Saba v Plumb

Solicitors: Fraser Clancy Lawyers (Appellant) Lexes Lawyers (Second Respondent) File Number(s): CA 2017/173625 Decision under appeal Court or tribunal: Supreme Court Jurisdiction: Equity - Real Property List Citation: [2017] NSWSC 622 Date of Decision: 19 May 2017 Before: Black J File Number(s): SC 2016/110233

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

HEADNOTE [This headnote is not to be read as part of the judgment] In 2005 the respondents, Mr Noel Plumb and Ms Jeanette Minifie, purchased a property in which they subsequently lived in a de facto relationship. They held the title to the property as tenants in common. In 2011 there was a confrontation between Mr Plumb and Mr Anthony Saba, the appellant and a neighbour of the respondents. As a result, the police sought an apprehended violence order against Mr Plumb on behalf of Mr Saba and Mr Plumb sought an AVO against Mr Saba (the "Plumb AVO proceedings"). Relevantly, the latter proceedings continued into September 2012. In June 2012, after the breakdown of the respondents' relationship, Mr Plumb transferred his interest in the property to Ms Minifie pursuant to a property settlement effected by Consent Orders of the Family Court of Australia. In September 2012 the Plumb AVO proceedings were dismissed, with indemnity costs awarded against Mr Plumb. Costs were assessed in 2015 and judgment was entered in favour of Mr Saba against Mr Plumb. Due to his inability to enforce the judgment, Mr Saba commenced proceedings in the Equity Division, alleging that Mr Plumb's disposition to Ms Minifie of his interest in the property was voidable under s 37A of the Conveyancing Act 1919 (NSW). After a six day hearing before Black J, his Honour dismissed Mr Saba's claim and a defensive cross-claim filed by Ms Minifie. On appeal, the appellant argued that: (i) The primary judge's conclusion that Mr Plumb did not have the intention to which s 37A of the Conveyancing Act referred was implausible and inconsistent with "all the objective, incontrovertible evidence"; and, (ii) Contrary to the primary judge's finding, Ms Minifie had not established pursuant to s 37A(3) of the Conveyancing Act that she was a purchaser of Mr Plumb's interest in the property and that she did not have notice of his alleged intent. Held, dismissing the appeal: In relation to (i): (1) For the purposes of s 37A of the Conveyancing Act "it [is] 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": [65]. Marcolongo v Chen (2011) 242 CLR 546; [2011] HCA 3 followed. (2) Section 37A is enlivened by an intent to defraud future creditors and an intent to defraud any present or future creditor will suffice. As a result, the relevant issue was whether Mr Plumb intended to defraud Mr Saba, that being the way in which Mr Saba framed his case: [69]. Cannane v J Cannane Pty Ltd (in liq) (1998) 192 CLR 557; [1998] HCA 26 followed. (3) The primary judge was correct in concluding that Mr Saba did not establish that Mr Plumb knew that his superannuation funds would not be available to meet a future costs judgment in Mr Saba's favour: [73]-[83]. (4) It was open to the primary judge to find that the property transfer was driven by Ms Minifie's desire, acted on by Mr Plumb, to leave the property to her daughter: [84]-[88]. In relation to (ii): (1) The primary judge was correct in concluding that Ms Minifie was a purchaser for valuable consideration: [99]-[104]. Barton v Official Receiver (1986) 161 CLR 75; [1986] HCA 44 referred to. (2) The primary judge was correct in concluding that Ms Minifie established that she did not have relevant notice: [105]-[108].

Judgment

1. MACFARLAN JA: In 2005 the first respondent, Mr Noel Plumb, and the second respondent, Ms Jeanette Minifie, purchased a property in which they subsequently lived in a de facto relationship. The purchase was mainly funded by Ms Minifie but Mr Plumb contributed as well. They held the title to the property as tenants in common: Ms Minifie had a 75% interest in the property and Mr Plumb had 25%.
2. On 27 January 2011 there was a confrontation between Mr Plumb and Mr Anthony Saba, the appellant and a neighbour of the respondents. The police sought an apprehended violence order ("AVO") against Mr Plumb on behalf of Mr Saba (the "Police AVO proceedings") and Mr Plumb sought an AVO against Mr Saba (the "Plumb AVO proceedings"). These proceedings were on foot in 2011 and into 2012. Ultimately, on 15 March 2012 Mr Plumb succeeded on an appeal against the Police AVO that had been granted against him. The Plumb AVO proceedings continued. Relevantly, evidence was taken in those proceedings on 29 March 2012, including from Ms Minifie.
3. In the meantime, the relationship between Mr Plumb and Ms Minifie had deteriorated and Ms Minifie had moved into a separate bedroom at the property in October 2011. In the period from January to March 2012 they discussed termination of their relationship and in March 2012 Ms Minifie "demanded" that Mr Plumb enter into a property settlement with her.
4. On 4 June 2012 the respondents signed a Family Court document entitled "Consent Orders" in which they recorded an agreed settlement of their financial affairs. The settlement provided, inter alia, for Mr Plumb to transfer his 25% interest in the property to Ms Minifie and for Ms Minifie to grant to Mr Plumb a qualified "personal right to reside … for life" at the property.
5. The Family Court made orders in accordance with the Consent Orders on 14 June 2012.
6. On 28 September 2012 the Plumb AVO proceedings were dismissed. Subsequently Mr Plumb's appeal against that order was also dismissed and indemnity costs were awarded against him. Those costs were assessed in 2015 as $232,187.12, including the costs of assessment. Judgment was entered in favour of Mr Saba against Mr Plumb for that amount.
7. Due to his inability to enforce the judgment, Mr Saba commenced the present proceedings in the Equity Division, alleging that Mr Plumb's disposition to Ms Minifie of his 25% interest in the subject property was voidable under s 37A of the Conveyancing Act 1919 (NSW). He alleged that Mr Plumb made the disposition with intent to defraud his creditors by rendering his property interest unavailable to satisfy Mr Saba's judgment.

Ms Minifie's will

1. On 3 June 2011 Ms Minifie made a will that provided, inter alia, for Mr Plumb to have a qualified right of residence at the subject property, with the residue of the estate to be left to Ms Minifie's daughter.

Settlement offers

1. Whilst the AVO proceedings were on foot, many written settlement offers were made by the parties to the proceedings, principally by Mr Saba.
2. Mr Saba's first offer of 9 June 2011 sought payment by Mr Plumb of 50% of Mr Saba's legal costs. Those costs were stated to be $18,601, of which 50% was $9,300.50. The offer stated that further costs would be incurred in preparing for a forthcoming hearing and that costs would increase by approximately $5,000 per hearing day.
3. In his offer of 5 August 2011 Mr Saba said that his costs then exceeded $30,000 but he would settle on the basis that Mr Plumb pay 40% of his costs on a party/party basis. On 24 October 2011 he indicated that he would require Mr Plumb to pay 80% of his costs. On 22 November 2011 he sought 50% of his party/party costs. His October and November offers stated that failing settlement he would seek indemnity costs. His offer of 22 December 2011 contemplated each party bearing their own costs. His letter of 6 March 2012 stated that his costs had "increased significantly since September 2011" and encouraged Mr Plumb to consider settlement. Mr Saba's next offer was not made until 14 December 2012. The offer stated that Mr Saba's costs were currently $208,898 and that Mr Saba offered to settle the case on the basis that Mr Plumb pay 50% of his costs. Again, his letter stated that failing settlement he would seek indemnity costs.

The court hearing on 14 February 2012

1. On 14 February 2012 the Plumb AVO proceedings were listed for hearing before Magistrate Reiss. The following exchange occurred between counsel and the magistrate: "HIS HONOUR: I'd imagine if nothing else, as indicated previously, I presume that costs might be a massive impediment to any resolution of the matter at this late stage. ARCH [Mr Plumb's solicitor]: I understand that it is possible that that might be an issue at this stage. HIS HONOUR: That problem for one party or another is only going to get larger from hereon in. So you have two short witnesses and whether or not you go into evidence Mr Barham [Mr Saba's counsel] depends upon submissions that may be made at the end of the applicant's case? BARHAM: Yes your Honour."
2. His Honour's oral judgment delivered on that day included the following: "Mr Plumb has clearly been inappropriate by remaining on the property and calling Mr Saba a coward and inviting him to come out and discuss the issue, clearly inappropriate. It was very clearly and in no uncertain terms as he has in a sense acknowledged himself in any event being told to leave and he declined to do so because in his mind he wished to persist and have a discussion with Mr Saba about matters of concern to him. Certainly inappropriate behaviour, not the kind of behaviour that reflects any level of fear or concern. Mr Plumb has said that he has fears of harassment and possible further assault and yet from what I see from his behaviour in fact is a man without fear in a number of circumstances. I have evidence before the court [that] he certainly sees himself as very passionate about his issues concerning the environment, has had matters of protest and the like in which he has had confrontation or issues with the police. Clearly on the evidence before the court he is not in any way cowered by any of those confrontations or issues and is well prepared to continue with what he sees as an appropriate behaviour and agenda and despite allegations of some aggressive behaviour on prior occasions including when his deck chairs were being delivered there is evidence which he has accepted of moving towards Mr Saba. … I have already made a general indication about my view of the evidence of Mr Saba. For Mr Plumb often in his evidence he has been evasive, non-responsive, argumentative and even on simple matters has put forward very evasive and indirect answers including today which ultimately he then moves away from and adopts a more straightforward acknowledgment. … Much of the evidence shows Mr Plumb is a very strong willed, determined individual, in no way cowered by anything of the knowledge or behaviour of Mr Saba and indeed again has very clearly been very forthright, determined, obstinate on 27 January 2011 when being asked very vigorously to leave somebody else's property, not the behaviour of somebody who holds fear. I am certainly not persuaded at this stage that he has fears of any ongoing possibility of a physical assault or harassment of the kind that might be relevant to the making of a final interim order."

The court hearing on 15 March 2012

1. On 15 March 2012 Keleman DCJ upheld Mr Plumb's appeal against the Police AVO made against him. His Honour declined to award costs in favour of Mr Plumb, leading to the following exchange: "HIS HONOUR: I mean, you were at fault in relation to this incident, there's no question about it. You appreciate that, don't you? APPELLANT: I do, your Honour. I deeply regret it. You have my heartfelt assurances there'll be no such - HIS HONOUR: You're fortunate that in my view I've held that the conduct fell short of harassment but I emphasise that it fell short. APPELLANT: There'll be no repetition, your Honour, in any way. HIS HONOUR: I hope there won't be."

The court hearing on 29 March 2012

1. On 29 March 2012 evidence was taken before Magistrate Reiss in the Plumb AVO proceedings. Ms Minifie gave evidence-in-chief and was cross-examined.
2. In the course of the hearing, his Honour made the following observation: "I can't see it finishing today, either way, but he's entitled to present his case as he wishes. It certainly is taking up a ridiculous amount of time, no question about that, for a neighbourhood neighbour dispute, and it's been lengthy for a whole range of reasons, and that's certainly not desirable. But ultimately, a party can present the case as they see fit, particularly when there is provisional issues of relevance that need to be potentially aired along the way. In addition to that, obviously each party takes a risk in relation to costs at the end of the day."
3. The Plumb AVO proceedings were adjourned to 14 June 2012 for final submissions. On 28 September 2012 his Honour delivered judgment dismissing the proceedings.

The Family Court Consent Orders of 14 June 2012

1. As noted earlier, a form of Consent Orders was signed by the respondents on 4 June 2012 and approved by the Family Court on 14 June 2012.
2. The document recited that Ms Minifie had contributed about 85% of the costs of acquisition, conservation and improvement of the subject property, whilst Mr Plumb had contributed about 15%. The parties' assets were listed. Mr Plumb's assets comprised his 25% share of the property, superannuation of $181,000 and cash of $3,000. In addition to providing for Mr Plumb to transfer his interest in the property to Ms Minifie, the document recorded an agreement that Ms Minifie "grants [Mr Plumb] a personal right to reside at [the property] for life". The following agreement is also recorded: "Each of the parties agree that it is the intention of the Consent Orders that they should end finally all matters of a financial nature between them and that they are intended to be in full and final settlement and discharge of all claims that each may have against the other pursuant to Parts VIIIAB and VIIIB of the Family Law Act including any claim that either may have against the other for spousal maintenance."

Mr Plumb's letter of 26 November 2013

1. Mr Plumb sent the following email letter of 26 November 2013 in response to a request by Mr Saba for information as to his assets: "I refer to your letter of 15 November 2013. In view of concerns about privacy for both Ms Minifie and myself, I am unable to provide you with the information sought. I have discussed the matter of a loan with my brother and am able to offer your client $5000 (five thousand) in full settlement of the costs incurred by your client. Please let me know if this acceptable to your client and, if not, then I require your client's costs to be assessed pursuant to the Legal Profession Act."

Mr Plumb's evidence

1. In his principal affidavit, Mr Plumb recounted that Ms Minifie had moved into a separate bedroom at the property in late 2011 and that in January 2012 she repeatedly told him that "she could not take any more of [his] emotional withdrawal, the stress, [his] depression and anger and the neighbours' hostility towards her".
2. Amongst the statements he said that she made were: "'Noel, we need to go our separate ways. I want out. You have got me afraid to step out the door because Saba is always lurking and watching, he is egging his boys on as well.'" "'You won't stop, you're like your brothers, obsessed [with the court proceedings] and can't [you] see what you're doing to me.'"
3. Mr Plumb then deposed to a conversation in March 2012 as follows: "59. She … reminded me of our conversation in 2011 wherein she said words to the effect that she was 'entitled to the share of the property I had given you as you had failed to meet your promises to me' and that she was 'anxious that my daughter would have difficulties with her inheritance if you remained as part owner of the house.' 60. She said 'I want my property back now as we agreed when I made my Will; you have not kept your promises. My daughter deserves better than this, my daughter should not have to share this house with you.' 61. She told me, 'Our marriage is over and I want to be able to make up my own mind, make my own decisions, without having to worry about you all the time. It's too late to fix things, you would not listen to me for years, and everything had to be done your way.' 62. She said something like 'Noel, I am not happy that you are in such a mess but I want my life back. I do not see any other way but for you to leave. I am not leaving this house, Saba is not going to force me out with his nasty harassment and malice but you have got yourself into this mess.' 63. Embroiled as I was in the legal proceedings against the Plaintiff, I was very distressed and depressed. I sought the assistance of my brother, an accountant, to finalise the Family Court Consent Orders. 64. I said to Jennie words to the effect: 'The Consent Orders should confirm my life interest in the house as agreed by us last year when you made your Will. Why don't we divide the house and live separately in it without needing to intrude on each other all of the time.' 65. This was feasible because the house is a tri-level house that permits separate bedrooms, bathrooms, dining and living or study areas for each of us with separate access, separated by a mid-level kitchen and laundry for common use. Neither of us wanted to leave the rare bushland amenity with convenient city access that would have followed the sale of the house and a split in the proceeds. Our children were all independently established and long since made clear that they had no desire to live with us … 66. Jennie agreed to my proposal. She said words to the effect: 'All I want is to make my daughter's inheritance uncomplicated.' 67 The Family Court Settlement between Jennie and me had nothing whatsoever to do with the legal proceedings between me and the Plaintiff, except that the stress of the said proceedings took its toll on our relationship. The Consent Orders had their genesis in 2011 when Jennie and I discussed Jennie's testamentary plans."

Ms Minifie's evidence

1. Ms Minifie's principal affidavit included the following evidence: "97 … out of the blue, around Christmas 2011 Noel told me words to the effect that Mr Saba's solicitors and Noel's solicitors were working on a settlement. I was very happy and felt relieved that the case would be over. I started to have hope that my relationship with Noel should improve, as Noel would soon be freed from the case and his health would benefit. 98 Sometime in January 2012 Noel told me words to the effect that Mr Saba had changed his mind and was no longer interested in settling. I felt anger and frustration, based on my belief that my relationship with Noel could not withstand the on-going AVO proceedings. 99 Noel became very depressed and avoided any real response for several weeks, just walking away from me whenever I tried to talk with him. This did not improve matters one little bit. 100 The AVO proceedings took its toll on us individually and collectively. I observed Noel becoming totally withdrawn from me and experiencing longer bouts of depression. I also became depressed and sought treatment from a psychologist. 101 I was a witness in the AVO proceedings. Because I was a witness, I would wait outside the Court room and did not know how things were going on inside. I recall being present for some of the initial court appearances, and then at some point was told to wait outside as I was yet to give evidence. 102 Sometime in March 2012 I said to Noel words to the effect: I said: 'I can't take it anymore; my life is miserable. I want a separation. I don't think you're ever going to fulfil your promise of renovating the property.' Noel: 'I don't know how I could live if we sell the house and I only have a quarter of the value of the house, and have to rehouse myself. I couldn't live on my low income from part-time bush regeneration.' I said: 'Noel, you should have thought of that earlier. I don't think you deserve one quarter of the value of the house because you did not meet all of your commitment to me.' Noel: 'That was not just down to me. You went off to work and I had to deal with all the issues on my own.' I said: 'Do you mean going off to work and you going to see Tony Saba without a witness?' Noel: 'Yes.' I said: 'I am sorry but I can't keep on supporting your actions when I think that you should stop!' Noel said: 'I believe that I can win because I told the truth.' 103 This conversation occurred around the time that Noel won his appeal. I recall the day that Noel came home and looked optimistic. But despite this, I was determined to reach a family law settlement with Noel because I had had enough and also I felt that I needed to give my daughter certainty. 104 Sometime in late March 2012 I said to Noel words to the effect: I said: 'Regardless of your victory in the appeal, I really need to have a settlement with you. I'm not going to throw you out on the street. In my Will you have the right to reside in the house for life. I just want back the 25% I gave you. I want certainty.' Noel: 'You can always change your Will, and I could be left with nothing.' I said: 'I would not do that to you.' Noel looked stressed and didn't talk to me for 2 days. 105 Some days later Noel approached me again. He said to me words to the effect: Noel: 'I've spoken with Charlie and he told me that we can make binding consent orders in the Family Court. That way my life interest is more secure than if it was in a Will.' [I knew that Charlie was Noel's brother] I said: 'Noel, you can have the life interest, but I want my own space with separate living areas.' Noel: 'Okay.' … 117 It is my intention to pass ownership of the property to my daughter. She was only a few months old when her father died in a helicopter accident in Papua New Guinea in 1986. 118 With full legal control over my home I could protect my interest in the property, and leave it to my daughter in good condition. She has lived in the house in the past after returning from overseas for several weeks and I hope that she will live in it in the future. … 120 The situation regarding any potential costs orders in the AVO proceedings did not enter my mind when agreeing to the Consent orders. But the situation of the continuing and ongoing AVO proceedings did. I was fed up with the whole process and had had enough."

Particularisation of Mr Saba's case

1. At an early directions hearing, the Court rejected Ms Minifie's request for an order for pleadings. However, by letter of 5 May 2016 Ms Minifie' solicitors sought particulars, including as to the events that Mr Saba relied upon. Mr Saba's solicitors responded as follows: "The Plaintiff says that the relevant conduct was engaged in by the First and Second Defendants at or around the time of the hearing of the Local Court proceedings on 14 June 2012, the execution of the Family Court of Australia Consent Orders on 14 May 2012 [in fact, on 4 June 2012], the transfer of Mr Plumb's interest in the land also on 14 June 2012, the subsequent registration of the Consent Orders and the subsequent registration of that transfer on 18 July 2012."
2. In answer to a request to specify each "motivation or intent" relied upon, the solicitors replied: "The Plaintiff relies upon the elements of s37A(1) of the Conveyancing Act and relevantly that the First Defendant alienated the First Defendant's interest in the property by transferring that interest to the Second Defendant with intend to defraud the First Defendant's creditors."
3. The solicitors added the following in further answer to a number of questions: " … the Plaintiff says that at all material times, the Second Defendant was aware of the First Defendant's Court proceedings and the First Defendant's liability to pay costs to the Plaintiff if the case was lost. The Second Defendant was also aware of the First Defendant's financial and personal circumstances and must have been aware that the transfer of the First Defendant's interest in the property, particularly for no consideration, would have the effect of defrauding the First Defendant's creditors."
4. Ms Minifie's solicitors complained about the adequacy of these particulars provided on behalf of Mr Saba but the Court (not constituted by the present primary judge) did not accept her complaint.
5. As Mr Plumb's state of mind as to the availability of his superannuation to satisfy Mr Saba's costs judgment assumed particular significance in the primary judge's judgment and in the argument on appeal, it is necessary to describe as follows what was said about it at the Equity Division hearing in addition to the references in evidence to which I have earlier referred and which I conclude below did not squarely raise the topic.

Legal principles

1. In addressing the principles to be applied, the primary judge observed: "Mr Alexander, who appears for Ms Minifie, submits and I accept that any allegation of fraud on the part of Mr Plumb must be approached bearing in mind s 140(2) of the Evidence Act and the principle in Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336. Mr Alexander also submits, and I recognise, that there is a distinction between this case and many other claims under s 37A of the Conveyancing Act, since Mr Plumb was a plaintiff in the AVO proceedings against Mr Saba and not a defendant facing a substantive claim for damages at the time of the transfer of his interest in the East Ryde property to Ms Minifie, pursuant to the consent orders made by the Family Court. I proceed on the basis that s 37A of the Conveyancing Act would, in principle, be available in respect of a transaction directed to avoid a plaintiff's apprehended liability for an adverse costs order. I nonetheless recognise that it would be an unfortunate result if parties in proceedings in this and other courts were generally unable to deal with their assets while those proceedings were on foot, where one or other party to any proceedings will generally fail in whole or in part and may be exposed to a costs order in consequence. The answer to that difficulty may be that commonly, as I will find below in this case, parties pursue proceedings because they anticipate their success and the recovery of their costs, not their failure and the payment of the other party's costs. The elements of a claim under s 37A of the Conveyancing Act may therefore be rarely satisfied in this context" (Judgment [26]).

Whether Mr Plumb intended to defraud creditors

1. In response to Mr Saba's submission that the magistrate's reasons given for refusing on 14 February 2012 to continue the interim AVO earlier granted in favour of Mr Plumb would have indicated to Mr Plumb that Mr Saba might succeed in the proceedings, the primary judge agreed that they would have emphasised the possibility that Mr Saba would succeed. The primary judge did not accept however that the magistrate's reasons would have indicated to Mr Plumb that he was "bound to or likely to lose the application or was at substantially greater risk than Mr Saba as to the costs of the proceedings". His Honour found that Mr Plumb was confident in his prospects of success but noted Mr Plumb's evidence acknowledging that there was always a risk of loss of proceedings and an adverse costs order if that occurred.
2. Having referred to Mr Plumb's evidence of his confidence of success, his Honour said: "While I recognise that that evidence is consistent with Mr Plumb's interest in the proceedings, and could potentially be self-serving, it also seems to me to be consistent with the objective probabilities. In the ordinary course, one might think that parties generally bring proceedings anticipating their success not their failure. There is no reason to think that Mr Plumb was any less confident of his success in the AVO proceedings, irrespective of any matters that might with hindsight have indicated the contrary possibility, than Mr Saba appears to have been confident of his success in this claim. The fact that their respective confidence as to the success of their respective claims was, with hindsight, misplaced does not mean that it did not exist" (Judgment [61]).
3. His Honour then said that "the level of costs that Mr Plumb could reasonably have foreseen, in 2012, as recoverable by Mr Saba if Mr Plumb failed in the AVO proceedings in the Local Court is plainly a matter that is relevant to his intention in respect of the impugned transaction". His Honour then referred to the settlement offers (as to which see [15] and [16] above) and described the amount of $9,300 that Mr Saba sought by his letter of 9 June 2011 as a "relatively modest amount" of costs. His Honour concluded that costs of the magnitude later incurred (totalling $232,187.20) could not reasonably have been foreseen in mid-2012 as likely to be incurred.
4. The primary judge then referred to Mr Plumb's evidence that he would "never touch [his] superannuation monies" (see [33] above) but noted that there was a real distinction between the position in mid-2012 (when the costs in view would have been "somewhere in excess of $30,000") and those accrued at the time of the Equity Division hearing ($232,187.12).

Whether Ms Minifie was a purchaser in good faith without notice

1. The primary judge proceeded on the basis that Ms Minifie bore the onus of establishing that she was a purchaser in good faith without notice.
2. His Honour found first that Ms Minifie was "a purchaser for valuable consideration" within the meaning of the definition of "purchaser" in s 7. He held that Ms Minifie provided consideration both because she granted a right of residence in the property to Mr Plumb and because "she compromised the claims that would otherwise have been available to her in respect of that property under the Family Law Act."
3. On the issue of notice, his Honour referred, with apparent acceptance, to Ms Minifie's evidence that the potential costs orders did not enter her mind when agreeing to the Family Court Consent Orders and found that her "opposition to the proceedings was driven by the very real effect that they were then having upon Mr Plumb and her relationship with him". His Honour proceeded as follows to find that Ms Minifie did not have notice of Mr Plumb's alleged fraudulent intent: "94 As Mr Alexander points out, the suggestion that Ms Minifie recognised an intent on Mr Plumb's part to defraud Mr Saba, as a future creditor, requires not only that she have recognised that Mr Plumb was likely to lose the AVO proceedings, but more significantly that the conduct of proceedings in the Local Court would result in a costs order of such magnitude that he could not pay them from his remaining assets (including, I interpolate, monies held in superannuation funds to which I have referred above) and that the consent orders made by the Family Court were structured to avoid the need for him to do so. It was not specifically put to Ms Minifie that she reasoned in that manner and it does not seem to me that she did so or a reasonable person in her position would have done so. … 96 … I find that, in entering into the Family Court orders, Ms Minifie focused, not surprisingly, upon the difficulties which she then perceived in her relationship with Mr Plumb and how those difficulties could be addressed by a separation and consensual arrangements for future residence in the East Ryde property. It seems to me that Ms Minifie's attention at that time was squarely focused on her own needs and (to some extent) Mr Plumb's needs, to which it was not surprising she had reference given their long history. Ms Minifie has established that she was not on notice of Mr Plumb's alleged intent to defraud creditors, or Mr Saba as a further creditor, had such intent been established."

Ms Minifie's cross-claim

1. By her cross-claim, Ms Minifie sought a declaration to the effect that, prior to the transfer of Mr Plumb's 25% interest in the property to her, she and Mr Plumb held interests in the property proportionate to their contributions. She contended that Mr Plumb's contributions were considerably less than 25% of the total costs referable to the property and that his interest was accordingly substantially less than 25%. As a result, so Ms Minifie submitted, if Mr Saba's claim was otherwise well founded, she was not bound to restore a 25% interest in the property but only the lesser beneficial interest reflective of Mr Plumb's contributions.
2. His Honour said that he would have "held that Ms Minifie's Cross-Claim should succeed as to the reduced percentage which she advanced" if Mr Saba had otherwise been successful in the proceedings.

Challenges to credit-based finding

1. Fundamental to the determination of Mr Saba's proceedings under s 37A of the Conveyancing Act were findings that needed to be made, and were made, concerning the subjective state of mind of Mr Plumb and Ms Minifie. Although consideration of the objective evidence was of considerable importance to the making of these findings, so also was the respondents' affidavit and oral evidence. His Honour accepted their evidence on the critical questions and his findings were thus to a substantial extent credit-based. In these circumstances, the principles stated in Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [28]-[29], concerning appellate challenges to credit-based findings, are applicable.
2. In accordance with these principles, for such a challenge to succeed, an appellant must establish that the relevant findings were contrary to "incontrovertible facts", or "uncontested testimony", or were "glaringly improbable" or "contrary to compelling inferences" (ibid).

Section 37A of the Conveyancing Act

1. The principles applicable to an action under s 37A of the Conveyancing Act were authoritatively stated by the High Court in Marcolongo v Chen (2011) 242 CLR 546; [2011] HCA 3. In that case, a property development company transferred a project property to a financial advisor of the company to put it out of reach of Mrs Marcolongo, a future creditor of the company in relation to another project. This Court refused relief under s 37A because it considered that that section was only enlivened where there was an "'actual' or 'predominantly' fraudulent intent or purpose to deprive creditors of their rights or the fruit of their rights and that this required an element of dishonesty'", which it held was absent in that case (at [8]). The High Court reversed this decision, holding that Mrs Marcolongo had established an "intent to defraud creditors" as contemplated by the section.
2. The plurality in the High Court (comprising French CJ, Gummow, Crennan and Bell JJ) first referred to the proposition accepted by the High Court in SZFDE v Minister for Immigration and Citizenship (2007) 232 CLR 189; [2007] HCA 35 at [8] that "fraud is infinite in variety". Their Honours emphasised that constructive knowledge or notice as understood in equity is insufficient for the purposes of s 37A, but rejected that the corollary was that an intention to defraud required "a desire to 'cheat' or 'swindle' those prejudiced" ([25]-[28]). Thus their Honours accepted at [32] that it is: " … unnecessary to show that the debtor wanted creditors to suffer a loss or that the debtor had a purpose of causing loss: it [is] 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."
3. Consistently with this, their Honours accepted the proposition stated in an earlier decision that: "If [a debtor] 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" (at [32]).
4. Whilst their Honours recognised that the existence of the intent to defraud referred to in s 37A may be inferred from objective circumstances, they accepted that it remained necessary to find as a fact that that intent existed (at [34]). In the case before their Honours, the intent to "defraud", which they said "includes the hindering or delaying of creditors" (at [56]), was supported by admissions made in cross-examination by Ms Yang, the debtor's principal. As described by Heydon J in his separate judgment at [78], Ms Yang admitted in cross-examination that "a reason for her signing the contract of sale on behalf of [the debtor] was to get the property away from those who might claim against that company and to avoid the company suffering a 'big loss' in the form of the $600,000 claim [of Mrs Marcolongo]".

Whether he believed his superannuation funds would be available

1. As indicated, Mr Plumb's state of mind concerning a creditor's ability to access his superannuation entitlement was fundamental to the primary judge's reasoning (see [53] to [56] above). This entitlement was identified in the Family Court Consent Orders as being $181,000 (see [25] above). In evidence, Mr Plumb indicated that in 2012 he was entitled to draw on that entitlement (no doubt because of his age), although whether he was entitled to access the whole of it was not made clear.
2. In cross-examination, Mr Plumb stated firmly that he would not draw on his superannuation to pay the costs debt due to Mr Saba but, as the primary judge pointed out, this assertion related to the debt as it stood at the time of the Equity Division hearing. His statement did not indicate what his attitude would have been in June 2012 to payment out of his superannuation of whatever he then thought might be the potential debt. What he thought that amount might be was not explored in the evidence but it can be inferred that he would have thought that it would be far less than the amount of the subsequent costs judgment of $232,187.12.
3. Mr Plumb's belief in June 2012 as to whether Mr Saba could, as a matter of law, obtain access to Mr Plumb's superannuation to satisfy his judgment was relevant to whether Mr Plumb intended by the transfer of his 25% interest to defraud Mr Saba. If Mr Plumb believed in June 2012 that Mr Saba would be unable directly to attach his superannuation to satisfy any costs judgment in favour of Mr Saba and that any trustee in bankruptcy of Mr Plumb's estate would similarly be unable to use it for that purpose, an inference that Mr Plumb intended to defraud Mr Saba was capable of being drawn. To put it in reverse, if Mr Plumb thought that Mr Saba could use Mr Plumb's superannuation to satisfy any costs judgment in favour of Mr Saba, it is most unlikely that he intended to defraud Mr Saba by transferring his 25% interest in the property to Ms Minifie. The primary judge recognised this in stating: "It seems to me that knowledge that Mr Plumb's superannuation funds would not be available to meet a costs judgment in Mr Saba's favour was essential to any intent of Mr Plumb to defeat creditors" (Judgment [83]).
4. As recorded earlier (see [54] to [56] above), the primary judge concluded that Mr Saba did not establish that Mr Plumb knew that his superannuation funds would not be available to meet a future costs judgment in Mr Saba's favour. His Honour declined to draw an inference that Mr Plumb knew this when the proposition that he did know or believe it was not put to him in cross-examination and he therefore did not have an opportunity to respond to it. His Honour considered that the absence of pleadings or particulars identifying any issue as to the superannuation funds was significant in determining whether Mr Plumb had been afforded procedural fairness. His Honour took into account in this context that Mr Plumb was self-represented "for much of the case" (in fact until shortly before the final hearing).

Assuming that belief that superannuation protected not established

1. Mr Saba submitted on appeal that "even if Mr Plumb thought his superannuation could be accessed by creditors", Mr Saba was still entitled to succeed because the property transfer still had "the effect that it protected the family home from claims by prospective creditors" (written submissions [64]).
2. I do not accept this submission. After a lengthy hearing, the primary judge found that the respondents' family settlement was a bona fide agreement designed to deal with a genuine breakdown in their relationship. The property interest transfer formed part of that agreement. In the absence of a finding that Mr Plumb believed that he would not have any other assets to meet a costs order in favour of Mr Saba, it would be difficult, if not impossible, to draw an inference that an additional purpose of the settlement was an intent to defeat creditors. The primary judge did not draw it and, in the absence of error being established, it is not this Court's role to re-examine the facts to decide whether it should be drawn. Rather, this Court's role is to determine whether not drawing the inference was, in effect, glaringly improbable in light of the evidence before his Honour. Mr Saba did not establish that it was. Whilst there was much evidence highlighting the importance the respondents placed on their home, it did not compel the inference for which Mr Saba contends.
3. In summary, Mr Saba relied upon the following matters as compelling the inference that Mr Plumb, at least in part, was motivated by an intent to hinder or delay Mr Saba in enforcement of any costs judgment.
4. Mr Saba contended that: ● Mr Plumb was "aware that Ms Minifie had become distressed about the effect of the litigation on her and specifically on her interest in the property". ● Mr Plumb intended to continue the AVO proceedings whilst Ms Minifie wanted them to stop. ● Both Mr Plumb and Ms Minifie had "an attachment to the [property] that was not merely financial". ● Both respondents "appreciated that there was a risk of an adverse costs order". ● Ms Minifie wanted to protect her interest in the property so that she could leave it to her daughter. ● "Ms Minifie's distress and frustration over the AVO proceedings boiled over on 29 March 2012" when she "demanded" that Mr Plumb transfer his 25% interest in the property back to her.

Whether Ms Minifie was a purchaser without notice

1. As I have held that Mr Saba did not establish that Mr Plumb intended to defraud Mr Saba, the question of whether Ms Minifie established a defence under s 37A(3) does not arise. Nevertheless, it is appropriate to deal with that defence as follows, making an assumption, contrary to my finding, that Mr Plumb did have that intent.

Whether a purchaser

1. The word "purchaser" in s 37A of the Conveyancing Act is defined in s 7 of the Act to mean "a purchaser for valuable consideration". As noted at [58] above, the primary judge found that Ms Minifie gave consideration, first, by her grant of a right of ongoing residence to Mr Plumb and, secondly, by agreeing in the Family Court Consent Orders to a compromise in respect of claims that "would otherwise have been available to her in respect of [the] property under the Family Law Act".
2. In challenging these findings, Mr Saba first submitted that, according to the figures appearing in the Consent Orders, "Mr Plumb was exchanging a 40% interest in the … property for a right to reside at the property for life". Even if this is the effect of those figures, they do not assist Mr Saba as it is not for this Court, nor was it for the primary judge, to assess the value of the consideration given by each party to see whether it equated or bore some other asserted relationship. It is sufficient to conclude that the right to reside at the property was an apparently valuable right that Ms Minifie gave to Mr Plumb. As the High Court indicated in Barton v Official Receiver (1986) 161 CLR 75 at 86; [1986] HCA 44, in this context the Court does not make any inquiry as to the adequacy of consideration, it being sufficient if the transferee has given consideration for its purchase "which has a real and substantial value, and not one which is merely nominal or trivial or colourable".
3. Secondly, Mr Saba submitted that the right of residence that Mr Plumb obtained under the Family Court Consent Orders was something he already had as his 25% interest in the property gave him a legal right of occupation as a co-owner. However, the rights were different because the right of occupation that he had as a co-owner could be defeated by Ms Minifie obtaining from the Court an order, albeit discretionary, under s 66G of the Conveyancing Act, appointing trustees for sale of the property. On the other hand, as a result of the Consent Orders, Mr Plumb had, at least arguably, a right to restrain Ms Minifie from selling the property unless she arranged to bind the purchaser to give effect to Mr Plumb's continuing right of occupation.
4. Thirdly, Mr Saba submitted that the "legal quality of the right of residency agreed on by the parties" could be disregarded and regard had only to the "practical reality" that Mr Plumb continued to reside on the property after the Family Court Consent Orders as he had done before. The nature of Mr Plumb's legal rights cannot however be disregarded. By the Consent Orders, he received a right that was, for the reasons I have identified, different in character from that which he had before. It does not matter that his right has not yet been formalised by an instrument other than the Consent Orders, as the agreement evidenced by that document was plainly intended to have binding effect.

Whether Ms Minifie had notice of Mr Plumb's alleged intent to defraud Mr Saba

1. As noted above, the primary judge found that, when agreeing to the Family Court Consent Orders, Ms Minifie did not have notice of the alleged intent of Mr Plumb to delay or hinder Mr Saba in his enforcement of any costs order that he might obtain (see [59] above). His Honour found that, instead, Ms Minifie was focused on the difficulties in her relationship with Mr Plumb and how they could be addressed. This accorded with her evidence that a potential costs order did not enter her mind when agreeing to the Family Court Consent Orders. On her evidence, she believed that her relationship with Mr Plumb could not withstand the continuation of the AVO proceedings which Mr Plumb was determined to pursue. She thus sought a settlement that would terminate the financial aspects of their arrangements and enable her to pass full ownership of the property to her daughter. Whilst Mr Plumb was given a right to continue to reside in the property, Ms Minifie obtained his registered 25% interest which she thought was not proportionate to the contributions he had made in relation to the property.
2. Whilst Ms Minifie said that she wanted to protect her interest in the property to enable her to leave it to her daughter in good condition, this did not necessarily mean that she believed that Mr Saba might take Mr Plumb's 25% interest in the property to satisfy a judgment in his favour. The primary judge had the advantage of seeing and hearing the witnesses give their evidence. His Honour's conclusion about Ms Minifie's state of mind involved the determination of a credit issue. I do not consider that his conclusion was glaringly improbable or otherwise inconsistent with the evidence.
3. Ms Minifie's concessions that she was aware of a risk that court proceedings could be lost and that the losing party might be ordered to pay costs were relevant for his Honour to consider but did not require a different conclusion to that which his Honour reached. That is particularly so when Ms Minifie did not say, and the proposition was apparently not put to her in cross-examination, that she believed that Mr Plumb would have insufficient assets to pay any costs found to be due to Mr Saba. As with Mr Plumb, it was not suggested to Ms Minifie in cross-examination that she believed that Mr Plumb's superannuation funds would not be available for that purpose.

Other issues

1. During argument on the appeal, a number of issues concerning the relief that should be granted to Mr Saba in the event that he was successful on his appeal were addressed. As his appeal clearly fails and the issues are of some complexity, I do not consider it necessary to deal with them. Likewise, it is unnecessary to deal with Ms Minifie's cross-claim (see [60] and [61] above) as this would only have arisen if Mr Saba's appeal had been successful and in any event was not pressed by Ms Minifie on the appeal.

ORDER

1. For the reasons I have given, Mr Saba's appeal should be dismissed with costs.
2. SACKVILLE AJA: I agree with the orders proposed by Macfarlan JA and, subject to what follows, with his Honour's reasons.
3. As the primary Judge recorded, the principal claim made by the appellant (Mr Saba) at trial was that the respondents' personal relationship had not broken down and that the consent orders made by the Family Court in June 2012 did not constitute a genuine adjustment of their property rights in consequence of the alleged breakdown. [1] The primary Judge accepted the evidence given by the respondents (Mr Plumb and Ms Minifie, respectively) that their relationship had indeed broken down and that the Family Court orders represented a genuine adjustment of their property rights. Mr Saba does not challenge these findings on the appeal.
4. Mr Saba mounted an alternative case at trial. The primary Judge described this case as a "claim that the transaction was, on its face, an attempt to defeat or delay Mr Saba's claim for costs". [2] It is, however, fair to say that the alternative case was subsidiary to the principal claim, which rested on a sustained attack on the credibility of Mr Plumb and, to a lesser extent, Ms Minifie.
5. A good deal of the cross-examination of Mr Plumb, as the primary Judge remarked on more than one occasion, seems to have been of marginal relevance to the issues in the proceedings. But the thrust of the cross-examination was to challenge Mr Plumb's claim that his relationship with Ms Minifie had broken down and that the consent orders were made in consequence of that breakdown. It was put to Mr Plumb that his objective in executing the consent orders was to divest himself of as many assets as possible in order to protect himself from a potential costs claim by Mr Saba. Mr Plumb rejected these suggestions and his denial was accepted by the primary Judge.
6. The alternative case presented at trial faced the difficulty that it is not easy to disentangle a claim that a transaction was fraudulent because it involved an elaborate pretence perpetrated by two persons, from a claim that even if the impugned transaction was genuinely negotiated between these persons it is nevertheless liable to be set aside as a fraud on a third party. It was suggested to Mr Plumb in his cross-examination (and denied by him) that he appreciated that Mr Saba's interests would be affected by the making of the consent orders. However, this suggestion was made in the context of a cross-examination directed to establishing that the very reason Mr Plumb entered into the consent orders was to prevent Mr Saba from enforcing any future costs orders. It was not put to Mr Plumb - no doubt because it would have been very difficult to do so - that even though the consent orders represented a genuinely negotiated adjustment of property rights between the parties, Mr Plumb appreciated that the effect of the orders was to prevent or impede Mr Saba from enforcing any costs order he might obtain in the future.

Endnotes

1. Saba v Plumb [2017] NSWSC 622 (Primary Judgment) at [27].
2. Primary Judgment at [27].
3. Marcolongo v Chen (2011) 242 CLR 546; [2011] HCA 3 at [20] (French CJ, Gummow, Crennan and Bell JJ).
4. Marcolongo v Chen at [31]-[33].
5. Marcolongo v Chen at [32]. This need not be the sole or primary intention of the alienor: Marcolongo v Chen at [57].
6. Marcolongo v Chen at [25].

Amendments 29 January 2019 - [98]: Section 37(3) changed to s 37A(3). 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: 29 January 2019