this makes no difference. The market value of the shares was not tested; but, at the time of the agreement, both parties genuinely believed they were worth at least $280,000. Mrs Pearson agreed to surrender an interest that then had real value.

8. Mr Ellicott made reference to Re Tapp; ex parte Official Trustee in Bankruptcy (1987) 15 FCR 117. In that case Pincus J held that a property transfer made by a bankrupt to his wife within two years of his bankruptcy was void against the trustee pursuant to s.120. The agreement between the spouses was intended to be the subject of an application for approval under s.87 of the Family Law Act; but it was never submitted for approval. Consequently, s.123(6) of the Bankruptcy Act afforded no defence to the trustee's claim. The wife also relied on para.(a) of S.120(1), but Pincus J held that she had not given any consideration for her husband's promise to transfer the property to her. His Honour's determination was entirely one of fact. He said at 120:
   

"... the bankrupt received nothing which he did not already own in consideration for the transfer of his interest in the house, nor was any promise made to him."

The facts in the present case are different. By the agreement he made with his wife, Mr Pearson did receive assets he did not already own. The defence under s.120(1)(a) succeeds.

Orders
44. I propose to make a declaration that the transfer of Mr Pearson's interest in the Linley Point property to Mrs Pearson is not void against Mr Wansley and to order Mr Wansley to withdraw the caveat lodged on the title to the property. Mr Wansley must pay Mrs Pearson's costs of both Applications, but those costs are to be taxed upon the basis of a single matter.