REASONS FOR JUDGMENT
1 The court is asked to determine an application for a stay of orders made on 10 September 2013 by the primary judge. On 27 September 2013 the appellants filed a notice of appeal from his Honour's orders. An amended notice of appeal was tabled in court today. The effect of the primary judge's orders is that the residential home of the first appellant, whom I will call Mrs Coshott, will be sold by the first respondent, who is the trustee of the bankrupt estate of Mrs Coshott's husband.
2 The proceedings below involved an application brought by Mrs Coshott and her son James Coshott. Mrs Coshott's husband, Mr Robert Coshott (Mr Coshott), and his trustee in bankruptcy (the trustee) were respondents to that application. In the proceedings below, the trustee also brought a cross-claim. The cross-respondents were Mr James Coshott, Mrs Coshott, Mr Coshott and a company called Schlotzsky's Nominees Company Pty Limited (Schlotzsky), who is the second appellant in the appeal.
3 His Honour also made orders on 10 September 2013 in respect of matters other than those briefly described above. His Honour's orders were as follows:
In respect of the application in this Court in NSD 1412 of 2009
THE COURT ORDERS THAT:
1. The application filed in the Supreme Court of New South Wales on 24 June 2009, later transferred to this Court, is dismissed.
2. The applicants in this Court are to pay the costs of the second respondent, as taxed, on an indemnity basis.
In respect of the further amended cross-claim in this Court in NSD 1412 of 2009
THE COURT DECLARES THAT:
3. The property 1 Bunyula Road, Bellevue Hill being the whole of the land contained in Certificate of Title Folio Identifier 2/336490 ("the property") was acquired by the second cross-respondent and the third cross-respondent beneficially as joint tenants.
4. Upon the date of bankruptcy of the third cross-respondent, the joint tenancy between the second cross-respondent and the third cross-respondent in the property was severed and the ownership became:
4.1 the second cross-respondent as to an undivided one half share;
4.2 the cross-claimant as to an undivided one half share
as tenants in common.
5. The half interest in the property registered to the third cross-respondent vested in the cross-claimant pursuant to sections 58, 115(1) and 116(1) of the Bankrupty Act 1966 (Cth), as and from the date of the commencement of the bankruptcy of the third cross-respondent.
THE COURT ORDERS THAT:
6. The property vest in the cross-claimant as trustee for sale.
7. The property be sold by the cross-claimant as trustee for sale, with all the obligations and privileges pertaining thereto (including signing for and on behalf of the second cross-respondent any contract for the sale of land and any transfer pursuant to the Real Property Act 1900 (NSW) and determining the price at which the property is to be sold) and the proceeds after payment of all expenses of and incidental to such sale to be divided equally between the cross-claimant and second cross-respondent, pursuant to order 11.
8. For the purposes of giving effect to order 7, the second cross-respondent, by herself her servants and agents do all such things, acts and deeds and sign all documents to list for sale and sell the property, and for that purpose, including but not limited to the following:
8.1 maintain the property in a clean and presentable manner as required for the proper and effective marketing of the property;
8.2 allow and permit for an inspection of the property on 24 hours notice of a request made by the cross-claimant or agent for sale.
9. Each cross-respondent deliver up vacant possession of the property 42 days from these orders.
10. Pending the sale of the property and to the extent to which she is able, the second cross-respondent shall continue to meet one half of the outgoings (including electricity, gas, telephone and council rates) in respect of the property.
11. Upon completion of the sale of the property, the proceeds thereof be distributed in the following manner and priority:
11.1 Firstly, in discharge of any valid encumbrance over the title to the Property;
11.2 Secondly, in payment of agent's commission, auctioneers and auction fees associated with the sale of the property;
11.3 Thirdly, expenses and reasonable legal costs and disbursements incurred upon the sale of the property;
11.4 Fourthly, in adjustment of council rates, water rates and other statutory imposts;
11.5 Fifthly, in payment of the cross-claimant's professional and legal costs of the proceedings;
11.6 Sixthly, and subject to orders above, the remains to be divided equally between the cross-claimant and the second cross-respondent subject to any charge or lien.
12. The cross-respondents are to pay the costs of the cross-claimant, as taxed, on an indemnity basis.
4 As I have mentioned, an appeal has been filed against those orders. The appeal is brought not only by Mrs Coshott, but also by Schlotzsky, who is the corporate trustee of the Coshott Family Superannuation Fund (the Super Fund). The respondents to the appeal are the trustee, Mr Robert Coshott and Mr James Coshott.
5 The orders against which the appeal is brought include an order that Mrs Coshott deliver up vacant possession of the home and property within 42 days from 10 September 2013, which is 27 October 2013. The orders also had the effect of vesting the relevant home in the trustee as trustee for sale.
6 The appellants now rely on an amended notice of appeal which in broad terms raises four separate grounds of appeal. The grounds of appeal are as follows:
Grounds of appeal
1. The trial judge erred in holding that the property at 1 Bunyula Road Bellevue Hill, being the whole of the land contained in Certificate of Title Folio Identifier 2/336490 (property) was acquired by the first appellant and the second respondent beneficially as joint tenants. The trial judge ought to have held that interest of the second respondent was non-beneficial, because it was purchased with the funds of the Coshott Family Superannuation Fund (Superannuation Trust). In reaching the decision, the trial judge made the following errors:
(a) the trial judge failed to have regard to the most probative evidence, namely the evidence relating to the particular chain of transactions that resulted in the purchase of the second respondent's interest in the property. In particular, the trial judge failed to consider or have regard to the evidence of Mr Ron Coshott to the effect that the monies distributed to the second appellant from the estate of the late Elizabeth Yates Murray were distributed to the second appellant as trustee (see transcript at page 268). In the face of that evidence, which was neither rejected nor disbelieved, it was not open to the trial judge to conclude at [68] that there was 'no evidence of any kind that the distributions were applied as contributions to the trust fund';
(b) the trial judge gave undue weight to irrelevant or unimportant considerations relating to the operation of the Superannuation Trust and its bank account at other times. These considerations were not a safe basis for the finding. The irrelevant considerations were:
(i) the finding that there were irregularities in the records of the Superannuation Trust and evidence that the bank account held by the second appellant as trustee for the Superannuation Trust was sometimes used for purposes that were not consistent with its use as a trust account: at [37], [38], [49], [50] and [52];
(ii) the finding that the purchase of the interest in the property would not have been authorised by the trust deed and would have contravened certain provisions of the legislative superannuation regime: at [37], [43], [75]. These considerations were irrelevant, or of marginal relevance, because they did not affect the efficacy of the transactions. If the monies were impressed with trust at the outset, the fact that they were applied in ways that were not authorised by the trust deed could not have caused them to lose their character as trust monies;
(iii) the finding that the second respondent, Mr Coshott, could not have been the trustee of the Superannuation Trust at [73]. This consideration was irrelevant because, if Mr Coshott purchased his interest with trust monies then his interest must have been held non-beneficially, regardless of whether he could have been validly appointed as trustee;
(iv) the finding that the lawyer acting on the sale had been instructed that the first appellant and second respondent were to purchase the property as joint tenants: at [61], [62]. That finding was irrelevant because, if the monies used by the second respondent were impressed with trust, then that instruction could not have destroyed the trusts. Rather, equity would have regarded the trustee of the Superannuation Trust as a tenant in common of the property in a proportion corresponding to the extent that trust monies were applied to the purchase.
(c) the trial judge misapplied the law in relation to his findings of sham in that:
(i) the trial judge made findings of sham without ever making any findings of fraud or deliberate attempt to deceive: at[42]. [73], [92];
(ii) the trial judge wrongly characterised a series of events as a 'sham' at [42], [92] and misunderstood that each case of shamming intent involves a finding of intentional deception as to the effect of a document. His Honour did not make any such findings. Rather, the trial judge relied upon the irrelevant considerations set out at [42], [73] and [92];
(iii) the trial judge failed to apply the appropriate standard of proof to find a sham, which requires a need for 'clear and convincing proof';
(iv) the trial judge ought to have found that there was an inference that was at least equally open that did not involve a shamming intention, namely that the second respondent's interest in the property was purchased with the funds of the Superannuation Trust. The facts that supported this finding were:
1. The evidence that Mr Ron Coshott paid the distribution monies to the second appellant as trustee of the Superannuation Trust;
2. The evidence that the purchase monies were paid for from an account held by the second appellant as trustee for the Superannuation Trust; and
3. The 'acknowledgement of trust' document that was signed at the time of the purchase, which acknowledged that the second respondent purchased his interest in the property with funds provided by the Superannuation Trust.
(d) the trial judge erred in applying a presumption at [42] that the court would not lightly draw an inference that the second respondent, Mr Coshott, engaged in illegal or unauthorised conduct so that he could rely upon that illegal conduct to make out his case. That presumption ought not to have been applied because it affected persons other than Mr Coshott, namely the beneficiaries of the Superannuation Trust who had not engaged in any illegal or unauthorised conduct.
2. The trial judge erred in holding that the proceedings commenced by the first appellant and the third respondent in the Supreme Court of New South Wales, and maintained in the Court below, were an abuse of process: at [103]. The trial judge ought to have found that the first appellant and third respondent had standing and were justified in bringing the proceeding as beneficiaries of the Superannuation Trust in circumstances where the trustee of the Superannuation Trust had been deregistered at the time that the proceedings were commenced.
3. The trial judge erred in making orders 6 to 11. The court had no power to do so under the Bankruptcy Act 1966 in circumstances where the first appellant was a co-owner of the property and was not the relevant bankrupt.
4. The court erred in making order 11.5 where by the first respondent's legal and professional costs for the entire proceedings below are to be paid out of the sale of the property. Those fees are properly payable out of the bankrupt estate only. Order 11.5 wrongly has the effect that part of the first appellant's share of the sale proceeds will be applied to the first respondent's professional and legal fees that it incurred as trustee in bankruptcy for the second respondent.
7 The relevant principles applicable to the court's consideration of an application for a stay pending an appeal are well established. The decision which is perhaps most frequently referred to in this context is that of the Court of Appeal of New South Wales in Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685. Although that decision related to the power of the Supreme Court to grant a stay pending an appeal, the principles have generally been regarded as being equally applicable to this court.
8 The formal source of the power of the court to grant a stay is to be found in s 29 of the Federal Court of Australia Act 1976 (Cth) and also in r 36 of the Federal Court Rules 2011. It is important to note at the outset that r 36.08 provides that an appeal does not operate as a stay of execution or a stay or any proceedings under the judgment subject to the appeal. However, it is further provided in subrule 2 that an appellant or interested person may apply to the court for an order to stay the execution of the proceeding until the appeal is heard and determined.
9 Cambridge Credit establishes that, for the purposes of considering whether or not to stay the execution of orders pending an appeal, there is no requirement or obligation for the applicant to establish special circumstances or exceptional circumstances. It is equally clear, however, from other decisions in this court (and I will refer to some of them in a moment), that the applicant for a stay carries the onus of persuading the court that it has at least one arguable ground of appeal.
10 Cases in which the relevant principles have been discussed in this court include Logan J's decision in George v Fletcher (Trustee) [2011] FCA 952 and also Flick J's judgment in Dubow v Fitness First (Australia) Pty Ltd [2010] FCA 660. In addition to focusing on whether or not the notice of appeal raises arguable grounds of appeal, the court is also required to take into account matters which can broadly be described as arising under the rubric of the balance of convenience.
11 Before I turn to deal with the four broad grounds of appeal raised in the amended notice of appeal, it is convenient to set out a little more background to the matter.
12 Mr and Mrs Coshott are registered joint owners of a residential property at 1 Bunyula Road, Bellevue Hill, which is the property the subject of the proceedings. They live there with their two sons. They purchased the property in June 2003.
13 A central issue in the proceedings below and also in the appeal relates to whether Mr Coshott's 50 per cent interest in that property was purchased with trust moneys. Mr Coshott's claim, at least as it was articulated at one point below, is that the interest was purchased with trust moneys from the Super Fund. If the answer to that question is answered affirmatively, then Mr Coshott's interest in the relevant property is not held beneficially, and so could not vest in his trustee in bankruptcy and should not be sold.
14 There is some further history to the proceedings which is set out in the primary judge's reasons for judgment. It includes the fact that in June 2009, after Mr Coshott had been made a bankrupt (which occurred in 2008), his son Mr James Coshott commenced proceedings by summons in the Supreme Court of New South Wales naming his mother and father as the first and second defendants respectfully. He sought a declaration that his parents held the property in trust for the Coshott Family Trust (the Family Trust) and the Super Fund.
15 Consent orders were signed by the parties in those proceedings which included declarations along the lines just described. The trustee in bankruptcy, having become aware of those consent orders, then moved successfully and had the orders set aside. Subsequently, Mrs Coshott was added as a plaintiff together with her son James. Mr Coshott became the first defendant and the trustee in bankruptcy was the other defendant. A statement of claim was then filed by the plantiffs in which it was pleaded, among other things, that the plaintiffs were the trustees of the Family Trust and of the Super Fund. This allegation is inconsistent with the notion that the Schlotzsky is the trustee.
16 The proceedings in the Supreme Court were then transferred to this court. It is those proceedings which are the subject of his Honour's reasons for judgment which deal not only with the application that was brought by Mrs Coshott and her son, but also with a cross-claim filed by the trustee.
17 The case advanced by the appellants and other parties below was that Mr Coshott's interest in the property was purchased using the assets of the Super Fund. It was argued that the purchase moneys with which Mr Coshott paid for his 50 per cent interest in the property were drawn from a bank account operated by the Super Fund. Reliance was also placed by the parties on an "Acknowledgment" document which is dated 3 June 2003 and which is the subject of some adverse findings made by the primary judge to which I will return shortly.
18 The appellants identity the critical question as whether the moneys in the Super Fund bank account were assets of the Super Fund. The primary judge held that they were not. In broad terms, the basis for his Honour's finding to that effect were as follows: first, no documents or accounts were kept and the Super Fund never complied with relevant regulatory requirements or with in-house rules. Secondly, there were no records of any contributions made to the Super Fund. Thirdly, many of the transactions recorded in the Super Fund bank account were unexplained and appeared to be inconsistent with that account being used as an account of the Super Fund. Fourthly, the trust account was in reality used by Mr Coshott for his own personal benefit. Fifthly, Schlotzsky as trustee did not have the power to purchase the property because to do so would breach the in-house asset rules. The terms of the Super Fund required the trustee to be a corporation, so it was not possible for Mr Coshott to be the trustee of Super Fund (which is a reference to something which appears in the Acknowledgment deed to which I will return shortly). Seventhly, the ultimate source of the moneys were distributions made from the estate of the late Ms Elizabeth Yates Murray, who was the mother of Mr Coshott. Eighthly, there was no evidence of any kind that the distributions were applied as contributions in the Super Fund and no evidence that the Super Fund had any assets, much less that it applied them in the way alleged. And, finally, the Acknowledgement deed and the use of the Super Fund trust bank account were each a sham.
19 It is appropriate if I now turn to deal with the various grounds of appeal raised in the amended notice of appeal.
20 In summary, the first ground is an allegation that the primary judge erred in the approach he took to what has been described above as the central issue in the proceedings. The primary judge's reasoning on that central issue had the following broad components: first, that there are no documents that indicate that the Super Fund trust did anything. It never complied with superannuation regulations and Mr Coshott often used the trust account for his own personal purposes in a way which was unconnected to the trust. Secondly, the primary judge reasoned that although the distribution moneys from the deceased estate of Ms Murray that were applied to the purchase passed through the Super Fund bank account they were, in fact, moneys belonging to Mr Coshott. Thirdly, there was no other evidence that the distribution moneys from the deceased estate were ever made part of the assets of the Super Fund. Therefore, the Acknowledgement deed and the use of the Super Fund bank account were shams.
21 The appellants argue that the approach taken by the primary judge was in error for various reasons. The first sub-ground is a challenge to [68] of the primary judge's reasons for decision, which is in the following terms:
In my view, the picture is a very clear one. The funds to pay for the 50 percent interest taken by Mr Coshott in his own name in the Bunyula Road property came directly from the first and second distributions to him from his mother's estate. They passed through Schlotzky bank accounts including, very briefly, the business cheque account purportedly operated by Schlotzky as trustee for the superannuation fund. There is no evidence of any kind that the distributions were applied as contributions to the superannuation fund, and such inferences as are available are that the superannuation fund never had assets of this kind. (Emphasis added).
22 The appellants argue that this finding of no evidence ignores what they say are two relevant pieces of evidence. The first, which is described by the appellants as "critical evidence" about the transaction, is evidence that was given below by Mr Coshott's brother, Mr Ronald Coshott. Neither Mr Robert Coshott or his wife, Mrs Coshott, gave evidence in the proceedings below. Mr Ronald Coshott was trustee of Mrs Murray's estate. He gave the following evidence in chief below about the circumstances surrounding the decision to purchase the property:
And, Mr Coshott, could I take you back to the events of around May, June, July 2003, regarding the property of 1 Bunyula Road?---Yes.
…
THE WITNESS: Yes. My brother and myself went up to do an inspection on the property that he was proposing on buying and asked me to look at it and have a general conversation with him about, you know, whether it would be a fair price for it and other matters as to the financing and arrangement of the purchase.
MR SPENCER: So this is the property 1 Bunyula Road?---1 Bunyula Road. Yes.
And what advice did you give or did you say to your brother?---Well, I suggests to him he put structures in place that are similar ones of - - -
MR JOHNSON: Objection. It's form.
THE WITNESS: I'm sorry.
MR SPENCER: Mr Coshott, you need to use the exact - or as near as possible?--- I said to him, "Yes. That's okay but make sure we've got the structure in place for the self-managed super fund and the family trust and claim it through those".
And I appreciate the face that's now going back 10 years. Can you say more about that - about the proposed structure? So - you said it was to do with the Coshott Family Trust?--- Family trust, yes. And to get the family superannuation fund off and running, too.
And did you say anything further about that at the time?---No. Not really. I mean, it was already agreed that that would be the best structure to go through.
Did you have any conversations with Ljiljana Coshott- - -?---Yes I did.
- - - regarding the purchase of the property?---Yes.
And what were those conversations?---The same vein as what I just said then in putting property in the family trust and setting up the superannuation fund accordingly.
And what did Robert Coshott say to you? Oh, he agreed.
And Ljiljana Coshott?---Yes. Agreed wholeheartedly.
And what did you - once that agreement was in place what happened then?---I then contacted my accountants who … me for 20-odd years - Trood Pratt & Co - and asked them on behalf of my brother and his family to obtain a suitable self-managed super trust deed to set up a regulated fund.
…
MR SPENCER: When was the Coshott Family Superannuation Fund set up, do you remember?
Mr Johnson: Objection, your Honour. It's outside the ambit of the outline that's been served - - -
MR SPENCER: I don't know. And your mother had passed away around this time; is that correct?---She passed away in July 2002.
2002. And you were - - -?---The executor of the estate, yes.
And who was in effective control of the estate?---I was.
And did you draw cheques on the estate?---Yes.
And, your Honour, might the witness be shown exhibit - a copy of the - exhibit 25 - 25 and 26 I think they are. The trustees exhibits.
…
MR SPENCER: It's just - 225 your Honour. Mr Coshott, do you recognise those documents as being copies of certain documents?---Yes.
And what do you recognise those documents as being copies of?---Of cheques drawn on the estate account payable to the nominated company of my brother Robert's that he wanted his disbursement of the inheritance paid into.
And Schlotzsky's Nominees?---Schlotzsky's Nominee Account, yes.
As the trustees for?--- …
MR JOHNSON: Objection.
HIS HONOUR: Well, what's the foundation? You have to lay a foundation, Mr Spencer.
MR SPENCER: Why did you draw those cheques in that fashion?---Because that was going to be the trust company for the family trust. (Emphasis added).
23 In my opinion, this evidence does not provide any assistance to the appellants' argument that the primary judge overlooked evidence supporting their claim that Super Fund monies were used. The material emphasised above highlights that Mr Ronald Coshott was referring to the Family Trust, not the Super Fund. It is evident from the answers that Mr Ronald Coshott was well aware of the fact that there were in place two distinct entities: first, the Coshott Family Trust and, secondly, the Coshott Family Superannuation Fund.
24 The other evidence which the appellants point to as being inconsistent with his Honour's finding in [68] relates to the Acknowledgment deed. That document was considered at some length by the primary judge in his reasons for judgment commencing at [71]. His Honour set out in [72] part, but not all, of that instrument. The full version of that instrument is as follows:
25 As is evident from his Honour's reasons in [71] to [74], that document was held to be of no probative value because his Honour found it to be part of a sham. His Honour made that finding by reference to several matters. First, his Honour pointed to the fact that the second paragraph of the acknowledgement was inconsistent with in-house asset rules under the Superannuation Industry (Supervision) Act 1993 (Cth).
26 Secondly, his Honour found that the reference in the text of that document to Mr Robert Coshott purchasing a one-half interest as trustee for the Super Fund with funds provided by the Super Fund was inconsistent with the fact that Mr Coshott was not in fact the trustee of that fund. Rather, Schlotzsky was the trustee. Indeed, his Honour went further in explaining his finding of sham by highlighting the inconsistency between the terms of the Acknowledgement deed and the way in which the case was conducted. His Honour pointed out in [73] that:
The very account on which the funds were drawn was purportedly conducted by Schlotzsky as trustee.
27 Yet Mr Coshott stated in the Acknowledgement instrument that he was the trustee of that fund.
28 Mr Kidd SC, who appeared for the appellants along with Mr Hughes, drew the court's attention to the fact that the text of the Acknowledgement deed uses the term "trustee" in lower case and that there could be no basis for objecting to its use in that context where Mr Coshott was saying that he was investing the money having withdrawn it from the Super Fund bank account. He acquired the legal interest, but the beneficial interest remained with the Super Fund. Therefore, it was not inappropriate for the document to refer to him as "trustee".
29 The difficulty, however, with the argument lies in the description which is then given to Mr Coshott immediately below his signature. It is unambiguously stated there that Mr Coshott is the actual Trustee for the Super Fund. For those reasons, I consider that the attack on [68] of his Honour's reasons for judgment is not arguable.
30 I turn now to deal together with grounds 1(b) and 1(c) of the amended notice of appeal. In support of these grounds of appeal, Mr Kidd SC places heavy reliance on a recent decision of the New South Wales Court of Appeal in Lewis v Condon [2013] NSWCA 204. In particular, strong reliance is placed on the leading judgment of Leeming JA. In order to understand these particular grounds of appeal, it is necessary to go to [42], [52], [73] and [92] of Buchanan J's reasons for decision, which are as follows:
The position adopted by Mr Coshott, the applicants and Schlotzky in the proceedings invited the Court to conclude that Schlotzky as trustee of the superannuation fund and Mr Coshott as its director engaged in systematic, deliberate and ongoing breach of the in-house asset rules, apart from all the other failures to comply with the provisions of the Supervision Act. Mr Coshott unashamedly sought to deflect any criticism of that consequence by relying upon the fact that breach of the in-house asset rules does not invalidate a transaction. However, the conclusion which is sought is one which requires inferences and assumptions to be made that illegal conduct has occurred. Apart from the fact that the evidence as a whole is plainly against the conclusion which is sought, I would not lightly draw an inference or make an assumption of illegal conduct by a party so that the party could rely upon that illegal conduct to make out its case. In any event, as I have said, I am more than satisfied that the propositions advanced by the applicants, Schlotzky and Mr Coshott are devoid of any factual or legal merit. They are part of a sham which was clearly exposed in the present proceedings.
…
I conclude, as the cross-claimant submitted, that the business cheque account in Schlotzky's name was conducted by Mr Coshott as his personal account and that any appearance that it represented an account reflecting the affairs of Schlotzky as trustee for the superannuation fund was deceptive.
…
I am satisfied that whenever this document was brought into existence it is part of a sham. The second paragraph suggests a clear breach of the in-house asset rules under the Supervision Act. It would be a clear breach of the trust deed if it was a statement to which the trustee of the superannuation fund was a party. But the trustee of the superannuation fund was not a party to this statement. Mr Coshott was not the trustee of the superannuation fund and was incapable of being the trustee. Any statement that he was the trustee was part of the sham. The very account on which the funds were drawn was purportedly conducted by Schlotzky as trustee. That was, if nothing else, a plain and apparently contemporaneous contradiction of the assertion in this document that Mr Coshott was trustee of the superannuation fund. The funds were not provided by the superannuation fund. There is no evidence that the superannuation fund had assets from which such funds might be provided. The fact that money found its way through the account operated by Mr Coshott in Schlotzky's name makes no difference to that conclusion.
…
When the evidence in the present case is carefully sifted, the only evidence that the superannuation fund had an interest in the property at Bunyula Road is reduced to two matters. One is the fact that funds for the deposit, the balance of Mr Coshott's 50 percent interest and, perhaps, stamp duty pursuant to the contract of sale, passed through the business cheque account of Schlotzky, after coming into that account as a partial distribution of Mr Coshott's inheritance, coupled with the fact that the account was operated by Mr Coshott in the name of Schlotzky as trustee for the superannuation fund. The second circumstance is that, by a document bearing the date 3 June 2003, Mr and Mrs Coshott represented that Mr Coshott's 50 percent interest was taken beneficially for the superannuation fund. I have no hesitation in branding each of those circumstances as a sham to the extent that they are relied upon to support the contention that the superannuation fund took any interest in the Bunyula Road property. I have explained the basis for my conclusion that the Schlotzky business cheque account was used by Mr Coshott for his own purposes. I have explained why I give no credence to the "acknowledgement".
31 The first point taken by the appellants in respect of his Honour's findings of sham, which findings relate not only to the operation of the bank account but also to the deed of Acknowledgement, is that his Honour did not make any clear findings of fraud or intention to deceive.
32 Mr Kidd SC relies not only on Leeming JA's decision in Lewis v Condon on this issue, but also on the High Court's decision in Raftland v Federal Commissioner of Taxation (2008) 238 CLR 516. He submits that there is an obligation on the court, if it is making a finding of sham, to make a clear finding of fraud or a deliberate attempt to deceive third parties. In my opinion, that is not an appropriate reading of those authorities. Each case must necessarily turn on its own facts. A finding of sham which is made by reference to relevant surrounding circumstances may, itself, necessarily carry with it an implicit finding of intention to deceive or deceptive conduct. In my view, that is the case here in respect of the paragraphs set out above in which his Honour made the relevant findings of sham.
33 It might also be noted that in [52] of Buchanan J's reasons for decision, his Honour specifically found that the business cheque account in Schlotzsky's name was conducted by Mr Coshott as his personal account and that any appearance that it represented an account reflecting the affairs of Schlotzsky as trustee for the superannuation fund was "deceptive". In my opinion, such a finding of sham which is made by reference to relevant surrounding circumstances also implicitly involves a finding of intention to deceive or deceptive conduct. Having regard to the detailed matters to which his Honour refers in support of his relevant sham findings, his Honour was implicitly holding that, not only were the relevant matters shams, but also that there was a deliberate intention to deceive.
34 The next matter raised under this ground of appeal concerns the question of whether or not the primary judge appreciated the seriousness of a finding that a transaction is a sham, and whether he applied an appropriate standard of proof. Reference was made to the need for the matter to be established to the Briginshaw standard. Again, in my view, I consider this argument to be without reasonable merit or prospects. In particular, it seems to me that when regard is had to his Honour's reasons, particularly at [42] and [92], his Honour was very conscious of the seriousness of the findings, but he was satisfied that this was a very clear case of sham. It is significant, for example, that in [42], his Honour concludes by saying that the sham was one which was "clearly exposed in the present proceedings".
35 The next matter that was raised was the proposition which, it was said, flowed from Lewis v Condon and also from other authorities, including Lockhart J's decision in Sharrment Pty Limited v The Official Trustee in Bankruptcy (1988) 18 FCR 449, which is to the effect that a finding of sham is one which cannot be made if another inference is at least equally open. Again, in my respectful view, the point does not have any merit in the circumstances here for the simple reason that, on the grounds articulated by Buchanan J, there was no other inference which was at least equally open to the one that his Honour found. The reasons for coming to that view are reflected in [38] and [49] to [52] as far as the operation of the business cheque account is concerned, and in [73] and [74] as far as the Acknowledgment deed is concerned.
36 As to ground 2 of the amended notice of appeal, it relates to the primary judge's finding at [103], that the commencement of the proceedings below by Mrs Coshott and her son were an abuse of process. That paragraph is as follows:
The position taken by the applicants, by Schlotzky and by Mr Coshott in the present proceedings was, as I have said, without any merit and represented an attempt to mislead the Court in serious ways. It is not going too far to describe the proceedings commenced in the Supreme Court, and the attempted surrender to the declarations sought in those proceedings, as an abuse of process of that court. Maintenance of the contentions upon which the applicants' statement of claim depended represented an abuse of process of this Court. Contrary to the foundation upon which those proceedings were commenced, it rapidly became clear that the applicants had no standing to maintain them. Contrary to the "admissions" in his defence it became clear also that Mr Coshott's attempted surrender to the applicants' case was based on a falsehood.
37 It is evident from [103] that a part of his Honour's reasoning for that conclusion relates to the question of whether or not the applicants had any standing to maintain the proceedings below. But that was not the only basis upon which the finding of abuse of process rested, as is evident from the clear terms of [103] itself.
38 It seems to me that there are several formidable difficulties which stand in the way of ground 2. The first is the fact that the solicitor who represented the applicants below actually conceded the point that Mrs Coshott did not have standing to bring the proceedings, a concession which is made in unambiguous terms in the transcript at page 368. The second difficulty lies in the fact that, even if that was not a complete answer to this ground of appeal, there are other matters, other than the lack of standing, which led to his Honour's finding of abuse of process. They are set out in [103].
39 Ground 3 of the notice of appeal relates to orders 6 to 11, which vest the property in the trustee as trustee for sale and require the delivery up of vacant possession of the property. The appellants complain that the primary judge did not identify the basis upon which these orders were made. The appellants draw attention to the fact that, in argument below, the trustee had submitted to his Honour that s 30 of the Bankruptcy Act 1966 (Cth) provided a source of power for such orders.
40 The appellants rely upon a decision in the Federal Magistrates Court in Park v Barclay (2010) 239 FLR 396, a decision of Jarrett FM, where, at [38], the Federal Magistrate (as he then was) held that the Court did not have power to make an order for sale under s 30 of the Bankruptcy Act against a co-owner of real property who is not the relevant bankrupt. I raised with Mr Kidd SC the availability of s 66G of the Conveyancing Act 1919 (NSW) as a source for that power. He accepted that that provision could provide a source of power, however, he then said that if that was the power that was being relied upon, the exercise of the power miscarried. In support of that submission he made reference to Slattery J's decision in the New South Wales Supreme Court in Starr-Diamond v Diamond (No. 3) [2013] NSWSC 351 at [4]:
The defendant also seeks in her motion to have herself appointed to sell the properties. This is not acceptable. Although it might save expense, such a course is unlikely to engender the confidence of both parties and it is likely to risk further conflict between them. The law is clear that the trustees appointed for sale must be impartial as between the co-owners, so much so that it is even regarded as inadvisable for the trustees to engage the same solicitor to act for them as may act for one of the co-owners: Dixon v Roy (1991) 5 BPR 11,655. I will therefore not appoint the defendant to sell the Tasmanian properties.
41 In my view, the factual situation in Starr-Diamond, where one of the co-owners herself was seeking to be appointed trustee for sale, puts the case in a very different category factually from the circumstances here.
42 In any event, the appellants' attack is one which has moved from the alleged absence of any power to make such an order to the exercise of the power in making such an order, but no such issue is raised by ground 3 of the amended notice of appeal. Ground 3 simply states that the court had no power under the Bankruptcy Act to make the orders where the first appellant is a co-owner of a property and is not the relevant bankrupt. Ground 3 does not raise any issue concerning the exercise of a power which it is now conceded was available to the court in terms of s 66G of the Conveyancing Act 1919 (NSW).
43 That brings me then to ground 4 of the amended notice of appeal, which relates to the costs of the proceeding and, in particular, to order 11.5, which orders that the proceeds of the sale of the property should be distributed to the trustee's professional and legal costs of the proceeding. It is argued that that order was inappropriate because it confuses the role of the trustee as trustee in bankruptcy and as trustee for sale: the trustee's professional and legal costs in getting in the bankrupt estate can only be taken from the bankrupt estate. It is argued that order 11.5 impermissibly allows the trustee to take those fees from assets from beyond the bankrupt estate, namely from Mrs Coshott's assets.
44 There are two difficulties in accepting that this presents an arguable ground of appeal. The first relates to the fact that, as the primary judge records in [98] of his reasons for judgment, the parties were given an opportunity to make whatever submissions they wished on the proposed orders, including order 11.5, and the relevant parties did not take advantage of that opportunity. In other words, they did not contest, oppose or resist the making of an order in terms of order 11.5. The second difficulty is that, in my view, the reasons given by Buchanan J in [101] of his reasons for judgment are compelling in terms of the appropriateness of making such an order.
45 For these reasons, I do not accept that any of the four broad grounds of appeal raised in the amended notice of appeal are reasonably arguable.
46 For completeness, it is appropriate if I say something about irreparable harm, that being an important aspect of what I have broadly described as balance of convenience considerations. The appellants say, and not without some force, that the irreparable harm to the family in this case is clear. The orders made by Buchanan J will force the sale of the residential home, where the Coshott family have apparently lived for over 10 years, and they say that the loss of the family home is not capable of reparation by the payment of moneys.
47 I would have expected in a case such as this, however, that if the appellants seek to persuade the court to attach weight to this aspect of irreparable harm, they would have gone into evidence and put before the court relevant material describing the residents' personal and individual financial circumstances. Mr Johnson, who appeared for Mr Coshott's trustee in bankruptcy, drew my attention to a decision of the Victorian Court of Appeal in Ozden v Ozden [2013] VSCA 195, and in particular to the judgment of Robson AJA at [88] where his Honour said that:
In circumstances where the court is being asked to exercise its discretion to give a stay, the court should have been fully informed of all relevant matters.
48 I respectfully agree with that observation. There is another aspect which has weighed with me on the question of irreparable harm. It relates to the fact that although under the current orders, vacant possession has to be provided by 22 October 2013, Mr Johnson indicated from the bar table, and it was not disputed, that the trustee expects that the auction of the relevant property will not take place until at least February 2014. Understandably, time needs to be taken after vacant possession has been delivered to put the property in order so as to maximise its sale price.
49 It seems to me that under that timeframe, while vacant possession needs to be delivered, if the appeal is heard and determined quickly, one might reasonably expect that the final judgment could be made available before any such auction takes place in February next year.
50 For all those reasons, I dismiss the application for a stay and order the appellants to pay the costs of the trustee (the first respondent). I also order that the appeal be expedited.
I certify that the preceding fifty (50) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Griffiths.