FEDERAL COURT OF AUSTRALIA

Evans v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2012] FCAFC 81

FEDERAL COURT OF AUSTRALIA

Evans v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2012] FCAFC 81

CORRIGENDUM

1    The third sentence of [4] to be amended by adding the word “not” so that it reads as follows:

“Mrs Evans was unwell and not able to give evidence.”

Associate:

Dated:    13 June 2012

FEDERAL COURT OF AUSTRALIA

Evans v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2012] FCAFC 81

CORRIGENDUM

1    The second sentence of [4] has been amended to add the word “not” and now reads as follows:

“Mrs Evans was unwell and not able to give evidence.”

Associate:

Dated:    8 June 2012

THE COURT ORDERS THAT:

1.    The appeal be dismissed.

2.    The appellant pay the respondent’s costs.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

Introduction

1    This appeal has its origins in arrangements which were asserted to have been made amongst the late Mrs Joan Gladys Evans, her husband Mr Douglas Evans and the executor of her estate, their son Gordon Douglas Evans in about 1993 or 1995. At that time Mr Gordon Evans was working as a theatre designer. His contention is that he agreed with his father that he would become the managing director of his parents’ business which dealt in industrial fasteners, nuts and bolts and occupational health and safety equipment. As a result he gave up a fulfilling and profitable career in his own right. He took, he contended, little from his parents’ business in salary and as a result, over the period 1995 to 2007, lost earnings which he estimated at $1.2 million. The arrangement made in 1993 or 1995 was alleged to include the promise that when the family home was sold he would share equally with his parents, or any surviving parent or, if neither survived, would receive the entire proceeds of the sale of the residence. There was no other witness to this conversation or arrangement. It was never reduced to writing. Nevertheless, Mr Gordon Evans contended that the arrangement was contractual in nature.

2    That contention was advanced to challenge a decision by the Secretary, through Centrelink, which cancelled Mrs Evans’ aged pension. The aged pension was cancelled because on 14 September 2007 Mrs Evans sold the family home for $2,250,000 and subsequently purchased another house and transferred approximately half of the proceeds of the sale ($1,131,233) to Mr Gordon Evans. Mr Douglas Evans had died on 23 April 2006. Centrelink regarded the transfer of money to Mr Gordon Evans as a gift which amounted to a disposal of assets within the meaning of ss 1123 and 1124 of the Social Security Act 1991 (Cth). When the value of the “gift” was taken into account then Mrs Evans’ assets nullified her entitlement to a pension.

3    Initially this decision was challenged in the Social Security Appeals Tribunal (“the SSAT”). The SSAT affirmed the decision made by Centrelink. Then the decision was challenged in the Administrative Appeals Tribunal (“the tribunal”). The tribunal also affirmed Centrelink’s decision. At first there was no further challenge but on 15 September 2010 Mrs Evans applied for an extension of time to appeal to this Court against the decision of the tribunal. Before judgment was delivered Mrs Evans died. Nevertheless, on 1 February 2011 the primary judge ordered that an extension of time should be granted. On 27 October 2011 his Honour dismissed the appeal against the decision of the tribunal.

The primary judge’s decision

4    The primary judge dealt with three broad grounds of appeal. The first dealt with the weight given by the tribunal to a statutory declaration provided by Mrs Evans in support of the contention by Mr Gordon Evans of the arrangement to which reference was earlier made. Mrs Evans was unwell and able to give evidence. There was evidence before the tribunal which the primary judge found sufficient to support the conclusion that the statutory declaration was drafted and prepared in part by Mrs Evans’ legal representative and that she had relied on the memory of Mr Gordon Evans in the process. The statutory declaration also contained statements of opinion about the legal effect of the asserted arrangements which, if they were relevant at all, were of no real assistance. The primary judge concluded that the tribunal had made no appellable error within the confines of s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) in deciding to give little weight to the declaration.

5    The next ground of appeal concerned whether the tribunal should have acted upon a “rebuttable presumption” that family arrangements were not intended to give rise to legal obligations. The primary judge undertook a diligent analysis of the origins and development of the “presumption”, including the reservations expressed by the High Court in Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 at 105-106 [25]-[27]. The question at issue before the tribunal was whether there was a contractual arrangement concluded between Mr Gordon Evans on the one hand and his parents on the other. It is clear that the evidence provided to the tribunal by Mr Evans and his mother was insufficient to persuade it that a contract had been made between Mr Evans and his parents. The evidence, such as it was, did not suggest that it was more likely than not that the arrangement had any contractual significance as opposed to being merely an understanding amongst the three people involved, if the arrangement could be put so high.

6    Furthermore, not the least of the difficulties which Mr Evans faced before the tribunal was that he provided no documentary material to sustain his alleged loss, or its quantification. As a result, the tribunal concluded that it had not been proved that any consideration for the alleged contract had been provided. The primary judge took the view that this was a finding of fact which was not reviewable in the appeal before him.

7    The third ground of appeal involved an attempt by Mr Evans to rely upon “post contractual” conduct (the transfer of half of the proceeds of sale of Mrs Evans’ house to him) to sustain the proposition that a contract existed. In the circumstances, the tribunal did not regard the payment of money in this way as probative of the contention that the money was paid pursuant to a contractual arrangement rather than pursuant to a family understanding. The primary judge considered that the tribunal had not made any error in finding that this conduct was not determinative to establish the alleged agreement.

This appeal

8    Mr Evans effectively repeated his arguments to the primary judge before the Full Court. Having considered Mr Evans’ arguments on the first and third grounds, we are satisfied that the primary judge correctly dismissed them for the reasons that his Honour gave. The central issue in the appeal related to the second ground argued before the primary judge. That was whether the tribunal had made an error in relying on a rebuttable presumption that arrangements between parents and children are not intended to create contractual rights. We shall deal with this issue below.

9    The tribunal observed there was “a rebuttable presumption of fact that close relatives such as parent and child do not intend their arrangements to create legal relations” and cited Jones v Padavatton [1969] 1 WLR 328; [1969] 2 All ER 616 in support of this proposition. The primary judge rejected the appellant’s argument that this presumption was not now the law in Australia. The appellant had relied below on what Gaudron, McHugh, Hayne and Callinan JJ had said in Ermogenous 209 CLR at 105-107 [24]-[28] where they doubted the utility of using the language of presumptions in the context of discerning whether parties intended to create legal relationships. The primary judge concluded, after reviewing Jones [1969] 1 WLR 328 and a number of subsequent Australian cases, that their Honours’ observations in Ermogenous did “no more than provide a salutary warning that the presumption is not necessarily determinative nor that its application is mandatory, and that it could be erroneous to afford it undue weight”. He concluded that Ermogenous did not indicate that the presumption applied by the tribunal was no longer good law.

10    The Secretary relied on a number of authorities, some of which were considered by his Honour. In Gray v Gray [2004] NSWCA 408 at [56]-[58], Young CJ in Eq with whom Sheller and Bryson JJA agreed, upheld a trial judge who had distinguished Jones and found a legally binding agreement of loan between a mother and son. In Darmanin v Cowan [2010] NSWSC 1118 at [206]-[214] Ward J discussed the “presumption”, but examined only a part of what the plurality had said in Ermogenous 209 CLR at 105 [24] in respect of the need for an objective appraisal as to whether the parties intended to create legal relations. Her Honour did not refer to the subsequent passages in the plurality reasons that dealt with whether presumptions should be used at all in this context at 209 CLR at 105-107 [25]-[28].

11    The primary judge also referred to Tadrous v Tadrous [2010] NSWSC 1388 at [5], Xu v Shi [2009] NSWSC 955 at [30] and Selen v Selen [2011] Fam CA 310 at [49]-[50]. In the first case, after referring to Ermogenous 209 CLR at 106 [26], Pembroke J said that presumptions in this area may sometimes be unhelpful and did not rely on the presumption in Jones. In the second case, Bryson AJ did not refer to Ermogenous all but, correctly, noted that in cases involving financial arrangements in families there is no legal rule involved apart from the need to consider the facts in each case in order to ascertain whether the parties intended to enter into legal relations. In the third case, Austin J said that there was a “usual expectation”, not a rebuttable presumption, that agreements made in a domestic or family context are not legally enforceable. The Secretary also relied before the Full Court on Ashton v Pratt [2012] NSWSC 3 at [29]-[33] where Brereton J followed Ward J in Darmanin [2010] NSWSC 1118 at [206] in holding that there was a rebuttal presumption of the kind in Jones.

12    In our opinion, Ermogenous 209 CLR at 105-107 [24]-[28] rejected the use of presumptions as a basis for ascertaining whether parties intended to enter into contractual relations. Their Honours explained that the question in every case was whether an objective assessment of the state of affairs between the parties, in the context in which they were dealing evinced an intention to create contractual relations. That enquiry can take account of the subject matter of the agreement, the status of the parties to it, their relationship to one another and other surrounding circumstances. But, having regard to the potentially broad and diverse nature of those matters, as Gaudron, McHugh, Hayne and Callinan JJ said (209 CLR at 105 [25]):

“… not only is there obvious difficulty in formulating rules intended to prescribe the kinds of cases in which an intention to create contractual relations should, or should not, be found to exist, it would be wrong to do so.” Because the search for the “intention to create contractual relations” requires an objective assessment of the state of affairs between the parties (as distinct from the identification of any uncommunicated subjective reservation or intention that either may harbour) the circumstances which might properly be taken into account in deciding whether there was the relevant intention are so varied as to preclude the formation of any prescriptive rules”. (emphasis added)

13    That is why their Honours went on to doubt the utility of using presumptions in the context of “family arrangements” or the engagement of ministers of religion, saying (209 CLR at 106 [26]):

“For our part, we doubt the utility of using the language of presumptions in this context. At best, the use of that language does no more than invite attention to identifying the party who bears the onus of proof. In this case, where issue was joined about the existence of a legally binding contract between the parties, there could be no doubt that it was for the appellant to demonstrate that there was such a contract. Reference to presumptions may serve only to distract attention from that more basic and important proposition.

More importantly, the use of the language of presumptions may lead, as it did in this case, to treating one proposition (that an intention to create legal relations is not to be presumed) as equivalent to another, different proposition (that generally, or usually, or it is to be presumed that, an arrangement about remuneration of a minister of religion will not give rise to legally enforceable obligations). References to “the usual non-contractual status of a priest or minister” and factors which “generally militate against” a finding of intention to create legal relations (cf Greek Orthodox (2000) 77 SASR 523 at 576 [207] per Bleby J) illustrate the point. The latter proposition may then be understood as suggesting, in some way, that proof to the contrary is to be seen as particularly difficult and yet offer no guidance at all about how it may be done. Especially is that so when the chief factor said to justify the proposition that an intention to create legal relations must be proved (the essentially spiritual role of a minister of religion) is then put forward as the principal reason not to find that intention in a particular case, and any other matters suggesting that there may be an intention to create legal relations are treated as dealing only with "collateral" or "peripheral" aspects of the relationship between the parties (Greek Orthodox (2000) 77 SASR 523 at 576 [207] per Bleby J). In practice, the latter proposition may rapidly ossify into a rule of law, that there cannot be a contract of employment of a minister of religion, distorting the proper application of basic principles of the law of contract.” (emphasis added)

14    The fundamental question, whatever the circumstances of the parties, is whether in the situation in which they were, did their words and conduct objectively assessed, evince an intention that they intended to assume legally binding contractual obligations to each other? The family or other relationship is one circumstance that is relevant.

15    Where a parent asks a child to change his or her life, such as by giving up a job or career to look after a family business or to nurse or care for the parent in old age, on the holding out of a reward, the circumstances may warrant the inference that a legally binding contract was intended: see too NC Seddon and MP Ellinghaus: Cheshire and Fifoot’s Law of Contract (9th Austn Ed) at [5.6] where the learned authors suggest that in Australian law detrimental reliance by a promisee is treated as relevant to the issue of intention to enter into contractual relations, rather than to the issue of whether there is consideration.

16    Much depends on an evaluation of the actual circumstances. There will, of course, be situations in which language or conduct that is capable of being viewed as contractual if it were between strangers, could be viewed differently if it occurred between family members or friends. Although the characterisation of promises made between persons in family, domestic and social relationships is not be governed by a presumption that they are not contractual, nonetheless courts must be careful not to convert informal situations that frequently arise in circumstances that involve love, friendship and concomitant human emotional feelings of duty or responsibility, into the stuff of daily commercial life. Hence, the importance of considering, objectively, all the circumstances in arriving at a conclusion in respect of whether the parties intended to enter into contractual relations, free from suggested presumptions. The surest and safest way to proceed is, as the plurality held in Ermogenous 209 CLR at 106 [26]-[27], by examining objectively the actual circumstances and context of the parties’ dealings to ascertain whether what they said and did evinced an intention to contract as opposed to expressing a sincere, but legally insufficient, promise or commitment that reflected the trust or love shared between them.

17    All that said, there was no error in the finding of the primary judge that the tribunal ultimately made an unappellable finding of fact that it had not been established that Mr Evans and his parents had intended to make a legally enforceable contract. Although the tribunal referred to a rebuttable presumption of fact that close relatives such as parent and child do not intend their arrangements to create legal relations, it is clear that the tribunal’s finding would have been no different if the reference had not been made. Accordingly, the tribunal’s finding that it was not satisfied that the alleged contract was made, has not been shown to be open to review.

18    There was no legal onus of proof in the proceedings before the tribunal: McDonald v Director-General of Social Security (1984) 1 FCR 354 at 356-357 per Woodward J and at 366 per Northrop J; Catena v Australian Securities and Investments Commission (2011) 276 ALR 25 at 33 [33] per North, McKerracher and Jagot JJ. The function of the tribunal was to give what it considers to be the correct or preferable decision: Wilson v Minister for Aboriginal and Torres Strait Islander Affairs (1996) 189 CLR 1 at 18 per Brennan CJ, Dawson, Toohey, McHugh and Gummow JJ. The proceedings before it were not adversarial, but it remained for Mrs Evans to establish that her disposition to her son of over half the proceeds of sale of her home was not caught by ss 1123 and 1124 of the Social Security Act: SZBEL v Minister for Immigration and Indigenous Affairs (2006) 228 CLR 152 at 164 [40] per Gleeson CJ, Kirby, Hayne, Callinan and Heydon JJ, in referring to the Refugee Review Tribunal. As her case relied upon the suggested existence of a binding contractual obligation to make good her argument, the existence of the contract, and adequate consideration for it at the time it was made, had to be established.

19    Mr Evans gave the tribunal no objective information about how he and his parents conducted their relationship at the time of their discussions or even during the period when he worked in the family business. As the tribunal noted, Mr Evans and his mother did not produce either his financial and tax records or those of the business. Moreover, neither Mr Evans nor his mother put the will of the late Mr Evans senior or the mother’s then proposed will into evidence. Thus, the tribunal lacked any source of ascertaining whether the factual circumstances were consistent with or contradictory of the assertion that Mr Evans and his mother were seeking to prove. That left the tribunal to speculate about what, if any, detriment or consideration Mr Evans supplied for the alleged promise made in 1993 or 1995 that he and his mother claimed justified his receipt of over $1 million over 12 years afterwards.

20    In this context, the tribunal was entitled to conclude that it was not satisfied that, in all the circumstances, Mr Evans and his parents intended to and had made a legally binding and enforceable agreement in 1993 or 1995 that contained the terms they claimed.

21    Although the tribunal was not entitled to rely on any presumption, in the end, its reference to a rebuttable presumption made no difference to the outcome of the proceedings before it. That is because of the variety of factors which the tribunal found that told against a finding of the asserted contract ever having been made.

Conclusion

22    In our opinion the appeal must be dismissed and Mr Evans should pay the Secretary’s costs.

Associate:

Dated:    1 June 2012