Re Permewan No. 2

Case [2022] QSC 114

SUPREME COURT OF QUEENSLAND

CITATION:

Re Permewan No. 2 [2022] QSC 114

PARTIES:

IN THE WILL OF PRUDENCE VERONICA PERMEWAN, DECEASED

MYLES GERARD MURPHY (AS ADMINISTRATOR OF THE ESTATE OF PRUDENCE VERONICA PERMEWAN, DECEASED)

(applicant)
v
JOHN SCOTT PERMEWAN
(first respondent)
ZERELDA PTY LTD
ACN 623 050 760
(second respondent)

DONNA ANNE FRATER
(first cross-applicant)
MARLA JEANNE HURLIMANN
(second cross-applicant)
v
MYLES GERARD MURPHY (as administrator of the estate of Prudence Veronica Permewan, deceased)
(first cross-respondent)
JOHN SCOTT PERMEWAN
(second cross-respondent)
ZERELDA PTY LTD
ACN 623 050 760
(third cross-respondent)

FILE NO/S:

BS 6343 of 2020
BS 1091 of 2022

DIVISION:

Trial

PROCEEDING:

Application

ORIGINATING COURT:


Supreme Court at Brisbane

DELIVERED ON:

10 June 2022

DELIVERED AT:

Brisbane

HEARING DATE:

16 May 2022; 17 May 2022; 18 May 2022; 20 May 2022

JUDGE:

Cooper J

ORDER:

In BS 6343 of 2020:

1.   On or before five days from the date of publication of this judgment, the parties file agreed orders or, if orders cannot be agreed, each party file the form of orders it proposes together with written submissions limited to three pages.

In BS 1091 of 2022:

1.   The plaintiff’s claim is dismissed.

2.   The plaintiff (Zerelda Pty Ltd) pay the first defendant (Myles Gerard Murphy as the Administrator of the Estate of Prudence Veronica Permewan (deceased) and the second defendant (Orion Investments (Qld) Pty Ltd) the costs of and incidental to the claim to be assessed on the indemnity basis.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – INDEMNITY COSTS – PARTICULAR CASES – UNREASONABLE CONDUCT OR DELINQUENCY RELATING TO PROCEEDINGS – where proceedings were commenced seeking remedies against the administrator regarding a series of inter vivos transactions made by the deceased – where the first respondent/third cross-respondent argued that the inter vivos transactions were valid and enforceable against the estate but conceded after the evidence had been heard that the transactions were invalid and unenforceable – where the respondent/second cross respondent and the second respondent/third cross-respondent pleaded that the administrator’s challenge to the enforceability of the inter vivos transactions was “frivolous and vexatious and an abuse of the process” of the Court – where consent orders were subsequently made reflecting that the transactions were invalid and unenforceable at law – whether there has been making of allegations which ought never to have been made or the undue prolongation of the proceeding by groundless contentions – whether indemnity costs should be awarded

Bills of Exchange Act 1909 (Cth), s 90
Corporations Act 2001 (Cth), s 175
Succession Act 1981 (Qld), s 41
Uniform Civil Procedure Rules 1999 (Qld), r 681

Barns v Barns (2003) 214 CLR 169, considered
Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225, cited
Fairfield Services Pty Ltd (in liq) v Leggett (2020) 5 QR 50; [2020] QSC 183, considered
Frizzo v Frizzo (No 2) [2011] QSC 177, cited
Jones v Dunkel (1959) 101 CLR 298, cited
ONE.TEL Ltd v Deputy Commissioner…

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AGLC
Re Permewan No. 2 [2022] QSC 114
Case
[2022] QSC 114
Decision Date

CaseChat Overview and Summary

The case of Re Permewan No. 2 involved a dispute between the Administrator of Prudence Permewan's estate, her daughters, and her former husband. The Administrator sought declarations that a series of inter vivos transactions made by Prudence were invalid and unenforceable. The daughters and the former husband argued that the transactions were valid and enforceable against the estate. The primary legal issues before the court were whether the inter vivos transactions were valid and enforceable and, if not, whether indemnity costs should be awarded due to the unreasonable conduct or delinquency relating to the proceedings.

The court found that the transactions were invalid and unenforceable at law. The Administrator was almost certain to have succeeded on his application, and the daughters and the former husband were almost certain to have succeeded on their cross-applications. The court relied on the principle that a contract is not enforceable if its enforcement would be opposed to public policy, particularly in light of the Succession Act's policy of making provision for the maintenance of family members in need. The court also considered the evidence and submissions, concluding that the inter vivos transactions constituted an inter vivos gift of Prudence’s property, which had the effect of leaving the estate with no assets upon her death.

The court awarded indemnity costs to the Administrator against the former husband and the daughters, finding that there had been making of allegations which ought never to have been made or the undue prolongation of the proceeding by groundless contentions. The court directed that the parties confer and deliver agreed orders or propose their own orders, with supporting submissions limited to three pages.

The final orders included dismissing the Administrator's claim and requiring the former husband and the daughters to pay the Administrator's costs on an indemnity basis. The court's decision emphasised the importance of considering the broader public policy implications of inter vivos transactions and the consequences of unreasonable conduct in legal proceedings.

Orders

Orders of the court

In BS 6343 of 2020:

1. On or before five days from the date of publication of this judgment, the parties file agreed orders or, if orders cannot be agreed, each party file the form of orders it proposes together with written submissions limited to three pages.

In BS 1091 of 2022:

1. The plaintiff’s claim is dismissed.

2. The plaintiff (Zerelda Pty Ltd) pay the first defendant (Myles Gerard Murphy as the Administrator of the Estate of Prudence Veronica Permewan (deceased) and the second defendant (Orion Investments (Qld) Pty Ltd) the costs of and incidental to the claim to be assessed on the indemnity basis.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

No explanation has been offered by Scott and Zerelda as to why, in light of the position pleaded in its points of defence to Donna’s points of cross-claim:(a)Scott took the position on the Removal Application referred to at [39] above;(b)Zerelda pleaded the allegations in the Enforcement Proceeding referred to at [47] to [49] above;(c)Scott and Zerelda pleaded the allegation in its points of defence to the Administrator’s points of claim referred to at [52](d) above.Relevant evidence at the hearing of the application Prior to Prudence’s signing of the documents recording the Transactions, there was a meeting between Prudence, Scott, Brett Hart and Prudence’s accountants where the subject of the protection of Prudence’s assets was discussed. In his affidavit sworn on 12 May 2022, Mr Hart gave the following evidence about that meeting:“6. On 12 October 2017, I met with Prudence Permewan (Prue) and [Scott] at [Northern Business Consultants’] Mango Hill office, with Joe [Kong] and David Robertson, the accountants of Prue and Scott, to discuss the potential work. I recall that:a.The basis of the meeting was that Prue intended to exclude her two daughters, whom she did not get on well with, from any significant benefit in her estate.b.Prue was aware of and concerned about asset protection upon her death and the prospect of a challenge to her estate, from her two daughters.c.I discussed an asset protection model which [Cleary Hoare] (and other advisers) use, which we refer to as ‘Secured Debt’, in order to protect her assets now and provide substantial protection against any result of a challenge to Prue’s estate.i.Where I refer to the ‘Secured Debt’, I am referring to a gift and loan back process, whereby an entity gifts an amount of money almost equal to their net equity to a trust which, in turn, loans the amount of the gift back to the originating entity, and takes security for the loan amount (Secured Debt).ii.The effect of implementing Secured Debt is that the net equity which the originating entity (in this case Prue) intends to protect is moved to a separate trust structure.iii.Secured Debt is a common form of asset protection strategy.d.We discussed the Secured Debt process at length, including the control mechanisms in the in the (sic) Lotus Trust and asset protection generally …” In his affidavit, Mr Hart also addressed a further meeting on 29 November 2017 at which Prudence signed the documents recording the Transactions. Relevantly, he said:“14. On 29 November 2017, I attended Prue’s property in Burpengary again, with another solicitor of [Cleary Hoare] at the time, Catherine Da Silva (Catherine), to execute Prue’s Secured Debt documents and Will. Whilst there, and before execution of the documents, I explained in detail again the effect of the Secured Debt process and documents. I recall that:a.Prue demonstrated she understood the effect of the documents, including that she was giving away almost her entire net worth and that, should the loans be called in during her lifetime, she may be forced to sell her assets to repay the loan; as would her estate.b.Prue was ultimately satisfied that the cost and complexity of implementing the Secured Debt work was warranted to reduce the effect of an attack on her estate by her daughters, and during her lifetime.…16. I recall Prue wanting to sign the Secured Debt documents that day, with the dates to be left blank and the documents not to be immediately effective. Whilst this is not common practice for myself or [Cleary Hoare], I knew that the documents would not come into effect until dated. This was also explained to Prue. Prue proceeded to sign the Secured Debt documents, without dating them, which I took with me to [Cleary Hoare’s] office at Newstead for safe keeping.”

Decision

Reasons for decision

As noted at [82] above, I have not found it necessary, in order to decide the question of costs, to resolve the argument as to whether the appointment of Zalerina as trustee of the Lotus Trust was invalid or to make factual findings concerning that issue. In those circumstances, and in light of the position taken by the Administrator, it is appropriate that those paragraphs of the Administrator’s application be dismissed. That dismissal does not alter my conclusion as to the appropriate costs orders on the Administrator’s application or otherwise.Conclusion During the argument on costs, counsel sought an opportunity to consider these reasons and to seek to agree upon a form of orders which reflects the conclusions I have reached. That is appropriate in this case. I direct that on or before five days from the date of publication of this judgment the parties confer and deliver to my associate agreed orders giving effect to these reasons or, if orders cannot be agreed, each party deliver the form of orders it proposes together with supporting submissions limited to three pages.

Ratio Decidendi

Legal Principle Established

As noted at [2] above, the concession made by Scott and Zerelda was limited in its scope: that the Court could not find that the promissory note had been delivered. That concession was said to have been made in the face of Mr Hart’s evidence under cross-examination (see [63] above). As to that evidence, Scott and Zerelda submit that they should not be visited with the “extraordinary and inexplicable” conduct of Prudence’s solicitors, both in 2017 and 2018, as well as in the course of this proceeding.Consideration of other grounds of invalidity Having conceded the unenforceability of the Transactions on that limited basis, Scott and Zerelda submit that there is no occasion or necessity to consider other grounds upon which the Administrator, Donna and Marla relied in asserting the Transactions were invalid. I disagree. Having heard the evidence and having had the benefit of both written and oral opening submissions, I am confident that the Administrator was almost certain to have succeeded on his application, and both Donna and Marla were almost certain to have succeeded on their cross-applications, in obtaining declarations that the Transactions were invalid and unenforceable at law for reasons other than the matter the subject of the concession made by Scott and Zerelda. The principal ground advanced by the Administrator in arguing invalidity was that enforcement of the Transactions would be contrary to public policy. The Administrator relied upon the following statement of Jordan CJ in the case of In re Jacob Morris:[25]It is well settled that a contract is not enforceable if its enforcement would be opposed to public policy. Public policy is not, however, fixed and stable … As a general rule, it may be said that any type of contract is treated as opposed to public policy if the practical result of enforcing a contract of that type would be generally regarded as injurious to the public interest.[25](1943) 43 SR (NSW) 352 at 355-6 (citations omitted). More recently, a majority of the High Court stated the principle as follows in Westfield Management Limited v AMP Capital Property Nominees Ltd:[26] The public policy upon which s 41 of the Succession Act is based is “the making of provision for the maintenance of members of a family who are found to be in need of such maintenance when the family tie has been broken by death. That policy is of public, as well as private importance.”[27][27]Barns v Barns (2003) 214 CLR 169 at [34]. It was submitted on behalf of Scott and Zerelda that the Transactions constituted an inter vivos gift of Prudence’s property, adopting a gift and loan-back structure, the lawful effect of which was intended to be, and was, that upon her death the estate had no assets. The submission that the Transactions were lawful rests on the following obiter statement from the judgment of Gleeson CJ in Barns v Barns:[28] The following paragraph of the judgment of Gleeson CJ should also be noted:[29]“The appellant also relied upon a qualification expressed in the reasons of Lord Cross of Chelsea, speaking for the majority in Schaefer v Schuhmann. His Lordship stated that he was considering ‘the rights of a person on whom a testator has agreed for valuable consideration under a bona fide contract to confer a benefit by will’ (emphasis added). The meaning of the expression ‘bona fide’ in this context is a little obscure. No doubt his Lordship was concerned with the obvious possibility that, if his general conclusions were correct, then it would be very easy for a person, who was not willing to divest himself or herself of all assets prior to death, to make, by deed or for nominal consideration, a binding contract to make a certain form of testamentary disposition and thereby leave the legislation with no work to do. But why could not a person, in good faith, set out to do that? In this case, the Court knows very little of the reasons behind the actions of the parties. It may be inferred that at least one of the purposes of the deed and the mutual wills was to make it impossible for the appellant to claim under the Act against the estate of the survivor of the deceased and the second respondent. Unless that, of itself, is sufficient to justify a conclusion that the legal arrangements were not bona fide, then the qualification expressed by Lord Cross would not be relevant. However, for the reasons already given, if the deed and the wills had that effect, it was only because of the scheme of the Act. There is no reason to describe conduct intended to produce a state of affairs that falls outside the scheme of the Act as, on that account, lacking good faith. If the deceased, during his lifetime, had given all his assets to charity, that would have left the appellant without a claim under the Act; but it would have been a bona fide gift, even if one of the reasons for making the gift was to deprive the appellant of a claim.”[29](2003) 214 CLR 169 at [39] (emphasis in original, citation omitted).