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[1989] FCA 462
Federal Court of Australia
1989-11-10
Original judgment source is linked above.
Bankruptcy - maintenance agreement registered under s. 86 of the Family Law Act 1975 - covenant by husband to transfer real property to trustee of family trust - no valuable consideration - transfer executed but not registered - supervening sequestration order against estate of husband - whether caveat against title to real property by trustee of husband's estate should be removed so as to permit registration of transfer to trustee of family trust - whether property of bankrupt vested under s. 58 of Bankruptcy Act 1966 subject to any rights of trustee of family trust.
Equity - equitable interests - whether the operation of provisions of Family Law Act 1975 upon maintenance agreement registered under s. 86 of that Act gave rise to presently subsisting equitable interest in real property the subject of a voluntary covenant by husband to transfer to trustee of family trust.
Real Property Act 1900 (NSW)
Conveyancing Act 1919 (NSW)
Perlman v Perlman [1984] HCA 4; (1984) 155 CLR 474
In Re Clark. Ex parte Beardmore (1984) 2 QB 394
Whyte v Williams (1903) 29 VLR 69
Ex parte Holthausen; In re Scheibler (1874) 9 Ch App 722
In re Hart. Ex parte Green (1912) 3 KB 6
Mitford v Mitford [1803] EngR 676; (1803) 32 ER 534
National Provincial Bank Ltd. v Ainsworth [1965] UKHL 1; (1965) AC 1175
Price v Parsons [1936] HCA 5; (1936) 54 CLR 332
Re Veli; Ex parte A.E. Developments Pty. Ltd. v Scott (1988) 18 FCR 204
Re Jones; Ex parte Mayne (1953) 16 ABC 169
Official Receiver v Klau (1987) 74 ALR 67
Re Hirth, Ex parte Trustee (1899) 1 QB 612
In Re Carey. Ex parte Jeffreys (1895) 2 QB 624
Re Hyams; Official Receiver v Hyams (1970) 19 FLR 232
Re Bedford; Ex parte Official Receiver (1968) 12 FLR 309
Liveris v Commissioner of Taxes [1989] NTSC 13; (1989) 13 Fam LR 65
Re Goode (1974) 24 FLR 61
Official Receiver v Klau (1987) 74 ALR 67
D.K.L.R. Holding Co. (No. 2) Pty. Ltd. v Commissioner of Stamp Duties (NSW) [1982] HCA 14; (1982) 149 CLR 431
Brunker v Perpetual Trustee Co. (Ltd.) [1937] HCA 29; (1937) 57 CLR 555
Noonan v Martin (1987) 10 NSWLR 402
Cannon v Hartley (1949) Ch 213
Milroy v Lord [1862] EngR 951; (1862) 4 DeG F & J 264
Olsson v Dyson [1969] HCA 3; (1969) 120 CLR 365
Pullan v Koe (1913) 1 Ch 9
Brown v Heffer [1967] HCA 40; (1967) 116 CLR 344
R. v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett [1945] HCA 50; (1945) 70 CLR 141
Arnotts Ltd. v Trade Practices Commission [1989] FCA 135; (1989) 87 ALR 73
Re Weeks' Caveat (1971) QWN 4
National Provincial Bank Ltd. v Hastings Car Mart Ltd. [1965] UKHL 1; (1965) AC 1175
R. v Toohey; Ex parte Meneling Station Pty. Ltd. [1982] HCA 69; (1982) 158 CLR 327
Bendall v McWhirter (1952) 2 QB 466
Pearce v Bastable's Trustee in Bankruptcy (1901) 2 Ch 122
Kern Corporation Ltd. v Walter Reid Trading Pty. Ltd. [1987] HCA 20; (1987) 163 CLR 164
Grant v Dawkins (1973) 3 All ER 897
the Appellant: A.E. Cramer-Roberts Esq.
instructed by Messrs.
Walker & Raphael.
Counsel and Solicitors for Mr. K.R. Handley Q.C.
the Respondent: and S. Motbey Esq.
instructed by Messrs.
Ferrier & Associates.
Vary the orders made at first instance on 10 March 1989 on the cross application by (i) omitting the words "the cross application is dismissed but in lieu thereof the Court declares"; and (ii) substituting the words "On the cross application, declare".
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
This is an appeal, in a bankruptcy matter, arising out of certain dealings between the bankrupt, Stephen Moor, his wife, Tessie Moor, and a family company controlled by them, Sonenco (No. 77) Pty. Limited, ("Sonenco"). Sonenco is the appellant in the appeal and Brian Raymond Silvia, the trustee of Mr. Moor's bankrupt estate, is the respondent. In order to understand the complex issues which arise on the appeal, it is necessary to describe the background facts.
2. (1) On 25 August 1980, Mr. and Mrs. Moor married. They live together, and have, at all material times, lived together as husband and wife. (2) On 21 January 1985, the "Moor Family Trust" ("the trust") was constituted by a deed of settlement between D.K.L.R. Holding Co. Pty. Limited, as settlor, and Sonenco, as trustee. (The original directors of Sonenco were Mr. and Mrs. Moor. When, in May 1987, Mr. Moor became bankrupt, he ceased to be a director of Sonenco. Mrs. Moor is still a director.) The beneficiaries of the trust are Mr. Moor, Mrs. Moor and any children of their marriage. (3) On 5 February 1985, Mr. Moor became the registered proprietor of an estate in fee simple in the land ("the land") under the Real Property Act 1900 (NSW) comprised in certificate of title Vol. 11309 Fol. 236 ("the certificate of title"). The matrimonial home of Mr. and Mrs. Moor, known as No. 59 Georges Road, Leppington, N.S.W., is erected upon the land. (4) On the same date, 5 February 1985, a mortgage to Westpac Banking Corporation ("Westpac") was registered on the title to the land, securing the indebtedness of Mr. Moor to the bank. (5) On 12 February 1985, The Deputy Commissioner of Taxation instituted proceedings against Mr. Moor in the Supreme Court of New South Wales for the recovery of certain taxation debts. The amount claimed was approximately $618,000. Mr. Moor indicated his intention to defend the proceedings which were not finally dealt with until May 1986. (6) On 8 August 1985, a caveat was lodged in respect of dealings with the land by Mr. Raphael, Mr. Moor's solicitor. The evidence does not reveal what interest in the land was claimed by Mr. Raphael as caveator. (7) On 24 October 1985, Mr Moor, as the husband, Mrs Moor, as the wife, and Sonenco, as the trustee, entered into a deed ("the maintenance agreement") which is of central importance in this litigation. After reciting that Mr. Moor wished "to give...effect to his obligations both moral and legal to make adequate and proper provision for the accommodation, welfare and maintenance of (Mrs Moor)...", the maintenance agreement provided, inter alia, that:
"3. The Husband hereby covenants to transfer to the
Trustee forthwith all his right title and
interest in the matrimonial home.
4. The Husband and the Wife agree that the Deed
herein contained is a 'Maintenance Agreement'
intended to be registered in the Family Court of
Australia at Parramatta pursuant to the
provisions of Section 86 of the Family Law Act,
1975, as amended, and the Husband and the Wife
mutually covenant to join in seeking the
registration of this Agreement in the Family
Court of Australia at Parramatta.
5. The Trustee covenants that, subject to the terms
of the Trust, the Trust Fund therein referred to
shall be devoted and applied exclusively to the
benefit of the Wife and members of the family of
the Husband and Wife."
(8) On the same day, 24 October 1985, Mr. Moor and Sonenco executed a form of transfer under the Real Property Act purporting to transfer the land to Sonenco. The transfer was not stated to be subject to any prior encumbrances notwithstanding that Westpac's mortgage was undischarged at that time. The consideration was said to be "pursuant to an agreement under s.86 of the Family Law Act...duly registered in the Family Court..." (In fact, the maintenance agreement was not so registered until 11 November 1985.) (9) On 6 December 1985, in the proceedings brought by the Deputy Commissioner, a "Mareva" injunction was granted by the Supreme Court restraining Mr. Moor, up to and including 7 February 1986, from dealing with, inter alia, the land, without the consent of the Deputy Commissioner. On 19 December 1985, in the same proceedings, another order was made restraining the Registrar General, until further order, from registering any dealings with, inter alia, the land, without the consent of the Deputy Commissioner ("the order"). On 28 January 1986, a reference to the order was entered upon the certificate of title. It appears that the order still remains in force. (10) On 27 February 1986, Mr. Moor paid out his indebtedness to Westpac. On the previous day, 26 February 1986, Westpac had executed a discharge of its mortgage ("the discharge of mortgage"), presumably in anticipation of the repayment of the loan by Mr. Moor. On or about 8 May 1986, Westpac forwarded the discharge and the duplicate certificate of title to Mr. Moor's solicitors. The discharge was lodged for registration but, on 3 October 1986, the Registrar General rejected the application for registration of the discharge, presumably by reason of the terms of the order. (11) On 26 May 1986, the Supreme Court gave reasons for its decision in the contested proceedings between the Deputy Commissioner and Mr. Moor. On that day, the Supreme Court directed the entry of judgment for the Deputy Commissioner in the sum of $618,089.92 ("the judgment debt"). (12) Shortly thereafter, a bankruptcy notice addressed to Mr. Moor was issued at the request of the Deputy Commissioner, requiring payment of the judgment debt. Mr. Moor did not comply with the requirement of the bankruptcy notice and, on 17 September 1986, he thereby committed an act of bankruptcy. The Deputy Commissioner then petitioned for a sequestration order in respect of Mr. Moor's estate and, on 19 May 1987, a sequestration order was made and Mr. Silvia was appointed trustee of Mr. Moor's estate. (13) On 17 August 1987, Mr. Silvia lodged a caveat in respect of any dealings with the land, claiming an estate or interest in the land as the trustee of the bankrupt estate of Mr. Moor ("the caveat").
3. In July 1988, Sonenco filed an application in this Court for an order that Mr. Silvia withdraw the caveat. In August 1988, Mr. Silvia filed a cross application for the following orders: (i) an order declaring that the maintenance agreement was void as against Mr. Silvia; (ii) an order declaring that the land was part of the bankrupt estate of Mr. Moor and divisible among his creditors; and (iii) an order vesting the land in Mr. Silvia as the trustee of the bankrupt estate of Mr. Moor.
4. In November 1988, the primary judge gave directions for the hearing of the matter. He ordered that the following questions be determined as preliminary questions: (a) Was the maintenance agreement a "maintenance agreement" for the purposes of s.123(6) of the Bankruptcy Act 1966? (b) If so, was Mr. Silvia entitled, as at 24 October 1985, "to avoid the agreement for fraud"?
(By s.123 of the Bankruptcy Act, certain transactions are protected against "relation back". By s.123(6), in its form at the material time, it was provided that nothing in the Bankruptcy Act invalidated, inter alia, any disposition of property by a debtor before his bankruptcy if the disposition was "executed, made or incurred" by the debtor "under or in pursuance of", inter alia, a "maintenance agreement". A "maintenance agreement" was defined, in s.5(1), to mean a "maintenance agreement, within the meaning of the Family Law Act 1975, that has been, inter alia, registered in a court in Australia". The expression "maintenance agreement" is defined in s.4(1) of the Family Law Act to mean an agreement in writing made between the parties to a marriage, being an agreement that makes provision with respect to financial matters, whether or not there are other parties to the agreement and whether or not it also makes provision with respect to other matters, and includes such an agreement that varies an earlier maintenance agreement. Section 87, which deals with maintenance agreements entered into in substitution for rights under the Family Law Act, is not relevant here. Maintenance agreements are, relevantly, for our purposes, dealt with in s.86 which provides that a maintenance agreement other than an agreement to which s.87 applies may be registered in any court having jurisdiction under this Act (s.86(1)). Where a maintenance agreement is so registered in a court, the court may, in relation to the agreement, exercise any of the powers conferred on the court under s.83 as if the agreement were an order of the court (s.86(2)). The court in which a maintenance agreement is registered may set aside the agreement if, and only if, the court is satisfied that the concurrence of a party was obtained by fraud or undue influence or that the parties desire the agreement to be set aside (s.86(3)). By s.83 of the Family Law Act, the discharge, suspension and modification of maintenance orders by courts exercising jurisdiction by virtue of the Family Law Act is dealt with. Section 88 is important for our purposes. It provides that a maintenance agreement that has been registered, or is deemed to have been registered, in a court, may be enforced as if it were an order of that court (s.88(1)). By s.84(1A) it is provided that where (a) a provision of a maintenance agreement that has been registered under s.86 requires a person to execute a deed or instrument; and (b) that person has refused or neglected to comply with that provision of the maintenance agreement or, for any other reason, the court thinks it necessary, the court may appoint an officer of the court or other person to execute the deed or instrument in the name of the person required by that provision of the maintenance agreement to execute the deed or instrument and to do all acts and things necessary to give validity and operation to the deed or instrument.)
5. The primary judge dismissed the application and made the orders on the cross application as follows:
"1. The application is dismissed.
2. The cross application is dismissed but in lieu
thereof the Court declares that:
(a) the property known as 59 Georges Road,
Leppington, NSW has not been transferred
under the deed entered into on 24 October
1985
(b) the memorandum of transfer pursuant to that
deed was not effective to divest the
bankrupt of the property
(c) The property is, subject to the Bankruptcy
Act, available for distribution amongst the
creditors of the bankrupt estate..."
6. In his reasons for judgment, although the primary judge did refer to the two preliminary questions mentioned above, yet, as the orders he made indicated, he proceeded to deal with both the application and the cross application in a final way. His reasons for dismissing the application were, in essence, as follows:
(1) The maintenance agreement was "a valid maintenance agreement
and the transfer of the property was not affected by the
fact that the agreement had not been registered (with the
Family Court) at the time of executing the transfer."
(2) On the other hand, "in the light of the operation of the
trust instrument (constituting the Moor Family Trust) and
the subsequent transfer, (the maintenance agreement)
amounted to a fraudulent attempt to defeat creditors."
(3) The "intent" of s.123(6) of the Bankruptcy Act, as in force
at the relevant date, was "to protect the final or binding
act in relation to each of the transactions (specified)".
Title, in the present case, was under the Real Property Act,
and, since the transfer was not registered, "the question is
whether it (sc. the disposition of property) has...been
executed within the meaning of s.123(6)". Applying, by way
of analogy, the reasoning in Cope v. Keene (1968) 118 CLR
l, the "intention of the (maintenance agreement) was to
transfer the (land), not to deliver a completed memorandum
of transfer". The "transfer could not be achieved other
than by registration". When s.123(6) "talks of the
'execution' of a transfer, it is not talking about the
completion of a document which will one day operate as a
transfer. It is speaking of the effective legal transfer";
it is "not documents which are protected...from avoidance".
The relation back scheme is "concerned with actual binding
transactions creating rights and obligations". There would
be "no point in protecting documents which do not by
themselves create rights and obligations". The transfer
here is "in this category".
7. By its notice of appeal, Sonenco appealed from that part of the judgment of the primary judge which held that the transfer of the land was of no legal effect. In particular, Sonenco challenged the judge's conclusion that the transfer had not been "executed" within the meaning of s.123(6) of the Bankruptcy Act for the reason that it had not been registered under the Real Property Act.
8. At the commencement of the hearing of the argument on the appeal, senior counsel for Sonenco submitted that, although the primary judge had earlier framed the two preliminary questions already discussed, in the events which happened, his Honour had actually dealt with the application and cross-application on a final basis. In the result, it was submitted on behalf of Sonenco, an appeal lay as of right because the judgment appealed from was final and not interlocutory. Senior counsel for Mr. Silvia did not suggest that leave to appeal was necessary. In my opinion, the judge's decision was final, both in form and in substance, so that Sonenco has the statutory right to appeal conferred by s.24(1)(a) of the Federal Court of Australia Act 1976 (cf. s.24(1A)).
9. Senior counsel for Sonenco then sought leave to tender further evidence explaining some of the background to the transactions the subject of these proceedings. Senior counsel for Mr. Silvia did not oppose this course and also sought leave to adduce further evidence, without any opposition from Sonenco. Affidavits sworn by Peta Bollinger and Robert Neill Brook were then read, on behalf of Sonenco and Mr. Silvia respectively, without objection.
10. Sonenco advanced the following contentions: (1) The first preliminary question was resolved by the primary judge in favour of Sonenco. (2) The second issue was framed on the assumption that the agreement was activated by fraud, either of the Commissioner of Taxation, or of creditors generally proving in the bankruptcy, or of the Family Court (in the sense of an abuse of that Court's processes). But no actual finding of fraud was then appropriate: such an issue remained for determination by the Bankruptcy Court, depending upon the resolution of the preliminary issues. Yet, his Honour made such a finding. (3) Whether the Family Court could set aside the registration (under s.86 of Family Law Act) of the maintenance agreement upon the basis of the abuse of its processes, or under its inherent power, is an open question. Whether there was a fraud committed upon the Commissioner or the creditors, or an abuse of process, would not be conclusive upon an issue as to the retention of the registration. It would not be open to the Bankruptcy Court to treat the maintenance agreement as void, or to set it aside on any such grounds, in the light of s.123(6) of the Bankruptcy Act as it stood and operated at the material time. (4) His Honour should therefore have also answered the second preliminary question in the affirmative. (5) However, his Honour purported to resolve the entirety of the proceedings by declaring, in effect, that the subject property had not been effectively transferred to Sonenco by reason of the "analogous" application of the principles explained in Cope v. Keene. Leaving aside the appropriateness of that course, there was insufficient evidence before the Court to deal with that property question: hence the parties' need to tender affidavit evidence to the Full Court. (6) Any application of the principles in Cope v. Keene to the present case requires not only a consideration of the earlier decisions of the High Court on the point (see the discussion by Meagher, Gummow and Lehane, Equity - Doctrines and Remedies, 2nd ed. at pp 160-168). There also falls for consideration the implications of s.88(1) of the Family Law Act, the operation of which was discussed by the High Court (albeit in relation to its impact upon s.87) in Perlman v. Perlman [1984] HCA 4; (1984) 155 CLR 474, where it was decided that s.88(1) gives to the person having the benefit of the agreement procedures for its enforcement. (7) If, upon the true construction of s.88(1), Mr. Moor's covenant, in cl. 3 of the maintenance agreement, is enforceable by curial process, for instance, by invoking s.84(1A), it follows that: (i) the equitable doctrine that assistance will not be given to a volunteer, does not apply; (ii) the circumstance that the injunction restraining the Registrar General from registering dealings had apparently not been dissolved would not be fatal to the enforceability of the maintenance agreement at the instance of Mr. Moor (or Mrs. Moor). (8) In any event, the existence of the injunction restraining the Registrar General at the time of delivery of the Certificate of Title and the discharge of mortgage did not operate to exclude the application of the principle that "equity does not favour capricious results" (see Meagher, Gummow and Lehane, Equity - Doctrines and Remedies at pp 167-8), since it would have been open to Mr. Moor to have applied for the dissolution of the injunction.
11. The first issue for resolution is whether Mr. Silvia's caveat ought to have been removed. It will be recalled that, in his caveat, Mr. Silvia claimed an estate or interest in the land as the trustee of the bankrupt estate of Mr. Moor. In order to understand his claim, reference should be made to the legislative scheme which governs the availability of property of the bankrupt for division among his creditors. It is now common ground that s.123(6) does not bear upon the present question.
12. The effect of bankruptcy on the property of the bankrupt is dealt with by Division 4 of Part IV of the Bankruptcy Act. So far as presently material, s.58 provides:
"58.(1) Subject to this Act, where a debtor becomes
a bankrupt -
(a) the property of the bankrupt...vests forthwith in
the Official Trustee or...a registered trustee...
(b) ...
(2) Where a law of...a State requires the
transmission of property to be registered and enables
the trustee of the estate of the bankrupt to be
registered as the owner of any such property that is
part of the property of the bankrupt, that property,
notwithstanding that it vests in equity in the trustee,
by virtue of this section, does not so vest at law
until the requirements of that law have been complied
with."
13. The "property of the bankrupt" is relevantly defined, in s.5(1) of the Bankruptcy Act, to mean the "property divisible among the bankrupt's creditors." The property available for payment of debts is dealt with by Division 3 of Part VI of the Bankruptcy Act. By s.116(1)(a), the property "divisible amongst the creditors of the bankrupt" includes, inter alia, "all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy". By s.116(2), it is provided that s.116(1) does not extend to, inter alia, "property held by the bankrupt in trust for another person" (s.116(2)(a)).
14. These provisions should be read against the background of the following established principles: first, that the trustee in bankruptcy takes the property of the bankrupt subject to "equities"; and, secondly, that the trustee's title to that property is no better than the bankrupt's (see McDonald, Henry and Meek, Australian Bankruptcy Law and Practice, 5th ed at p 269; Halsbury's Laws of England, 4th ed Vol 3 at pp 328-9); Williams and Muir Hunter The Law and Practice in Bankruptcy, 19th ed at pp 248-9). In In re Clark. Ex parte Beardmore (1894) 2 QB 393, Davey L.J. said, (at p 410):
"The broad and general principle is, that the trustee in
a bankruptcy takes only the property of the bankrupt,
and takes it subject to all the liabilities and
equities which affect it in the bankrupt's hands..."
15. The settled rule that equitable interests of third parties stand outside the bankruptcy was stated by Madden C.J. in Whyte v. Williams (1903) 29 VLR 69 at p 81 as follows:
"If (a third party) had an equitable interest, the law
would protect it without an injunction. The property
would still pass to the official assignee, because he
is the person who takes all the insolvent's property;
but it would be clogged with all the equitable
conditions which attach to it."
16. In Ex parte Holthausen; In re Scheibler (1874) 9 ChApp 722, Sir W.M. James L.J. said (at p 726):
"...with certain exceptions, the trustee in bankruptcy
is bound by all the equities which affect a bankrupt or
a liquidating debtor; that is to say, if a bankrupt or
a liquidating debtor, under circumstances which are not
impeachable under any particular provision connected
with his bankruptcy or insolvency, enters into a
contract with respect to his real estate for a valuable
consideration, that contract binds his trustee in
bankruptcy as much as it binds himself."
17. The reason for the rule was explained by Cozens-Hardy M.R. in In re Hart. Ex parte Green (1912) 3 KB 6 at p 11:
"The Court of Bankruptcy has always been regarded as a
Court of Equity. The Courts of Equity have for
centuries refused to grant relief against a purchaser
for value without notice in whom or in a trustee for
whom a legal title is vested."
See also Mitford v. Mitford [1803] EngR 676; (1803) 32 ER 534 per Sir W. Grant M.R. at p 539; National Provincial Bank Ltd. v. Ainsworth [1965] UKHL 1; (1965) AC 1175 per Lord Wilberforce at pp 1256-8.
18. Hart's Case was considered in Price v. Parsons [1936] HCA 5; (1936) 54 CLR 332. Rich, Dixon and McTiernan JJ. said (at p 352):
"If, after the date when the bankruptcy commenced by
relation back, the appellant had transferred the goods
for value, the purchaser would have obtained, as
against the trustee, an indefeasible title..."
19. It has been held that the principle applies so as to place outside the bankruptcy monies advanced to the bankrupt for a specific purpose, that is, a "Quistclose" trust (see Re Veli; Ex parte AE Developments Pty. Ltd v, Scott (1988) 18 FCR 204 per Ryan J. at pp 208-9; see also Re Jones; Ex parte Mayne (1953) 16 ABC 169 at p 174). On the other hand, it appears that there is an exception to the general rule "when a pool of mixed funds becomes subject to tracing principles, even though at an earlier stage they may have been held upon constructive trust" (per Fisher J. in Official Receiver v. Klau (1987) 74 ALR 67 at p 73).
20. In explaining the general rule (at p 328), Halsbury (at p 329) says that property which the bankrupt before bankruptcy has "affected to sell by a colourable transaction" will be divisible among his creditors on bankruptcy. Reference is made to Re Hirth, Ex parte Trustee (1899) 1 QB 612. This was a case of a fraudulent conveyance which was also an act of bankruptcy and fell within the relation back period. These circumstances may be distinguished for our purposes. It is common ground that at the trial at first instance here, the parties did not seek to present a case on the issue whether the transactions in question amounted to a fraud on creditors (cf. In re Carey. Ex parte Jeffreys (1895) 2 QB 624 at p 626). The parties further accept that it is not appropriate that we now attempt any consideration of that question. It may also be noted that the subject transactions took place outside the relation back period. The question here is whether the material dealings constituted an "equity" which affected the land.
Did the dealings in question create an "equity" which affected the land?
21. It is accepted, on behalf of Sonenco, that no legal title could pass until registration of a transfer under the Real Property Act, so that Sonenco's interest, if any, could be equitable only.
22. It is further accepted, on behalf of Sonenco, that no consideration moved from Mrs. Moor or Sonenco to Mr. Moor for his covenant to transfer the land to Sonenco. No consideration was expressed, nor is it possible to imply any consideration from the surrounding circumstances (cf. Re Hyams; Official Receiver v. Hyams (1970) 19 FLR 232 at pp 255-6). In short, it is accepted, on behalf of Sonenco, that it was a volunteer.
23. The present question is, of course, one of proprietary right, if anything. It is nothing to the point here that a voluntary promise under seal may give rise to a common law claim for damages. No title could pass to Sonenco at law until registration of a transfer. But did an equitable title pass, or, to put the matter more broadly, was an "equity" affecting the land created, in the events which happened?
24. The relevant events which had happened, by the time of the making of the sequestration order, may be summarised as follows: (1) Pursuant to his covenant with Mrs. Moor and Sonenco, Mr. Moor had executed a transfer of the land to Sonenco, and handed over the transfer and the duplicate certificate of title to the firm of solicitors acting for both Mr. Moor and Sonenco, which firm also held a discharge of mortgage executed by Westpac. (2) There was registered on the title: (i) Westpac's discharge of mortgage; (ii) Mr. Raphael's caveat; (iii) the Supreme Court injunction.
25. Even if it be assumed, for the sake of argument, first, that it were possible to register Westpac's mortgage and, secondly, that Mr. Raphael would withdraw his caveat, at the date of bankruptcy the "Mareva" injunction obtained by the Deputy Commissioner of Taxation remained an insuperable obstacle to registration of any transfer. There can be no reason to suppose, as at the date of the making of the sequestration order, that the Deputy Commissioner would have then consented to the registration of the dealing in favour of Sonenco or that the injunction would have then been dissolved, or varied to permit the dealing to be registered. On the contrary, it may be expected that the Deputy Commissioner would continue to press for the continuation of the existing restraint (see Town and Country Building Society v. Daisystar Ltd., English Court of Appeal, The Times Law Report, l6 October 1989).
26. It may be that it was open to Mrs. Moor to invoke the provisions of s.88, and, if necessary, s.84(1A) of the Family Law Act by commencing proceedings for the enforcement of the maintenance agreement (see the definition of "matrimonial cause" in s.4(1) of the Family Law Act, para.(ea); see Perlman v. Perlman supra, per Mason J. at pp 491-2 (a passage cited by Ryan and Gummow JJ.); cf. Re Bedford; Ex parte Official Receiver (1968) 12 FLR 309 at p 311; discussed in Note (1970) 44 ALJ 82; Harris v. Walker (1968) 14 FLR 167 at pp l73-176; Liveris v. Commissioner of Taxes (1989)13 Fam LR 65 at pp 7O-1). But it does not follow that, at the date of bankruptcy, Sonenco possessed any relevant "equity" affecting the land. As Ryan and Gummow JJ. have pointed out in their reasons, which I have had the advantage of reading, no order under s.88, or s.84(1A) of the Family Law Act had been made or sought. Even if such an application had been made, it is difficult to see how the Family Court could then have been asked to order Mr. Moor to take all the steps that were necessary to achieve registration of the transfer to Sonenco.
27. For one thing, Mr. Raphael's caveat would have to be withdrawn. For another, and more important, the "Mareva" injunction would have to be lifted. But this was not within the power of Mr. Moor. Moreover, the Family Court could not be expected to order registration of a transfer in breach of the Supreme Court order, especially when it was known that the order was followed by the entry of a judgment in favour of the creditor in the sum of $618,089.92. In practical terms, the only way in which the "Mareva" injunction would have been lifted, so as to permit registration of the transfer to Sonenco, would have been by Mr. Moor's paying, securing or otherwise compounding the judgment debt. Given the size of that debt and Mr. Moor's insolvency, this was not a feasible proposition.
28. It must follow, in my view, that Sonenco had no real prospect of obtaining relief under the Family Law Act which would have achieved the registration of its transfer. It must further follow, in my opinion, that Sonenco has failed to establish any relevant "equity". Rather, it is a case of a voluntary covenant to transfer the land which, in accordance with orthodox doctrine, cannot be perfected in equity (see, e.g., J.D. Heydon, W.M.C. Gummow and R.P. Austin, Cases and Materials on Equity and Trusts, 3rd. ed at p 136), nor, as I think, by resort to the provisions of the Family Law Act. It seems to me that the "Mareva" injunction was intended to prevent the effective transfer of any proprietary rights in the land by Mr. Moor except with the leave of the Supreme Court or the consent of the Deputy Commissioner, neither of which, it may be taken, would have been forthcoming.
29. In all the circumstances, it is not possible to hold that, at the date of bankruptcy, Senenco possessed an "equity" which affected the land.
30. In the result, in my view, the appeal must fail, although for reasons different to those which found favour with the primary judge.
31. It will be recalled that, in dealing with the cross application, the primary judge made certain declaratory orders, but did so after dismissing the cross application. In order to remove any formal problems which might arise as to jurisdiction, I propose orders, including the dismissal of the appeal, as follows:
1. Vary the orders made on 10 March 1989 on the
cross application by (i) omitting the words "The cross
application is dismissed but in lieu thereof the Court
declares"; and (ii) substituting the words: "On the
cross application, declare".
2. Appeal otherwise dismissed, with costs.
On 19 May 1987, a sequestration order was made by the Federal Court of Australia against the estate of Stephen Moor ("the bankrupt"). The respondent is Trustee of the estate. On 5 February 1985, the bankrupt became registered proprietor, pursuant to the provisions of the Real Property Act 1900 (NSW) ("the Real Property Act"), of the land comprised in Certificate of Title Vol. 11309 Folio 236 ("the Property"). The matrimonial home of the bankrupt and his wife is erected upon the Property. They were married in August 1980 and at all material times have lived together as husband and wife.
2. On 17 August 1987, there was registered, as instrument No. W994052, a Caveat pursuant to s. 72 of the Real Property Act forbidding the recording in the Register maintained under that Act of any dealing affecting the Property. The respondent was the caveator and he claimed an estate or interest "as the trustee of the bankrupt estate of Stephen Moor pursuant to a sequestration order No. P 670 of 1987 made by the Federal Court of Australia on 19th May, 1987".
3. By Application to this Court filed 18 July 1988, the appellant sought an order that the respondent withdraw the caveat. The appellant is a company of which the bankrupt's wife is a director; the bankrupt was a director before his bankruptcy. The appellant is trustee of a trust styled "the Moor Family Trust" which was established by deed made 21 January 1985. The beneficiaries referred to therein are identified as the bankrupt, his wife, and any children born of their marriage.
4. On 24 October 1985, the bankrupt and the appellant executed a form of transfer pursuant to the provisions of the Real Property Act. The subject of the transfer was the whole of the land comprising the Property, and the transfer was not stated to be subject to any prior encumbrances. The consideration stated therein was said to be "pursuant to an agreement under S. 86 of the Family Law Act of Australia duly registered in the Family Court of Australia at Parramatta". In fact, as will appear, the agreement in question ("the Maintenance Agreement") was not so registered until 12 November 1985.
5. In substance, in these proceedings, the appellant claims a right to registration as registered proprietor of the Property notwithstanding the supervening bankruptcy of the registered proprietor, and seeks to have the respondent's caveat removed, by this means putting aside what is presently a barrier to the attainment of registration. As we have said, the bankrupt was made a bankrupt upon a sequestration order of this Court on 19 May 1987, that is to say after the execution of the transfer and the registration of the Maintenance Agreement under s. 86 of the Family Law Act 1975 ("the Family Law Act"). Sub-sections 58 (1) and (2) of Bankruptcy Act 1966 ("the Bankruptcy Act") provide:
"58. (1) Subject to this Act, where a debtor
becomes a bankrupt -
(a) the property of the bankrupt,
not being after - acquired
property, vests forthwith in
the Official Trustee or, if,
at the time when the debtor
becomes a bankrupt, a
registered trustee becomes the
trustee of the estate of the
bankrupt by virtue of section
156A, in that registered
trustee;
. . .
(2) Where a law of the Commonwealth or of
a State or Territory of the Commonwealth
requires the transmission of property
to be registered and enables the trustee
trustee of the estate of a bankrupt to
be registered as the owner of
any such property that is part of the
property of the bankrupt, that
property, notwithstanding that it
vests in equity in the trustee, by
virtue of this section, does not so
vest until the requirements of that
law have been complied with."
Sub-section 116 (1) relevantly provides that subject to the Bankruptcy Act, the property divisible amongst the creditors of the bankrupt includes all property that belonged to or was vested in the bankrupt at the commencement of the bankruptcy; however, the property so divisible does not extend to, inter alia, property held by the bankrupt in trust for another person (sub-s. 116 (2) (a)).
6. The term "property" is defined in sub-s. 5 (1) as follows:
"'Property' means real or personal
property of every description, whether
situate in Australia or elsewhere, and
includes any estate, interest or profit,
whether present or future, vested or
contingent, arising out of or incident to
any such real or personal property."
7. It has often been said that the trustee in bankruptcy takes the property of the bankrupt subject to "equities" or "equitable interests". A number of the authorities are discussed by Beaumont J. in his reasons for judgment. In those authorities, it is clear enough (putting to one side questions of set-off) that the terms "equities" and "equitable interests" are used to identify equitable rights with a proprietary rather than a purely personal character. That would be consistent with the scheme of the present Australian legislation.
8. The "tracing remedy" may present particular problems; it is unnecessary to deal with them here. But we would reserve our position as to what was said on that subject in Re Goode (1974) 24 FLR 61 at 80-81, and in Official Receiver v Klau (1987) 74 ALR 67 at 73.
9. Plainly enough, on 19 May 1987, the whole of the interest of the bankrupt in the Property vested in equity in the respondent, by force of the Bankruptcy Act. The respondent's caveat No. W994052 supports and protects that equitable interest. The essential question, therefore, is whether the appellant can make out the existence in its favour of any rights of sufficient substance to entitle it to an order for the removal of that caveat.
10. In our view, the appellant has not made out such a case and the result is that the appeal fails. In order to understand the submissions made and our decision concerning them, it is necessary first to detail further facts.
11. On 5 February 1985, instrument No. V514469 was registered against the title to the Property. It was a mortgage of the property to Westpac Banking Corporation, which secured indebtedness of the bankrupt. A week later, on 12 February 1985, the Deputy Commissioner of Taxation commenced proceedings in the Supreme Court of New South Wales against the bankrupt. The bankrupt defended these proceedings. On 8 August 1985, a caveat by the bankrupt's solicitor was registered against the title to the Property. The evidence does not disclose the nature of the interest claimed by the caveator.
12. On 24 October 1985, the bankrupt, his wife, and the appellant entered into the Maintenance Agreement, with a view to attracting the provisions of s. 86 of the Family Law Act. On that day, the bankrupt and the appellant also executed the form of transfer of the Property, to which we have already referred. It was not in registrable form because it did not identify the encumbrances subject to which the transferee would take title to the Property: D.K.L.R. Holding Co. (No. 2) Pty. Ltd. v Commissioner of Stamp Duties (NSW) [1982] HCA 14; (1982) 149 CLR 431 at 447-448, per Mason J. The expression "maintenance agreement" is defined in sub-s. 4 (1) of the Family Law Act as follows:
"'Maintenance agreement' means an
agreement in writing made, whether before
or after the commencement of this Act and
whether within or outside Australia,
between the parties to a marriage, being
an agreement that makes provision with
respect to financial matters, whether or
not there are other parties to the
agreement and whether or not it also
makes provision with respect to other
matters, and includes such an agreement
that varies an earlier maintenance agreement."
Section 87 deals with maintenance agreements entered into in substitution for rights under the Family Law Act. That provision is not relevant to the circumstances of this case. Maintenance agreements are relevantly dealt with in s. 86. This includes the following:
"86. (1) A maintenance agreement other than an
agreement to which section 87 applies
may be registered, as prescribed by
the Rules of Court, in any court
having jurisdiction under this Act.
(2) Where a maintenance agreement is so
registered in a court, the court may,
in relation to the agreement,
exercise any of the powers conferred
on the court under section 83 as if
the agreement were an order of the court.
(3) The court in which a maintenance
agreement is registered under
sub-section (1) may set aside the
agreement if, and only if, the court
is satisfied that the concurrence of
a party was obtained by fraud or
undue influence or that the parties
desire the agreement to be set aside.
(3A) . . .
(4) . . ."
Section 83 of the Family Law Act deals with the discharge, suspension and modification of maintenance orders by courts exercising jurisdiction by virtue of the Family Law Act. The argument on the appeal focused particular attention upon the provisions of s. 88. This provides:
"88. (1) A maintenance agreement that has been
registered, or is deemed to have been
registered, in a court may be
enforced as if it were an order of
that court.
(2) Sub-section (1) does not apply in
relation to maintenance agreements
that have been approved under section 87."
As we have indicated, s. 87 had no application to the facts of this case.
13. The Maintenance Agreement executed on 24 October 1985 by the bankrupt, by his wife and by the appellant was in the form of a deed. The parties to the deed were described therein respectively as "the Husband", "the Wife" and "the Trustee". On the appeal, it was undisputed that this instrument answered the statutory definition of "maintenance agreement". The deed recited that there had been negotiations between the spouses in relation to their property and other financial affairs, that these negotiations had resulted in an agreement between them in relation to those matters, that the husband recognised and wished to give substance and effect to his moral and legal obligations to make adequate and proper provision for the accommodation, welfare and maintenance of his wife, and that he desired to preserve and protect his marriage. The deed also recited that the wife was an object of the Moor Family Trust of which the appellant was the trustee. Clauses 2, 3, 4 and 5 of the deed should be set out in full:
"2. The parties shall make execute and do all
such instruments acts and things as may be
necessary to give effect to the terms of
these Presents with due diligence and
expedition and without costs or expense to
the party seeking any such further assurance.
3. The Husband hereby covenants to transfer to
the Trustee forthwith all his right title
and interest in the matrimonial home.
4. The Husband and the Wife agree that the Deed
herein contained is a 'Maintenance
Agreement' intended to be reigstered (sic)
in the Family Court of Australia at
Parramatta pursuant to the provisions of
Section 86 of the Family Law Act, 1975, as
amended, and the Husband and the Wife
mutually covenant to join in seeking the
registration of this Agreement in the Family
Court of Australia at Parramatta.
5. The Trustee covenants that, subject to the
terms of the Trust, the Trust Fund therein
referred to shall be devoted and applied
exclusively to the benefit of the wife and
members of the family of the Husband and Wife."
The expression "the matrimonial home" is defined so as to identify the house standing upon the land contained in the certificate of title to the Property. The Maintenance Agreement was registered at the Parramatta Registry of the Family Court of Australia on 11 November 1985.
14. On 6 December 1985, an order was made in the Common Law Division of the Supreme Court of New South Wales in the proceedings between the Deputy Commissioner of Taxation and the bankrupt. The Court ordered as follows:
"Upon the plaintiff giving the usual
undertaking as to damages, the defendant,
whether by himself, his servants, agents
or otherwise howsoever, be restrained up
to and including 7 February 1986 from
removing from the jurisdiction or from
disposing of or otherwise dealing with
(including in this restraint mortgaging
or creating any manner of charge over)
any of his assets (including any interest
held by him jointly or in common with any
other person) within the jurisdiction and
without limiting the generality of the
foregoing that the defendant be so
restrained in particular in respect of
his right title and/or interest in the
parcels of land described in the schedule
hereto save that the defendant may enter
into or complete any contract or disposition
with respect to the said land provided that
the plaintiff consents thereto in writing
upon such terms and conditions as are
acceptable to the plaintiff."
The schedule in question identified three parcels of land, one of which is the Property upon which is erected the matrimonial home with which the present proceedings are concerned. The order of 6 December 1985 was entered on 20 December 1985. In the meantime, on 19 December 1985, another order was made in the same proceedings whereby the plaintiff was given leave to join the Registrar General as second defendant. An injunction was granted against the Registrar General in the following terms:
"(T)he Registrar General, by himself, his
employees, agents or Attorneys or
otherwise howsoever be restrained until
further order from registering any
dealings affecting the parcels of land
referred to in the schedule hereto
provided that the Registrar General may
register any dealing to which the
plaintiff has consented in writing."
This order apparently remains in force. The Supreme Court also directed that the Registrar General be notified of the orders that were made. These orders also were entered on 20 December 1985. The schedule in the second set of orders referred to the same parcels of land as did the schedule to the first orders. On 28 January 1986, there was entered upon the certificate of title to the property a reference to instrument No. W136064 identified as "Request - Order of Court".
15. The liability to Westpac Banking Corporation upon the mortgage registered against the title to the Property was paid out on 27 February 1986. The discharge of mortgage was dated 26 February 1986. The discharge of mortgage and duplicate certificate of title were returned by Westpac Banking Corporation to the bankrupt's solicitor shortly after 8 May 1986. The Registrar General on 3 October 1986 rejected for registration the discharge of mortgage. Since that time, the duplicate certificate of title and discharge have been held by the bankrupt's solicitors. They are also solicitors for the appellant. The Maintenance Agreement and the transfer executed on 24 October 1985 were returned, duly stamped, by the New South Wales Commissioner of Stamp Duties to the solicitors for the bankrupt on 27 May 1986. On the day before, 26 May 1986, the Supreme Court directed entry of judgment for the Deputy Commissioner of Taxation and against the bankrupt in the sum of $618,089.92. It was this judgment which founded the bankruptcy notice, non-compliance with which constituted the act of bankruptcy relied upon in the petition upon which the sequestration order was made.
16. When the sequestration order was made against the bankrupt on 19 May 1987, there still remained registered against the certificate of title to the Property, (i) the mortgage to Westpac Banking Corporation which had been registered on 5 February 1985; (ii) the caveat by the bankrupt's solicitor which had been registered on 8 August 1985; (iii) the Supreme Court order which had been registered on 21 January 1986.
17. The registration of the Supreme Court order was itself a sufficient bar to registration of the transfer to the appellant so as to deny the existence at the date of the sequestration order of a right in favour of the appellant of the kind described by Dixon J. in Brunker v Perpetual Trustee Co. (Ltd.) [1937] HCA 29; (1937) 57 CLR 555 at 599. In the course of dealing with the position of a transferee before registration under a voluntary transfer of an interest in land registered under the provisions of the Real Property Act, his Honour said that such a person was the owner of neither a legal nor an equitable estate in the subject land; Dixon J. continued:
"But, under the system of the Real
Property Act, a transferee may be in a
position by registering an instrument to
obtain a legal estate, although prior to
registration neither the legal nor any
equitable estate was vested in him. If
that system allows a volunteer to acquire
an indefeasible right to the registration
of an instrument in his favour, then,
although it would remain true that before
registration he had neither a legal nor
an equitable estate in the land, yet he
would be entitled to a right of a new
description arising under the statute,
and by its exercise he could vest the
legal estate in himself.
The true question in the present case
appears to me to be whether the appellant
acquired a right of this nature which the
deceased or his executor could not
intercept or defeat. There is no a
priori reason why statutory provisions
making title depend upon registration
should not confer upon a person in whose
favour a registrable instrument has been
made, a right to procure its registration,
notwithstanding that it is voluntary, and
no reason why it should not leave the
transferor powerless to countermand his
instrument. Such a right would not
depend upon the doctrines or remedies of
a court of equity, and, pending actual
registration, the transferee could not be
considered entitled to an equitable
interest any more than to a legal
interest in the land. It might appear
anomalous, but the anomaly would bear no
obstacle to the existence of the right."
18. The principle thus propounded has been subject to considerable criticism, notably by Professor Zines ("Equitable Assignments: When Will Equity Assist a Volunteer?" (1965) 38 ALJ 337 at 340-342) and by Professor Sykes ("The Law of Securities", 4th Ed, pp 311-314). But it remains the law. The most recent judicial discussion appears to be that by Bryson J. in Noonan v Martin (1987) 10 NSWLR 402 at 411-413. Dixon J. had stressed that the donee must obtain property in the piece of paper constituting the transfer because if the property in the transfer remained in the transferor the transferor's power of recalling it must also remain, so that he might refuse to have it presented for registration and could destroy it. Hence, Professor Sykes' comment (supra at 312) that this piece of paper becomes one "carrying immense potentialities" and that whilst the donor could not prevent its registration, if the donee were to lose the document or if it were destroyed he would lose his right to registration.
19. Counsel for the appellant accepted that he could not bring the facts within the application of the principle in Brunker's Case. Therefore, it becomes unnecessary to decide whether, if there had existed in the appellant such a right at the date of the sequestration order, the supervening sequestration would have put an end to further pursuit of that right to registration. Dixon J. expressed the right as one which would prevail against the executor of a deceased donor, but did not deal with the effect of the vesting of an equitable title by force of the bankruptcy law.
20. Counsel for the appellant also accepted that the appellant was to be treated as a volunteer in respect of the covenants in the Maintenance Agreement whereby the bankrupt covenanted to transfer to the appellant all his right, title and interest in the matrimonial home, and the appellant as trustee covenanted that it would devote and apply the matrimonial home, as part of the trust fund, exclusively to the benefit of the bankrupt's wife and members of their family. No doubt the bankrupt's covenants would have been enforceable against him by the appellant in an action at law for damages: Cannon v Hartley (1949) Ch 213. Further, the bankrupt's wife was not a stranger to the deed comprising the Maintenance Agreement, because she was joined in as a party thereto; cf. Cannon v Hartley supra at 223.
21. Nevertheless, in the eye of equity, the covenant by the bankrupt in clause 3 of the Maintenance Agreement to transfer the Property would not be regarded as having been made for value; see Snell's "Principles of Equity", 28th Ed, at pp 127-129. Nor, as counsel for the appellant agreed, would the bare covenant by the bankrupt as settlor to transfer forthwith the Property to the appellant as trustee, be treated in equity as an immediately effective declaration of trust binding the Property in the hands of the bankrupt. Irrespective of a general intention of benefaction, a covenant to settle property upon another as trustee is not to be construed in this way: Milroy v Lord [1862] EngR 951; (1862) 4 DeG F & J 264; 45 ER 1185; Olsson v Dyson [1969] HCA 3; (1969) 120 CLR 365 at 375, per Kitto J.
22. This being a voluntary covenant, equity would not have compelled performance of it by the bankrupt; nor would the rights of the parties be treated on the footing that the covenantor's obligation had been performed: see Pullan v Koe (1913) 1 Ch 9; Brown v Heffer [1967] HCA 40; (1967) 116 CLR 344 at 348-349; Jacobs' "The Law of Trusts in Australia", 5th Ed, 602-611.
The Family Law Act
23. However, counsel for the appellant referred to the impact upon the Maintenance Agreement of the Family Law Act as thereby giving rise before the sequestration order to rights in the appellant in relation to the Property which were of sufficient substance to support the conclusion that whilst the Property vested in the respondent in equity upon the making of the sequestration order, it did so subject to those rights. By this means, the appellant sought to go arpimd the difficulties otherwise placed in the path of reliance upon the doctrine in Brunker's Case or upon the protection given by equity to covenants for value to settle property.
24. The appellant placed some reliance upon the decision of the High Court in Perlman v Perlman [1984] HCA 4; (1984) 155 CLR 474. That case was heard before the coming into force of the amendments to the Family Law Act effected by the Family Law Amendment Act 1983. That statute inserted sub-s. 84 (1A), which is of central importance in the present case. It also should be noted that Perlman v Perlman involved a deed approved by the Family Court of Australia under s. 87 of the Family Law Act, being a deed which operated in substitution for any rights of the parties to the agreement under Part VIII of the Family Law Act. Therefore, under the general law, the agreement would be seen as one where mutually valuable consideration was given and (as counsel for the respondent emphasised to us) there was thus a footing for an application to the Supreme Court of New South Wales for, inter alia, specific performance of certain covenants in the deed. In this respect, the facts in Perlman v Perlman stand in some contrast to those in the present dispute.
25. The issue in Perlman v Perlman was whether the proceedings in the Supreme Court of New South Wales should be struck out on the ground that the proceedings were a "matrimonial cause" within the meaning of the definition in sub-s. 4 (1) of the Family Law Act, thus being a proceeding in respect of which the Supreme Court had no jurisdiction. The High Court held that the proceedings for enforcement of the deed were not a matrimonial cause and that the proceedings in the New South Wales Supreme Court were competent. No one suggests that the application in respect of which this present appeal is brought was a "matrimonial cause". Accordingly, what was decided in Perlman v Perlman is not of immediate significance to the present case.
26. However, the appellant does rely upon, inter alia, s. 88 of the Family Law Act. Although s. 88 was amended by the Family Law Amendment Act 1983, at all material times it has provided in respect of a maintenance agreement, like the present, registered under s. 86 that it may be "enforced as if it were an order" of the court in which it has been registered. In Perlman v Perlman, supra at 491, Mason J. pointed out that s. 88 did not deem the agreement to be an order of the court; rather, it merely enabled the agreement to be enforced as if it were an order of a court. Mason J. also pointed out that the effect of s. 88 was to bring a maintenance agreement registered under s. 86 "within the area of powers of enforcement conferred upon the courts pursuant to s. 106 by the regulations". His Honour continued:
"Garnishee proceedings, seizure of
property and sequestration of the estate
of a party are the remedies currently
made available by the regulations in
relation to the enforcement of
maintenance agreements. It is common
ground that the regulations do not
empower the courts exercising
jurisdiction under the Act to order
specific performance of a maintenance
agreement.
The result is that the proceedings for
the specific performance of the agreement
taken in the Supreme Court do not
constitute a matrimonial cause within s.
4 (1) of the Act. This, in the light of
the present incapacity of the Family
Court to grant the relief sought by the
respondent in the Supreme Court, is a
satisfactory result."
The provisions of the regulations to which his Honour referred are now represented by Order 33 of the Family Law Rules, which commenced 2 January 1985. Further, the new sub-s. 84 (1A) of the Family Law Act goes beyond the previous law and provides:
"84. (1A) Where -
(a) a provision of a maintenance
agreement that has been
registered under section 86 or
approved by a court under
section 87 requires a person
to execute a deed or
instrument; and
(b) that person has refused or
neglected to comply with that
provision of the maintenance
agreement or, for any other
reason, the court thinks it
necessary to exercise the
powers of the court under this
sub-section;
the court may appoint an officer of
the court or other person to execute
the deed or instrument in the name of
the person required by that provision
of the maintenance agreement to
execute the deed or instrument and to
do all acts and things necessary to
give validity and operation to the
deed or instrument."
The expression "court" in the Family Law Act is defined, in relation to any proceedings, as meaning the court exercising jurisdiction in those proceedings by virtue of the Family Law Act; see sub-s. 4 (1), s. 39.
27. Sub-section 84 (1A) is a provision of the description given in R. v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett [1945] HCA 50; (1945) 70 CLR 141 at 155, 165, of a law which both creates new "rights" and invests jurisdiction to adjudicate upon a matter with respect to those rights. Another example of such a law was considered by the Full Court of the Federal Court in Arnotts Ltd. v Trade Practices Commission [1989] FCA 135; (1989) 87 ALR 73 at 80.
28. Counsel for the appellant submitted that at the date of sequestration, there was attached to the bankrupt's covenant in favour of the appellant for a transfer to it of the right, title and interest of the bankrupt in the Property, the right to approach a court exercising jurisdiction under sub-s. 84 (1A) of the Family Law Act for the appointment of an officer of the court or some other person to execute an instrument to comply with that covenant. The covenant in question was that in para. 3 of the Maintenance Agreement. That order might be made, it was submitted, even though a court of equity would not have done so, given the absence of valuable consideration to support the covenant. Therefore, it was submitted, the vesting of equitable title in the respondent upon the making of the sequestration order is to be treated as subject to the exercise or potential exercise of those rights. There were several difficulties in the path of these submissions.
29. For the purposes of this case, it may be conceded, without deciding, that an order might be made under sub-s. 84 (1A) of the Family Law Act in circumstances where in equity proceedings a decree for specific performance or a vesting order would not be made. However, the legal regime established by the inter-relation between s. 86, s. 88 and sub-s. 84 (1A) is one of a special, and limited, character. The court first must be persuaded that it is necessary for it to exercise its powers under sub-s. 84 (1A). The court may think it necessary if the person required to execute a deed or instrument by the maintenance agreement has refused or neglected to comply with the relevant provision of the maintenance agreement. The court may think it necessary to exercise its powers "for any other reason".
30. Upon the case presented in this Court for the appellant, it was never suggested that before the date of the sequestration order the appellant had called upon the bankrupt to comply with the provisions of the Maintenance Agreement and had been met with a neglect or refusal on the part of the bankrupt. No order under sub-s. 84 (1A) had been made or sought before the intervention of the sequestration order. Whether such an order would have been made had there been an application to a court invested with jurisdiction in respect of the matter is a hypothetical question to which in these proceedings one cannot essay any answer.
31. In short, the "rights", to use that rather elusive term, created by the inter-relation of ss. 86, 88 and sub-s. 84 (1A) of the Family Law Act are of an inchoate character before a court is asked to exercise its powers under sub-s. 84 (1A). One cannot sensibly speak of the vesting of property upon a sequestration order as being made subject to these "rights" where, as in the present case, no court has exercised its powers under sub-s. 84 (1A) and, indeed, no court has been asked to do so.
32. It may be noted that in Re Weeks' Caveat (1971) QWN 4, Hoare J. held that the mere possibility that the Court might make an order for the settlement under s. 86 of the Matrimonial Causes Act 1959 upon the wife of the matrimonial home wholly owned by the husband, the wife having instituted proceedings for dissolution of their marriage, did not give her at that stage any estate or interest in the land to support a caveat by her under The Real Property Acts 1861 to 1963 (Qld).
33. Some further analogy is provided by the discussion by Lord Wilberforce of the "deserted wife's equity", in National Provincial Bank Ltd. v Hastings Car Mart Ltd. [1965] UKHL 1; (1965) AC 1175 at 1252-1257. This judgment attracted favourable attention by Mason J. in R. v Toohey; Ex parte Meneling Station Pty. Ltd. [1982] HCA 69; (1982) 158 CLR 327 at 342, as affording guidance as to what was required to characterize as proprietary rights created by or arising under statute. Lord Wilberforce concluded that the so-called equity of the deserted wife was not a right affecting property such that it bound the trustee in bankruptcy of the husband. In the course of discussing the English Court of Appeal decision in Bendall v McWhirter (1952) 2 QB 466, Lord Wilberforce said that no relevant distinction could be drawn between a trustee in bankruptcy on the one hand and purchasers or mortgagees on the other. The question was whether the rights of the wife affected the title to the land; the House of Lords answered that question in the negative.
34. If, before his bankruptcy, a bankrupt has contracted to sell or mortgage his property, the trustee in bankruptcy takes the vendor's property subject to the obligation to fulfil the contract; this is on the footing that the estate in the property vests in the trustee subject to the equitable title of the purchaser to have the estate conveyed to him on payment of the purchase price; see Pearce v Bastable's Trustee in Bankruptcy (1901) 2 Ch 122 at 125, Halsbury's "Laws of England", Vol. 3 (2), "Bankruptcy", 408. Whether or not they be described as the rights of a beneficiary under a trust (as to which see the remarks of Deane J. in Kern Corporation Ltd. v Walter Reid Trading Pty. Ltd. [1987] HCA 20; (1987) 163 CLR 164 at 191-192) the protection given by equity to the rights of a purchaser under a contract for the sale of property of a kind which ordinarily attracts the remedy of specific performance, is so well established that one can treat the purchaser as having rights of a proprietary character; these rights stand outside the estate which vests in the Official Trustee upon the bankruptcy of the vendor. It is "tacitly assumed" that in a court of equity the contract would be enforced specifically; see the authorities cited in Brown v Heffer [1967] HCA 40; (1967) 116 CLR 344 at 349. It follows from what we have said concerning the interrelation between the Maintenance Agreement and the relevant provisions of the Family Law Act that, in our view, the present is by no means a case in this universe of discourse.
35. In any event, as Beaumont J. points out in his reasons for judgment, even if an application had been made under sub-s. 84 (1A) of the Family Law Act, it by no means follows that the relief obtained would have led to the acquisition by Sonenco of a clear title to the Property. The Supreme Court order remained registered against the title to the Property. A most serious question would have arisen as to whether federal law was to be interpreted as investing federal jurisdiction to make orders overreaching the operation of the New South Wales Torrens System legislation by requiring registration of a transfer despite the state of the Register. Further, even if the federal legislation had that effect, a question would have arisen as to whether that power should be exercised in the particular case.
36. Finally, there would have been an issue as to the content of the bankrupt's obligation under clause 3 of the Maintenance Agreement. He did not covenant to transfer to Sonenco a clear title to the Property. The covenant was to transfer "all his right title and interest" thereto, which apparently are qualified words, given the existence at the date of the Maintenance Agreement of the registered mortgage of Westpac Banking Corporation and the caveat by the bankrupt's solicitor; see Norton on Deeds, 2nd Ed, pp 298-305 and cf. Conveyancing Act 1919 (NSW) s. 68, Grant v Dawkins (1973) 3 All ER 897 at 898-900.
37. The respondent's caveat upon the title to the Property should not be removed on the application of the appellant. The caveat protects the interest of the respondent in the Property, being the equitable title arising by virtue of s. 58 of the Bankruptcy Act. The appellant has not established any rights which encroach upon that equitable title.
38. That being so, there is no call for the application of sub-s. 123 (6) of the Bankruptcy Act. As this stood before the amendment made by the Bankruptcy Amendment Act 1987, this provided that:
"123. (6) Nothing in this Act invalidates, in
any case where a debtor becomes a
bankrupt, a conveyance, transfer,
charge, disposition, assignment,
payment or obligation executed, made
or incurred by the debtor, before the
day on which the debtor became a bankrupt,
under or in pursuance of a maintenance
agreement or maintenance order."
Sub-section 45 (2) of the 1987 statute provides that the amendment of sub-s. 123 (6) of the Bankruptcy Act so as to render it subject to s. 121 applies only in relation to conveyances and other dealings made or incurred by the debtor after the commencement of the amendment on 13 January 1988.
39. In order to make out his title, the respondent does not have to rely upon any provision of the Bankruptcy Act as invalidating any conveyance, transfer, charge, disposition, assignment, payment or obligation executed, made or incurred by the bankrupt before the day on which his estate was sequestrated, under or in pursuance of a maintenance agreement. Sub-section 123 (6) would have assumed a central importance in the case if, contrary to the fact, the equitable title of the respondent to the Property was subject to, for example, an equitable interest vested in the appellant pursuant to the Maintenance Agreement, and if, for the respondent to vindicate his title, it was necessary for him to invalidate what had occurred by reliance upon provisions of the Bankruptcy Act, such as ss. 121, 122 and 123.
40. Before the learned primary Judge, the case was principally concerned with sub-s. 123 (6). It follows from what we have said that it is by a different path that we have reached the conclusion that the application for removal of the caveat should fail. The course of the proceedings at first instance is described by Beaumont J. We agree with what his Honour has said and that the orders disposing of the appeal should be as set out in his Honour's judgment.
# Re Sonenco (No 77) Pty Limited
Brian Raymond Silvia \[1989\] FCA 462; 89 ALR 437 24 FCR 105
(1968) 118 CLR 1
(1984) 155 CLR 474
(1936) 54 CLR 332
(1988) 18 FCR 204
(1987) 74 ALR 67
(1970) 19 FLR 232
(1968) 12 FLR 309
(1989) 13 Fam LR 65
(1974) 24 FLR 61
(1982) 149 CLR 431
(1937) 57 CLR 555
(1987) 10 NSWLR 402
(1969) 120 CLR 365
(1967) 116 CLR 344
(1945) 70 CLR 141
(1989) 87 ALR 73
(1982) 158 CLR 327
(1987) 163 CLR 164
(1968) 14 FLR 167