Green v Schneller [2002] NSWSC 671 | Case summary

Supreme Court of NSW|2002-07-31|Before: Barrett J

Background and factual outline 1 The plaintiff ("Mr Green") seeks, as principal relief, orders for the avoidance of an alienation of property by the first defendant ("Mrs Schneller") to the second defendant, her husband ("Mr Schneller"). The claim is based on s.37A of the Conveyancing Act 1919: "(1) Save as provided in this section, every alienation of property, made whether before or after the commencement of the Conveyancing (Amendment) Act 1930, with intent to defraud creditors, shall be voidable at the instance of any person thereby prejudiced. (2) This section does not affect the law of bankruptcy for the time being in force. (3) This section does not extend to any estate or interest in property alienated to a purchaser in good faith not having, at the time of the alienation, notice to the intent to defraud creditors." 2 Mr Green also seeks an order under s.79A of the Family Law Act 1975 (Cth) setting aside certain orders made by the Local Court at Manly in proceedings between Mrs Schneller and Mr Schneller. 3 The evidence consists of a number of documents tendered by Mr Green without objection by Mrs Schneller and Mr Schneller, affidavit evidence of Mr Green's solicitor, a valuer, an accountant and the next door neighbours of Mrs Schneller and Mr Schneller (all of the affidavit evidence being adduced by Mr Green) and oral evidence upon cross-examination of the accountant and the neighbours. Mrs Schneller and Mr Schneller did not seek to place any evidence before the court. 4 The central facts are not in dispute. In June 1994, Mr Green sued Mrs Schneller in the Common Law Division seeking damages for alleged defamation arising out of statements made by her in an interview telecast on Channel 7. On 21 October 1994, 22 August 1997 and 10 November 1997, orders for costs were made against Mrs Schneller at various stages of the defamation proceedings, including upon application to the Court of Appeal. A further order for costs was made against Mrs Schneller on 18 March 1998 when her application for leave to file a cross-claim against Channel 7 was refused by Levine J - it may be noted that the possibility of a subsequent application for such leave was left open by his Honour and that the matter was in fact re-visited before Simpson J at a subsequent stage. 5 The alienation of property attacked by Mr Green under s.37A occurred (or, at least, was completed) by transfer registered under the Real Property Act 1900. The transfer is dated 6 May 1998. Mrs Schneller is named as transferor and Mr Schneller as transferee. It was executed by Mrs Schneller and by Mr Schneller's solicitor. The operative part is as follows: "TRANSFEROR JENNIFER ANN SCHNELLER acknowledges receipt of the consideration of $1.00 and as regards the land specified above transfers to the transferee an estate in fee simple." 6 The property in question is situated at 42 Upper Cliff Road, Northwood. I shall refer to it as "the Northwood property". Mr Schneller and Mrs Schneller purchased it in 1986 and became the registered proprietors as joint tenants. They commenced to live in it and it has been at all material times the home of them and their children. The joint tenancy came to an end by virtue of the transfer of 6 May 1998. 7 The transfer was executed in conformity with the first of several orders made by the Local Court at Manly on 6 April 1998. The orders were made by consent of Mrs Schneller and Mr Schneller, they being the parties to the relevant Local Court proceedings which were initiated by a form entitled "Application for Consent orders - Form 12A" to which I shall return. The form carries a reference to the Family Court of Australia but is expressed to be "Filed at Manly" on 6 April 1998 and it is clear that, as I have said, the orders were made by the Local Court at Manly. 8 There was no issue before me as to the jurisdiction of the Local Court, being a court of summary jurisdiction of the kind referred to in s.39(b) of the Family Law Act, to make the orders in question. Nor was it disputed that s.79 of that Act was the provision under and by reference to which the orders were made. The orders were as follows: " 1. Order that on the 30th day after the date of these orders, or on such other date as the parties may agree in writing, the parties shall execute all documents and perform all acts necessary on their respective parts:- (a) to transfer to the husband the whole of the wife's right, title and interest in and to the property known as 42 Upper Cliff Road, Northwood NSW 2066 being the whole of the land comprised in certificate of title Volume 4909 Folio 23 ('the property'). (b) to transfer to the wife the whole of the husband's shareholding and interest in the company known as Patmon Pty Ltd A.C.N. 002 578 010. 2. Order that the husband pay all of the rates, taxes and outgoings, and all payments due under the mortgage in respect of the property and indemnify the wife in relation thereto, as from the date of such transfer. 3. Declarations that, otherwise than as provided in these orders, each party henceforth is (as between the parties) the sole and absolute owner of all property in his or her respective possession or under his or her respective control." 9 The Local Court also noted the following: "4. That the parties intend that for the purpose of Part VIII of the Family Law Act 1975 these orders shall constitute final orders for property settlement between them and agree that once these consent orders are made, neither party shall have the right to seek any further orders under the Family Law Act 1975 for alteration of their interests in the matrimonial property. 5. That each of the husband and the wife each severally release his and her right to make application in relation to the estate of the other party, after the death of the other party, under the Family Provision Act 1982 (NSW). 6. That each party agrees, that upon the death of the other party, he or she shall if so requested by the legal representative of the deceased party and at the expense of the deceased party's estate, make application to the Supreme Court of New South Wales for its approval of the above release of the rights which that party would have had under the said Family Provision Act 1982 against the deceased party's estate." 10 The defamation proceedings instituted by Mr Green against Mrs Schneller were heard by Simpson J over several days in February 1999. Judgment was given in June 2000 in favour of Mr Green. Mrs Schneller was ordered to pay damages. A further costs order was made against her. 11 The present proceedings were commenced in June 2001. Separately, an order was made in the defamation proceedings on 19 July 2001 ordering Mrs Schneller to attend before the Prothonotary on 13 August 2001 for examination as to her means of satisfying the judgment debt awarded against her. The examination summons was served on her on 3 August 2001. Three days later, on 6 August 2001, Mrs Schneller became a bankrupt by virtue of the presentation of a debtor's petition. As a result, s.58(3) of the Bankruptcy Act 1966 (Cth) precluded continuation of these proceedings without leave under that section. In Green v Schneller (2001) 164 FLR 82, I held that this court had no jurisdiction to grant the necessary leave. Such leave was subsequently granted by the Federal Court of Australia (Hill J) in the following terms (see Green v Official Trustee in Bankruptcy; Re Schneller (Bankrupt) [2001] FCA 1644): "1. Leave be granted to Mr Green to continue proceedings 3331 of 2001 in the Equity Division of the Supreme Court of New South Wales against Jennifer Ann Schneller and Paul Ronald Schneller and to take all necessary steps in those proceedings together with all necessary fresh steps. 2. Leave is granted without prejudice to any issues of substance which may arise in the Supreme Court proceedings." 12 The Federal Court also noted the following undertakings by Mr Green: "1. To recover the property at 42 Upper Cliff Road Northwood and not seek final relief without 7 days notice to the Official Trustee. 2. Not to oppose the Official Trustee being joined in the Supreme Court proceedings at any time. 3. To hold the benefit of any order made for the Official Trustee on behalf of the bankrupt estate of Mrs Schneller. 4. To seek amendment of the amended summons filed in the Supreme Court proceedings so as to delete the claim for an order that the first defendant's share of the proceedings (sic) be forthwith applied in satisfaction or partial satisfaction of the plaintiff's judgments against the first defendant and for the costs of the Supreme Court proceedings. 5. To notify the Official Trustee on at least 48 hours notice of any application which Mr Green may seek to make to amend substantively the orders presently sought in the amended summons filed in the Supreme Court proceedings. 6. To notify the Official Trustee of any settlement proposed to be entered into in respect of the Supreme Court proceedings and not to enter such settlement unless consented to by the Official Trustee." A preliminary issue 13 Before the merits of Mr Green's claim based on s.37A of the Conveyancing Act can be considered, it is necessary to decide whether, in view of the Local Court orders of 6 April 1998 requiring the transfer by Mrs Schneller, it is open to this Court to make an order, by reference to that section, which produces an outcome inconsistent with those orders. 14 Mrs Schneller and Mr Schneller contend that, unless and until the orders of 6 April 1998 are set aside, this Court cannot properly make any determination under s.37A with respect to the transfer made on 6 May 1998. Mr Green's position is that this is not so and that the appropriateness of such a course is confirmed by the decision of Hodgson CJ in Eq in Silvera v Savic (1999) 46 NSWLR 124 and that of Austin J in Langdon v Gruber [2001] NSWSC 276. 15 Silvera v Savic involved a challenge under s.37A to a transfer of property made pursuant to and in the context of consent orders made by a Local Court under the De Facto Relationships Act 1984 (now the Property (Relationships) Act 1984). In Langdon v Gruber, the s.37A challenge was aimed at a transfer made, as in the present case, under and in conformity with consent orders made by a Local Court under s.79 of the Family Law Act. Hodgson CJ in Eq accepted in Silvera v Savic that, having regard to the principles discussed in Re Baxter; Ex parte Official Receiver in Bankruptcy (1986) 10 FCR 398, the Supreme Court should not make orders inconsistent with subsisting orders of the Local Court. Those principles point to the undesirability, as a matter of public policy, of concurrent but conflicting court orders. There should not be extant simultaneously an order of one court requiring one person to transfer property to another and an order of another court contradicting the first order. Having decided that the case was, on the merits, one calling for relief by reference to s.37A, Hodgson CJ in Eq proceeded to discuss ways of resolving this difficulty. His approaches are summarised in the following passage in the judgment of Austin J in Langdon v Gruber: "His Honour identified four ways of giving effect to s37A in such a case: · First, the Court could declare that the effect of the Local Court order was spent by reason of its being carried out through the transfer of the property, and could then order appropriate re-transfers of the property. The re-transfer of the properties would be followed by writs of execution and possible sale by the sheriff. That may not be the most effective way to satisfy the plaintiff's rights. · Therefore, a second approach would be to make declarations and/or orders that would have the effect of bringing about an early sale of the property and the application of the proceeds of sale towards the plaintiff's debt. · Thirdly, his Honour found that the 'alienation' rendered voidable by s37A in the case before him was the whole process of obtaining the Local Court order and the consequent transfer. Without expressing a final view, his Honour thought that s37A might itself be a source of jurisdiction for the Supreme Court to set aside an order of a Local Court obtained by fraudulent intent to defeat creditors. · Finally, the Supreme Court could make a declaration and/or orders requiring one of the parties to make an application to the Local Court to set aside its order." 16 In both Silvera v Savic and Langdon v Gruber, the earlier orders were regarded as spent by virtue of compliance by way of actual transfer by one party to the other in conformity with the orders. That being so, it was not seen as inconsistent with the earlier order for the court to make orders reversing the transfer's effect by reference to s.37A of the Conveyancing Act. 17 Mr Skinner of counsel, who appeared for Mrs Schneller and Mr Schneller, submitted that the decisions of Hodgson CJ in Eq and Austin J failed to recognise principles applied by Simos J in Official Trustee in Bankruptcy v Edwards (1997) 139 FLR 104. In that case, the Official Trustee sought orders under ss 120 and 121 of the Bankruptcy Act directed to recovery of property disposed of by the bankrupt, as in Silvera v Savic, pursuant to consent orders made under what is now the Property (Relationships) Act. As a preliminary, the Official Trustee sought to have set aside the orders pursuant to which the transfers of property had been made, the ground being want of jurisdiction by virtue of the fact that the parties were lawfully married and therefore not within the purview of the Property (Relationships) Act. 18 Because of the way in which the proceedings were constituted (with the application to set aside the consent orders heard and determined before the application based on ss.120 and 121 of the Bankruptcy Act), it was not necessary for Simos J to deal with the issues confronted by Hodgson CJ in Eq and Austin J. Simos J did, however, have occasion to consider the effect of the consent orders and the implications of their not being set aside. After referring to a submission that the court should not, in its discretion, set those orders aside since there would still be no basis for ordering re-transfer of the relevant property, his Honour said: "This was because, in the submission of the second defendant, the property was transferred and the moneys were paid by the second defendant to the first defendant at a time when the Court orders were valid and had not been set aside, and that even if those orders were now to be set aside, that setting aside would have a prospective operation only, and could not affect the validity of the original transfer of property and payment of money to the first defendant under the originally valid consent orders. In this connection the second defendant referred to a number of authorities supporting the well-established principle that the order of a superior court, even if made without jurisdiction, is valid until set aside, and submitted that this meant in the circumstances that the plaintiff could not succeed in any application under s.120 or s.121 of the Bankruptcy Act . In particular, so it was submitted by the second defendant, the result was that any attempt by the plaintiff to recover the property and moneys transferred to and paid by the second defendant to the first defendant pursuant to the consent orders by virtue of the application of s.120 or s.121 of the Bankruptcy Act or otherwise was bound to be unsuccessful. In such circumstances, so it was submitted, the Court should decline to exercise its jurisdiction to set aside the consent orders since to do so would be an exercise in futility. I note that the relevant substance of this submission will still be available to the defendants in the final stage of these proceedings even if the consent orders are set aside. In my opinion, however, it would not be appropriate, to decline to exercise my jurisdiction to set aside the consent orders on these grounds since to do so would pre-empt the decision to be made by the Court on the further hearing of this matter when the applications pursuant to ss.120 and 121 of the Bankruptcy Act are to be made, more especially since, as stated above, the submissions now being made by the second defendant in this connection will still be available to him. If on that further hearing the Court were to decide that the plaintiff could not succeed, pursuant to s.120 and s.121 of the Bankruptcy Act or otherwise, in recovering the property transferred and the moneys paid by the second defendant to the first defendant pursuant to the consent orders, for the reasons submitted by the second defendant, the first defendant would not have suffered any prejudice by reason of the consent orders having been set aside in the present proceedings, other than as to the costs of the present proceedings. I propose to accommodate that consideration by ordering that the costs of the present proceedings before me be costs in the final hearing of the summons." 19 Mr Skinner also relied on Official Trustee in Bankruptcy v Higgins (2000) 109 FCR 1 in which Tamberlin J expressed some reservation about the approach of Hodgson CJ in Eq in Silvera v Savic of regarding the consent orders as "spent" by virtue of the conveyance effected in conformity with them: "However, as Davies J pointed out in the passage I have quoted from Re Sabri; Ex parte Sabri v Brien , on their face, the consent orders and any order requiring the retransfer of the property by the respondent give at least an appearance of conflict which should be avoided if possible." 20 The relevant passage in the judgment of Davies J in Re Sabri; Ex parte Sabri v Brien (1995) 60 FCR 131 is as follows: "… if this Court were to make orders in favour of the Trustee, it is likely that those orders would appear, on the face of them, to conflict with the order of the Family Court. Mr Thomson, counsel for the Trustee, has submitted that there would in fact be no actual conflict, for the orders would have been made under different statutes and would each have different effects. Nevertheless, on the face of the matter, if an outsider, not knowing either the terms of the Family Law Act or the terms of the Act, simply looked at the two orders, - there would certainly be a likelihood of an appearance of conflict. Matters of conflict should, if possible, be avoided. If this matter can be transferred to the Family Court so that all orders in relation to the matters are made by the Family Court, then the potential for an appearance of conflict will disappear." 21 Tamberlin J stated his conclusions in Higgins as follows: "In my view, the position in the present case is that the Federal Court has both the power and jurisdiction to make an order under s.121 in a case such as this. In this respect I do not agree with the remarks of Northrop J in Baxter 's case. However, as a matter of discretion, for the reasons given by Davies J in Re Sabri: Ex parte Sabri v Brien it is desirable in this case not to do so where the Family Court has power to both set aside or vary the order under s.79A and to exercise jurisdiction under the Act. Such a course will avoid the appearance of conflicting orders between the two courts." 22 There is here a clear finding that there is jurisdiction to make an order under s 121 of the Bankruptcy Act in respect of a disposition of property effected by or pursuant to consent orders made under s 79 of the Family Law Act, although as a matter of discretion it is preferable that that jurisdiction be exercised in conjunction with the jurisdiction to set aside those orders. In Re Mateo (Bankrupt); Mateo v Official Receiver in Bankruptcy [2002] FCA 344 (27 March 2002), Tamberlin J again referred to the general desirability, in this kind of case, of questions under ss 120 and 121 of the Bankruptcy Act being determined in the context of and together with proceedings to set aside the relevant orders under the Family Law Act. Approaches to these Bankruptcy Act provisions are, in my view, also valid in relation to s.37A. 23 In light of the decisions to which I have referred, I do not think that there is any principle of law which precludes the making of an order under s.37A of the Conveyancing Act in respect of an alienation of property effected under an order made pursuant to s.79 of the Family Law Act. In addition, I am of the opinion that where a s.79 order requires one party to a marriage to transfer property to the other and those parties then perform acts of a conveyancing kind to cause the property to be transferred in such a way that the first party no longer has any interest in it and the second party comes to occupy the ownership position contemplated by the order, there are good grounds for regarding the s.79 order as "spent" in the sense that it ceases to be an order which is the source of any continuing requirement or compulsion. 24 This last point requires amplification. A s.79 order of the kind to which I have referred is not to be regarded as a command that the party to whom the property is to be transferred must remain its owner permanently. Once the order has been complied with, it is open to the transferee to sell or give the property back to the transferor if both of them are minded to take voluntarily the steps necessary to achieve that end. Any such return of the property does not entail disobedience to or disregard of the original order. Rather, there is a new and separate set of events predicated on the position created in obedience to the order, namely, that the transferee party has become the owner of the property to the exclusion of the transferor. 25 I consider that the same kind of analysis holds good in a case where it is asserted that s.37A of the Conveyancing Act should be invoked to reverse the effect of a transfer of property effected in conformity with a s.79 order. Section 37A works on the basis that the alienation sought to be impugned has taken effect and, unless reversed by reference to the section itself, will stand indefinitely. This was recognised by Dixon CJ and Fullagar J in their joint judgment in Brady v Stapleton (1952) 88 CLR 322. Their Honours quoted with approval extracts from a number of older cases, including as follows: "Again, in Harrods Ltd v Stanton , Bailhache J said: 'But in my opinion until a deed of gift is set aside the donee under the deed of gift is the true owner of the goods comprised therein. It is true that the donee has a defeasible title, but unless and until the deed of gift is set aside the title is a good title'. In the same case McCardie J said: 'It was an actual gift from himself to his wife and she therefore became the owner of the goods, though it is clear that her title was subject to defeasance upon an application by the creditors of her husband under 13 Eliz 1 c.5 as being in fraud of creditors' [(1923) 1 KB at p.521]". 26 A person taking under a disposition susceptible to attack under an equivalent of s.37A was seen by Dixon CJ and Fullagar J as acquiring "a title, albeit a defeasible title". The defeasibility arises from proof of the matters to which the section directs attention. Absent defeasance by reference to those subsequently proved matters, the alienation is in all respects effective. The section and the defeasance it effects do not seek to undermine or impugn the process by which the alienation was effected. They are concerned solely with causing the relevant property to be restored to the person by whom it was alienated. 27 The matter was summed up thus in the judgment of Brennan J (with Deane and Fisher JJ concurring) in Noakes v J Harvey Holmes & Son (1979) 37 FLR 5, an appeal from Norfolk Island where the progenitor statute 13 Eliz I c.5 was still in force: "The title of the person claiming under the impeached disposition stands until the disposition is avoided. It is that title which the creditors must attack, and it will not avail them to pursue the debtor in litigation if they leave the assignee out of the suit."

This passage emphasises that the legislation operates upon the result of the impugned transaction and that it is the title of the transferee that is challenged, the intention of the transferor being the basis of the challenge. 28 It is necessary now to say a few words about the meaning of "alienation" in s.37A. It is, in my view, synonymous with "transfer" in the analogous Bankruptcy Act provision, with the result that the following observation of Tamberlin J in Mateo (above) is relevant: "In my view, the 'transfer' in this matter consisted of the whole transaction ranging from the signing of the consent orders on 18 April 2000 through to the completion of the transfer of the interest on or about 10 August 2000. There is no basis on which to isolate the making of the consent orders from the 'transfer' which took place and rely only on the formal instrument of transfer."

This is consistent with the approach taken by Hodgson CJ in Eq in Silvera v Savic (above): "In my opinion, the 'alienation' in this case was the whole process of obtaining the Local Court order and the consequent transfer; and it is that whole alienation that is made voidable by s.37A." 29 It is to be remembered that s.37A refers to an alienation which is "made" with a particular intent, that intent being, of necessity, an intent of the person by whom the alienation is "made". In a case such as the present where s.79 consent orders are involved, the acts amounting to alienation "made" are, of necessity, acts of the person who, before the first relevant step is taken, has it within his or her power to decide whether to make the alienation - in the present case, Mrs Schneller. The fact that the chosen series of steps involves actions by other persons or instrumentalities does not detract from the reality that the alienation "made" by the particular party consists of those of the steps actively taken by that party. On that basis, the s.79 consent order in this kind of case should not be regarded as a part of the alienation "made" by the relevant party, any more than should the stamping under the Duties Act 1997 of any instrument made necessary by a need to obtain registration under the Real Property Act 1900 in such a way as to prevent its being "not available for use in law or equity for any purpose" (see s.304 of the Duties Act and Ash Street Properties Ltd v Pollnow (1987) 8 NSWLR 80). The relevant "alienation" consists of the series of steps taken by the initiating property owner, including steps which result in participation by some outside person or instrumentality. But I do not see the acts of such an outside party at the property owner's instigation as part of the alienation, given that those acts are not "made" by the owner, although of course the owner's instigation of them is so "made". 30 With the alienation concept thus understood as limited to the acts of the initiating property owner, there need be no particular concern that an order made by reference to s.37A aimed at eliminating the effects of the alienation appears to cut across s.79 orders obtained on the application of that initiating party. That party's approach to a court exercising jurisdiction under the Family Law Act may fairly be regarded as no more or less than the invocation of a jurisdiction exercisable by reference to the requirements of justice as they affect the interests of the parties to the marriage, unaffected by considerations relevant to other interests. If considerations relevant to s.37A are afterwards found to provide independent grounds for a subsequent order that the effect of the particular alienation be undone, the earlier Family Law Act order does not operate as any form of impediment to the making of the subsequent order. 31 In none of the instances in which the existence of an earlier order under the Family Law Act or the Property (Relationships) Act has been raised as an issue has it been seen as a legal obstacle. The concern has been, rather, as to the appropriate exercise of discretion, with a preference, particularly in Higgins and Mateo, for a course which sees the application for the order affecting the voidable disposition linked with an application to set aside the earlier order. But there is, as I see it, no legal need for the earlier order to be set aside; it is, rather, a matter of comity. 32 If, in the present case, Mr Green's case based on s.37A were made out, the court might, within the scope of that section, make an order requiring Mrs Schneller to apply under s.79A of the Family Law Act for an order setting aside the relevant order of 6 April 1998, and requiring Mr Schneller to consent to that course. The court might also, as sought by Mr Green's amended statement of claim, exercise, pursuant to s.4 of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth), the jurisdiction to make such an order under s.79A, Mr Green being a competent applicant for such an order as a "person interested". However, for the reasons I have stated, I do not see any need to go to those lengths. 33 Because the existence of the Local Court orders does not preclude in any way the s.37A jurisdiction, I proceed to review the evidence relevant to the s.37A question. Documentary evidence: the work done by the solicitors 34 Because neither Mrs Schneller nor Mr Schneller gave evidence, all that is available to explain the instructions they gave to their solicitors and the work the solicitors did is a collection of file notes and correspondence. 35 It seems clear enough from these documents that Mrs Schneller and Mr Schneller went together to see Mr Somerville of Somerville & Co, solicitors of North Sydney, on 19 March 1998. Mr Somerville's file note is as follows: "19 MAR 1998 Attg 1 ½ hrs c. Paul & Jenny Consent orders : (1) Wife to transfer whole interest in property 42 Upper Cliff Road, Northwood NSW 2066 to H. (2) H to indemnify wife for mortgage & all outgoings (3) H to transfer to W all of his = shareholding & interest in PATMON P/L ACN 002578010 (we to change arts of co, to enable it to have one shareholder) (4) Don't mention super Marriage cert : We to order certified copy Stat records of co : With either Eislers or former accountant J.F. Wells of 5 Dock Instructions : (1) We act for Paul Jenny (2) We refer Jenny Paul to John De Mestre ["Paul" appears above the crossed-out "Jenny"] (3) Jenny will come on Monday to sign consent orders Title deed : Jenny will get the bank to produce the CT to the LTO when necessary Costs : $1,500" 36 Mr Somerville made the following note of a meeting with Mrs Schneller on 23 March 1998: "23 MAR 1998 Attendance on Jenny Schneller 25 mins · I explained consent orders. She read s79 & 75(2) of Family Law Act · She signed orders and application · She read transfer of shares and signed it. Signed transfer · I said to get Paul to sign them & then return them to us so we can file them · She signed costs agreement (explained $1500 is estimate)." 37 The costs agreement is in evidence. It describes the work covered by it as "resolution of family law matter". 38 Also in evidence are a letter from Mr de Mestre, solicitor, to Mr Somerville and a letter from Mr de Mestre to Mr Schneller, both dated 31 March 1998, confirming that Mr Schneller attended on Mr de Mestre on 28 March 1998 and was provided with advice on the consent orders and that Mr Schneller signed them. The signed document, together with the transfer of the land and the transfer of shares (also apparently signed by Mr Schneller) were sent to Mr Somerville with Mr de Mestre's letter. Mr de Mestre submitted to Mr Schneller a memorandum of fees ($150 costs and $9 disbursements) also dated 31 March 1998 for "Independent legal advice re Family Law Proceedings". There is no record of any further work done by Mr de Mestre. 39 Mr Somerville's memorandum of costs to Mrs Schneller was dated 17 April 1998 with a narration as follows: "To our professional costs for acting on your behalf until 31 March 1998 including attendance on Paul on 19 March 1998; ordering certified copy of marriage certificate on 20 March 1998; telephone call from you on 23 March 1998; preparation of Consent Orders and Application for Consent Orders; preparation of transfer; preparation of transfer of shares form; attendance on you on 23 March 1998; telephone call to Eislera & Stevenson on 30 March 1998; telephone call to J F Wells on 31 March 1998." 40 Mr Somerville (or his assistant) afterwards arranged for the transfer of the land and the transfer of shares to be marked exempt from stamp duty upon production at the Office of State Revenue. 41 I also mention, in relation to the activities of the solicitors, Mr Somerville's file note of 22 April 1998 which records a conversation with Mr Schneller concerning procedural matters concerning stamping and registration of the transfer and includes the following: "I said not much more is involved in finalising matter - costs won't reach $1500.00." 42 Finally, on 2 June 1998, Mr Somerville submitted to Mrs Schneller a further memorandum of his costs containing the following narration: "To our professional costs for acting on your behalf from 1 April 1998 to date including telephone call to you on 1 April 1998; telephone call from you on 2 April 1998; letter to Manly Local Court on 3 April 1998; telephone call to you on 17 April 1998; letter to you on 17 April 1998; attending to stamping of transfer of shares form at the Office of State Revenue on 20 April 1998; attendance on you on 22 April 1998; attending to stamping of transfer for Northwood property at the Office of State Revenue on 22 April 1998; telephone call to you on 6 May 1998; telephone call from you on 7 May 1998 letter to you on 8 May 1998; preparation of transfer of shares consent form; letter to you on 13 May 1998; preparation of notice of sale form; attending to registration of transfer for Northwood property on 13 May 1998; subsequent conversations with you in relation to the certificate of title not having been produced at the Land Titles Office; attending to registration of transfer for the Northwood property on 22 May 1998; telephone call from the Land Titles Office on 22 May 1998; perusal of registration notice from the Land Titles Office on 22 June 1998." 43 Mr Somerville's covering letter of 2 June 1998 concluded: "As this matter is now finalised, we thank you for your instructions and hope that we may be of assistance to you in the future." 44 The evidence includes a number of Mr Somerville's file notes to which I have not found it necessary to refer. For the most part, they related to registration of the transfer of the Northwood property (and the need for the Schnellers' bank to produce the certificate of title to permit this) and actions to locate the records of Patmon. Mr Somerville's notes show that he is a solicitor who is meticulous in making records for file. I quote two file notes as examples of the detailed nature of his recording. The first refers to a message Mr Somerville left on Mrs Schneller's answering machine on 6 May 1998: " I left a message for her to call me (she left a message earlier today with our office, saying that the bank is still in progress of assessing situation). I said I'll contact them for her if she gives me details. (they may require copy of stamped transfer which I have)." 45 The second example relates to a conversation with Mrs Schneller on 22 May 1998: " She said slip no. is 55018. Bank apparently did not put enough info on slip, that's why LTO sent it back. Bank amended slip & CT should be at LTO now. I'll arrange for registration. She'll come in today to collect register & return consent form." Documentary evidence: the application for the orders 46 The application to the Local Court for the making of the orders proceeded by way of the printed form to which I have already referred. Mrs Schneller is shown as the applicant and Mr Schneller as the respondent. Mr Somerville is shown as solicitor for the applicant and Mr de Mestre as solicitor for the respondent. 47 Questions as to the existence of completed or pending family law, domestic violence or child welfare proceedings between the parties are answered "no". Dates of commencement of cohabitation and marriage are included in the spaces provided. The space marked "Date of final separation" contains "N/A".

48 The application includes a statement on independent legal advice in respect of each party. The statement in relation to Mr Schneller is signed by Mr de Mestre. The statement in relation to Mrs Schneller is signed by Joanne Blair, a solicitor who I infer to be the "Joanne" who appears in internal memoranda of Mr Somerville's firm. In each case, the solicitor states that he or she has given the party independent legal advice as to the meaning and effect of the proposed consent orders. Documentary evidence: bank statements 49 There are in evidence statements relating to four bank accounts. The first is a "State Basic" account with Colonial State Bank at Lane Cove designated "Paul & Jennifer Schneller", account number 186-800493-82. The second is a personal cheque account with the same bank at the same branch designated "Paul Ronald Schneller and Jennifer Ann Schneller", account number 186-800493-00. Third, there is a "Streamline" account with the Commonwealth Bank, Lane Cove, designated "Paul Ronald Schneller and Jennifer Ann Schneller", account number (06 2192)1 0003388. Finally, there is a loan account with the Commonwealth Bank, Sydney, in the names of Mrs Schneller and Mr Schneller, account number 278885405. 50 The evidence extends to only two statements in relation to each account. 51 The first account was conducted in joint names in April 1988. It was still conducted in joint names in March 2001, although the credit balance was only $1.50 and there were no transactions in the period December 2000 to March 2001, from which it may be inferred that it was dormant and of no consequence. 52 The first statement in relation to the second account covers the period 10 March 1998 to 7 May 1998. It shows four deposit transactions and eight debit transactions apart from taxes. The second statement is for the period 10 September 1999 to 20 September, the account having been closed on the latter date. This shows an opening overdraft balance of $13.35 and a deposit to produce a nil balance. 53 The first statement in relation to the third account covers the period 27 February 1998 to 9 April 1998. There are six deposits and fifteen debits (apart from those for taxes), with several of these designated "HL REPAY 278885405" which may be taken to be home loan repayments related to the fourth account of that number. The other statement covers the period 10 January 2001 to 16 May 2001. It records ten credits and twelve debits none of which appears to relate to home loan repayments. 54 For the fourth account, being the home loan account, there is a statement covering the period January 1998 to June 1998 and a "Complete Home Loan Summary" for the period 1 January 2001 to 30 June 2001. These show a pattern of reduction of the debit balance by regular payments. The evidence of the neighbours 55 Mr and Mrs Biggs have lived at 44 Upper Cliff Road, Northwood for more than 30 years. Mrs Schneller and Mr Schneller are their immediate neighbours and have been since the Schnellers moved into 42 Upper Cliff Road. 56 Mr and Mrs Biggs deposed in a joint affidavit sworn on 29 July 2001: "We have not observed any change in the habits or behaviour of Jennifer Anne Schneller and Paul Ronald Schneller since the time we have been neighbours and in particular from in or about May 1998 to date. To our observations they have continued to reside at 42 Upper Cliff Road apparently as husband and wife." 57 Each of Mr Biggs and Mrs Biggs was cross-examined. The following passage from the cross-examination of Mrs Biggs reflects the substance of the evidence of these witnesses: Q. What did you observe about Mr and Mrs Schneller, that is, both of them, before March 1998, so far as their habits or behaviour were concerned? A. They appeared as a normal family. Q. Appeared as a normal family. What does that mean? A. They came and went, did what normal families do. Q. This is outside of the house? A. Absolutely. Q. So you can't tell us anything about their habits or behaviour inside the house? A. No, I can't. Q. Nor can you tell us tell us anything about their habits outside the house, nothing about their habits or behaviour, since March 1998? A. Nothing appears to have changed. Q. What was it that hasn't changed? A. The normal comings and goings that people do when they reside -- Q. Your observations, for the purposes of these proceedings, are the comings and goings that people do? A. The way our houses are situated, that's all I can tell you. Q. That's all you can say for the purpose of the hearing? A. They put their garbage out as normal people do, get in their cars, go to work; the children are going and coming from school. Q. So the comings and goings that you think would be assisting his Honour with consists of the egress and ingress of the house of Mr and Mrs Schneller? A. Yes, and in the garden and backyard." The evidence of value of the Northwood property 58 According to the rates notice issued by the Lane Cove Council for the year 1 July 1997 to 30 June 1998, the rateable value of the Northwood property at the valuation base date of 1 July 1995 was $303,000. This was land value only, disregarding the house and other improvements. 59 A "kerbside" inspection report by Mr Bennett, a registered valuer with L J Hooker, North Sydney, in August 2001 noted that the property "appears to require some work" and described it as follows: "The property comprises a 2 storey rendered brick or block home with a double carport. The home is a desirable property in an excellent location with open north-easterly views in a quiet street in leafy surrounds. There appears to be a small terraced rear yard with an open basement area. Located close to Lane Cove Country Club and the Northwood Wharf, the property is approximately 7 kilometres from the CBD. We believe the property, having a modern contemporary design, will have special appeal making it an extremely saleable property." 60 Mr Bennett's preliminary competitive marketing report (which he emphasised was not a valuation) said that the selling price was expected to be between $800,000 and $900,000, "however the final price could go beyond these expectations". 61 Mr Garder, a registered valuer, prepared a valuation on the instructions of Mr Green's solicitors for the purposes of these proceedings. He inspected the property from the outside only and noted a need for external maintenance. The market value assessed by Mr Garder in November 2001, assuming an unencumbered estate in fee simple in possession unaffected by deleterious restrictions and zonings, was $1,100,000. 62 The statement for home loan account with the Commonwealth Bank shows that the mortgage debt of Mrs Schneller and Mr Schneller in the period January to June 1998 fluctuated from a high of $65,538.58 at 19 June to a low of $54,795.91 at 21 May.

The evidence of value of the Patmon shares 63 Opinion evidence was given by Mr Dorfan, an accountant, as to the value of shares in Patmon at 23 March 1998. In reaching his conclusions, Mr Dorfan inspected or relied upon minutes of certain directors' meetings, the income tax returns of each of Mrs Schneller, Mr Schneller and Patmon for the years ended 30 June 1995 to 2000, a subpoena filed for Mr Green, instalment activity statements of Tangent Productions and Tangent Productions' cash record. 64 Mr Dorfan expressed the opinion that Patmon's operating result for three out of the four financial years up to 30 June 1998, before interest and loss on sale of non-current assets, was a loss. The loss was $6,594 for 1995, $4,156 for 1997 and $1,976 for 1998. There was a profit of $7,115 for 1996. Gross revenue was $11,906 (1995), $27,769 (1996), $20,363 (1997) and $27,506 (1998). 65 At the end of each of the four financial years mentioned, liabilities exceeded assets, the differential being $17,698 at 30 June 1995, $9,710 at 30 June 1996, $13,490 at 30 June 1997 and $15,241 at 30 June 1998. A salary was paid to Mrs Schneller in each of the four years ($5,350 in 1995, $5,400 in 1996, $11,000 in 1997 and $11,000 in 1998). 66 Mr Dorfan concluded that Patmon was unable to demonstrate future maintainable earnings. This, coupled with the deficiency of assets at the end of each of the years in question, led him to express the opinion that the value of the business at 23 March 1998, based on the financial results for the three years to 30 June 1997 was nil. In expressing this opinion, he had regard to both the net asset value method of valuation and the capitalisation of profits basis. 67 Mr Dorfan was cross-examined. It was put to him that the shares in Patmon had value because of the history of losses, there being, it was suggested, a future income tax benefit referable to the ability to set off against future years' taxable income tax losses carried forward from previous years. Mr Dorfan remained of the opinion that the shares had no value. The evidence: timing factors 68 It is important that a number of the events to which I have referred be seen in their sequential context. The following chronology of pertinent events emerges from the evidence: 21 October 1994 : Costs order made against Mrs Schneller in defamation proceedings 22 August 1997 : Further costs order made against Mrs Schneller in defamation proceedings 10 November 1998 : Costs order made against Mrs Schneller in the Court of Appeal 18 March 1998 : Costs order made against Mrs Schneller in defamation proceedings 19 March 1998 : Mrs Schneller and Mr Schneller meet with Mr Somerville 6 April 1998 : Consent orders made by Local Court on Mrs Schneller's application Findings 69 Mrs Schneller and Mr Schneller went to see Mr Somerville on 19 March 1998. This was the day immediately after the making of the fourth costs order against Mrs Schneller in the defamation proceedings. Mrs Schneller and Mr Schneller met with Mr Somerville for one and a half hours. Mr Somerville's note of the ninety minute meeting is uncharacteristically brief, being only twice the length of some of his other file notes relating to telephone conversations which could not have taken more than five minutes. 70 According to Mr Somerville's file note, the whole of the meeting was devoted to the single matter of consent orders directed towards the specific ends of transfer of Mrs Schneller's interest in the Northwood property to Mr Schneller (with him indemnifying her against mortgage payments and outgoings) and transfer of Mr Schneller's Patmon shares to Mrs Schneller. There is no record of discussion of any other matter which might normally be covered in the first consultation with parties considering proceedings under the Family Law Act - in particular, separation, marriage breakdown, dissolution of marriage, custody of children and maintenance. The reason why the husband, rather than the wife, should in the context of matrimonial relief become the sole owner of the matrimonial home is not disclosed. 71 Nor does the file note of 19 March 1998 suggest that the parties to the marriage gave Mr Somerville particulars of any property owned by them beyond the Northwood property and the Patmon shares. There was no reference, for example, to the furniture and other household items which would logically have played a part in any discussion involving an intention that one party would occupy and enjoy the house to the exclusion of the other. There was no reference to family cars or to cash resources or investments. The single and confined matter was pursued in isolation. 72 I infer that Mrs Schneller and Mr Schneller went to Mr Somerville with a preconceived plan of achieving a limited purpose centred upon the Northwood property and without any intention of even investigating, let alone undertaking, any general property settlement or division of assets. Indeed, the note "Don't mention super" indicates an intention that the particular item of superannuation was to be left out of account. 73 I mention next the aspect of Mr Somerville's file note which states who is to act for whom. In its unamended form, the note said that Mr Somerville's firm would act for Mr Schneller and that Mrs Schneller would be referred to Mr de Mestre. The roles were reversed by the alterations. Mr de Mestre did act for Mr Schneller but in a very limited way. The evidence refers to one attendance by Mr Schneller on Mr de Mestre which occurred on 28 March 1998. Mr de Mestre's total fees, inclusive, no doubt, of his correspondence with Mr Somerville, amounted to $150. From this I infer that Mr Schneller's attendance on Mr de Mestre on 28 March was short - probably not much more than 30 minutes - and that no other services were provided, Mr de Mestre having been retained for the sole and simple purpose of ensuring that there would be someone who could provide, in relation to Mr Schneller, the "Statement in independent legal advice" called for by the printed form of application for consent orders. The minor nature of the role envisaged for Mr Schneller and Mr de Mestre is confirmed by Mr Somerville's note of Mrs Schneller's attendance on him on 23 March 1998 in which, referring to the relevant documents, Mr Somerville recorded: "I said to get Paul to sign them & then return them to us so we can file them." 74 It was Mr Somerville who carried the transaction through. Apart from the first meeting at which both Mrs Schneller and Mr Schneller were present, all contact with Mr Somerville was by Mrs Schneller only. It was she who busied herself arranging production of the certificate of title by the bank and searching for the corporate records of Patmon. 75 Mr Somerville's fee note of 22 April 1998 and his memorandum of fees and covering letter both dated 2 June 1998 show that, in his mind, the "matter" was confined to the property aspects the subject of the Local Court orders. 76 Mrs Schneller, rather than Mr Schneller, was the applicant in the Local Court. Both in this formal sense and through her activities in facilitating practical aspects of the steps which Mr Somerville was taking, Mrs Schneller was the principal actor in producing the results achieved through the Local Court orders and associated steps. She expended considerable time, trouble and effort to achieve results which saw her lose her interest in the family home. 77 On the valuation issues, I find that the Northwood property had a value, in March 1998, of about $1 million or, at any rate, more than $800,000, with an equity, on the part of Mrs Schneller and Mr Schneller, of some $60,000 less. I also find that Mr Schneller's shares in Patmon had no value at that time or, at best, merely nominal value. The idea that there was a value attributable to a future income tax benefit is one which I cannot accept in the absence of any evidence that the accounting losses referred to in Mr Dorfan's report were also losses as recognised by the taxation legislation or that there was any realistic prospect of the generation of taxable income in subsequent years against which any tax loss could have been applied. In any event, the figures emerging from the otherwise unchallenged evidence of Mr Dorfan are such that, if there were any future income tax benefit, the positive value it generated for Mr Schneller's shareholding would have been minimal to the point of being negligible. 78 On the subject of the relationship between Mrs Schneller and Mr Schneller, I have evidence that they and their children continued after May 1998 to live in the Northwood property and that, according to the observations of the neighbours, their "comings and goings" now are of the same general kind as they were in the period March to June 1998. I conclude, therefore, that Mrs Schneller and Mr Schneller continue to live together in the same house with their children in a way which, to external observers, suggests ordinary family life. There is, of course, no evidence of living arrangements within the house. 79 The evidence about the bank accounts shows that Mrs Schneller and Mr Schneller conducted a joint account with the Commonwealth Bank in both February/April 1998 and also in January/May 2001. This is the third of the accounts referred to above. It was actively operated during both periods. The home loan account with the same bank was in operation as a joint account in both January/June 1998 and January/June 2001. Apart from the fact that the home loan repayments no longer appeared to come from the joint account in the later period, the general nature of the operation of both accounts was the same in both periods and was consistent with normal relationships between husband and wife. 80 I conclude that Mrs Schneller actively pursued (and Mr Schneller co-operated in) a course of action which involved resort to Family Law Act processes as a means of divesting herself of her interest in the Northwood property and that this occurred in a context where Mrs Schneller and Mr Schneller did not seek legal advice on any matter of separation or divorce in the context of which a re-arrangement of interests in the property of parties to a marriage might normally be undertaken. The Family Law Act processes were undertaken for at least a predominant purpose - and probably the sole purpose - of causing Mrs Schneller's interest in the Northwood property to pass from her to Mr Schneller. The fact that, by virtue of s.90 of the Family Law Act, a transfer made in compliance with a court order does not attract the ad valorem stamp duty applicable to a transfer effected simply by instrument of transfer was in all probability a factor in the choice of methodology. 81 Inclusion of the Patmon shares in the overall transaction was an attempt to establish some plausible quid pro quo. The Patmon shares had no value and there was no apparent reason for them to be transferred. This is particularly so when it is noted that both Mrs Schneller and Mr Schneller, who had been directors since before April 1998, remained directors afterwards. An extract from ASIC records dated 6 July 2001 shows both as having been in office as directors continuously since March 1984, that is, before their marriage. The transfer of Mr Schneller's shares to Mrs Schneller in April 1998 was thus not part of any plan to see her take over sole operation of the company. She did not move to a position of sole responsibility but continued with her husband to make up the two-person board of directors. Unless the constitution (which is not in evidence) contained some casting vote provision, both of them would need to agree on all matters requiring decision at board level if any effective resolutions were to be passed. 82 The consent orders and the steps undertaken pursuant to them had as their main and substantial feature change of the ownership of the Northwood property, without any rationale in relation to the other aspects of the relationship between Mrs Schneller and Mr Schneller all of which, so far as the evidence reveals, remained after that change of ownership substantially the same as they had been before, subject only to the essentially worthless shareholding in Patmon previously owned by Mr Schneller having passed to Mrs Schneller. 83 On the evidence before me, the orders that Mrs Schneller, with Mr Schneller's agreement, sought under the Family Law Act had no logical or causal connection with their marriage and did not arise in any way from the state of the marital relationship. Approach to the "intent to defraud" question 84 The onus of showing that the transfer of the Northwood property by Mrs Schneller to Mr Schneller was made "with intent to defraud creditors" rests with Mr Green: Williams v Lloyd (1934) 50 CLR 341. However, as Clyne J observed in Re Trautwein; Richardson v Trautwein (1944) 14 ABC 61, it is not necessary that he: "… bring actual proof that the alienor had in his [or, as here, her] mind an intention to defraud creditors; for if it appears from the evidence that the effect might be expected to be and has been to do so, the court will attribute the fraudulent intention to the alienor." 85 It is also pertinent to quote from the judgment of Brennan J in Noakes v J Harvy Holmes & Son (above): "We were pressed with some observations in Williams v Lloyd; Re Williams where the court affirmed that the burden of proof that a transfer was made with a real intent to defeat or delay creditors is upon the party who so alleges. But that was a case where, at the time of the challenged disposition of property by a husband to his wife, he was in a sound financial position, and it was held that subsequent conduct and events were insufficient to show that the husband had at that time an intent to defraud creditors: see the judgment of Dixon J (at 372). In the present case, the inevitable result of the transfer of shares on 13 December 1976 was to defeat or delay any attempt to execute the judgment in Norfolk Island. The case falls squarely within the line of authorities of which Freeman v Pope is the leading example, where Lord Hatherley LC said (at 541): 'But it is established by the authorities that in the absence of any such direct proof of intention, if a person owing debts makes a settlement which subtracts from the property which is the proper fund for the payment of those debts, an amount without which the debts cannot be paid, then, since it is the necessary consequence of the settlement (supposing it effectual) that some creditors must remain unpaid, it would be the duty of the judge to direct the jury that they must infer the intent of the settlor to have been to defeat or delay his creditors, and that the case is within the Statute.' That proposition does not trespass upon the rule as to onus of proof; it is a particular illustration of the discharge of the onus by inference from the known facts cf Re Holland; Gregg v Holland [1902] 2 Ch 360 at 381. In this case, the inference is strengthened by the proximity in time of the failure to have the judgment set aside and the execution of the transfer of the shares. The challenge to his Honour's finding that the transfer fell within the Statute of Elizabeth therefore fails." 86 The necessary inference may be drawn if, on the evidence, it is clear that defeating of creditors' claims was "the necessary consequence" of the transaction, particularly where it was undertaken with haste after the emergence of circumstances entailing a monetary burden or claim upon the transferor: see PT Garuda Indonesia Ltd v Grellman (1992) 35 FCR 515. A finding that intent to defraud creditors is the sole intent of the transferor is not necessary: Barton v Deputy Commissioner of Taxation (1974) 131 CLR 370. 87 When s.37A refers to "creditors", it does not have in contemplation only persons to whom debts are presently owing. In the context of provisions of bankruptcy legislation concerning departure from Australia "with intent to defeat or delay creditors", Stephen J (with whom Menzies and Gibbs JJ agreed) said in Barton (above): "This awareness of an impending liability is sufficient for the purposes of s.40(1)(c). That paragraph employs language very similar to the reference, in the Statute 13 Eliz c.5, to conveyances made 'with intent to defraud, defeat or delay creditors' and it is well established that conveyances may fall within that Statute, although there existed no creditors at the date of conveyance, so long as the intent to defeat future creditors be made out - Mackay v Douglas ; Re Mackay . In Ex parte Russell , in which Sir Richard Malins' decision in Mackay v Douglas was applied, the members of the Court of Appeal again referred to the Statute of Elizabeth as concerned with the protection of future creditors. In Williams v Lloyd , although the majority allowed the appeal, all the members of the Court treated the 'intent to defraud creditors' to which s.37A of the Conveyancing Act 1919 (NSW) referred as capable of being established despite undoubted solvency at the time of the challenged alienation of property. So too in the case of s.40(1)(c) there may, I think, be the requisite intent despite the absence of existing indebtedness. A fortiori, the intent may exist if the debtor, unaware of his existing indebtedness, nevertheless believes in some impending indebtedness. Moreover an intent formed in relation to only one such existing or anticipated creditor will suffice, the combined effect of s.23(b) of the Acts Interpretation Act (Cth) and of s.6 of the Bankruptcy Act producing this result." 88 The combined effect of the applicable principles was summed up by Wilcox, Gummow and von Doussa JJ in PT Garuda (above) as follows: "Accordingly, in our view, upon the true construction of s.121: (i) the intent referred to in subs(1) may be inferred in the manner described by Brennan J in Noakes v Harvy Holmes & Son (supra), and by Fisher J in Official Trustee v Marchiori (supra); and (ii) an intention to defraud or defeat or delay some one or more of the creditors of the disponor may be inferred where this is the necessary consequence of a disposition to stave off action by another creditor or creditors; and (iii) an intention to defeat future creditors may be sufficient in the particular circumstances."

Although these principles were enunciated in relation to s.121 of the Bankruptcy Act , they are equally applicable to s.37A of the Conveyancing Act . Conclusion on the "intent to defraud" question 89 As applicant in the Local Court proceedings, Mrs Schneller initiated and pursued a legal process by far the most significant element of which was the transfer of her interest in the Northwood property to Mr Schneller. She took all active steps necessary to achieve that end by the chosen process. By that means she effected an alienation of her property in favour of Mr Schneller. 90 The quid pro quo Mrs Schneller received in the form of the transfer to her of Mr Schneller's shares in Patmon was effectively illusory because those shares had no value or, at best, merely nominal value. The quid pro quo in the form of Mr Schneller's indemnifying her in respect of mortgage payments and other outgoings should also be regarded as illusory, being no more than the natural consequence of his becoming sole owner. 91 Resort to the Family Law Act process occurred in a context where, on the evidence, there was no indication of matrimonial disharmony and where the matters which became the subject of the Local Court orders were the only ones that the parties to the marriage raised in their meeting with Mr Somerville on 19 March 1998. These were purely property matters. Nothing else arose. The transfer mechanism centred on orders under the Family Law Act which avoided the substantial stamp duty which would have been attracted by a simple instrument of transfer and also surrounded the purely property transaction with an illusion of matrimonial property settlement designed to detract from its true nature. The evidence about the Commonwealth Bank accounts in mid-2001 shows that the financial affairs of Mrs Schneller and Mr Schneller continued to be linked in a way which is commonplace with cohabiting married couples. The evidence of the "comings and goings" observed by the neighbours is consistent with the domestic arrangements of a cohabiting married couple. 92 The process which culminated in the transfer by Mrs Schneller to Mr Schneller was initiated the day after Mrs Schneller suffered an award of costs against her in the defamation proceedings. That was the fourth adverse costs order to which she had been subjected. Those proceedings had reached a stage where, although still incomplete and with the outcome still uncertain, the prospects of further adverse consequences for Mrs Schneller, in terms of damages or costs or both, were real. I infer with complete confidence that there was a direct causal connection between the making of the fourth costs order against Mrs Schneller on 18 March 1998 and the visit by Mrs Schneller and Mr Schneller to Mr Somerville on 19 March 1998. 93 The several costs orders were, of course, not the source of debts immediately owing - much less due and payable. An obligation to pay would not arise until the process of assessment of costs had quantified the amount of the costs to be paid and the assessor's certificate had been filed. But the four costs orders nevertheless represented a sufficiently real and present financial burden to cause them to occupy a central place in the assessment called for by s.37A(1). 94 Finally, I attach very considerable weight to the fact that neither Mrs Schneller nor Mr Schneller offered or sought to adduce any evidence to counter any of the inferences which were clearly open on Mr Green's evidence and which I have drawn. They know why they did what they did; yet neither of them made any attempt to offer any rationale for the transfer of Mrs Schneller's interest in the Northwood property, whether by reference to matrimonial difficulties or otherwise. 95 It is established, on the balance of probabilities, that Mrs Schneller undertook the process to which I have referred, culminating in the transfer of her interest in the Northwood property to Mr Schneller pursuant to the consent orders, with intent to defraud creditors. I accordingly hold that her alienation of that interest was made with that intent. Section 37A(3) 96 Section 37A(3) will operate to protect Mrs Schneller's alienation from the consequences effected by s.37A(1) if it can properly be said that Mr Schneller was "a purchaser in good faith" and that, at the relevant time in 1998, he had no notice of Mrs Schneller's intent to defraud creditors. 97 Mr Schneller must be regarded as a "purchaser" of Mrs Schneller's interest in the Northwood property. The transfer of that interest took place in a context where at least one element of consideration passed from Mr Schneller to Mrs Schneller: he transferred to her his shares in Patmon. Even though those shares were worthless or, at best, of purely nominal value, they did constitute property and the transfer of that property to Mrs Schneller was an element of the overall transaction in which Mrs Schneller's interest in the property passed to Mr Schneller. That was enough to make him a "purchaser". 98 But it cannot be accepted that Mr Schneller was a purchaser in good faith and without notice of Mrs Schneller's intent to defraud creditors. I infer that he knew of the costs orders against her. By going with her to see Mr Somerville on the day immediately following that on which the fourth costs order was made and thereafter playing his part in the consent order and transfer process, he intended to become and did become a party to and an active and knowing participant in moves calculated to put the family home beyond the reach of debt collection processes which were, by then, looming ominously for Mrs Schneller. And the gross disparity between what he received and what he gave means, in the whole of the circumstances, that Mr Schneller's "purchase" was not made "in good faith". 99 Mr Schneller did not volunteer any evidence to displace or question these clear inferences which, in the absence of any countervailing evidence, I consider irresistible. 100 I conclude, therefore, that s.37A(3) does not operate to protect the alienation made by Mrs Schneller. Relief 101 The conclusions I have reached mean that the transfer of Mrs Schneller's interest in the Northwood property to Mr Schneller is, in terms of s.37A, "voidable". The court must therefore make orders which overcome the effect of the transfer in so far as that effect is such as to cause the property to be beyond the reach of Mrs Schneller's creditors. 102 Mr Schneller is now the sole registered proprietor of the Northwood property for an estate in fee simple, subject to the mortgage to the Commonwealth Bank. It is not necessary that matters be so far reversed and restored to their former position that the joint tenancy is recreated by means of a transfer by Mr Schneller to himself and Mrs Schneller as joint tenants. The severance effected by the May 1998 transfer may be allowed to stand, but with Mr Schneller now becoming the proprietor of one undivided half share and the other undivided half share being removed from his ownership and placed within the assets available to Mrs Schneller's creditors. 103 The principal relief sought in the further amended statement of claim is: "1. A declaration that the instrument of transfer of Jennifer Schneller's interest in the property known as 42 Upper Cliff Road, Northwood, in the State of New South Wales, being the whole of the land comprised in Certificate of Title Volume 4909 Folio 23 ('the property') is voidable and that (pending rectification of the Land Titles register) Paul Schneller holds an undivided one-half share in the property on trust for the Official Trustee in Bankruptcy of Jennifer Schneller. 2. An order that Paul Schneller transfer an undivided one-half share in the property to the Official Trustee in Bankruptcy of Jennifer Schneller as tenant in common." 104 An alternative would be to make a declaration and order in these terms but with the references to the Official Trustee in Bankruptcy omitted so that the undivided one-half share is ordered to be transferred to Mrs Schneller, the expectation being that s.58(1)(b) of the Bankruptcy Act will then operate upon that interest and cause it to vest in the Official Trustee. 105 I am mindful of the fact that the Official Trustee in Bankruptcy has taken no part in these proceedings. I am also mindful of the terms on which the Federal Court granted leave for these proceedings to be continued, including terms embodied in undertakings given to that court by Mr Green. A clear case has been made out for a declaration by this court that the transfer of Mrs Schneller's interest in the Northwood property to Mr Schneller is voidable by virtue of s.37A of the Conveyancing Act. Further orders are necessary to ensure that the effect of the transfer is appropriately countered but I consider it desirable that the Official Trustee in Bankruptcy be afforded an opportunity to make submissions on that subject. It may also be appropriate for the Official Trustee in Bankruptcy to become a party to the proceedings. 106 At this stage, I make the following directions:

Direct that the plaintiff furnish to the Official Trustee in Bankruptcy a copy of these reasons not later than Friday 2 August 2002. 2. Direct that these proceedings be listed for mention before me at a time I shall now fix with counsel. 107 I shall, at that time, hear any application for joinder of the Official Trustee in Bankruptcy, as well as submissions on the precise form of the orders to be made in consequence of my finding that the operation of s.37A is attracted by the transfer made by Mrs Schneller in favour of Mr Schneller. **********

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Family Provision Act 1982(NSW)

CITATION : Green v Schneller [2002] NSWSC 671 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 3331/01 HEARING DATE(S) : 24/06/02 JUDGMENT DATE : 31 July 2002

COUNSEL : Mr T J Morahan - Plaintiff Mr B J Skinner - Defendants SOLICITORS : Harris & Company - Plaintiff Somerville & Co - Defendants CATCHWORDS : CONVEYANCING - position after completion - conveyance by wife to husband - no explanation offered - proximity to imposition of liability upon wife - intention to defraud creditiors - order avoiding alienation of property - JUDGMENTS AND ORDERS - alienation of property pursuant to Family Law Act order - whether order avoiding alienation conflicts with Family Law Act - whether Family Law Act order prevents making of order avoiding alienation order Bankruptcy Act 1966 (Cth) Conveyancing Act 1919 De Facto Relationships Act 1984 LEGISLATION CITED : Duties Act 1997 Family Law Act 1975 (Cth) Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) Property (Relationships) Act 1984 Real Property Act 1900 Ash Street Properties Ltd v Pollnow (1987) 8 NSWLR 8 Barton v Deputy Commissioner of Taxation (1974) 131 CLR 370 Re Baxter; Ex parte Official Receiver in Bankruptcy (1986) 10 FCR 398 Brady v Stapleton (1952) 88 CLR 322 Green v Official Trustee in Bankruptcy; Re Schneller (Bankrupt) [2001] FCA 1644 Green v Schneller (2001) 164 FLR 82 Langdon v Gruber [2001] NSWSC 276 CASES CITED : Re Mateo (Bankrupt); Mateo v Official Receiver in Bankruptcy [2002] FCA 344 Noakes v J Harvy Holmes & Son (1979) 37 FLR 5 Official Trustee in Bankruptcy v Edwards (1997) 139 FLR 104 Official Trustee in Bankruptcy v Higgins (2000) 109 FCR 1 PT Garuda Indonesia Ltd v Grellman (1992) 35 FCR 515 Re Sabri; Ex parte Sabri v Brien (1995) 60 FCR 131 Silvera v Savic (1999) 46 NSWLR 124 Re Trautwein; Richardson v Trautwein (1944) 14 ABC 61 Williams v Lloyd (1934) 50 CLR 341 DECISION : Alienation of property avoided

Green v Schneller

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Legislation Cited (5)

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