Deryk Rowan Andrew as Trustee for Estate of Colin George Ward (Deceased) v Zant Pty Ltd & Ors

(b) the transferor's main purpose in making the transfer was: (i) to prevent the transferred property from becoming divisible among the transferor's creditors; or (ii) to hinder or delay the process of making property available for division among the transferor's creditors. (2) The transferor's main purpose in making the transfer is taken to be the purpose described in paragraph (1)(b) if it can reasonably be inferred from all the circumstances that, at the time of the transfer, the transferor was, or was about to become, insolvent. (3) Subsection (2) does not limit the ways of establishing the transferor's main purpose in making a transfer. 81 The relevant property in the present case will be the money which I have found Mr Ward provided for the purpose of purchasing the Balmain Property. 82 The first question which arises is whether s 121(2) permits an inference to be reasonably made that at the time the money was paid by Mr Ward (or at his direction from funds he otherwise owned) he was or was about to become, insolvent. For this purpose I permitted further evidence to be filed dealing with Mr Ward's financial position and particularly his assets at the relevant time. 83 Mr Ward did not file income tax returns as and when required by the provisions of the Income Tax Assessment Act 1936. As has already been noted assessments ultimately issued to him made under s 167 of that Act (ie default assessments) for the years ending 30 June 1981 to 1987 inclusive. Details of these assessments and the dates they issued are to be found in paragraph 17 of these reasons. There is a question whether the amounts assessed should properly be seen to be liabilities which arose at the end of each financial year of income when the liability crystallised, albeit there was no assessment and thus no amount in one sense due and payable or only at the date of assessment or the date notified as the date when the tax as assessed was due and payable. That controversy (or the issues involved in it) is discussed in Re Mendonca (1969) 15 FLR 256 at 259 per Gibbs J and Clyne v Deputy Commissioner of Taxation (1981) 140 CLR 1 at 16-17. It need not be resolved here. 84 On 12 May 1998 Mr Ward's Statement of Affairs showed assets of $458 (cash) and liabilities at that time of $3,878,165 said to be secured creditors. This included the amount of $700,000 then estimated by him to be owing to the Commissioner of Taxation as well as amounts said to be owing to other creditors. This was after the time when Mr Ward was seeking review of the assessments by the Administrative Appeals Tribunal. 85 At the time of the purchase of the Balmain Property, even on the view espoused by Gibbs J in Re Mendonca,the tax liability of Mr Ward could not have exceeded approximately $220,000, being the amount of tax ultimately assessed for the 1981 and 1982 years of income excluding interest and penalties ultimately assessed. There would not seem to have been any other substantial creditor at the time. 86 It is more difficult to determine what assets Mr Ward had at that time. The applicant has searched the Land and Property Information Register for details of assets which Mr Ward may have had registered in his name at any relevant time. Apart from the assets the subject of the present proceedings and his residence at Wahroonga which was sold in 1985 and the proceeds used to purchase another property in Warrawee in the name of Mr Ward's wife, there were no other assets at any time available to creditors to satisfy Mr Ward's debts. The Wahroonga property, while originally in his name was transferred to his wife in 1979. There is no evidence before me which would establish that Mr Ward was the beneficial owner of the Wahroonga property at the time of the Balmain Property purchase although it seems that the applicant ultimately settled proceedings involving Mrs Ward and the Warrawee property on terms that money was paid to him for the benefit of creditors which may suggest that Mr Ward did have an interest in that property and perhaps therefore the Wahroonga property. Other searches made by the applicant for assets have not revealed the existence of any assets that might at any relevant time have been available to Mr Ward to satisfy the demands of creditors. 87 The applicant submits that it should be inferred that at the time of the purchase of the Balmain Property, Mr Ward was or was about to become insolvent. The submission proceeds upon the basis that the only assets of Mr Ward were the McMahon's Point Property, the Long Jetty Property and the purchase money used to purchase the Balmain Property. The submission ignores any money ultimately used by Mr Ward in the latter half of 1983 to purchase the Ourimbah Property and the Doyalson Property. It is hardly conceivable that these monies only became available to Mr Ward after the purchase of the Balmain Property. The applicant has not, therefore, shown that at the time of the purchase of the Balmain Property Mr Ward was insolvent, even assuming that income tax is to be treated as a debt due and owing as at the last day of the year of income to which the assessment relates. 88 Accordingly if the applicant is to succeed the applicant must show that Mr Ward's main purpose at the time of the purchase of the Balmain Property and the payment of the purchase monies for the benefit of the Balmain Trust (the relevant transfer) was to prevent the transferred property from becoming divisible among creditors or to hinder or delay the making of property available for division among his creditors. The applicant can not rely upon the inference of main purpose in s 121(2). 89 Obviously the onus of proving main purpose lies upon the applicant. Nevertheless it will not be necessary for there to be direct evidence of Mr Ward's purpose. The conclusion as to main purpose may arise by inference from all relevant circumstances. As Brennan CJ and McHugh J said in Cannane v J Cannane Pty Ltd at 556-7: "Although the party impugning the disposition of property must show an actual intent to defraud creditors at the time of the disposition, the intent may be inferred from the making of a disposition which, to adopt the words of Lord Hatherley LC in Freeman v Pope, 'subtracts from the property which is the proper fund for the payment of [the] debts, an amount without which the debts cannot be paid'. The 'proper fund' may consist in assets out of which future creditors as well as present creditors would be entitled to be paid a dividend in respect of what is owing to them. Therefore a subtraction of assets which, but for the impugned disposition, would be available to meet the claims of present and future creditors is material from which an inference of intent to defraud those creditors might be drawn." 90 The intent would readily be inferred in a case where the effect of the alienation of property will be that the proper funds available for the payment of creditors become insufficient: PT Garuda Indonesia Limited v Grellman at 524. Further, the purpose may be established by reference to future creditors: Barton v Deputy Commissioner of Taxation (1974) 131 CLR 370 at 374. 91 It is submitted for the applicant that by the latest as at the time the Balmain Property was purchased (but indeed, earlier than that time), Mr Ward embarked upon a course of conduct which involved him in not lodging taxation returns (and accordingly not being easily assessed for taxation by the Commissioner of Taxation) while at the same time putting his assets beyond the reach of creditors or otherwise dealing with them in such a way that creditors would find it difficult, if not impossible to have those assets available to pay Mr Ward's debts. The matters which are said to be relevant in reaching such a conclusion are said to include the non-lodgement of taxation returns and the various transactions referred to in these reasons which involve the purchase of assets in the names of others, the use of forged signatures, or fictitious names and the steps taken by Mr Ward to ensure that at all times, whether through trusts, options or mortgages he retained control of the assets otherwise not in his name. 92 That such a course of conduct was undertaken by Mr Ward is clear. It is also clear that he had begun to do so before the purchase of the Balmain Property, indeed, at the latest by the time of the acquisition of the McMahon's Point Property by Eband Pty Ltd. The question therefore is whether this suffices to show that the main purpose of the use of the funds to purchase the Balmain Property as trustee for the Balmain Trust (and ultimately for the benefit of the son) was such as to fall within s 121 or whether the main purpose was nevertheless to benefit the beneficiaries of the Balmain Trust, that is to say, in effect, his son. 93 There is little doubt that Mr Ward did intend to benefit his son in some way. However, it is also obvious that Mr Ward's desire to benefit his son was itself motivated by the desire to put his assets, which in addition to the properties by then acquired, still included a substantial amount of cash, beyond the reach of creditors or at least so as to delay creditors from gaining access to them. I would find that at the time of the purchase of the Balmain Property Mr Ward's main purpose in so doing was the desire to delay or hinder the recovery by the Commissioner of Taxation of income tax not yet assessed, and in respect of the years for which Mr Ward did not lodge returns or did not intend to lodge returns in the future. I do so in particular having regard to the fact that his main intention in purchasing McMahon's Point and Long Jetty both in the names of corporations which he controlled, was to delay or hinder the recovery of tax and it is not probable that the one purchase of the Balmain Property was mainly motivated by benevolence toward his family, even if such motivation was a purpose that he had. 94 It follows that I would find that the Trustee was entitled either to the Balmain Property as representing the cash which he had transferred in a transfer which was void as against him in accordance with s 121 of the Act or perhaps the property itself. Whether or not the property so acquired is to be regarded as property disposed of by the debtor or bankrupt to the donee is a question of fact to be determined in each case: Official Trustee v Alvaro at 357. Since this has not been argued it should be dealt with when considering the orders to be made. It accordingly is not necessary to consider the application of s 37A of the Conveyancing Act 1919. 95 I should say that in so far as I should be wrong in the conclusions I have reached in respect of the other properties the subject of the present proceedings, those properties would likewise form part of the bankrupt estate of Mr Ward having regard to s 121 of the Act. McMahon's Point 96 On 27 June 1980, the McMahon's Point Property was purchased from a third party, Satopa Pty Limited for $51,000 by Eband Pty Limited which as a result became the registered proprietor of it. There are no records which show whether the solicitors acting for Eband received the purchase price in cash or by cheque. Nor is there any evidence as to who provided the purchase money. The accounts of Eband show a liability under an unregistered mortgage of $51,956. The name of the mortgagee is not disclosed. The property was valued on 25 February 2004 at $580,000. The 1984 accounts record a liability of "unsecured loan-unreg. Mortgage-FG Ward" in the sum of $42,000 indicating at the least that some part of the original loan had been repaid. By 1988 this "unsecured loan - unreg mortgage" had been replaced by a mortgage from Fitstar in the sum of $43,295. 97 The directors of Eband and its subscribing shareholders were Ian Sticpwich and Premila Lanny. Mr Sticpwich did not give evidence. Ms Lanny swore an affidavit which was read in the present proceedings in which she said that she was never aware that she was a director of Eband. She swore that Mr Ward had said to her that "Eband is one of the most lucrative tax deals I've ever done". A company search dated 14 October 1993 reveals that Eband was deregistered on 9 February 1988. Eband's registered office was the same address as Mr Ward's previous office in Milsons Point. Eband was removed from the register in February 1988. 98 Before entering into the contract, Eband was party to a deed of settlement establishing what was to be called the "Ward Trust No 1" bearing the date 16 May 1980. Under this deed the settlor was Ms Ross, Eband was to be the trustee and the beneficiaries were Mrs Ward and the descendants of Mr and Mrs Ward. Accounts for the Ward Trust No 1 for the years ended 30 June 1980, 30 June 1984 and 30 June 1995 to 30 June 1998 were in evidence. There is no evidence as to when these accounts were prepared. All show the McMahon's Point Property as an asset of the trust. Associated profit and loss accounts of the trust show rent receipts from the trust property although in the years 1989, 1990, 1991, 1992, 1993 and 1994 it is recorded that the obligation of the tenant to pay rent was satisfied by the tenant paying outgoings. 99 On 23 May 1980 Mr Ward signed as appointor a memorandum of wishes. His signature was witnessed by Mr Raphael. The document expresses Mr Ward's wish or instruction that the trust property at McMahon's Point vest in Simon Ward at the age of forty-five years. Annual resolutions signed by Mr Ward as appointor purported to distribute net taxable income of the trust to Simon. 100 Prima facie the documentary evidence would support the view that the McMahon's Point Property was acquired by Eband as trustee of the Ward Trust No 1 and that Mr Ward had no beneficial interest in it. 101 It is submitted, however, that the Court should hold that Mr Ward was nevertheless the beneficial owner of the property. A number of matters are relied upon. 102 It seems that on 8 August 1980 a transfer was executed between Eband and a Mr Battisti, the eighth respondent for a consideration of $1. That transfer was executed under the common seal of Eband and signed by Mr Sticpwich as director of the company. On the same day Mr Battisti gave a general power of attorney to Mr Ward. The transfer to Mr Battisti remained unregistered until 12 August 1986. 103 Another power of attorney from Mr Battisti to Mr Ward was executed on 9 March 1988 and registered with the Land Titles Office. That power of attorney purports to be witnessed by a Mr Geoffrey Adelstein, a solicitor. Mr Adelstein in April 1989, however, swore that he had no recollection of witnessing the power of attorney. It is possible that Mr Adelstein may simply have forgotten the occasion. 104 In an email dated 22 August 2004 addressed to the solicitors for the applicant Mr Battisti claimed that he had purchased the McMahon's Point Property: "out of money I left in Australia when I returned overseas; It was bought in 1980 long before investigation of Colin George Ward (sic) business. Obviously, due to my own business in Italy, I could never directly take care of the property, but I let Colin Ward (my brother in law) run it on my behalf. After all my intention in buying the property was to have a place in Australia to retire, so I didn't care what happened in between times" 105 Given that the consideration shown in the transfer was nominal it could not be accepted that Mr Battisti purchased the property out of his own money. The fact that the consideration was nominal would suggest that Mr Battisti was a trustee taking on a change of trustees. However, it would seem from the email that Mr Battisti, at least, claims not to be a trustee, a matter consistent with the submission that it was Mr Ward who was the beneficial owner of the property and that it was not purchased by Eband as trustee. 106 Clearly it was Mr Ward, and neither Eband nor Mr Battisti who administered the McMahon's Point Property. 107 The latter view is reinforced by the fact that while Mr Battisti seemingly had little to do with the property, Mr Ward, who was neither a trustee nor a director of Eband, appeared to be intimately connected to its affairs. Council rates on the property were last paid on 4 September 2002, shortly before Mr Ward's death. No rates, or strata levies have since been paid. The second last rate payment made on 7 June 2002 was made by cheque drawn upon the account of Colin Ward & Co. It is not clear who paid the last rate instalment, although it may be inferred that it was Mr Ward. The records of North Sydney Council showed Eband still listed as owner with its address in care of Mr Ward at Braeside Street, Wahroonga even after Mr Battisti became the registered proprietor. 108 Moreover, not only did Eband appear to operate from addresses associated with Mr Ward, he clearly had authority over its operations, because on or about 22 February 1988, it would seem that Mr Ward collected the Certificate of Title for the property and the file in relation to Eband from Messrs. John Conti & Associates. Furthermore, rent and correspondence related to the rental of the property was sent by the real estate agent (R.B Kerr) to "F Battisti c/- Colin Ward". There would seem to be a distinct possibility that rent, which was paid in cash, found its way to Mr Ward personally. 109 In 1988, Mr Battisti mortgaged the McMahon's Point Property to Fitstar for $43,960. Mr Battisti's signature on that document appears to have been witnessed by Mr Ward. Strangely the balance sheets from 1988 onwards disclose that the trustee of the trust was a Mr Shaw. Just who Mr Shaw was is not clear. He never became the registered proprietor and the property is still registered in the name of Mr Battisti. A caveat was lodged by Ian Struthers on 3 June 1988 claiming an interest in the property as receiver. Mr Struther's interest is not explained on the evidence. Then on 1 March 1988, a lease of the property with an option to purchase was executed in favour of Helen Johnson. It would seem that prior to March 1988 the McMahon's Point Property was occupied by Ms Ross. Indeed, there is some suggestion that Ms Ross may have lived in the property continuously. At any rate she said in her affidavit evidence in the present proceedings that she and Mr Ward occupied the property from 1996 to 1999. 110 While the burden of proof in these proceedings lies upon the applicant it must also be said that whether that burden is satisfied is a matter which will take into account that all the facts concerning the transaction will be within the knowledge of persons other than the trustee in bankruptcy and that will obviously be so where, as here, the individual who is claimed to have acted in fraud of creditors is dead. So, as has already been noted, it has been said that in the context of fraudulent settlements "a very slight degree of proof should be sufficient to shift that burden": Re Trautwein; Richardson v Trautwein. The degree of control which Mr Ward exercised in the administration of the McMahon's Point Property, the fact that at least one director of the so called trustee company Eband had no knowledge that she was a director and in consequence no knowledge that that company was trustee, the fact that Mr Battisti did not assert that he was a trustee but nevertheless gave to Mr Ward a power of attorney to enable Mr Ward to administer the property, the inexplicable reference to Mr Shaw as trustee, coupled with the inference that it was Mr Ward who provided the funds for the purchase and probably pocketed some at least of the rent of the property and the fact that Mr Ward lived in the property with Ms Ross and treated the property as his own suggest that the appearance of a trust was but a façade for the reality that it was Mr Ward who was the beneficial owner. I am satisfied that he was. Doyalson Property 111 Pursuant to an Agreement for Sale of Land dated 5 August 1983, the Doyalson Property was purchased from a third party by a contract under which Ms Ross was purchaser for $130,000. Ms Ross became the registered proprietor of it by a transfer dated 2 September 1983. As at 1 March 2004, the value of the Doyalson Property was $650,000. 112 Prior to the purchase Ms Ross signed, it would seem, on 14 June 1983 a deed of settlement for a trust styled "the Doyalson Trust". The settlor was Ms Thomas, the appointor was Mr Ward and Ms Ross was trustee. The potential beneficiaries were named as Alfred and Pamela Fisher, their descendants, Mrs Ward, the descendants of Mr and Mrs Ward and the sisters, parents and descendants of Ms Ross. Ms Ross says nothing in her affidavit evidence about signing this trust deed. 113 Ms Ross in her affidavit records that she went with Mr Ward to the solicitor who acted upon the purchase. Mr Ward had with him a cotton bank bag filled with rolled notes which he handed to the solicitor. Present at the meeting was the person who was to be the first tenant of the Doyalson Property. The tenant made out cheques for rent in favour of Ms Ross but addressed them to Mr Ward's office. Ms Ross never received any cash from the property and made no payments of rates. 114 Ms Ross said that on many occasions, of which, inferentially, this was one, Mr Ward asked her to sign documents which she did willingly. If she sought to scrutinise a document she had been asked to sign Mr Ward would employ stand over tactics to get her to sign. The solicitor who acted on the purchase issued trust account receipts reading "Received from Lynnette Ross for the Doyalson Trust" and "Received from Lynette Ross, Trustee for the Doyalson Trust". It would seem, however, that the reference to a trust on the first receipt issued was added at some time after the receipt was made out as the words have been added in a different ink and initialled. It seems that Ms Ross on 2 August 1983 gave a power of attorney in favour of Mr Ward which was registered. Apparently a second power of attorney was given to Mr Ward on 13 August 1984. Ms Ross' signature was witnessed by the solicitor. 115 From Ms Ross' evidence it is clear that it was not her intention to purchase the property as trustee of the Doyalson Trust. She understood that she was purchasing the property as trustee for Mr Ward beneficially. On this basis the contribution by Mr Ward of the purchase price would lead to the conclusion, whether as a resulting trust or otherwise that Ms Ross was trustee of the property absolutely for Mr Ward. 116 Mr Ward resigned as appointor of the Doyalson Trust on 12 December 1985 and Ronald Norman Stonestreet replaced him. Simon Ward was appointed the trustee by Mr Stonestreet on 11 November 2002. Before these changes, however, Ms Ross signed a Resolution of Trustee on 23 September 1983 purporting to vest the Doyalson Property in Robin Ward. Presumably this was a document she signed at Mr Ward's insistence. 117 Consistent with the view that Mr Ward was the beneficial owner the evidence shows that Mr Ward was in control of the Doyalson Property. As noted, the property was tenanted, and although the cheques for the rent were made out to Ms Ross, they were addressed to Mr Ward's office and she never received any of that money. In fact, the property appears to have been managed by Wyong First National and by 8 July 2004, the account into which the rent was paid, namely Holicross Pty Limited T/F L J Ross, had a balance of $88,501.44. Also, a letter dated 14 May 1986 from Ms Ross (countersigned by Mr Ward) to Wyong First National requested all correspondence to go to him at his home, 6 Winton Street, Warrawee. It would seem that this request was acceded to, because among the documents in evidence was a rent statement from Wyong First National that was addressed to 6 Winton Street, Warrawee. Indeed the rent statements for 1988 and 1989 were sent to "Mr L J Ross" at 6 Winton Street, Warrawee. 118 On 28 November 1988 Ms Ross signed a mortgage of the Doyalson Property in favour of Yonder Investments Ltd. The mortgage purported to secure an advance of 160,000 Swiss Francs. Ms Ross said that she recalled signing this mortgage and that Mr Ward had paid her $1,000 to sign it; however, she never saw the 160,000 Swiss Francs. Yonder lodged a caveat over the property on 30 November 1988. A caveat had also previously been lodged by Dawnrays Investments Pty Ltd on 14 August 1984 pursuant to an alleged mortgage executed on 8 August 1984; however, it was withdrawn on 19 August 1986. The evidence does not explain this transaction. Ms Ross also said she was at no time aware that Mr Thomas Harper had a caveat over the Doyalson Property in relation to an Option to Purchase. The applicant asserts that this has now lapsed due to the death of Mr Harper. 119 There is much to be said for the view that the Yonder transaction was a sham, that is to say that it disguised no real transaction at all but rather was a means whereby Mr Ward could retain control of the property in the event that creditors sought to get at his assets. Interestingly, not only was a Banque Worms bank cheque dated 12 December 1988 to L.J Ross for 160,000 Swiss Franks found at Mr Ward's home, but also a letter from Company Formations Far East Limited dated 2 May 1990 to Mr Ward in relation to the annual fee for administering Yonder Investments Ltd was found at his office. There is also a courier consignment note No.208568 dated 8 December 1988 from Mr Ward to Banque Worms in Hong Kong, which the applicant notes was shortly before the date of the purported mortgage to Yonder Investments. 120 In a letter from Filmcrew Pty Limited to Armando Y.C Chung & Co dated 21 October 1996, it was noted that the loan of 160,000 Swiss Franks was actually from Fitstar and not Yonder Investments Ltd. According to the letter, the debt was assigned by Yonder Investments to Fitstar on 15 August 1995 for $1. It is interesting to note that Fitstar and Yonder have the same directors. 121 Based upon this evidence, it seems quite clear that Mr Ward purchased the Doyalson Property with his own cash, and had it placed in the name of Ms Ross. That appears to be Ms Ross' understanding at least. No mention appears to have been made of a trust at the time the property was purchased and it may be that the settlement purporting to set up the Doyalson Trust was brought into existence at a date later than the date it bears. Indeed, the notion of a trust purchasing the property may well have been an afterthought. This would explain why the initial trust account receipt showed an alteration naming the trust, an alteration obviously made later than the time the receipt was initially made out. The mortgages registered over properties in favour of Fitstar 122 Reference has been made in dealing with the five properties to mortgages executed in favour of Fitstar. I have no difficulty in finding that these mortgages were entered into with a view of putting the relevant properties beyond the reach of creditors while retaining control in Mr Ward. It was no coincidence that these mortgages coincided with the taxation investigation and the issue of large assessments of income tax to Mr Ward. 123 Fitstar was a company registered in Hong Kong and administered, on the instructions of Mr Ward by a company known as Company Formations Far East Ltd in Hong Kong. It ceased to administer the company on 23 May 2003 presumably when its accounts were not being paid by Mr Ward following his death. In the financial statements of Fitstar for the years ended 1988 to 1996 the reported assets of the company were said to range from HK$1.7 million in 1988 to HK$3.8 million by 1996. It is important that I deal now with the evidence concerning this company. The applicant submits that Mr Ward in fact controlled Fitstar and that it was but Mr Ward's alter ego. Mr Ward, however, when he was alive, on the other hand attempted to distance himself from the company. 124 In the examination before George Kemp of the ATO on 30 October 1989, Mr Ward agreed that he knew of Fitstar, but said that it was through Ms Ross that he had heard about the company. Indeed, Fitstar does not even appear in Mr Ward's client list. I should say here that it is most unlikely that Mr Ward heard of Fitstar through Ms Ross. However, some information concerning the company has come to light through investigations either by the ATO or the applicant. 125 In Mr Raymond Perkes' affidavit evidence he said that Fitstar is a company registered in Hong Kong and that it was administered by a Hong Kong company known as Company Formations Far East Ltd. There is a fax from that company dated 23 October 2003 that states that it ceased to administer the affairs of Fitstar on 23 May 2003. Fitstar's financial statements for the years ended 1988 to 1996, show, in addition to reported assets to the extent already noted, liabilities totalling approximately $2.8 million. No reference is made to the name of the creditor. Apart from gains from exchange rate fluctuations, Fitstar always declared a loss in its financial statements. A Hong Kong firm of auditors, Armando Y C Chung & Co ceased to act as auditors of Fitstar in 1998. 126 In various proceedings during his life time Mr Ward protested that he knew nothing of Fitstar. This is clearly not the case. In evidence is a letter from Company Formations Far East Limited to Mr Ward in relation to Fitstar returning a Commonwealth Bank of Australia draft that was meant to be in payment of an invoice for services rendered because the draft required two signatures, where only one appeared. It seems to be clear that Mr Ward personally paid Company Formations Far East Limited to administer Fitstar. In evidence is a letter dated 6 July 1989 from that company to Mr Ward in relation to the annual charge for administering Fitstar. There is also in evidence a letter dated 4 December 1987 from Fitstar to Abelitis & Co requesting them to act for Fitstar on a mortgage. That firm was a firm also used by Mr Ward. 127 There is evidence that Mr Roseland of the ATO discovered various documents at Mr Ward's home in Warrawee suggesting a strong link between Mr Ward and Fitstar. There was an unsigned letter from Fitstar to Zant offering to lend $110,000 dated 4 September 1987 and an unsigned letter from Fitstar to I.Abelitis & Co dated 10 September 1987 requesting Mr Abelitis to act on a mortgage. There was also a letter from an Edwardo Lopez of the Philippines to Mr Abelitis dated 28 September 1987 requesting him to act on a mortgage for Fitstar and claiming that Fitstar is his company. Finally there was a letter from Fitstar to Banque Worms in relation to a bank draft dated 7 December 1988 and signed by Mr Ward. It must be asked why these documents would be at Mr Ward's home, when he claimed no connection to the company. 128 So far as the connection between the Fitstar mortgages and the ATO audit is concerned, it should be noted that the McMahon's Point mortgage was executed on 29 February 1988, the Long Jetty mortgage on 4 October 1987, the Ourimbah mortgages on 18 June 1988 and 3 February 1997, the Balmain mortgage on 18 January 1988 and the Doyalson mortgage on 28 November 1988. By contrast, the ATO audit commenced in 1987. The inference is almost irresistible that the Fitstar mortgages were each entered into in an attempt to defeat or delay the Commissioner of Taxation recovering outstanding tax through the sale of these properties. No doubt, incidentally, the mortgages provided a further level of control for Mr Ward over the properties in question which were, in each case, held by trustees or companies. 129 Finally, the sequence of events in relation to the mortgage over the Long Jetty Property is also compelling in this regard. The mortgage was executed on 4 October 1987 from Zant to Fitstar as security for a purported loan of $110,000 and was registered. Both a mortgage document and a cheque from Banque Worms drawn in favour of Zant in the amount of $110,000 were uncovered in searches of Mr Ward's home. It seems that an account was opened in the name of Zant with the Milsons Point branch of the National Australia Bank on 26 October 1987, the cheque was deposited in a Zant account (it is not clear whether it was this one) and then three cheques totalling $110,000 were drawn upon that account in favour of a Ken Saunders between 4 and 5 November 1987. Finally, on 6 November 1987, 10 November 1987 and 16 November 1987, application forms to remit a sum totalling $110,000 to an account with Swiss Bank Corporation were signed by "K.Saunders". 130 The identity and whereabouts of this Mr Saunders is unknown. Searches undertaken by the ATO failed to locate him. The name was not to be found in the records of the ATO, the White Pages or the records maintained by the Department of Social Security. When asked about Mr Saunders, Mr Ward had also been somewhat vague. He told Mr Kemp under examination on 16 March 1989 that he had met Mr Saunders socially through a client, and then confirmed that Mr Saunders now lived in Lightning Ridge, although he was unable to produce his contact details. He denied ever having had business dealings with him or having paid monies to him. I think it is more likely than not that the name Saunders was a name invented by Mr Ward as a disguise for himself. 131 The most likely conclusion is that in each mortgage the funds which purported to have been advanced by Fitstar were funds beneficially owned by Mr Ward and that these funds were passed around a circle to give the appearance of a real advance being made by Fitstar when actually Fitstar was acting as trustee or agent for Mr Ward. It is not irrelevant that Fitstar, although a party to the present proceedings has not sought to defend the proceedings or sought to adduce evidence which was clearly within its knowledge showing that the mortgages were genuine. The failure to do so enables the inference to be more readily drawn that Fitstar was merely the alter ego of Mr Ward and that the mortgages entered into were to assist Mr Ward in his plan to defeat, hinder or delay creditors.

At a glance

Court

Decision date

Before

Source

Judgment (10 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (13)

Cited By (5)