Legal database - View: Cases: Nelson v Nelson

Nelson v Nelson
[1995] HCA 25

(Judgment by: Deane J, Gummow J)

Nelson
vNelson

Court:

High Court of Australia

Judges:
Deane J Dawson J
Toohey J
Mchugh J

Gummow J

Legislative References:
Defence Service Homes Act 1918 (Cth) - s 4(1); The Act
Real Property Act 1900 (NSW) - The Act
Defence Service Homes Amendment Act 1988 (Cth) - The Act
Land Act 1962 - s 91; s 296
Aboriginal Land Rights (Northern Territory) Act 1976 (Cth) - s 19
Life Assurance Act 1774 (UK) - The Act
Crimes Act 1914 (Cth) - The Act
Banking Act 1959 (Cth) - The Act
Family Law Act 1975 (Cth) - Section 66B(1); The Act
Statutory Declarations Act 1959 (Cth) - s 11; The Act
Banking Act 1959 (Cth) - s 8

Case References:
-

Hearing date: 10 May 1995
Judgment date: 9 November 1995

Sydney

Judgment by:
Deane J
Gummow J

DECISION

The Facts

The first appellant, Mrs B J Nelson, is the widow of Mr J W Nelson, who died on 4 November 1987 at the age of 73. Mrs Nelson was then aged 66. 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 4(1) in the Defence Service Homes Act 1918 (Cth) ("the Act"). As his widow, Mrs Nelson was also an "eligible person" within that definition.

2. 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 37 and his sister 33 years.

3. The property known as 5 Bent Street, Petersham, Sydney ("the Bent Street property") is land under the provisions of the Real Property Act 1900 (NSW). On 10 August 1987, Peter Nelson and Elizabeth Nelson entered into a contract to purchase as joint tenants the Bent Street property for $145,000. The purchase was completed on 4 November 1987 and a transfer registered on 18 November 1987. Peter Nelson and Elizabeth Nelson were registered as proprietors of the Bent Street property as joint tenants. Mrs Nelson did not appear on the title. Three years later, on 23 October 1990, Peter Nelson and Elizabeth Nelson entered into a contract to sell the Bent Street property for $400,000. In the meantime, and relevantly with effect from 19 December 1988, the Act had been considerably amended by the Defence Service Homes Amendment Act 1988 (Cth) ("the Amendment Act").

4. The sale of Bent Street was completed on 29 November 1990. Of the settlement moneys, $127,302.24 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 $232,509.83. 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.

5. By proceeding commenced in the Equity Division of the Supreme Court of New South Wales on 24 December 1991, 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 cross-claim, 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.

6. The issues in the Supreme Court extended to further matters arising from property dealings of the family, including the properties at 6 Yasmar Avenue, Haberfield, Sydney ("the Yasmar Avenue property") and 129 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 1986 for $165,000 and the Windsor Street property in August 1986 for $188,500. The registered proprietor of both properties had been Mr Nelson, although, in circumstances not presently material, in March 1986 he had transferred the Windsor Street property to Peter Nelson and a Mr Hans Bendler.

7. Of the proceeds of sale of the Windsor Street property in August 1986, $124,000 was paid into an account with Hambro Australia Limited ("Hambro") in the name of Mrs Nelson. The sum of $59,900 was paid into an account with Hambro held by Peter Nelson. These payments to the Hambro accounts were made in November 1986.

8. 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 10 August 1987 to purchase the Bent Street property for $145,000. 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 $160,991.66 was transferred into that account from Mrs Nelson's account with Hambro. These funds, as to $124,000, represented the proceeds of sale of the Windsor Street property.

9. On 3 November 1987, in anticipation of settlement the next day, three cheques were drawn on the joint account in the total of $130,782.06. By then, Mr Nelson had been in hospital for a month. He died in the early hours of 4 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 5 November 1991. This was shortly before Mrs Nelson instituted the present litigation.

10. After settlement, Peter Nelson organised renovations of the Bent Street property. These were completed in June 1988. 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 1988, 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 3 Kidman Lane, Paddington, Sydney ("the Kidman Lane property"). The Bent Street property subsequently was sold in the manner already outlined.

11. 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.

12. The purchase of the Kidman Lane property was completed on 31 August 1989. By loan agreement dated 30 August 1989 between Mrs Nelson, her two children and the Bank, an advance of $150,000 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.

13. In addition to the advance of $150,000 raised from the Bank by loan agreement also dated 30 August 1989, Mrs Nelson obtained from the Bank $25,000 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 25 July 1989. 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.

14. 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 $150,000 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 7 September 1989. The relationship between the parties broke down. Elizabeth Nelson made no further deposits after May 1990, some six months before the Bent Street property was sold. Mrs Nelson still holds the Kidman Lane property.

The decisions in the Supreme Court

15. 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 $195,500; and
(ii): she also was entitled to the same proportion of the interest earned by the fund as that amount bore to $232,509.83.
: An appeal to the Court of Appeal was dismissed ^[1] .

16. 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 $408.93 in favour of Mrs Nelson and the Master ordered Elizabeth to pay that sum to her mother. This order has not been challenged.

17. 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 Courts below, that she should have a declaration that the proceeds of sale are held in trust for her, on 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.

18. 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.

19. 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.

20. 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.

21. 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

22. 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.

23. 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?

24. 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.

25. In the Court of Appeal ^[2] , 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.

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

The presumptions

27. 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 ^[3] .

28. 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 ^[4] . Evidence also may be given to support the presumption of advancement ^[5] .

29. Where the presumption of advancement is rebutted, the trust which then is enforced is a resulting trust, not an express trust. The trust thus is outside the operation of the requirement for writing in s 7 of the Statute of Frauds 1677 (Eng) and its modern Australian equivalents ^[6] . Accordingly, oral evidence is admissible to rebut the presumption of gift and thus to affirm the operation of the presumption of resulting trust. Professor Scott deals with the matter as follows ^[7] :

"This reasoning is somewhat artificial; but trusts arising where the evidence shows an intention to create a trust when land is purchased in the name of a relative were considered to be resulting trusts before the enactment of the Statute of Frauds ^[8] , and that statute expressly excepts resulting trusts from its operation."

30. The present case was determined in the Supreme Court on the footing that the presumption of advancement operated in respect of dealings by mothers in favour of children and was not limited to those by fathers in favour of children. In the last century, the view had been taken in England that, when a mother takes title in the name of a child, a resulting trust rather than a gift is to be presumed. In Bennet v Bennet ^[9] , Sir George Jessel MR pointed to the general law obligation of a father and one in loco parentis to provide for the child and to the absence of such a recognition in equity of a duty imposed upon a mother. Caution in accepting Bennet v Bennet was expressed by Isaacs J in Scott v Pauly ^[10] . In Brown v Brown ^[11] , Gleeson CJ (with whom Cripps JA agreed) was dealing in 1993 with a transaction that occurred in 1958 and his Honour preferred not to decide the case upon the basis that, Mrs Brown being a mother rather than a father, the presumption of advancement had not applied.

31. The appellants submit that there is no compelling reason why the presumption of advancement should be extended to dealings by mothers in favour of children. They contend that, if anything, the presumption in the case of a father and child should be given a more restricted operation.

32. These presumptions are interrelated and entrenched "land-marks" in the law of property ^[12] . Many disputes have been resolved and transactions effected on that foundation. We prefer to approach this appeal on the footing that the existence of a presumption of advancement of her children by Mrs Nelson was properly accepted in the Supreme Court.

33. In a case such as the present, the presumption of advancement may be of practical importance only if the evidence, including that of the actual relationship between the parties, does not enable the court to make a positive finding of intention ^[13] . Here, such a finding of intention was made, namely that Mrs Nelson had no intention to confer on her children any beneficial interest in the Bent Street property or in the proceeds of sale. Yet Mrs Nelson failed to make good her claim to the sale proceeds held by the second respondents.

34. It is here that it becomes crucial to consider the impact of what was classified as the "illegal purpose".

Illegality - the submissions

35. The claim of illegality in the present case presents two distinctive features. First, the rights which Mrs Nelson asserts and the remedies she seeks are equitable. Secondly, the source of the alleged illegal purpose is in statute.

36. This is not a case where, independently of statute, the creation or performance of a trust or the observance of any condition imposed by the terms of the trust is said to offend a head of public policy. Nor is it a case of a contract to create an express trust where it is contended that the constitution of the trust by the conveyance of the legal title from the settlor to the trustee would be illegal.

37. Rather, the question is whether a joint owner of the legal title to land is able to resist, by reason of illegality, the assertion of a beneficial title arising as a resulting trust.

38. The accounting by the second respondents to the first appellant, Mrs Nelson, of the proceeds of sale as Mrs Nelson's beneficial entitlement on its face does not involve the doing of any illegal act. Nevertheless, a source of "illegality" may be public policy as to acts associated with or in furtherance of illegal purposes. In turn, this may involve consideration of the purposes a statute seeks to serve. Accordingly, there is a large and miscellaneous class of trusts which are held invalid on the ground that their enforcement would be against public policy, even though enforcement would not involve any criminal act by the trustee; likewise, provisions contained in an express trust may be illegal on the same grounds even though the trust itself does not fail for illegality.

39. The first respondent, the joint holder of the legal title, submits that (i) a court of equity will never enforce an equitable proprietary interest at the suit of a party to an illegality, rather, it will let the loss lie where it falls; (ii) further, the claimant must fail if the making good of the claimant's case necessarily involves disclosure of the illegal purpose; (iii) in this case rebuttal of the presumption of advancement requires disclosure of an unlawful purpose, thus precluding the setting up by Mrs Nelson of the resulting trust in her favour; and (iv) the only relevant recognised exception to the operation of these principles applies where the claimant has not carried the illegal purpose into effect, whereas in the present case the purpose was carried into effect with the purchase of the Kidman Lane property. As we will endeavour to explain, these submissions should not be accepted.

40. Counsel for the appellants contends that the Act, both before and after the 1988 amendments, did not expressly or impliedly prohibit the transaction the subject of the present action, namely the purchase by Mrs Nelson of the Bent Street property in the names of her children. Still less did it expressly or impliedly prohibit the enforcement by Mrs Nelson of what she maintains is the trust in her favour over the proceeds of sale. Therefore, it is submitted, the issue of illegality must depend upon a refusal to enforce the resulting trust on a ground of public policy derived from the statute. The appellants deny there is such a policy which operates in this way.

Illegality and statute

41. In a case where principles of illegality operate, the result is to impugn the plaintiff's rights, legal and equitable. It is true that, on occasion, the courts, in refusing to order reconveyance to the plaintiff of property transferred to further a purpose forbidden by statute, have said that the plaintiff lacks clean hands. An example is Groves v Groves ^[14] where land had been so conveyed to give a property qualification to the transferee; but Alexander CB also said that the illegal object of the conveyance required refusal to interfere "consistently with law and equity". In some cases the doctrine as to parties in pari delicto has been treated as the common law "counterpart" to the equity maxim, so that the two concepts are interchangeable ^[15] .

42. However, in cases of illegality, it is not merely a question, as is involved with the operation of the maxim that he who comes to equity must come with clean hands, of denying the plaintiff equitable remedies, for example, specific performance of a contract, whilst leaving the plaintiff to the remedy at law, for example, damages for breach of contract. The distinction between the operation of the equity maxim, as a discretionary defence to a claim to equitable relief, and the notion of illegality has been drawn by Professor Pettit. Writing as contributor to the title "Equity" in Halsbury and with citation of much authority, he says ^[16] :

"Where the transaction is itself unlawful it is not necessary to have recourse to this principle. In equity, just as at law, no suit lies in general in respect of an illegal transaction, but this is on the ground of its illegality, not by reason of the plaintiff's demerits."

In the United States, the same point is expressed by Professor Dobbs in his work Law of Remedies ^[17] :

"The first step in analysis of a putative unclean hands defense is to determine whether the defense really appeals to (or seeks to generate) a rule of law grounded in legal policy and applicable to a describable class of cases. For example, the defense might really be the defense that the plaintiff is attempting to enforce an illegal contract. If this is the case, the term 'unclean hands' should be dropped altogether and the analysis should proceed on the basis of the rule of law in issue."

In Loughran v Loughran ^[18] , Brandeis J distinguished between illegality, "a substantive defence", and the equitable "doctrine of clean hands" ^[19] .

43. It is well settled that, in a case where the contention is that an express trust fails for illegality because performance of the trust or of a provision thereof involves commission of an act rendered illegal by statute, the extent of the illegality and its consequences turn upon construction of the statute.

44. In Orr v Ford ^[20] , ss 91 and 296 of the Land Act 1962 (Q) were interpreted as rendering certain selections held by a trustee liable to forfeiture by the Minister but as not touching the lawfulness or enforceability of the equitable interest of the beneficiary of a trust of the selection unless and until there was a forfeiture. That was not to deny that the policy of the statute was directed against the holding of selections on trust.

45. Difficult questions may arise in relating the alleged illegality in the constitution or performance of the trust to what, upon its true construction, is the operation of the statute in question. Authorities in contract law such as Vita Food Products, Inc v Unus Shipping Co ^[21] and Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd ^[22] suggest the drawing of a distinction between (i) an express statutory provision against the making of a contract or creation or implication of a trust by fastening upon some act which is essential to its formation, whether or not the prohibition be absolute or subject to some qualification such as the issue of a licence; (ii) an express statutory prohibition, not of the formation of a contract or creation or implication of a trust, but of the doing of a particular act; an agreement that the act be done is treated as impliedly prohibited by the statute and illegal; and (iii) contracts and trusts not directly contrary to the provisions of the statute by reason of any express or implied prohibition in the statute but which are "associated with or in furtherance of illegal purposes". The phrase is that of Jacobs J in Yango ^[23] .

46. Examples in the third category include cases where the mode of performance adopted by the party carrying out the contract contravenes statute, although the contract was capable of performance without such contravention ^[24] .

47. In this last class of case, the courts act not in response to a direct legislative prohibition but, as it is said, from "the policy of the law". The finding of such policy involves consideration of the scope and purpose of the particular statute. The formulation of the appropriate public policy in this class of case may more readily accommodate equitable doctrines and remedies and restitutionary money claims than is possible where the making of the contract offends an express or implied statutory prohibition ^[25] .

48. In earlier times, effect was given to what the courts perceived to be "the equity of the statute" ^[26] . This doctrine had the support of the common law judges led by Sir Edward Coke, who looked back to a time before the rise of the doctrine of parliamentary sovereignty and the subjection to it of the common law ^[27] . The notion of the equity of the statute operated in two ways. First, the policy of the statute, as so perceived, might operate upon additional facts, matters and circumstances beyond the apparent reach of the terms of the statute. In addition, cases within the terms of the statute but not within its mischief might be placed outside its operation. Bentham gave the following, ironical description of this development ^[28] :

"The best-imagined provision might perhaps have done more mischief than good unless moulded into form by the prudence of the judge. On the one hand, the obligative part was not wide enough to embrace the mischief: on the other hand, the qualificative parts were not wide enough to yield shelter to innocence or to afford the necessary range to power."

49. Further, it was said that, although courts of equity did not differ from those of law in the exposition of statutes, they did so in the remedies given and the manner of applying them ^[29] . Thus, as was pointed out in Fonblanque ^[30] , the Chancellors devised the principle (still familiar ^[31] ) that equity will not allow a statute made for the prevention of fraud to be converted into the instrument of fraud, and also developed the doctrine of part performance. Again, Chancery would order delivery up of a security given for a usurious and thus illegal consideration only upon terms that the plaintiff pay the defendant what was bona fide due to the defendant. It will be necessary to refer again to the usury cases later in these reasons.

50. The doctrine of the equity of the statute has analogies in civil law systems. It is said that the search for the statute's equity "has become indispensable for civil code readers" ^[32] . However, the doctrine of the equity of the statute attracted the ire of Bentham. He described it as a further branch of customary law which struck its roots into the substance of the statute law and infected statute law "with its own characteristic obscurity, uncertainty and confusion" ^[33] . The doctrine fell deeply into disfavour in England and the United States, with the rise of legal positivism in the last century ^[34] . Nevertheless, the doctrines developed in equity survived. In the legal system as a whole there remained, and indeed entered the statute law itself, particular applications, developed by the 18th century judges, of the broader concept of the equity of the statute. One such instance in the modern law of bankruptcy is the avoidance of preferences. This was first devised by Lord Mansfield, as it was said, "without any positive enactment" ^[35] and as a protection or furtherance of the policy disclosed by the existing statute law.

51. The third class of illegality, represented by many modern authorities, may be seen as a survival of an earlier school of statutory interpretation. Further, various decisions of Lord Mansfield and Lord Eldon ^[36] , to which reference is still made in contemporary authorities and to which it will be necessary to refer in these reasons, must be understood with this background in mind.

52. A fundamental principle of the common law has been said to be that a court will not lend its aid to a plaintiff who founds a course of action upon an immoral or illegal act, particularly where both parties are equally in fault. These propositions are generally treated as following from the judgment of Lord Mansfield in Holman v Johnson ^[37] . One issue which underlies various submissions in the present case is the extent to which those propositions, with the qualifications to them which have developed in the law of contract, apply to a plaintiff who comes to equity seeking to enforce a resulting trust.

53. It should be noted that Holman v Johnson was a case in which the making and performance of the contract in question appears not to have been directly contrary to the provisions of statute. The allegation was that the contract was associated with or in furtherance of illegal purposes in the sense of the phrase later used by Jacobs J in Yango. The case came before the King's Bench in banc on a rule to show cause why a new trial should not be granted. The rule was discharged. The buyer was sued for the price of tea under a contract made in France for sale and delivery in that country. The buyer's defence was that the tea was to be smuggled into England without payment of duty and that the seller had been aware of this. It was held that there had been no contravention of the relevant English revenue laws. The seller had no concern in the smuggling scheme and the circumstance that the seller had knowledge of the illegal purpose of the defendant in buying the tea from him did not render the contract sufficiently associated with or in furtherance of that illegal purpose ^[38] . What has largely gone unnoticed in the later decisions is that Lord Mansfield held that the facts of Holman v Johnson did not fall within the principles as to illegality which he propounded, so that recovery in fact was allowed to the seller ^[39] .

54. The importance in a case such as this of ascertaining what two Canadian scholars have called "the underlying purpose" of relevant legislation ^[40] is borne out by the course of authority dealing with both express and implied or resulting trusts. Brief mention should be made of express trusts.

55. Upon its true construction a statute itself may prohibit the creation of an express trust. It may do so in direct terms or by forbidding the taking of a step necessary for the formation of such a trust, such as a transfer of the legal title. The prohibition may be absolute ^[41] , or subject to a condition or approval. An example of the latter ^[42] is provided by s 19 of the Aboriginal Land Rights (Northern Territory) Act 1976 (Cth), which imposes special requirements upon dealings by a Land Trust with any estate or interest in land vested in it.

56. Another example, closer to the present litigation whilst not involved in it, was provided by s 35 of the Act. This was included in Pt VI (ss 28-38B). Part VI, together with Pt III (ss 16A-18A), Pt IV (ss 19-19B) and Pt V (ss 20-27B), were repealed, with effect from 19 December 1988, by s 10 of the Amendment Act. These provisions thus were in force at the time of the acquisition of the Bent Street property in 1987. Section 25 forbade the making of advances by the Defence Service Homes Corporation ("the Corporation") except upon the security of a mortgage to the Corporation of the interest in the property of the borrower. Section 35(1) provided that, so long as any land was subject to a mortgage in accordance with the statute, a transfer of the land "or of any estate or interest therein" would not "have any force or effect" unless made with the consent in writing of the Corporation.

57. It was held that the creation of an express trust was a transfer within the meaning of the provision ^[43] . However, in a series of decisions it also was held that, if the property in question had been sold and the rights of the Corporation fully satisfied, there was nothing in the statute which prevented the trust, the operation of which had been temporarily denied by it, attaching to the proceeds of sale ^[44] , and that upon discharge of the mortgage held by the Corporation a trust previously denied force and effect might bind the land itself ^[45] . These decisions were upon the old s 35, contravention of which was not alleged in this case. However, they also are consistent with the broader proposition that, as the statute then stood, the interest which it sought to protect was that of the Corporation in the moneys advanced. It will be necessary to return to that proposition later in these reasons when consideration has been given to other provisions of the Act.

Contract and trust

58. Counsel for the first respondent, Elizabeth Nelson, contend that what they identified as the principles of property law applicable in the present case are not displaced or qualified by principles of illegality discerned from the underlying purpose or policy of the statute in question. Rather, counsel submits, the position as regards trusts was simpler than that in contract. Equity would never enforce an equitable proprietary interest at the suit of a party to an illegality, and Mrs Nelson was such a party. Further, the unlawful purpose had been carried into effect and Mrs Nelson could not displace the presumption of advancement in favour of her daughter unless that illegal purpose was disclosed. The result, on the submissions, would be that equity would leave the loss to lie where it fell, upon Mrs Nelson.

59. These submissions seek to draw a false line between the legal institutions of contract and trust. Lord Wilberforce observed that there was surely no difficulty in recognising the co-existence in the one transaction of legal and equitable rights and remedies ^[46] . In Gosper v Sawyer ^[47] , Mason and Deane JJ said:

"The origins and nature of contract and trust are, of course, quite different. There is however no dichotomy between the two. The contractual relationship provides one of the most common bases for the establishment or implication and for the definition of a trust. Conversely, the trust, particularly the resulting and constructive trust, represents one of the most important means of protecting parties in a contractual relationship and of vindicating contractual rights."

Further, many express trusts, particularly those created or manifested in writing, contain conditions, precedent or subsequent, to which the same principles of public policy apply whether perceived through the lens of contract or trust. Thus, in Permanent Trustee Company v Dougall ^[48] , Harvey CJ in Eq held that a condition in a will aimed at preventing any beneficiary becoming a lessee or licensee of a hotel was invalid on the ground of public policy, being a condition absolutely in restraint of trade ^[49] .

60. However, that is not to say that the case is necessarily treated in the same fashion where, on the one hand, it is a question of recovery of moneys paid under, or damages for breach of, an illegal contract and, on the other, a particular equitable remedy is sought to give effect to an allegedly illegal trust.

61. The first respondent's submissions rely upon the apparently pervasive effect of the dictum of Lord Mansfield in Holman v Johnson ^[50] that: "(n)o Court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act."

That dictum, as well as the proposition "let the estate lie where it falls", has been applied not only, for example, to actions in tort for damages for conversion as in Bowmakers Limited v Barnet Instruments Ltd ^[51] , and for moneys had and received ^[52] , but also in suits to enforce resulting trusts, as in Palaniappa Chettiar v Arunasalam Chettiar ^[53] .

62. We turn to consider these propositions as the first respondent would have them apply to this appeal, commencing with that dealing with reliance upon illegality.

63. There are several difficulties with the acceptance of such a principle as determinative of a case such as the present. First, it has been held in England that the outcome turns upon whether what immediately is in issue is the rebuttal of a resulting trust by demonstrating that what was intended was a gift, or the rebuttal of a presumption of advancement by demonstrating that a gift was not intended. The distinction may be considered by an example where Blackacre is purchased with the money of A but transferred by the vendor on completion to B, who is the child of A. Authority in England, provided by Tinsley v Milligan ^[54] , is that A cannot rely on evidence of his own illegality to rebut the presumption that a gift in favour of B was intended. On the other hand, if A purchases Blackacre in the name of B, the relationship between them being such that there is no presumption of advancement, A may enforce the resulting trust in A's favour because there is no necessity to prove the reason for the conveyance into the name of B and thus no need to rely on A's illegality ^[55] .

64. These results depend on the form in which a particular legal proceeding is cast and, unusually for equity, are achieved at the expense of substance. Further, they may operate indiscriminately and thus lead to harsh consequences as between particular parties. It is true, as Lord Mansfield pointed out in Holman v Johnson ^[56] that:

"if the plaintiff and defendant were to change sides, and the defendant was to bring his action against the plaintiff, the latter would then have the advantage of it".

But that consideration only heightens the lack of attraction of such a proposition in the court of equity. Furthermore, it in turn encourages a quest for mitigation by the drawing of further fine distinctions and exceptions whereby recovery will be permitted.

65. A second approach to the matter is to let the loss lie where it falls, the policy being one to encourage observance of the law by threat of a sharp and broad sword. This view commended itself to the minority in Tinsley v Milligan. It was said, again with reference to Lord Mansfield in Holman v Johnson, that ^[57] :

"(i)t is important to observe that, as Lord Mansfield made clear, the principle is not a principle of justice; it is a principle of policy, whose application is indiscriminate and so can lead to unfair consequences as between the parties to litigation. Moreover the principle allows no room for the exercise of any discretion by the court in favour of one party or the other."

Reliance also was placed by the minority ^[58] upon what was seen as the authoritative source of principle in equity provided by the decision of Lord Eldon LC in Muckleston v Brown ^[59] . It will be necessary further to consider this case, together with Cottington v Fletcher ^[60] .

66. The outcome in Tinsley v Milligan indicates that adoption of one approach rather than the other may lead to opposite results. As we have indicated, on this appeal the first respondent relies upon both as operating in her favour. She submits (and the Court of Appeal so decided) that Mrs Nelson can only rebut the presumption of advancement by revealing her purpose of obtaining a subsidised loan by concealment and, further, that the loss should be left to fall upon Mrs Nelson.

67. In our view, neither of these approaches is to be adopted in the present case. Two factors are of paramount importance. First, as the appellants submit and we would accept, the question of illegality is bound up with the view taken of the underlying policy of the Act. To quote a United States scholar, "if illegality consists in the violation of a statute, courts will give or refuse relief depending upon the fundamental purpose of the statute" ^[61] . Secondly, what is sought are equitable remedies in aid of an alleged trust and equity is equipped to attain a result which eschews harsh extremes.

68. The range and flexibility of equitable remedies assist in achieving an appropriate result in the particular case; this means, in the words of one commentator, "(t)he old common law idea of all or nothing will no longer have to apply" ^[62] . Accordingly, unlike the common law, equity may impose terms upon a party seeking administration of equitable remedies. Further, equity has not subscribed to any absolute proposition that the consequence of illegality, particularly where what is involved is contravention of public policy manifested by statute, is that neither side may obtain any relief, so that the matter lies where it falls. Rather, in various instances equity has taken the view that it may intervene, albeit with the attachment of conditions, lest there be "no redress at all against the fraud nor any body to ask it" ^[63] .

Let the loss lie where it falls?

69. Cottington v Fletcher and Muckleston v Brown require attention, given the reliance placed upon them for a general proposition that, in a case of illegality, equity lets the loss lie where it falls. In particular, remarks of Lord Eldon in Muckleston have been treated as controlling authority as to the attitude of equity to illegality in trust law ^[64] .

70. One must begin with the decision of Lord Hardwicke LC in Cottington v Fletcher. The litigation arose at a time when there was in force extensive legislation which imposed serious civil disabilities upon those professing the Roman Catholic faith. The plaintiff held an advowson as patron, that is to say, he held, as an incorporeal hereditament, the right to present a priest to a particular church and benefice in the Church of England ^[65] . However, the plaintiff was an adherent of the Roman Catholic faith. He assigned the advowson to the first defendant for the term of 99 years intending that the defendant hold the advowson on trust for him so as to avoid the operation of legislation ^[66] which vested in the Universities of Oxford and Cambridge the presentation of livings otherwise in the gift of Roman Catholics. The plaintiff then conformed to the Church of England and brought a bill in Chancery seeking reassignment by the first defendant of the balance of the term. In the meantime, the first defendant, upon the recommendation of the plaintiff, had presented the second defendant to the living. To the bill, the first defendant pleaded the Statute of Frauds, saying that there was no written declaration of trust. The first defendant also admitted that he had held as express trustee, but only to make the appointment of the second defendant. The consequence was an admission that there was a resulting trust for the plaintiff after the performance of that presentment.

71. Lord Hardwicke overruled the plea of the Statute of Frauds because it was coupled with these admissions. Furthermore, the trust which was so admitted was not rendered void by the legislation. This vested the interest in the two Universities only upon the purported presentment. The plaintiff had conformed to the Church of England before the presentment of the second defendant. The Lord Chancellor went on to say that the result might have been different if, rather than having made these admissions, the first defendant had demurred. For it would then simply have appeared from the bill itself that the plaintiff had assigned the advowson in trust for himself in order to avoid the operation of the legislation. The case thus turned upon the operation of statute upon express and resulting trusts.

72. In Muckleston v Brown Lord Eldon was dealing with an alleged testamentary secret trust of real estate for charitable purposes at a time when the Mortmain Act 1736 ^[67] assisted the interests of the heir at law by hampering, through a registration procedure, devises of land for charitable purposes. The heirs at law of the testator brought a bill contending that the testator had devised certain estates to the defendants on terms that they be held on an intended trust for charitable purposes. The defendants demurred to the discovery sought by the bill. Their objection was based upon the nature of the discovery sought, so that they were entitled to have the decision on the point in the first instance before the defendants were required to plead ^[68] . The Lord Chancellor held that the plaintiffs were claiming entitlement under a resulting trust upon failure of the trust of the land for charitable purposes, a trust "against the policy of the law", and that the trustees were required to answer. In particular, it was no answer for the trustees to resist discovery on the footing that it exposed them to penalty or forfeiture. Primacy had to be given to the proposition that that which was liable to be forfeited was a trust against a policy of the law manifested by the Mortmain legislation ^[69] .

73. Cottington was cited. Lord Eldon appeared to prefer the view that, in Cottington, even though the trust was admitted, the better view would have been that equity should have declined to interfere. The plaintiff had stated in the bill that he had been guilty of "a fraud upon the law", namely "to evade, to disappoint, the provision of the Legislature, to which he is bound to submit". He had come to equity to be relieved against the consequences of his own act, and the defendants were implicated in that dishonesty. In such circumstances, equity should say, "Let the estate lie, where it falls". However, Lord Eldon went on, that was not the case before him.

74. These authorities, when so understood, appear as responses to certain statutory regimes which controlled the litigation. They do not provide authority for any general proposition as to the attitude taken by equity in any case where an issue of illegality in relation to a trust arises by reason of a contravention of the policy of a particular statute. As one might expect from such situations, equity eschews any broad generalisations in favour of concentrating upon the specific situation which has arisen, in the light of the relevant statutory provisions.

Equitable relief and illegality

75. In Smith v Jenkins ^[70] , Windeyer J declared that the maxim ex turpi causa non oritur actio should be confined to the law of contracts and conveyances. The decreasing significance of the maxim in the law of tort, especially negligence, may be traced in subsequent decisions of this Court ^[71] .

76. Story ^[72] stated that, in general, although not universally, equity followed the rule of law as to participants in a common crime where parties were concerned in illegal transactions. However, Story continued:

"But in cases where the agreements or other transactions are repudiated on account of their being against public policy, the circumstance that the relief is asked by a party who is particeps criminis is not in equity material. The reason is that the public interest requires that relief should be given, and it is given to the public through the party."

77. One such class of case, well recognised in this Court ^[73] , was identified by Ashburner ^[74] as that of "repentance before anything done to carry out illegal purpose". Another concerns recovery of money or other property which, whilst tainted by illegality, was induced by fraud of one of the parties or was the product of a breach of fiduciary duty owed by one party to the other ^[75] .

78. Ashburner also refers to a group of decisions identified as cases of public policy. He, like Pomeroy ^[76] , refers to marriage brokage contracts and to the decisions holding that money paid thereunder may be recovered. Pomeroy and Story ^[77] discuss cases of borrowers coming to equity seeking relief against contracts declared void by the old statutes against usury ^[78] , saying that equity would interfere but on terms that the plaintiff pay the defendant what was really and bona fide due, after deduction of the usurious interest; if the plaintiff did not make such an offer, the defendant might demur to the bill and it would be dismissed. Story goes on to say ^[79] :

"The ground of this distinction is, that a Court of Equity is not positively bound to interfere in such cases by an active exertion of its powers; but it has a discretion on the subject, and may prescribe the terms of its interference, and he who seeks equity at its hands may well be required to do equity. And it is against conscience that the party should have full relief, and at the same time pocket the money loaned, which may have been granted at his own mere solicitation. For then a statute made to prevent fraud and oppression would be made the instrument of fraud."

79. Of course, the usury laws are gone, and marriage brokage cases little heard of. But much modern regulatory legislation concerns financial dealings, and, in any event, what is of present importance are the fundamental reasons for, not the occasions of, equitable intervention. In that regard, reference should be made to the decision of Jacobs J in Money v Money (No 2) ^[80] . His Honour referred ^[81] to the jurisdiction of equity to order delivery up of instruments, such as bonds, negotiable instruments or deeds, upon which a party otherwise could sue at law, where there was an illegal consideration and such consideration did not appear on the face of the document. Jacobs J went on to identify a further principle of equity that, even though a transaction might be tainted with illegality on the ground that its performance is contrary to public policy, equity will interfere on further grounds of public policy if the transaction ought not to be allowed to stand even where the plaintiff is particeps criminis. After referring to what is said on the subject by Story ^[82] , his Honour continued ^[83] :

"It seems to me that it is only by such a principle that the cases in Equity on, for instance, marriage brokage contracts can be explained. In Hall v Potter ^[84] , the House of Lords granted relief even though the marriage had actually taken place. In Hermann v Charlsworth ^[85] , Collins MR referred ^[86] to the broader point of view of the Courts of Equity and dealt with many of the authorities. It would not seem that this approach is limited to marriage brokage contracts but it extends to other agreements such as those which involve a fraud upon the legislature: Vauxhall Bridge Co v Spencer (Earl) ^[87] ".

80. But, in these cases, no doubt the operation of the particular statute will be critical. That is illustrated by the money lending legislation considered by the Privy Council in Kasumu v Baba-Egbe ^[88] and by this Court in Mayfair Trading Co Pty Ltd v Dreyer ^[89] . These are best understood as cases in which the legislation precluded the money lender from recovering any compensation for the loan which had been made by it, with the result that it was not open for such compensation to be recoverable by means of the imposition of a term upon equitable relief sought by the borrower ^[90] .

81. In Kasumu, the borrower brought an action seeking delivery under the mortgage documents and the Privy Council rejected the contention of the money lender that such relief, being equitable, should be granted only on terms that the principal amount of the mortgage be repaid. The money lender had failed to comply with the requirements of the relevant statute which had provided that, in those circumstances, the money lender "shall not be entitled to enforce any claim in respect of any transaction in relation to which the default shall have been made". Hence, the Privy Council held that the imposition of a requirement of repayment, as a condition of equitable relief, would constitute a claim in respect of a transaction within the very terms of the statutory prohibition.

82. As will become apparent, the scheme of the present Act is quite different. Its policy may be satisfied by the imposition of an appropriate term concerning the subsidy received by Mrs Nelson as the price for the relief she seeks to enforce by the resulting trust.

Resulting trusts and statutory illegality

83. The intersection between the institution of the resulting trust and the principles of illegality is identified by Scott as follows ^[91] :

"Although a resulting trust ordinarily arises where A purchases property and takes title in the name of B, A may be precluded from enforcing the resulting trust because of the illegality of his purpose. If A cannot recover the property, B keeps it and is thereby enriched. The question in each case is whether the policy against the unjust enrichment of the grantee is outweighed by the policy against giving relief to the payor who has entered into an illegal transaction."

84. However, where the illegality flows from statute, the matter is not at large in the manner suggested above. Rather it is a question of the impact of the statute itself upon the institution of the resulting trust. As the matter is put by White and Tudor ^[92] in their notes to Dyer v Dyer ^[93] :

"There will be no resulting trust if the policy of an Act of Parliament would be thereby defeated."

The position was further explained by Griffith CJ in Garrett v L'Estrange ^[94] , in giving the judgment of the Court:

"It was laid down by Lord Eldon a long time ago ... that there can not be a resulting trust contrary to the provisions of an Act of Parliament. The suggestion of an implication of law contrary to a positive law is indeed a contradiction in terms. This contention is, therefore, negatived by the same considerations which negative the alleged express trust."

The decision of Lord Eldon to which the Chief Justice referred was Ex parte Houghton ^[95] . This case and Lord Eldon's earlier decision in Ex parte Yallop ^[96] concerned resulting trusts said to arise by payment of purchase money where there was a device to avoid ship registry laws. In Yallop ^[97] , the Lord Chancellor said:

"These two Acts of Parliament (stat 26 Geo III c 60; stat 34 Geo III c 68) were drawn upon this policy; that it is for the public interest to secure evidence of the title to a ship from her origin to the moment, in which you look back to her history; how far throughout her existence she has been British-built, and British-owned; and it is obvious, that, if, where the title arises by act of the parties, the doctrine of implied trust in this Court is to be applied, the whole policy of these Acts may be defeated; as neutrals may have interests in a ship, partly British-owned; and the means of enforcing the Navigation Laws depend upon knowing from time to time, who are the owners, and, whether the ship is British-owned, and British-built. Upon that the Legislature will not be content with any other evidence than the registry; and requires the great variety of things, prescribed by these Acts. They go so far as to declare, that notwithstanding any transfer, any sale, or any contract, if the purpose is not executed in the mode and form, prescribed by the Act, it shall be void to all intents and purposes. The consequence, established by positive and repeated decisions, is, that upon a contract for the purchase of a ship, which it may be supposed, might have been executed without public mischief, though by force of that contract and by operation of Law the purchaser would be the owner in Equity from the moment of the purchase, and the vendor from that moment would be devested (sic) of all interest, yet it is decided, that these Acts are so imperative, that, if they rest upon the contract, it cannot be said of a ship, as of an estate, that by operation of Law, and by force of the contract, the ownership is changed; and if the money had been paid, the decision would be upon the same principle; and it must be recovered by another form of proceeding." (emphasis added)

85. In Worthington v Curtis ^[98] , a contract between a father and an insurance company for the issue of a policy on the life of his child was considered illegal and void under the Life Assurance Act 1774 (UK). The child died and the insurer paid the money assured by the policy to the father as administrator of the child's estate. It was held that, although as between the insurer and the company the policy was illegal and void, as between the father and the estate the father was entitled to retain the money for his own benefit, the presumption of advancement being rebutted by the evidence that the policy was effected for the benefit of the parent. Accordingly, the administrator of the estate could not resist the claim of the beneficiary to money in his hands, on the footing that the money was the product of a contract rendered illegal and void by statute. The question of title to the proceeds of the policy was insufficiently connected with that to which the legislation had been directed.

86. Recent United States decisions deal with legislation of a similar nature to that with which this appeal is concerned. They do so in a manner consistent with the older authorities. In re Torrez ^[99] concerned federal laws which limited the right to receipt of federally subsidised irrigation water to landowners of parcels not exceeding a particular acreage. If a farmer had a holding in excess of the acreage limitation, the result was loss of eligibility for irrigation water for the excess acreage. Mr and Mrs Torrez were already receiving their maximum allotment of subsidised water before they purchased additional land in the names of their son and daughter-in-law. The son and daughter-in-law wished to sell the property in order to finance a reorganisation of their affairs under Ch 11 of the federal bankruptcy law. The issue was whether they were at liberty to do so and, in particular, whether the illegality of the purpose of their parents in putting the property in their names was destructive of a resulting trust in favour of the parents. The Court of Appeals held that the resulting trust was enforceable. It referred to various relevant factors under the law of California, as follows ^[100] :

"These factors include the completed nature of the transaction, such that the public can no longer be protected by invocation of the rule that illegal agreements are not to be enforced; the absence of serious moral turpitude on the part of the party against whom the defense is asserted; the likelihood that invocation of the rule will permit the party asserting the illegality to be unjustly enriched at the expense of the other party; and disproportionality of forfeiture as weighed against the nature of the illegality."

87. Their Honours went on to refer to previous statements to the effect that one who takes title to land in the name of another "for the purpose of defrauding the government cannot enforce a resulting trust in his favour" ^[101] . The Court of Appeals then referred to the decision of the California Court of Appeal in Hainey v Narigon ^[102] . It had been held there that it was wrong to impose a resulting trust upon property purchased by the plaintiff in the name of the defendant pursuant to an agreement between them which permitted the plaintiff to subvert the loan requirements of the federal Veterans Administration legislation ^[103] . The California Court of Appeal held that, because the agreement violated the federal statute and regulations governing loans to veterans and was contrary to public policy, the plaintiff was not entitled to enforce the trust; a lien was imposed on the property in favour of the plaintiff but only for the net amount of his financial investment in it.

88. In In re Torrez the Court of Appeals distinguished Hainey in the following passage ^[104] :

"Essential to Hainey was the fact that the applicable statutes and regulations explicitly prohibited assignment of benefits conferred upon a veteran in connection with the VA guarantee of home loans for veterans. ... Here, no prohibitions exist against the acquisition of excess land; instead, federal regulations provide merely for the loss of eligibility for receipt of water upon such acquisition. ... Similarly lacking in Hainey were the problems of disproportionality of forfeiture to illegality, given the court's grant of a lien to plaintiff in the amount of his investment in the property notwithstanding his illegal conduct."

The Court of Appeals then dealt with the public policy consideration that recognition of a resulting trust would give judicial sanction to a continuing fraudulent scheme against the federal government. The Court pointed out ^[105] that the government was entitled, under the legislation, to deny eligibility for subsidised water in respect of the excess acreage, saying that any public policy objections might adequately be addressed by administrative proceedings under those provisions.

89. Against the background traced above we accept the submission for the appellants that the crucial step is to identify the relevant public policy, beginning with the provisions of the Act, before and after the amendments made in 1988. The Bent Street property was purchased before the commencement of those amendments but it was after their commencement that the application for subsidy was lodged on 25 July 1989 and the subsidy towards the purchase of the Kidman Lane property was procured.

The scheme of the Act and the facts of the case

90. We have already referred to s 35 as it stood before its repeal. Nothing turns upon it directly for the purposes of this case. There was no "transfer", being the purported creation of a trust in respect of any property in which the Corporation already held an interest as described in the section.

91. As we have indicated, Pts III, IV, V and VI of the Act were repealed with effect from 19 December 1988. Part V (ss 20-27B) had been headed "Advances on mortgage for purposes of homes". Section 20 empowered the Corporation to make an advance to an eligible person on the prescribed security, to enable that person, among other things, to purchase a dwelling-house together with the land on which it was erected. The maximum advance was $25,000 (s 21). With an exception not presently relevant, no advance was to be made to any person unless the Corporation was satisfied that (i) the dwelling-house in question was intended to be used by the person as a home for himself and his dependents and (ii) neither the person nor the person's spouse was the owner of any other dwelling-house (s 23). If at any time, in the opinion of the Corporation, any money advanced had not been applied for the purpose for which it was advanced, the Corporation might, by notice in writing, call in the whole or part of that amount (s 27(1)) and remedies were given for the recovery of that amount by the Corporation (s 27(2)).

92. Section 32A empowered the Corporation to call up, by notice in writing, the whole of the moneys secured under the mortgage on the relevant property, making the moneys due and payable, if, at the time of the making of the advance, a person had declared "that the person was not the owner of any dwelling-house" or "that the wife or husband of the person was not the owner of any dwelling-house" other than the one to which the advance related and it subsequently had come to the knowledge of the Corporation that the declaration was untrue. In this way, ss 23 and 32A were linked.

93. The scheme of the Act changed in 1988 with the Amendment Act. This implemented an agreement ("the Agreement") made 9 November 1988 between the Commonwealth of Australia and the Bank ^[106] . Section 16 of the Amendment Act inserted the Agreement as Sched 1 to the Act. Clause 11 of the Agreement provided for payment by the Commonwealth of an interest subsidy to the Bank upon "Subsidised Advances" made by the Bank. The term "Subsidised Advances" was defined in cl 1 of the Agreement as including an advance made by the Bank in accordance with a certificate of entitlement issued by the Commonwealth to an entitled applicant.

94. These provisions were implemented by amendments to the Act. In place of Pts III, IV, V and VI, new Pts III (ss 15-23), IV (ss 24-30), V (ss 31-37) and VI (ss 38-38H) were inserted. Section 15(1)(b) provides that a person may apply to the Secretary for a certificate of entitlement in relation to a subsidy on a subsidised advance that the person may seek from the Bank. The certificate of entitlement shall specify the maximum amount determined under s 25, in respect of which subsidy is payable, and the rate of interest payable on the advance (s 17). The rate of interest upon an initial advance is 6.85 per cent per year (s 31). Section 18(1)(b) obliges the Secretary not to issue a certificate of entitlement unless satisfied that the person is not the owner of any dwelling-house other than the dwelling-house in respect of which the advance is payable. The $25,000 received upon the Kidman Lane purchase was the maximum amount for which subsidy was payable.

95. The Secretary may, by notice of cancellation, cancel the subsidy from the date specified in the notice if the Secretary is satisfied that a certificate of entitlement in relation to the advance was issued as a result of a false statement made by the person to whom it was issued, or where the person was not entitled to the certificate (s 26(1)).

96. Where a subsidy has ceased to be payable under s 26 for either of the above reasons, the Secretary may, by notice in writing, require payment to the Commonwealth of the amount specified in the notice in the manner and within the period specified in the notice (s 29(1)). The amount in the notice might be the whole or such part of the amount of subsidy as the Secretary determined to be reasonable (s 29(2)). Where a person has failed to comply with a notice, the amount specified in the notice may be recovered from the person in a court of competent jurisdiction as a debt due to the Commonwealth (s 29(4)). Section 30 states:

"(1) The Secretary may, on behalf of the Commonwealth, by instrument in writing:

(a)
write off an amount that a person has been required to pay to the Commonwealth under section 29;

(b)
waive the right of the Commonwealth to recover from a person the whole or part of an amount that the person has been required to pay to the Commonwealth under that section; or

(c)
allow a person who has been required to pay an amount to the Commonwealth under section 29 to pay that amount by such instalments as are specified in the instrument.

(2) A decision under subsection (1) takes effect:

(a)
on the day specified in the notice, being the day on which the decision is made or any day before or after that day; or

(b)
if no day is so specified - on the day on which the decision is made."

97. Decisions under s 26, and those requiring payment under s 29, are "reviewable decisions" within the meaning of the definition in s 4. The consequence is that they attract the operation of the system of internal review and review by the Administrative Appeals Tribunal pursuant to ss 43 and 44 of the Act.

98. Reference also should be made to certain provisions of the Crimes Act 1914 (Cth) which were in force at all material times. It is not suggested by counsel for the first respondent that any of the parties to the litigation had rendered themselves liable for prosecution under those provisions. Rather, he draws attention to them in connection with what he describes as the wide operation of the Act itself. He submits that these provisions showed that the legislature had not left the Act without attendant criminal sanctions for contravention.

99. The provisions in question are ss 29A, 29B, 29D and 86. Section 86 creates conspiracy offences, s 29A deals with false pretences and s 29D defrauding the Commonwealth or a public authority under the Commonwealth. Section 29B should be set out in full. It states:

"Any person who imposes or endeavours to impose upon the Commonwealth or any public authority under the Commonwealth by any untrue representation, made in any manner whatsoever, with a view to obtain (sic) money or any other benefit or advantage, shall be guilty of an offence. Penalty: Imprisonment for 2 years."

100. On the other hand, counsel for the appellants points to these provisions in support of the proposition that the purpose of the Act is sufficiently served by such penalties and that the denial of the resulting trust would cause prejudice to a person in the position of Mrs Nelson without furthering the objects of the legislation. Reference is made to the statement in Archbolds (Freightage) Ltd v S Spanglett Ltd ^[107] , adopted by Jacobs J in Yango ^[108] , that the purpose of a statute may sufficiently be served by the penalties prescribed for the offender ^[109] . It then is submitted that the imposition of the additional sanction, the inability of the first appellant to enjoy the proceeds of what otherwise is her beneficial ownership of the Bent Street property, would not be an appropriate adjunct to the scheme for which the Act provides.

101. That submission should be accepted. Further, the relevant provisions of the legislation, before and after the Amendment Act, show its purpose to be the provision of public moneys to facilitate the purchase of housing by eligible persons, but on the footing that the eligible person not own another dwelling. The means by which that purpose has been effected have changed from secured loan to interest subsidy in respect of an advance by the Bank. But it has consistently been the scheme of the legislation that, if the public moneys are misapplied, they are made recoverable by the Corporation or the Commonwealth. However, as the cases on the former s 35 demonstrate, the interest of the Corporation or the Commonwealth in the dwelling or proceeds of sale thereof is co-extensive with the funds provided by it; if they be restored then effect may be given to a trust in respect of the balance of the equitable interest in the dwelling or the proceeds of sale thereof.

102. A question in the present case thus arises as to whether the trust in respect of the proceeds of sale which Mrs Nelson asserts in her favour is tainted by illegality because of its association with or furtherance of a purpose which is contrary to the policy of the law as indicated by the scheme of the Act. If that be so, the question then is whether the consequence is that (i) no relief is available to Mrs Nelson, or (ii) relief may be granted but upon terms apt to make good the concern of the Commonwealth which was denied by the grant of the subsidy in respect of Kidman Lane whilst, as she always intended, Mrs Nelson was beneficial owner of the Bent Street property.

103. In our view, the answer to the first question is in the affirmative. The findings in the Supreme Court show that the title to Bent Street was taken in the name of the children, with the intention that Mrs Nelson be the beneficial owner so as to put her in an advantageous position later to obtain, if she so wished, financial assistance under the Act by concealing the true state of affairs.

104. It may have been that a change of heart upon which she had acted before she sought to enforce the resulting trust may have meant that the trust was never more than incipiently illegal. But that issue does not arise. The purpose was implemented with the obtaining of the subsidy for the Kidman Lane purchase. Mrs Nelson still holds this property. The litigation concerns ownership of the fund from the later sale of the Bent Street property. Given this state of affairs, the question remains as to what are the limitations upon the relief obtainable by Mrs Nelson.

105. In our view, as the price of obtaining the relief she seeks for the recognition and enforcement of a resulting trust in respect of the whole of the balance of the proceeds of sale of the Bent Street property, Mrs Nelson must be prepared to do equity according to the requirements of good conscience. That may involve consideration of more than the interests of the parties to the litigation. Here, good conscience calls for the taking by Mrs Nelson of steps sufficient to satisfy the demands of the underlying policy of the Act.

106. This requires denial to Mrs Nelson of the benefit in respect of the purchase of the Kidman Lane property which she has obtained by her unlawful conduct. This would appear to us to be a sum representing the present value of the difference, over the term of the loan agreement dated 30 August 1989, for the advance by the Bank to Mrs Nelson of $25,000, between the subsidised interest rate and that rate which, upon its usual terms, the Bank would have charged Mrs Nelson on an advance of $25,000 over the same period and for the same purpose.

107. That sum should be in the same amount as that which the Commonwealth might properly specify in a notice given to Mrs Nelson under s 29 of the Act.

108. If Mrs Nelson were to tender to the Commonwealth that amount which the Commonwealth might properly have specified in a notice given under s 29 of the Act, it is to be presumed that the Commonwealth would accept it. In particular, it is to be presumed that the amount would not be written off by the Commonwealth under par (a) of s 30(1) and that there would be no waiver under par (b) of the right of the Commonwealth to recover the amount of the subsidy.

109. The state of the record before this Court does not enable us to compute the sum we have mentioned ("the Benefit Sum"). The solicitors for the first appellant and for the first respondent should be given the opportunity to agree that amount, after such consultation with the Commonwealth and the Bank as they may be advised. If that agreement is not reached on or before 30 November 1995 , any party should have liberty to apply to this court. It would appear, in that event, to be necessary to refer the proceeding to the Equity Division of the Supreme Court for a finding as to the amount of the Benefit Sum. The Judge or Master dealing with the matter then might admit such further evidence as might be necessary to dispose of the matter.

110. If the agreement mentioned is reached, then declarations made in this Court should take effect finally to dispose of the case without further litigation in the Supreme Court.

111. What is required is the formulation of, and acceptance by Mrs Nelson of, a term upon the relief to which she is otherwise entitled which denies to her the benefit she obtained by her unlawful conduct and provides for the payment to the Commonwealth of the Benefit Sum.

Conclusions

112. The appeal should be allowed with costs. The orders of the Court of Appeal entered 21 September 1994 should be set aside. The declarations 1, 2 and 3 as made by the Master and entered 10 January 1994 should be set aside. The first respondent should pay the costs of the appellants of the proceeding at first instance and in the Court of Appeal.

113. There should be a declaration to the effect that, if on or before 9 January 1996 Mrs Nelson has paid to the Commonwealth an amount equal to the Benefit Sum received in respect of the purchase by her of the Kidman Lane property, the second respondents hold the whole of the balance of the proceeds of sale of the Bent Street property, together with any interest earned thereon, upon trust for the first appellant. This should be accompanied by an order that any moneys so held by the second respondents be paid to the first appellant.

114. The making by Mrs Nelson of this payment to the Commonwealth should have the effect of discharging any liability to the Commonwealth under s 29 of the Act.

115. There should be a further declaration to the effect that, if the Benefit Sum has been ascertained but shall not have been paid by Mrs Nelson as provided in the first declaration, the second respondents hold the balance of the proceeds of sale of the Bent Street property, 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. Such a trust of the Benefit Sum would do no more than reflect the unavailability of equity to obtain for the first appellant the actual fruits of her unlawful conduct. There should also be orders that the moneys so held by the second respondents be paid respectively to the first respondent and first appellant.

116. The parties should have liberty to apply to this Court if, on or before 30 November 1995 , the first appellant and the first respondent shall not have agreed the amount of the Benefit Sum.

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