Consideration of issue of Mrs Oswal's intention
71 I reject the submissions that the suit must fail because there is no evidence that Mrs Oswal was aware of the existence of any creditors or potential creditors at the time she executed the Mortgage, nor evidence that she was aware of any potential liability to the Commissioner. Proof of such knowledge is not, in my opinion, necessary to obtain relief under s 89(1). Indeed it is not necessary to prove the existence of any creditor or that there will be creditors in the future.
72 The thrust of the submission on behalf of Mrs Oswal, as to her intent, was that the only inference the Court could properly draw in all the circumstances, if it was so minded, was an intent by her to defraud the ANZ, although it was put that the evidence did not warrant even that conclusion. Whilst Mrs Oswal believed the ANZ was her creditor and that the Mrs Oswal ANZ Securities were enforceable against her, in fact, as agreed for the purposes only of this case, the ANZ was not a creditor and those securities were not enforceable. It was then submitted that because there was no evidence that she was in business in Australia, nor that she had creditors, that the relevant finding of intent was not open.
73 I reject these submissions. I find, for reasons I will now explain, that Mrs Oswal intended to defraud not merely the ANZ but her creditors generally, whether present or future. The fact, agreed for the purposes only of this case, that the ANZ was not actually a creditor does not denude her intent, so far as concerned her creditors, of operative force for the purposes of s 89(1) PLA. Her intention is not to be viewed by reference merely to the ANZ in isolation from the question of creditors generally. Section 89(1) is concerned with "creditors". Her intent to defraud the ANZ which she believed was a creditor is a relevant fact to consideration of her intent generally as to her creditors, existing and future.
74 The conclusion I have reached in relation to Mrs Oswal's relevant intent is by inference from other proved facts. I have not chosen between conflicting inferences with equal degrees of probability. I have inferred what was Mrs Oswal's intention with a high degree of probability emerging from the evidence as a whole.
75 This is a case, par excellence, where amongst other relevant factors the rational and probable consequences of the alienation was to delay, hinder or defraud creditors. The evidence to which I will now turn warrants such a conclusion and so far as concerns her intention was certainly sufficient to shift the evidentiary burden to Mrs Oswal to dispel it. She did not give evidence.
76 The backdrop to her executing the Mortgage, as Mrs Oswal ultimately asserted, concerns a promissory note which her husband entered into with Mercury on 8 January 2009, (the Promissory Note). It was executed by Mr Oswal and witnessed by the placement of Mercury's company seal, attested to by Mr Naveen Arora. Its terms set out a loan of US$ 45 million made to Mr Oswal, as borrower, with interest at the rate of 10% per annum. Clause 7 provides that Mr Oswal agreed to provide as security for the loan a mortgage over the Properties, and that the "[m]ortgage will be procured and facilitated by the Borrower in favour of lender as and when demanded by the lender or immediately, in the cause of default as per clause 8". Clause 8 includes terms that there would be an event of default if "any person takes any action or any legal procedure is commenced or other steps taken against Borrower in relation to his business" (clause 8.3) or "[a] distress or other execution is levied or enforced or sued out upon or against any property of the Borrower'' (clause 8.5).
77 It is contended for Mrs Oswal that it is open to the Court to infer that she agreed to provide the Mortgage because her husband, by clause 7 of the Promissory Note, had agreed with Mercury that such mortgages would be provided if an event of default occurred. An event of default under clause 8 occurred when the ANZ made demands on Mr Oswal on 3 December 2010.
78 This is a somewhat different contention to that pleaded at [14] and [17(b)] of her further amended defence. There, it is not asserted that she agreed to provide the Mortgage because her husband had agreed with Mercury that mortgages over the Properties would be provided if an event of default occurred. Rather the pleading, relevantly, was that she agreed with her husband, prior to the Promissory Note being executed, that she would provide such mortgages if this was necessary to secure the loan of funds that were required for use by Burrup Holdings and general corporate purposes. It is also pleaded that she agreed to her husband entering into the Promissory Note.
79 Despite the terms of the Promissory Note there was no evidence of any loans made by Mercury to Mr Oswal. Indeed, in its defence at [11(c)], Mercury pleads that it advanced, pursuant to the Promissiory Note, approximately US $45 million to a number of entities associated with Mrs Oswal and/or Mr Oswal.
80 Mrs Oswal, in her further amended defence at [14(c)], also pleads that Mercury, pursuant to the Promissory Note, advanced US $45 million to a number of entities associated with Mrs Oswal and/or Mr Oswal.
81 Each of these pleadings asserts, in effect, that the Promissory Note was executed prior to the loan funds being advanced.
82 Various documents relied upon by Mercury as evidence of loan funds made to these entities all post-date the date of the Promissory Note.
83 However, the Promissory Note is in terms that the promise to pay is given "(for) value received", that is, the Promissory Note was given after the loan funds had been advanced.
84 There was evidence of transfer of monies made by Mercury to certain "entities" in Australia. Mrs Oswal, it seems, may have been a shareholder in two of these: Shridhar Pty Ltd; and Petrochemical Holdings Pty Ltd. It appears that US $4.1 million was transferred to the former at Mercury's request by the Emirates Bank on 13 September 2010 and US $850,000 to the latter also at the request of Mercury by Emirates Bank on 21 November 2010. Self-evidently these payments, accepting that they were loans, were not loans made to Mrs Oswal. Moreover they were made after the date the Promissory Note was executed.
85 I would not draw the inference advanced on behalf of Mrs Oswal. Rather, as I earlier stated, I infer that Mrs Oswal executed the Mortgage with the intent to defraud her creditors. I have so concluded for the reasons already explained and those which now follow.
86 The Mortgage was executed shortly after three things occurred concerning Mrs Oswal directly: the making of a demand for approximately US $529 million on 3 December 2010 by ANZ on the personal guarantee given by Mrs Oswal; the appointment on 16 December 2010 by ANZ of receivers to the shares of Mrs Oswal in Burrup Holdings; and the appointment on 17 December 2010 by ANZ of receivers to Burrup Holding's shares in Burrup Fertilisers and the assets and undertakings of the latter company. At the time these events occurred, Mrs Oswal believed that ANZ was a creditor of hers and, I infer, was very concerned about her financial position. This last fact I infer as being highly probable for someone in her apprehended very serious financial position confronted with these events and most particularly the massive claim under the guarantee she had provided and which she believed to be enforceable against her by the ANZ.
87 The Mortgage was executed by Mrs Oswal whilst overseas following her unexplained and abrupt departure from Australia together with her husband on 13 December 2010, just 10 days after the demand by ANZ upon her under the guarantee.
88 It was submitted on Mrs Oswal's behalf that she and her husband, as temporary residents in Australia under so called 457 visas, were, upon Mr Oswal's employment terminating with Burrup Holdings, required to leave Australia. This termination was said to have occurred upon the appointment of receivers to that company on 17 December 2010.
89 I do not accept this submission. A number of observations may be made in this respect. Mr Oswal too was served, on 3 December 2010 with a demand under his guarantee to the ANZ in the sum of approximately US $529 million. The Oswals left Australia prior to the appointment of those receivers. There is no evidence that Mr Oswal's employment terminated on 17 December 2010. The endorsement on Mr Oswal's passport is to the effect that his temporary residence in Australia is subject to Schedule 8 of the Migration Regulations 1994, in particular at 8107. This does not provide for immediate suspension or cancellation of the visa upon the termination of employment. The endorsement also noted that he was permitted to remain in Australia until 1 March 2012.
90 Whatever be the precise position concerning his entitlement to remain in Australia I do not accept that it was this which caused his wife, Mrs Oswal, to leave Australia so abruptly. It has not been explained other than by unsupported assertion why these events, even if correct, caused Mrs Oswal, who was not permitted to work and who was not employed, to leave so abruptly. The endorsement on her visa permitted her to remain in Australia until 1 March 2012.
91 I infer that it was as a result of receiving the demands under their respective guarantees that she and her husband left Australia.
92 The Mortgage, I find, was prepared, granted and registered in haste. It was signed by Mrs Oswal whilst she was overseas, shortly after her abrupt departure from Australia. It was not dated by Mrs Oswal, nor was her signature witnessed by any person. The witness attestation was later falsely completed by a Ramesh Sodum in Australia. He was not present at the time it was signed by Mrs Oswal. As I earlier mentioned, Ramesh Sodum was in Australia between 12 November 2010 and 25 December 2010. Mrs Oswal left Australia on 13 December 2010. Some person, unknown, dated the Mortgage 24 December 2010, which is also the date of its registration. Significantly, concerning the question of haste, the Mortgage makes no reference to the Promissory Note. It contains no provision pursuant to which Mrs Oswal is rendered liable to repay funds lent, according to the Promissory Note, to Mr Oswal. These are extraordinary omissions given the submission put on behalf of Mrs Oswal that I should infer that she granted the Mortgage because her husband, by clause 7 of the Promissory Note, had agreed with Mercury that such mortgages would be provided if an event of default occurred.
93 The Mortgage was executed in favour of a company owned by Mrs Oswal's brother, Mr Gupta.
94 Mrs Oswal had no legal obligation to Mercury to grant the Mortgage and no valuable consideration was received by her for granting the Mortgage. Thus, the grant was voluntary.
95 The Mortgage encumbered Mrs Oswal's only real property assets in Australia. The combined value of the Properties, as Mrs Oswal admitted in her amended defence, as at December 2010 was $45 million.
96 Mrs Oswal, in her Further Amended Defence at [14(g)], admitted the allegation in [17] of the Further Amended Statement of Claim that she had asserted that the Mortgage was to secure debts of $45 million incurred by her to Mercury during 2009 and 2010. This assertion was false at the time it was made and I infer was false to Mrs Oswal's knowledge. It is highly improbable that she would have made such an assertion by mistake. Nonetheless, this defence, in effect, at [14(a)-(d)] disavowed that earlier assertion.
97 Whilst the Promissory Note manifests a number of unusual features, I have not taken these into account in reaching my conclusion as to Mrs Oswal's intention in granting the Mortgage.
98 I was invited by Counsel for Mercury to treat the Promissory Note according to its terms, which I have done. Whatever was the fact as to the funds loaned by Mercury, none whatsoever were loaned to Mrs Oswal. She had no obligation to repay any loans. It was not submitted by either of the respondents to the contrary.
99 In summary I find by inference, having regard to all the circumstances to which I have referred, that Mrs Oswal had the relevant intent and in particular where the natural and probable consequences of the disposition was the defeat or delay of Mrs Oswal's creditors and where as I have found, the Mortgage:
(1) was granted when Mrs Oswal believed upon objectively reasonable grounds that she was in parlous financial circumstances;
(2) was prepared in haste;
(3) was granted without consideration;
(4) was granted voluntarily;
(5) was granted to Mercury which was owned and controlled by a close family member, namely Mrs Oswal's brother;
(6) had the effect of alienating Mrs Oswal's entire real property assets within Australia.
100 These circumstances individually or in some combination are such as to have shifted the evidentiary onus to Mrs Oswal upon the issue as to her intention. She did not discharge that evidentiary burden. This has enabled me to draw more readily the inference as to Mrs Oswal's intention.
101 I also infer, that when she granted the Mortgage, to her knowledge, she had actual or future creditors, including in relation to income tax as well as obligations, as the owner of the Properties, to council rates, land tax, water rates and the like. The latter are ordinary incidents of property ownership.
102 At the time the Mortgage was granted, the Commissioner was a present creditor of Mrs Oswal, by operation of law. By reason of the operation of s 5-5 of the Income Tax Assessment Act 1997 (Cth) and s 250-10 of Schedule 1 of the Taxation Administration Act 1953 (Cth), as least the income tax the subject of the notice of assessment issued for the 2007 income year was due and payable prior to the date of alienation (24 December 2010) despite not having been issued by the Commissioner until February 2011.
103 I am prepared, on the evidence, to infer that in January 2009 Mrs Oswal knew that the Commissioner was making enquiries as to her tax affairs, which was referred to in correspondence mentioned above, but I also infer that as at February 2009 she knew that her tax agent was of the opinion that she had then no present tax liabilities. This is not to conclude that she then, in fact and law, had no such liabilities.
104 However, I have already mentioned that judgment was entered against Mrs Oswal on 9 August 2011 in respect of tax liabilities in an amount of approximately $186 million in respect of the income years ended 30 June 2007 and 2010. This followed the assessments issued by the Commissioner in February 2011 in respect to those tax years. I infer, in these circumstances, that Mrs Oswal, at the time she executed the Mortgage, would on the balance of probabilities have known that she would have income tax liabilities for at least the financial year ended 30 June 2010 even if she was not aware of the precise amount of that liability at the time she granted the Mortgage.
105 My findings that Mrs Oswal had knowledge of actual creditors at the time she granted the Mortgage reinforces my conclusion as to her intention. However such findings are not necessary to proof of the relevant intent and my conclusion as to Mrs Oswal's intent does not depend upon those findings.
Jones v Dunkel
106 Furthermore, whilst it is, in the circumstances, unnecessary to resort to the rule in Jones v Dunkel (1959) 101 CLR 298 at 308, 312 and 320-1, nonetheless I am again reinforced in the adverse inference I have drawn as to Mrs Oswal's intent by her failure to give evidence or to call her husband as a witness. Plainly their evidence would have gone to the central issues in the case. It is to be expected in this case that Mrs Oswal would have given evidence and that Mr Oswal would have been called by her to give evidence in support of her defence. Indeed that was her intention prior to the trial. I infer that the evidence each could have given would not have assisted Mrs Oswal's defence.
107 Neither Mrs or Mr Oswal gave direct evidence explaining their failure to give evidence. Evidence had been given by their solicitor, on information and belief during the course of Commissioner of Taxation v Oswal (No 5) [2015] FCA 1504.
108 The asserted explanation given in submissions was their desire not to be detained in Australia by a departure prohibition order (DPO) which might be made by the Commissioner in respect of each of them should they enter Australia: Taxation Administration Act 1953 (Cth) s 14S.
109 I accept that there was a risk of a DPO being served on each of them had they come to Australia for the purpose of giving evidence in this case. However, their assertion that a DPO would entitle the Commissioner to detain each of them in Australia "indefinitely" is overstated. The exercise of the power to issue a DPO is not unqualified. The Oswals would each have had an entitlement to appeal from any DPO (s 14V) or to seek a variation or revocation of any DPO (s 14T).
110 I do not regard this as a reasonable explanation for Mrs Oswal's failure to give evidence or to call her husband to give evidence. This is not a case where either of them was unable to come to Australia to give evidence. Rather, each has chosen not to come. This conclusion is not affected by the fact that last year the Oswals failed in judicial review proceedings seeking to assert wrongful conduct on the part of the Commissioner in failing to give an undertaking not to serve a DPO on each of them: Oswal v Commissioner of Taxation [2015] FCA 1439.