Payne v McDonald [1908] HCA 40; (1908) 6 CLR 208 (23 June 1908)

Payne Defendant, Appellant; and McDonald Plaintiff, Respondent.

The point raised on this appeal is one upon which, apparently, no argument was addressed to àBeckett J., for he does not mention it in his judgment. The point on which he decided the case was not pressed before us. The plaintiff's case is very simple. As established by the evidence it is this: - Some years ago she bought some property and it was transferred into her mother's name. Under those circumstances, if there were no more in the case, the mother was a trustee for her. On the mother's death the property passed to the defendant, and the plaintiff now asks that the defendant should transfer it to her, which J. ordered him to do. The point now made is this: - When the property was bought in the mother's name, the plaintiff was indebted to certain creditors, and the property was so transferred to the mother with the view of defeating those creditors. There the allegations and the evidence end. It is said that, that being so, the plaintiff cannot get the property back. I apprehend the principle is that the Court will not assist a party to carry out an illegal transaction - that, if, in the course of the plaintiff's story, the relevant facts show an illegal transaction, the Court will not assist him. As L.J. said in []: - "If it was merely a question for the first time to be determined upon principle, without authority, I should have no doubt in saying that the plaintiff was not obliged to rely upon the fraud for the purpose of recovering back the goods." In this case the plaintiff is not obliged to rely on anything except the fact that the land was transferred into her mother's name as trustee for her. I doubt, indeed, very much whether the doctrine applies at all to a case where the only illegality or impropriety alleged is an intent, not effectuated, to defeat creditors. , a man may do what he likes with his own property. Any restriction on his doing so is imposed by positive law, and there are a number of such restrictions to be found in the insolvency laws. Those laws are all, so far as I know, made for the benefit of creditors, and the restricted transactions are valid between the parties to them unless the creditors intervene. So that I doubt whether there is any foundation at all for the argument. If the mere fact that a transaction was entered into with intent to defeat creditors were sufficient to prevent a man from asserting any rights in respect of it, most extraordinary results would ensue. For instance, every fraudulent preference, so-called, would be an illegal transaction. Now, a fraudulent preference very often consists of a transfer of property to a creditor by way of security or mortgage. If the debtor becomes insolvent within (in Victoria) three months of the transaction, it may be impeached by the other creditors, but if he does not, it cannot be impeached. If, however, the transaction is illegal in its inception, as according to the argument it is, the mortgagor can never set up his right to an account against the mortgagee. That is so absolutely contrary to the whole scheme of the insolvency law that it cannot be the law.