Xiao Hui Ying v Perpetual Trustees Victoria Ltd
[2015] VSCA 124
•27 May 2015
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2015 0023
| XIAO HUI YING | Applicant |
| v | |
| PERPETUAL TRUSTEES VICTORIA LIMITED (ACN 004 027 258) | Respondent |
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| JUDGES: | BEACH and McLEISH JJA and DIXON AJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 12 May 2015 |
| DATE OF JUDGMENT: | 27 May 2015 |
| MEDIUM NEUTRAL CITATION: | [2015] VSCA 124 |
| JUDGMENT APPEALED FROM: | Perpetual Trustees Victoria Ltd v Xiao Hui Ying & Anor [2015] VSC 21 (Hargrave J) |
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TRUSTS – Transfer of land by husband to wife without monetary consideration – Where husband used wife’s name in fraudulent design to obtain finance on land in excess of its true value – Whether natural love and affection constitutes valuable consideration – Whether presumption of resulting trust arose – Whether presumption of advancement rebutted – House v Caffyn [1922] VLR 67; Wirth v Wirth (1956) 98 CLR 228; Director of Public Prosecutions (Vic) v Le (2007) 232 CLR 562, considered – Leave to appeal refused.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr F Lim | Francis Lim Barristers & Solicitors |
| For the Respondent | Mr A T Strahan | Colin Biggers & Paisley |
BEACH JA
McLEISH JA
DIXON AJA:
On 24 February 2015, following a nine day trial, a judge of the Commercial Court made orders giving judgment for Perpetual Trustees Victoria Ltd (‘Perpetual’) against Xiao Hui Ying (‘Xiao’) and Craig Ronald Fitzgerald (‘Fitzgerald’). Judgment was given for Perpetual against Fitzgerald in the amount of $1,264,625.99 following default on two loans. Fitzgerald took no part in the trial and there is no appeal from that part of the judgment.
Perpetual had contended that there was a mortgage over certain land of which Xiao was the registered proprietor and on which Xiao and Fitzgerald resided as husband and wife (‘the land’), which secured repayment of the loans. The judge rejected that claim for reasons that are not material for present purposes. However, he held that the land (which had previously been transferred by Fitzgerald to Xiao without the payment of any purchase price) was held on a resulting trust for Fitzgerald.[1] He therefore declared that the land was held by Xiao on trust for Fitzgerald, and made orders for the appointment of a receiver and trustee for the sale of the land for the purpose of satisfying the judgment debt.[2]
[1]Perpetual Trustees Victoria Ltd v Xiao [2015] VSC 21, [112] (‘Reasons’).
[2]See Supreme Court (General Civil Procedure) Rules 2005, O 74.
Xiao seeks leave to appeal[3] from the order declaring her to hold the land on trust for the benefit of Fitzgerald, and from the orders requiring a sale of the land. The application for leave to appeal was heard along with argument on any appeal. By consent, the relevant orders were stayed until the hearing and determination of this appeal.
[3]Supreme Court Act 1986, s 14A.
Background
Xiao was born in China and came to Australia in November 1996. She had only a limited ability to understand or speak English at the time. In about June 1997, Xiao commenced living with Fitzgerald at his mother’s property — the land the subject of the proceeding — situated at 18 Frances Avenue Vermont. There she cared for his mother until she died in September 2000. The land was then transferred to Fitzgerald. Xiao also cared for Fitzgerald’s disabled sister.
Xiao and Fitzgerald were married in December 2000. Xiao gave evidence that Fitzgerald said to her at their wedding ceremony words to the effect ‘After we are married I will give this house to you. You will be happy’.[4] The judge did not accept this evidence.
[4]Reasons, [26].
Early in 2004, Fitzgerald wished to apply for a loan for the purpose of investing in a restaurant business. Because he had a number of unsatisfied judgments against him at the time and a poor credit rating, he decided to apply for the loan in Xiao’s name. He forged her signature on the loan agreement and related documents. Subsequently he also forged her signature on a second loan agreement. [5]
[5]Reasons, [56], [62].
In order to advance the first loan application, Fitzgerald needed to arrange security. Fitzgerald contacted Mr Harry Szmerling (‘Szmerling’), a solicitor, and met him for the first time on 1 March 2004. Fitzgerald instructed Szmerling that he wanted to arrange a transfer of the land to his wife for natural love and affection.[6]
[6]Reasons, [32].
Fitzgerald met with Szmerling on 9 March 2004. The trial judge accepted Szmerling’s evidence.[7] Szmerling said that Fitzgerald instructed him that he wanted to retain the beneficial interest in the land. Szmerling’s evidence in chief was as follows:
In the first part of the conference, can you recall what was said to you by Mr Fitzgerald?---Mr Fitzgerald said words to me to the effect that he wanted to have a situation where the property would be transferred back to him or under his control or words to that effect.
Did you say anything to him, as you recall, in response?---I said that that would require a transfer of land to be prepared from his wife back to him and supported by a declaration of trust.
Did he say anything in response to that?---He became irritated, didn’t seem to be particularly interested in the advice that I was giving, made a critical comment to me along the lines of I was complicating the matter or something like that.[8]
[7]Reasons, [37].
[8]Reasons, [33].
In cross-examination, Szmerling accepted that his file note did not record Fitzgerald’s instruction that he ‘wanted to have a situation where the property would be transferred back to him or under his control’. When it was put to him that Fitzgerald did not instruct him that ‘he wanted the wife to hold the property on trust for him’, Szmerling responded:
That’s absolutely incorrect, and that’s the whole reason that Mr Fitzgerald became angry and told me that I was complicating the issue.
...
What did come out of his mouth, what I did record was the fact that he accused me of complicating the matter. I did not put in his reason for saying that. That’s a gap. With the benefit of hindsight I agree with you as an experienced solicitor I should have put in the reason for him saying that. But he did say that. He did get angry for a reason, and I’m saying to you that is the reason.[9]
[9]Reasons, [36].
Fitzgerald authorised Mr Bernhard Seifert (‘Seifert’), who was also present at the meeting, to give Szmerling instructions on his behalf. Fitzgerald then left the meeting. Later on the same day, Seifert instructed Szmerling to prepare a transfer back from Xiao to Fitzgerald to be held in escrow. Szmerling gave evidence that he told Seifert that it would probably be appropriate in those circumstances for Xiao to sign a declaration of trust in favour of Fitzgerald.
By letter dated 11 March 2004 addressed to Fitzgerald, Szmerling noted Fitzgerald’s instruction to accept instructions from Seifert on his behalf and, in accordance with those instructions, enclosed three documents to be signed by Fitzgerald and Xiao in the presence of independent adult witnesses. The documents were a transfer of land from Fitzgerald to Xiao in consideration of ‘Natural Love and Affection’, a transfer of land from Xiao back to Fitzgerald (in respect of which Szmerling wrote ‘we understand that that transfer is to be held in escrow’), and a declaration of trust ‘under which your wife declares that she holds [the land] solely as Trustee for you’.[10]
[10]Reasons, [39].
The trial judge found that the letter and enclosures were provided by Szmerling to Seifert and then given to Fitzgerald.[11] Xiao signed the first transfer. The judge inferred, on the balance of probabilities, that she also signed the other documents.[12]
[11]Reasons, [42].
[12]Reasons, [118].
Xiao gave evidence as to the circumstances in which she signed the transfer of the land from Fitzgerald to her, as follows:
Can you tell His Honour who asked you to sign this document?---My husband.
Can you remember when did you sign this document?---In 2004, in March.
Can you remember where did you sign this document?---My husband brought it home and I signed it at home.
When your husband brought this home, when he asked you to sign did he tell you anything before he asked you to sign?---He told me - my husband told me that when we got married he said he’ll give me this house, and he then said that when I sign this document the house will be mine, and he then asked me, ’Are you happy that I’ve given you this house?’
What did you say?---I said, ‘I’m very happy.’[13]
[13]Reasons, [43].
The judge rejected the last two answers as a recent invention and found that they were false. More generally, he held that Xiao was an unreliable witness who did not do her best to assist the Court. He treated her evidence with caution whenever there were no contemporaneous documents or objectively demonstrated facts to corroborate it.[14]
[14]Reasons, [21].
Szmerling received the transfer of land back from Fitzgerald, but not the other two documents. He then prepared a statutory declaration as to a transfer of land between married spouses.
Xiao was registered as the sole proprietor of the land on 29 March 2004. Immediately after the transfer, Fitzgerald used Xiao’s name to apply for a loan on the security of the land, and subsequently applied for the second loan. These were the loans advanced by Perpetual and the subject of the judgment debt in its favour entered against Fitzgerald.
The trial judge found that Fitzgerald acted fraudulently in obtaining the loans in reliance on false documents including a fraudulent valuation of the land, and that he forged Xiao’s signature on the loan agreements, the mortgage and related documents. The entire loan amount was paid to a company wholly owned and controlled by Fitzgerald. The loan proceeds were used in part to purchase a one-half share in a restaurant in the name of an entity of which Xiao was a director, and as to the remainder for use in the business and for his personal purposes.[15] No loans, advances or financial accommodation were provided by Perpetual to Xiao or at her request to any other person. The judge found that Xiao was ‘a pawn’ in the fraud perpetrated by Fitzgerald and that Fitzgerald exploited Xiao’s limited English skills by using her name to raise finance on the land without her knowledge.[16]
[15]Reasons, [66].
[16]Reasons, [75].
The judge further held that Fitzgerald’s principal purpose in transferring the legal interest in the land to Xiao was to enable him to raise finance to purchase his share in the restaurant.[17]
[17]Reasons, [114].
The judge held that Fitzgerald was liable to Perpetual for his fraud, and assessed damages at the full amount outstanding under the two loan agreements, plus interest. Because the loan agreements were void as forgeries, he held that the mortgage did not secure the moneys outstanding. On its proper construction, there was no ‘secured agreement’ between Perpetual and Xiao and therefore no ‘secured money’ as defined in the mortgage.[18]
[18]The judge applied Perpetual Trustees Victoria Ltd v English [2010] NSWCA 32 and Perpetual Trustees Victoria Ltd v Cox [2014] NSWCA 328 in reaching this conclusion. It is not challenged in this appeal.
It was in these circumstances that it became necessary for the judge to decide Perpetual’s claim that Xiao held the land, not in her own right, but on trust for Fitzgerald, so as to make the land available to Perpetual by way of equitable execution of its judgment debt against Fitzgerald. This is the only issue which remains alive on the appeal.
Trial judge’s conclusion on the trust question
The trial judge set out the legal principles to be applied in determining whether Xiao held the land on a resulting trust for Fitzgerald. Those principles were not in issue at the trial. The judge summarised them as follows:
(1) Where a person transfers land to another without any consideration, equity presumes that the property is held by the transferee on a resulting trust for the transferor.[19]
(2) But where, as here, a husband transfers land to his wife without monetary consideration, there is a rebuttable presumption of advancement that the husband intended to convey both the legal and beneficial interest in the land to his wife.[20]
(3) The presumption of advancement may be rebutted by evidence of a ‘definite intention’ by the husband to retain the beneficial title in the land.[21] A definite intention may be proved by evidence which satisfies the ordinary standard of proof, the balance of probabilities.[22] Earlier suggestions that a higher standard of proof may apply no longer represent the law.[23] It has been held, however, that a definite intention will not be established where there is no more than a ‘nebulous intention to rely upon the relationship [of husband and wife] as a source of control over the property’.[24]
(4) Evidence of the parties’ acts and statements before or at the time of the transfer, ‘or so immediately after it as to constitute a part of the transaction’, are admissible to prove a definite intention to rebut the presumption of advancement.[25] Although ‘subsequent declarations are admissible as evidence only against the party who made them, and not in his favour’,[26] this does not exclude the husband giving testimonial evidence as to his intention when transferring property to his wife.[27] In this case, there [was] no such evidence from Mr Fitzgerald.[28]
[19]Wirth v Wirth (1956) 98 CLR 228, 235–6; Nelson v Nelson (1995) 184 CLR 538, 600–2.
[20]Calverley v Green (1984) 155 CLR 242, 247.
[21]Damberg v Damberg [2001] NSWCA 87, [44].
[22]Ibid.
[23]Ibid.
[24]Ibid, citing Drever v Drever [1936] ALR 446, 450 (Dixon J, dissenting but not on this point); Mischel Holdings Pty Ltd (in liq) v Mischel [2013] VSCA 375, [67].
[25]Shephard v Cartwright [1955] AC 431, 445–6 and Damberg v Damberg [2001] NSWCA 87, [45], both citing R E Megarry and P V Baker, Snell’s Principles of Equity (Sweet & Maxwell, 24th ed, 1954) 153.
[26]Ibid.
[27]Damberg v Damberg [2001] NSWCA 87, [45].
[28]Reasons, [110].
The judge held that Fitzgerald had transferred the land to Xiao without monetary consideration, such that a rebuttable presumption arose that Fitzgerald intended to convey to Xiao both the legal and beneficial interest in the land (i.e. a presumption of advancement). He further held that the presumption was rebutted, because the circumstances as a whole established on the balance of probabilities that Fitzgerald had a definite intention of retaining his beneficial interest in the land. The judge based the latter conclusion in particular on Szmerling’s evidence as to the instructions Fitzgerald had given him about wanting the property to remain under his control. He also relied on the evidence as to Fitzgerald’s principal purpose in transferring the legal interest to Xiao and the fact that he had embarked upon arrangements to raise finance on the land before it was transferred.
Finding that the presumption of advancement was rebutted, the judge held that Fitzgerald was doing no more than using Xiao’s name in his fraudulent design to obtain finance on the land in excess of its true value.[29]
[29]Reasons, [116].
As noted above, the judge rejected Xiao’s evidence that Fitzgerald had told her at their marriage ceremony and when he asked her to sign the transfer that he was giving her the land. However, he found that, even if Fitzgerald had made those statements, his definite intention at the time of the transfer was to retain the beneficial interest in the land and to deal with the land as if it was his own.[30]
[30]Reasons, [119].
Xiao challenges both these aspects of the trial judge’s reasons in her application for leave to appeal.
Grounds of appeal
The proposed grounds of appeal contend, in essence, that:
(i) a presumption of resulting trust did not arise in favour of Fitzgerald because the transfer was stated to be for consideration, namely ‘natural love and affection’, which constitutes valuable consideration (grounds 1 and 2); and
(ii) any presumption of a resulting trust was in any event rebutted, and a presumption of advancement arose instead and could not be rebutted, because Perpetual could not set up Fitzgerald’s fraudulent design for the purpose of establishing a resulting trust in his favour and because there was no evidence that Xiao signed the declaration of trust and re-transfer of land (ground 3).
Was there a presumption of resulting trust in favour of Fitzgerald?
In her first two grounds of appeal, Xiao contends that no presumption of resulting trust arose because there was valuable consideration given by Xiao in the form of ‘natural love and affection’ and by virtue of the fact that Xiao had cared for Fitzgerald’s mother and sister. It may be observed at once that the judge’s reasoning did not rely on any presumption of resulting trust. Rather, the resulting trust upon which his declaration was founded arose upon the rebuttal, on the evidence, of a presumption of advancement in favour of Xiao. It is none the less convenient to consider the arguments relied upon by Xiao on appeal, in respect of the presumption of resulting trust.
To the extent that it is submitted that the transfer was made for valuable consideration in the form of care for Fitzgerald’s mother and sister, that submission can be disposed of shortly. The judge noted that, while Xiao gave some general evidence about looking after Fitzgerald’s mother and sister, she did not give evidence of any statement by Fitzgerald to her that he was giving her the land in consideration for those services. In this respect, her evidence did not support her pleaded case.[31] In the circumstances, there is no basis for finding that Fitzgerald transferred the land in consideration for the care Xiao had given his mother and sister.
[31]Reasons, [45]–[46].
It is only necessary, then, to identify the nature of the consideration expressed in the instrument of transfer, namely ‘natural love and affection’.
Xiao submitted that, for the purposes of determining whether a resulting trust arises upon a transfer of land, a transfer between husband and wife for natural love and affection constitutes valuable consideration sufficient to prevent any presumption of resulting trust in favour of the transferor from arising. The presence of such valuable consideration meant also that Xiao did not have to rely on the presumption of advancement in her favour. Instead, there was a transfer of legal and beneficial title and no question of the intention of the transferor arises.
Perpetual contested the characterisation of the consideration as ‘natural love and affection’. It pointed out that the trial judge had made no such finding. It further submitted that the submissions for Xiao at trial had accepted that the only issue for decision in this aspect of the case was whether Perpetual had proved, against the presumption of advancement, that Fitzgerald had the definite intention of retaining the beneficial interest in the land.
It is convenient to proceed on the basis that, notwithstanding the manner in which the trial proceeded, it is open to this Court to consider whether the judge erred in his approach to the governing legal principles. It is also convenient to assume that the consideration for the transfer was as stated in the instrument of transfer, namely ‘natural love and affection’. Certainly, the judge made no contrary finding.
It is well established that there is a difference between valuable consideration and good consideration, and that a transfer for natural love and affection is a transfer for good, rather than valuable, consideration.[32] There is no authority for the applicant’s submission that a transfer for natural love and affection is a transfer for valuable consideration. However, that is not determinative of whether or not a presumption of resulting trust arises upon such a transfer.
[32]Chief Commissioner of State Revenue (NSW) v Dick Smith Electronics Holdings Pty Ltd (2005) 221 CLR 496, 505 [24] (Gleeson CJ and Callinan J); Director of Public Prosecutions (Vic) v Le (2007) 232 CLR 562, 575 [37] (Gummow and Hayne JJ).
Deane and Gummow JJ explained the operation of the presumptions of resulting trust and advancement, in the case where one person provides the purchase money for the acquisition of property by another, in Nelson v Nelson:[33]
The presumptions operate to place the burden of proof, if there be a paucity of evidence bearing upon such a relevant matter as the intention of the party who provided the funds for the purchase. The first presumption is that where a person … paid the purchase price for the … property and caused it to be transferred to other persons, they hold the property upon trust for the person who provided the purchase money. The other presumption, that of advancement, is perhaps not strictly a presumption at all. Rather, the position is that there are certain relationships from which equity infers that any benefit provided for one party at the cost of the other has been provided by way of ‘advancement’. The consequence is that the equitable estate follows the legal estate and is at home with the legal title; there is an absence of any reason for assuming that a trust arose.
The operation of the presumption of advancement may be rebutted by evidence of the actual intention, at the time of the purchase, of the parent or other person who provided the purchase money. Evidence also may be given to support the presumption of advancement.
Where the presumption of advancement is rebutted, the trust which then is enforced is a resulting trust, not an express trust.
[33](1995) 184 CLR 538, 547 (citations omitted).
Their Honours referred to Calverley v Green.[34] In that case, Gibbs CJ referred to authorities stating that the presumption of advancement 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’ and is ‘no more than a circumstance of evidence which may rebut the presumption of resulting trust’.[35]
[34](1984) 155 CLR 242, 255–6, 265, 267.
[35](1984) 155 CLR 242, 247 (citing Martin v Martin (1959) 110 CLR 297, 303 and Pettitt v Pettitt [1970] AC 777, 814 respectively).
Both these cases involved payments or contributions by one party towards the purchase price of land acquired by another. The position here is different, because the transfer took place between the relevant parties. Gibbs CJ observed in Calverley v Green[36] that the question whether a resulting trust is presumed to arise in the case of a voluntary transfer in such circumstances is ‘not without complications’, but authority might be thought to suggest an affirmative answer.[37]
[36](1984) 155 CLR 242, 249.
[37]The Chief Justice referred to the discussion of House v Caffyn [1922] VLR 67 in Wirth v Wirth (1956) 98 CLR 228, 236 (Dixon CJ). See also Nelson v Nelson (1995) 184 CLR 538, 600 (McHugh J); House v Caffyn [1922] VLR 67, 78 (Cussen J); cf J D Heydon and M J Leeming, Jacobs’ Law of Trusts in Australia (LexisNexis Butterworths, 7th ed, 2006) [1220].
In House v Caffyn,[38] the question was whether, in a transfer between two brothers for an expressed consideration of £950, a resulting trust arose in favour of the transferor by reason of the facts that the consideration expressed in the transfer was not paid, and that no other valuable consideration was given. Only Cussen J examined whether a presumption of resulting trust arose. He held that it did not, in the face of the expressed consideration. In the course of reaching that conclusion, he expressed the tentative view that a presumption of resulting trust arises upon a voluntary conveyance of land.[39] He defined ’voluntary’ as meaning that ‘there was no valuable or good consideration (money, money’s worth, marriage, or blood)’.[40] Because a brother came within the consideration of ‘blood’, Cussen J stated that there was ‘a good deal to be said’ for negativing the presumption of a resulting trust, ‘blood’ being a ‘good’ consideration.[41] However, he was inclined to think that this consideration could not be relied upon since a pecuniary consideration had been expressed. Instead, the expressed valuable consideration negatived a presumption of resulting trust in that case.[42]
[38][1922] VLR 67.
[39][1922] VLR 67, 79.
[40][1922] VLR 67, 75–6.
[41][1922] VLR 67, 79.
[42][1922] VLR 67, 79–80.
House v Caffyn may therefore be taken to suggest that, although a voluntary transfer of land will ordinarily give rise to a presumption of resulting trust in favour of the transferor, a transfer of land between persons in respect of whom there is ‘good’ consideration will not attract such a presumption. It may be thought that Dixon CJ endorsed that understanding of the reasoning of Cussen J, in Wirth v Wirth.[43] Other authority can be taken as indicating that, in the case of a transfer between husband and wife, the presumption of advancement operates to displace a presumption of resulting trust.[44]
[43](1956) 98 CLR 228, 236. See also Nelson v Nelson (1995) 184 CLR 538, 600–2 (McHugh J); Director of Public Prosecutions (Vic) v Le (2007) 232 CLR 562, 576 [40] (Gummow and Hayne JJ).
[44]See, eg, Calverley v Green (1984) 155 CLR 242, 247 (Gibbs CJ).
It is not necessary to consider this issue further. Even if, strictly speaking, no presumption of resulting trust arose in the present case, this does not advance Xiao’s case. Whether or not a resulting trust was to be presumed was not determinative of whether, on all the evidence, a resulting trust was ultimately established. In particular, just as the judge found in the present case, a resulting trust could still be found if the presumption of advancement arose but was rebutted by evidence of Fitzgerald’s intention. It was thus critical to this part of Xiao’s argument that ‘natural love and affection’ constitutes valuable consideration, because this meant that the transfer operated as one for valuable consideration and there was no occasion to consider Fitzgerald’s intention at all.
Once it is clear that the transfer was not for valuable consideration, Nelson v Nelson shows that the ultimate issue for determination becomes the intention of Fitzgerald in transferring the land. The presumptions of resulting trust and of advancement operate only as aids in deciding that question. Even if, as House v Caffyn implies, Perpetual could not rely on a presumption of resulting trust for this purpose, that does not alter the underlying question. The next issue, then, is whether a presumption of advancement arises in respect of a transfer for ‘good’ consideration.
Was there a presumption of advancement in favour of Xiao?
It is clear that a presumption of advancement does arise in a voluntary transfer between husband and wife. It is immaterial if the transfer is expressed to be for ‘natural love and affection’. As already explained, such a transfer is not one for valuable consideration but for ‘good’ consideration. In Wirth v Wirth Dixon CJ said that the presumption of advancement ‘in its inception was concerned with relationships affording “good” consideration’.[45]
[45](1956) 98 CLR 228, 237.
The position was explained by Gummow and Hayne JJ in Director of Public Prosecutions (Vic) v Le.[46] The question in that case was whether a transfer for natural love and affection was a transfer of land for ‘sufficient consideration’ within the meaning of s 52(1) of the Confiscation Act 1997. The relevant passage of the judgment examines the general law regarding such a conveyance, as follows:[47]
Equity will not (subject to what appears below) assist what it regards as a volunteer to perfect an otherwise imperfect gift of property. In that regard, it would be insufficient to show ‘good consideration’, being natural affection for family members or moral obligation. However, ‘valuable consideration’ will attract the intervention of equity. Equity regards this as not including a bare covenant under seal but as including not only money or money’s worth but a settlement made before and in consideration of marriage or agreed before and executed after the marriage. There was no marriage consideration in the present case and no ‘valuable consideration’. …
By way of qualification to the general principle that equity does not lend the assistance of its doctrines and remedies to voluntary undertakings, the presence of motive as ‘good consideration’ has been treated as sufficient to deny the implication of what otherwise would be a resulting trust in favour of the disponor. As was said in the American case of Groff v Rohrer:[48]
‘The relation of … husband and wife, if there were no proof of a valuable consideration in the deeds, furnished ground of meritorious consideration, to prevent the implication that the husband merely intended that [the wife] should be a trustee of the property conveyed, for his benefit.’
[46](2007) 232 CLR 562.
[47]Ibid 575–576 [37]–[40] (citations omitted). See also 591 [109] (Kirby and Crennan JJ), where it is stated that a reference to natural love and affection ‘strongly suggests a gift’.
[48](1872) 35 Md 327, 336. See also House v Caffyn [1922] VLR 67, 79; Wirth v Wirth (1956) 98 CLR 228, 235–6; Scott on Trusts (4th ed, 1989), vol 5, [405].
These authorities support the proposition that the presence of ‘good’ consideration by way of natural love and affection in a transfer of land between husband and wife does not exclude the presumption of advancement. To the contrary, such consideration is consistent with an intention that the transferor intended the property to be held, both as to the legal and equitable titles, by the transferee as a gift. The probability that this will have been the intention in a transfer between husband and wife is the very foundation or justification for the presumption of advancement.[49] If it matters, any presumption of a resulting trust between transferor and transferee that might have arisen is thereby rebutted.
[49]Wirth v Wirth (1956) 98 CLR 228, 237 (Dixon CJ); Calverley v Green (1984) 155 CLR 242, 249–50 (Gibbs CJ).
However, even if it is accepted that such a transfer does not give rise to a presumption of resulting trust, and that a presumption of advancement arises instead (at least in a transfer between husband and wife), that is not the end of the matter because the presumptions are always rebuttable. As Perpetual submitted, there will still be a resulting trust in favour of the transferor if a definite intention to that effect can be shown.
Was the presumption of advancement rebutted?
The trial judge treated the question before him as whether the evidence as to Fitzgerald’s intentions at the time of the transfer rebutted the presumption of advancement in favour of Xiao. It follows from the above analysis that there was no error in the manner in which he approached the matter.
The applicant however sought to impugn the trial judge’s finding that it was Fitzgerald’s definite intention to retain beneficial ownership of the property, on two principal bases.
First, it was submitted that the finding should be set aside because there was no evidence for the judge’s finding that Xiao signed the declaration of trust and re-transfer of land in escrow. This submission is not sustainable. The judge stated expressly that the latter finding was not necessary for the conclusion, reached earlier in his judgment, that the presumption of advancement had been displaced. The evidence on which he relied, including the testimony of Szmerling and the evidence of Fitzgerald’s own actions and purposes in relation to the loans and the land, was ample to justify that conclusion. For these reasons, even though the inference the trial judge drew as to the signing of the documents by Xiao might be open to question, nothing turned on it in the outcome of the case.
Reliance was also placed on three passages in the transcript which it was said indicated that the judge’s adverse findings as to Xiao’s credit should be disturbed. The passages were said to show that Xiao had been confused by documents put to her in cross-examination. It was submitted that there was unfairness in placing untranslated documents over ten years old before her and asking her questions about them without first explaining their contents.
This argument was advanced only as a basis for rejecting the judge’s finding as to the signing of the declaration of trust and the re-transfer of the land. As we have said, that finding was not dispositive. Nor did it rest on a rejection of any of Xiao’s evidence.[50] It therefore did not turn on her credit in any event.
[50]Xiao gave evidence that she did not remember whether or not she had signed the documents.
In so far as the judge’s approach to Xiao’s credit was challenged on any wider basis, that challenge must also fail. We are not persuaded that there was any unfairness to Xiao in the manner in which the trial was conducted. She was assisted by an interpreter and legally represented throughout. The specific answers to which the Court was taken were able to be followed up in re-examination. There is no basis for disturbing the judge’s conclusions as to the weight to be placed on Xiao’s evidence.
Moreover, the judge stated that, even if he had accepted Xiao’s evidence as to the statements made to her by Fitzgerald, he was still confident that Fitzgerald’s definite intention was to the contrary of those statements. As already noted, there was ample evidence for that finding.
The second ground of attack on the judge’s finding as to Fitzgerald’s intention was a submission that Perpetual was, in effect, setting up Fitzgerald’s fraudulent design to rebut the presumption of advancement whereas Xiao, it was submitted, was the ‘pawn’ in that design.
There was no evidence, and no finding, that Perpetual was in any way aware of or involved in Fitzgerald’s fraud. To the contrary, it was the victim of that fraud. There is no reason in these circumstances why equity would withhold its assistance from Perpetual. In a real sense, the recognition of the equitable interest in Fitzgerald goes towards redressing, rather than furthering, Fitzgerald’s fraudulent design.
In recognizing the beneficial interest in favour of Fitzgerald in the present case, the Court was not giving him a remedy; quite the contrary. There is therefore no scope for the operation of the principle that the courts will not lend their aid to a person who founds a cause of action on an immoral or illegal act.[51] Nor was the Court enforcing an interest that arose from a fraudulent transaction. The fraud involved creating the very opposite impression, namely that the beneficial interest was held by Xiao.
[51]See, eg, Nelson v Nelson (1995) 184 CLR 538, 604ff (McHugh J); Martin v Martin (1959) 110 CLR 297, 305–6 (Dixon CJ, McTiernan, Fullagar and Windeyer JJ).
There is no question here of Fitzgerald taking the benefit of his fraud as against Xiao. The evidence strongly suggests that the property of itself will not satisfy the judgment debt. If it were a question of Fitzgerald seeking the aid of equity to take an interest in the property at the expense of Xiao, different considerations would arise. The trial judge ordered, in that regard, that any balance from the proceeds of sale of the land, after payment of the judgment debt and the trustee’s costs and expenses, be paid to Xiao. In the circumstances, nothing more need be said as to the legal or equitable rights Xiao would have as against Fitzgerald in the event that the value of the property exceeds the amounts to be paid out.
For these reasons, the challenge to the trial judge’s finding as to Fitzgerald’s intention should be rejected.
Conclusion
For the reasons set out above, the declaration of the trial judge in respect of the land should not be disturbed. We do not consider that the application for leave raised a point that had a prospect of success that was real in the sense of not being fanciful.[52] The submission that the transfer was made for valuable consideration was without substance and the challenges to the trial judge’s finding as to Fitzgerald’s intention were misconceived. Leave to appeal must therefore be refused.[53]
[52]Kennedy v Shire of Campaspe [2015] VSCA 47, [13], [19] (Whelan and Ferguson JJA); Note Printing Australia Ltd v Leckenby [2015] VSCA 105, [78]–[82] (Tate JA, Whelan and Ferguson JJA agreeing).
[53]Supreme Court Act 1986, s 14C.
Some of the orders of the trial judge operated by reference to specific dates commencing approximately a month after the date of his orders. The purpose, we were told, was to give Fitzgerald time to pay the judgment debt. As indicated, the judge’s orders have been stayed pending the determination of this appeal. In the circumstances, this Court should vary the relevant orders so that they operate from dates commencing 14 days after this Court gives judgment.[54]
[54]Supreme Court (General Civil Procedure) Rules 2005, r 64.36(1).
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