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Supreme Court 9 May 2003

Wentworth v Rogers & Anor

[2003] NSWSC 371

Fraud & dishonesty
FRAUDULENT CONVEYANCES

Citation: Wentworth v Rogers & Anor [2003] NSWSC 371
Court: Supreme Court of New South Wales, Common Law Division
Date: 9 May 2003
Judge(s): Howie J

Background

The plaintiff, a self-represented litigant who had been in protracted proceedings against the first defendant for approximately two decades, sought to set aside a deed, transfer, and mortgage over a farming property near Tamworth called "Te Mata." The first defendant was the plaintiff's long-term litigation opponent. The second defendant was his wife, who held an interest in the property.

The plaintiff alleged that the first defendant had fraudulently mortgaged his interest in Te Mata to his wife. Her core contention was that the underlying debt the mortgage was said to secure, arising from the wife's payment of her husband's legal expenses, was a sham designed to either defeat any future judgment the plaintiff might obtain against the husband, or to give the wife priority if the husband became bankrupt.

The proceedings were initially commenced by notice of motion in related litigation before Sperling J, who severed the matter and ordered it to proceed by summons. The plaintiff was later granted leave to file a statement of claim specifically pleading fraud and seeking relief under s 37A of the Conveyancing Act 1919.

  • Whether the deed, transfer, and mortgage over Te Mata constituted a fraudulent alienation of property under s 37A of the Conveyancing Act 1919, being transactions entered into to defeat the interests of a prospective creditor.
  • Whether the acknowledgement of indebtedness by the husband to the wife, which underpinned the mortgage, was a sham.
  • Whether the plaintiff had discharged the heightened standard of proof required when fraud is alleged, as discussed in Briginshaw v Briginshaw (1938) 60 CLR 336.
  • Whether any equitable or inherent jurisdiction relief was available in the alternative.

Decision

The court found that the plaintiff had failed to establish her case to the requisite standard. Because the claim was one of fraud, the Briginshaw standard applied: the court required reasonable satisfaction commensurate with the gravity of the allegation before drawing the inferences the plaintiff urged. Despite extensive documentary material and written submissions spanning over 100 pages from each side, the evidence did not support a finding that the defendants' transactions were not bona fide.

The plaintiff's case relied on three overlapping arguments: drawing inferences from the timing and circumstances of the transactions, demonstrating that the underlying debt was false, and relying on the defendants' subsequent conduct as evidence of guilty knowledge. The court declined to draw the necessary inferences to the required standard, particularly given that the defendants gave sworn evidence to the contrary and the court accepted aspects of their account, including that the husband had intended to make a gift to his wife of a half interest in Te Mata and a separate cash payment.

On the alternative claim that money paid by the wife should be treated as repayments of loans from the husband, the court found the plaintiff had made no attempt to rebut the presumption of advancement that the wife enjoyed in respect of the property interest. The plaintiff also appeared to abandon aspects of this argument during the hearing, and no evidentiary basis was found to support it in any event.

The court also considered whether relief under the court's inherent jurisdiction or in equity (analogous to relief granted in Kang v Kwan) was available, but concluded that neither basis was made out on the facts as found. The plaintiff's summons was accordingly dismissed with costs.

Orders Made

  • The summons is dismissed.
  • Verdict and judgment entered for the defendants on the statement of claim.
  • The plaintiff is to pay the defendants' costs.

Key Takeaways

  • A plaintiff seeking to set aside a transaction as fraudulent under s 37A of the Conveyancing Act 1919 bears the onus of proving the fraud to the heightened standard of reasonable satisfaction described in Briginshaw v Briginshaw, reflecting the gravity of the allegation.
  • The Supreme Court declined to treat a mortgage by a husband over his interest in a farm property to his wife as a fraudulent conveyance where the defendants gave sworn evidence of a genuine underlying debt and the plaintiff could not displace that evidence to the required standard.
  • Where a plaintiff's case rests substantially on inference rather than direct evidence, and the defendants' sworn testimony supports the bona fides of the transactions, courts will scrutinise the inferential case carefully before finding fraud.
  • Under s 37A of the Conveyancing Act 1919, a prospective creditor, meaning a person not yet holding a judgment at the time of the impugned transaction, may in principle seek to challenge a conveyancing transaction on fraud grounds, but the claim must be made out on the evidence.
  • The presumption of advancement in favour of a wife receiving property from a husband remains a relevant consideration: a plaintiff challenging such a transfer must lead evidence sufficient to rebut it, or risk that aspect of the claim failing entirely.

Legislation and Cases Referenced

Legislation:
- Conveyancing Act 1919 (NSW), s 37A
- Supreme Court Rules (NSW), Pt 13 r 2
- Supreme Court Act 1970 (NSW), ss 23, 88
- Justices Act 1902 (NSW), s 41(6)
- Bankruptcy Act 1966 (Cth), ss 6, 121, 122

Cases:
- Briginshaw v Briginshaw (1938) 60 CLR 336
- Australian Competition and Consumer Commission v Amcor Printing Papers Group Ltd [2000] FCA 17; (2000) 169 ALR 344
- Bradshaw v McEwans Pty Ltd (HCA, 7 April 1951, unreported)
- Wentworth v Rogers [1984] 2 NSWLR 422
- Wentworth v Rogers (No. 5) (1986) 6 NSWLR 534
- Wentworth v Rogers (No. 10) (1987) 8 NSWLR 398
- Jones v Dunkel (1959) 101 CLR 298
- Freeman v Pope (1870) LR 5 Ch App 536
- Kang v Kwan [2002] NSWSC 1187
- Silvera v Savic (1999) 46 NSWLR 124
- Williams v Lloyd; Re Williams (1934) 50 CLR 341
- PT Garuda Indonesia Ltd v Grellman (1992) 35 FCR 515
- Gregg v Bromley [1912] 3 KB 474
- Abignano v Wenkart (1998) 9 BPR 16,765
- Harkness v Partnership Pacific Ltd (1997) 41 NSWLR 204