Joanne Elizabeth Young v Josephine Aapa Smith

Contentions of the parties

1. Mrs Young says the transfer of the Property constitutes an alienation of property done at a time when Mrs Young was a creditor of Mr Young and when this fact was known to Mr Young. Mrs Young says the transfer was affected in order to defraud Mrs Young. Mrs Young submits that, in the circumstances, the transfer of Mr Young's interest to Ms Smith is void.
2. On the other hand, Ms Smith says that Mr Young, at all times, held his interest in the Property on trust for her by virtue of the 2001 Agreement.
3. Mrs Young makes a number of submissions regarding the 2001 Agreement. First, she contends the agreement was executed in dubious circumstances. In effect, she challenges its authenticity.
4. Mrs Young submits that even if the 2001 Agreement is genuine, it involves an alienation of property and was entered into at a time when Mrs Young was a future creditor of Mr Young (a fact known to Mr Young). Mrs Young says therefore the 2001 Agreement itself represents an attempt to defraud her.
5. In the alternative she submits there was no consideration to support the agreement. She submits that the promise of Ms Smith to use her "best endeavours" in the advancement of Mr Young's businesses was illusory consideration as Ms Smith had been working "with enthusiasm" in Mr Young's hotel business for some time at the time the promise was made. In addition the plaintiff argues that the consideration is illusory because it was a promise to use best endeavours offered in the context of a domestic relationship.
6. In addition, she submits that in the circumstances it could not be said that the property was "purchased" by the defendant and Mr Young in accordance with the 2001 Agreement as the defendant made no financial contribution to the purchase.
7. She also submits, if the acquisition of the property in 2007 was governed by the 2001 Agreement, that agreement by the conduct of Mr Young and Mrs Smith had been abandoned or abrogated in the circumstances leading up to the purchase of the Property. In the alternative she submits that the conduct of Mr Young and Ms Smith subsequent to the execution of the 2001 Agreement is antithetical to them intending ever to create a trust.

Section 37A of the Conveyancing Act

1. The most recent High Court authority concerning when parties have manifested intention such that a transaction is liable to be set aside pursuant to s 37A is Marcolongo v Chen (2011) 242 CLR 546 (Marcolongo v Chen). It was made clear in that case that the phrase "intent to defraud" encompasses an intent to delay or hinder creditors, and that a desire on the part of the debtor that creditors suffer loss or a purpose of causing loss need not be demonstrated.
2. After considering the provenance of s 37A, French CJ, Gummow, Crennan and Bell JJ went on to say at [32]-[34] that (footnotes omitted): 32. …Mrs Marcolongo correctly relies upon a statement by Blanchard and Wilson JJ when considering the comparable New Zealand legislation in Regal Castings Ltd v Lightbody. Their Honours said that it was unnecessary to show that the debtor wanted creditors to suffer a loss or that the debtor had a purpose of causing loss: it was necessary to show the existence of an intention to hinder, delay or defeat creditors and in that sense to show that accordingly the debtor had acted dishonestly. Mrs Marcolongo correctly relies also upon the observation by Russell LJ when considering s 172 of the 1925 Act in Lloyds Bank Ltd v Marcan. His Lordship said: "I am not sure what is meant by a perfectly innocent defeat, hindrance or delay. It must be remembered that in every case under this section the debtor has done something which in law he has power and is entitled to do: otherwise it would never reach the section. If he disposes of an asset which would be available to his creditors with the intention of prejudicing them by putting it, or its worth, beyond their reach, he is in the ordinary case acting in a fashion not honest in the context of the relationship of debtor and creditor. And in cases of voluntary disposition that intention may be inferred … The intention of Mr Marcan is perfectly plain: the lease to his wife was designed expressly to deprive the bank of the ability to obtain the vacant possession to which the bank plainly attributed value, and to diminish to that extent the strength of the bank's position as creditor. To take that action at that juncture, in my judgment, was, in the context of relationship of debtor and creditor, less than honest: it was sharp practice, and not the less so because he was advised that he had power to grant the lease. It was, in my judgment, a transaction made with intent to defraud the bank within s 172, and would have been within the [Elizabethan Statute]." 33. To that may be added the statement in the joint reasons of the Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd: "As a matter of ordinary understanding, and as reflected in the criminal law in Australia, a person may have acted dishonestly, judged by the standards of ordinary, decent people, without appreciating that the act in question was dishonest by those standards. Further, as early as 1801, Sir William Grant MR stigmatised those who 'shut their eyes' against the receipt of unwelcome information." 34. Lym relied upon the references by Brennan CJ and McHugh J in Cannane v J Cannane Pty Ltd (In liq) to "the onus of proving an actual intent". But their Honours were adding the word "actual" as a periphrasis to emphasise that, while the existence of the intent might be inferred from the evidence, it was to be found as a fact. With Gaudron J and Gummow J, Brennan CJ and McHugh J concluded that the facts of Cannane did not support the drawing of such an inference.
3. The question of whether a conveyance was voluntary has some bearing upon the ascertainment of an intention to defraud creditors. In Marcolongo v Chen it was said at [25] that (footnotes omitted): The point sought to be made in the text of Halsbury attached to footnote (c) may be expressed by saying that it would be the duty of the judge to direct a jury that they might infer an intention by the settlor to defeat or delay creditors, even in the absence of direct evidence of that intention, where this outcome was the necessary consequence of a voluntary settlement. In this way, it was easier to infer a dishonest intention if the conveyance were voluntary than if it were made for consideration. Evidence that the conveyance was voluntary does not replace the requirement of proof of intent by a distinct category where constructive fraud, with notions of constructive knowledge or notice as understood in equity, would suffice for the application of s 37A. Rather, the evidence is that species which has sufficient weight to entitle the fact finder to decide an issue (here the necessary intent) in favour of the moving party, although the fact finder is not obliged to do so and other evidence given may be decisive to the contrary.
4. It is not necessary, for the purposes of s 37A, that there be actual proof that the alienator had in his mind an intention to defraud creditors; the court can attribute to the alienator the requisite fraudulent intent if, from all the surrounding circumstances, it appears that the effect might be expected to be, or has in fact been, to defeat creditors: Re Trautwein; Richardson v Trautwein (1944) 14 ABC 61 at 75 per Clyne J, cited with approval by the Full Court of the Federal Court of Australia in PT Garuda Indonesia Ltd v Grellman (1992) 35 FCR 515 at 523. The relevant intention need not be a predominant or sole intention; Marcolongo v Chen at [57] and [58]. As Heydon J pointed out in Marcolongo v Chen, the section does not postulate a mixture of motives from which there must be extracted a predominant intention to defraud: Marcolongo v Chen at [25]
5. Noakes v J Harvy Holmes & Son (1979) 37 FLR 5 concerned a transfer of shares where the inevitable result of the transfer was to defeat any attempt at the execution of a judgment. Brennan J (Deane and Fisher JJ agreeing) applied at 10-11 the principle articulated by Lord Hatherley LC in Freeman v Pope (1870) LR 5 Ch 538 at 541: …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.
6. In circumstances where the alienator is in financial difficulty and the transaction is undertaken on a voluntary basis the court may more readily infer the requisite intention: Marcolongo v Chen at [25]; Jew v Holloway [2013] VSCA 260 at [21].
7. In Agusta Pty Ltd v Provident Capital Ltd [2012] NSWCA 26 at [105], Sackville AJA (with whom Campbell JA agreed) considered that it "may be possible in a particular case to demonstrate that an alienation of property was made with the intent to defraud creditors even where the effect of the alienation is not to hinder, delay or defraud creditors."
8. "Creditors" for the purpose of s. 37A includes future creditors. Stevenson J recently gathered some of the authorities on the point: Ingram v Y Twelve [2013] NSWSC 1777 at [107].
9. However Stephen J (with whom Menzies and Gibb JJ agreed) in Barton v The Deputy Federal Commissioner of Taxation (1974) 131 CLR 370 said at 374 (footnotes incorporated into text): 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 (1872) L.R. 14 Eq. 106; Re Mackay (1951) 16 A.B.C. 18 at p. 28. In Ex parte Russell (1882) 19 Ch. D. 588, in which Sir Richard Malins' decision in Mackay v. Douglas (1982) L.R. 14 Eq. 106 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 (1934) 50 C.L.R. 341, 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: (1934) 50 C.L.R. 341, at pp. 360-361, 372, 377. 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.

Adequacy of consideration

1. There is no doubt that the promise to perform an existing legal duty is not to be regarded as good consideration: Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723 at 738; Stilk v Myrick (1809) 170 ER 1168. Ms Smith, under the 2001 Agreement, promised that she would use her "best endeavours to contribute her expertise in accounting and business management for the furtherance of Leslie's business enterprises".
2. It is clear that a promise to use best endeavours in pursuit of a particular goal can be enforceable. The defendant pointed to several cases to this effect: see, eg, Hudson Resources Limited v Australian Diatomite Mining Pty Ltd [2002] NSWSC 314; Sovereign v Bevillesta [2001] NSWSC 369. A best endeavours clause "prescribes a standard of endeavour which is measured by what is reasonable in the circumstances": see Transfield Pty Ltd v Arlo International Ltd (1980) 144 CLR 84 at 101 per Mason J. It is true that such an obligation would normally arise in a commercial contract where the parties have negotiated at arm's length: see, eg, Electricity Generation Corporation v Woodside Energy Ltd & Ors [2014] HCA 7. These cases do not squarely consider the issue of whether a promise to use best endeavours in pursuit of a goal will constitute good consideration.
3. The fact that the promise was between persons in a domestic relationship does not render the promise illusory. It is true that natural love and affection will not be adequate consideration: Tweddle v Atkinson (1861) 1 B&S 762 at 764, that is not to say, however, that the fact Ms Smith and Mr Young were in a domestic relationship means there can be no consideration.

Abandonment or abrogation of the 2001 Agreement

1. The plaintiff submits that by the time the Property was acquired Mr Young and Ms Smith had conducted themselves so as to have abandoned or abrogated the 2001 Agreement (whatever its effect).
2. In Summers v The Commonwealth (1918) 25 CLR 144, Isaacs J considered at 151-152 (footnotes omitted): Whatever the terms of a contract may be, it is possible for the parties so to conduct themselves as mutually to abandon or abrogate it. A position not altogether dissimilar arose in the case of De Soysa v. De Pless Pol. There, neither party had repudiated or refused to perform the contract, nothing in the nature of rescission had occurred, but, said Lord Atkinson for the Privy Council: --"One party to a contract is not bound to give to the other unlimited time after a day named to do that which the other has contracted to do. There must be some point of time at which delay or neglect amounts to refusal … In truth, the projects seem to have been to a great extent, if not altogether, abandoned by all parties concerned." In my opinion, that is the legal position here. Informally, but effectively, the parties have so acted in relation to each other as to abandon or abrogate the contract.
3. In Ryder v Frohlich [2004] NSWCA 472 McColl JA (with whom Hodgson and Ipp JJA agreed) made the following observations regarding abandonment: 135 Where it is plain from the conduct of parties to a contract that neither intends that the contract should be further performed the parties will be regarded as having so conducted themselves as to abandon or abrogate the contract: DTR Nominees Pty Limited v Mona Homes Pty Limited [1978] HCA 12; (1978) 138 CLR 423 at 434 (per Stephen, Mason and Jacobs JJ with whom Aickin J agreed); Summers v The Commonwealth [1918] HCA 33; (1918) 25 CLR 144 at 151 - 152 per Isaacs J. The inference of abandonment will be drawn where "an 'inordinate' length of time has been allowed to elapse, during which neither party has attempted to perform, or called upon the other to perform, a contract made between them … What is really inferred in such a case is that the contract has been discharged by agreement, each party being entitled to assume from a long-continued ignoring of the contract on both sides that … 'the matter is off altogether' ": Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420 at 432 per Dixon CJ and Fullagar J. 136 Whether there is abandonment or abrogation of a contract is a matter of fact to be inferred from an objective assessment of the conduct of the parties: see CIC Insurance Limited v Bankstown Football Club Limited (1995) 8 ANZ Ins Cas ¶61 - 232 per Kirby P; Wallera Pty Limited v CGM Investments Pty Limited [2003] FCAFC 279 at [2] per Ryan J, at [30] - [32] per Kiefel J; at [57] per Gyles J; Marminta Pty Limited v French [2003] QCA 541 at [22] per Jerrard JA, Williams JA and Philippides J agreeing. 137 The underlying premise of the abandonment cases is that a period of time elapses during which neither party to the contract manifests any intention to perform the contract, leading to the inference that the contract has been abandoned. It is clear that the question whether an "inordinate length of time has been allowed to elapse" is relative. In DTR Nominees Pty Limited v Mona Homes Pty Limited the High Court was prepared to infer abandonment after a period of less than five months had elapsed during which neither party took any steps to perform the contract. In Fitzgerald v Masters it was held that a contract for the sale of land had not been abandoned even though proceedings for its specific performance were not commenced until 26 years after its execution.

Whether Mr Young and Ms Smith evinced intention to create a trust

1. A question arises as to whether Mr Young and Ms Smith evinced the requisite intention to create a trust. The word "trust" is not used in the 2001 Agreement; it is styled as a "Property Agreement" and provides that "the parties are agreed that any residential property purchased by them for their joint use shall be the property of Josephine".
2. Although the Defence asserts at [8] that the 2001 Agreement resulted in Mr Young holding his interest in the Property on trust for Ms Smith, neither party dealt squarely with the creation of what was said by the defendant to be an express trust, in their submissions in chief or otherwise. The plaintiff's preliminary outline of submissions made reference to the defendant's position that the 2001 Agreement created a trust and went on to identify the plaintiff's contentions regarding the 2001 Agreement, including an alleged lack of certainty and an absence of consideration. The defendant addressed these contentions in submissions, while continuing to assert that a trust existed, without elaborating upon the genesis of the asserted trust.
3. It is clear that both parties proceeded on the basis that the question of whether a trust existed was in issue between them. The creation of a trust requires certainty of intention, certainty of subject matter and certainty of objects: see Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 at 147; Federal Commissioner of Taxation v Clarke (1927) 40 CLR 246 at 282-4; Leahy v Attorney-General (NSW) (1959) 101 CLR 611.
4. Byrnes v Kendle (2011) 243 CLR 253 (Byrnes v Kendle) considered the necessary intention for the creation of an express trust. That case differed from this one in that the parties had signed an explicit written declaration of a trust. A question arose as to whether "it was appropriate for the primary judge to go beyond the Acknowledgement of Trust to inquire into Mr Kendle's "real intention"". French CJ at [17] expressed the view that: The relevant intention in such a case is that manifested by the declaration of trust. Such a case does not require any further inquiry into the subjective or "real" intention of the settlor.
5. His Honour also expressed concurrence with the consideration of Gummow and Hayne JJ at [52] (footnotes omitted): 52 Counsel for the appellants emphasised the exiguous and equivocal oral evidence given by Mr Kendle as to his intention upon which the trial judge relied. In addition, and more fundamentally, evidence of this nature was inadmissible…the maxim that "equity looks to the substance rather than the form" would be misapplied and misunderstood if used to warrant "the substitution of a different transaction for the one into which the parties [to the 1997 Deed] have entered."
6. Their Honours went on to say: 53 The fundamental rule of interpretation of the 1997 Deed is that the expressed intention of the parties is to be found in the answer to the question, "What is the meaning of what the parties have said?", not to the question, "What did the parties mean to say?" The point is made as follows, with reference to several decisions of Lord Wensleydale, in Norton on Deeds: "The word 'intention' may be understood in two senses, as descriptive either (1) of that which the parties intended to do, or (2) of the meaning of the words that they have employed; here it is used in the latter sense."
7. In Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 618, Mason CJ and Dawson J considered, quoting Du Parcq LJ in Re Schebsman; Ex parte Official Receiver [1944] Ch 83 at 104, that "unless an intention to create a trust is clearly to be collected from the language used and the circumstances of the case, I think the court ought not to be astute to discover indications of such an intention." In Byrnes v Kendle there was no difficulty in this regard because the trust had been manifested and proved by deed so that there was "no degree of informality".
8. Where informal language is utilised by the parties, the Court will look to the nature of the transaction and "all the relevant circumstances" to infer the relevant, objective intention: Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588 at [34]; Byrnes v Kendle at [49] per Gummow and Hayne JJ and [112] per Heydon and Crennan JJ; Kauter v Hilton (1953) 90 CLR 86 at 100.

Impact of subsequent conduct on the intention to create a trust

1. In a contractual context, there is no doubt that subsequent conduct is admissible to prove the existence of a contract: Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; Kriketos v Livschitz [2009] NSWCA 96 at [5] (Allsop P) and [109] (McColl JA). In both McEvoy v McEvoy [2012] NSWSC 1494 at [3] and Reitano v Reitano [2012] NSWSC 1127 at [23] and [25] Pembroke J held that subsequent conduct can be as much an indicator of the existence of a trust as it may be for the existence of an agreement. The plaintiff submits that as subsequent conduct is admissible to prove the existence of a trust, so too should it be admissible to demonstrate that a trust did not exist.
2. In Stillisano v Adami [2010] SASC 351 White J considered that it was appropriate to look to subsequent conduct of the plaintiff in determining whether or not his mother had created a trust in his favour. The plaintiff became aware that the property said to be subject to the trust had been transferred to a third party. He failed to lodge a caveat until some five years after the transfer. White J considered that this inaction was inconsistent with the plaintiff believing a trust over the property in his favour existed.
3. In some cases where the existence of an express trust is in issue, and where it is against the interest of the alleged trustee to admit that the trust exists, acts of the alleged trustee committed subsequent to the date of the alleged declaration of trust will be admitted as an admission against (but not for) the alleged trustee's interest: see Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271 at 276-277.
4. In Counsel v The Estate of James Albert Counsel (dec'd) [2007] WASC 101, Hasluck J made the following remarks at [163]-[165]: 163 Having regard to the decided cases, I consider that I am entitled to receive as admissible evidence statements allegedly made by the deceased at about this time which bear upon the transaction. Further, and in any event, the statements attributed to the deceased are admissible as declarations against interest, for in the various conversations he is said to have been making concessions against his interest about his entitlement to either capital or interest. However, it is for me to assess by reference to the credibility of the witnesses and related matters, whether the various statements attributed to him were in fact made, and to determine what weight, if any, is to be given to them. Conclusion 164 The decided cases establish that an express trust arises when a person expresses an intention to create a trust. The intention need not be the subject of formal language; it may even be inferred from conduct. A trust may be created without communication to the beneficiary. 165 Further, the mere opening of an account in trust for another is not necessarily sufficient to make the person who opens the account trustee for the other person. This means, in the present case, that it is not necessarily decisive of the central issue that the deceased paid the money into an account described as a trust account. All the circumstances of the case have to be investigated.

Credit of the witnesses

1. In this case the credit of both the defendant and Mr Young was put squarely in issue. I observe that a trial judge is in no way restricted in his or her assessment of a witness. He or she is not bound to accept any of that which the witness attests to or indeed may only accept part thereof: Cubillo v Commonwealth (No 2) (2000) 103 FCR 1 at [118]-[123]. Nor is a judge bound to accept the testimony of a witness where there has been no cross examination.
2. I am similarly mindful of the remarks of Gleeson CJ, Gummow and Kirby JJ in Fox v Percy (2003) 214 CLR 118 at [30]-[31] where they said: 30. It is true, as McHugh J has pointed out, that for a very long time judges in appellate courts have given as a reason for appellate deference to the decision of a trial judge, the assessment of the appearance of witnesses as they give their testimony that is possible at trial and normally impossible in an appellate court. However, it is equally true that, for almost as long, other judges have cautioned against the dangers of too readily drawing conclusions about truthfulness and reliability solely or mainly from the appearance of witnesses. Thus, in 1924 Atkin LJ observed in Société d'Avances Commerciales (Société Anonyme Egyptienne) v Merchants' Marine Insurance Co (The "Palitana"): "... I think that an ounce of intrinsic merit or demerit in the evidence, that is to say, the value of the comparison of evidence with known facts, is worth pounds of demeanour." 31. Further, in recent years, judges have become more aware of scientific research that has cast doubt on the ability of judges (or anyone else) to tell truth from falsehood accurately on the basis of such appearances. Considerations such as these have encouraged judges, both at trial and on appeal, to limit their reliance on the appearances of witnesses and to reason to their conclusions, as far as possible, on the basis of contemporary materials, objectively established facts and the apparent logic of events. This does not eliminate the established principles about witness credibility.
3. Whilst it is too simplistic and arguably erroneous for a trial judge to be solely influenced in his or her findings by contemporaneous documents, they will often have a potent part to play in that process, especially when they were created against interest. If they appear of course to be self serving they may need to be viewed with some care. Effective cross examination will usually play an important part in assisting a judge to come to a view about the facts importantly when inconsistencies are exposed which are not capable of rational explanation. In any fact finding exercise however a judge must always be astute in particular when drawing inferences to carefully distinguish in his or her mind between what is a reasonable inference as opposed to what may amount to no more than mere speculation: Jones v Sutherland Shire Council [1979] 2 NSWLR 206 at 222.
4. For reasons to which I shall return it is also apposite to note the principle in Jones v Dunkel (1959) 101 CLR 298 (Jones v Dunkel). The rule in Jones v Dunkel is a particular application of the general principle in the law of evidence that "all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted.": Blatch v Archer (1774) 1 Cowp 63 at [65] per Lord Mansfield. The statement of the rule in J D Heydon, Cross on Evidence, 9th ed (2013) LexisNexis Butterworths (at [1215]) was approved in R v Navarolli (2009) 194 A Crim R 96 by Muir JA at [2]: [2] What is known as the Rule in Jones v Dunkel is summarised in Cross on Evidence (Aust ed) as follows: First, that unexplained failure by a party to give evidence, to call witnesses, or to tender documents or other evidence or produce particular material to an expert witness may (not must) in appropriate circumstances lead to an inference that the uncalled evidence or missing material would not have assisted that party's case.
5. The rule can operate against a party who bears the onus of proof and against a party who does not: Ho v Powell (2001) 51 NSWLR 572 at [16] per Hodgson JA (with whom Beazley JA agreed).
6. In Lym International Pty Ltd v Marcolongo [2011] NSWCA 303, Campbell JA (Basten JA and Sackar J agreeing) observed at [91]: 91 Jones v Dunkel authorises, but does not require, a tribunal of fact to engage in two different types of reasoning. One is to infer that the evidence of an absent witness, if called, would not have assisted the party who failed to call that witness. The other is that the tribunal of fact can draw with greater confidence any inference unfavourable to the party who failed to call the witness, if that witness seems to be in a position to cast light on whether that inference should properly be drawn: Manly Council v Byrne [2004] NSWCA 123 at [51].

The evidence

1. The evidence filed on behalf of the plaintiff did not include any statement from her. Her case is to a large extent based upon an uncontroversial chronology together with the asserted effect of various events and documents. That evidence was put before the court by her solicitor, Mr Gregory Walsh, in an affidavit of 2 October 2014. He was not cross examined.
2. The evidence, however, for the defendant comprised three statements from her (6 November 2014, 9 and 12 February 2015). Three statements were also filed by her husband Mr Leslie Young (again 6 November 2014, and two further on 9 and 12 February 2015). In addition an affidavit was filed from Mr Bruce Ronald Young (no relation), a solicitor from New Zealand, dated 6 November 2014.

Ms Smith

1. Before I deal with her evidence in detail I should make some preliminary observations. I found Ms Smith to be a most unsatisfactory witness. My impression of her was that she was defiant, proprietorial and gave blatantly inconsistent evidence on important issues. I also considered her evidence in a number of respects to be untruthful.
2. In her first affidavit of 6 November 2014 she set out the history of her relationship with Mr Young. She said they met in 1993 and commenced a de facto relationship in 1999. At that time, of course, Mr Young was already married to the plaintiff (his second wife). The defendant had also previously been married.
3. She was aware at the time that she and Mr Young commenced their relationship in 1999 that Mr Young's first wife (Carolyn Young) owned 50% of "all of Les's assets". (JS1[10])
4. Soon after she commenced a relationship with Mr Young she became involved, she says, in the restructure, redesign and redevelopment of his hotel at Guildford. She and Mr Young then lived in the Guildford Hotel whilst refurbishment was being carried out and remained there until about 2008, when they purchased the Property.
5. She then set out the detail of the circumstances in which she and Mr Young executed what she described as the "2001 Agreement", which bears the date 6 December 2001.
6. She said by 2001 the relationship with Mr Young, as she described it, was "further developing". She had a conversation with her father in or about late January 2001 in which he expressed concerns about her living with a married man and the financial implications should they stay together. Ms Smith states that she rang her then New Zealand solicitor Mr Bruce Young. Mr Young recommended that she and Mr Young have some sort of agreement. She and Mr Young had a conference with Mr Bruce Young at which Mr Young described his current situation, which included disclosure of his first (former) wife's 50% interest in certain of his entities. Mr Bruce Young told Mr Young and Ms Smith that he would draft an agreement but that each should obtain separate advice in relation to the document. They, however, refused to obtain separate advice and that fact was recorded in the 2001 Agreement at cl 14.
7. She asserted that she called at Mr Young's office and collected the draft agreement and then went to her family home in the suburbs in Wellington. She recalled that the document was signed by herself and Mr Young and witnessed by her father in the dining room of what she described as "my New Zealand home". She asserted that the document was signed on 6 December 2001 ([33]) (she was later to change this testimony). She made no reference to any explanation being given to her about the terms of the agreement by the solicitor.
8. She then described the circumstances in which the Property was acquired. She asserted that she recalled the payment of $50,000 being advanced as a holding deposit but she could not recall whether she or Mr Young paid it. The purchase settled in July 2008. The apartment included a mooring.
9. She then described the circumstances surrounding the execution of the power of attorney. She stated that it was signed by Mr Young in the presence of his solicitor, Mr David Baker, on 31 July 2014. Mr Young, she said, was about to go into hospital for a serious operation the next day. After the surgery, Ms Smith visited Mr Young in St Vincent's and had a discussion with him on 1 August 2014 about the completion of the sale of a car park, at which time he apparently said to her "go get your house". The car park which was referred to was the car park of the Wiley Park Hotel, which was an asset of Jetobee which had been sold by its liquidator. It was the sale of this asset that facilitated the discharge of the St George Bank mortgage. Mr Young was discharged from St Vincent's on 6 August 2014.
10. Using the power of attorney, the defendant stated she executed a transfer of Mr Young's interest in the Property to herself on 7 August 2014.
11. However, in the affidavit of 6 November 2014 she made what, in my view, are a number of important concessions. Firstly, she accepted that prior to execution of the transfer on 7 August she was aware that in 2013 a judgment had been obtained against Mr Young by the plaintiff ([80]). Secondly, that prior to execution of the transfer she was aware from conversations she had with a Ms Anna Obryvalina from the liquidator's staff that the plaintiff was preparing a bankruptcy notice to serve on Mr Young ([81]).
12. However, she stated that, at the time she executed the transfer, she knew that she had signed the 2001 Agreement and that she believed that that agreement meant that the Property was at all times hers. Nonetheless, on the advice she obtained from her solicitor, a Ms Chang, a valuation of the Property was obtained for stamp duty purposes and in due course an amount of $84,490 was paid to the office of State Revenue. Her solicitor who gave that advice was not called to give evidence.
13. In her affidavit of 9 February 2015 she gave further evidence about the execution of the 2001 Agreement.
14. She stated that the conversation she had with Mr Bruce Young which led to him advising on such an agreement took place in or about January 2001 and that Mr Bruce Young prepared the 2001 Agreement sometime "during 2001".
15. She reiterated that the document was signed in the presence of herself, Mr Young and her father, at which point she wrote her father's address and occupation in the relevant part of the 2001 Agreement. She stated, however, that she did not date it at that point. She further stated that immediately after signing it she accompanied Mr Young and her daughter to the airport. She stated that she had an appointment with Mr Bruce Young on the day or so after it was signed at which point she wrote the date in the right hand corner, namely 6 December 2001. Further, she asserted that she and Mr Young signed the Agreement on 4 December 2001 but that she inserted the date of 6 December 2001 and she wished to make an amendment to her previous affidavit by inserting the words "on or about" before the date 6 December 2001 in [33] of that earlier affidavit.
16. In her third affidavit of 12 February 2015 she set out in considerable detail the work which she asserted she undertook in relation to the renovation and redevelopment of the Guildford Hotel. These events are not presently relevant and I do not propose to address the detail of them.
17. Ms Smith was cross examined. She gave, in my view, some rather strange and inconsistent answers in response to a number of very straightforward questions.
18. Unsurprisingly, Ms Smith conceded very early in her cross examination that in the first half of 2013 she was aware of the judgment of Adamson J and that it was for a substantial amount of money in favour of the plaintiff.
19. Notwithstanding what she had sworn to in [81] of her first affidavit she denied having knowledge in 2014 prior to executing the transfer that the plaintiff was proposing to institute bankruptcy proceedings against Mr Young, (T26.45-49). Indeed, she denied that she was intending to convey that she had that knowledge prior to executing the transfer, (T27.41-42, T28.5-20 and T29.41-45). During the course of this aspect of the cross examination Ms Smith suggested that she was confused, (T30.10). I am not prepared to find that she was confused. She simply realised it was unhelpful to her case and tried to recant. She clearly, in my view, knew of these bankruptcy proceedings.
20. Ms Smith agreed that she retained Ms Chang to get advice on the stamp duty aspects of the transfer of the Property. However, she agreed she did not tell Ms Chang that she was the owner of the Property and that Mr Young held his interest on trust for her, (T31/29-33). It is clear, in my view, when dealing with Ms Chang that the so called 2001 Agreement was furthest from her mind.
21. Ms Smith agreed that she knew at the time she commenced the relationship with Mr Young that he had been twice married and that proceedings by his former wives against him in relation to property matters of the marriage might be prolonged, costly and difficult, (T36/42-47).
22. She also said that in 2001 she and Mr Young had agreed that what property was his and what property was hers would remain his and hers respectively and that she would never have contemplated her family home in Wellington, New Zealand being otherwise than in her name, (T37/31-41).
23. She was asked many questions about the signing and/or dating of the 2001 Agreement. She reiterated on many occasions that she signed the documents in her "family home" in the presence of Mr Young and her father but that she dated it in Mr Bruce Young's office, (eg. T45/26-46.50). She then explained that she had a practice of signing documents and dating them later. She was also asked a number of questions as to why she had put on an amending affidavit changing the date of the signing of the 2001 Agreement from 6 December 2001 to 4 December 2001. It was put directly to her, which she rejected, that it was at Mr Young's suggestion that the signing might be 4 December 2001 and not 6 December 2001, (T50/20-25). Although I consider that to be likely I do not consider anything actually turns on this.
24. She asserted that she got an explanation of the document from her solicitor when she was in his office but she could not recall what explanation she was in fact given, (T54/30-T55.20). I regard that evidence as fanciful in the extreme. I do not accept she got such an explanation. She was asked again whether she, in fact, retained her family home in New Zealand and she reiterated that according to her "I retain it to this day, yes", (T57/15-17). She also asserted that it had always been in her name. She was then confronted with a transfer executed on 17 March 2006 the effect of which was to transfer her family home to Mr Young. She said she had no recollection of that occurring, (T57/35-39).
25. She then accepted that she did sign the transfer in relation to her New Zealand property which identifies Mr Young's interest in property as a "undivided one half share". The estate or interest is further defined by reference to an agreement dated "4 December 2001" as an agreement for sale and purchase.
26. When confronted with this document Ms Smith asserted that it was not in fact supposed to happen, (T61/44). However, she then explained that it was connected with some personal loans from Mr Young. She borrowed money from Mr Young to pay her tax. She said it was a totally separate agreement from the 2001 Agreement, (T61/46-62.44). When asked to explain the relevance of a caveat dated 2006 in respect of an agreement dated 4 December 2001 she asserted she had paid monies back to Mr Young and that her solicitor Mr Bruce Young was very slow and the document was in relation to the removal of a caveat. I am unable to accept that as either truthful or accurate.
27. The defendant accepted that by the middle of 2013 she was aware that Mr Young held a half interest in the Property and had an interest in the home in New Zealand, (T116/6-7). She agreed that she was aware that he had a substantial judgment that he could not meet, and that she discussed it with him, but she denied setting upon a course of action by which she would assist Mr Young to divest himself of those two assets, (T116/15-19).
28. The following exchange occurred between the defendant and counsel in relation to the New Zealand property, (T116/20-39). Q. You agreed with him that he would transfer back to you his interest in the Wellington property; that's correct, isn't it? A. Because he should never had had it? Q. Will you answer my question, please? You agreed, didn't you, that he would transfer back to you his interest in the Wellington property; that's correct, isn't it? A. No, he shouldn't have had it. Q. You know very well that he did transfer back to you his interest in the Wellington property in September 2013; that's right, isn't it? A. Yes. Q. You must have discussed that that would happen; correct? A. It was supposed to happen back… Q. Please answer my question. You must have discussed that that would happen? A. Yes.
29. When asked about the transfer of the Property, Ms Smith asserted somewhat defiantly that the reason she paid no purchase price (eg. $1.8 million) when it was transferred because it was her family home and she asserted that she had "signed my life for that home, that's my home", (T64/26). She certainly became a guarantor and signed a mortgage, but she made no financial contribution to the purchase nor did she provide any additional security for the transaction.
30. She was asked why she was entitled to keep the whole of the property herself. She gave numerous answers: that she paid the deposit and signed her life away; that she purchased it with Mr Young as a joint tenant and that it was her family home; she was entitled to it because she worked for it and that it was her home; she had cross guaranteed everything and again signed her life away; that it was purchased together with Mr Young because it was going to be the family home. She was asked whether, in effect, it was hers because of some agreement she had signed some time before the purchase. She indicated she did not understand that question, (T65/26-29).
31. Further, she said it was not only her home, it was the first family home she and Mr Young had ever purchased. Again, she was asked whether her proprietorial stance, in effect, was related to the 2001 Agreement to which her response was, (T66/5): A. I don't understand what you're asking me. I'm sorry, I'm confused now, sorry.
32. Although Ms Smith was aware that Mr Young's first wife had commenced proceedings prior to the execution of the 2001 Agreement she said she did not have any expectation that the plaintiff would commence proceedings, because she had remained employed at one of Mr Young's hotels. Ms Smith said she in effect believed Mrs Young was on a salary package and Mrs Young was very well looked after, (T69/20-22). In my view her response about the plaintiff not commencing proceedings was either breathtakingly naïve or blatantly untrue. I do not consider the former to be a realistic possibility. This is a successful business person who ran a number of businesses, one of which was to supply security personnel to Mr Young's hotels. She has been involved in her own matrimonial dispute with her former husband.
33. Ms Smith asserted that on 4 December 2001 she had signed a series of documents relating to various matters including her will and also her trust, (T70/36-37). As I have already observed, apart from the 2001 Agreement no other documents of the sort described were produced in evidence.
34. The defendant had some difficulty in her attempts to explain the 2001 Agreement in the context of the transfer of her home in Wellington, (T72/1-4, T73/9-11).
35. She agreed that at the time she undertook the purchase of the Property she made no statement to St George Bank to the effect that Mr Young's interest as joint tenant was, in fact, held on trust for her. She asserted, however, that she by implication did not do so because it was mortgaged. That is clearly nonsensical. She agreed that she did not provide any documents in relation to the so called trust to the bank, (T79/24-50).
36. She also agreed that until these proceedings had been commenced she had never provided any document to anyone in writing, signed by her or otherwise recording or suggesting Mr Young's interest as joint tenant in the Property was in fact held on trust for her, (T80/23-25).
37. On the question of stamp duty the defendant asserted that she had transferred $100,000 from an (unspecified) account into her personal account, out of which she drew the sum of the stamp duty on or about 8 August 2014, (T91/40-49). I should say there is no evidence to the contrary.
38. However, no doubt as a result of failing to advise her own solicitor that the Property was hers, and she paid some $84,000 in stamp duty which arguably could have been avoided. The following exchange occurred at p 32, lines 8- 22. Q. You didn't tell Ms Chang that in fact this property was yours all along did you? A. No. Q. You didn't tell her that this property was held on trust prior to the date of the transfer by Mr Young in your favour did you? A. No. Q. You didn't ask her, did you, to make an application to the Office of State Revenue, or the revenue authorities to absolve you from the need to pay stamp duty upon the transfer because the half interest in this unit was yours all along did you? A. No. Q. I suppose for you $84,000 was quite a bit of money as of August last year? A. Yes.
39. The defendant acknowledged that she was aware of the proceedings before Harrison AsJ and those before Adamson J and the outcome, namely judgment against Mr Young in the order of some $2.5 million. She also agreed that she discussed that fact with Mr Young, (T112/40-48). She remembered that Mr Young had written to Adamson J and she saw the letter but she did not go through "the whole thing". I do not accept her evidence as truthful. She had a keen interest to know what Mr Young was saying and would, I am sure, have read the letter. She did appreciate, however, that the letter was in fact in part a complaint about the size of the judgment, (T113/1-30).
40. She agreed that she later met with Mr Young and the plaintiff's solicitor, Mr Walsh, in company with a Ms Skocic, and at no time during that meeting did she suggest that she had an interest in the Property, (T114/27-31). She also agreed that at no time did she suggest to Mr Young that he tell Mr Walsh about the defendant's interest in the Property.
41. The defendant said that she appreciated that she could only transfer the Property to herself when the mortgage over it had been discharged, the possibility of which arose first on 1 August 2014. She also accepted that she realised that if Mr Young became a bankrupt he would not be in a position to transfer the Property, (T117/9-16).
42. She understood that when Mr Young said to her "[g]o get your house" that she should then and there transfer his interest in the Property to her pursuant to the power of attorney which had earlier been executed. She agreed, however, that although Mr Young made that statement on 1 August 2014 she did not in fact transfer the property until 7 August 2014, (T117/35-T118/8). Clearly she could not until the Bank discharged the mortgage which did not occur until about 7 August 2014.
43. In effecting the transfer she asserted that she relied upon the 2001 Agreement. She did say, however, that at the time of the transfer she could not recall the details of the agreement but she knew there was an agreement between herself and Mr Young: "I just remembered there was a property agreement that we had signed", (T120/20-21).
44. At some point she became aware that Mr Young had filed a debtor's petition but she asserted that she was unaware that in that document he was asserting that he was a half owner of the Property and she never read the petition, (T121/40-45). I do not accept that evidence as truthful. Again, she would in my view have been most concerned to know the detail of such a matter and its effect on her.
45. I have to say, I formed the impression of the defendant that she would do or say anything to advance her financial position. She was in my view less than frank with the Court and by and large, as is clear, I do not accept her as a truthful or reliable witness.

Evidence of Mr Young

1. Mr Young swore three affidavits (6 November 2014, 9 and 12 February 2015). I also found Mr Young to be an unsatisfactory witness.
2. In his first affidavit he set out some of his personal history. He married his first wife in 1968. They separated in 1987 and divorced in 1990. At the time of their separation his first wife still held 50% of the shareholding in Jetobee (trading as the Wiley Park Hotel) and 50% of the shareholding in LJ & CA Young Pty Limited. She was also a director of both companies. Between the date of their separation and the date of the divorce settlement (2004) Mr Young's first wife continued to receive remuneration from the shareholdings.
3. He married the plaintiff in 1992 and separated from her in 1999. He met the defendant in 1993.
4. In 1997 Mr Young offered the defendant's company, Smith Security Pty Ltd, the security contract for the Wiley Park Hotel. He asserts that he had begun a relationship with her in about 2000 and that they commenced living together at the Guildford Hotel along with the defendant's daughter.
5. He stated that he was introduced to Mr Bruce Young, who drafted the 2001 Agreement, which he originally asserted he signed on "6 December 2001", (LY[20]).
6. Mr Young acknowledged that in 2001 (before the 2001 Agreement) his first wife had commenced proceedings against him in the Family Court of Australia.
7. He said that he and the defendant purchased the Property off the plan so that they could reside in it as their "home".
8. Uncontroversially, Mr Young asserted that he was told in July 2014 by a doctor at St Vincent's clinic that he had a possible blocked carotid artery and he was referred to a vascular surgeon who confirmed the diagnosis and scheduled him for surgery on 1 August 2014. He was told that he may not survive the operation or may suffer a major stroke as a result. He asked the defendant to have his lawyers prepare an enduring power of attorney which he signed on 31 July 2014. Whilst in hospital the defendant told him (1 August 2014) that the liquidator had sold part of the real estate of the hotel business (namely the car park), which meant that the mortgage on the Property could be discharged, and so he told the defendant to "go get your home", (LY[44]).
9. The second affidavit was sworn for the purposes of correcting his initial assertion that he had signed the 2001 Agreement on 6 December 2001. Mr Young had had regard to his immigration records which showed that he arrived back in Sydney on 4 December 2001 leading him to assert that he must have signed the document then and not later.
10. His third affidavit dealt with a summary of the balance sheets of Jetobee for the years 2008, 2009 and 2010. Nothing of any moment arises from the materials contained therein. However, the comparison shows Jetobee allegedly had at all times significant assets along with significant debts. The net asset position, however, deteriorated as follows: 2008 - $1,857,994; 2009 - $1,566,608; 2010 - $1,369,533.
11. Mr Young was cross examined. He accepted that he had made certain statements to the police alleging that the plaintiff had committed criminal offences including the misappropriation of funds and that he gave evidence at a criminal trial concerning those charges. He agreed that the charges were dismissed and that in due course the plaintiff sued him for damages for malicious prosecution, (T128/5-50).
12. Mr Young agreed he gave no evidence before Justice Adamson nor was he represented. He was referred to the various adverse findings made by the judge but denied that he had made any false statements to the police or the local court and asserted that her Honour's findings were completely incorrect, (T133/20-28).
13. He agreed that as at 2001 he was involved in ongoing disputes with his first wife in relation to a property settlement claim she was making, (T133/46-50). He also accepted that at some point or other he could end up in a second property claim, (T134/29-35). He also asserted that by 2001 he had extensive financial interests in the hotel industry.
14. He agreed that in his first affidavit he made no reference to any conversation with the defendant concerning the 2001 Agreement they allegedly made at that time, (T137/10-14). He asserted that what he discussed with Mr Bruce Young was the best way to protect the defendant's financial future and he was advised that the property agreement was the answer. He also agreed that at the time he swore his first affidavit he did not have the 2001 Agreement before him, (T142/39-43).
15. Mr Young asserted that in 2001 he regarded himself as a reasonably wealthy person and he believed that he had more than adequate assets to cover whatever came out of "Family Law Courts". He also indicated that one of the underlying purposes of the 2001 Agreement was to protect his assets from the defendant and hers from him, (T144/15- 29).
16. He denied that the purpose of the arrangement was to make sure that any future property acquired with the defendant would be beyond the reach of either of his former spouses. He further asserted that it was not contemplated at the time that he was considering the purchase of any properties. He was, however, taken to Recital C of the 2001 Agreement and the fact it was made in contemplation of acquisition of property in the future, (T147/10-24).
17. He had no recollection of the transfer of any interest of the defendant's property to him in 2007, although he thought he had signed an agreement for the sale and purchase of one of her properties on 4 December 2001. He thought it could have been signed in Bruce Young's office, (T150/26-50).
18. He agreed that in 2014 he filed a debtor's petition dated 1 September 2014. He agreed that between 2001 and the day before he signed the debtor's petition he never recorded in any single document any suggestion that his apparent half of the Property was in fact the defendant's, (T154/46-50).
19. It was put to him that at the time of the acquisition of the Property and the giving of the personal guarantees he did not indicate to anyone at St George Bank that his interest in that property was held on trust for the defendant. His answer was that he did not think of the word "trust" so far as the deed was concerned but it was a "plain and simple property transaction". "It wasn't a trust that normal people would associate trust with", (T155/28-33).
20. He was further challenged about whether he told anyone at St George Bank about the 2001 Agreement and then asserted for the first time that he had told a Mr Paul Cooke from St George Bank, who told him not to worry about it. He went on to assert that he told Mr Cooke that he and the defendant had an agreement whereby "eventually the property would become hers", (T156/5). He gave a further answer indicating that it would become "hers" when the mortgage had been discharged. He further insisted that he told Mr Cooke that that consequence was by reason of the agreement. He and Mr Cooke were friends at the time and Mr Cooke was allegedly financing a number of hotels in the industry upon the recommendation, it seems, of Mr Young. Mr Young also indicated that it was not a "formal" conversation. He was unsure whether Mr Cooke still lived in Sydney as he had lost contact with him, (T156/10-36). Mr Cooke was not called to give evidence. I regard the evidence of Mr Young as simply untruthful. He realised the difficulty and inconsistency of his stance and, I am certain, on the spur of the moment thought he would attempt to improve his position.
21. The following exchange then took place at T179.15-181.8: HIS HONOUR Q. In that same volume that you're in Mr Young would you be kind enough to turn to page 137, lower right hand corner A. This is the St George guarantor copy facility? Q. Yes, this is the facility letter which came to the directors of Jetobee for the purposes of acquiring the unit at Pyrmont A. Yes. Q. and at page 147 you'll see that a Mr Michael Grace who's said to be the senior relationship manager, was he someone you'd dealt with? A. Michael Grace was there for some time, your Honour, but I believe he was still with St George but they moved him on to a different Q. Whether he's moved or whether he isn't, was he the principal person you were dealing with for the purposes of the facility, or the increase in facility? A. Yes, I'd say so, yes. Well no, sorry. I'm trying to think, I'm confused. Q. Mr Cooke hasn't come anywhere near this letter has he? A. No. Q. In the sense that he hasn't signed it A. Mr Cooke was his boss, that's where it was. Q. Mr Cooke was above Mr Grace was he? A. Yes, he was. Q. Did you tell Mr Grace about the 2001 document as well? A. No I did not, no. Q. Why not? A. The reason I suppose is just that I would have been concerned that we were not going to get the money, the loans, because of the mortgage requirements. Q. So is it the fact that you deliberately withheld the information from St George because you were fearful that you may not get the loan otherwise? A. Yeah, I think that's what I'm trying to say, your Honour, yes. Q. Are you trying to say it? A. I am saying it, yes. Q. I don't want to be too blunt about it but you were quite dishonest with St George on this issue? A. Yes. Q. Is that right? A. Survival. Q. Is that what they call it? A. Yes. Q. When you say it "was survival" do you mean by that that you were prepared to lie in order to advance your personal financial interests? A. Not advance them, keep them. It depends who I'm talking to of course. Q. Do you mean by that that depending on whether or not it's in your interest, person interest or not, you are prepared to lie as long as your financial interests are protected? A. No PAINTER: I object to that question. HIS HONOUR: I'll allow it. PAINTER: I object on the basis that he might require a certificate your Honour. HIS HONOUR: Sit down please. EINFELD Q. You lied when you informed the Court that you owned 50% of the home unit when you wrote in your financial statement of 14 December 2011, didn't you? A. I withheld the fact about the Q. If you withheld it you weren't telling the truth about it, do you agree? A. Yes. Q. Was that a matter of survival as well? A. Yes. Not from the court's point of view. Q. From your personal point of view? A. From the point of view of the bank, I'm sorry. Q. It wasn't the bank that had to survive, it was you that wanted to survive; is that right? A. Well I needed to survive with the bank. Q. In these proceedings you need to survive by ensuring that the interest that was transferred to Josephine doesn't get recovered by your trustee in bankruptcy; correct? A. I don't understand that.
22. He agreed that he provided the Court with a financial statement for the purposes of the Family Law proceedings before Adamson J. It was put to him that in it he had said he had a 50% share in the Property. He accepted that he knew that the document was being filed in proceedings in which the plaintiff was making a claim against him, (T159.1-4). He asserted that it was not his intention to mislead the Court. Further, he indicated that he did not think that this was the opportunity, as it were, for him to inform the Court as to the ownership of the unit, (T159.45-50). As to this latter statement I simply do not accept it as truthful. The true position is, in my view, that it never crossed his mind to disclose it.
23. He accepted that in the document to the Court he had described his interest in the Property as his "next most valuable asset", (T160/44-45). He said, however, he was in fact intending to convey that in terms of the deed the unit was an asset of the defendant's, (T161/37). Rather bizarrely, he asserted that because his name was on the title it was his obligation to point that out, (T161/50). This is, of course, entirely contrary to any belief he ever held the property on trust or that the 2001 Agreement was of any relevance. If what he meant was that because his name was on the title, any person would reasonably conclude he was an owner then I agree with him.
24. It was further put to him that as at 1 September 2014 he must have in effect regarded the unit as having no value to him at all, (T161/40-162/25): Q. And in fact it was as of 1 September last year of no value to you personally at all because you, you tell us, never had an interest in it, never have had; is that right? A. Well that was the thought about at the time. I believed that because my name was on the transfer, it was on the title, it was on everything connected with it that that was my obligation to point that out. HIS HONOUR Q. Point what out? A. That I was the owner of it. The deed EINFELD Q. Mr Young A. I just never thought about that the deed should be presented in this situation. I believed that the Court would see that my name was on the transfer document, on the mortgage documents that the conclusion would be yes, it's your property. HIS HONOUR Q. But you knew it was, didn't you, or you believed it wasn't? A. I believed it wasn't. But because of… Q. Do you believe in telling the truth about these things? A. I try to. Q. Well then why didn't you? A. I thought I was. I'm just confused by the way he's… the questions are being asked. Q. I'm not so sure about that, Mr Young, that'll come out in due course, but if you believed genuinely that it was at all times Josephine's asset why didn't you say so as you apparently did to the person at St George? A. Yes, well I thought being efficient no, it's my fault, I made a mistake. I'm not trying to cheat anybody I can assure you.
25. Mr Young agreed that in a letter dated 4 March 2013, he instructed his then solicitors, a firm called Legal Wisdom, to indicate, in effect, that he had an interest in the Property. He agreed that he did not instruct his solicitors to indicate the Property was entirely the defendant's.
26. He further agreed that he wrote a letter to Adamson J after judgment had been delivered in order to express his "bewilderment" at the orders made by her Honour, in particular the extent of damages that had been awarded, (T165/25-27). He dated that letter 18 April 2013. (Ex P5, handwritten letter Tab 7) He agreed he had discussed the letter he sent to Adamson J with the defendant, (T169/10-12).
27. Although he agreed that the purpose of writing to the judge was to demonstrate that his assets were exceeded by his liabilities he nonetheless included as one of his assets a 50% interest in the Property, (T166/5-12). Again, his reasons for not disclosing the true position were first because his name appeared on the transfer and the title and because the mortgage was in both his and the defendant's name. However, he also ventured that he never thought at the time to disclose the defendant's ownership in such a letter, (T166/15, T167/1-3). He would not agree that the reason he did not think of it was because he never thought of the interest as one involving a trust in favour of the defendant. Again, in my view it is plain it simply never occurred to him to disclose the defendant's so-called interest in the Property.
28. He agreed that he had a meeting with Mr Walsh, the solicitor for the plaintiff, for the express purpose of discussing his financial circumstances. He accepted that Mr Walsh asked him to provide a list of his assets and he did so, indicating again that he held a half interest in the Property. He did not, apparently, think it was appropriate to tell Mr Walsh what the true position was, (T169/1-3). In my view that is simply not credible.
29. He accepted that when he was dealing with St George Bank in 2012 or 2013 he did not inform anyone else at the bank that he had told Mr Cooke about the trust arrangement, nor did he disclose to any other person at the bank what the "true" arrangement was, (T170/4-12).
30. He agreed that he instructed Mr Bruce Young in 2013 to transfer Mr Young's interest in the defendant's New Zealand home back to her, but only after it had been brought to his and her attention that the property had not been transferred when it should have been, (T173/41-45).
31. Mr Young denied that the defendant told him between the time he went into hospital and when he came out that she had spoken to a person in the liquidator's office who told her that the plaintiff was taking steps to file a bankruptcy petition against him. He accepted that the defendant had told him that she had had discussions with someone in the liquidator's office, but not that the plaintiff was taking steps to have him declared a bankrupt, (T175/1-14). I do not accept his evidence. There is no doubt in my mind the defendant would have told him of such an important development.
32. Mr Young also impressed me as a man who would do or say anything to advance his financial interest. However, when it was clearly in his financial interest to disclose the defendant's ownership of the property he failed regularly to say what he now says is the truth. There is no doubt his conduct on these occasions provides abundant evidence the 2001 Agreement never crossed his or the defendant's mind, when it should have been at the forefront.
33. Mr Young was taken to an email and some attachments dated 4 August 2014, (CB110-111). He agreed that the letter enclosed an application for substituted service of a bankruptcy notice. He agreed that he saw the document when he was discharged from hospital on 6 August 2014, (T178/4-6).
34. He asserted, however, that he did not see the email of 4 August 2014 until 10 August 2014 and he denied that as a result of seeing the email, he decided to transfer his interest in the Property to the defendant, (T178/23-25).

Evidence of Mr Bruce Young

1. Mr Bruce Young swore an affidavit of 6 November 2014. He is a solicitor practising in New Zealand. He was admitted to practice in 1971 and has practised continuously since that date. He stated that he had prepared the 2001 Agreement on the instructions of the parties, namely the defendant and Mr Young.
2. In cross examination he agreed that he prepared the 2001 Agreement sometime in the latter part of that year. Following its preparation he provided an unsigned draft to the defendant. He did not recall the defendant discussing the document with him, nor did he explain the terms of the document to either the defendant or Mr Young, (T104/36-47).
3. To the best of his recollection it was not signed by the defendant in his office on 6 December 2001, (T106/46-48).
4. At some point in time, he recalled preparing a caveat to be lodged against the property owned by the defendant following a transaction that had later occurred between Mr Young and the defendant. He recalled obtaining instructions from both the defendant and Mr Young. He further recalled that only one half share was supposed to be transferred but somehow the document ended up transferring the whole of the interest, (T107/10-45).
5. He agreed that the caveat was registered about one year after it was signed, but could offer no explanation for the delay. He also agreed that it was likely that he had prepared the agreement referred to back in December 2001. He accepted that the agreement for the sale and purchase of the defendant's property was probably prepared at or about the same time as the 2001 Agreement, (T109/24-31).
6. He accepted that on 23 September 2013 he acted on a transaction which had the effect of transferring the interest of Mr Young in the defendant's property back to her and for that purpose he prepared relevant documentation on instructions from both the defendant and Mr Young. The solicitor asserted that it was a rearrangement of what had been proposed at an earlier point and which had not been effected correctly. I am by no means certain about the reliability of this evidence.
7. He also recalled there was a mortgage to the Bank of New Zealand which had to be discharged before the transfer could occur, (T110/29-34).
8. In broad terms I accept Mr Bruce Young's evidence although clearly the passage of time and a lack of contemporaneous documents has had an effect on his ability to precisely recall the relevant events.

Discussion

1. In my view I consider that there is a substantial body of evidence from which I would conclude that the transfer on 7 August 2014 facilitated by Mr Young was done with the intention of defrauding his creditors within the meaning of s 37A. The same conclusion applies to the 2001 Agreement. Indeed I think these conclusions are inescapable. The 2001 Agreement is of course put forward as a complete answer to the 2014 transfer. For reasons which follow in my view it is not.
2. It is significant that at the time of the 2014 transfer both the defendant and Mr Young were obviously aware of a judgment given by Adamson J in April 2013.
3. Mr Young accepted that to his mind there was a possibility of bankruptcy proceedings and I am satisfied that he had likely become aware by email in early August 2014 of an application for substituted service of the bankruptcy notice issued against him by the plaintiff. I am also satisfied the defendant told Mr Young prior to the 2014 transfer of the bankruptcy proceedings brought by the plaintiff. He also knew the liquidator was in the process of selling Jetobee's assets, which would facilitate a discharge of the mortgage over the Property. When he became ill he was astute to arm the defendant with the ability, if he was unable, to transfer his interest in the Property to herself when the discharge occurred. That was all part of a planned strategy.
4. In any event there is, in my view, a substantial body of evidence which demonstrates that as at August 2014 Mr Young, or for that matter the defendant, did not genuinely believe that his interest in the Property was truly owned by anybody except himself. This has its own consequences for the 2001 Agreement. On the many occasions when he had an obligation to be truthful and a real incentive to disclose only that which he owned he simply failed to assert that the Property belonged entirely to Ms Smith or that there was any trust arrangement. In the financial statement he prepared for the hearing before Harrison AsJ, and in turn for the proceedings before Adamson J he failed to do so. After judgment he subsequently sent a letter of complaint addressed to Adamson J and in that he failed to do so. He had meetings with officers of the St George Bank and with the plaintiff's solicitors and again failed to do so. One possibility is that on these occasions he deliberately told untruths. I do not accept that. I am firmly of the view he told the Court and the various persons what he genuinely believed was the true situation at the time. He and the defendant's very belated attempt to invoke the 2001 Agreement is, in my view, an utter contrivance.
5. In September of 2013 Mr Young attended to the transfer back to Ms Smith of her interest in the Wise Street property in New Zealand. I consider this is another example of Mr Young putting his house in order as and when he could as a result of the judgment of Adamson J.
6. In passing it should be recalled that the defendant does not seek to set up any defence under s 37A(3) to the effect, for example, that she acquired Mr Young's interest in the unit in good faith and without notice. Rather, the defendant resists the s 37A claim based on the 2001 Agreement.
7. As far as the 2001 Agreement is concerned I am, however, satisfied it was prepared by Mr Bruce Young and executed by Mr Young and Ms Smith in December 2001. They did so in circumstances where they provided their solicitor with minimal instructions. He does not appear to have checked the clauses with any great care prior to releasing it to his clients. I am satisfied he gave no explanation as to the effect of the 2001 Agreement nor does it seem was he asked for one. The terms of the 2001 Agreement in part lack clarity. It was apparently prepared along with a good deal of additional documents.
8. The only purpose put forward for the creation of the document was that the parties wished that their respective property interests be kept separate. The difficulty with this, of course, is that at or about the same time that the 2001 Agreement was purportedly executed, Mr Young and the defendant had entered into another agreement, the object of which was to facilitate the transfer to Mr Young of an interest which Ms Smith held in her family home at Wise Street, Wellington New Zealand. That transfer was, of course, inconsistent with the alleged purpose of the 2001 Agreement. In explaining the transfer Ms Smith indicated that she wanted to borrow some money to pay a tax liability, which she borrowed from Mr Young. She proffered Wise Street to him as security for the loan.
9. Those events to one side, the plaintiff submits that there is sufficient uncertainty surrounding the creation of the 2001 Agreement such that I should have doubts about its creation in or about 2001 and hence its authenticity. However, having heard Mr Bruce Young, I am satisfied that he prepared the document in the latter part of 2001, albeit as I have said on minimal instructions, and I am also satisfied that it was likely signed on 4 December of that year. I note that although the defendant's father was not called in the proceedings, I am satisfied that the document was prepared and executed as alleged in his presence.
10. Although the defendant accepted that the term "creditors" includes future creditors, I understand her argument to be that in a domestic environment it is necessary for the creditor to have made it plain or, if I may put it slightly more generously, that the claim for a future creditor must be real and not just a mere possibility. This was advanced on the question of the plaintiff's status to complain or attack the 2001 Agreement.
11. It was said here, for example, that the plaintiff failed to give evidence about what her intentions were in 2001. In addition it was said that at the time of the 2001 Agreement the evidence pointed towards Mr Young being a man of substantial means. Further, it was suggested that the evidence supported the fact that the plaintiff and Mr Young were on good terms, hence negativing any possibility of a claim at the time the property agreement was entered into.
12. I consider that that proposition or notion as best I understand it to be erroneous for a number of reasons.
13. First, s 37A focusses exclusively for relevant purposes on the "intent" of the person alienating the property and where the creditor is "thereby prejudiced". The state of mind or the activity or inactivity of "any person" is wholly irrelevant.
14. In any event, there is an abundance of authority supporting the proposition that future creditor includes both contingent and prospective creditors.
15. Once it is found that there is a fraudulent intention in the relevant sense, for example to defeat any creditor, the transaction is usually voided against all. The conduct must be such as to lead to a diminution in the fund available for the satisfaction of creditors.
16. The debtor in all instances is simply doing something which in law he or she has power to do, but where the conduct has the effect of disposing of an asset which would otherwise have been available to creditors, with the intention of defrauding them in the relevant sense by putting the asset or its worth beyond their reach.
17. By 2001 Mr Young's first wife, Carolyn Young, had commenced proceedings against him in the Family Court. She was in quite a potent commercial and legal position because at the relevant time she owned 50% of his assets. Mr Young accepted that the plaintiff might bring claims against him as the result of the breakdown of their marriage. He clearly contemplated continuing his relationship with Ms Smith and, as they had set up house together, that they would likely acquire property in the future.
18. Mr Young, in a rare moment of candour, made the following concession at T144/15-29: Q. On the other hand any property that you had should stay yours and the mix up not happen the other way, as it were? A. Well the one little thing about it was in 2001 I was probably regarded as a reasonably wealthy person and my assets were listed in 2001 and having regard to my first wife and the possibility of a second process I had adequate more than adequate assets to cover whatever came out of family law courts. The purpose of this was to ensure that whatever happened between Josephine and myself didn't interfere with my assets and nor could anybody else say you reduced your assets, you diminished your assets in favour of Josephine. The agreement was essentially to avoid all that. Q. In other words that property which was yours, as it were, would be protected from her and that property which was hers would be protected from you; is that right? A. I think that's basically something similar. .
19. There is little doubt in my mind that what Mr Young was quite clearly indicating was that the purpose of the 2001 Agreement at least, in his mind, was to insulate himself and, for that matter, the defendant, from any attempt on the part of either of his former wives to get their hands on any assets he might acquire jointly with the defendant in the future. This, in my mind, evinces an intention to hinder the prospects of either of his former wives having access to that class of asset. I consider this qualifies as a relevant intention for the purposes of s 37A.
20. In the alternative, it was put by the plaintiff in submissions that Mr Young and Ms Smith had so conducted themselves as to have mutually abandoned or abrogated the property agreement if it was otherwise effective. I consider that to be correct. Of course until 2007/2008 the 2001 Agreement had no relevance because they had not "jointly" acquired property. Thereafter no mention is made of it or indeed thought given to it until these proceedings.
21. Throughout 2013 and 2014, for example, when Mr Young to the knowledge of the defendant was obliged truthfully to provide information about his assets, he never once identified the Property as the defendant's. Apparently neither the defendant nor Mr Young thought to remind the other of this so called arrangement. It is inconceivable given its alleged significance that it would simply have been forgotten. Their conduct is, in my view, only consistent with abandonment and/or abrogation. The 2001 Agreement had obviously long ceased to have any significance to their lives.
22. In my view there is an even more fundamental point. Neither conducted themselves following the execution of the 2001 Agreement as if a trust was ever intended to exist. When the Property was acquired there was no attempt or thought of making it clear it was being acquired as part of a trust arrangement. That state of affairs continued until it suited the defendant to raise the point in this litigation.
23. Mr Young, of course, asserts that he told one bank officer that he had no interest in the unit. The officer apparently told him in effect not to worry about it. As I have said I regard that evidence as deliberately untruthful. He accepted himself that if it came to his own personal financial interests he was prepared, as it were, to be economical with the truth. No attempt was made to call the officer and it is clear to me from the way in which the matter arose in evidence that Mr Young simply fabricated that evidence. The defendant and Mr Young behaved as if a trust never existed.
24. For the purposes of this litigation there is little doubt that Ms Smith had persuaded herself that the Property should be entirely hers. That belief is based upon her having selected it and having asserted that "she paid the deposit" (which of course she did not), that she was a cross guarantor, that she had worked for it, that she had signed her life away", that it was going to be her family home and matters of that sort. At no point during these remarks in her evidence did she instinctively think to advert to the existence of the so called "trust" or 2001 Agreement.
25. Although it is not necessary for me to do so because of my conclusions otherwise, I should, however, say something about other arguments raised by the plaintiff.
26. The plaintiff submits that the 2001 Agreement fails for want of consideration. It is submitted that the promise by the defendant in cl 4 to use "best endeavours" is ineffective in providing consideration because it was offered in the context of a domestic situation between parties in a de facto relationship. I do not accept that of itself robs the 2001 Agreement of consideration.
27. In addition, however, the plaintiff submits that the promise was not fresh consideration because Ms Smith had worked for some time prior to the 2001 Agreement for Mr Young. Again, I do not regard this as a valid criticism. The promise in cl 4 was to operate prospectively, and although there may well be some similarities between the work she was to undertake as a result of the 2001 Agreement and that which she had previously undertaken, I consider that the consideration provided was adequate and not illusory.
28. In the alternative, the plaintiff submits that there was no "purchase" in accordance with the 2001 Agreement. It is submitted that cl 1 of the 2001 Agreement requires that for there to be relevantly a purchase some monetary contribution must come from both parties. The plaintiff asserts that the evidence would suggest that Ms Smith contributed no part of the purchase price, it being funded entirely by an extension by St George Bank of its line of credit in favour of Mr Young's company Jetobee. In that sense it is submitted the acquisition could not be seen as a purchase in accordance with cl 1 of the 2001 Agreement. I do not think that is a reasonable construction of the 2001 Agreement.
29. Clause 1 certainly provides that the property would be "purchased by them for their joint use".
30. It seems to me that the 2001 Agreement really focusses upon joint acquisition, rather than requiring some financial contribution from both parties. Property, of course, can be purchased in a variety of ways. A simple cash acquisition with each party contributing equal shares would be at one end of the spectrum. The parties, however, could jointly borrow and be responsible for a mortgage in differing proportions. Clause 8, for example, is relevant in this regard. It contemplates that in relation to outgoings including mortgage payments and other expenses the parties are entitled to agree between them as to who shall make such payments and/or how they should be shared and the basis on which that arrangement has been paid and may be varied. Although the clause is not elegantly drafted, it does in my view provide for a significant amount of flexibility as to how any outgoings are to be borne. More to the point, it leaves open, in my view, a construction that it may be agreed between the parties that one as opposed to the other bear all or a particular class of outgoings. That is, it seems to me, consistent with an acquisition in joint names with one party only providing the purchase monies.
31. Clause 10 is a somewhat strange provision but in that regard it is not alone in the context of this agreement. Part of the clause contemplates property being in joint names and requiring each person not to charge or mortgage their respective interest in the property without the prior written consent of the other person. Again, it does not necessarily point to joint contributions toward the purchase. The second part of the clause, however, is somewhat intriguing in that it contemplates the possibility that the defendant (on one view alone) might acquire property "pursuant to this Agreement". Again, she agrees not to mortgage or charge her interest "in the property" without the consent of Mr Young. It is very difficult to determine precisely what that clause, more importantly the second part of the clause, is intended to achieve over the first part of the clause.

Conclusion

1. The 2001 Agreement, like the transfer in 2014 itself, was in my view a clear attempt on the part of the defendant and Mr Young acting in concert to relevantly defraud creditors existing or future. In particular the 2001 Agreement, in my view, was deliberately contrived by the defendant and Mr Young to thwart any attempt on the part of either of Mr Young's former wives to successfully make a claim against any property acquired with the defendant following the date of its execution.
2. By 2001 Mr Young's first wife had already made a claim against him in the Family Court. He clearly anticipated the likelihood of the plaintiff doing the same thing. His second wife, the plaintiff, was not, however, in as favourable a position as opposed to his first wife. She had simply devoted herself to Mr Young and his business interests for what appears to be little more than accommodation and a salary. She was rewarded, as it were, according to Adamson J, by having a falsely contrived case of misappropriation brought against her. Mr Young's boast that he was a man of some means in 2001 does not in any way detract from him having the intention, which I am satisfied he did, to defraud his creditors, principally his two former wives. Whilst ostensibly the 2001 Agreement was to ensure he and the defendant's joint residence was kept safe from the possibility of a claim being made against him, in my view that is a situation which is caught by the section.
3. However, if I am wrong about that, in my view the subsequent conduct of Mr Young and the defendant satisfies me that they either never intended the 2001 Agreement to operate as a trust or that by their conduct they simply abandoned or abrogated it. That inference I regard as overwhelming given Mr Young's repeated representations against his interest as to his ownership of the Property.
4. It follows that the 2001 Agreement is not available to Mr Young to justify the 2014 transfer by the defendant. There is also no doubt in my mind that the latter transfer was done again with the requisite fraudulent intent in relation again to Mr Young's creditors, but more to the point the plaintiff.
5. In all the circumstances, in my view the plaintiff is entitled to the relief sought in paragraphs 1 and 2 of the Summons.
6. I would invite the parties to prepare short minutes reflecting my reasons. They should also arrange for the matter to be relisted for argument on costs unless that matter is agreed.

One final matter

1. Adamson J made serious findings about the conduct of Mr Young in awarding damages against him for malicious prosecution: see Young v State of New South Wales (No 2) [2013] NSWSC 330, [125], [129], [130], [132], [133] and [134].
2. On that view of Mr Young's conduct, precious resources were expended by authorities in bringing a case based on falsehoods. I find that, together with the trauma inflicted upon the plaintiff, unacceptable and very disturbing.
3. I am aware that Mr Young was not a party to these proceedings. However, I would be prepared to give him or any legal representative an opportunity to address the question of why I should not send the papers to the relevant authorities to give consideration to whether any charges should be brought against him. I would like arrangements for this to occur as soon as possible. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 10 April 2015