Trust Property Transfer Voidable for Defrauding Creditors

The court held that the transfer of trust property to a new trustee was voidable under s 37A of the Conveyancing Act 1919 (NSW) as it was made with the intent to defraud creditors. The transfer occurred after a writ of execution had lapsed, allowing the new trustee to avoid the creditor’s claim.

Supreme Court New South Wales

Medium Neutral Citation: [COMPANY] v [COMPANY]; [COMPANY] v [COMPANY] [2011] NSWSC 258 Hearing dates: 2-3 March 2011 Decision date: 01 April 2011 Before: Rein J Decision: Transfer of property voidable for breach of s 37A of Conveyancing Act 1919 (NSW) Catchwords: REAL PROPERTY - s 37A of Conveyancing Act 1919 (NSW) - alienation of land with intent to defraud creditors - where the plaintiff executed a writ over trust property of which the first defendant was trustee to secure a judgment debt that the plaintiff obtained against the first defendant - the first defendant was replaced by the second defendant - the writ lapsed and the first defendant transferred the trust property to the second defendant as the new trustee before a new writ could be lodged - whether the transfer was intended to delay or hinder or defeat the creditor in circumstances where no step was taken by the outgoing trustee to protect its right to indemnity from the trust assets before it transferred the property to the new trustee - nature of relief Legislation Cited: Conveyancing Act 1919 (NSW) Real Property Act 1900 (NSW) Cases Cited: [COMPANY] v [NAME] (as trustee of estates of [NAME]) [2009] NSWCA 129 [COMPANY] as trustees for [COMPANY] v [NAME] as trustee of bankrupt Estates of [NAME] [2008] NSWSC 685 Black v Garnock [2007] HCA 31; (2007) 230 CLR 438 Blatch v Archer (1774) 1 Cowp 63; 98 ER 969 Chen v Marcolongo [2009] NSWCA 326; (2009) 260 ALR 353 [NAME]. of Australia v Ferrcom Pty Ltd (1991) 22 NSWLR 389 Custom Credit Corp Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42 Green v Schneller [2002] NSWSC 671; (2002) 29 Fam LR 346 Hampton Court Ltd v Crooks (1957) 97 CLR 367 Houvardas v Zaravinos [2003] NSWSC 387 In re [NAME]; Ex parte Trustees [1923] 2 Ch 1 Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd [2008] NSWSC 1344; (2008) 74 NSWLR 550 Marcolongo v Chen [2011] HCA 3 Re Cummins; Richardson v Cummins (1951) 15 ABC 185 Silvera v Savic [1999] NSWSC 83; (1999) 46 NSWLR 124 Travis v Illingworth [1868] WN 206 Zaravinos v Houvardas [2004] NSWCA 421 Texts Cited: [NAME] & [NAME], Principles of the Law of Trusts, 4th ed (2010), [NAME], Lewin on Trusts, 18th ed (2008), Thomson/Sweet & Maxwell Category: Principal judgment Parties: [COMPANY] (plaintiff in proceeding 2010/241786; defendant in proceeding 2010/78630) [COMPANY] (first defendant in proceeding 2010/241786; first plaintiff in proceeding 2010/78630) [COMPANY] (second defendant in proceeding 2010/241786; second plaintiff in proceeding 2010/78630) Representation: Counsel: [redacted] [NAME] ([COMPANY] and [COMPANY]) Solicitors: [redacted] [NAME] ([COMPANY] and [COMPANY]) File Number(s): SC 2010/241786; 2010/78630

Judgment 1These proceedings concern an application for finance made by [COMPANY] ( "[NAME]" ) in October 2005. An offer was made by [COMPANY] ( "[NAME]" ) on 16 March 2006, which offer was accepted by [NAME] and guaranteed by Ms [NAME], who was at the time a director of [NAME]. 2Agusta was described in the loan application and the letter of 16 March 2006 as trustee of the [COMPANY] ( "the Trust" ). 3The Trust had been established in 1995. It has had a number of names and has had a number of trustees. On 19 April 2005, Mr [NAME] and [NAME] ( "the [NAME]" ) resigned as trustees of the Trust and were replaced by [COMPANY] ( "[NAME]" ). On 14 October 2005, the [NAME] were declared bankrupt. On 9 February 2006, [NAME] resigned as trustee and [NAME] was appointed trustee by deed dated 9 February 2006: see pages 54-55 of Exhibit A (" the Court Book" ). This deed is signed by [NAME] on behalf of both [NAME]. According to Exhibits C and D, [NAME] was a director of both these companies on that date. 4By the letter of offer, [NAME] offered a loan of $5.5million, which offer was accepted by [NAME]. [NAME] agreed to pay several amounts to [NAME] even if the loan contemplated by the letter of offer did not proceed: see pages 59-64 of the Court Book. [NAME] guaranteed the amounts due from [NAME]. The loan did not proceed. [NAME] sought payment of the amounts due under the loan agreement from both [NAME] and [NAME], and following non-payment, [NAME] commenced proceedings in the District Court. 5On 23 November 2007, [NAME] obtained judgment in the District Court against both [NAME] and [NAME] for $119,341 and interest in the amount of $19,225.35 ( "Judgment Debt" ). No appeal was brought by [NAME] or [NAME]. 6Provident sought to enforce the Judgment Debt obtained by it against [NAME] by a writ of execution taken out on 18 June 2009 on a property at [ADDRESS] (" the Property" ) of which [NAME] was the registered proprietor. 7On 18 June 2010 it appears that the writ expired and notwithstanding the efforts of [NAME] to prevent any dealing with the Property between 18 June and 23 June 2010, [NAME], on 23 June 2010, was able to lodge a transfer of the Property from [NAME] to itself. [NAME] had earlier complained to the Sheriff about the execution of the writ on the Property and had commenced proceedings in both the District Court and this Court in that connection. The proceedings in the District Court did not proceed but in this [NAME] brought proceedings on behalf of the Trust asserting that [NAME] had not been properly appointed and claiming that [NAME] should be the registered proprietor of the Property. 8Following the lapsing of the writ and the registration of [NAME] no longer needed the intervention of the Court to become registered proprietor and the only relief now sought by [NAME] is the removal of a notation on the title: "AFS97049 NOTE: NO DEALINGS TO BE REGISTERED. REFER ALL INQUIRIES TO LEG 2. SEE LM 220100868" 9Provident maintains that the transfer of the Property by [NAME] to [NAME] falls within s 37A of the Conveyancing Act 1919 (NSW)("the Act") which is in the following terms: "(1) Save as provided in this section, every alienation of property, made whether before or after the commencement of the Conveyancing (Amendment) Act 1930, with intent to defraud creditors, shall be voidable at the instance of any person thereby prejudiced. (2) This section does not affect the law of [NAME] for the time being in force. (3) This section does not extend to any estate or interest in property alienated to a purchaser in good faith not having, at the time of the alienation, notice of the intent to defraud creditors." 10Ms [NAME] of counsel appears for [NAME] and [NAME] of counsel appears for [NAME]. 11Agusta had become the registered proprietor of the Property on 1 May 2006 when the [NAME], who had been trustees of the Trust until 19 April 2005 executed, a transfer to [NAME] from themselves as registered proprietors of the Property. Since the [NAME] were no longer trustees of the Trust, if the Property was Trust property, which both parties accept it was, they were entitled to transfer it to the new trustee. If the [NAME] owned the Property beneficially, then they had no power to transfer the Property because it would pass to their trustee in [NAME]. There was initially a suggestion, on behalf of [NAME], that the transfer from the [NAME] to [NAME] was invalid because they were, at the time of the transfer, undischarged bankrupts, but I think it was accepted that since they were trustees only they were entitled to transfer the Property to a new trustee, namely [NAME]. 12It was also asserted that [NAME] was not validly appointed as trustee of the Trust. Whilst it is possible that [NAME] was not validly appointed as trustee, I do not think that this has been established. I proceed upon the basis that [NAME] was entitled to act as trustee of the Trust in 2006. It was not suggested by either party that the appointment of [NAME] as trustee in 2008 was an invalid appointment, and so I proceed on the basis that that too was a valid appointment. 13The case for [NAME] is that [NAME] was entitled and required, as trustee, to ensure the transfer of the Property to itself and that [NAME] consented to that course by execution of the transfer on 23 June 2010. Prior to that date, the transfer could not be lodged because [NAME] had lodged a writ on title which writ lapsed on 18 June 2010. There was also a mortgage on title which mortgage was discharged on 23 June 2010 (see second page of Exhibit B). That mortgage would appear to be one to [NAME] (see Exhibit B), but it was not identified and no details of the amount owing on the mortgage as at 23 June 2010 were provided to the Court. 14Agusta and [NAME], by the amended summons filed in this Court, sought declarations that [NAME] was the registered proprietor of the Property and an order that the [NAME] register ( the "Register" ) should be amended to reflect that. The summons asserted that [NAME] had been invalidly recorded as registered proprietor and did not hold the Property in its own right (see page 2 of the Court Book). [NAME] do not now press for any relief other than the removal of the notation on the Register referred to in [8] above because on the lapsing of [NAME]'s writ, [NAME] was able to register the transfer. It was accepted by [NAME] that the lapsing of the writ did not occur by reason of anything done by [NAME] or [NAME]. Indeed, the lapsing was described by [NAME] as resulting from a "bungle" in the District Court registry. It is not clear how exactly the writ came to lapse without being replaced by a new writ, but it is clear that it did so lapse and it is accepted that the reason for the lapse has nothing to do with [NAME] or [NAME]. It appears that the inability of [NAME] to execute the writ within the 12-month period was a result of action taken by and complaints made to the Sheriff by [NAME]. 15In [COMPANY] as trustees for [COMPANY] v [NAME] as trustee of bankrupt Estates of [NAME] [2008] NSWSC 685 ("Proceedings 4820/06"), [NAME] sought a determination as against the [NAME] that first [NAME] had been appointed trustee of the Trust and then [NAME] had been appointed, and that the [NAME] had no claim on the balance of the sale proceeds obtained from the Point Piper property (that property was the subject, incidentally, of the [NAME] agreement). [NAME] noted at [23]: "Initially, [[NAME]] contended that the [NAME] had been replaced as trustees by [NAME], alternatively, by [NAME]. However, during the course of submissions the case for [NAME] was not pressed and the preference for [NAME] was stated (T pp 175, 181 and 186). I was left with the impression that the plaintiffs accepted the indubitably correct situation that upon the [NAME] of the [NAME] s 5 and s 58(1) of the [NAME] Act 1966 (Cth) operated to vest the rights and powers attached to their units in the defendant so that they became unable to vote for, or to otherwise approve, a change to [NAME] under either cl 15(a) or cl 15(b) of the trust deed. (See Wood v W & G Dean Pty Ltd [1929] HCA 44 ; (1929) 43 CLR 77, per Isaacs J.) Accordingly, I have proceeded on the basis that it was [NAME] which the plaintiffs finally claimed to be the trustee at the relevant time. In support, they relied upon the deed of 19 April 2005 and the remedial deed of 5 April 2006." 16Nicholas J determined that although [NAME] was the trustee at the relevant time, the Trust assets had not vested in [NAME]. An appeal was brought by [NAME] ( [COMPANY] v [NAME] (as trustee of estates of [NAME]) [2009] NSWCA 129 ) on specific items to which the [NAME] was held to be entitled but the appeal had no relevance to the current matter, save for the Court of Appeal's acceptance at [15] per Tobias JA (with whom Beazley and Macfarlan JJA agreed) of the principles as set out in [35] of [NAME]'s judgment at first instance. [NAME] was found to be the trustee, as against the [NAME]'s contention that the [NAME] were the trustees, the question of whether [NAME] was validly appointed was not the subject of determination by [NAME]. It was agreed before me that the determination by [NAME] that [NAME] was the trustee from 2005 was not evidence or binding on me and this concession is clearly correct. 17Mr [NAME]'s submission, however, seems to rely on the conclusion that [NAME] was held to be the trustee, as justifying a belief that [NAME] should become the registered proprietor of the Property. This seems to slide into a proposition that [NAME] was not acting in bad faith of [NAME] because it was merely taking steps in accordance with [NAME]'s determination. 18As I have pointed out, [NAME]'s determination that [NAME] was the trustee was based upon an agreement between [NAME] that [NAME] was not replaced by [NAME]. In any event, I do not think [NAME] needs to defend the transfer to it of Trust property in a general sense since by deed of 26 July 2008 it had become trustee. A number of submissions were made by [NAME] concerning [NAME]'s knowledge and position. The relevant "person" is the debtor ie [NAME], not the transferee, unless the transferee asserts that it is a bona fide purchaser for value without knowledge of the intent to defraud a creditor.

Evidence of [NAME] 19Agusta and [NAME] rely on the affidavit of [NAME] ( "[NAME]" ) of 29 March 2010. 20Mr [NAME] is not a director of [NAME] or [NAME] but he says he is a manager of both companies. He does not say how long he has been manager. No director of [NAME] (or [NAME]) gave evidence. 21Mr [NAME] annexed the deed of 9 February 2006 appointing [NAME] (see pages 53-54 of the Court Book), but whilst he said (at paragraph 11 of his affidavit of 29 March 2010 at pages 8-9 of the Court Book) that [NAME] "purportedly became the trustee", he offered no evidence as to why what is contained in the deed was not correct. He was a witness to [NAME]'s signature on behalf of both [NAME]. He made reference to the letter of offer (pages 59-64 of the Court Book) to [NAME] from [NAME] but did not positively assert that [NAME] was not acting as trustee or assert that it was not entitled to so act. 22Whilst it appears that [NAME] seeks to assert that the deed of 9 February 2006 appointing [NAME] was invalid, the basis is quite unclear. [NAME] submitted that the word "purportedly" was used because as at 9 February 2006, the [NAME] were bankrupt (see T51.19-20). This is not of itself a reason why a properly constituted meeting of unit holders could not appoint a new trustee. To the extent that there is any reliance on the judgment of [NAME] in Proceedings 4820/06, as I have indicated, whether [NAME] or [NAME] was the trustee was not an issue determined by his Honour. [NAME] offers no direct evidence as to why the appointment of [NAME] was invalid or ineffective. Although he refers to the letter of offer to [NAME] from [NAME] and the consequences (see paragraphs 18-21 of his affidavit of 29 March 2010 at pages 8-10 of the Court Book), he does not assert that (other than implicitly by reason of the decision of [NAME]) that [NAME] was not acting or entitled to act as trustee. 23In my opinion, if it was [NAME]'s case that it was never validly appointed, it was incumbent on it to bring evidence forward to support that contention and a concession made by it in other proceedings that [NAME] was the trustee is not evidence. No evidence was given by unit holders in the Trust as to the process or lack of process by which [NAME] (or [NAME] for that matter) was appointed as trustee. 24On the rights and liabilities of trustees in dealing with third parties, there are some basic principles, which I take from the restatement by Brereton J in Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd [2008] NSWSC 1344; (2008) 74 NSWLR 550 at [14]-[22] , that need to be borne in mind to understand the parameters of the present dispute: "14 First, as against a third party, a trustee is personally liable for debts and liabilities incurred in its capacity as trustee: Vacuum Oil Co Pty Ltd v Wiltshire (1945) 72 CLR 319; Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 367. 15 Second, however, the trustee has a right of indemnity out of the trust assets for expenses or liabilities incurred by the trustee, by recoupment of expenditure and exoneration from liability: [NAME] v [NAME] (at 367); Chief Commissioner of Stamp Duties for New South Wales v Buckle (1998) 192 CLR 226 at 245. 16 Third, this right of indemnity, recoupment and exoneration is secured by an equitable lien over the trust assets, which arises by operation of law and confers a proprietary interest, in the nature of a security interest, in the trust assets, and takes priority over the claims of beneficiaries: [NAME] v [NAME] (at 367, 370); Chief Commissioner of Stamp Duties for New South Wales v [NAME] (at 246). 17 Fourth, this equitable lien extends to all of the trust assets, save only those that are specifically excluded by the trust instrument: Dowse v Gorton [1891] AC 190; [NAME] v [NAME] (at 367). 18 Fifth, being an equitable lien, the security is enforceable by the trustee only by judicial sale or appointment of a receiver, and not by foreclosure or by sale out of Court: Tennant v Trenchard (1869) LR 4 Ch App 537; ANZ Banking Group Ltd v Intagro Projects Pty Ltd [2004] NSWSC 1054 at [14]; Melbourne Tramways Trust v Melbourne Tramway & Omnibus Company Ltd (1887) 13 VLR 487 at 490; Re [NAME] (1882) 22 Ch D 255 at 265; Re Stucley [1906] 1 Ch 67; Davies v Littlejohn (1923) 34 CLR 174 at 184; Hewett v Court (1983) 149 CLR 639 at 663; [NAME], The Law of Securities: an account of the law pertaining to securities over real and personal property under the laws of Australian jurisdictions , 5th ed (1993) Sydney, [COMPANY] a t 198. 19 Sixth, the right of indemnity accrues at the time the obligation is incurred: Xebec Pty Ltd (In Liq) v Enthe Pty Ltd (1987) 18 ATR 893; [NAME] Wine Corporation Pty Ltd (In Liq) v Frankland River Olive Co Ltd (2005) 31 WAR 162 at [30]; and is not subsequently lost by cessation of office, whether by retirement or removal: [NAME] v [NAME] (at 898); Coates v McInerney (1992) 7 WAR 537; [NAME] (at [30]); Dimos v Dikeakos Nominees Pty Ltd (1996) 68 FCR 39 at 43. 20 Seventh, upon [NAME] or liquidation of a trustee, its right of indemnity vests in its trustee in [NAME] or liquidator: [NAME] O'Neill v O'Neill (1898) 16 NZLR 628; Jennings v Mather [1901] 1 KB 108 at 117; [NAME] v [COMPANY] (1906) 3 CLR 1170 at 1188, 1196; [NAME] v [NAME] ; [COMPANY] (In Liq) (1983) 33 SASR 99. 21 Eighth, if the trust property is transferred to a new trustee, the lien survives and the new trustee takes subject to the lien of the old trustee - except perhaps in the exceptional case of a bona fide purchaser for value without notice: Belar Pty Ltd (In Liq) v Mahaffey [2000] 1 Qd R 477 at [20]; [NAME] v [NAME] (at 370); Chief Commissioner of Stamp Duties for New South Wales v [NAME] (at 246); [COMPANY] (1866) 55 ER 970. 22 Ninth, a trustee is entitled to retain possession of trust property against a beneficiary until its indemnity is exercised: [NAME] v [NAME] (at 369-370); Chief Commissioner of Stamp Duties for New South Wales v [NAME] (at 246); [COMPANY] (at 972); Re [COMPANY] [1983] 1 VR 561." 25To this has to be added the fact that the [NAME] system of land in New South Wales does not permit trust interests to be recorded in the Register: see s 82 of the Real Property Act 1900 (NSW) . The Real Property Act does permit trust instruments to be lodged and if lodged, the Registrar-General is required to record in the Register a caveat. In the absence of the trust instrument being lodged, the fact that the registered proprietor holds the land as trustee is relevant only as between himself and the trust but not as between himself and third parties. In the High Court's decision of Black v Garnock [2007] HCA 31; (2007) 230 CLR 438, Hayne, Gummow and Callinan JJ emphasised the significance of the Register and rejected the claim of a third party purchaser for value who had no notice of a writ of execution on land lodged by the Sheriff two hours before settlement. 26It follows from the principles set out at [24] and [25] above that: (1)[NAME] was liable to [NAME] on the contract made on 16 March 2006; (2)[NAME]'s registration as owner of the Property did not require any notation as "trustee", and it was, as trustee, entitled to be registered as the owner of the Property without lodging the trust instrument; and (3)if [NAME] was validly appointed as trustee, it was entitled to an indemnity out of Trust assets for the Judgment Debt owed to [NAME]. I shall deal separately with [NAME]'s entitlement to indemnity even if it was not validly appointed. 27For a transfer of an interest in land to be voidable under s 37A of the Act, there are four elements which need to be established: (1)that there has been an alienation; (2)of property; (3)with intent to defraud creditors; and (4)that the person seeking to set aside the transfer has been prejudiced. 28Mr [NAME] conceded that the transfer constituted an alienation of property, thereby accepting implicitly the correctness of the following cases: Green v Schneller [2002] NSWSC 671; (2002) 29 Fam LR 346; Re Cummins; Richardson v Cummins (1951) 15 ABC 185; and Silvera v Savic [1999] NSWSC 83; (1999) 46 NSWLR 124 . 29The contest between the parties centred upon: (1) whether an intent to defraud creditors, a requirement of s 37A of the Act, was established; (2) whether [NAME] had established that it was prejudiced by the alienation; and (3) the nature of the relief to be granted, as [NAME] contended that even if the transaction was avoided, it would not assist [NAME] because [NAME] is not the trustee and has no right to be recorded as registered proprietor of the Property, so the Registrar-General would not have the power to place [NAME] on the Register. [ADDRESS], [NAME] submitted, would not order the Registrar-General to do what he has no power to do.

Intent to defraud creditors 30At the hearing, it was accepted that the Court of Appeal's decision in Chen v Marcolongo [2009] NSWCA 326; (2009) 260 ALR 353 was binding authority on the issue of what is required to make out a case based on s 37A of the Act. 31A few days later however, the High Court handed down its decision in Marcolongo v Chen [2011] HCA 3 and unanimously overturned the Court of Appeal's decision. Counsel agreed on a regime for an exchange of written submissions so that they could deal with the High Court's decision and I received detailed written submissions. 32The plurality in [NAME] (French CJ, Gummow, Crennan and Bell JJ) examined the history of s 37A of the Act and its analogues and held that the statute should be given a liberal construction and that "defraud" should be read as "delay, hinder or [otherwise] defraud": see [19], [32], [56] and [58]. It was not necessary to show that the debtor wanted creditors to suffer a loss or that the debtor had a purpose of causing loss, rather, "it was necessary to show the existence of an intention to hinder, delay or defeat creditors and in that sense to show that accordingly the debtor had acted dishonestly." (emphasis added): see [32]. 33In [NAME] had encouraged or procured [NAME] to sell the property to him in haste and at a relatively low price ($15 million), telling her that there were outstanding claims against her company [COMPANY] ( "[NAME]" ), and that if she did not do that [NAME] would suffer a big loss and have its assets frozen. 34Mrs [NAME] was a next door neighbour who had a claim against [NAME] in respect of the building works carried out on [NAME]'s property, which at the time of the sale by [NAME] to [NAME], had not yet been the subject of adjudication in the District Court. [NAME] did subsequently obtain judgment for $388,000 plus costs against [NAME]. French CJ, Gummow, Crennan and Bell JJ observed at [56]-[58]: "56 ...But the provision in special condition 33(b) for application of the balance of the proceeds to debts owed by [NAME] and related entities of [NAME], and the evidence as to the lack of arrangements for [NAME] to pay that balance, shows the deterioration to the position of [NAME] that inevitably ensued. It is no answer, as it was no answer in In re [NAME]; Ex parte Trustees, that there had been no delay and hindrance occasioned by the transaction because eventually she might have had some recovery for any judgment she recovered and costs. 57 The second point is that s 37A requires a finding, which Hamilton J made, of intent to achieve the proscribed prejudice. The section does not postulate a mixture of motives from which there must be extracted what is identified as a predominant intent to defraud. Further, as Stephen J indicated in his discussion in [NAME] v [NAME] of Taxation , a provision such as the Elizabethan Statute does not require for its operation that the proscribed intent to defraud be the sole intent. Nor is it an answer to an application under the section that the transferor formed the intent of which it speaks by reason of the misconduct of another or, as here, of the transferee; the transferor, as in this case, will have remedies against that party but that does not deny success on the application made under the section by the person prejudiced. Counsel for [NAME] was unable to point to any line of authority in the extensive case law upon the Elizabethan Statute which would confine s 37A in this fashion. 58 The final point is that the limiting effect which [NAME] sought to place upon s 37A would be to deny it the liberal construction which the Elizabethan Statute has long been held to require." 35Heydon J, in his judgment, made reference to the fact that [NAME] had told [NAME] that she could go to gaol if [NAME] had liabilities that could not be met. His Honour noted at [78] the trial judge's finding that [NAME]'s reason for signing the contract of sale on behalf of [NAME] was "to get the property away from those who might claim against that company and to avoid the company suffering a "big loss" in the form of the $600,000 claim." After noting the haste with which the transaction was conducted, Heydon J said at [87]-[88]: "87 Whatever the precise test called for by s 37A, the intent underlying the conduct of [COMPANY] through [NAME] was enough to satisfy it. It was as "actual" and "dishonest" an intent as it is possible to have. The intent was to delay or hinder a creditor, [NAME], by forestalling any attempt by her to obtain an injunction ensuring that assets in the hands of [COMPANY] would remain available to satisfy any judgment which she obtained in the District Court proceedings. It was an intention that was primary and not "merely incidental" to other intentions. The intent was not merely a minor element amidst a range of mental states. [COMPANY] submitted that [NAME]'s reasons for entering the transaction were many and varied. On examination each of them boils down either to an element of or factor in the intent found by the trial judge, or to a worry [NAME] was experiencing but which the transfer could not overcome. In the Court of Appeal it was said that she was very worried about "a great number of factors, including the incarceration of her husband in China, the stalled building project, the claims from the first project and her inability to fund the project." The first cannot have been a reason for the transfer, and the remainder are all related to the intent found by the trial judge. [COMPANY] submitted that [NAME] was unwell, but that did not go to her intent. In evidence she identified as other reasons for the transaction the following: the indebtedness of [COMPANY]; the need for another $3.4 million to complete the project; the need for that money to be invested within two months, when the construction licence would expire; and the need to repay a debt to avoid going to gaol. Of these reasons, only two were not related to the intent found by the trial judge. One was the need to invest the $3.4 million. The other was the need to repay a debt to avoid going to gaol. The transaction with [NAME] did not meet either need. 88 The evidence accepted by the trial judge, and his findings, reveal that the proscribed intention was probably the sole one, but at all events it was a predominant and primary one." 36It was accepted that no consideration was paid to [NAME] for the transfer of the Property to [NAME] and it is clear that as soon as the writ lapsed, [NAME] moved rapidly to effect the transfer. There is no doubt that the transfer removed the prospect of [NAME] being able to lodge a further writ on the title of the Property at least without the intervention of this Court. Although the registration of the writ does not create any interest in land under the Real Property Act (see s 105(1)), the recording of the writ prevents any registration of dealing which does not recognise the writ as if it were a prior encumbrance: see s 105A(2). 37At first glance it appears obvious that the transfer by [NAME] was designed to impede [NAME] from issuing a fresh writ to enforce its Judgment Debt. The following arguments were advanced by [NAME] in his written submissions as to why the requisite intent in s 37A of the Act has not been established: (1) [NAME] was hindered or delayed in enforcing its Judgment Debt against [NAME] because the writ lapsed before it was executed. (2) [NAME] was not the proper trustee of the Trust "so that it was mistakenly recorded as the proprietor of the [ADDRESS]". (3) [NAME] failed to take advantage of the mistake before [NAME] or the Court were able to rectify it. (4) [NAME] was unable to obtain a fresh writ because [NAME] was not a debtor of [NAME]. 38The argument in [37](1) focuses on the writ which had undoubtedly lapsed and as I have noted, not directly by reason of any conduct on the part of [NAME]. I think however that the focus is too narrow - [NAME] would in the normal course have been entitled to the issue of a fresh writ and it was the transfer out of [NAME]'s name which precluded a fresh writ from being issued. 39The arguments in [37](2) and (3) refer to [NAME] being "mistakenly recorded" as the registered proprietor of the Property. If this is intended to assert that [NAME] should never have been recorded as proprietor, I do not think that has been established. If it is intended merely to assert that since [NAME] had been appointed as trustee in 2008, the transfer should have been effected earlier than 2010, I do not think that the phrase "mistakenly recorded" is apt. However, I accept, subject to one important matter, that it was not inappropriate for [NAME] to transfer the Property to [NAME] as the newly appointed trustee and to do so without any consideration as such being paid for the Property. 40The qualification to which I have referred in [39] is this. [NAME], when it incurred the Judgment Debt, had been appointed as trustee and it was conceded by [NAME] that it appears that the loan it sought from [NAME] was for the benefit of the Trust: see T7.5-T7.27. In the absence of any evidence that [NAME] was not acting on behalf of the Trust, I infer that it was acting on behalf of the Trust when it entered into the loan contract with [NAME]. When [NAME] transferred the Trust property, it had a judgment against it and was well aware that [NAME] was seeking to enforce that Judgment Debt. There is no evidence that [NAME] made any arrangement with [NAME], as incoming trustee, for indemnification out of Trust assets of the Judgment Debt, or for payment of the Judgment Debt by [NAME] directly to [NAME]. It is obvious that [NAME] had no intention of accepting that the Judgment Debt owed by [NAME] should be paid by it out of Trust assets or otherwise. There is no evidence before the Court as to why [NAME] (or [NAME] for that matter) has never paid the Judgment Debt and I infer it is because [NAME] does not have the means out of its own assets to pay the Judgment Debt. 41The fact that as at the time [NAME] incurred the liability to [NAME] it was not the registered proprietor of the Property but only became registered at a later time is relied on by [NAME] to demonstrate that [NAME] received a benefit by a fortuitous transfer and the removal of the benefit is in the same category. This has, it is submitted, two aspects. The first is that it is said that there is nothing unfair about the transfer and secondly that the transfer into [NAME]'s name after it has incurred a liability demonstrates the absence of bad faith. 42There are a number of answers to this point: (1) If [NAME] was validly appointed as trustee (and as I have said it has not been demonstrated that it was not), then it was appropriate that the assets of the Trust, including the Property, be transferred to it prior to and at least as at 16 March 2006. If that had occurred, [NAME] would have been entitled to be registered as the proprietor. When [NAME] incurred the liabilities to [NAME] (see [19] of [NAME] as set out at [24] above), [NAME] had a right of indemnity. (2) The first point links to the second. Had the transfer in February 2006 been effected, as it ought to have been, then [NAME] would have had protection for debts incurred by it acting as trustee. When [NAME] was subsequently appointed as trustee and a transfer was arranged from [NAME] to it, the matters to which I have referred in (1) above became pertinent. (3) Although the judgment of [NAME] in Proceeding 4820/06 was handed down on 8 July 2008, no steps were taken by [NAME] or [NAME] to transfer title until 2010. Whilst it is true that from 18 June 2009, the writ of execution had been lodged, there was a period of almost a year before that in which no steps were taken. 43Mr [NAME] also relied on the failure of [NAME] to cross-examine [NAME] on his affidavit and he argued that there were potential reasons for the failure to transfer the Property prior to 23 June 2010, particularly the mortgage that were not explored with [NAME]. [NAME] submitted that it would be unfair to infer fraudulent conduct on the part of [NAME] or [NAME] in the absence of cross-examination. [NAME] replied to this (at T69), pointing out that it was not necessary to bring evidence of the state of mind of the alienor and that the Court could infer the necessary intention for the purposes of s 37A of the Act. [NAME]'s second point was that [NAME] was not the directing mind of either [NAME] or [NAME] and rather significantly, in any event, his affidavit is dated March 2010, ie three months before the impugned transaction. [NAME] could have provided evidence on behalf of [NAME] as to the intentions behind the transfer, the fact is that he did not do so. Nor did he explain the delay from July 2008 to June 2010. He gave no evidence about the mortgage which is recorded on the title of the Property: see the second page of Exhibit B. If [NAME] had the ability to deal with matters to rebut [NAME]'s case based on his knowledge of the facts, his failure to do so points to the conclusion that the evidence he could give would not assist the case of [NAME]: see [NAME]. of Australia v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418. The matters were very much in the province of [NAME] (and [NAME]) and evidence on this topic should be weighed in accordance with the power of the defendant to adduce it: see Blatch v Archer (1774) 1 Cowp 63; 98 ER 969 , approved in Hampton Court Ltd v Crooks (1957) 97 CLR 367 at 371. In the circumstances, I do not think that [NAME]'s failure to cross-examine [NAME] precludes the conclusion that the transfer of the Property without adequate protection of [NAME]'s rights to indemnity from the Trust was not a breach of s 37A of the Act. The conclusion that [NAME] had the required intent under s 37A of the Act does not, in my view, require a finding that [NAME] had that intent, but if it does then I would make that finding. 44In response to [NAME]'s submissions that [NAME] had acted in secrecy in lodging the transfer of the Property, [NAME] submitted that his clients had acted openly because they had commenced proceedings in this Court to obtain relief and had notified [NAME]'s solicitors on two occasions after the transfer was lodged. I think the latter notifications do not assist because by then the transfer had been effected. So far as the commencement of proceedings is concerned, I do not think that this rebuts the claim of secrecy since the action taken by [NAME] (and [NAME]) was taken outside of the proceedings. 45The position then in essence is that: (1) [NAME] had acted as trustee of the Trust and incurred a debt to [NAME] in the course of so acting. (2) [NAME] obtained judgement against [NAME]. (3) [NAME] did not meet that Judgment Debt. (4) [NAME] had assets of the Trust transferred to it after the contract with [NAME] was entered into but which it was entitled to have transferred upon execution of the deed of 9 February 2006. (5) [NAME] had obtained judgment, but before a writ was issued, [NAME] was reappointed as trustee. (6) A writ was issued at the request of [NAME] as judgment creditor. (7) Efforts were made by [NAME] to block the Sheriff's attempts to sell the Property (see for example page 73 of the Court Book). (8) After the writ was issued and three days after the writ had expired, [NAME] transferred the Trust property to [NAME] without any arrangement being made for [NAME] to be indemnified or [NAME] to pay [NAME] the Judgment Debt out of the Trust assets. (9) [NAME] could not obtain a writ on the Property (without this Court's intervention) and was thereby prejudiced because it could not execute the writ and obtain an order for the sale of the Property to satisfy the Judgment Debt. [NAME] was also exposed to the risk that the new trustee could sell the Property to a third party for valuable consideration and then distribute the net proceeds of sale to the beneficiaries of the Trust. 46Agusta, as trustee, had the right to be indemnified out of Trust assets and thus protect itself and [NAME], as a judgment creditor (with or without a writ), and what [NAME] did was to transfer the Property without any arrangement being made in its or [NAME]'s favour. In my view, this at the least hindered or delayed [NAME]'s claims, as a judgment creditor, against [NAME]. If it is said that [NAME] still has the right to be indemnified out of Trust assets, then its path to recovery of the Judgment Debt will be far slower than it would have been had [NAME] obtained indemnity from the Trust when it had the opportunity to do so: see [52] and [56] of the High Court's decision in [NAME] in this connection. 47Ms [NAME] submitted that even if [NAME] was not validly appointed as trustee, but was acting as trustee in good faith believing itself to have been duly appointed, it was entitled to indemnity as if it were a duly appointed trustee: see Travis v Illingworth [1868] WN 206 and [NAME], Lewin on Trusts, 18 th ed (2008), Thomson/Sweet & Maxwell at [21-28], and nothing was said by [NAME] to challenge that proposition which I accept. 48Mr [NAME] submitted that [NAME]'s right to obtain funds from [NAME] on a winding up or from [NAME] meant that it was not prejudiced by the transfer of the Property. The High Court's judgment in [NAME] at [56] and its approval of In re [NAME]; Ex parte Trustees [1923] 2 Ch 1 at 13, 15, 17 require the rejection of that contention.

The Precise Form of Relief 49Section 37A of the Act renders the transfer of the Property voidable but [NAME] raised the point that even if the transfer is voidable, the Court should not order the Register to be "rectified" because it would, in effect, reinstate [NAME] as the registered proprietor when it is not and could not be so described. To the extent that it was suggested that [NAME]'s debt should be treated as [NAME]'s debt, I agree with [NAME]'s submission that [NAME] has not itself incurred any debt and it would be inappropriate to order [NAME] to pay any money itself. 50Ms [NAME] accepted that there are difficulties with ordering the Registrar-General to record [NAME] as the registered proprietor of the Property and sought a different form of relief, which I understood to be that [NAME] should be entitled to stand in [NAME]'s shoes in relation to [NAME]'s right to be indemnified out of the Trust property. 51In this connection, [NAME] submitted that: (1) either as trustee in fact or as someone acting as trustee in good faith, [NAME] was entitled to be indemnified out of the Trust assets for its liabilities to [NAME]; (2) in Silvera v Savic (1999) 46 NSWLR 124, a s 37A case, Hodgson CJ in Equity (as his Honour then was) said at [72]: "What s 37A says is that the "alienation" is "voidable". In my opinion, when an application is made under s 37A to the Supreme Court, that Court can achieve the effect of avoiding the alienation by such measures as seem appropriate in the particular case. For example, the Court could declare that the effect of the [ADDRESS] order is spent by reason of its being carried out by the subsequent transfers, and then order appropriate re-transfers of the property. Such orders would not be inconsistent with the [ADDRESS] orders, nor could they give rise to any possible embarrassment by reason of the existence of conflicting court orders." and that this case and Houvardas v Zaravinos [2003] NSWSC 387 support the conclusion that the Court has power to grant relief other than avoidance of the relevant contract to protect the plaintiff's equity; (3) in [NAME] , Bergin J (as her Honour then was) referred to [NAME] when considering relief in respect of an impugned transaction (see [125]-[128]). Also see [47]-[51] in the Court of Appeal's decision in Zaravinos v Houvardas [2004] NSWCA 421 . 52I accept the submissions set out in [51](1) and (2). 53Given that the vice in this case was the failure to ensure that [NAME] was able to meet its liability on the Judgment Debt to [NAME], I think it is appropriate to fashion relief which deals with the specific problem. There are several possibilities, including declaring that [NAME] has a lien over the Property, and ordering [NAME] to lodge a caveat to protect that interest (see Custom Credit Corp Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42 and the other cases cited at [14.270] of [NAME] & [NAME], Principles of the Law of Trusts, 4 th ed (2010), Thomson Reuters on the right of a trustee to protect its right to indemnity). However, this introduces a degree of complication that can be avoided by a practical solution which is to declare that [NAME] has an equitable charge over the Property, which it can enforce by sale of the Property if the Judgment Debt and associated enforcement expenses are not paid to it within a short period, and that is the relief I propose to grant, but I will hear the parties on this. I have in mind one month as the appropriate period, but will hear the parties further on that point as well. The notation which is currently on title should remain until an alternative regime is put into effect.

Costs 54Agusta and [NAME] should pay [NAME]'s costs.

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