Nelson v Nelson [1995] HCA 25 (1995) 184 CLR 538 (9 November 1995) PDF

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Australasian Legal Information Institute

High High Court Court of of Australia Australia

Nelson v Nelson [] HCA ; ()  CLR  ( November ) HIGH COURT OF AUSTRALIA BETTIE JUNE NELSON AND PETER JOHN NELSON v ELIZABETH ANNE NELSON, RUSSELL HODGE, STEPHEN LANCKEN, STEPHEN FULLER, SHARON BOWLES, MICHELE WORNER AND ANTHONY HATZIS TRADING AS OWEN HODGE AND SONS WITH FORREST DUFTY AND CO F.C. / Number of pages -  [] HCA ; ()  CLR  HIGH COURT OF AUSTRALIA DEANE(), DAWSON(), TOOHEY(), McHUGH() AND GUMMOW() JJ CATCHWORDS HEARING CANBERRA,  May  ::, SYDNEY ORDER . Appeal allowed. . Orders of the Court of Appeal set aside and in place thereof order that:

(ii) declarations ,  and  made by Master Macready set aside; (iii) it be declared that if on or before  January  the first appellant shall have paid to the Commonwealth of Australia the amount ("the Benefit Sum") agreed by the solicitors for the first appellant and for the first respondent to be the present value, over the term of the loan agreement dated  August  and for the advance by Westpac Banking Corporation ("the Bank") to the first appellant of $,, of the difference between the subsidised rate which applied pursuant to the Defence Service Homes Act  (Cth)

and that rate which, upon its usual terms, the Bank would have charged the first appellant on an advance of $, over the same period and for the same purpose, the second respondents then hold the whole of the balance of the proceeds of the sale of the property known as  Bent Street, Petersham, New South Wales, together with any interest earned thereon, upon trust for the first appellant; (iv) moneys which became held by the second respondents upon trust for the first appellant as provided in the declaration in order (iii) be paid by the second respondents to the first appellant or as she may direct; (v) it be declared that if the Benefit Sum has been ascertained as aforesaid but the first appellant has not paid it to the Commonwealth, as provided in order (iii) hereof, on or before  January , the second respondents then hold the balance of the proceeds of the sale specified in that declaration, as to the Benefit Sum upon trust for the first respondent and as to the remainder (including interest earned upon the whole of the said balance) upon trust for the first appellant; (vi) any moneys which become held by the second respondents upon trust for the first respondent and the first appellant respectively as provided in the declaration in order (v) be paid by the second respondents to those parties or as respectively directed; (vii) the first respondent pay the costs of the appellants and the second respondents of the proceeding at first instance and in the Court of Appeal. . There be liberty to any party to apply to this Court if, on or before  November , the solicitors for the first appellant and for the first respondent shall not have agreed the amount of the Benefit Sum as provided in order  hereof. . The first respondent pay the costs of the appeal of the appellants and the second respondents. DECISION The Facts DEANE AND GUMMOW JJ. The first appellant, Mrs B J Nelson, is the widow of Mr J W Nelson, who died on  November  at the age of . Mrs Nelson was then aged . Mr Nelson was a retired Master Mariner and as a result of his war service he had been an "eligible person" within the meaning of the definition in s () in the Defence Service Homes Act  (Cth) ("the Act"). As his widow, Mrs Nelson was also an "eligible person" within that definition.

. There were two children of the marriage, the second appellant, Peter Nelson, and the first respondent, Elizabeth Nelson. At the time of their father's death, Peter was aged  and his sister  years.

. The property known as  Bent Street, Petersham, Sydney ("the Bent Street property") is land under the provisions of the Real Property Act  (NSW). On  August , Peter Nelson and Elizabeth Nelson entered into a contract to purchase as joint tenants the Bent Street property for $,. The purchase was completed on  November  and a transfer registered on  November . Peter N l d Eli b th N l i t d i t f th B t St t t j i t

tenants. Mrs Nelson did not appear on the title. Three years later, on  October , Peter Nelson and Elizabeth Nelson entered into a contract to sell the Bent Street property for $,. In the meantime, and relevantly with effect from  December , the Act had been considerably amended by the Defence Service Homes Amendment Act  (Cth) ("the Amendment Act").

. The sale of Bent Street was completed on  November . Of the settlement moneys, $,. was paid to Westpac Banking Corporation ("the Bank") to discharge a mortgage over the Bent Street property. After allowing for adjustments, there was a balance of $,.. This sum is invested in an interest bearing trust account in the name of the second respondents, who are Elizabeth Nelson's solicitors, to await the resolution of a dispute between the parties as to the ownership of that fund. It is this dispute which has led to the present appeal.

. By proceeding commenced in the Equity Division of the Supreme Court of New South Wales on  December , Mrs Nelson and Peter Nelson as plaintiffs sought a declaration that the second defendants held the balance of the proceeds of sale of the Bent Street property on trust for Mrs Nelson, and an order that those proceeds, together with interest, be paid to Mrs Nelson. By her crossclaim, Elizabeth Nelson sought various relief against her brother and mother, including a declaration that she had a beneficial interest in the proceeds of sale. The solicitors were joined as respondents so that they might be bound by any decision as to the ownership of the proceeds of sale. They have taken no active part in the litigation.

. The issues in the Supreme Court extended to further matters arising from property dealings of the family, including the properties at  Yasmar Avenue, Haberfield, Sydney ("the Yasmar Avenue property") and  Windsor Street, Paddington, Sydney ("the Windsor Street property"). It is necessary to refer briefly to these matters, and to retrace steps to the period before the death of Mr Nelson. The Yasmar Avenue property was sold in January  for $, and the Windsor Street property in August  for $,. The registered proprietor of both properties had been Mr Nelson, although, in circumstances not presently material, in March  he had transferred the Windsor Street property to Peter Nelson and a Mr Hans Bendler.

. Of the proceeds of sale of the Windsor Street property in August , $, was paid into an account with Hambro Australia Limited ("Hambro") in the name of Mrs Nelson. The sum of $, was paid into an account with Hambro held by Peter Nelson. These payments to the Hambro accounts were made in November .

. By this time, Mr Nelson had been diagnosed as suffering the disease which a year later caused his death. There were discussions between Mr and Mrs Nelson and their son as to the use of the proceeds of sale to buy a new property. This led to the exchange of contracts on  August  to purchase the Bent Street property for $,. As we have indicated, the purchasers of the Bent

Street property were Peter Nelson and Elizabeth Nelson. However, both the deposit and the balance of the purchase price were provided from a joint account of Mr and Mrs Nelson. A sum of $,. was transferred into that account from Mrs Nelson's account with Hambro. These funds, as to $,, represented the proceeds of sale of the Windsor Street property.

. On  November , in anticipation of settlement the next day, three cheques were drawn on the joint account in the total of $,.. By then, Mr Nelson had been in hospital for a month. He died in the early hours of  November. Later that day, the purchase was completed with cheques drawn as described, and the transfer was taken in the names of Peter Nelson and Elizabeth Nelson, as joint tenants. Mrs Nelson was the sole executrix of and beneficiary under the will of her husband. Probate was granted to her on  November . This was shortly before Mrs Nelson instituted the present litigation.

. After settlement, Peter Nelson organised renovations of the Bent Street property. These were completed in June . Some of the moneys for the renovations were supplied by Mrs Nelson and others came from the account of Peter Nelson with Hambro and thus were derived from the proceeds of sale of the Windsor Street property. In March or April , Mrs Nelson and her son moved into occupation of the Bent Street property. Mrs Nelson thought that the property was too large for a family home. She then purchased in her name a property at  Kidman Lane, Paddington, Sydney ("the Kidman Lane property"). The Bent Street property subsequently was sold in the manner already outlined.

. The issues on the appeal to this Court concern the ownership of the fund held by the second respondents, representing the remaining proceeds of sale of the Bent Street property. A claim by Mrs Nelson that Elizabeth was liable to compensate her for breach of trust was abandoned during oral submissions. No issue as to ownership arises with respect to the Kidman Lane property. However, some understanding of the interrelation of the dealings affecting both properties is necessary.

. The purchase of the Kidman Lane property was completed on  August . By loan agreement dated  August  between Mrs Nelson, her two children and the Bank, an advance of $, was made, subject to the provision of a mortgage by Peter Nelson and Elizabeth Nelson over the Bent Street property. This security was provided to the Bank. It was intended to demolish the house on the Kidman Lane property and to erect a new dwelling.

. In addition to the advance of $, raised from the Bank by loan agreement also dated  August , Mrs Nelson obtained from the Bank $, as a subsidised advance at a low rate of interest pursuant to the provisions of the Act as it by then stood. A form entitled "Subsidy Application" had been completed by Peter Nelson for his mother and lodged on  July . In response to the question "Do you or your spouse own or have a financial interest in a house or dwelling other than the

one for which a subsidy is sought?", a tick was placed in the box beside the word "No". Mrs Nelson completed a statutory declaration on the form, verifying the accuracy of the information supplied in it.

. Elizabeth Nelson was the only one in the family with a regular income. The loan agreement with the Bank had provided that the advance of $, be made into a joint account in the names of the three Nelsons. Elizabeth undertook to contribute her wages into the account to meet the cost of the finance. She commenced to do so on  September . The relationship between the parties broke down. Elizabeth Nelson made no further deposits after May , some six months before the Bent Street property was sold. Mrs Nelson still holds the Kidman Lane property.

The decisions in the Supreme Court . Various issues were dealt with by a Master in the Equity Division of the Supreme Court. The Master held that Mrs Nelson was the beneficial owner of the Kidman Lane property. The Master granted declaratory relief as to ownership of the proceeds of sale of Bent Street. Elizabeth Nelson had sought a declaration as to the extent of her beneficial interests in the proceeds. Declarations were made that:

(i) Elizabeth Nelson was entitled to one-half of the net

proceeds of sale, that one-half share at the time of completion being $,; and

(ii) she also was entitled to the same proportion of the

interest earned by the fund as that amount bore to $,..

An appeal to the Court of Appeal was dismissed (). . The Master also considered the state of accounting between Elizabeth Nelson and Mrs Nelson in respect of other family financial dealings. As we have indicated, Elizabeth made payments into the joint account from which the loan from the Bank for Kidman Lane was serviced. However, on the other side of the accounting, Elizabeth had drawn cheques on her father's account. The result was a balance of $. in favour of Mrs Nelson and the Master ordered Elizabeth to pay that sum to her mother. This order has not been challenged.

. By her cross-claim, Elizabeth Nelson had contended that the provision by her parents of funds to pay for the purchase of Bent Street was an advancement for herself and her brother and succeeded in obtaining relief. Before this Court, Mrs Nelson again presses the submission, which failed in both

the footing that there was a resulting trust in her favour of the Bent Street property. The resulting trust is said to arise by reason of the provision of all of the purchase moneys by Mrs Nelson on her own behalf or as executrix and sole beneficiary of the estate of her husband.

. The Master held that the relationship between a mother, as well as a father, and adult children may give rise to a presumption of advancement. Evidence was led to rebut the presumption. The Master found that Mrs Nelson had no intention to confer any beneficial interest in Bent Street or in the proceeds of sale thereof on her children, and that Bent Street was purchased in the names of Peter and Elizabeth to preserve Mrs Nelson's entitlement as an "eligible person" under the Act, an entitlement which would have been lost or prejudiced if her name was on the legal title. He also held that Mrs Nelson and Peter Nelson had knowledge of the illegality involved in the application for subsidy in respect of the Kidman Lane property, and intentionally went ahead with that application.

. The Master found that the purpose at the time of the acquisition of the Bent Street property of preserving Mrs Nelson's entitlement by keeping her name off the registered title "of itself is not illegal". However, he went on to conclude that, when the application for subsidy was made in respect of the Kidman Lane property and the subsidy was obtained, that purpose was achieved by concealment of the then subsisting beneficial ownership by Mrs Nelson of the Bent Street property. The making of the false statement was said to be sufficient for the purpose of showing illegality.

. On this basis, the Master held that Mrs Nelson's case to rebut the presumption of advancement failed. It should be noted that the case failed not only as to the amount of the subsidy in respect of the loan for the Kidman Lane property but as to the whole of the fund representing the proceeds of sale of the Bent Street property. The result was the declaratory relief in favour of Elizabeth Nelson. She had been found to have had no part in applying for the subsidy.

. In dismissing the appeal by Mrs Nelson, the Court of Appeal held that:

(i) the presumption of advancement should be regarded as

applying to the relationship of mother and adult child;

(ii) if a party who has put property in the name of

another for an illegal purpose seeks to rebut the presumption of advancement, once the illegal purpose has been carried out it is no answer that the intention not to benefit the donee could have been proved without reference to the illegal purpose;

(iii) the obtaining of the subsidy on the purchase of the

Kidman Lane property involved the carrying out by Mrs Nelson of an illegal purpose; and

(iv) that illegal purpose could not be relied upon to

rebut the presumption of advancement in respect of the Bent Street property.

The issues . The basic questions which arise on the appeal to this Court may now be stated. The fund in contention represents the proceeds of sale of real property, the registered title to which was in the names of Mrs Nelson's children, Peter and Elizabeth Nelson, as joint tenants. The issue then is whether equity requires the second respondents, who hold the fund, to account for a portion of it to Elizabeth Nelson on the footing that it derives from and represents a beneficial interest she had in the Bent Street property, even though the purchase moneys for that property had been provided by her mother.

. There is an interplay of three doctrines or principles. They are that concerned with the imputation or presumption of a resulting trust in favour of Mrs Nelson as the source of the purchase moneys, the countervailing presumption of advancement which would leave the equitable title to Bent Street at home with the legal title, and the effect of what was classified as the illegal purpose in the later concealment by Mrs Nelson, to obtain the subsidy for the Kidman Lane property, of what she was found always to have intended to be her beneficial ownership of the Bent Street property. Do the circumstances of the case, as disclosed by the findings on the evidence, supply sufficient reason for concluding that the equitable title to Bent Street was not at home with the legal title when Bent Street was sold?

. Where an express trust fails as a whole, or as to part only, the question arises whether a resulting trust as to the balance is to be enforced in favour of the settlor. This case is not concerned with the law of resulting trusts as it operates in that situation.

. In the Court of Appeal (), it was said that "what matters" was "the actual intention" in having the Bent Street property transferred into the names of Peter and Elizabeth and that this involved the question of why it was not merely registered in the name of Mrs Nelson. The purpose was described as that of "obtaining a subsidised loan by concealment". The Court of Appeal held this to have been carried out by concealing the interest of Mrs Nelson in the Bent Street property when the Kidman Lane property was purchased. In this analysis, there appears to have been no consideration of the question whether public policy, deriving ultimately from the provisions of the Act, before and after the

Amendment Act, required that transactions other than those provided for in the statute itself, should be impugned by denying the operation of the resulting trust that would otherwise arise in favour of Mrs Nelson as provider of the purchase moneys for the Bent Street property.

. We turn first to consider the role of the presumptions and then what was identified below as the "illegal purpose".

The presumptions . The presumptions operate to place the burden of proof, if there be a paucity of evidence bearing upon such a relevant matter as the intention of the party who provided the funds for the purchase. The first presumption is that where a person in the position of Mrs Nelson paid the purchase price for the Bent Street property and caused it to be transferred to other persons, they hold the property upon trust for the person who provided the purchase money. The other presumption, that of advancement, is perhaps not strictly a presumption at all. Rather, the position is that there are certain relationships from which equity infers that any benefit provided for one party at the cost of the other has been provided by way of "advancement". The consequence is that the equitable estate follows the legal estate and is at home with the legal title; there is an absence of any reason for assuming that a trust arose ().

. The operation of the presumption of advancement may be rebutted by evidence of the actual intention, at the time of the purchase, of the parent or other person who provided the purchase money (). Evidence also may be given to support the presumption of advancement ()).

. Where the presumption of advancement is rebutted, the trust which then is enforced is a resulting...