Wentworth v Rogers & Anor

[2007] HCATrans 747

[2007] HCATrans 747

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S500 of 2004

B e t w e e n -

KATHERINE WENTWORTH

Applicant

and

GORDON ROGERS

First Respondent

TONI ROGERS

Second Respondent

Application for special leave to appeal

HAYNE J
CRENNAN J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

FROM CANBERRA BY VIDEO LINK TO SYDNEY

ON MONDAY, 10 DECEMBER 2007, AT 12.15 PM

Copyright in the High Court of Australia

MR N.A. COTMAN, SC:   If the Court please, I appear with my learned friend, MR R.C. BEASLEY, for the applicant.  (instructed by Russo and Partners)

MR R.M. LOVAS:   If the Court please, I appear for the second respondent.  (instructed by Dorrough Smart)

HAYNE J:   Yes, thank you, Mr Cotman.  I have a certificate from the Deputy Registrar stating that he has been advised by the first respondent, Gordon Rogers, that he will not be attending Court on 10 December 2007.  The first respondent has, however, advised the Deputy Registrar that he will be adopting any submissions made by the second respondent, Toni Rogers, and the Deputy Registrar enclosed a copy of an email from Mr Rogers to that effect.  Yes, Mr Cotman.

MR COTMAN:   Thank you, your Honours.  Your Honours, might I inquire whether your Honours received an abbreviated document of submissions to summarise our position in relation to what might be called the debt argument in relation to this matter?

HAYNE J:   We did.  We received it on Friday, thank you, Mr Cotman.

MR COTMAN:   Again, your Honours, I apologise to be cutting across the submissions regime but it seemed useful to try and put that argument into somewhat terser form again and to separate it out from the other issues that are the subject of the application.  Your Honours, can I deal with three issues in the application.  The first is what might be called the advancement issue, the second is the subject of the note which is the debt issue and the third is briefly the subject of the note which is what might be called the collateral benefit issue.

Can I say, your Honour, we do not shirk from the proposition that this matter was below an intensely practical or factual debate, but it becomes fairly rapidly infected or affected by the operation of two significant principles of law which, in our respectful submission, this Court would be interested to revisit for the purposes of determining their proper ambit, either generally or in particular in the context of the operation of the personal insolvency arena, that being 37A, and, we would respectfully submit, it would also impact on matters such as the law of bankruptcy.

In relation to the submissions that your Honours have seen as to the presumption of advancement in relation to this matter, it arose in two separate areas of discourse below.  The first was in relation to the acquisition as joint tenants of the Tamworth property that was the subject of the 1994 transactions but bought in 1981.  It was, on any view of things and, as his Honour found, bought out wholly out of the assets of Mr Rogers.  It was bought, however, with a joint tenancy, which joint tenancy was the title severed in anticipation of the 1994 transactions for a nominal consideration of $1. 

In relation to that transaction, as part of the statement of claim, there had been sought a declaration or an order that the whole of the property remained an asset of Mr Rogers.  That appears, your Honours, in the supplementary application book at page 7.  It is paragraph 24 of the pleading.  Your Honours would see that effectively what has been pleaded is the application of the resulting trust presumption arising out of the whole of the moneys for the purchase price having been provided by Mr Rogers in relation to the acquisition and then, as his Honour Justice Howie found, subsequently in the improvement of the property by the expenditure of some $40,000‑odd dollars on the acquisition of a home that was built or assembled on the property.

So effectively, when one came to the 1994 transactions, in respect of which they are the subject also of the application, the severance of the joint tenancy for $1 had the effect of conferring on Mrs Rogers a one half separate interest in the Tamworth property.  When one then looked at the second half of the 1994 transaction, which is to say the mortgage and the acknowledgement of debt, the net effect of the two transactions was to effectively put the whole of the Tamworth property at the disposal of Mrs Rogers.  There was, on any view, no further equity, so to speak, that was not caught up either in the division into the two parcels and then the mortgage of the parcel in the name of Mr Rogers. 

The first issue that is flagged in relation to the application for special leave is, notwithstanding that this is a transaction between husband and wife and therefore within the presumption of advancement that this Court has dealt with in Calverley v Green and the like, what is raised for consideration is whether in the circumstances, as it is put in our submissions, of two mature adults with their own estates and dealing with the acquisition of a property which your Honours will have seen became partnership property for the purposes of a rural partnership and was conducted, as Mr Justice Howie found it, as a hobby farm, whether in effect the presumption of advancement as between husband and wife applies in relation to non-matrimonial assets, that is to say, assets acquired other than the matrimonial home or other than expenditure on affairs of the household but here expenditure on an asset outside the ordinary ambit of matrimonial expenditure and, indeed, for the acquisition of a business asset employed by the parties as such.

Your Honours, I must say that in the disposal ‑ ‑ ‑

HAYNE J:   Just before you go on with that, is the resolution of that issue one which in part depends upon an assessment of the facts?

MR COTMAN:   I think the facts as I have stated them are as they were found below and I do not think any of those findings were the subject of challenge in the Court of Appeal.

HAYNE J:   Though you divide the world into assets that you describe as matrimonial assets and assets that you describe as business assets.  That is an essential step in the process you undertake, is it not?

MR COTMAN:   It is, because, in our respectful submission, just as the ambit of the doctrine requires the identification of relationships between people that would attract the doctrine, so, in our respectful submission, it would attract a need for analysis of the nature of the transaction to determine that it is one appropriate to be attached to the relationship between the people to have a symmetrical relationship between the subject matter of the transaction and the parties that are engaging in it. 

At the moment, the Court has been considering in the various revisiting of this matter that has occurred over the years the question of what is the ambit of the relationships that will attract the presumption but the Court has not in terms been asked to address the ambit of the types of transactions that the doctrine would be attracted to and, in our respectful submission, that is a significant matter as, indeed, the facts of this case disclose, where it can effectively move large bodies of assets between individuals with significant consequences for third parties who deal with either of those individuals, not in their matrimonial capacity, but in their ordinary capacity. 

With respect, it takes not a great deal of imagination to consider business relationships between spouses where significant assets are involved and where the introduction of a presumption of advancement would have significant consequences for third parties dealing with those individuals in relation to their business as to where and with whom those assets fall from time to time.  So that at one extreme one can have a clear characterisation where a husband and wife are involved in a commercial operation involving, to take an example, heavy machinery, something that one ordinarily would not associate with the functioning of a household, it would be remarkable if, as between them, transactions in relation to the acquisition or use of that heavy machinery would attract the presumption of advancement.

HAYNE J:   There are some assumptions underpinning that about the nature of relationships which themselves may be contested, I would have thought, Mr Cotman, but there we are.

MR COTMAN:   Certainly, your Honour, the relationship area is, of course, a matter of debate as to what its ambit is.  Here the relationship is clear insofar as the undertaking of a solemn form of marriage had occurred some years before these transactions, but that the relationship is not the difficulty, the difficulty is the relationship of those persons with the assets that are said to be the subject of the presumption of advancement.

HAYNE J:   Yes.

MR COTMAN:   Your Honours, I should point to this as a matter for the Court’s attention in relation to considering this question.  At page 37 of the application book is the final paragraph from the judgment of Mr Justice Howie where he deals in a rolled-up fashion with a number of issues in relation to the presumption of advancement and I draw that to your Honours’ attention because obviously that may impact on the appropriateness of this matter as a vehicle to resolve that issue.

HAYNE J:   Where do we find it most conveniently dealt with in the Court of Appeal reasons?

MR COTMAN:   At page 93, paragraph 61, where the question is reserved and not argued before the Court of Appeal beyond the formal submission because it was considered that it would require this Court to consider the grounds of appeal which were raised in relation to that matter.  I can say this to your Honours, for example, at page 65 of the application book your Honours will see that there were extensive submissions and a ground of appeal addressed to that aspect of the matter.

HAYNE J:   Yes.

MR COTMAN:   The second point, your Honours, if I can move quickly having regard to the time, and I apologise for moving quickly through it, the second aspect of the matter in relation to the presumption of advancement is this, and it is the matter we have picked up in the short submissions.  As your Honours will have appreciated from the analysis undertaken by the Court of Appeal found on page 95 in paragraph 76 and following, the court considered what the evidence was in relation to the transactions said to be the payment of legal expenses by Mrs Rogers that would attract a debt or attract an interest in the land to her under the 1981 agreement between the parties. 

As appears from paragraph 75, midway through that paragraph, as your Honours see at line 12, “It is also appropriate to have regard to the presumption of advancement”, when one drops down to, for example, paragraph 78 – and I simply flag that as an example, it appears in a number of the paragraphs – what the court does is to treat one half of the moneys coming out of joint accounts as being advances by Mrs Rogers out of her own resources such as would attract a debt to her by Mr Rogers as a foundation for the acknowledgment of debt of $130,000 made in 1994.

HAYNE J:   Is the inquiry you would have the Court undertake in this respect anything more than a factual inquiry?  Is there a point of principle which is engaged?

MR COTMAN:   It is at bottom a factual inquiry insofar as there being the 1981 agreement between the parties that a debt or interest in property would be created to the extent Mrs Rogers deployed her own assets, or her own money as it is put, in the payment of Mr Rogers’ legal expenses.  The oddity or the matter that we raise for consideration is whether the presumption of advancement could sensibly operate in such an environment at all.  In other words, to the extent that that the presumption of advancement is a rebuttable presumption, whether it could operate in the face of the 1981 agreement or again, coming back to the underlying question in relation to the 1981 transaction, whether transactions in relation to the payment of the legal fees and legal expenses attracts the doctrine of advancement at all, but principally it is the question whether – and in regard to the terms of the 1981 agreement. 

The Court could proceed as the Court did in the paragraphs I have drawn attention to in employing a presumption of advancement, which presumption on my calculations, your Honours, leads to some 50 of the $82,000‑odd advanced, in fact being advanced by reason of the operation of the presumption of advancement.

If I can then move to the short submission document and what we have recorded there.  The last and principal matter that materially impacts on the outcome as between the parties is what is described as the understanding in the judgment of the Court of Appeal.  We have picked up the reference to the understanding in paragraph 10 of the short submission which in turn cross‑refers to paragraph 74 of the judgment of the Court of Appeal where that turn of phrase is used and is used to describe, as it is put in paragraph 84 of the judgment, an understanding between the parties – that is to say, Mr and Mrs Rogers – that all moneys spent on legal fees would be treated as having been spent by her, or putting it in its compound form as we have in paragraph 13, which is to take it literally from the judgments:

that Mr Rogers’ income would be expended on maintaining the family and Mrs Rogers would fund the legal expenses.

That became, to all intents and purposes, as it is expressed in the judgment in the Court of Appeal, an agreement that to the extent anything was spent on legal expenses it would be treated as being spent by Mrs Rogers and that allows the Court of Appeal in paragraph 85 to conclude that there would be, in effect, an uplift of the indebtedness from some $80,000‑odd to $130,000.

That is a factual issue in respect of which the findings are against us as to the making of the agreement.  Can I respectfully submit, the issue which would concern this Court is that an agreement or understanding, as it was put below – that is to say, as the court records there being no evidence of agreement as such but, rather, from each of Mr and Mrs Rogers of an understanding, albeit expressed in somewhat difference terms – would be, in our respectful submission, a classically private or domestic arrangement not intended to generate legal consequences.  But in the way it is deployed in the reasoning of the Court of Appeal, in our respectful submission, and indeed in the reasons of Justice Howie, it has the effect of having the remarkable outcome that to the extent that Mr Rogers’ own moneys, even after taking into account the presumption of advancement, are employed in the payment of his own legal expenses, that becomes a debt to Mrs Rogers and a debt that would support the making of the deed of acknowledgment of 1994 at $130,000 and interest running on that as a charge on the property being, as I observed at the beginning of these submissions, your Honours, a disposal of the whole of the balance of the equity in the property.

The issue thrown up, in our respectful submission, by the process of reasoning that has been deployed here is whether, in addition to the beneficial attributes of the presumption of advancement as between married couples, a domestic arrangement can be elevated into or provided as the consideration for a formal legal debt acknowledged by deed binding on the property of Mr Rogers by dent of the mortgage and so as to defeat the claims of the creditors of Mr Rogers when they come to seek recourse to his assets.

Those, with respect, your Honours, are the principal three matters in addition to the short point notes we have given in relation to the other matters that would affect the application of the mortgage in this case, being the matters dealt with on page 3 of our submissions in paragraphs 30 and 31.  In paragraph 32 we have dealt then with the matter subsequent to that in relation to the position of Mrs Rogers as a bona fide purchaser, so to speak, for the purposes of the subsection 3 defence.  Those are our submissions, if the Court please.

HAYNE J:   Yes, thank you, Mr Cotman.  Court will adjourn for a time to consider the course we will take in this matter.

AT 12.37 PM SHORT ADJOURNMENT

UPON RESUMING AT 12.40 PM:

HAYNE J:   We will not trouble you, Mr Lovas. 

In this Court the grounds of appeal Ms Wentworth would seek to agitate if special leave were to be granted are chiefly directed to the application of section 37A of the Conveyancing Act 1919 (NSW). In oral argument, however, chief weight was placed upon the application in the courts below of a presumption of advancement considered by this Court in Calverley v Green (1984) 155 CLR 242.

In this respect, and in relation to the application of section 37A of the Conveyancing Act, the arguments which the applicant would seek to advance in this Court depend in critically important respects upon the facts in relation to which the presumption and the statutory provision are each said to be engaged. 

There is no reason to doubt the correctness of the conclusions reached by the Court of Appeal about the trial judge’s findings of fact.  An appeal to this Court would enjoy no reasonable prospect of success.  Special leave to appeal, accordingly, should be refused.

MR COTMAN:   Yes, your Honour.

HIS HONOUR:   Yes, Mr Lovas.

MR LOVAS:   Could I have an order for costs, please?

HIS HONOUR:   Yes.  Can you resist that, Mr Cotman?

MR COTMAN:   I do not think I can, your Honour.

HIS HONOUR:   Yes, leave is refused with costs. 

Adjourn the Court till 2.15 pm in Court 1.

AT 12.42 PM THE MATTER WAS CONCLUDED