Anscor Pty Ltd v Clout

DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1981) 149 CLR 431 cited Re Fiorino; Fiorino v Woodgate [1994] FCA 181 followed Re Fitzgerald; Ex parte Burns (1986) 10 FCR 261 cited Fodare Pty Limited v Official Trustee in Bankruptcy [2000] FCA 1721 referred to Re Goode; ex parte Mount (1974) 24 FLR 61 cited Halfey v Tait (1875) 1 VLR (Eq) 8 cited Re Hallet's Estate; Knatchbull v Hallet (1880) 13 ChD 69 cited Harrods Ltd v Stanton [1923] 1 KB 515 cited Issitch v Worrell (2000) 172 ALR 586 cited Jack v Smail (1905) 2 CLR 684 cited Re La Rosa; Ex parte Norgard v Rocom Pty Ltd (1990) 21 FCR 270 cited Lumsden v Snelson [2001] FCA 83 In re Mouat; Kingston Cotton Mills Co v Mouat [1899] 1 Ch 831 cited Noakes v Harvy Holmes & Son (1979) 37 FLR 5 Official Trustee in Bankruptcy v Alvaro (1996) 66 FCR 372 referred to Official Receiver for and on behalf of the Official Trustee in Bankruptcy v Klau [1987] FCA 242 cited Official Trustee in Bankruptcy v Lopatinsky (2003) 30 Fam LR 499 cited Re Pahoff; ex parte Ogilvie v Pahoff (1961) 20 ABC 17 cited Price v Parsons (1936) 54 CLR 332 cited PT Garuda Indonesia Ltd v Grellman (1992) 35 FCR 515 cited Richard Walter Pty Ltd v Commissioner of Taxation (1996) 67 FCR 243 referred to Sharrment Pty Ltd v Official Trustee in Bankruptcy (1998) 18 FCR 449 referred to Snook v London & West Riding Investments Ltd [1967] 2 QB 786 referred to Stephens Travel Services v Qantas (1988) 13 NSWLR 331 cited Sutherland v Brien (1999) 149 FLR 321 Tooheys Ltd v Commissioner of Stamp Duties (NSW) [1960] SR(NSW) 539 discussed Tooheys Ltd v Commissioner of Stamp Duties (NSW) (1961) 105 CLR 602 discussed Trautwein v Richardson [1946] Arg LR 129 cited Trustee of the Property of O'Halloran, in the matter of O'Halloran v O'Halloran [2002] FCA 1305 cited Valoutin v Furst (1998) 154 ALR 119 cited In re Vansittart; Ex parte Brown [1893] 2 QB 377 cited Victorian Producers Co-operative Co Ltd v Kenneth [1999] FCA 1488 approved In re Williams; Williams v Lloyd (1934) 50 CLR 341 referred to

ANSCOR PTY LTD & ORS v DAVID LEWIS CLOUT (AS TRUSTEE IN BANKRUPTCY OF THE ESTATE OF GEOFFREY ROBERT DEXTER) & ANOR

DAVID LEWIS CLOUT (AS TRUSTEE IN BANKRUPTCY OF THE ESTATE OF GEOFFREY ROBERT DEXTER) v ANSCOR PTY LTD & ORS

Q 62 of 2003 WILCOX, MOORE and LINDGREN JJ 26 MARCH 2004 SYDNEY (HEARD IN BRISBANE) IN THE FEDERAL COURT OF AUSTRALIA Q 61 of 2003

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

AND IN ITS CAPACITY AS TRUSTEE OF THE ANSCOR EXECUTIVE INCENTIVE TRUST AND THE THORNVILLE EXECUTIVE INCENTIVE TRUST

(FORMERLY CALLED PACIFIC INTERNATIONAL ASSET MANAGEMENT LTD)

2. The appellants, Anscor Pty Ltd, Anne Shirley Corbett, Thornville Pty Ltd, Anscor Investments Pty Ltd and WKF Asset Management Ltd, pay the costs of the appeal incurred by the first respondent, David Lewis Clout. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

AND IN ITS CAPACITY AS TRUSTEE OF THE ANSCOR EXECUTIVE INCENTIVE TRUST AND THE THORNVILLE EXECUTIVE INCENTIVE TRUST

JUDGES: WILCOX, MOORE and LINDGREN JJ DATE OF ORDER: 26 MARCH 2004 WHERE MADE: SYDNEY (HEARD IN BRISBANE)

THE COURT ORDERS THAT:

1. The appeal be allowed. 2. Order (19) made on 10 April 2003 in proceeding QG 7308 of 1998 ('the Proceeding') (that the present appellant's proceeding against the present second respondent be dismissed) be set aside, and in lieu thereof, there be an order that the appellant is entitled to a charge over property 624 Mt Crosby Road, Anstead (described as Lot 8 on RP 89621, Title Reference 13445161) and securing as a first ranking charge the payment to the appellant of the sum of $245,000 abated in accordance with declaration (3) made on that date in the Proceeding with interest on the abated sum at the rate or rates referred to in order (5) made on that date in the Proceeding from 4 February 1998, or, alternatively, a declaration that the present second respondent holds that property on trust for the appellant. 3. The appellant elect between the order for a charge and the declaration of trust by notice to the respondents within 60 days from today's date. 4. Order (22) made on 10 April 2003 in the Proceeding (that the present appellant pay the present second respondent's costs of and incidental to the proceeding against it, including that respondent's costs incurred with respect to the proceeding brought against it for interlocutory injunctions) be set aside, and in lieu thereof, that the present second respondent pay the appellant's costs of and incidental to the Proceeding, including his costs of proceedings for interlocutory injunctions.
2. The second respondent pay the appellant's costs of and incidental to the appeal. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

AND IN ITS CAPACITY AS TRUSTEE OF THE ANSCOR EXECUTIVE INCENTIVE TRUST AND THE THORNVILLE EXECUTIVE INCENTIVE TRUST

(FORMERLY CALLED PACIFIC INTERNATIONAL ASSET MANAGEMENT LTD)

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

AND IN ITS CAPACITY AS TRUSTEE OF THE ANSCOR EXECUTIVE INCENTIVE TRUST AND THE THORNVILLE EXECUTIVE INCENTIVE TRUST

REASONS FOR JUDGMENT WILCOX AND MOORE JJ: 1 We have read the judgment of Lindgren J in a draft form. We agree that the appeal of the Anscor interests should be dismissed and the Trustee's appeal should be allowed. With one qualification, we agree with his Honour's reasons. The qualification concerns his Honour's eleven propositions concerning the operation of s 120 of the Bankruptcy Act 1996 (Cth). We do not consider it is necessary to propound principles of general application to resolve these appeals. We would not wish to determine, in the absence of full argument and it being a point required to be determined, whether the amendments to the section which enable a payment of money to be treated as a transfer of property were intended to result in money paid being treated as property for the purposes of applying principles developed in authorities concerning the "settlement of property" decided before the amendment. 2 Money in the form of currency can be property: see, for example, Ilich v The Queen (1987) 162 CLR 110 at 129, but the payment of money does not readily fall into the description of a conveyance or transfer of property: see, for example, Robert Reid Pty Ltd v Cassidy (1996) 114 CLR 558 at 573. Also, the expression "payment of money" can have wide application: see East Finchley Pty Ltd v Federal Commissioner of Taxation (1989) 90 ALR 457. It may well be, for example, that the legislature intended that the Trustee in Bankruptcy could avoid a transaction involving the payment of money under s 120 in a way (and by orders) that was not on all fours with the avoidance of the settlement of property under the earlier legislative provisions. 3 We emphasise that we are not expressing a concluded view that is opposed to anything said by Lindgren J. We merely reserve our position in relation to his Honour's statement of principles. I certify that the preceding three (3) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Wilcox and Moore.

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

AND IN ITS CAPACITY AS TRUSTEE OF THE ANSCOR EXECUTIVE INCENTIVE TRUST AND THE THORNVILLE EXECUTIVE INCENTIVE TRUST

(FORMERLY CALLED PACIFIC INTERNATIONAL ASSET MANAGEMENT LTD)

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

AND IN ITS CAPACITY AS TRUSTEE OF THE ANSCOR EXECUTIVE INCENTIVE TRUST AND THE THORNVILLE EXECUTIVE INCENTIVE TRUST

REASONS FOR JUDGMENT LINDGREN J: 4 Two related appeals have been heard together. Central to them is s 120 of the Bankruptcy Act 1966 (Cth) ('the Act'), which provides as follows: '(1) A transfer of property by a person who later becomes a bankrupt (the transferor) to another person (the transferee) is void against the trustee in the transferor's bankruptcy if: (a) the transfer took place in the period beginning 5 years before the commencement of the bankruptcy and ending on the date of the bankruptcy; and (b) the transferee gave no consideration for the transfer or gave consideration of less value than the market value of the property. (2) Subsection (1) does not apply to: (a) a payment of tax payable under a law of the Commonwealth or of a State or Territory; or (b) a transfer to meet all or part of a liability under a maintenance agreement or a maintenance order; or (c) a transfer of property under a debt agreement; or (d) a transfer of property if the transfer is of a kind described in the regulations. (3) Despite subsection (1), a transfer is not void against the trustee if: (a) the transfer took place more than 2 years before the commencement of the bankruptcy; and (b) the transferee proves that, at the time of the transfer, the transferor was solvent. (4) The trustee must pay to the transferee an amount equal to the value of any consideration that the transferee gave for a transfer that is void against the trustee. … (6) This section does not affect the rights of a person who acquired property from the transferee in good faith and by giving consideration that was at least as valuable as the market value of the property. (7) For the purposes of this section: (a) transfer of property includes a payment of money; and (b) a person who does something that results in another person becoming the owner of property that did not previously exist is taken to have transferred the property to the other person; and (c) the market value of property transferred is its market value at the time of the transfer.' (Original highlighting)

The proceeding 5 The applicant before the primary judge was David Lewis Clout ('the Trustee'), trustee in bankruptcy of the estate of Geoffrey Robert Dexter ('Dexter'). The Trustee sought declarations that payments of commission amounting to $26,379,260.35 made by Dexter to the first respondent, Anscor Pty Ltd ('Anscor'), constituted transfers of property which were made void against the Trustee by s 120 of the Act and an order for payment by Anscor to him of that amount with interest. He sought similar relief against seven other companies (the second to eighth respondents) in respect of lesser amounts paid by Dexter to them. 6 His Honour noted that the Trustee had discontinued against the seventh and eighth respondents before him, and that for various reasons the proceeding as against the second to sixth was to be dismissed. 7 As against Anne Shirley Corbett ('Mrs Corbett'), the ninth respondent, the Trustee claimed the same declarations in relation to the sum of $26,379,260.35 as he sought against Anscor, and, as well, declarations that Mrs Corbett held four specified properties and a motor vehicle in trust for the Trustee. That claim depended upon a tracing of the commission moneys after they left Anscor. At material times, Mrs Corbett was the sole director of Anscor, though much managerial activity was undertaken by her husband, Robert Edward Corbett ('Mr Corbett'). I will refer to the couple collectively as 'the Corbetts'. 8 The Trustee made similar claims (but in relation to different properties) against three companies associated with Mrs Corbett, namely, Croftby Downs Pty Ltd ('Croftby Downs', the tenth respondent), Thornville Pty Ltd, in its own capacity and as trustee of the Anscor Executive Incentive Trust and of the Thornville Executive Incentive Trust ('Thornville', the eleventh respondent) and Anscor Investments Pty Ltd ('Anscor Investments', the twelfth respondent). At material times, Mrs Corbett was also the sole director of each of those companies. 9 I will use the term 'the Anscor parties' to refer collectively to the first, ninth, tenth, eleventh and twelfth respondents, that is, Anscor, Mrs Corbett, Croftby Downs, Thornville and Anscor Investments. 10 Finally, the Trustee claimed an order for release of securities and the repayment of certain moneys by the thirteenth respondent, Pacific International Asset Management Ltd ('PIAM') (now called 'WKF Asset Management Ltd'). 11 After a lengthy trial, his Honour found substantially in favour of the Trustee. He made a series of orders, the detail of which I need not set out. The orders triggered two appeals. 12 The first appeal (Q 61 of 2003, 'the Anscor appeal') was brought by Anscor, Mrs Corbett, Thornville, Anscor Investments and PIAM. The notice of appeal stated numerous grounds, most of which were abandoned at the hearing. Only five grounds were pressed. 13 The second appeal (Q 62 of 2003, 'the Trustee's appeal') was brought by the Trustee against Anscor, Thornville and Anscor Investments. The Trustee's appeal challenged the primary judge's dismissal of the Trustee's tracing claim for a declaration that Thornville held a property at 624 Mt Crosby Road, Anstead on trust for the Trustee, or, alternatively subject to a charge in favour of the Trustee.

The background facts 14 It is not necessary for me to set out, or even to summarise, all the factual findings made by the primary judge. To the extent that detailed factual exposition is necessary, it is preferable for this to be done in conjunction with discussion of the particular grounds of appeal. However, it may be useful to outline the background facts. 15 For several years prior to 26 March 1998, Dexter carried on a business under the name 'the Wattle Group'. The business was one of soliciting money from members of the public, allegedly to enable Dexter to make high-interest, short-term loans to strangers; in particular, by way of bridging finance to purchasers of real estate. In reality, however, at least for several years prior to 26 March 1998, Dexter did not use the money placed with him for this purpose at all. Rather, he made the moneys available, at little or no interest, to various businesses with which he was associated. These businesses were known collectively as 'the Foundation Group'. 16 It appears that, for the most part at least, Dexter did not deal directly with the persons from whom he received 'investment' funds. Rather, the funds were obtained from them for him by a number of entities he called 'administrators'. Anscor was one of those administrators. 17 Administrators were paid commissions on funds they placed with the Wattle Group (Dexter). The commission paid to Anscor seems to have been, at various times, either 4 per cent or 5 per cent per month; so, introducing an investor who made a deposit for the minimum term of six months and no more would have yielded Anscor a commission of up to 30 per cent of the invested sum. In addition, Dexter paid interest to the investor (either in cash or by adding the interest to the investor's loan account) at the rate of 5 per cent per month - a further 30 per cent of the invested sum for a six-month period. 18 In terms of the interest to investors and commissions to administrators, his borrowings were costing Dexter about 100 per cent per annum. Plainly, the situation was unsustainable in the long term. However, it was highly successful in the short term. The trial judge found that, in the four years before the collapse of the scheme in March 1998, Dexter received sums totalling nearly $200,000,000. Most of this money came directly or indirectly from investors, rather than as repayments by members of the Foundation Group of the funds Dexter advanced to them. 19 At the date of the Trustee's appointment, Dexter owed investors over $155,000,000. 20 Some time in 1997, Dexter's activities came to the notice of Australian Securities and Investments Commission ('ASIC'). ASIC conducted an investigation. In March 1998, ASIC obtained an injunction restraining Dexter from continuing to carry on the business. On 26 March 1998, Dexter ceased to carry on business, and appointed the Trustee as controlling trustee of his estate pursuant to s 188 of the Act. On 28 May 1998 a sequestration order was made against Dexter's estate and the Trustee was appointed as trustee in bankruptcy of the estate. The date of commencement of Dexter's bankruptcy is deemed to be 26 March 1998, being the date of his appointment of Mr Clout as controlling trustee: see ss 115(1) and 40(1)(i) of the Act. 21 Originally, the Trustee's claim was to recover all the moneys paid by Dexter to Anscor. However, the claim was amended so as to be restricted to the commissions (totalling $26,379,260.35) paid by Dexter to Anscor in the two years from 26 March 1996 to the commencement of Dexter's bankruptcy on 26 March 1998. The trial judge assumed that the claim was so confined in order to relieve the Trustee of the task of attempting to prove that Dexter was insolvent at the dates of the earlier payments by him: see s 120(3) of the Act, set out in [1] above.

22 Not all issues argued before the primary judge arise on the two appeals. The issues on the appeals are as follows:

(i) Whether Anscor gave no consideration for, or consideration of less value than the market value of, the commission moneys totalling $26,379,260.35 paid to it by Dexter in the two-year period mentioned; (ii) Whether the trusts in favour of investors created under a form of investment agreement which was in use for a time had the effect that the Trustee was disentitled to recover, or to trace, the Anscor commissions totalling $26,379,260.35 or part of them; (iii) Whether, on 30 June 1997, Anscor paid $2,805,000 to PIAM as a contribution to the Anscor Executive Superannuation Plan. This issue raises subsidiary questions of whether PIAM lent back $2,800,000 to Anscor and whether PIAM took effective securities for the loan on 30 June 1997 and in March 1998. In relation to all these transactions, the question arises whether they were a 'sham'; (iv) Whether the commission moneys paid by Dexter to Anscor can be traced into various properties owned by the Anscor parties; (v) Whether his Honour should have allowed the Anscor parties to raise the defence that many of the amounts totalling $26,379,260.35 paid to Anscor during the period of the Trustee's claim were paid by members of the Foundation Group and not by Dexter. (vi) Whether his Honour erred in concluding that there was no debt owing by Anscor Investments to Thornville and that the mortgage given by Thornville to Anscor Investments for $210,000 over the Sunshine Beach property was therefore invalid. (b) The Trustee's appeal (Q 62 of 2003) Whether his Honour erred in rejecting the Trustee's application for a declaration that Thornville holds the property at 624 Mt Crosby Road, Anstead on trust for the Trustee, or, alternatively, holds it subject to a charge in his favour. 23 I will deal separately with each issue.

General 24 The present s 120 was introduced by the Bankruptcy Legislation Amendment Act 1996 (Cth) (No 44 1996), s 3, Sch 1, Item 208, in substitution for the previous s 120. The former s 120 dealt with certain settlements of property made by a person who became a bankrupt, after, or within five years before, the commencement of the person's bankruptcy (where the settlement was made more than two years before the commencement of the bankruptcy, the provision did not apply if the disponee established that the settlor was, at the time of the settlement, able to pay all his or her debts without the aid of the property settled, and the settlor's interest in the property passed under the settlement on its execution). 25 The new s 120 applies where the date of the bankruptcy is on or after the commencement of Sch 1, which was on 16 December 1996 (see Item 457 of the Schedule). 26 The former s 120 was itself the successor to s 94 of the Bankruptcy Act 1924 (Cth), which descended from provisions in the various State Insolvency Acts. The relevant English provision was s 42 of the Bankruptcy Act 1914 (UK), which was derived from s 47 of the Bankruptcy Act 1883 (UK), and, originally, s 91 of the Bankruptcy Act 1869 (UK). 27 Distinct from, but related to, this line of provisions, is the provision avoiding dispositions of property with intent to defraud creditors, which commenced with the Fraudulent Conveyances Act 1571 (UK) (13 Eliz 1 c 5), ('the Statute of Elizabeth'). The Statute of Elizabeth was replaced in England by s 172 of the Law of Property Act 1925 (UK). The Statute of Elizabeth was the progenitor of provisions in Australian State property legislation (see s 37A of the Conveyancing Act 1919 (NSW), s 172 of the Property Law Act 1958 (Vic), s 86 of the Law of Property Act 1936 (SA) and s 89 of the Property Law Act 1969 (WA)), and now of s 121 of the Act (the provision did not form part of the Bankruptcy Act 1924 (Cth)). 28 A third distinct but related provision is that providing for the avoidance of preferences: cf s 122 of the Act and its predecessor, s 95 of the Bankruptcy Act 1924 (Cth). 29 The new s 120 effected two changes from the previous s 120 of present relevance. First, the notion of a transfer of property replaced that of a settlement of property. The former s 120(8) provided that in s 120 'settlement of property' included any disposition of property. The word 'property' was (and is) defined widely in s 5. The notion was understood to include money; cf Jack v Smail (1905) 2 CLR 684 at 700. But it was established that a 'settlement' required a purpose of conferring benefit on the disponee, and therefore contemplated retention by the disponee of the property settled for at least some period, rather than its immediate dissipation or consumption: see Jack v Smail at 700-701 per Griffith CJ, 709-710 per Barton J; In re Williams; Williams v Lloyd (1934) 50 CLR 341 at 364 per Starke J, 375-6 per Dixon J with whom McTiernan J agreed; Re Pahoff; Ex parte Oglivie v Pahoff (1961) 20 ABC 17; Re La Rosa; Ex parte Norgard v Rocom Pty Ltd (1990) 21 FCR 270 (approved on appeal by Northrop, Davies and Lee JJ on 16 August 1990, unreported); P T Garuda Indonesia Ltd v Grellman (1992) 35 FCR 515 at 533-534; Re Fiorino; Fiorino v Woodgate [1994] FCA 181 (unreported, Gummow J, 14 April 1994) ('Fiorino') at 9-10 (page numbers in original judgment). 30 Money is easily dissipated or consumed. Accordingly, it was held that 'a gift of money which is not hedged about with conditions that it shall be invested and kept in a certain way cannot be called a "settlement" …': Jack v Smail at 701 per Griffith CJ. 31 The notion of a 'transfer of property' in the present s 120 does not require retention of the transferred property for any period. Section 120(7) provides expressly that a transfer of property includes a payment of money. Accordingly, any payment of money, even one 'not hedged about with conditions that it shall be invested and kept in a certain way' is a transfer of property for the purposes of s 120. 32 The second change of present relevance is referable to the holding in Barton v Official Receiver (1986) 161 CLR 75 ('Barton v Official Receiver') that a person who claimed protection under the former s 120(7) as a person who had purchased from the disponee under the settlement 'in good faith and for valuable consideration' needed to show, in relation to consideration, only that he had given 'consideration for his purchase "which has a real and substantial value, and not one that is merely nominal or trivial or colourable" …' (at 86). The new s 120(1), in contrast, is enlivened by nothing more than a transfer of property within the specified period under which 'the transferee gave no consideration for the transfer or gave consideration of less value than the market value of the property' (my emphasis): see the Explanatory Memorandum relating to the Bankruptcy Legislation Amendment Bill 1995 ('the Explanatory Memorandum'), par 84.13; Official Trustee in Bankruptcy v Lopatinsky (2003) 30 Fam LR 499 at [94]. 33 In considering the questions raised by the appeal, it is important to note the following matters. 34 First, since s 120(1) is triggered by a transfer for less than full consideration, if the transferor (later the bankrupt) sells land having a market value of $1 million for $950,000 at any time in the period beginning five years before the commencement of the transferor's bankruptcy and ending on the date of the bankruptcy, the provision is activated. It matters not that the transferee was a purchaser in good faith and for valuable consideration. However, if the transfer took place more than two years before the commencement of the transferor's bankruptcy, the provision does not operate if the transferee proves that, at the time of the transfer, the transferor was solvent: s 120(3) (a person is insolvent if, and only if, the person is unable to pay all the person's debts, as and when they become due and payable: ss 5(2), 5(3). 35 As noted earlier, in the present case, the Trustee does not seek to go back earlier than the two year period immediately before the commencement of Dexter's bankruptcy on 26 March 1998, and therefore there is no scope for s 120(3) to operate. 36 Second, s 120(1) requires the Court to be satisfied only that the value of the consideration was less than the market value of the property transferred as at the date of the transfer. Unlike s 120(4), s 120(1) does not require the Court to assign any particular value to the consideration. My views just expressed are in conformity with those of Merkel J in Victorian Producers Co-operative Co Ltd v Kenneth [1999] FCA 1488 at [23]. 37 Third, s 120(6) provides that s 120 does not affect the rights of certain persons who acquire property from the transferee ('acquirers'), irrespective of when, in the 'five years plus' period they acquire it. Acquirers are not protected unless they purchased in good faith from the transferee and gave a consideration which was 'at least as valuable as the market value of the property' (presumably as at the date of acquisition by the acquirer from the transferee). The requirement of good faith in s 120(6) may be found, in practice, to be of little importance in view of the requirement of full consideration. 38 Fourth, s 120(4) raises the question: Is the transferee required to 'lodge a proof of debt in the bankruptcy to the extent of any consideration he or she gave for the transfer', as stated in par 84.21 of the Explanatory Memorandum, or must the trustee pay to the transferee the full value of the consideration the transferee gave, as a condition of the trustee's avoiding the transfer? The primary judge and parties in the present case appear to have assumed the latter. His Honour provided for a deduction from the amount of $26,379,260.35 paid by Dexter to Anscor as commissions during the two-year period of the amount of the full value of the consideration (services) provided by Anscor. His Honour determined the value of that consideration to be a one-off commission of 5 per cent of the amount invested with Dexter through Anscor, plus a trailing commission of 0.25 per cent per annum on the amount invested for as long as it remained with Dexter. 39 Subsection 120(4) does not provide for the transferee to become a creditor of a bankrupt but imposes an obligation to pay upon the trustee in bankruptcy. Moreover, the policy underlying s 120 is to enable the trustee in bankruptcy to recapture the amount of the 'shortfall in consideration'; not to go further by, in effect, requiring the transferee to pay more for the property than its market value at the time of the transfer. These conditions lead me to think that his Honour and the parties were correct in their assumption, and that par 84.21 of the Explanatory Memorandum does not reflect s 120(4). However, this was not an issue on the appeal, and I need not decide the matter finally. 40 Fifth, 'consideration' is not defined. Commonly, the consideration will be a benefit provided by the transferee to the transferor (as in the present case), or, in the case of s 120(6), by the acquirer to the transferee. But there are other forms of consideration, in particular, a detriment undertaken by the transferee or acquirer at the request of the transferor or the transferee, respectively. There may be difficulty in applying ss 120(1)(b) and (6) in such cases. 41 Sixth, the effect of ss 58(1), 116(1) and (2)(a) and the definition of 'the property of the bankrupt' in s 5(1) is that the property which vests in the trustee in bankruptcy is to be identified as at the commencement of the bankruptcy (26 March 1998 in the present case), and that there is excluded property which the bankrupt held in trust for another person as at that date. (For convenience, I put to one side property acquired by, or devolving upon, the bankrupt after the commencement of the bankruptcy.) 42 Since property held on trust by the bankrupt does not vest in the trustee in bankruptcy, he or she cannot recover it: there is no question of the trustee in bankruptcy's recovering it and holding it on the same trust. It is otherwise in the case of property that belonged to, or was vested in, the bankrupt at the commencement of the bankruptcy subject to an equitable charge: such property, not being 'property held by the bankrupt in trust for another person', vests in the trustee in bankruptcy subject to the equitable charge: Re Goode; ex parte Mount (1974) 24 FLR 61 at 79-80 per White J; Official Receiver for and on behalf of the Official Trustee in Bankruptcy v Klau [1987] FCA 242 (unreported, Fisher J, 16 April 1987). 43 Seventh, in my opinion, the following propositions in relation to the operation of s 120 should be accepted (some of the authorities cited relate to the Statute of Elizabeth provision (intent to defraud creditors), rather than s 120 (transfers for less than full consideration) or its predecessors (settlements).

(a) 'Void' in the expression 'void against the trustee' in s 120 (as in ss 121 and 122) means 'voidable', so that where the debtor/later bankrupt (or a transferee from the debtor) transfers property for no consideration or a consideration less than market value, within the time specified in the section, the transferee (and an acquirer from the transferee) takes a good title, but one which may, depending on the circumstances, be defeated if the trustee elects to avoid the transfer by the debtor/bankrupt: among numerous authorities, see In re Vansittart; Ex parte Brown [1893] 2 QB 377; In re Brall; Ex parte Norton [1893] 2 QB 381 ('Brall'); In re Carter and Kenderdine's Contract [1897] 1 Ch 776 ('Carter'); Harrods Ltd v Stanton [1923] 1 KB 516; In re Williams; Williams v Lloyd (1934) 50 CLR 341 at 374; Price v Parsons (1936) 54 CLR 332 at 347, 351-352; Re Cummins; Richardson v Cummins (1951) 15 ABC 185 at 188; Brady v Stapleton (1952) 88 CLR 322 at 333-335; Noakes v Harvy Holmes & Son (1979) 37 FLR 5; Barton v Official Receiver (1984) 4 FCR 380 at 393; Re Fitzgerald; Ex parte Burns (1986) 10 FCR 261 at 262-263; Fiorino at 18-21; Baker v Official Trustee in Bankruptcy [1995] FCA 565 (unreported, Burchett, Ryan and Carr JJ, 3 August 1995) ('Baker'); Official Trustee in Bankruptcy v Alvaro (1996) 66 FCR 372 ('Alvaro') at 426; Issitch v Worrell (2000) 172 ALR 586 ('Issitch') at [36]; Trustee of the Property of O'Halloran, in the matter of O'Halloran v O'Halloran [2002] FCA 1305 ('O'Halloran') at [77]. (Some modern successors to the State of Elizabeth use 'voidable' rather than 'void'; see s 89 of the Property Law Act 1969 (WA), s 37A of the Conveyancing Act 1919 (NSW) and s 172 of the Property Law Act 1958 (Vic).)

(b) Subject always to the various exceptions and protections in ss 120(2), (3), (4) and (6), where the trustee in bankruptcy elects to avoid, the trustee is entitled, for the purpose of identifying and realising the property of the bankrupt, to have the transfer of property by the debtor treated as not having occurred, and the debtor as having continued to own the property following the transfer until it vests in the trustee (if it does so vest - see below).

(c) This does not mean that s 120(1), activated by the trustee's avoidance, re-vests title in the debtor/bankrupt retrospectively and ab initio,and thereby makes the act of transferring, whether by the debtor-transferor or subsequently by the transferee (or the act of taking a transfer, whether by the transferee or by the subsequent acquirer from the transferee), a wrongful act so as to give rise to a liability in personam in the transferee or acquirer, unless, of course, the transfer in fact occurs after title vests in the trustee (see below), in which case there will be a liability to the trustee on a common money account for money had and received: Halfey v Tait (1875) 1 VLR (Eq) 8 ('Halfey'); Brady v Stapleton at 333, 334; Baker; Alvaro at 426; Valoutin v Furst (1998) 154 ALR 119 at 149; Fiorino at 21.

(d) By contrast, s 139ZQ of the Act (inserted by the Bankruptcy Amendment Act 1991 (Cth)with effect from 1 July 1992) provides for a personal liability, by stipulating that where a person has received money or property as a result of a transaction that is void under Div 3 of Pt VI of the Act (ss 120, 121 and 122 are in Div 3), the person may be required by a notice issued by the Official Receiver, on the application of, relevantly, the trustee in bankruptcy, to pay to the trustee an amount equal to the money or the value of the property received, and that the trustee may recover that amount as a debt in a court of competent jurisdiction.

(e) Section 120 does not vest property in the trustee in bankruptcy; it makes transfers of property void as against the trustee in bankruptcy. The vesting of property in the trustee in bankruptcy is provided for elsewhere in the Act, as noted below.

(f) Where a debtor becomes a bankrupt, there vests forthwith in the trustee in bankruptcy 'the property of the bankrupt', that is, relevantly, the property that belonged to, or was vested in, the bankrupt, at the commencement of the bankruptcy (ss 58, 115, 116, 5(1) ('the property of the bankrupt')). But, subject to, relevantly, s 120, s 123 will protect any transfers for full market value by the debtor between the commencement of the bankruptcy and the date of the bankruptcy, if the other conditions specified in that section are satisfied.

(g) The vesting in the trustee in bankruptcy does not take place upon the commencement of the bankruptcy; it takes place forthwith upon the debtor's becoming a bankrupt. A debtor becomes a bankrupt on the making of a sequestration order upon a creditor's petition (s 43(2) of the Act) or upon the endorsement by the Official Trustee of a debtor's petition as 'accepted' (s 55(4A) of the Act). Until then, there is no trustee in bankruptcy in whom property can vest: cf Carter at 780 - 781 per Lindley LJ. The 'commencement of the bankruptcy', however, marks the time as at which the items of property constituting the 'property of the bankrupt' are to be identified. Those items of property constitute the property which vests in the trustee in bankruptcy forthwith upon the debtor's becoming a bankrupt. Such an item of property will not vest in the trustee in bankruptcy if it no longer exists when the debtor becomes a bankrupt, or if it still exists then but has been transferred in the meanwhile for full value under a transaction protected by s 123 as mentioned in the preceding paragraph. Statements to the effect that avoidance by the trustee is effective as from 'the date of the accruer of [the trustee's] title, or, in other words … from the date of the act of bankruptcy to which the title of trustee relates back' (Carter at 782 per AL Smith LJ - and see Fiorino at 18 and Alvaro at 426-427), do not signify that there is an actual vesting in the trustee at the commencement of the bankruptcy. They signify that, the transfer by the debtor/bankrupt being disregarded, if the property still exists at the commencement of the bankruptcy, it will form part of the property of the bankrupt which will vest in the trustee forthwith upon the debtor's becoming a bankrupt, if the property also still exists then.

(h) If the property the subject of a transfer made void by s 120 as a result of the trustee's election to avoid, still exists in specie as at the commencement of the bankruptcy, it will vest in the trustee in bankruptcy forthwith upon the debtor's becoming a bankrupt if it also still exists then (by reason of ss 58, 115, 116 and 5(1) ('the property of the bankrupt'), subject always to the exceptions and the protections given to third parties found in s 120. From the date of the bankruptcy, the owner will have had the property in trust for the trustee in bankruptcy, and, if the owner sells it after that date, will be accountable to the trustee for the proceeds of sale as for money had and received: cf Brall at 384; Brady v Stapleton at 334; Alvaro at 426; Fiorino at 21. (In Fiorino, the sale by the bankrupt's mother, to whom the bankrupt had given the property, took place after the making of the sequestration order and before avoidance by the trustee. Gummow J held that she had held the property on trust for the trustee in bankruptcy and came under a personal liability to him 'to account for, as money had and received, the proceeds of the sale of the property by her'.)

(i) If the property the subject of a transfer made void by s 120 as a result of the trustee's election to avoid, no longer exists in specie as at the commencement of the bankruptcy, but can be seen to exist as at that date in an identifiable substitute form of property, such as a fund representing the proceeds of sale of the property, that substitute property will vest in the trustee in bankruptcy forthwith upon the debtor's becoming a bankrupt, if that substitute property, or an identifiable substitute for it, still exists then, subject, as ever, to the exceptions and the protections given to third parties found in s 120: cf Alvaro at 426-427; Halfey; In re Mouat; Kingston Cotton Mills Co v Mouat [1899] 1 Ch 831 ('Mouat') at 834-835; Brady v Stapleton at 332-333; Lumsden v Snelson [2001] FCA 83 at [24]-[27].

(j) If, at the commencement of the bankruptcy, property the subject of a transfer made void by s 120 exists neither in specie nor in an identifiable substitute form, equitable relief founded in equity's auxiliary jurisdiction may nonetheless be available to the trustee in bankruptcy. This may occur where, for example, the property, such as money, can be 'followed' or 'traced' into, other property which is not, however, simply an identifiable substitute for it: cf Mouat at 834-835; Trautwein v Richardson [1946] Arg LR 129; Issitch at [36]; O'Halloran at [80] per Allsop J and works cited by his Honour. In such a case an equitable charge over that other property in favour of the trustee in bankruptcy for the amount of the value of the property, or the amount of money which the debtor/bankrupt transferred plus interest, will often be found to be an appropriate remedy: for a recent illustration, see Fodare Pty Limited v Official Trustee in Bankruptcy [2000] FCA 1721.

(k) Where s 120 makes a transfer of property void, s 120(4) obliges the trustee in bankruptcy to pay to the transferee an amount equal to the value of any consideration the transferee gave for the transfer. There is no comparable provision relating to a transfer for less than full consideration by the transferee to an acquirer (cf s 120(6)). In the event of an effective avoidance by the trustee of a transfer from the debtor-transferor to the transferee, general law principles would give an acquirer from the transferee who gave some, but less than full, consideration, a personal right of recovery from the transferee, because the acquirer would at the same time be deprived of title to that for which he or she provided the consideration. In the absence of s 120(4), general law principles would apparently have given the transferee a similar right of recovery from the bankrupt, and a right to prove as a creditor in the bankruptcy. But s 120(4) goes further by imposing a personal liability on the trustee in bankruptcy in favour of the transferee for the full amount of the value of the consideration.

44 I turn now to the issues raised by the Anscor appeal and the Trustee's appeal.

Issue 1: Whether Anscor gave no consideration for, or consideration of less value than the market value of, the commission moneys totalling $26,379,260.35 paid to it by Dexter in the two-year period mentioned 45 It is a condition of a transfer of property (including a payment of money) being void against the trustee of a bankrupt estate under s 120 that 'the transferee gave no consideration for the transfer or gave consideration of less value than the market value of the property': see s 120(1)(b) set out at [1] above. It was common ground that the 'market value' of money paid is the nominal value of that money - in this case, $26,379,260.35. The question that arises under s 120(1)(b) is whether Anscor gave no consideration, or consideration of less value than $26,379,260.35, for the payments to it totalling that amount. 46 The Trustee does not contend that Anscor gave no consideration for the payments. He recognises that Anscor provided services to Dexter by introducing investors and by monitoring the making of payments and crediting of interest to them. However, the Trustee contends that the value of those services fell well short of $26,379,260.35. 47 The Anscor parties rely on a letter dated 1 July 1994 written by Dexter 'for the Wattle Group' to 'ANZCORP' (I read this as referring in fact to Anscor) which purports to 'confirm' the 'brokerage agreement' between them. The letter is loosely worded. It provides for certain obligations on the part of both parties, including an obligation of 'the Wattle Group' (that is, Dexter) to 'maintain true and accurate records, and supply on a transaction by transaction basis regular updates as to the status of each client introduced by [Anscor]'. The letter contains a promise by the Wattle Group to pay 'a 5 per cent brokerage fee' 'on the .. basis' that Anscor will render the services set out in the letter (the letter does not say '5 per cent per annum', although it says 'for as long as [the] clients [introduced by Anscor] have funds at the disposal of the Wattle Group for lending to approved borrowers'). 48 With respect, his Honour and the parties were correct in understanding the 'consideration' mentioned in s 120(1) to refer to the services which were in fact provided by Anscor, not those which Anscor may be found, on the basis of the vague language of a letter written nearly two years earlier, to have then promised to provide. 49 It is the consideration for the actual transfer of property (in this case, the payment of money) with which s 120(1) is concerned. Dexter did not pay $26,379,260.35 to Anscor for its promises. It paid that sum it for its services. It must not be assumed, without more, that Anscor's performance fully matched its promises. 50 In par 7A of the Fifth Amended Statement of Claim, the Trustee alleged that the services provided by Anscor involved no more than the following: '(a) acquiring the money to be invested from the investor; (b) obtaining a written agreement from Dexter concerning the investment; (c) forwarding the agreement to the investor for execution; (d) receiving the signed agreement from the investor and sending it to Dexter or in the alternative signing the agreement on behalf of Dexter; (e) on-forwarding the money received from the investor to Dexter; (f) receiving the signed agreement from Dexter and sending it to the investor or, executing it (as described at sub-paragraph (d)) and sending it to the investor; (g) periodically sending statements to the investor; (h) maintaining records of the individual investments; (i) receiving monthly investor summary sheets and payments of principal and interest from Dexter and on-forwarding them to investors; (j) answering the queries of investors.' In an affidavit sworn 15 May 2001, Mr Corbett responded to par 7A as follows: '7A. I agree with but clarify those services by saying that they were undertaken primarily on our clients and our own behalf as part of our ongoing costs of doing our business efficiently. All statements to clients were done on a monthly basis for each client. That means that a certain number of clients were due for these statements each and every day. It meant checking all information provided by the Wattle Group to ensure accuracy for our clients which numbered approx 1500 and the Wattle Group operations necessitated a staffing level at Anscor of 8 persons during most of 1997 and into 1998. Wherever the agreement was not signed by Dexter it was signed by Mr Ken Parker under a power of attorney arranged between himself and Dexter for reasons of efficiency to ensure no delay to the clients in their funds commencing to earn income.' 51 Anscor's role was in fact limited to finding investors through its 'business contacts' or 'acquaintances'; using, for that purpose, promotional material provided to it by Dexter (which made false representations as to how previous investors' moneys had been invested and earned interest); and the subsequent routine administration of the investors' loans, including the sending of cheques to investors, and the checking and forwarding to them of 'client summary sheets', which had also been provided to Anscor by Dexter. The forms of investment agreement were also prepared by Dexter who supplied stocks of them to Anscor. In cross-examination, Mr Corbett acknowledged that after obtaining the initial investment and paying the amount of it to Dexter, Anscor, for its commissions of 50 per cent per annum for as long as the investor allowed the investment to continue, was doing nothing more than on-forwarding cheques prepared by Dexter and supplied to Anscor by him for on-forwarding, paying Anscor's own agents, and receiving and noting the 'client summary sheets' prepared by Dexter. 52 Mr Corbett said that at the beginning (Anscor's role as an administrator for Dexter commenced in about July 1994) it was very difficult to get people to provide unsecured funds to an individual for such a high risk venture. He said, however, that Anscor's 'role became easier as time went on and the Wattle Group continued to perform'. The primary judge referred to the rapid increase in the amount being invested with Dexter over time, and to the lack of marketing effort required of Anscor. Importantly, his Honour concluded that by the time of the two-year period from 26 March 1996 to 26 March 1998 with which we are concerned, 'the marketing of Dexter's business performed by Anscor, including sourcing investment funds for Dexter, was uncomplicated and required little effort on Anscor's part' (at [65]). 53 In support of his case that the commissions paid to Anscor by Dexter exceeded the value of the services Anscor provided to Dexter, the Trustee adduced evidence from Paul McLaren, a finance broker and investment adviser. Mr McLaren said he had conducted his own finance broking business since 1987. He had had experience of short-term bridging finance, involving 'desperate' borrowers who were prepared to pay interest rates well above mainstream lending rates. He said such loans were rare and were always negotiated on an individual basis, as also was the commission paid to the introducing finance broker. He said: 'In my experience when such loans are brokered the commission paid although often higher than the norm is still only ever a one off with perhaps a trailing commission. That is, except for the Wattle product I have not ever heard of or seen a product which paid a commission of say 5% per month for the full term of the loan. I have not ever seen or heard of a payment of commission which exceeded an amount equal to 5% of the principal sum.' Mr McLaren added: 'I have been told that the Wattle scheme had in excess of $150m of investors' money which was said to have been employed earning high returns of the order of 150% per annum from a market said to be of the type I have just discussed. That simply could not have been true. There is no true market for such financial products, let alone one which would absorb that much money and pay consistent returns of that order month in month out.' 54 Mr McLaren accepted that the Wattle investment was not a 'mainstream product' (see [52] below), and, indeed, that there was no product like it in the market because a product which paid commissions of between 18 per cent to 50 per cent of capital invested on a per annum basis to brokers 'could have no realistic prospect of producing any return to investors over the medium or long term'. 55 The Anscor parties called evidence on this issue from two people. The first was Maurice John Unwin, a self-employed finance broker who had worked as a finance broker on his own or his company's account since 1989. Mr Unwin said there was no set fee structure for finance brokers. He said: 'The industry norm for most products usually ranges from 1% of the loan amount to 5% of the loan amount payable by the borrower, generally from the loan proceeds. Fees are often negotiated on a transaction by transaction basis. The Wattle product was not a mainstream product and one would expect the brokerage fees payable to exceed the industry norm.' (my emphasis) 56 Mr Unwin said finance brokers often provided the same services to consumers as did loan officers with financial institutions such as banks. He explained: 'Services usually include taking the application, obtaining the credit report and appraisal, counselling the borrower on the loan process and collecting the necessary documentation.' 57 Mr Unwin indicated that there was a market for high interest, short-term loans in the mid-1990s and that it was common for such loans to bear interest at a rate of up to 15 per cent per month, in which case it was 'not unusual' for brokers to receive fees of 5 per cent per month. However, in considering the appropriate fee for a large scale operation, he mentioned the figure of 4 per cent. 58 In par 28 of his affidavit, Mr Unwin set out a list of the steps which would generally need to be followed 'in the management of a lending book/portfolio of multiple borrower/investors with a completely computerised system' as follows: '(1) Receive inquiry by telephone or facsimile as to whether funds are available using the security offered; (2) receive formal application from borrower or broker/investor; (3) if property is provided as security, instruct the valuer to obtain current value. If chattels, arrange for an appraisal; (4) on receipt of valuation and/or appraisal, issue a letter of terms and conditions to borrower or his representative to either accept or reject; (5) if accepted, instruct solicitor to prepare security documents for execution by borrower; (6) on advice that security documents are executed by borrower, arrange for the funds from an investor to be forwarded to solicitor to effect settlement; (7) on advice that settlement has transpired, set up a loan ledger and advise borrower in writing of payment terms and repayment date of principal amount and any unpaid interest; (8) on advice from borrower or his solicitor that loan will be discharged, instruct solicitor to prepare release documents in readiness to exchange for payment in full; (9) on advice from solicitor that loan has been discharged, bank monies, reconcile account, close ledger and refund monies to the investor.' 59 In cross-examination, Mr Unwin agreed that his opinion about the reasonableness of a fee up to 4 per cent per month was based on the finance broker providing the range of services just mentioned. Counsel for the appellants accepted that Mr Unwin had conceded at trial that his understanding was that Mr Dexter's introducers had provided that range of services. Mr Unwin also agreed that a loan of money for a minimum of six months was not what would be called 'short term' in the finance brokering business. Ultimately, Mr Unwin conceded that it would not be usual for a borrower to charge a commission of 4 per cent per month on a loan for as long as six months. It was put to him that this would not be reasonable. He answered: '[i]n some cases you're right'. 60 The second Anscor witness on this subject was William Ross Jackson, a self-employed real estate agent and finance broker. Mr Jackson said that in about 1990 he became 'aware that certain private individuals had started lending money at between 10 and 15 per cent per month to businesses and individuals for short periods like one to two months to bridge cashflow problems' At about that time Mr Jackson met Dexter. He learned that Dexter had commenced to engage in 'short term bridging finance'. Mr Jackson said: 'As a broker for arranging loans as I did in the case of arranging loans for Dexter my fees range from 1% per month to 5% per month depending on the deal and the financiers policy. I firmly believe that the fees paid by Dexter to the administrators was fair and reasonable in the arena of high risk, high return performance orientated finance where all of the returns come out of interest earned and not out of client capital. I believe the opinions sought by Mr Clout of financial planners can not be compared in any way to the purported business operations of Dexter at the time he promoted himself to be in the business of bridging finance.' 61 Mr Jackson ran a company called Spectrum Fund Administrators Pty Ltd, which was one of the so-called 'administrators' for the Wattle Group. Mr Jackson thought the company had received from Dexter commissions of about $480,000 over six months, being the last six months prior to closure of Dexter's business in March 1998 (prior to that period, Mr Jackson or his company had been a 'sourcing agent' for Anscor), on the basis of 4 per cent per month on investors' funds obtained for Dexter. He acknowledged that the 4 per cent per month rate, for twelve months a year, was 'in effect, 50 per cent per annum'. Asked what work his company did for that fee, Mr Jackson replied: 'We arranged the loan to Dexter, arranged the paperwork, explained the terms of the document that the lenders to Dexter were to sign, the fact that it was unsecured, a little bit about the background as we knew it of the Wattle operation, and then did the ongoing administration of making the payments and checking on making sure that they were paid the right amount of money in accordance with the contract.' He said his role did not include giving advice to investors, although he 'imparted the information [he] knew'. He would supply to prospective investors, documents which had been prepared by Dexter, and which purported to summarise (falsely as it turned out) the returns which other investors had received from the Wattle Group. 62 After summarising the evidence relevant to the present issue, the primary judge said (at [71] to [74]): 'The fact that Dexter was prepared to pay the commissions he did to Anscor provides no evidence that they were a fair or reasonable recompense for the work done by Anscor. There was no written agreement between Anscor and Dexter detailing Anscor's obligations. There is nothing to suggest that the rate of commission that Anscor (and other administrators) received was the result of any bargaining process between Anscor and Dexter. Rather does it appear that Dexter simply offered to pay the very high rate of commission which Anscor was paid. Dexter was on a treadmill which he could not get off: he needed a constant inflow of new funds to keep the scheme going. He was apparently not prepared or not able to do that himself or through his own organisation. Hence his willingness to offer the very large commissions he did to Anscor and the other administrators. The fact that Anscor's sub-agents received commissions from Anscor that varied, in some cases between 1% and 2.5% per month of the funds sourced by the sub-agent, does not, I think, provide any ground for thinking that Anscor's own commissions were a fair or reasonable return for the work Anscor did for Dexter: as Clout submits, the rates paid to sub-agents to Anscor derived from the rates Dexter paid and not vice versa. Anscor could only offer them to its sub-agents because Dexter paid as much as he did to Anscor. And as the trustee submits, Anscor had to pay its sub-agents generously to discourage them from going to Dexter and requesting that they be appointed 'administrators', as some sub-agents in fact did. I do not accept the Anscor respondents' submission that, in order to determine whether Anscor gave adequate consideration for the commissions it received in the two years in question, it is necessary to examine every payment of commissions in that period and the services actually performed each month in respect of each and every one of the thousands of investors. Anscor was paid throughout, a standard commission that equated on an annual basis to 50% of the amount of the funds placed with Dexter through Anscor. Much of the sourcing of these funds was done by Anscor's sub-agents in this two year period. There is nothing to suggest that sourcing funds in this particular period, when the Wattle scheme was attracting large numbers of investors because of its performance up to that time, presented Anscor with any difficulty. I have referred to the evidence detailing the limited administrative services that Anscor provided. The Anscor respondents did not put any evidence before the Court to suggest that Anscor's task in administering investments in this two year period was anything other than the routine one I have described. In particular, the Anscor respondents did not attempt to show that Anscor had to deal with any individual investors, who each raised difficulties which required the input of considerable effort by Anscor to resolve. There is, as Clout submits, no basis for thinking that Anscor provided services in relation to some investors which were substantially more valuable than its services for investors generally. Each investor therefore appears to have been interchangeable with any other investor, so far as the quantum of effort that Anscor put into locating the investor and then administering the investor's loan is concerned. In my opinion, Anscor gave consideration of very much less value than the amount of the commissions it received in the two year period to March 1998. The payment by Dexter of these commissions to Anscor is therefore void as against Dexter's trustee in bankruptcy. It is unnecessary, in reaching this conclusion, to assess the value of the consideration that Anscor gave for those commissions… However, in order to deal with the issues raised in this case and in particular the tracing claims, it is necessary to determine the allowance the trustee in bankruptcy must make pursuant to s 120(4) for what was done by Anscor in return for receiving the commissions.' 63 On the basis of Mr McLaren's evidence, his Honour concluded that he should allow, first, a one-off fee of 5 per cent of the amount sourced by Anscor from each investor, and, secondly, a 'trailing commission' of 0.25 per cent per annum of the amount of each investor's investment over the period that the investor's moneys remained with Dexter. Mr McLaren's evidence was that such a one-off fee and trailer commission, both represented the upper limits of what one might find paid in the market place. The orders ultimately made by his Honour provided for calculation of these amounts and their deduction from the moneys otherwise to be paid by Anscor to the Trustee. 64 In arguing this first issue before us, counsel for the Anscor parties did not challenge the particular substitute fees selected by his Honour, otherwise than by submitting that his Honour erred in substituting any figure at all for that agreed between Dexter and Anscor. Counsel argued that since Dexter and Anscor were at arm's-length, their agreement provided the best evidence of the value of Anscor's services. Counsel also said the agreed rate was supported by the evidence of Mr Unwin and Mr Jackson. 65 Counsel for the Anscor parties frankly recognised the unsustainable nature of Dexter's business. But they sought to turn this to their advantage, arguing that Dexter's need for ever-increasing investment funds increased the value of the administrators' services. They acknowledged that the services provided by Anscor did not include many of the steps that finance brokers would normally take, such as advising the investor and ensuring that adequate security was provided by the borrower. But they argued this was irrelevant to the determination of the value of the services provided to Dexter; he was interested only in receiving funds. Counsel also repeated an argument which had been put to the primary judge, that payment of a fee of 4-5 per cent per month to an administrator was supportable on the basis that sub-agents were paid between 1 per cent and 2.5 per cent per month. 66 A difficulty with counsel's argument is that it focuses entirely upon the position of Dexter; in particular, his special need to receive an ever-increasing flow of new investment funds in order to allow him to service his existing loans. However, s 120(1)(b) of the Act requires the Court to consider the 'value' of the consideration given for the transferred property. That is something to be determined on an objective basis: see Sutherland v Brien (1999) 149 FLR 321 at 332. Undoubtedly, it is necessary to have regard to surrounding circumstances, but, as Sutherland v Brien makes clear, the value of the consideration is not to be determined by the special needs of the debtor/bankrupt or the special value he or she places on it. If recovery could be defeated by exigencies personal to the debtor/bankrupt, the policy underlying s 120 would be seriously compromised. 67 It is true that Dexter and Anscor operated at arm's-length in the sense that each was conducting a business on his or its own account. However, there was no evidence that they ever engaged in negotiations over the level of Anscor's commission. Dexter needed a constant stream of new investment funds and seems to have been prepared to encourage this by offering extremely generous commissions, as well as extremely generous rates of return. 68 I agree with his Honour that the payment of commissions to sub-agents does not assist Anscor's case on this issue. The fact that an administrator paid commissions calculated at a certain rate to sub-agents is not logically probative of the value of the services provided by the administrator to Dexter. Arguably the rate of commission paid to the sub-agents was dictated by the level of commissions that Dexter was willing to pay to administrators. 69 Counsel for the Anscor parties submits that his Honour erred by applying the rates of commission charged in a market which was irrelevant. It was put that the Wattle Group investment product lay outside the market of which evidence was given, and by reference to which his Honour made his findings. The appellants submitted that the Wattle investment was of a special, indeed unique, nature, and that it followed that Anscor's services in marketing it were also of a special, indeed unique, nature. They submitted that his Honour erred in thinking that there was a 'market' for such a product, and, therefore, for such services. But in my view this attack on the evidence of Mr McLaren, and on his Honour's findings based on it, fails. Mr McLaren said, and his Honour clearly accepted, that there was no 'market' for the unsustainable Wattle Group investment product. His Honour had to determine the value of Anscor's services in promoting that which was commercially unorthodox, idiosyncratic and doomed to fail in the longer term. In my view he was entitled to adopt the rates of commission paid in respect of the most similar and relevant product for which a market in fact existed. 70 In a different case, the point made by the appellants might have greater force. Assume that a person who later became bankrupt paid a large fee for the services of a famous entertainer or sportsperson. Or assume that the person paid a 'success fee' for the making of a discovery or the finding of a business opportunity. It may be particularly difficult to determine value by analysis of the payee's activity, and there may be no relevant 'market'. In such a case the process of negotiation may call for close attention. 71 I agree with counsel for the appellants that if a service, such as checking the correctness of the monthly investor summary sheets, formed part of the consideration given by Anscor, no deduction in determining the value of the consideration should be made on account of the fact that the activity also benefited Anscor (the sheets provided the basis of the determination of Anscor's commission). But I do not accept that his Honour made any such deduction. 72 Once Anscor's special arguments are put aside, determination of this issue depends on an evaluation of the evidence of the three finance brokers, Mr McLaren, Mr Unwin and Mr Jackson. His Honour preferred that of Mr McLaren. He gave cogent reasons for that preference. I see no error in them. 73 In my view, the first issue should be determined in favour of the Trustee.

Issue 2: Whether the trusts in favour of investors created under a form of investment agreement which was in use for a time had the effect that the Trustee was disentitled to recover, or to trace, the Anscor commissions totalling $26,379,260.35 or part of them 74 Sections 116(1)(a) and (b) of the Act are as follows: '(1) Subject to this Act: (a) all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy, or has been acquired or is acquired by him or her, or has devolved or devolves on him or her, after the commencement of the bankruptcy and before his or her discharge; (b) the capacity to exercise, and to take proceedings for exercising all such powers in, over or in respect of property as might have been exercised by the bankrupt for his or her own benefit at the commencement of the bankruptcy or at any time after the commencement of the bankruptcy and before his or her discharge; (c) … (d) … is property divisible amongst the creditors of the bankrupt.' The date of commencement of Dexter's bankruptcy was 26 March 1998 (see [17] above) - the terminus of the two year period with which we are concerned. 75 Section 116(2) excludes from 'property divisible amongst the creditors of the bankrupt', inter alia: '(a) property held by the bankrupt in trust for another person'. Being an exclusion, this paragraph refers to property which the bankrupt held in trust at or after the commencement of the bankruptcy. 76 Section 120(1) refers to transfers by a person who became a bankrupt which took place within the period beginning five years before the commencement of the bankruptcy and ending on the date of the bankruptcy. 77 During the two-year period relevant to the proceeding (see [18] above), two different forms of investor agreement were used by Dexter. The earlier was in the form of exhibit REC 3 to an affidavit of Mr Corbett sworn 17 May 2001 ('the REC form of agreement' or 'REC form'). The REC form of agreement was used down to February 1997. As from February 1997 Dexter required investors to sign a different form of agreement was called an 'Agreement for the Loan of Money'. As well, from July 1997 to December 1997 Dexter sought and obtained the consent of nearly all the investors who had placed funds with him under the REC form, to their investments being governed by the new form of agreement in substitution for the REC 3 form. By December 1997, approximately 98 per cent of investors who had funds invested with Dexter were subject to the form of Agreement for the Loan of Money. Both forms of agreement provided that the minimum term of the investor's deposit was six months. 78 The primary judge stated (at [44]): 'Specific property which a bankrupt holds for the benefit of others is property held by the bankrupt on trust. The trustee in bankruptcy has no claim to such property. But I accept that property of a bankrupt which, by force of s 116 the Bankruptcy Act, vests in the trustee in bankruptcy, includes property in respect of which third parties have only equitable charges. That property vests in the trustee as property of the bankrupt, but subject to the equitable interests of the charges. See Re Hodby (Federal Court of Australia, 16 April 1987, unreported) at pars [19] and [20] where Fisher J expressed agreement with the views of White J in Re Goode; Ex parte Mount (1974) 4 ALR 579 at 595 and following. I also accept that, if property of a bankrupt does not cease to be such and accordingly vests in the trustee in bankruptcy pursuant to s 116, where the property is equitably charged in favour of a third party, a transfer of property by a person who later becomes bankrupt, which transfer his trustee in bankruptcy seeks to avoid under s 120, will include property of the bankrupt though equitably charged to third parties. Whether such a charge survives the transfer will depend on general equitable principles as to notice and whether the transferee gave value for the transferred property.' 79 Proceeding on the basis mentioned, his Honour held that:

The effect of the REC 3 form of agreement, used from March 1996 to February 1997, was to give rise to a trust in respect of the moneys which an investor placed with Dexter pursuant to it, so that the relationship between the investor and Dexter was that of beneficiary and trustee;

The effect of the form of Agreement for the Loan of Money used from February 1997 to March 1998 was that no such trust was created, so that moneys lent pursuant to it became Dexter's own moneys, and the relationship between the investor and Dexter was that of creditor and debtor;

In relation to those investors who placed money with Dexter under the REC 3 form ('the REC 3 investors') who, over a period from July 1997, 'switched' to the form of Agreement for the Loan of Money, the trust arising from the earlier form of agreement was not destroyed retrospectively but the REC form of agreement was discharged for the future when the Agreement for the Loan of Money was entered into in substitution for it;

Because of the indiscriminate mingling in the 'Wattle' account of:

· moneys received by Dexter from administrators (not limited to Anscor) in trust for the REC 3 investors; · moneys received from administrators (not limited to Anscor) from investors under the form of Agreement for the Loan of Money, which, therefore, were Dexter's own moneys ; and · moneys received from members of the Foundation Group which were also Dexter's own moneys,

and the indiscriminate use of the account by Dexter to pay outgoings of such kinds as commissions to administrators (not limited to Anscor) and personal and business expenses of Dexter, it was no longer practicable to identify in the account moneys advanced by any particular REC 3 investor and therefore to give effect to the trust in respect of those moneys (his Honour referred to Brady v Stapleton and other authorities);

Even though the commission payments made to Anscor probably came, in part, from moneys which had been invested under the REC 3 form of agreement, it was not possible to identify any particular part or proportion of the payments as having done so, and it was not possible to 'appropriate' a particular part or proportion of each commission payment to funds provided by any particular REC 3 investor;

Dexter owed fiduciary duties to the REC 3 investors who had been beneficiaries under the trusts which had become incapable of enforcement;

Those fiduciary duties would give rise to an equitable charge over the mixed fund in favour of those REC 3 investors, but would not result in the moneys not being Dexter's own moneys; accordingly, the whole of the mixed fund represented Dexter's own moneys, albeit subject to equitable charges, and lay outside the notion of 'property held by the bankrupt in trust for another person' found in s 116(2)(a) of the Act.

80 The Trustee submits that the primary judge's conclusion resolving this issue in his favour is sustainable on any one of the following four bases, all of which assume that the funds invested with Dexter under the REC 3 form of agreement were, at the time of investment, held by Dexter on trust for the respective REC 3 investors:

(a) the basis relied on by the primary judge (intermingling in the Wattle account making enforcement of the trusts unenforceable, that is, making it impossible to conclude that Dexter held any part of the moneys in the Wattle account upon trust for REC 3 investors, and compelling the conclusion that he held them as his own moneys);

(b) the trusts did not avail the appellants in the absence of a claim by them that trusts in favour of the REC 3 investors subsisted as at the commencement of Dexter's bankruptcy;

(c) the trusts did not survive and were discharged once the forms of Agreement for Loan of Money were entered into in substitution for the REC 3 forms;

(d) the application of the principle for which Re Hallett's Estate; Knatchbull v Hallett (1880) 13 ChD 69 is authority, showed that most of the amounts paid by Dexter to Anscor as commissions were paid out of his own moneys, and not moneys invested under the REC 3 forms of agreement.

81 In my opinion, the Trustee succeeds on grounds (a) and (b), and I need not address grounds (c) and (d).

Ground (a) 82 The appellants do not point to any evidence contradicting his Honour's finding that intermingling in the Wattle account made enforcement of the trusts impossible. 83 It is true, as the appellants submit, that since money in an account is all of a piece and forms an 'indistinguishable mass', it is not necessary to the enforcement of a trust that trust parts be separately identifiable; it is assumed, in favour of the Trustee, that he or she has not committed a breach of trust and has paid out non-trust moneys first, leaving the trust able to be observed in relation to the remainder: cf Brady v Stapleton at 336 - 339 per Dixon CJ and Fullagar J; Stephens Travel Services v Qantas (1988) 13 NSWLR 331 at 346 - 347 per Hope J. But the appellants do not point to any evidence, and, in particular, to any contemporaneous documentary evidence, by which the necessary accounting exercise could be carried out. 84 The appellants do not demonstrate error in the primary judge's reasoning or conclusion.

Ground (b) 85 If, contrary to his Honour's conclusion, Dexter held identifiable amounts in the Wattle account in trust for the REC 3 investors, the appellants still fail. 86 The appellants submit that Anscor was a bona fide purchaser for value, without notice of the REC 3 trusts, of the commission moneys which Dexter paid to it. The Trustee did not contend otherwise. In exchange for the payments of commission totalling $26,379,260.35, Anscor provided services which had a real and substantial value and which were not merely nominal, trivial or colourable: cf Barton v Official Receiver at 86, discussed at [29] above. The Trustee's only contention in this respect was that the value of Anscor's services was less than $26,379,260.35. 87 It follows that in the hands of Anscor, a bona fide purchaser for value without notice, the commission moneys were not affected by the trusts, and the REC 3 investors had no remedy against Anscor: whether they would have a personal remedy against Dexter for breach of trust is another matter. 88 Section 120 makes the transfer of property (here, a payment of money) void only as against the trustee in bankruptcy. It does not make a transfer of property (payment of money) by a trustee of property who later becomes a bankrupt, void as against the beneficiaries for whom the trustee held the property transferred (money paid) in trust. Accordingly, the transfer of property by a trustee of the property who later becomes bankrupt, will be as effective or ineffective as against such beneficiaries as general law principles allow. 89 Section 116(2)(a) operates as at the commencement of the bankruptcy (see [72] above). But the appellants do not contend that any money or other property was held in trust for the REC 3 investors as at that date. In these circumstances, s 116(2)(a) is irrelevant. (A submission by the Anscor parties that property was held in trust for the REC 3 investors as at the commencement of the bankruptcy would, of course, be opposed to their interests.) 90 The appellants rely on Brady v Stapleton, but that case did not concern a bona fide purchaser of trust property for value without notice of the trust, such as Anscor. 91 In the result, even if Dexter held parts of the money in the Wattle account in trust for REC 3 investors, the trusts did not continue to be impressed on the moneys he paid as commissions to Anscor, a bona fide purchaser for value and without notice.

Issue 3: Whether, on 30 June 1997, Anscor paid $2,805,000 to PIAM as a contribution to the Anscor Executive Superannuation Plan. This issue raises subsidiary questions of whether PIAM lent back $2,800,000 to Anscor and whether PIAM took effective securities for the loan on 30 June 1997 and in March 1998. In relation to all these transactions, the question arises whether they were a 'sham'

General 92 The Trustee claimed against PIAM a declaration of voidness of the payments of commissions totalling $26,379,260.35 made by Dexter to Anscor and a declaration that numerous registered securities granted by various Anscor parties to PIAM were void as against the Trustee. The securities in favour of PIAM comprised six registered Bills of Mortgage over various properties in Queensland, and a registered Mortgage Debenture over all the assets and undertaking of Anscor, dated 30 June 1997, registered on or about 12 August 1997 (ASIC No 603957), and expressed to secure an advance of $2,800,000 ('the Mortgage Debenture'). 93 The primary judge accepted the Trustee's case, finding that the transactions were shams. 94 The appellants challenge this conclusion, focussing primarily on the Mortgage Debenture. First, the appellants say no allegation was made in the pleadings that the transactions were shams; and, secondly, the evidence does not support his Honour's conclusion that they were. 95 On 30 June 1997, PIAM took the Mortgage Debenture as part of a transaction in which a superannuation fund was purportedly established. The fund was purportedly established by a Deed dated 30 June 1997. The parties to the Deed were John McDonald McAuley as settlor, PIAM as trustee, and Anscor as principal employer. The Deed recited that Mr McAuley had paid to PIAM NZ $20 to be held on the trusts of the Deed. The fund was called the 'Anscor Executive Superannuation Plan'. It was established on the advice of the Corbetts' accountant, Mr McAuley. The fund had the appearance of a superannuation fund for the benefit of certain employees of Anscor. PIAM was a New Zealand company. Mr McAuley had had no contact with PIAM before mid-June 1997. At that time he visited New Zealand for the purpose of taking legal and accounting advice and meeting people there, in connection with his proposal that a non-complying superannuation fund be established having a 'non-resident' trustee. He was introduced to PIAM, in May 1997, through a business associate. PIAM acted through one of its directors, Nico Francken of New Zealand. Also it gave a power of attorney to Geoffrey Simon Klooger, a Brisbane solicitor who regularly acted for the Corbetts. The Deed provided for the employees of other employers who agreed to be bound by its terms, also to receive superannuation benefits under it. 96 The Deed also provided for the payment of additional amounts to PIAM to form part of the 'Settled Fund'. On the day the trust was established, 30 June 1997, Anscor paid PIAM $2,805,000, purportedly by way of contribution to the Settled Fund. PIAM immediately lent that sum, save for $5,000, back to Anscor for a period of 12 months. To secure the loan, PIAM took the Mortgage Debenture from Anscor. 97 As noted earlier, his Honour found this transaction was a sham. He concluded that none of the actors involved in it (McAuley, the Corbetts, Anscor or PIAM) intended that the fund would in fact operate as a trust for the benefit of Anscor's staff. In his Honour's opinion, the evidence established that PIAM merely minded, off-shore, moneys provided by Anscor, and disbursed them as the Corbetts directed. His Honour found that at the time when the transaction occurred in June 1997, the Corbetts were already concerned about the possible collapse of the Wattle Group business. By June 1997 ASIC's investigation into that business had reached the stage where ASIC was issuing notices. 98 Some nine months after the purported transactions of 30 June 1997, a further series of transactions relating to the Anscor Superannuation Trust took place. These all occurred on 26 March 1998 - the date on which Dexter appointed the Trustee as his controlling trustee. His Honour described these events of 26 March 1998 as follows (at [153], [154]): '[153]On 26 March 1998, Dexter ceased trading and appointed Clout as his controlling trustee under the bankruptcy laws, having told Mr Corbett of his intention to do this two days before. On the same day, 26 March, the Corbetts, McAuley, their accountant since 1996, and their solicitor, Klooger, engaged in a flurry of activity. This, so the Corbetts and McAuley contend, had nothing to do with Dexter's collapse. They then arranged for PIAM to take mortgages, subsequently registered, over the following properties: (a) Anscor's property at 344 Queen Street (b) Mrs Corbett's property at Mt Crosby Road (c) her property at 76 Cantwell Street (d) her property at 78 Cantwell Street (e) her property at Gold Creek Road (f) the Croftby Downs farm. [154] On the same day, 26 March 1998: (g) Early that day Klooger sought, and obtained from PIAM later that day, its authority for him to amend the Anscor Superannuation Fund Trust Deed to remove the power under the deed vested solely in Anscor Pty Ltd as principal employer to replace the trustee of the fund, which power would vest in any liquidator of Anscor, and to vest that power instead in "all employers, including any principal employer, together". This amendment was made, according to Klooger's advice to PIAM, on 26 March 1998 "with the agreement of Anscor Pty Ltd as principal employer and Saleja Nominees Pty Ltd as additional employer". Saleja was trustee of Klooger's family trust. (h) moneys provided by Anscor totalling $969,000 were deposited into the PIAM account referred to in sub-par (i). (i) $1,155,000 was transferred from this account which was kept in Brisbane by Klooger then acting in his capacity as attorney for PIAM, trustee of the Anscor Superannuation Fund, to the account of a PIAM associated company in Singapore.'

Natural justice - did the Trustee give adequate notice of the contention of 'sham'? 99 The Anscor parties submit that it was not open to the primary judge to conclude that the transactions relating to establishing the superannuation fund were a sham because that was not alleged in the pleadings. Those parties point out that particular findings made by the primary judge had not found expression in the Trustee's pleading, but the question is one of substance, not form: did the Trustee give adequate notice that the claim of 'sham' would be made? 100 The Trustee alleged in par 70A of the fifth amended statement of claim that on 30 June 1997 a 'round robin' transaction occurred by which Anscor 'purportedly' paid $2,805,000 to PIAM 'purportedly' as a superannuation contribution, and that PIAM 'purportedly' lent back to Anscor $2,800,000. Similarly, in par 70C, the Trustee alleged that on or about 30 June 1997, Anscor granted the Mortgage Debenture 'purportedly' as security for the loan. In par 70D the Trustee alleged that Anscor made certain payments to PIAM 'purportedly' as a part repayment of the loan, 'purportedly' as interest on the loan, and 'purportedly' as member contributions to the Anscor Executive Superannuation Plan. 101 Following the pleading of these various 'purported' transactions, par 70F alleged that '[i]n truth no debt was owed by Anscor to [PIAM]'. It was thus clearly alleged that the various purported dealings were not as they seemed, and did not have the effect that they purported to have. 102 In par 44(b)(v) of the second amended defence of Anscor and further amended defence Mrs Corbett, Croftby Downs, and PIAM filed on 12 April 2001 ('the Defence'), those parties asserted that: '… at the time the transaction [payment of $2,805,000 to PIAM and payment of $2,800,000 back by PIAM to Anscor] … occurred, Anscor (by its director Mrs Corbett) and [PIAM] (by its director Mr Francken) intended those transactions to effect a superannuation contribution and a loan respectively, and those transactions in fact effected a superannuation contribution and a loan respectively.' This pleading shows that the pleading parties understood the Trustee's allegation to be that those concerned did not intend the transactions to effect:

• a superannuation contribution; or
• a loan, and that the transactions did not in fact effect:
• a superannuation contribution; or
• a loan. 103 In par 35(b) of the Trustee's Reply filed on 22 June 2001, the Trustee denied those allegations in the Defence. 104 Finally, in his 'Statement of the Applicant's Contentions of Fact and Law' filed on 18 May 2001, the Trustee contended that: (a) (par 86) '[t]here was no genuine intention on the part of Anscor and PI Asset Management that the latter should act as a trustee of a superannuation fund, genuinely constituted to benefit Anscor employees, when regard is had to the following circumstances …'; and (b) (par 87) '[i]n truth … there was no genuine debt owing by Anscor to PI Asset Management, to secure such a debt …' 105 In my opinion, the question whether the purported establishment of the superannuation fund, loan back and giving of securities were shams was clearly in issue between the parties prior to the commencement of the hearing before his Honour. 106 Notwithstanding the terms of the pleading set out at [99] above, the appellants did not lead evidence from Mrs Corbett or Mr Francken as to their respective intentions. They called Mr Corbett but he was not a director of Anscor at the relevant time. 107 Contrary to the appellants' submission, Mr Mc Auley was cross-examined at length in ways clearly directed to showing that the superannuation fund, the loan and the Mortgage Debenture could not sensibly be regarded as intended to achieve their purported objectives. 108 In relation to the March 1998 transactions, par 70E of the fifth amended statement of claim pleaded that in March 1998, Croftby Downs 'purportedly agreed to assume liability' for the loan from PIAM to Anscor. Paragraph 70J pleaded that the mortgages by Anscor, Mrs Corbett and Croftby Downs were given 'to make it appear' that the mortgaged properties were not susceptible to claims. 109 In response, pars 45 and 47(b) and (c) of the Defence pleaded, in substance, that the March 1998 transactions were what they purported to be. 110 Paragraphs 36 and 38 of the Trustee's Reply filed on 22 June 2001 put those paragraphs of the Defence in issue. 111 Finally, in his 'Statement of the Applicant's Contentions of Fact and Law' filed on 18 May 2001, the Trustee contended that: (a) (par 87) 'In truth … the securities given to PI Asset Management in March 1998 by Anscor, Mrs Corbett and Croftby Downs were given for no valuable consideration, because there was either no genuine debt owing by Anscor …' and (b) (par 88) 'none of [those securities] is good against the Applicant's interest … either because:- it is a sham and of no actual effect or …' 112 The genuineness of the March 1998 transaction was also clearly in issue prior to the commencement of the trial. 113 Mr McAuley was cross-examined about the March 1998 transactions, again with a view to showing that they could not be accepted at face value. 114 There is no substance in the appellants' submission that certain questions should have been put to Mr Corbett in cross-examination about the March 1998 transactions: he was not a director of any of the companies involved, and Mrs Corbett, who was, did not testify about the transactions.

Did the evidence support the finding of a 'sham'? 115 The Anscor parties submit, in effect, that the finding of the primary judge that the transactions surrounding the creation of the superannuation fund were shams was not open on the evidence. I disagree. 116 Central to the question whether there was a sham was, as his Honour pointed out, the intention of those involved: Snook v London & West Riding Investments Ltd [1967] 2 QB 786 at 802 per Diplock J; Sharrment Pty Ltd v Official Trustee in Bankruptcy (1998) 18 FCR 449 at 453-458 per Lockhart J, 467-469 per Beaumont J (Foster J agreed with both Lockhart J and Beaumont J); Baker at 13-17; Richard Walter Pty Ltd v Commissioner of Taxation (1996) 67 FCR 243 ('Richard Walter') at 245 per Lockhart J, 257-258 per Hill J. It is true that Mr McAuley, the settlor and architect of the arrangements, gave evidence to the effect that his intention was to establish a fund to provide benefits to the Corbetts and for the employees of Anscor. However, his Honour rejected this evidence, as it applied, both at the time the trust was purportedly established on 30 June 1997 and subsequently. He did so because of the surrounding circumstances. It was open to his Honour to take that course, particularly having regard to the fact that none of the other persons involved in the formation of the purported trust (Francken, Klooger and Mrs Corbett) gave evidence about it. 117 What were the circumstances on which his Honour relied? I will not attempt to recount all of them: his Honour's detailed and careful discussion of the transactions with PIAM extend over 33 paragraphs of his reasons ([142] - [174]). The following are perhaps the more significant: (a) By June 1997 the Corbetts, and their accountant, Mr McAuley, had concerns about how long the Wattle Scheme would continue to operate, and, therefore, how long Anscor would continue to receive its steam (river!) of income from Dexter (Mrs Corbett acknowledged that when Dexter's scheme did collapse, Anscor's business came to an end.) Mr McAuley conceded that, given the ASIC investigation, it was 'sort of on the cards' that Dexter would not be able to continue to trade. (b) The idea of establishing the fund was that of Mr McAuley. The decision to establish it was taken at a meeting attended by the Corbetts, Klooger and McAuley held on 30 June 1997. Minutes of the meeting recorded that it was desired to safeguard against the possibility of 'the death or incapacitation' of Dexter, Anscor's only source of income. His Honour found, however, that the minutes misrepresented the position, and that the concern which actually prompted the establishment of the fund was that Dexter might not long continue to operate the Wattle scheme. In cross-examination, Mr Auley conceded that it was an expected 'levelling off' of Dexter's business activities that caused him to suggest the arrangements that were entered into. (c) By lending virtually the entire $2,805,000 immediately back to Anscor, PIAM acted inconsistently with its duty as trustee of the fund, because it put it out of its power to meet the entitlement of the beneficiary who might die or resign within the first 12 months of the operation of the fund (the loan back by PIAM to Anscor of $2,800,000 was repayable on 30 days' notice, not to be given before 30 June 1998). In cross-examination, Mr McAuley suggested that PIAM might have been able to borrow on the security of the Mortgage Debenture given to it by Anscor to secure the 'loan' of $2,805,000. (d) Mr McAuley agreed that the documents he supplied to PIAM on 26 June 1997 would not have enabled it to assess Anscor's capacity to repay the loan of $2,800,000. (e) Between the receipt by PIAM from Anscor of $2,805,000 on 30 June 1997 and $1,155,000 on 26 March 1998, PIAM showed no interest in performing its duties as trustee. It left the interest payments made by Anscor in the non-interest bearing account of its attorney, Klooger, at the Bank of Queensland in Brisbane (by earlier 1998, the interest amounted to more than $180,000). (f) PIAM disbursed the money it received from Anscor on various overheads, costs and expenses of Anscor, including its legal costs; on the Croftby Downs Farm, including normal overhead and operating expenses, as well as an olive grove plantation; and on various unsuccessful smaller investments. In some of the instances, PIAM paid the amounts to the Corbetts who spent them for the purposes mentioned. PIAM did not insist on the preparation of loan agreements or on security for these disbursements to, or at the direction of, the Corbetts, and did not require payment of interest on the amounts of them. PIAM's conduct showed that it treated the so-called trust moneys as moneys minded by it, to be paid out as and when requested by the Corbetts, without regard to its obligation to protect the interests of the four staff members of Anscor who were nominated on 30 June 1997 to be, with the Corbetts, members of the fund. (g) The interest paid by Anscor on the amount of $2,800,000 is some evidence that the $2,800,000 was indeed lent, however, PIAM paid, inter alia, those amounts of interest out to the Corbetts. Accordingly, the payments said to be by way of interest did not suffice to persuade his Honour that there was a genuine loan-back by PIAM to Anscor. (h) PIAM advertised on its website that it was part of a network of professional firms offering services which included international funds movement and international assets protection from 'the unwanted and untimely claims from government authorities, creditors and others who may have a claim on their assets'. Mr McAuley says he was 'shocked to hear this' in mid June 1998 and immediately contacted Mr Francken to explain his concerns. Although he says that because of its website he did not use PIAM for other clients, 'PIAM has not been removed as trustee … because … it does act clearly as an independent trustee'. The primary judge rejected this description of the role played by PIAM, finding that throughout, PIAM simply acted at the behest of the Corbetts. (i) His Honour found that the way in which the supposed trust arrangement in fact operated (outlined above) was the way in which it was, prior to its purported establishment on 30 June 1997, intended to operate. His Honour said (at [146]): 'I do not accept that it was ever the intention of McAuley as settlor of this trust or of the Corbetts or of Anscor or PIAM that the Anscor Superannuation Fund would operate as a trust fund for the benefit of Anscor's staff. The evidence showing that PIAM merely minded off-shore, moneys provided by Anscor and disbursed them as the Corbetts directed, evidences that no trust was intended. McAuley was privy to so many of the activities of PIAM and the Corbetts that it can be inferred that this was his intention from the outset.' 118 It is possible to seize upon individual circumstances relied on by his Honour, but he was entitled to regard all the circumstances cumulatively, as he did. And it should not be overlooked since his Honour did not accept that Mr McAuley had the intention he professed to have, that his Honour had the opportunity of observing Mr McAuley during his cross-examination over more than a day. 119 His Honour was entitled to find that the transactions which purported to establish the superannuation fund, and the secured loan, were a sham. 120 The other transactions in question were mortgages given over six properties (owned by Anscor, Mrs Corbett or Croftby Downs Pty Ltd) on 26 March 1998, the day Dexter ceased trading and appointed Mr Clout as his controlling trustee. PIAM was the mortgagee. For reasons given by the primary judge, he concluded at [156]: 'Anscor's investment account, on 20 March 1998, had a credit balance of $1,253,000. The $969,000 paid by Anscor from this account into Klooger's PIAM account on 26 March 1998 was one of a number of drawings from Anscor's investment account which, between 20 March and 27 March, reduced the opening credit balance to a little over $3,000 only. Between 24 March, when the Corbetts were told by Dexter of the impending collapse of the Wattle Scheme, and 27 March, the $1,200,000 of moneys that Anscor had under its control were entirely dissipated, a large part of those moneys being sent off-shore on 26 March 1998 to PIAM. Further, on the morning of 26 March 1998, each of Anscor and the ninth and tenth respondents [Mrs Corbett and Croftby Downs Pty Ltd] held property acquired by each with moneys obtained from Anscor. Some were unencumbered while others were mortgaged to third parties. By the end of that day, each had granted mortgages over their properties to PIAM. Prima facie, these raised a barrier to anyone, and in particular Dexter's trustee in bankruptcy, who might seek to follow the Anscor moneys used by these respondents in acquiring these properties into the properties themselves. The transaction by which this position, at the end of the day on 26 March 1998, was achieved - the substitution of Croftby Downs for Anscor as provider of security to PIAM for the $2,000,000 balance then outstanding of the $2,800,000 loan-back to Anscor made by PIAM on 30 June 1997 with the first and ninth respondents [Anscor and Mrs Corbett] granting PIAM the mortgages over their properties as security collateral to the Croftby Downs mortgage - has, for the reasons given, the hallmark of a subterfuge engaged in to protect Anscor moneys received from Dexter that then remained in the form of various properties held by Anscor and the other Anscor respondents from a claim by Dexter's trustee.' 121 It is unnecessary to repeat the basis upon which the conclusion in the final sentence was reached. It is sufficient to note that the appellants now challenge this conclusion because Mr Corbett said in evidence that as at 26 March 1998, he was not aware of the impending demise of Dexter. He says that consideration was being given to the granting of the mortgages as early as 20 February 1998. Perhaps it was; but that would not be inconsistent with the Corbetts then believing that the writing was on the wall. The Corbetts were aware, before that date, of the ASIC investigation. For the reasons given by the primary judge, the characterisation of the transactions as a subterfuge was open on the evidence. 122 The following findings of his Honour support his conclusion of 'sham' in relation to the giving of securities by the Anscor parties on 26 March 1998: (a) 'On 26 March 1998, Dexter ceased trading and appointed Clout as his controlling trustee under the bankruptcy laws, having told Mr Corbett of his intention to do this two days before. On the same day, 26 March, the Corbetts, McAuley, their accountant since 1996, and their solicitor, Klooger, engaged in a flurry of activity. This, so the Corbetts and McAuley contend, had nothing to do with Dexter's collapse.' (at [153]) (b) 'Anscor's investment account, on 20 March 1998, had a credit balance of $1,253,000. The $969,000 paid by Anscor from this account into Klooger's PIAM account on 26 March 1998 was one of a number of drawings from Anscor's investment account which, between 20 March and 27 March, reduced the opening credit balance to a little over $3,000 only.' (at [156]) (c) 'Between 24 March, when the Corbetts were told by Dexter of the impending collapse of the Wattle scheme, and 27 March, the $1,200,000 of moneys that Anscor had under its control were entirely dissipated, a large part of those moneys being sent off-shore on 26 March 1998 to PIAM.' (at [156]) (d) 'Further, on the morning of 26 March 1998, each of Anscor and the ninth and tenth respondents held property acquired by each with moneys obtained from Anscor. … By the end of that day, each had granted mortgages over their properties to PIAM.' (at [156]) (e) '… The transaction by which this position, at the end of the day on 26 March 1998, was achieved … has, for the reasons given, the hallmark of a subterfuge engaged in to protect Anscor moneys received from Dexter that then remained in the form of various properties held by Anscor and the other Anscor respondents from a claim by Dexter's trustee.' (at [156]) (f) 'That is, PIAM agreed to substitute for Anscor, a debtor which had been paying interest, a company, Croftby Downs, which had no income, which had just purchased its only undertaking, the farm, and which had no demonstrated means of servicing a debt of $2,000,000 at 10% per annum …' (at [157]) (g) 'Croftby Downs has paid no interest at all to PIAM as trustee for the fund. Almost immediately after PIAM agreed to substitute Croftby Downs for Anscor, Croftby Downs went into default and PIAM became entitled to enforce its security over Croftby Downs … PIAM has taken no action at all to protect the fund of which it is said to be trustee …' (at [158]) (h) 'Despite its agreement to substitute Croftby Downs for Anscor on 26 March 1998 and despite taking security from Croftby Downs and the other collateral securities from Mrs Corbett and over Anscor's Queen Street property, PIAM did not release the mortgage debenture over the entirety of Anscor's assets and undertaking.' (at [161]) (i) 'PIAM showed no interest in performing its duties as trustee. It was content to leave the interest payments made by Anscor in the Brisbane bank account held by its attorney Klooger … the Bank of Queensland did not pay any interest on the moneys … PIAM did nothing to make these moneys productive of any benefit for the trust. Though PIAM received into one of its Singapore accounts the $1,155,000 transferred by Klooger on 26 March 1998, it has not treated those moneys as the trust moneys they are supposed to be: instead, as and when the Corbetts called on it for access to those moneys to meet their own personal expenses, including legal costs and the legal costs of the other Anscor respondents in this litigation, PIAM handed the moneys over …' (at [162]) (j) 'There is no suggestion PIAM required loan agreements to be drawn up or security from the Corbetts for these disbursements to them of what are presented by the respondents to be trust moneys. Nor has PIAM required the Corbetts to pay any interest. Instead, its conduct shows it has treated so-called trust moneys as moneys minded by it and to be made available to the Corbetts for whatever purposes they wanted … Immediately the Corbetts called on PIAM to give them unrestricted access to so-called trust moneys, PIAM simply abandoned all responsibility for protecting the interests of Berridge, van der Kolk, Rapley and Cruickshank, the four staff members of Anscor nominated on 30 June 1997 and spoken to at length that day by McAuley about the benefits they were supposed to anticipate from the trust fund.' (at [164]) (k) 'So little interest has PIAM in performing a trustee's duty of protecting the trust assets that, once the Corbetts said they were not prepared to continue to pay for PIAM's representation in this action, it proposed in the most casual of ways that Mr Corbett should represent it.' (at [167]) 123 The observations I made at [114] - [116] above in relation to the events relating to the 30 June 1997 transactions are also relevant to those of 26 March 1998. Indeed, once it is accepted that the earlier establishment of the superannuation fund, the loan and the giving of the Mortgage Debenture were a sham, it is difficult to see any basis on which the transactions of 26 March 1998 would not be 'infected'. 124 Although I have concluded earlier that there was not created on 30 June 1997 a genuine indebtedness of Anscor to PIAM, if there was, that debt and the associated Mortgage Debenture given by Anscor to PIAM were to be discharged as a result of the novation agreement made in March 1998 substituting Croftby Downs as debtor. On the hearing of the appeal, senior counsel for the appellants accepted that this was so.

Issue 4: Whether the commission moneys paid by Dexter to Anscor can be traced into various properties owned by the Anscor parties 125 During a period before Dexter's bankruptcy, various properties were purchased by Anscor, Mrs Corbett and Croftby Downs. The Trustee contended that they were purchased with moneys Anscor received from Dexter which the Trustee was entitled to recover by application of the equitable process of tracing. The primary judge agreed. He took the view that the commission moneys received by Anscor from Dexter could be traced into the properties. 126 The primary judge's approach was as follows. Moneys paid by Dexter to Anscor were transformed into identifiable property of Anscor, Mrs Corbett and Croftby Downs and could be traced: his Honour cited Alvaro at 427 per Wilcox and Cooper JJ. Those parties were all closely associated. Mrs Corbett was the sole director of Anscor and of Croftby Downs. All were aware that the moneys received from Anscor had come from Dexter commissions. None were bona fide purchasers of the properties for value. None gave any value to Anscor for the moneys. None were protected by s 120(6) of the Act. 127 In the alternative, his Honour held that 'loans' by Anscor to any other Anscor parties, if real, were made in breach of Mrs Corbett's fiduciary duties, as the sole director of Anscor, because of the absence of benefit to Anscor in those transactions. The primary judge did not think it necessary to look at each transaction (each purchase). 128 The Anscor parties submitted there was no evidence to support the primary judge's conclusion that Mrs Corbett had appropriated Anscor's money (used to purchase the properties); nor that the rewriting of Anscor's accounts after March 1998 to record the transfer to Mr Corbett, of Mrs Corbett's indebtedness to Anscor as at 30 June 1997, was part of an elaborate exercise designed to put the properties acquired (with Anscor's funds) by Anscor parties beyond the reach of Dexter's prospective trustee in bankruptcy. The Anscor parties also submitted there was no evidence to support the conclusion that Mrs Corbett breached her duties as a director of Anscor. No challenge was made to the principle that funds can be traced by a trustee in bankruptcy in certain circumstances. 129 As to the first matter, there was a basis for his Honour's finding that Mrs Corbett appropriated Anscor's money for her own benefit. There were no loan records. There was no evidence of any interest having been paid in respect of the loans, and no evidence of security of any kind having been provided by Mrs Corbett to Anscor in respect of the loans. Also, as His Honour noted, it was difficult to accept that Mrs Corbett ever intended to repay the large amounts in question. This consideration militated against a conclusion that the payments should be regarded as loans: see Richard Walter at 259 per Hill J. 130 In any event, I accept the Trustee's submission that his Honour allowed the tracing claim because: '(a) Anscor moneys made up of avoided Dexter commissions, had been transformed into the identifiable property of a third party (the relevant proprietors of the properties); and (b) His Honour's acceptance (not challenged on appeal) that equity would allow the first respondent to claim the property in its altered form from that third party so long as the third party could not rely upon equitable principles protecting a bona fide purchaser for value; and then his findings (c) that the Anscor respondents were not so protected because each of them acquired interests in the relevant properties, which they still held, with moneys provided to them by Anscor with notice that the moneys had come from Dexter commissions; and (d) that none gave any value to Anscor for the moneys received from it which they laid out in acquiring the interests in question - in other words the relevant proprietors of the properties in question were neither bona fide nor did they give value; and (e) in the alternative to the findings recorded at judgment [96] - [109], and assuming, contrary to those findings, that the "loans" by Anscor to either Mr or Mrs Corbett were real, they could only have been made in breach of Mrs Corbett's fiduciary duties as the sole director of Anscor because of the absence of benefit to Anscor in those transactions.' 131 Contrary to the Anscor parties' submission, his Honour found, and the finding was supported by the evidence, that Mr Corbett's purported taking over of Mrs Corbett's 'loans' from Anscor (said by the Anscor parties to have occurred on 30 June 1997) did not in fact occur until after the Corbetts learned of the impending collapse of the Wattle Group in late March 1998. 132 Similarly, contrary to the Anscor parties' submissions, there was a basis, as recorded by the primary judge, for his finding that the steps taken after March 1998, by which Mr Corbett assumed liability for Mrs Corbett's indebtedness to Anscor, was part of an elaborate exercise designed to put the properties acquired by the Anscor parties beyond the reach of Dexter's prospective trustee in bankruptcy. 133 The following finding of his Honour suffices to support the tracing claim (at [90]): '… where Anscor has not retained the Dexter commissions but they have been transformed into the identifiable property of a third party, equity will allow the trustee in bankruptcy to claim the property in its altered form from that third party, so long as the third party cannot rely upon equitable principles protecting a bona fide purchaser for value to answer the trustee's demand. These principles cannot protect the other Anscor respondents from the trustee's demands: each of the respondents, Mrs Corbett, Croftby Downs, Thornville and Anscor Investments acquired interests in properties which they still hold with moneys provided to them provided to them by Anscor with notice that the moneys had come from Dexter commissions: Mrs Corbett was the sole director of Anscor and the other corporate Anscor respondents. As will appear, none gave any value to Anscor for the moneys each received from Anscor and which they laid out in acquiring the interests in question.' 134 Having regard to the conclusion reached above, it is strictly unnecessary for me to address the challenge to the primary judge's conclusion that Mrs Corbett breached her fiduciary duties as sole director of Anscor. In my opinion, however, this challenge also fails. Mrs Corbett caused Anscor to lend money, directly or indirectly to herself, without security and without any agreement for the payment of interest. 135 Generally, the attacks made on the tracing claims are attacks made on his Honour's findings of fact. There was, in my opinion, evidence on which the primary judge made his findings relevant to the tracing claims.

Issue 5: Whether his Honour should have allowed the Anscor parties to raise the defence that many of the amounts totalling $26,379,260.35 paid to Anscor during the period of the Trustee's claim were paid by members of the Foundation Group and not by Dexter. 136 On 21 May 2001, the day which had been fixed some seven months previously (on 20 October 2000) as the date for the start of the trial, Mr Corbett, who had replaced his wife as sole director of Anscor on or about 17 January 2001, made oral application for leave to represent Anscor at the trial. The primary judge adjourned the hearing until the following day to give Mr Corbett the opportunity to adduce evidence in support of the application. In a written submission presented to the Court on 22 May 2001, Mr Corbett applied for leave to amend Anscor's defence by putting in issue that Dexter was the source of the payments of commission to Anscor. The basis of the application was the contention that many of the payments received by Anscor came from The Foundation Group Pty Ltd, rather than from Dexter. It would follow that the Trustee would have no rights in respect of those moneys or in respect of properties into which they could be traced. 137 Counsel for the Trustee opposed the application on the following grounds:

• the longstanding nature of the admission in Anscor's defence;
• the absence of any satisfactory evidentiary basis for permitting a withdrawal of it;
• the existence of evidence, in the form of exhibit DLC 130 to the Trustee's affidavit sworn 18 May 2001, which was inconsistent with the proposed new defence; and
• the fact that if the amendment were allowed, the Trustee would have to embark upon an extensive factual inquiry at a very late stage. 138 In Anscor's defence, which was settled by counsel, and filed in January 2000, Anscor admitted it was Dexter who paid the commissions to Anscor. This admission reappeared without change in Anscor's amended defence filed on 12 April 2001. In an intervening affidavit sworn on 23 February 2001, Mr Corbett referred to the payments to Anscor as having been made 'by Dexter, trading as the Wattle Group' (my emphasis). 139 On 23 May 2001, the primary judge gave reasons for declining to grant leave to amend ([2001] FCA 604). 140 Though accepting that his Honour's ruling involved the exercise of a discretionary power, Anscor attacks the refusal of leave on two grounds: · that his Honour did not mention the total amount of the payments in question, said to be $4,047,276.13; and · that his Honour gave undue weight to exhibit DLC 130. 141 In relation to the first of these grounds, it is to be noted that his Honour did describe the payments as 'many' (at [29]). Moreover, paragraphs [27]-[33] (seven paragraphs occupying a little over two pages) of his Honour's reasons for judgment addressed the application for leave to amend the defence. Both considerations suggest that he appreciated the substantiality of the issue which the defence, if allowed, would raise. 142 In these circumstances, there is no merit in the argument that his Honour erred by failing to specify the figure of $4,047,276.13 or the proportion of the commissions totalling $26,379,260.35 paid by Dexter to Anscor that this amount represented. 143 Exhibit DLC 130 was an unsigned one-page typed letter from Dexter to Mr and Mrs Corbett dated 10 February 1997. Its first paragraph read: 'As you are aware I have been restructuring my personal Tax position with Coopers & Lybrand over the last few months. The culmination of this is at hand, and it entails a few changes in the way I treat fees and client interest payments, these are amongst a battery of other accounting changes they have implemented at the same time.' In the letter, Mr Dexter acknowledged that interest payable to clients was his personal liability and would continue to be paid 'from the main Wattle account' as he received funds on behalf of the clients. Then the letter stated: 'Your fees however are a profit and loss item and are classified as an overhead. I will therefore be transferring the fees from the main Wattle account into a working account. This account will be managed by The Foundation Group Pty Ltd under licence from the Wattle Group. Staff at the Foundation Group will manage and reconcile this process twice weekly, for this a fee will be paid amounting to $750 per week per funds manager.' (our emphasis) The letter stated: 'The current format of the Funds disbursement sheet will be the same, however a credit will be applied to your fees (as per attached example). I will then pay the fees a few days later via The Foundation Group once I have received all fees from the loans applicable, and have transferred the funds into the working account (sample also attached). This is necessary to ensure that I am not prepaying fees, which in a lot of cases I am before I have received the funds (as long as my cash flow permits) ...' (my emphasis) 144 With respect, his Honour was correct to regard the letter as strong evidence that the moneys in question were those of Dexter, who, as principal, was employing the services of The Foundation Group Pty Ltd. Such evidence that the withdrawal of an admission would probably be futile was relevant to the exercise of his Honour's discretion: cf Coopers Brewery Ltd v Panfida Foods Ltd (1992) 26 NSWLR 738. 145 His Honour did not attach undue weight to exhibit DLC 130. 146 No criticism is made of his Honour's having relied also on the following further considerations in refusing Anscor leave to withdraw the admission in its defence: · the absence of any explanation as to why the admission was made in successive pleadings settled by counsel; · the fact that the admissions went to the heart of the Trustee's case; · the lateness of the application for leave to amend (after the date fixed for the commencement of the trial); and · the fact that, if amendment were allowed, the hearing dates would be lost while the Trustee conducted an extensive factual investigation in order to address the new defence. 147 His Honour did not err in the exercise of his discretion by refusing leave to amend. The present ground of appeal fails.

Issue 6: Whether his Honour erred in concluding that there was no debt owing by Anscor Investments to Thornville and that the mortgage given by Thornville to Anscor Investments for $210,000 over the Sunshine Beach property was therefore invalid. 148 On the hearing, the appellants sought leave to raise an additional ground of appeal. This was that his Honour erred in concluding:

• that there was no debt owing by Anscor Investments to Thornville; and
• that the mortgage for $210,000 given by Anscor Investments to Thornville over Villa 2, 3 Park Edge Road, Sunshine Beach ('the Sunshine Beach property') was therefore invalid. The proposed additional ground of appeal is expressed in the following paragraphs 28, 29 and 30 proposed for addition to the notice of appeal as expressed in a document headed 'Additional Grounds of Appeal' handed up in Court on Monday 17 November 2003: '28. The learned trial judge erred in preferring the trustee's evidence that there was, in fact, no debt owing by Anscor Investments to Thornville for which it granted, by way of security, a mortgage to Thornville over the Sunshine Beach property. 29. The trial judge further erred in inferring that the debt/mortgage transaction between Anscor Investments and Thornville was but yet another step taken by the Corbetts on McAuley's advice on 26 March 1998 in the flurry of activity that then occurred, all designed to put the assets the Corbetts controlled through their various companies beyond the reach of Dexter's trustee in bankruptcy, who they then well knew would soon be appointed. 30. The trial judge ought to have found that there was in fact a debt owing by Anscor Investments to Thornville in the sum of $210,000 and that the mortgage granted by Anscor Investments to Thornville by way of security in respect of that debt was valid.' 149 After considering the matter overnight senior counsel for the Trustee informed the Court that the Trustee did not oppose the raising of the additional ground of appeal. 150 A historical title search in evidence shows that the mortgage from Anscor Investments to Thornville was:
• executed on 26 March 1998;
• registered number 702588264;
• granted to Thornville 'as Trustee for the Anscor Executive Incentive Trust' ('AEIT'); and
• produced for registration on 30 March 1988. 151 Paragraph [135] of his Honour's reasons for judgment was as follows: 'One of the many things which the Corbetts did on McAuley's advice on 26 March 1998 was for Mrs Corbett, the sole director of Anscor Investments, to arrange for it to grant a mortgage [over the Sunshine Beach property] to Thornville, of which she was also sole director. Mr Corbett, in his affidavit, said that his wife granted this mortgage by Anscor Investments to Thornville "to secure funds of $210,000 to be advanced by Thornville and which were subsequently advanced by payments as follows: $60,000 on 21 April 1998, $100,000 on 1 May 1998 and $50,000 on 20 May 1998".' 152 It will be noted that, according to Mr Corbett, no funds were lent by Thornville to Anscor Investments at the time of the giving of the mortgage on 26 March 1998. 153 The evidence showed that Anscor Investments purchased the Sunshine Beach property from The Foundation Group Pty Ltd, effectively paying $710,000 for the real estate and $80,080 to the vendor for furniture and fitout, and using Anscor moneys of 'not less than $510,000', with the balance being borrowed from the Bank of Queensland. 154 The background to the present issue is order (14) made by his Honour on 10 April 2003 charging the Sunshine Beach property with payment of $510,000, abated, but with interest added, both as previously mentioned. The basis of the charging order was that Anscor Investments had used, in the purchase of the Sunshine Beach property, the $510,000 provided by Anscor (out of the commission moneys it had received from Dexter). 155 It was common ground before his Honour that Anscor Investments did in fact receive funds of $510,000 from Anscor to assist it in the purchase of the Sunshine Beach property and which it in fact used for that purpose. 156 The Trustee's case before his Honour was simply that Anscor's commission moneys had been advanced to a related party, Anscor Investments, and that the Trustee was entitled to trace them into the Sunshine Beach property. There was no written agreement of loan between Anscor and Anscor Investments, no written agreement for the payment of interest and no written agreement for the provision of security by Anscor Investments to Anscor. Further, his Honour did not accept that there was any oral arrangement touching these matters. 157 The appellants submitted to his Honour that Anscor Investments paid interest to Anscor on its indebtedness to that company down to 30 June 1998, when the indebtedness was paid out in full. His Honour said, however, there was no acceptable evidence of the indebtedness, the payment of interest, or the discharge of the supposed debt, and that the matter rested on Mr Corbett's testimony alone. Mr Corbett said, at first, that the indebtedness was discharged by journal entries made after 30 June 1998, but intended to take effect as on and from that date. He said in cross-examination that the way in which the journal entries effected the repayment was that Anscor, as trustee of the Anzcorp Discretionary Trust, made a distribution to 'Global Managed Investments', which made a loan to Anscor Investments, which, in turn, repaid its debt to Anscor. 158 However, later in cross-examination, Mr Corbett gave a different version. He said that Anscor Investments repaid $210,000 to Anscor in cash by three payments of $60,000, $100,000 and $50,000, and that the total of $210,000 had been lent to Anscor Investments by Thornville. 159 Mr Corbett conceded that consistently with his evidence, the effect of the making of the three payments of $60,000, $100,000 and $50,000 by Thornville to Anscor Investments and then by Anscor Investments to Anscor, was, to the extent of $210,000, only to substitute Thornville for Anscor as the creditor of Anscor Investments. It may be asked rhetorically why would this be done? What commercial purpose would it serve? 160 Paragraphs [138] - [141] of the primary judge's reasons for judgment are as follows: '138. Though Mr Corbett's evidence initially was that Anscor Investments repaid the loan from Anscor in respect of the Sunshine Beach property on 30 June 1998 by means of journalised transfers of funds effected at some time after 30 June 1998, when later called on to explain why Anscor Investments had granted a mortgage to Thornville on 26 March 1998, his evidence that repayment by Anscor Investments of the Anscor loan was effected as mentioned on 30 June 1998 was forgotten and he then gave an account involving Thornville borrowing from Anscor, lending the cash in three transfers to Anscor Investments for which it took the mortgage as security with Anscor Investments using that cash totalling $210,000 by the end of May 1998 to repay, in part, its indebtedness to Anscor.

139. I reject Mr Corbett's evidence, unsupported by any satisfactory documentation and internally inconsistent, that the $510,000 loan from Anscor to Anscor Investments to assist it in purchasing the Sunshine Beach property should be taken to have been repaid in full by 30 June 1998. I prefer Clout's evidence that there was, in fact, no debt owing by Anscor Investments to Thornville for which it granted, by way of security, the mortgage in question to Thornville. The inference is that this was but yet another step taken by the Corbetts on McAuley's advice on 26 March 1998 in the flurry of activity that then occurred, all designed to put the assets the Corbetts controlled through their various companies beyond the reach of Dexter's trustee in bankruptcy, who they then well knew would soon be appointed.
140. I accept that Anscor Investments used $510,000 of Anscor moneys which came from Dexter commissions to purchase this property. I do not accept that any part of this sum has been repaid by Anscor Investments to Anscor.
141. For similar reasons to those I gave in relation to Mrs Corbett's Mt Crosby Road property, Clout is entitled to a charge on the Sunshine Beach property for the sum of $510,000, abated as indicated, together with interest on the abated amount.' (my emphasis) 161 I accept the Trustee's submission that the testimony of Mr Corbett provided evidence on which his Honour was entitled to reach the conclusion expressed by him in the passages set out above. The appellants contend that his Honour erred by preferring the Trustee's testimony, but the answer to this contention is that his Honour's conclusion is based on the testimony of Mr Corbett. 162 The starting point is that it was common ground that Anscor Investments purchased the Sunshine Beach property with, to the extent of $510,000, funds provided to it by Anscor out of the commission moneys it had received from Dexter. In accordance with general equitable principles, these circumstances would give rise to an equitable charge in favour of Anscor, unless it was established that a different relationship existed between Anscor and Anscor Investments, such as that of lender and borrower. In the light of the voidness of the payments by Dexter to Anscor brought about by the operation of s 120(1) of the Act, the equitable charge referred to would inure to the benefit of the Trustee. 163 His Honour was simply not satisfied by Mr Corbett's testimony that Anscor Investments paid back the sum of $510,000 to Anscor, or that Anscor Investments borrowed $210,000 from Thornville on the security of the mortgage over the Sunshine Beach property, or that Anscor Investments paid $210,000 to Anscor in partial payment of a debt it owed to that company. 164 The appellants attack the words 'Thornville borrowing from Anscor' which I have emphasised in the passage set out at [157] above. It may be that the words are erroneous, and should be 'Thornville lending to Anscor Investments', although those words do not sit comfortably with the words which follow. Another possibility is that his Honour did intend to refer to a borrowing by Thornville from Anscor of sufficient funds to enable it to make the three payments totalling $210,000 to Anscor Investments. Yet a further possibility is simply that there should be a comma after 'Thornville', so that the passage would read '… involving Thornville, borrowing from Anscor, lending the cash in three transfers to Anscor Investments …'. 165 Whatever may be the true explanation, the fact remains that the primary judge was not satisfied by Mr Corbett's evidence that Anscor Investments had repaid to Anscor any part of the $510,000 which Anscor had provided to it. I do not think his Honour erred in failing to be satisfied that it had done so. 166 In the result, I think the appropriate course is to allow the amendment to the notice of appeal to raise the additional ground of appeal, but to conclude that that ground fails.

The issues on the trustee's appeal (proceeding Q 62 of 2003) - whether trustee is entitled to declaration that Thornville holds 624 Mt Crosby Road, Anstead on trust for the trustee, or, alternatively, subject to a charge in favour of the trustee 167 The respondents to the Trustee's appeal are Anscor (first respondent), Thornville in its own capacity and as trustee of the AEIT and of the Thornville Executive Incentive Trust ('TEIT') (second respondent), and Anscor Investments (third respondent).

Issues arising under s 120(1) of the Act 168 On or about 4 February 1998 Thornville purchased a property at 624 Mt Crosby Road Anstead for $245,000. It is common ground that at all relevant times Thornville was acting as trustee of the TEIT. 169 The TEIT was established on 30 June 1997. It was a unit trust. The settlor was John McAuley, a chartered accountant whose clients included Anscor, Thornville and Mr and Mrs Corbett. Mr McAuley paid an 'Initial Sum' of AUD$10.00 to Thornville for ten 'Initial Units' in the 'Trust Fund'. The Deed of Trust also provided for the issue of 'A Class Units' and 'Residual Units'. According to the recitals in the Deed of Trust, the TEIT was established to provide incentives to nominated employees of Anscor as trustee of the Anzcorp Discretionary Trust, and to nominated employees of any other employer, which, upon application, might be accepted by Thornville as an employer for the purposes of the Deed of Trust. 170 It will be necessary for us to say more of the TEIT when addressing the issue raised by Anscor under s 120(6) (see [189] - [211] below). 171 Mrs Corbett was, at the relevant times, the sole director of both Thornville and Anscor. 172 On 30 June 1997, the date of the Deed of Trust, Anscor paid $1,500,000 to Thornville. His Honour called this a 'contribution'. This was a finding that Anscor paid the amount to Thornville to be held by it as part of the Trust Fund and upon the terms of the TEIT. His Honour said the TEIT was 'established' with this contribution by Anscor. According to the terms of the Deed of Trust, however, the TEIT was to be established with the payment by Mr McAuley of $10.00 for the Initial Units (see [192] below). On the same day (30 June 1997), Thornville paid $1,495,000 back to Anscor. The Anscor companies contend that this was a loan by Thornville to Anscor. 173 His Honour noted that the Trustee had been unable to find any loan agreement in respect of the payment of $1,495,000 by Thornville to Anscor. His Honour did not make a finding as to the legal nature of the payment. 174 Mr Corbett claimed that the Mt Crosby Road property was purchased by Thornville from moneys available to it at the time, in the form of loan repayments Anscor had made to Thornville and interest on the loan which Anscor had also paid to Thornville. 175 Part of exhibit REC 11 to Mr Corbett's affidavit sworn 15 May 2001 was a two-page document headed 'Account Inquiry'. His Honour observed that it was unclear when the information in this document was compiled. The document was at the heart of his Honour's resolution of the present claim made by the Trustee. 176 The Account Inquiry was headed: 'Depalex Pty Ltd atf TEIT Account Inquiry 30/6/97 to 26/03/98' Apparently Depalex Pty Ltd at some stage replaced Thornville as trustee of the TEIT, but this is of no present importance. The remainder of the first page of the Account Inquiry was as follows: Page 1 Account ID# Src Date Memo Debit Credit 1-4610 415621 CD 30/06/97 Anscor Pty Ltd $1,495,000.00 Anscor Pty Ltd CR000003 CR 02/07/97 Loan payment $115,000.00 CR000004 CR 07/07/07 Loan $30,000.00 GJ000003 GJ 31/07/97 July Interest payable by Anscor $11,176.71 CR000005 CR 21/08/97 Loan payment $150,000.00 CR000007 CR 29/08/97 July & August interest $21,861.64 CR000008 CR 29/08/97 Loan payment $180,000.00 GJ000004 GJ 31/08/97 Aug interest owed by $11,039.11 Anscor P GJ000006 GJ 15/09/97 TT to Paffrath & Thomas USD $7,009.22 CR000010 CR 26/09/97 Loan payment $50,000.00 GJ000019 GJ 30/09/97 September interest $8,302.87 CR000011 CR 30/09/97 September interest $8,299.96 from Ansc CR000012 CR 14/10/97 Loan for Kingscliffe $300,285.00 GJ000020 GJ 31/10/97 October interest $6,783.27 CR000013 CR 31/10/97 October interest $6,780.24 CR000014 CR 28/11/97 November interest $5,446.90 GJ000021 GJ 30/11/97 November interest $5,449.85 CR000015 CR 04/12/97 Loan $65,000.00 CR000016 CR 23/12/97 Anscor Pty Ltd $5,147.64 GJ000022 GJ 31/12/97 December interest $5,150.72 CR000017 CR 05/01/98 Loan Repayment $333,000.00 CR000019 CR 29/01/98 January interest $2,704.35 GJ000023 GJ 31/01/98 January interest $2,707.46 CR000022 CR 27/02/98 February interest $2,030.62 GJ000024 GJ 28/02/98 February interest $2,033.45 GJ000009 GJ 16/03/98 Purchase of 357,830 $357,830.00 redeema 31 CD 24/03/98 Pacific International $129,000.00 Asset Mm CR000027 CR 25/03/98 Loan $129,000.00 $1,676,643.44 $1,769,395.57

177 Since the Account Inquiry covered the period 30 June 1997 to 26 March 1998, it included the date (4 February 1998) when Thornville purchased the property at 624 Mt Crosby Road. 178 His Honour observed that after the opening entry of $1,495,000 paid by Thornville to Anscor on 30 June 1997, 'substantial sums in excess of $750,000 are recorded as having been paid into this account against the description "loan payment" or "loan repayment"'. His Honour referred to the fact that the account recorded the receipt of 'various payments', and instanced the 'September interest from Ansc - $8,299.96'. Then his Honour stated (at [128]): 'On the face of this account, Thornville had, as at 4 February 1998, more than enough moneys of its own to pay for the 624 Mt Crosby Road property.' 179 His Honour stated (at [129] &[130]): 'If Anscor did make substantial repayments of principal in respect of the loan back of the $1,495,000 in the period between 30 June 1997 and February 1998, the moneys that Thornville had available to it and which it used to purchase the Mt Crosby Road property were all moneys which Anscor obtained from Dexter's commission moneys, ie, Dexter's own moneys. But if Thornville did, in fact, loan the $1,495,000 of trust contributions it received from Anscor back to Anscor on 30 June 1997, moneys recorded in Thornville's account as subsequent repayments of that loan by Anscor and any property purchased by Thornville with those receipts, including 624 Mt Crosby Road, would be protected by s 120(6) from the claim Clout now makes. The account also records a payment made for the benefit of Thornville of $300,285 described as "loan for Kingscliffe". On the face of this document, which Clout does not deal with, it appears that Thornville, on 4 February 1998, had other moneys in excess of the amount paid for the Mt Crosby Road property available to it in addition to moneys it received from Anscor. On this state of the evidence, I am not prepared to hold that [the Trustee] has made out his claim in respect of this particular property. His claim against Thornville will be dismissed.' 180 The Trustee submits that the only factual finding made by the primary judge adverse to him was the finding in [129] to the effect that Thornville could have purchased the 624 Mt Crosby Road property using the payment made to Thornville of $300,285 described in exhibit REC 11 as 'loan for Kingscliffe', which his Honour assumed was non-Anscor money. 181 I accept the Trustee's submission that in the passage set out in [176] above, his Honour did not find that Thornville lent the sum of $1,495,000 to Anscor. Rather, his Honour assumed that that was the case. On that assumption, the 'repayments' would, according to his Honour, although made out of commission moneys paid to Anscor by Dexter, be protected by s 120(6) of the Act. As appears in [183] below, in my view it makes no difference to the result of the Trustee's appeal if Thornville did lend the sum of $1,495,000 to Anscor. 182 Mr Corbett's affidavit of 15 May 2001 to which the Account Inquiry was part of exhibit REC 11, was responding to an affidavit of the Trustee sworn on 10 April 2001, annexure DLC 72 to which comprised extracts from the General Ledger of Thornville as trustee for the TEIT, and extracts from the General Ledger of Anscor as trustee for the Anzcorp Discretionary Trust. The TEIT General Ledger included the same credits as appear on Mr Corbett's 'Account Inquiry' document (part of exhibit REC 11), including the entry '14/10/97 loan for Kingscliffe $300,285.00'. The Anzcorp Discretionary Trust General Ledger included a debit entry recording that the payment of $300,285.00 to Thornville on 14 October 1997 came from Anscor. 183 The Trustee also testified by affidavit that Anscor was the sole source of the funds for Thornville. 184 In his affidavit testimony, Mr Corbett responded to the relevant paragraphs of the Trustee's statement of claim and of the trustee's affidavit, admitting that the money used by Thornville to purchase 624 Mt Crosby Road had been received by it 'by way of contribution on the 30 June 1997', 'loaned back to Anscor' and 'repaid with interest'. That is to say, Mr Corbett did not contend that the $300,285.00 entry 'loan for Kingscliffe' came from a source other than Anscor. The 'Account Inquiry' document (exhibit REC 11) did not contradict the Trustee's evidence that Anscor was the sole source of the moneys used by Thornville to purchase 624 Mt Crosby Road. That document did not identify the source of any of the loan payments and identified Anscor as the source of only one of the interest payments ('September interest from Ansc $8,299.96'; and quaere the payment of $5,147.64 on 23 December 1997). 185 Moreover, there was testimony from both Mr and Mrs Corbett confirming that the $300,285 (indeed, all of Thornville's money) was provided to Thornville by Anscor. Mr Corbett described the 'Account Inquiry' as a printout from the computer system, in this case for the TEIT, showing a series of transactions between, or supposedly between, the TEIT and Anscor. As the learned primary judge noted (at [127]) Mrs Corbett admitted at her compulsory examination, in effect, that the TEIT did not trade or make money and that she did not recall the TEIT having any assets when the 624 Mt Crosby Road property was purchased by its trustee, Thornville. 186 Against the above background, it is useful to summarise the position.

The payments of commission by Dexter to Anscor were rendered void by s 120(1) of the Act for reasons previously given.

Pursuant to s 120(4) the Trustee must pay Anscor an amount equal to the value of the consideration (Anscor's services) it gave to Dexter for the payments of commission, namely, a one-off fee of 5 per cent of the amounts lent by the investors to Dexter plus a 'trailing commission' of 0.25 per cent per annum of the amounts owing by Dexter to the investors over the periods they remained owing.

The Trustee is entitled to trace the commission moneys paid by Dexter to Anscor into the sum of $1,500,000 being the contribution made by Anscor to the TEIT on 30 June 1997.

If, as the respondents to the Trustee's appeal contend, Thornville lent Anscor the sum of $1,495,000 which it paid to Anscor on 30 June 1997, the Trustee is entitled to trace the commission moneys paid by Dexter to Anscor into the chose in action, being the debt owed by Anscor to Thornville into which $1,495,000 of the contribution of $1,500,000 was transmogrified.

To the extent Anscor repaid its supposed debt to Thornville, the Trustee is entitled to trace the commission moneys paid by Dexter to Anscor into the amounts repaid to Thornville.

Subject to the possible operation of s 120(6) (discussed below), it would only be if, as his Honour found that Thornville derived the sum of $300,285 mentioned earlier from a source other than Anscor, that the Trustee would not be entitled to trace the commission moneys paid by Dexter to Anscor into the 624 Mt Crosby Road property.

As explained earlier, annexure DLC 72 shows that the sum of $300,285 came from Anscor.

187 The respondents to the Trustee's appeal direct attention to his Honour's statement (at [129]) that the Trustee did not 'deal with' the 'Account Inquiry' document (part of exhibit REC 11). They submit that the case should be seen as one in which the Trustee had simply failed to discharge the onus of proof incumbent upon him in tracing the commission moneys. 188 There are several answers to these submissions. 189 As noted above, Mr Corbett's affidavit of 15 May 2001 and its exhibit REC 11 responded to the Trustee's affidavit sworn 10 April 2001 and annexure DLC 72 to it. As a matter of evidence, there remained nothing for the Trustee to do by way of dealing with exhibit REC 11. 190 On the hearing of the appeal, neither party referred the Court to the submissions which were made to his Honour in relation to the 624 Mt Crosby Road property. It may be that counsel appearing for the Trustee before his Honour overlooked annexure DLC 72. I do not, however, accept the submission of counsel for the respondents to the Trustee's appeal that we should assume that there must be some explanation of the complete coincidence between the TEIT's incomings and Anscor's outgoings other than that Anscor funded the TEIT. Every single payment shown as a credit in the 'Account Enquiry' document contained within exhibit REC 11, including the credit of $300,285.00 on 14 October 1997 for 'Loan for Kingscliffe', is matched by a debit for the same amount on the same day in the General Ledger of Anscor. Counsel could suggest no explanation of this other than that sworn to by the Trustee in evidence - that the source of all of Thornville's funds was Anscor. 191 It follows that the money used by Thornville in the purchase of the 624 Mt Crosby Road property came from the payments of commission made by Dexter to Anscor, made void by s 120(1) of the Act.

Issues arising under s 120(6) of the Act 192 Thornville relied on s 120(6) of the Act which was set out in [1] above but which, for convenience, I will repeat here: 'This section does not affect the rights of a person who acquired property from the transferee in good faith and by giving consideration that was at least as valuable as the market value of the property.' The 'transferee' in the present case is Anscor. Did Thornville acquire (a) the sum of $1,500,000 from Anscor, and (b) the repayments to Thornville off Thornville's supposed loan to Anscor, 'in good faith and by giving consideration that was at least as valuable as the market value of [those payments]'? 193 In respect of the initial payment of $1,500,000, Thornville pointed to its undertaking of the role of trustee of the TEIT. The Trustee relies on a line of authority to the effect that: '[a]n acceptance of a trust and an agreement to hold the trust property upon the terms of the trust and to administer it accordingly, did not constitute the giving of consideration by the trustees for the property so accepted' per Walsh J in Tooheys Ltd v Commissioner of Stamp Duties (NSW) [1960] SR(NSW) 539 ('Tooheys') at 548 (affirmed in the High Court at (1961) 105 CLR 602). It is necessary to consider that line of authority and its applicability to the TEIT, having regard to the terms of the Deed of Trust dated 30 June 1997 by which it was established (see [166] above). 194 In Tooheys, a deed providing a pension scheme for the employees of a company was entered into by the company and six individuals who were to be the trustees of the scheme. The company paid Ł50,000 to the trustees to establish the scheme. Employees might, upon application to the trustees, become entitled to benefits under the scheme. 195 There were similarities and differences between the deed in Tooheys and the Deed of Trust in the present case. In each case no employee to be benefited was a party to the instrument, but an employer was a party - in Tooheys, Tooheys Ltd was the settlor, and in the present case, Anscor was a party to the Deed of Trust, not as settlor, but as 'Principal Employer'. In Tooheys the 'initial contribution' of Ł50,000 was referred to as such in the deed and was paid by Tooheys Ltd to the trustee, at a point of time which is not clear. In the present case the Initial Sum of $10.00 was paid by Mr McAuley to the trustee on the next day after that on which the Deed of Trust was executed and on which Anscor paid its 'contribution' of $1,500,000. That this is so is made clear by the extract from the General Ledger of the TEIT which formed part of annexure DLC 72 (that extract shows that the contribution of $1,500,000 was made on 30 June 1997, and the payment of $10.00 for the Initial Units on 1 July 1997). 196 In Tooheys, New South Wales ad valorem stamp duty of Ł7,750 was assessed on the deed, but in the present case Queensland stamp duty of $3.00 was paid on the Deed of Trust, $1.50 as a 'Settlement, Deed of Gift or Voluntary Conveyance' and $1.50 as on a 'Conveyance or Transfer' (see those headings in the First Schedule to the Stamp Act 1894 (Qld). (It is well-known to those who practise in the area of revenue law that the practice of establishing trusts with the initial settlement of no more than a nominal amount, in the expectation that significant moneys will be paid to the trustee subsequently in augmentation of the trust fund, developed as a response to the attraction of ad valorem duty by instruments such as the deed in Tooheys.) 197 There were several issues in Tooheys. Those presently relevant were how the deed was to be categorised for New South Wales stamp duty purposes, and the amount of stamp duty payable. A Full Court of the Supreme Court of New South Wales (Owen, Clancy and Walsh JJ), delivering a judgment prepared by Walsh J, held that the deed was a 'declaration of trust' within one of the meanings given to that expression in the Second Schedule to the Stamp Duties Act 1920 (NSW). That being so, s 4 of that Act made it chargeable with 'the same duty as if the instrument was a conveyance of the property comprised therein'. In the course of arriving at that conclusion, Walsh J observed that the deed was not effective as a declaration of trust under the general law because (a) it was not clear that at the moment of execution of the deed, the trustees held any property to which a trust could attach, and (b) it could not be said of any individual employee that there had been conferred on him or her any interest in the fund. Both observations are applicable to the circumstances touching the Deed of Trust in of the present case. 198 This does not mean, however, that the sums of $1,500,000 and $10.00, when paid to Thornville by Anscor and Mr McAuley respectively, were not held by Thornville as trustee upon the terms set out in the Deed of Trust - they were. Moreover, Thornville had bound itself contractually to Anscor, by virtue of their both having been parties to the Deed of Trust, to hold and deal with such contributions as Anscor, as Principal Employer, might make to the TEIT, upon and subject to the terms of the Deed of Trust. Being a deed, the Deed of Trust could be binding contractually without the presence of consideration for promises contained in it. 199 Once it was decided that the deed in Tooheys was a declaration of trust for stamp duty purposes, it was clear that it attracted the same duty 'as if the instrument was a conveyance of the property comprised therein'. The duty attracted by 'conveyances' differed according to whether or not the conveyance was made upon a consideration in money or money's worth of not less than the value of the property to which it related. The Commissioner of Stamp Duties treated the value of the property 'conveyed' as being Ł50,000. 200 It was in this context that Walsh J made the statement set out at [190] above. The full passage is as follows (at 548): 'The appellants contend that there is full consideration for the payment of, or the promise to pay, the Ł50,000. In the first place, it is contended that, if the matter is considered simply as a deed between the company and the trustees, then the trustees undertake to the company, to make contracts with the nominated employees, and to fulfil those contracts and thus to use in accordance with the deed all moneys which they receive. It is said that these covenants by the trustees constitute a full consideration for the property which they receive. In my opinion, this argument must be rejected. An acceptance of a trust and an agreement to held the trust property upon the terms of the trust and to administer it accordingly, do not constitute the giving of consideration by the trustees for the property so accepted. If it were so, every trust would have to be regarded as created for full consideration.' 201 The obligations undertaken by the trustees in Tooheys and by Thornville as trustee here were in some ways similar and in some ways different. In each case, wide discretionary powers of investment were given to Tooheys Ltd and to Thornville as trustee. In Tooheys, Tooheys Ltd undertook to make further contributions and the trustees undertook to pay pensions to members of the fund who had completed at least ten years' continuous service, or their widows or other dependants. The present Deed of Trust provides that an 'Employer' (as defined, and including the Principal Employer, Anscor) may pay money or transfer property to Thornville as trustee as additions to the Trust Fund, to be held by it as part of the Trust Fund. The Trust Deed empowers Thornville to lend money to enable 'Participating Employees' (as defined) to pay for units in the TEIT. The Trust Deed provides for the Trust Fund to be divided into units, classed as Initial Units, A Class Units and Residual Units. 202 It cannot be said that Thornville undertook obligations more onerous than those undertaken by the trustees in Tooheys; indeed, there is, for its protection, a widely expressed exemption from liability in Part 15 of the Deed of Trust. 203 I think the observations made in Tooheys and set out at [190] above are entirely applicable to the circumstances of the present case. 204 The High Court affirmed the decision in Tooheys: see Tooheys Ltd v Commissioner of Stamp Duties (NSW) (1961) 105 CLR 602. In the High Court, Dixon CJ alone referred to the question of consideration. He did so in terms which might be considered narrower than those which had been used by Walsh J. The Chief Justice observed (at 616): 'The company as the party directing the creation of the trust and the trustees as the parties creating the trust by the declaration of the trust obtained no consideration in money or money's worth. The placing of the trust fund in the trustees' hands was no consideration for the present or future equitable interests created.' I do not think the Chief Justice's reference to 'money or money's worth' of present importance. 205 The statements of Walsh J in Tooheys and of Dixon CJ on appeal in that case were referred to with approval by Gibbs CJ in DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1981) 149 CLR 431 at 442. The statement of Walsh J in Tooheys was also referred to with approval by Tadgell J (with whom Starke J agreed) in BL & M Grollo Homes Pty Ltd v Comptroller of Stamps (Vic) [1983] 1 VR 445 at 450. 206 The respondents to the Trustee's appeal rely on Cook v Benson (2003) 198 ALR 218, but in my opinion this case is distinguishable. 207 In Cook v Benson, within two years prior to the making of a sequestration order against his estate, a person made three payments into superannuation funds. The general scheme of the funds was that the trustee undertook to take out a policy on the person's life and to make other forms of investment. The bankrupt was entitled to death and retirement benefits in accordance with the terms of the deeds governing the funds. 208 The High Court, by majority (Gleeson CJ, Gummow, Hayne and Heydon JJ, Kirby J dissenting) held that the payments were not void against the trustee in bankruptcy under s 120(1) of the Act in that subsection's then form. The appeal was conducted in the High Court on the footing that each of the three payments constituted a 'settlement of property' within the then s 120(1), and that the question was whether the recipients were purchasers for valuable consideration. 209 The majority observed that the three payments were made for the acquisition of the rights secured by the respective deeds of trust and were enforceable by the bankrupt against the respective trustees. 210 The majority distinguished Tooheys, stating (at [36]): 'The payment of Ł50,000 by the company to the trustees was not made in return for any property, or right, received by or conferred upon the company in return. On the other hand, in the present case the first respondent made contributions in return for the undertaking by the trustees of the funds of obligations to pay death, retirement or other related benefits, to him or his nominees, in accordance with the rules of the respective funds. He obtained consideration in money's worth in return for the payments.' 211 Anscor did not pay the $1,500,000 as the price of undertakings provided by Thornville, whether for the benefit of Anscor or of any other person, and Thornville did not give its promises as an exchange for the payment to it of $1,500,000. Rather, the sum of $1,500,000 was the property in respect of which Thornville's promises operated. 212 Thornville did not give any consideration for the contribution of $1,500,000 paid to it by Anscor, let alone 'consideration that was at least as valuable as the market value of the property [$1,500,000]'. 213 In respect of the supposed repayments off the supposed loan back of $1,495,000, the respondents to the Trustee's appeal point to the pro tanto discharge of that debt. But the debt was the property of the Trustee. The pro tanto discharges of that debt cost Thornville nothing because it was not the beneficial owner of the chose in action constituted by Anscor's indebtedness, and could confer no benefit on Anscor in the absence of involvement of the beneficial owner, Dexter or his trustee in bankruptcy. 214 Having given no consideration for the initial contribution of $1,500,000, Thornville was not in a position to give consideration for the purported pro tanto discharges of the debt supposedly owed to it by Anscor.

CONCLUSION ON APPEAL AND ON TRUSTEE'S APPEAL 215 For the above reasons, the appeal should be dismissed and the appellants (Mrs Corbett, Thornville, Anscor Investments and PIAM) should be ordered to pay the costs of the first respondent (the Trustee). There should be no order as to the costs of the second respondent (Croftby Downs). 216 Also for the above reasons, the Trustee's appeal should be allowed and the respondents to that appeal should pay the Trustee's costs of that appeal. 217 As well, orders (19) and (22) made on 10 April 2003 in proceeding QG 7308 of 1998 (dismissing the Trustee's proceeding against Thornville and ordering him to pay its costs) should be set aside. According to the form of order proposed by him, the Trustee submits that there should be a declaration of trust, or, at the Trustee's election, a charge over the property at 624 Mt Crosby Road, Anstead. The whole of the purchase price for that property came from Anscor commission moneys. It was not submitted that the form of order proposed by the Trustee was inappropriate. There should be an order as he proposes and an order that the Trustee notify the other parties of his election within 60 days. There should also be an order that the second respondent to the Trustee's appeal (Thornville) pay the Trustee's costs of his proceeding against it at first instance. I certify that the preceding two hundred and fourteen (214) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.

Counsel for the Appellants: Mr D McGovern SC and Mr M P Cleary

Solicitor for the Appellants: Shand Taylor Lawyers

Counsel for the First Respondent: Mr H Fraser QC and Mr D A Quayle

Solicitor for the First Respondent: Mallesons Stephen Jaques

Date of Hearing: 17, 18 November 2003

Date of receipt of last submission: 2 December 2003

Date of Judgment: 26 March 2004

Counsel for the Appellant: Mr H Fraser QC and Mr D A Quayle

Solicitor for the Appellant: Mallesons Stephen Jaques

Counsel for the Respondents: Mr D McGovern SC and Mr M P Cleary

Solicitor for the Respondents: Shand Taylor Lawyers

Date of Hearing: 17, 18 November 2003

Date of receipt of last submission: 2 December 2003