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[2025] NSWCA 171
respondent. Appeal dismissed. The appellant was ordered to pay the first respondent's costs. [113]
Grapple argued that Jarrod Conroy transferred property to his mother to keep it beyond Grapple's reach when Prana entered administration. The Court of Appeal found that the arrangement was, in substance, a sale for value: Ingrid paid to discharge the mortgage and reimburse Lucas, who had funded most of the original purchase. Those payments broadly matched the property's value and left Conroy with no benefit. Although the transaction favoured Lucas and Sempre over Grapple, that preference alone did not prove an intent to defraud creditors under s 37A. The nil-consideration wording on the transfer form did not outweigh the evidence of payment. The appeal was dismissed. The court also gave alternative reasons about Ingrid's lack of notice, while stating that s 37A(3) did not need to be decided.
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Grapple Pay Pty Ltd appealed from a decision dismissing its application to avoid a transfer of rural property under s 37A of the Conveyancing Act 1919 (NSW). Jarrod Conroy had held the property as trustee of the Bungabbee First Light Trust. He transferred it to his mother, Ingrid Conroy. The transfer was registered on 1 September 2022, the same day he placed Prana Energy Co Pty Ltd, a company he controlled, into voluntary administration. Prana owed Grapple money, and Jarrod had guaranteed that debt. Grapple's case was that the transfer was made to hinder its recovery.
The financial history mattered. Isabel Lucas, Jarrod's former partner, contributed $551,790 towards the property's original $770,000 purchase price in 2021. The balance was funded through a loan to Prana from Sempre Funding Pty Ltd, secured by a mortgage over the property and guaranteed by Jarrod. The parties had no written agreement explaining whether Lucas's contribution was a loan or gave her an equitable interest. However, Jarrod and Lucas agreed that if she wanted her money back, the property would be sold to enable repayment. [8]-[10]
In 2022, Ingrid offered to buy the property. She had sold her home in Victoria and intended to move closer to her family. She paid $194,554.18 to discharge the Sempre mortgage and transferred $400,000 to Lucas before the property transfer was registered. Lucas later received a further $79,827. Ingrid's payments to Sempre and Lucas, counted as the purchase price, totalled $665,076. She also paid stamp duty of $26,590 based on a valuation of $700,000. [13], [17]-[18], [22], [26], [79]
The transfer form described the transaction as involving no monetary consideration. But the Court of Appeal treated that wording as one item of evidence, not a conclusive account of the transaction. It accepted that Jarrod had tried to avoid stamp duty by proposing a different characterisation. The objective payment evidence showed that Ingrid paid substantial sums connected with acquiring the property. [78]-[82]
The primary judge found no intent to defraud creditors and, alternatively, that Ingrid was a purchaser in good faith without notice. The Court of Appeal dismissed Grapple's appeal. It held that the evidence showed a preference for Lucas and Sempre over Grapple, but that preference was not enough, on its own, to establish the intent required by s 37A(1). [3], [71]-[75], [93], [112]-[113]
Section 37A(1) makes an alienation voidable at the instance of a person prejudiced by it if it was made with intent to defraud creditors. The court described the required intent as actual, rather than constructive, and said it can include an intention to hinder or delay creditors. The applicant must also establish prejudice. [2], [62]
The central question was not simply whether the transaction made Grapple's position worse. The court accepted that Jarrod was in a hurry and that he was concerned Grapple might enforce its guarantee against the property. The primary judge's finding was that Jarrod wanted to prefer Lucas over Grapple. But the Court of Appeal rejected the proposition that the natural consequence of a disposition being disadvantageous to one creditor automatically proves an intent to defraud that creditor. A debtor may intend to pay one creditor; another creditor's resulting inability or delay in obtaining payment can be an incidence of that choice, rather than its intended purpose. [71]-[75]
The court relied on the principle stated in Middleton v Pollock and recognised in later authorities: a debtor may prefer one creditor over another, and the preference alone does not establish the distinct intent required under s 37A. [64]-[65] The principle is not a statutory exception added to s 37A. Rather, it informs whether the statutory element of intent has been established in the particular case. The judgment explains that the right question is whether the debtor intended, by the alienation, to defraud creditors, not whether the transaction had the effect of preferring one creditor. [71]
The transaction's economic substance was important. Ingrid's money paid off the secured Sempre debt and reimbursed Lucas. The court concluded that those payments broadly equated to the property's value and did not confer a benefit on Ingrid or leave one with Jarrod. The trust was relieved of liabilities, and Jarrod remained liable to Grapple. The court therefore treated the transaction as one that used the property's value to discharge existing liabilities, rather than one that stripped value for Jarrod's personal benefit. [74], [87], [93]
Grapple argued that the nil-consideration entry on the transfer form meant the property had been transferred for nothing, or at a substantial undervalue. The court rejected that as inconsistent with the objective evidence. It also accepted that Jarrod had tried to create a different account of the transaction to obtain a stamp-duty exemption. The form did not change the substance of the payments Ingrid made. [78]-[82]
The court also rejected Grapple's contention that the preference principle could apply only if the property was transferred directly to the creditor who benefited. It distinguished s 37A from s 122 of the Bankruptcy Act 1966 (Cth) and s 588FA of the Corporations Act 2001 (Cth). Those provisions deal with preferences in bankruptcy or winding up, have different statutory settings, and provide for applications by a trustee or liquidator. Section 37A allows a prejudiced person to apply in their own interest. The court found no basis for importing a restriction from those other schemes. [88]-[92]
Finally, the court found no basis to infer that Ingrid knew Grapple was a creditor of Jarrod or knew of his guarantee. It also rejected the inference that she must have read and approved the transfer form merely because the form was attached to an email sent to her. Since the court had already found that s 37A(1) was not established, these s 37A(3) conclusions were not necessary to the result. [100]-[110]
The judgment presents its central rule as settled, not as a change in the law. It traces the principle that a debtor's preference of one creditor does not, without more, establish an intent to defraud from Middleton v Pollock, through Glegg v Bromley, to its approval and application in Australian authorities including Marcolongo v Chen. [64]-[65]
The key clarification is how that principle fits the language of s 37A. Grapple proposed what it called a “preference exception”, and argued that the exception should apply only where the debtor transfers property directly to an existing creditor and does not deplete overall assets. The court rejected that framing. It said the legislation does not create a free-standing exception: the question remains whether the evidence proves actual intent to defraud. A preference, even one with adverse consequences for another creditor, does not itself answer that question. [66]-[71]
The judgment also clarifies that the preference reasoning is not limited to a direct transfer to the creditor who is paid. Here, the property went to Ingrid, while the associated payments discharged debts to Sempre and Lucas. The court considered the arrangement as a whole. It concluded that the form of the transfer did not alter the conclusion where the transaction's effect was to pay existing creditors and Jarrod retained no benefit. [81], [88]-[93]
The court also set out why s 37A should not be read as if it were a preference provision under the Bankruptcy Act or Corporations Act. The statutory provisions have different purposes, processes and applicants. Under s 37A, a person prejudiced may seek relief; under the provisions discussed, the trustee in bankruptcy or liquidator has the relevant standing. The court therefore rejected the attempt to confine s 37A by importing language or limits from those other statutes. [90]-[92]
For conveyancing and insolvency analysis, the judgment reinforces the need to distinguish three matters: a transaction's consequence for a particular creditor, the debtor's actual purpose, and the value received or liabilities discharged. The first does not automatically prove the second, and documents describing consideration do not necessarily settle the third if the broader evidence demonstrates a different economic substance. Those propositions arise from the court's application of existing principles to the particular evidence, rather than a stated reformulation of the law. [71]-[82]
At [71], the court said: “it cannot be inferred from the mere fact that a debtor prefers one creditor over another that the debtor intended to defraud the latter creditor.” In plain English, paying one creditor before another is not, by itself, proof that the debtor intended to cheat or hinder the unpaid creditor. The surrounding evidence must establish the required intent.
At [74], the court said Ingrid's payments “broadly equated to [the property's] value” and that “no benefit was conferred on her or retained by him.” The point was that the transaction was not shown to have transferred value to Jarrod or gifted the property to Ingrid. The court viewed the payments to the mortgagee and Lucas as part of the purchase arrangement.
At [79], the court explained that the transfer form did not determine what had happened in substance. The form recorded no monetary consideration, but the evidence showed payments of $665,076 for the property and stamp duty paid on a valuation of $700,000. In plain terms, a conveyancing form's description is relevant, but it must be considered with the actual payments and surrounding circumstances.
At [81], the court said consideration may be valuable even where the purchaser pays the vendor's creditors directly rather than handing money to the vendor. This matters where an asset is transferred subject to a mortgage or where payment to a creditor is part of the agreed purchase arrangement.
At [92], the court rejected the argument that s 37A should be restricted by the statutory wording of the bankruptcy and corporate preference provisions. In plain English, similar subject matter does not make the statutory schemes interchangeable. Each must be read according to its wording, purpose and context.
At [93], the court said it was “not to the point” that the transfer was to Ingrid rather than Lucas. It considered the arrangement overall: Ingrid obtained the property, and the associated payments discharged liabilities. The court's conclusion depended on that arrangement and the evidence that Jarrod retained no benefit, not on a general rule that transfers to family members are immune from challenge.
The decision is most relevant to claims under s 37A where a creditor alleges that a debtor transferred property near insolvency to hinder recovery. It is particularly useful where the evidence also shows that the transferee paid substantial value, that money went directly to discharge debts connected with the property, and that the transferor retained no evident benefit. In that setting, the decision cautions against treating timing, family relationships or the effect on an unpaid creditor as conclusive proof of intent. The court itself recognised those kinds of circumstances as potentially relevant factors, while holding that they did not establish intent on the evidence before it. [63], [71]-[82]
It is also relevant where a transaction involves more than two parties. A purchaser may transfer money to the transferor's creditors rather than to the transferor. The decision treats those payments as potentially forming part of the consideration and explains that the creditor who benefits need not be the person named as transferee for the preference principle to be relevant. [81], [88]-[93]
The ruling does not mean that a transfer to a family member, a transaction close to insolvency, or a transfer document recording no consideration is immaterial. The judgment identifies family relationship, haste, financial stress, voluntariness and lack of consideration as factors that may inform an inference of intent. Its conclusion turned on the combined evidence, including the payments, the liabilities discharged and the absence of retained benefit. [63], [72]-[82]
Nor does it determine disputes where the alleged transferor retains use or control of the asset, receives less than its value, conceals proceeds, or makes a transfer without genuine payment. Those facts were not established here, and the judgment does not state how they would affect the result. Its reasoning instead highlights why a court examines the actual arrangement and its economic effect alongside the transfer documentation.
The judgment is dated 1 August 2025. The supplied judgment contains no information about how later courts have treated Grapple Pay Pty Ltd v Conroy. It would therefore be unsupported to describe it as followed, distinguished or applied by any subsequent court.
The authorities discussed in the judgment are earlier authorities, not later treatment of this decision. The Court of Appeal applied or discussed them to explain the existing legal framework: Middleton v Pollock and Glegg v Bromley for creditor preference; Cannane and Marcolongo for the statutory intent; and Re McCauley and Houvardas for the distinct operation of bankruptcy provisions and s 37A. [62]-[65], [90]-[92]
For research purposes, the decision's value lies in its own synthesis and application of those authorities to an indirect sale arrangement involving payments to existing creditors. Whether subsequent courts adopt or limit that analysis cannot be determined from this judgment alone.
The decision does not establish a numerical threshold for when a purchase price is sufficiently close to market value to undermine an inference of intent. The court noted that Ingrid paid about 95 per cent of the $700,000 valuation and that the five per cent difference did not support the inference on these facts. It did not prescribe a general tolerance or valuation method. [86]
The judgment also leaves open how the analysis might differ where the transferor retains a benefit, the payment is materially below value, or the evidence shows that the arrangement was a sham. The court's reasoning relied on the absence of retained benefit and the discharge of liabilities, but it did not catalogue every circumstance in which a creditor preference might coexist with an intent to defraud. [74]-[75], [87], [93]
The legal character of Lucas's contribution was not finally resolved in every respect. The court held that she was a creditor entitled to reimbursement, and observed that an equitable presumption might also give her an equitable interest, depending on the correct analysis. The appeal did not require a definitive resolution of all possible proprietary and personal remedies. [83]-[85]
Finally, the court's alternative discussion under s 37A(3) should be read with care. It expressly said that the subsection did not arise once the s 37A(1) case failed. Its analysis of Ingrid's good faith, knowledge and awareness of the transfer form explains why the court rejected the related appeal grounds, but the primary basis for dismissing the appeal was Grapple's failure to establish the required intent under s 37A(1). [100]-[110]
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Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: Grapple Pay Pty Ltd v Conroy [2025] NSWCA 171
Hearing dates: 21 July 2025
Decision date: 01 August 2025
Before: Adamson JA; Ball JA; Free JA
Decision: (1) Appeal dismissed.
(2) Order the appellant to pay the first respondent’s costs.
Catchwords: REAL PROPERTY — conveyancing — where land was transferred by director to his mother on same day that company entered voluntary administration — whether property transferred with intent to defraud creditors — whether first respondent was purchaser for good faith without notice — whether first respondent had notice of intent to defraud creditors at time of transfer — alienation of property — Conveyancing Act 1919 (NSW), s 37A
Legislation Cited: Bankruptcy Act 1966 (Cth), s 122
Conveyancing Act 1919 (NSW), ss 7, 37A
Corporations Act 2001 (Cth), s 588FA
Cases Cited: Abignano v Wenkart (1998) 9 BPR 16,765
Barton v Official Receiver (1986) 161 CLR 75; [1986] HCA 44
Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1
Cannane v J Cannane Pty Ltd (in liq) (1998) 192 CLR 557; [1998] HCA 26
Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353; [1956] HCA 28
Commissioner of Taxation v Oswal (No 6) [2016] FCA 762; (2016) 339 ALR 560
Fraser v Deputy Commissioner of Taxation & Anor (1996) 69 FCR 99
Galati v Deans [2023] NSWCA 13
Glegg v Bromley [1912] 3 KB 474
Grapple Pay Pty Ltd v Conroy [2025] NSWSC 64
Houvardas v Zaravinos [2003] NSWSC 387; (2003) 202 ALR 535
Re FW Projects Pty Ltd (in liq) [2019] NSWSC 892
Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8
Luxton v Vines (1952) 85 CLR 352; [1952] HCA 19
Marcolongo v Chen (2011) 242 CLR 546; [2011] HCA 3
Middleton v Pollock; ex parte Elliott (1876) 2 Ch D 104
Re FW Projects Pty Ltd (in liq) [2019] NSWSC 892
Re McCauley; Ex Parte Fraser & Anor (1995) 61 FCR 251
Steinberg v Federal Commissioner of Taxation (Cth) (1975) 134 CLR 640; [1975] HCA 63
Westpac Banking Corporation v The Bell Group Ltd (in liq) (No 3) (2012) 44 WAR 1; [2012] WASCA 157
Wise Investments Pty Ltd v Ruddy Tomlins & Baxter, Solicitors (A Firm) [2019] QCA 271
Texts Cited: D C Pearce, Statutory Interpretation in Australia (10th ed, 2024, LexisNexis)
Category: Principal judgment
Parties: Grapple Pay Pty Ltd (Appellant)
Ingrid Doris Conroy in her capacity as trustee of the Bungabbee First Light Trust (First Respondent)
Manuel Hanna as the trustee of the bankrupt Estate of Jarrod Arthur Conroy (Second Respondent)
Representation: Counsel:
A Cheshire SC / N Simpson (Appellant)
P Afshar / E ten Kate (First Respondent)
No appearance (Second Respondent)
Solicitors:
Maddocks (Appellant)
KB Legals Pty Ltd (First Respondent)
Not applicable (Second Respondent)
File Number(s): 2025/76545
[This headnote is not to be read as part of the judgment]
The appellant, Grapple Pay Pty Ltd (Grapple), appeals against orders made by Nixon J (the primary judge) in the Supreme Court on 18 February 2025 dismissing its application for an order under s 37A of the Conveyancing Act 1919 (NSW) (the Act) avoiding the transfer of rural property in Bentley (the property), by Jarrod Conroy to his mother, the first respondent, Ingrid Conroy.
Mr Conroy, the sole director and shareholder of Prana Energy Co Pty Ltd (Prana), had purchased the property in June 2021 as trustee of the Bungabbee First Light Trust. His former partner, Isabel Lucas, contributed $551,790 towards the $770,000 purchase price. $180,227.62 was funded by a loan to Prana from Sempre Funding Pty Ltd (Sempre), secured by a mortgage and guaranteed by Mr Conroy personally and as trustee.
By March 2022, Ms Lucas wanted to be paid out. In order to help her son, Ms Conroy (who wanted to move from Victoria to northern New South Wales) offered to pay out Ms Lucas and discharge the Sempre mortgage in return for clean title to the property.
On 2 May 2022, Prana separately entered into a Facility Agreement with Grapple, which was guaranteed by Mr Conroy. On 7 July 2022, Ms Conroy sold her home. On 11 August 2022, she paid $195,076.31 to discharge the Sempre mortgage.
Subsequently, Ms Conroy paid $400,000 to Ms Lucas in two instalments, each described as relating to the “Larnook Purchase”. Ms Conroy paid stamp duty on the transfer based on a valuation of the property at $700,000. The transfer form, which stated that the transfer was for no consideration, was signed by Mr Conroy and registered on 1 September 2022. Also on 1 September 2022, Mr Conroy placed Prana (which then owed Grapple $237,804.01) into voluntary administration. On 2 December 2022, Ms Lucas received a final payment of $79,827 for her contribution to the property.
At first instance, the primary judge was not satisfied that the transfer of property had been made with the intent to defraud creditors under s 37A(1) of the Act, or that Ms Conroy was not a purchaser in good faith without notice of such intent under s 37A(3).
The Court held (Adamson JA, Ball JA and Free JA) dismissing the appeal:
Whether the transfer of the property was made with intent to defraud creditors
(1) It cannot be inferred from the fact that a debtor prefers one creditor over another, that the debtor intended to defraud creditors. Mr Conroy was entitled to prefer the interests of Ms Lucas over Grapple: [71]-[75].
(2) As the amount which Ms Conroy paid for the property broadly equated to its value, the transfer reserved no benefit to Mr Conroy or conferred any benefit on Ms Conroy. The payments made by Ms Conroy to Ms Lucas and Sempre amounted to consideration for the purchase: [74], [80].
(3) The statement in the transfer form that there was no consideration was not determinative and can be explained by Mr Conroy’s attempt to avoid stamp duty. The incontrovertible evidence was that Ms Conroy paid $665,076 for the property and $26,590 for stamp duty (with the latter calculated on the basis that the property was worth $700,000): [78].
Commissioner of Taxation v Oswal (No 6) [2016] FCA 762; (2016) 339 ALR 560; Middleton v Pollock; ex parte Elliott (1876) 2 Ch D 104, applied.
Cannane v J Cannane Pty Ltd (in liq) (1998) 192 CLR 557; [1998] HCA 26; Marcolongo v Chen (2011) 242 CLR 546; [2011] HCA 3; Glegg v Bromley [1912] 3 KB 474; Wise Investments Pty Ltd v Ruddy Tomlins & Baxter, Solicitors (A Firm) [2019] QCA 271, cited.
Whether Ms Lucas was a creditor of the trust
(4) Ms Lucas was a creditor of the trust as she paid most of the purchase price for the property and had an agreement with Mr Conroy at the time of its purchase, that if she wanted her money back, the property would be sold to enable that to occur. Thus, Ms Lucas was entitled to the reimbursement of her contribution: [82]-[84].
Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353; [1956] HCA 28; Galati v Deans [2023] NSWCA 13, cited.
Whether the transfer must be to an existing creditor
(5) Where a debtor merely prefers one creditor over another, there is lacking a foundation to infer an intention to defraud creditors. The application of that principle does not depend upon the preference taking the form of an alienation to that creditor of the property that is the subject of the claim under s 37A(1). Here Mr Conroy received effectively full value for the property and used the entire proceeds of sale to repay two of his creditors, Sempre and Ms Lucas. Although the alienation of the relevant property was to Ms Conroy and not to Ms Lucas, the effect of the arrangement was to benefit the existing creditors Sempre and Ms Lucas: [87]-[93].
Fraser v Commissioner of Taxation & Anor (1996) 69 FCR 99; Houvardas v Zaravinos [2003] NSWSC 387; (2003) 202 ALR 535, applied.
Re McCauley; Ex Parte Fraser & Anor (1995) 61 FCR 251, cited.
Whether the transaction is not voidable because Ms Conroy is a purchaser in good faith without notice
(6) As it has not been established that Mr Conroy transferred the property with intent to defraud creditors, it is unnecessary to determine whether Ms Conroy was a purchaser in good faith without notice. Nonetheless, Ms Conroy paid valuable consideration for the property which was commensurate with its value. Further, the evidence was that Ms Conroy did not know that Grapple was a creditor of Mr Conroy. Thus, Ms Conroy was a purchaser in good faith without notice: [98]-[101].
(7) There was no evidence that Ms Conroy was aware of, or agreed with, the contents of the transfer form which stated that the transfer was for no consideration. The form was a document identified for Mr Conroy to sign and return. Although Ms Conroy had access to the form, the evidence did not establish that she had availed herself of that opportunity: [106]-[108].
Barton v Official Receiver (1986) 161 CLR 75; [1986] HCA 44; Wise Investments Pty Ltd v Ruddy Tomlins & Baxter, Solicitors (A Firm) [2019] QCA 271, applied.
Glegg v Bromley [1912] 3 KB 474*; Steinberg v Federal Commissioner of Taxation (Cth)* (1975) 134 CLR 640; [1975] HCA 63; Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1; Luxton v Vines (1952) 85 CLR 352; [1952] HCA 19; Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8, cited.
THE COURT: Grapple Pay Pty Ltd, the appellant (Grapple), appeals against orders made by Nixon J (the primary judge) in the Equity Division of the Supreme Court (the Court below) on 18 February 2025. The proceedings in the Court below ultimately turned on whether the transfer of rural property at Bentley, north-west of Lismore (the property), by Jarrod Conroy (whose trustee in bankruptcy is the second respondent) to his mother, Ingrid Conroy, was voidable at the instance of Grapple pursuant to s 37A of the Conveyancing Act 1919 (NSW) (the Act). The primary judge found that it was not and dismissed Grapple’s amended summons: Grapple Pay Pty Ltd v Conroy [2025] NSWSC 64 (J).
Section 37A of the Act relevantly provides:
37A Voluntary alienation to defraud creditors voidable
(1) Save as provided in this section, every alienation of property, made … with intent to defraud creditors, shall be voidable at the instance of any person thereby prejudiced.
…
(3) This section does not extend to any estate or interest in property alienated to a purchaser in good faith not having, at the time of the alienation, notice of the intent to defraud creditors.
The primary judge was not satisfied that the transfer of the property had been made with the intent to defraud creditors within the meaning of s 37A(1). His Honour was satisfied that Ms Conroy was, in any event, a purchaser in good faith who did not know of any intent to defraud creditors within the meaning of s 37A(3).
In 16 separate grounds of appeal (1-14, 8A and 9A) set out in its amended notice of appeal, Grapple seeks to challenge these determinative findings and several that underpinned them.
All references to legislation in these reasons are, unless otherwise stated, references to the Act.
Mr Conroy was the sole director and shareholder of Prana Energy Co Pty Ltd (Prana), which was engaged in commercial solar installations. Ms Conroy was employed as Prana’s book-keeper from about the time of its incorporation in mid-2017 until it was placed in liquidation on 10 October 2022. Her sign-off on two emails dated June and September 2021 represented that she was Prana’s Accounts and Finance Manager. Mr Conroy explained that Prana’s new Chief Executive Officer changed the titles of all employees.
Prior to June 2021, Mr Conroy was in a relationship with Isabel Lucas. They decided to purchase the property with a view to growing food and keeping bees with “community involvement”. Ms Lucas suggested that the property be purchased and held by a trust of which Mr Conroy would be trustee and Mr Conroy, Ms Conroy and Ms Lucas would be beneficiaries. Although Mr Conroy and Ms Lucas were no longer in an intimate relationship in June 2021, the Bungabbee First Light Trust (the trust) was established by settlement deed at that time and Mr Conroy was appointed as trustee. Mr Conroy engaged solicitors, Wall & Co, to act on his behalf on the purchase of the property.
On 9 June 2021, Mr Conroy, as trustee, entered into a contract for the purchase of the property for $770,000. The contract stipulated a settlement date of 9 August 2021. Ms Lucas provided $551,790 of the $732,107.62 which was due on settlement. The basis on which Ms Lucas provided these funds was not the subject of a written agreement. Thus, it was not clear whether she had provided them by way of a loan or whether her contribution entitled her to an equitable interest in the property.
As there was no dwelling on the property, Mr Conroy was unable to obtain bank finance. The balance of the purchase price, being $180,227.62, was provided by Prana from loan funds of $188,700 advanced to it by Sempre Funding Pty Ltd (Sempre). The Sempre loan was guaranteed by Mr Conroy in his own right and as trustee (the Sempre guarantee) and was secured by a first registered mortgage over the property. Settlement of the purchase occurred on 9 August 2021.
According to Mr Conroy, in about March 2022, Ms Lucas wanted to “exit the property”. She and Mr Conroy agreed that if he was unable to repay the money she had advanced, he would list the property for sale. At about this time, Mr Conroy told his mother, who was then living with her partner in Victoria, of this arrangement. She offered to purchase the property, as she intended to sell her home in Victoria to move closer to her children and grandchildren (Mr Conroy and his sister and her children) who lived near the property. When Mr Conroy told her of the Sempre mortgage and the amount of Ms Lucas’ contribution, Ms Conroy offered to buy the property for the sum of these two amounts. She intended to build a house on the property and live there. Mr Conroy retained Wall & Co to act on the sale on his behalf and on behalf of Ms Conroy. The solicitor with carriage of the matter was Emma Moses.
Please go ahead with the discharge
And also the stamp duty costs to move it into lngrids name asap
We will just have to accept that extra cost for our own peace of mind
Please action this swiftly, thanks
On 16 August 2022 at 3.34pm, Ms Moses confirmed that the discharge of the Sempre mortgage would be lodged at 4pm and advised Mr Conroy and Ms Conroy that they would need a valuation for stamp duty purposes.
Wall & Co obtained a valuation of the property dated 18 August 2022 which said that the property was worth $700,000 on an “as is” basis. The author of the valuation explained that since its purchase a year previously for $770,000, the value of the property had depreciated as a result of the substantial flooding in the area. On the basis of this valuation, the stamp duty payable was $26,590.
On 24 August 2022, Wall & Co sent an email to Mr Conroy and Ms Conroy with two attachments: a settlement statement and a transfer form for Mr Conroy “to sign and return”. The settlement statement indicated that an amount of $28,168.17 needed to be paid on settlement: $26,590 in respect of stamp duty with the balance to Wall & Co for their fees for acting on the transaction. In accordance with Wall & Co’s request, on 29 August 2022, Ms Conroy transferred an amount of $28,168.17 to the Wall & Co trust account, which covered the stamp duty and the solicitors’ fees.
The transfer form attached to the email said, beside “Consideration”:
The transferor acknowledges receipt of the consideration of $0.00 …
Certified correct for the purposes of the Real Property Act 1900 on behalf of the transferee by the person whose signature appears below.
Mr Conroy signed the transfer form (which was witnessed) and returned it to Ms Moses to be lodged for registration.
On 29 August 2022 Ms Conroy transferred $200,000 to Ms Lucas. A further $200,000 was transferred on 30 August 2022. Ms Conroy’s description of these transfers on her bank statement stated: “Isabel Lucas Larnook Purchase”. It was common ground that Larnook was a reference to the property. A third and final payment to Ms Lucas (referred to below) was made in December 2022.
On 1 September 2022, the transfer form was registered with the effect that Ms Conroy became the registered proprietor of the property. The consideration recorded on the registered transfer was: “Without Monetary Consideration And a Change In Manner of Holding”. It was common ground that there was no evidence that the registered version of this document was sent to Ms Conroy.
On the same day, Mr Conroy put Prana, (which then owed Grapple $237,804.01), into voluntary administration. On 12 September 2022, Mr Conroy spoke on the telephone to Stephen Dawson, the Chief Executive Officer of Grapple. Mr Dawson accepted in cross-examination that when he asked Mr Conroy why he changed the title of the property from himself to his mother, Mr Conroy answered, in effect, that it was because his mother had paid a large sum of money to the mortgagee and also paid out his ex-partner to purchase it (J [68]).
On 10 October 2022, an order was made for the winding up of Prana.
On 2 December 2022, Ms Conroy transferred $70,000 from her Connective Energies Foundation account into a bank account held by Mr Conroy in the name of “Innerstand Foundation” (J [70]). On that day, Mr Conroy transferred $79,827 from that account into Ms Lucas’ account in the name of “Earth Blossom Foundation” (J [71]). This was the last payment made to Ms Lucas.
On 24 January 2023, Grapple obtained default judgment in the District Court in the sum of $269,150.16 inclusive of costs against Mr Conroy in his own right and as trustee of the trust (J [72]-[73]). Mr Conroy declared himself bankrupt on 4 May 2023. Manuel Hanna, the second respondent, was appointed trustee of his bankrupt estate (J [75]).
On 24 May 2023, Mr Conroy was interviewed by Mr Hanna in the presence of Ben Chislett, who was helping Mr Conroy in relation to his bankruptcy. The file note of the interview recorded that Mr Conroy provided the following background:
- The Bentley Property was purchased by him in his capacity as Trustee of the Bungab[b]ee First Light Trust in 2021 and he purchased the property with his partner at the time, Isabel Lucas (now ex-partner).
- The BR [Mr Conroy] advise[d] that Isabel Lucas contributed all of the money and the rest came from finance obtained from Sempre Funding.
- In January 2022, Isabel and the BR agreed that they would either sell the property [or] she would get paid out by July or August 2022.
- The BR told his mother, Ingrid Conroy, about his finance and she said she would use her money to buy the property and pay [Isabel] out.
- The BR advised that Ingrid Conroy was from the Mornington Peninsula and sold her house in July/August 2022.
…
[Isabel] Lucas, Jarrod’s ex partner paid $551,790 towards the purchase of the property …
…
Once Jarrod and [Isabel] separated, [Isabel] wanted to finalise the financial connection between her and Jarrod.
The amount of funding Ingrid Conroy was able to secure at the time was $479,827. It was agreed for this to be full and final settlement.
The primary judge accepted that, as Mr Conroy was the sole director of Prana, he probably knew of the extent of Prana’s indebtedness to Grapple and that he had guaranteed that amount (J [130]).
At J [34], the primary judge set out Ms Conroy’s evidence of a conversation with Mr Conroy in February or March 2022:
Ms Conroy deposed to having had a conversation with Mr Conroy in late February or March 2022 during which words were said to the following effect:
Mr Conroy: “We (referring to Jarrod and Isabel) are placing the Larnook Property (referring to the Property) on the market as Isabel is wanting repayment of her loan.”
Ms Conroy: “I am in the process of selling my property and I would be willing to assist by buying the property. We (referring to me and my husband) can build a house on it and we could move up there and live in it. We would be closer to you all and the grandkids.”
Mr Conroy: “Really good timing that you are selling up in Victoria as Isabel has requested that her loan be repaid within 6 months.”
Ms Conroy: “How much do you want for the property?”
Mr Conroy: “There is a first mortgage on the property for about $180,000 and Isabel loaned the balance of the monies to enable our trust to purchase the property. The amount is roughly $550,000.”
Ms Conroy: “I will buy [the] property by paying out the first mortgage and repay the monies owing to Isabel.”
Mr Conroy: “I would be happy with that.”
I accept Ms Conroy’s evidence that she was purchasing the Property in order to live there in the future. She had sold her home in Victoria in July 2022 and, naturally enough, wanted to move closer to her family. Consistently with this evidence, Ms Conroy declared to Revenue NSW on 11 August 2022 that she would occupy the Property as her principal place of residence or for a continuous period of at least six months, commencing within twelve months from the date of settlement. Although there was no habitable dwelling on the Property as at August 2022, Ms Conroy did arrange, shortly after purchase, for building works to be undertaken on the Property. It is likely that, in deciding to purchase the Property (rather than any other similar property in the same region), Ms Conroy was also, in part, motivated by a desire to assist her son in finalising the financial position between himself and Ms Lucas, by providing the Trust, through this transaction, with the funds necessary to pay back what was owing to Ms Lucas in relation to the Property.
Mr Conroy’s keenness not to pay any form of tax or duty underlies and explains a number of the events which followed.
On 1 September 2022, the Property was transferred to Ms Conroy. Wall & Co lodged the transfer form in respect of the Property, which recorded the following information under the heading “Consideration”:
“Without Monetary Consideration And A Change In Manner of Holding”
The primary judge made adverse findings about Mr Conroy’s and Ms Conroy’s credit on the basis of documentation surrounding his attempts to obtain a stamp duty exemption (J [96]-[105]). However, his Honour rejected Grapple’s submissions that an adverse inference ought be drawn against Ms Conroy for failing to call Ms Lucas or Ms Lucas’ father (who had been party to discussions about the sale of the property to reimburse her contribution) (J [106]-[107]). His Honour did not accept that they were “in the camp of Ms Conroy” for, implicitly, Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 purposes.
Of the statement in the transfer form that the transfer was “without monetary consideration”, the primary judge said:
135 I consider the statement made in the transfer form to be of limited weight. There was no evidence that Ms Conroy was aware of or agreed with its contents. It is not clear whether Mr Conroy had an understanding of the term “without monetary consideration” or what his understanding was. For example, he may have been of the view that, because he did not personally receive any of the payments made by Ms Conroy, he was transferring the Property to her “without monetary consideration”.
136 Further, Mr Conroy’s instructions to Ms Moses must be read in the context of the email of 14 July 2022, in which those instructions are set out. Mr Conroy was, in that email, keen to find out whether, if the Property was transferred to a person who was a named beneficiary of the Trust, stamp duty would be payable. As has been set out above, Mr Conroy demonstrated, in his dealings with Ms Moses, a concern to see whether the transfer of the Property could be structured, or characterised, in such a way that stamp duty would not be payable (and was willing to “change the narrative” and make “incorrect statements” in order to achieve this outcome). Given that is so, I do not consider that Mr Conroy’s query about the stamp duty implications of a transfer to a beneficiary of the Trust is a reliable guide to the substance of the transaction.
The primary judge rejected Grapple’s submission, which was principally based on the transfer form, that the property was transferred without consideration. His Honour noted that Ms Conroy had made substantial payments to the Wall & Co trust fund (for the discharge of the Sempre mortgage), to Ms Lucas and for stamp duty on the transfer (which totalled $693,244.17) (J [137]).
The primary judge made the following finding at J [150], which is challenged in ground 4:
… I am satisfied that the payments by Ms Conroy to Ms Lucas in August 2022 were made in consideration for Ms Conroy’s purchase of the Property from the Trust and, in particular, were made at the request of the trustee, Mr Conroy, either for the purpose of repaying Ms Lucas’s loan to the Trust or for the purpose of paying out Ms Lucas’s equitable interest in the Property.
The primary judge found that Ms Lucas was a creditor of the trust by reason of the monies she had advanced for the purchase of the property (J [168]-[169]). This finding is challenged in ground 8A.
The primary judge also rejected Grapple’s submissions that:
as the money which Ms Conroy paid to Sempre related to a debt owed by Prana, it could not be counted as part of the consideration for Ms Conroy’s purchase of the property; and
because Ms Conroy had only paid Ms Lucas $470,000 and the property was worth $700,000, Mr Conroy had sold the property at an undervalue (this finding is challenged in ground 5).
The primary judge found that, as Prana was insolvent, it was “highly likely, if not certain” that if Sempre were not repaid, it would enforce its rights as mortgagee over the property (J [154]). Thus, his Honour found that the amount which Ms Conroy paid to Sempre ought be added to the amount she paid to Ms Lucas when assessing the purchase price of the property. The sum of these amounts was $665,076, which represented 95% of the valuation figure of $700,000 (J [156]-[157]).
The primary judge also assessed the “value” of the transaction from the point of view of Mr Conroy as transferor (J [160]). His Honour found that as a result of the payments made by Ms Conroy, the trust was released from the following liabilities: $195,076.31 to Sempre and $551,790 to Ms Lucas, which totalled $746,866.31 (about 7% above the valuation). This finding and its relevance are challenged in grounds 6 and 7.
The primary judge did not accept Mr Conroy’s evidence that the reason for the urgency in transferring the property was that Ms Lucas wanted to be repaid within six months of February or March 2022. His Honour found that the reason for the urgency was that Mr Conroy was “motivated to complete the transfer as swiftly as possible because of the looming insolvency of Prana” (J [166]). The primary judge found the urgency with which Mr Conroy effected the transfer was the result of his expectation that Prana would soon be placed in external administration, as a consequence of which Grapple would seek to enforce the guarantee against the property, being the only asset of the trust (J [165]). His Honour considered it to be significant that Prana entered voluntary administration on the day of the transfer (J [165]).
The primary judge considered that Mr Conroy’s motive for the transfer, and its timing, was to prefer Ms Lucas’ interests over those of Grapple (J [167]), which is challenged in ground 8.
His Honour addressed the question whether Ms Lucas had, as a consequence of her contribution to the purchase price of the property ($551,790 out of $770,000, being 72%), an equitable interest in the property, or whether her interest was merely that of an unsecured creditor. The primary judge found that, if Ms Lucas had an equitable interest in the property, the trust had no equity in the property at all which would be able to satisfy the indebtedness of Mr Conroy, as trustee, to Grapple. Thus, the transfer had no effect on Grapple (J [170]).
… a transaction which is advantageous to one creditor, while “prejudicial to unsecured creditors as a whole”, “would not be sufficient, without some further element amounting to fraud in the relevant sense to support relief under s 37A of the Conveyancing Act”.
[A]n insolvent creditor that disposes of the whole of its assets to a creditor to which the debtor was indebted, at least to the value of the assets transferred, does not infringe the corresponding provision, even if the debtor intended to prefer that creditor over its other creditors, unless the debtor reserved some benefit for itself.
The primary judge also addressed the question whether Ms Conroy was a bona fide purchaser for value without notice of Mr Conroy’s intention to defraud creditors (on the assumption, contrary to his Honour’s finding, that there was such an intent). His Honour found that Ms Conroy was a purchaser (J [178]). This finding is challenged in ground 9A.
At J [181], the primary judge said:
There was no evidence that Ms Conroy was aware of the financial position of Prana. I do not consider that Ms Conroy’s role as a bookkeeper for Prana provides, given her limited responsibilities, a sufficient basis for inferring that she was aware that Prana was, in August 2022, nearing insolvency. Nor do I consider that the close relationship between Mr Conroy and his mother provides a sufficient basis for inferring that he would likely have disclosed to her, prior to the transfer, such matters. Ms Conroy denied having any such knowledge and I regard those denials as plausible, particularly given the absence of any objective evidence that Mr Conroy informed her of Prana’s financial position during this period.
Q. Well, you were on notice by Jarrod discussing with you this plan to transfer the property before Prana went into voluntary administration, weren’t you?
A. Yes.
At J [183]-[184], the primary judge identified the ambiguity in her answer and found that its effect was that Ms Conroy agreed that Mr Conroy had discussed with her the transfer of the property to her before Prana went into voluntary administration. At J [185], the primary judge observed that, whatever knowledge Ms Conroy had about Prana’s financial position, there was no evidence that she was aware of Prana’s liability to Grapple (this finding is challenged in ground 11) or that Mr Conroy had guaranteed that liability (this finding is not challenged).
The primary judge found that there was no evidence that Ms Conroy was aware of, or agreed with, the transfer form that said that there was no monetary consideration (J [135]). This finding is challenged in ground 3.
His Honour accepted Ms Conroy’s evidence that she purchased the property so that she could live there once she had constructed a dwelling on the property (which she proceeded to do shortly after settlement of her purchase) and to help her son pay out Ms Lucas (J [186]). This finding is challenged in ground 13. The primary judge’s finding that Ms Conroy was a purchaser in good faith without notice of any intention to defraud creditors is challenged in ground 2.
At J [188], the primary judge said:
Further, the fact that Ms Conroy was motivated, in part, by a desire to assist her son to repay moneys owed to Ms Lucas does not establish that she was aware that Mr Conroy was preferring Ms Lucas over other creditors of the Trust, particularly since there was no evidence that she was aware that there were any other creditors of the Trust.
alleged error in failing to find that the transaction was voidable under s 37A (J [198]; ground 14).
A difficulty arises in addressing these grounds of appeal because the submissions advanced by Grapple both in writing and orally were not made by reference to them; and it is not always easy to draw a connection between the grounds and the submissions. In those circumstances, it seems preferable to focus on the submissions and address the grounds where appropriate.
Before addressing Grapple’s submissions in relation to s 37A(1), it is necessary to say something more about the legal principles applicable to it.
The wording of s 37A indicates that it is concerned with alienations of property made with an intent to defraud creditors, which are voidable “at the instance of any person thereby prejudiced”. Thus, the matters which are to be proved in order to attract the operation of s 37A(1) are:
an alienation of property;
with
(a) an intent (which must be actual, rather than constructive (Cannane v J Cannane Pty Ltd (in liq) (1998) 192 CLR 557; [1998] HCA 26 (Cannane) at [12]) and which need not be the transferor’s sole intent (Marcolongo v Chen (2011) 242 CLR 546; [2011] HCA 3 (Marcolongo) at [57]); (b) to defraud (which has been construed to include to hinder or delay: Marcolongo at [12], [19], [22]-[23], [28] and [56]); (c) creditors (including present and future creditors, whether individually or collectively rather than any particular creditor: Cannane at [12]); and
the applicant for an order declaring the transfer to be void must be prejudiced by the transfer.
The various ways in which the relevant intent can be proved (either by inference or admission by the debtor) include, as summarised by Gilmour J in Commissioner of Taxation v Oswal (No 6) [2016] FCA 762; (2016) 339 ALR 560 at [66]:
(1) the ‘natural and probable consequences’ of the disposition is the defeat or delay of creditors: Freeman v Pope (1870) 5 Ch App 538 at 541; Marcolongo at [24]; Bell Group Ltd (in liq) at [9146];
(2) the alienation is made voluntarily: Lloyds Bank Ltd v Marcan [1973] 1 WLR 1387 at 1390-1 per Russell LJ, referred to with approval by the plurality in Marcolongo at [32]; Marcolongo at [25];
(3) the alienation is made, relevantly, for no consideration by a person in financial difficulties: Cannane at [13];
(4) the alienation is made in favour of a family member: Noakes v J Harvy Holmes & Son (1979) 37 FLR 5 at 10; Cannane at [92(4)] per Kirby J; and
(5) the alienation is made in haste or proximately to one or more events indicating financial stress on the part of the disponor: PT Garuda 35 FCR 515 at 525 and 527; Marcolongo at [46], [80], [83], [84]; and Green v Schneller at [86].
(Emphasis added to indicate the factors which Grapple submitted were found by the primary judge. Grapple relied on each of factors (1)-(5).)
… whatever may be the morality of the case, as far as I know, there is no law which prevents a man in insolvent circumstances from preferring one of his creditors to another, except the bankruptcy law. Under the bankruptcy law, no doubt a man in insolvent circumstances is not entitled, without pressure, at all events, to pay one creditor and to leave the other creditors unpaid. But Mr. Pollock was not a bankrupt, and the bankruptcy law has no application to him.
Mr Cheshire SC, who appeared with Mr Simpson, for Grapple sought to put a gloss on the principle derived from cases such as Middleton v Pollock*,* which he referred to as the “preference exception”. He defined the preference exception as applying where a debtor “merely” pays one existing creditor in preference to another and there is no overall depletion of the debtor’s assets.
Having added that gloss, Mr Cheshire advanced the following argument:
The primary judge made the following finding at J [165]:
It is far more likely that the reason for Mr Conroy’s sense of urgency in August 2022 was that he was aware of Prana’s parlous financial state and was aware that Prana would likely be placed under external administration in the near future. Further, he was aware that, when this occurred, Grapple would likely take steps to enforce its rights under the Conroy-Grapple Guarantee against the assets of the Trust (that is, the Property). Significantly, the transfer of the Property to Ms Conroy ultimately took place on the same day that Prana entered voluntary administration.
(a) the transfer was not to an existing creditor (Ms Lucas) but was to Ms Conroy, and (b) the overall assets of the trust were depleted by the transfer.
Mr Cheshire advanced several alternative arguments in support of the proposition in (4)(b). In descending order of preference, he submitted that the transfer was for nil consideration (the amount set out in the transfer form); $194,544.18 (the amount paid to Sempre), $594,544.18 (the total of the amounts paid to Sempre and Ms Lucas before the transfer) and $665,076 (the total amounts paid to Sempre and Ms Lucas before the transfer plus the $79,827 paid to Ms Lucas in December 2022, after the transfer had been registered). Each of these submissions apart from the last, in one way or another, depended on treating the transfer and the arrangements by which Ms Conroy paid all, or some, of the amounts to Sempre and Ms Lucas as separate transactions. In this context, Mr Cheshire suggested that the payments to Ms Lucas might be explained as payments made in settlement of the breakdown in the relationship between Mr Conroy and Ms Lucas. In any event, according to Mr Cheshire, even if the last alternative is the correct one, the transfer was still at an undervalue because the evidence was that the property was worth $700,000.
Mr Cheshire also submitted that it would be incorrect to assess the value of what was paid for the property by reference to the liabilities of Mr Conroy which were discharged (which amounted to $746,866.31) because Mr Conroy’s negotiation for a reduction of the debt was separate from the amount paid by Ms Conroy.
There are several problems with this analysis.
It is not correct to say that s 37A(1) is engaged if a debtor prefers one creditor over another unless the so-called preference exception applies. Rather, the question in each case is whether the debtor intended by the alienation to defraud creditors. That intention may be inferred where the natural and probable consequence of the transfer is that creditors will be hindered or delayed or where the transfer was voluntary. But that is quite different from saying that the section is engaged if the natural and probable consequences of the disposition is that the interests of one creditor will be defeated unless some exception not found in the legislation applies. It is now well established that it cannot be inferred from the mere fact that a debtor prefers one creditor over another that the debtor intended to defraud the latter creditor. The consequence of the debtor’s action may be that that creditor is prevented from, or hindered or delayed in, being paid. But it does not follow from that that the debtor intended that consequence. Rather, the consequence is to be seen as a necessary but not intended incidence of the debtor’s intention that the other creditor is paid.
The primary judge found at J [167], that Mr Conroy transferred the property because he was motivated to pay Ms Lucas out. At J [174], his Honour found that Mr Conroy did not reserve any benefit to himself as a result of the transfer and there was no indication that he intended to defraud creditors “beyond the advantage of the transaction to Ms Lucas, which is insufficient to establish any such intent.”
… the main thing was mum was very adamant that the property had to go into her name, personally. She wanted to pay stamp duty because, you know, it’s her life savings, and her other property being sold going into this. So she stated very clearly that she wanted it to go in her name.
That Ms Conroy paid the monies to Ms Lucas and Sempre does not make the monies any less consideration for the purchase since the discharge of Mr Conroy’s liabilities with respect to the property (arising from Sempre’s first registered mortgage to secure a debt owed by Prana of which he was a guarantor and Ms Lucas’ contribution to the purchase of the property) amounted, as the primary judge found, to valuable consideration: Wise Investments Pty Ltd v Ruddy Tomlins & Baxter, Solicitors (A Firm) [2019] QCA 271 (Wise Investments) at [58]-[59]. A property owner who has no equity in a property nonetheless obtains valuable consideration when the property is sold and the debts secured over it are discharged, either partly or in full. This position does not depend on whether the property owner actually receives cash on settlement or whether the purchase price is paid directly to the creditors of the vendor.
The hypothesis that Ms Conroy was assisting her son in finalising his separation from Ms Lucas, by making payments unconnected with the acquisition of the property by Ms Conroy, is inconsistent with the findings of the primary judge, and unsupported by any evidence. It is also inconsistent with the way Ms Conroy described the two payments of $200,000 in her bank statements. On the available evidence, the only explanation for the payments is that they were made to purchase the Property.
By ground 8A of the grounds of appeal, Grapple contends that the primary judge erred in finding that Ms Lucas was a creditor of the trust. That contention is not part of the principal argument advanced by Mr Cheshire. In any event, it has no merit.
The evidence that Ms Lucas paid most of the purchase price for the property was not contested and was established by evidence of the money being deposited into the trust account of Wall & Co, who had acted for Mr Conroy on the purchase. Nor was there any contest with respect to the evidence of the agreement between Ms Lucas and Mr Conroy at the time of its purchase that, if she wanted her money back, the property would be sold to enable that to occur. In these circumstances, it would appear that the equitable presumption that a transferee of a property who does not provide the whole purchase price holds the property on trust for the provider of the funds arises in favour of Ms Lucas: Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 364-365; [1956] HCA 28, cited by White JA in Galati v Deans [2023] NSWCA 13 at [51].
If this be the correct analysis, it follows that Ms Lucas was entitled to be reimbursed for her contribution (the sale price to Ms Conroy being less than the amount paid for the purchase of the property) on equitable principles and that she would have an equitable interest in the property measured by the ratio which her contribution bore to the value of the property. She would also have a common law remedy: she was entitled to judgment for the money either in debt, for damages for breach of an implied loan contract or as restitution for money had and received. There was no suggestion that Ms Lucas intended to give the money away to Mr Conroy and therefore the possibility of a gift can be put to one side.
Mr Cheshire submitted that even if it is accepted that Ms Conroy paid $665,076 for the property, that price was an undervalue, with the result that the assets of the trust were depleted. There are two difficulties with this submission. First, as has been explained, the ultimate question is not whether the assets of the trust were depleted but whether Mr Conroy had the requisite intention. There is no evidence that he or Ms Conroy knew the true value of the property, other than it had been valued at $700,000 for the purpose of stamp duty. Ms Conroy paid approximately 95% of that amount as the purchase price. The difference of 5% does not provide an adequate basis from which to infer that Mr Conroy’s purpose in making the transfer was to defraud Grapple.
Second, it is not correct to say that the assets of the trust were depleted. As a result of the transaction, the trust disposed of an asset worth $700,000 and in exchange obtained a release of liabilities totalling $746,866.31. It is not to the point that in circumstances that are unclear from the evidence that came about because Mr Conroy was able to persuade Ms Lucas not to insist on payment of the balance. The effect was that the trust was better off as a consequence of the transaction. That was a matter the primary judge was entitled to take into account in determining whether Mr Conroy had the required intention.
An aspect of the preference exception relied on by Mr Cheshire is that it is said to apply only where the transfer is made to an existing creditor. On that basis, Mr Cheshire submitted that it had no application in this case because the property was transferred to Ms Conroy, not Ms Lucas. The basis for this qualification is unclear. However, it appears to derive from Mr Cheshire’s submission that s 37A ought be interpreted by reference to s 122 of the Bankruptcy Act 1966 (Cth) and s 588FA of the Corporations Act 2001 (Cth) which, respectively, confer rights on a trustee in bankruptcy and liquidator to have transactions avoided as against the trustee or liquidator.
In support of this argument, Mr Cheshire highlighted the words in s 122 of the Bankruptcy Act (avoidance of preferences) which refer to a transfer “in favour of a creditor”. Section 122(1) provides that, under certain circumstances and within particular periods, “[a] transfer of property by a person who is insolvent (the debtor) in favour of a creditor is void against the trustee in the debtor’s bankruptcy …” (Underlining emphasis added.). He also called in aid s 588FA of the Corporations Act which provides that “[a] transaction is an unfair preference given by a company to a creditor of the company if, and only if, (a) the company and the creditor are parties to the transaction (even if someone else is also a party) …”. We understood him to submit that the ambit of s 37A ought not be broader than the ambit of s 122 or s 588FA and, thus, ought be limited to transfers from the debtor to a creditor. For the reasons which follow we reject the submission.
There is a fundamental distinction between s 37A on the one hand and s 122 of the Bankruptcy Act and s 588FA of the Corporations Act on the other. Section 37A is concerned with avoidance, at the instance of a person prejudiced, of transfers of property made with an intention to defraud creditors. For the reasons given above, a transfer which results in a preference for one creditor over another is not voidable under s 37A, including at the instance of the creditor who has not been preferred. However, s 122 and s 588FA are concerned with preferences following bankruptcy of an individual or winding up of a company. These sections delineate the circumstances in which particular transactions (including those which amount to preferences) will be void against a trustee in bankruptcy or a liquidator. The different operation and applicability of s 122 and s 37A was discussed in Re McCauley; Ex Parte Fraser & Anor (1995) 61 FCR 251 (Re McCauley). Davies J said, at 255 (in a passage which was not addressed on appeal: Fraser v Deputy Commissioner of Taxation & Anor (1996) 69 FCR 99):
The operation of these sections [ss 115, 120, 121, 122] is that, insofar as they operate to avoid transactions, they do so only so far as the Trustee in Bankruptcy has an interest. The transactions are avoided against the Trustee and not otherwise. The Trustee’s interest is limited to obtaining payment in full of the debts and of the costs of the administration. Once that has occurred, the Trustee’s interest is at an end and the sections will cease to affect the impugned transaction.
Section 121 and the surrounding sections only operate so far as the trustee in bankruptcy has an interest. The plaintiff’s claim is not a challenge to the principles that have been referred to in the decided cases in respect of the trustee’s role. Under s 121, a transaction is void only to the extent that the property is necessary for division among creditors. There will be cases, and I am of the view that this is one, where parties are entitled to pursue an application under s 37A even though the fruits of the order will go into the bankrupt estate. It is reasonable to assume that if the legislature had intended that no person could pursue an action against a bankrupt, with the appropriate leave, under s 37A of the Conveyancing Act even if the Official Trustee decided not to pursue the bankrupt under s 121 of the Bankruptcy Act, the legislature would have made that clear. It did not.
Under s 37A, a creditor has standing to apply for a transaction to be avoided. However, under s 122 and s 588FA, only the trustee in bankruptcy or the liquidator, respectively, have standing to apply under those sections. The provisions have different aims and different sources. A creditor making an application under s 37A acts in its own interest. A trustee or liquidator is obliged to act in the interest of all creditors when calling in and distributing the estate of the bankrupt or the company which has been wound up. The interest of the trustee or liquidator ends when the bankruptcy ends or the winding up has been completed. Because of the different statutory language used and the different contexts in which the provisions apply, s 37A cannot be said to be in pari materia (that is, analogous) to ss 122 and 588FA: see D C Pearce, Statutory Interpretation in Australia (10th ed, 2024, LexisNexis) at [3.49]. Thus, there is no warrant for applying the gloss to s 37A for which Mr Cheshire contended (that a transfer which has the effect of giving a creditor or creditors preference over the applicant for relief cannot protect the transaction from being avoided under s 37A unless the transferee is also a creditor). The plain words of s 37A(1) are to be given their full force and effect, in accordance with general principle.
A fundamental impediment to Grapple’s submission that Mr Conroy transferred the property to Ms Conroy with an intent to defraud creditors is that he received effectively full value for the property and used the entire proceeds of sale to repay two of his creditors, Sempre and Ms Lucas. He retained no benefit for himself. As the authorities establish, it was open to Mr Conroy to choose which of his creditors to pay. Thus, he was entitled to choose to pay Sempre and Ms Lucas instead of Grapple. That the alienation was to Ms Conroy and not to Ms Lucas is not to the point. The arrangement involving the transfer of the property to Ms Conroy in exchange for the discharge of existing debts owed by Mr Conroy, viewed as a whole, benefited existing creditors and did not confer a benefit on Mr Conroy. The critical point is that an arrangement of this kind does not support the inference that Grapple seeks to draw of an intent to defraud creditors. That Mr Conroy was in a hurry to ensure that his mother was registered as the proprietor of the property before he put Prana into voluntary administration does not convert his intent – to prefer two of his creditors over Grapple – into an intent to defraud creditors within the meaning of s 37A(1).
These conclusions together dispose of the grounds of appeal concerning s 37A(1). They also dispose of ground 13, concerning Ms Conroy’s motivation in providing the funds she did, and ground 14, which is a general ground to the effect that the primary judge erred in concluding that s 37A did not apply.
Where a transfer is prima facie voidable under s 37A(1), s 37A(3) operates as a proviso. The burden of proof lies on the purchaser to show good faith and that the purchaser did not, at the time of the alienation have notice of the intent to defraud creditors: Glegg v Bromley at 492 (Parker J), approved in Marcolongo at [12].
The question of who will qualify as a “purchaser” is determined by the consideration which has passed as the quid pro quo for the transfer. According to the definition in s 7 of the Act, a “purchaser” means a purchaser for “valuable consideration”.
In Barton v Official Receiver (1986) 161 CLR 75 at 86; [1986] HCA 44, the High Court (Gibbs CJ, Mason, Wilson and Dawson JJ) held that, for the purposes of s 121 of the Bankruptcy Act 1966 (Cth) “a purchaser … for valuable consideration … is one who has given consideration for his purchase ‘which has a real and substantial value, and not one which is merely nominal or trivial or colourable’.” This dictum was applied by the Queensland Court of Appeal in Wise Investments at [57]-[61] in the context of an application to avoid a transfer under the equivalent provision to s 37A.
Mr Cheshire submitted that Ms Conroy had not discharged her onus of proof with respect to the matters in s 37A(3). He submitted that the primary judge had erred in finding that there was no evidence that Ms Conroy was aware of, or agreed with, the contents of the transfer form which represented that the transfer was made “without monetary consideration” (J [135]). He relied on the evidence which showed that the transfer form was an attachment to an email which had been sent by Ms Moses to both Mr Conroy and Ms Conroy. He also submitted that the primary judge’s negative credit findings about Ms Conroy were relevant to this alleged error.
Mr Cheshire submitted further that Grapple challenged the findings made by the primary judge on the basis of undisputed primary facts. However, he submitted that if the findings reflected his Honour’s assessment of Mr Conroy’s and Ms Conroy’s credibility, the findings were glaringly improbable or contrary to compelling inferences.
As Grapple, which bears the onus, has not established that Mr Conroy transferred the property with intent to defraud creditors within s 37A(1), s 37A(3) does not arise. It is, accordingly, not necessary to address the grounds relating to s 37A(3). However, as the primary judge did so for completeness, we propose to set out our reasons for rejecting these grounds.
It is unclear whether Grapple still presses the argument that Ms Conroy was not a purchaser within s 37A(3) (ground 9A). For the reasons given above, she plainly was. She paid valuable consideration for the property which was commensurate with its value. In these circumstances, she was a purchaser within s 37A(3).
Grapple submitted in the Court below and in this Court that it ought be inferred that Ms Conroy knew of Prana’s financial position at the time of the transfer and that, accordingly, she knew of Mr Conroy’s financial position. Mr Conroy denied that he had told her of his financial worries and Ms Conroy denied that she knew of them. Further, there was another explanation for the sale of which Ms Conroy was aware: Ms Lucas wanted to be paid out and the property would need to be put on the market if Ms Conroy did not buy it.
While Ms Conroy did book-keeping work at Prana and was aware that Prana had “severe cash flow difficulties”; its bank balance was sometimes zero; and bank fees were charged, she denied knowing of its assets and liabilities and did not have an overview of its financial position such as would permit her to judge whether it was solvent. Further, she did not know that Mr Conroy had guaranteed Prana’s debt to Grapple. Accordingly, the evidence did not reveal any basis on which it could be said that she knew that Grapple was a creditor of Mr Conroy.
It was not open to the primary judge to infer from Ms Conroy’s denials of knowledge or Mr Conroy’s denials that he told her, that Ms Conroy in fact had knowledge of Prana’s or Mr Conroy’s financial position: Steinberg v Federal Commissioner of Taxation (Cth) (1975) 134 CLR 640 at 684 (Barwick CJ) and 694 (Gibbs J); [1975] HCA 63.
The primary judge’s reasons at J [181]-[185], summarised or extracted above, amply explain why his Honour found, at J [181], that there was no evidence that Ms Conroy was aware of Prana’s financial position. His Honour also explained why Ms Conroy’s apparent concession (that she knew of Mr Conroy’s plan to transfer the property before he put Prana into voluntary administration) meant no more than she knew that his plan to transfer the property to her preceded Prana going into voluntary administration (J [183]-[184]).
It is significant that there is no challenge to his Honour’s finding at J [185] that there was “no evidence that Ms Conroy was aware that Mr Conroy as trustee of the Trust had given a guarantee in respect of any liability of Prana”. Given that the property was, prior to its transfer, an asset of Mr Conroy as trustee, his Honour was correct to reason that it is difficult to see how Ms Conroy’s knowledge, whatever it might have been, of Prana’s situation could affect her knowledge of the purpose of the transfer. As far as the evidence went, Ms Conroy knew that Mr Conroy had two creditors, Ms Lucas and Sempre, both related to the property. By paying them out in return for title to the property, she discharged his liabilities in full to each of them.
For the reasons given above, the Court makes the following orders:
Appeal dismissed.
Order the appellant to pay the first respondent’s costs.
**********
Grapple Pay Pty Ltd
Conroy [2025] NSWCA 171
(1986) 161 CLR 75
(1951) 217 ALR 1
(1998) 192 CLR 557
(1956) 95 CLR 353
(2016) 339 ALR 560
(1996) 69 FCR 99
(2003) 202 ALR 535
(1959) 101 CLR 298
(1952) 85 CLR 352
(2011) 242 CLR 546
(1995) 61 FCR 251
(1975) 134 CLR 640
(2012) 44 WAR 1
(1979) 37 FLR 5
Appeal dismissed. The appellant was ordered to pay the first respondent's costs. [113]
Separately, on 2 May 2022, Prana entered into a Facility Agreement with Grapple, whereby Grapple agreed to advance funds to Prana. Mr Conroy guaranteed the loan. Grapple provided monies to Prana until about 17 June 2022 (J [40]).
On 7 July 2022, Ms Conroy sold her home in Victoria. On 5 August 2022, the sale settled and the sum of $1,277,520.97 was paid into a bank account in the name of “Connective Energies Foundation”. It was common ground that this was Ms Conroy’s account (J [41]).
On 11 August 2022, Mr Conroy notified Ms Moses by email of the pay-out figure for the Sempre mortgage. On 11 August 2022, Ms Conroy transferred $195,076.31 to the Wall & Co trust account to discharge the Sempre mortgage. Mr Conroy initially endeavoured to obtain a stamp duty exemption on his mother’s purchase of the property. However, when Revenue NSW communicated to Ms Moses that a valuation of the property would have to be undertaken for stamp duty purposes, Mr Conroy instructed Ms Moses to go ahead with the discharge of the Sempre mortgage as he wanted the transaction to be effected as soon as possible. The final pay-out figure for the Sempre mortgage was $194,554.18, which left a balance of $1,022.13 in Wall & Co’s trust account.
On 11 August 2022, Ms Conroy also made a purchaser/transferee declaration in respect of the property (which had been forwarded to her by Ms Moses) in which she declared that she would occupy the property as her principal place of residence commencing within 12 months from the date of settlement and identified the “dutiable value” as $770,000. It nominated 31 August 2022 as the date of transfer.
On 16 August 2022, at 9.24am, Ms Moses confirmed to Mr Conroy that “[t]he funds are cleared in trust” and that she could sign off on the discharge that day. On 16 August 2022 at 11.18am, Ms Moses emailed Mr Conroy and Ms Conroy asking whether she should go ahead with the discharge “today”. At 11.57am, Mr Conroy responded in the following terms:
Alternatively, if Ms Lucas was no more than an unsecured creditor, she had a claim against the trust for repayment of $551,790 (her contribution to the purchase of the property) and Grapple had a claim under the guarantee for Prana’s indebtedness of $237,804.01. The effect of the transfer following repayments from the purchase price was to prefer the interests of one creditor (Ms Lucas) to those of another (Grapple) (J [172]). It did not confer or reserve any benefit to Mr Conroy. The primary judge applied the following proposition articulated by Black J in Re FW Projects Pty Ltd (in liq) [2019] NSWSC 892 at [76]:
Mr Conroy’s evidence, which the primary judge accepted, was that he and Ms Lucas had an arrangement whereby, if she wanted her contribution to the purchase of the property returned to her, the property would be sold to enable that to happen. Thus, Mr Conroy could either find a purchaser himself for the property or advertise the property for sale. He appreciated that any delay in realising the property would give Grapple the opportunity to enforce its debt against him under the guarantee with the result that he might be unable to meet his commitment to Ms Lucas.
By agreeing with Ms Conroy that she would purchase the property, Mr Conroy put it within his power to meet his commitment to Ms Lucas and to obtain a discharge of the mortgage so as to be in a position to transfer an unencumbered title to the property to Ms Conroy. It is not disputed that Ms Conroy paid Sempre $194,554.18 to discharge its first registered mortgage and $479,827 to Ms Lucas, with the result that Ms Lucas no longer maintains any claim against the trust. The amount which Ms Conroy paid for the property (being the amounts paid to Sempre and Ms Lucas) broadly equated to its value. Thus, no benefit was conferred on her or retained by him. Sempre’s secured debt was discharged and the debt owing to Ms Lucas was discharged, leaving Mr Conroy with his liability to Grapple.
The finding in J [165], on which Mr Cheshire relies, is a finding that Mr Conroy chose to prefer the interests of Ms Lucas over those of Grapple. But as the primary judge observed, that did not provide a sufficient basis to conclude that Mr Conroy had the required intention to defraud creditors or Grapple, in particular.
Mr Cheshire’s cascading submissions in relation to the value of the transfer (other than the last) must be rejected. Plainly, the arrangement by which Ms Conroy bought the property to enable Mr Conroy to repay Ms Lucas did not proceed as a normal commercial one. That is to be explained by the relationship between the parties and Mr Conroy’s misconceived and futile attempt to avoid stamp duty. But that does not alter the substance of what happened, which was that Ms Conroy paid a total of $665,076 for the property and Ms Lucas forgave the balance of the amount owing to her, with the result that the trust was relieved of a total liability of $746,866.31.
It is hardly surprising that the transaction between a mother and her son, involving the son’s ex-partner who had an undocumented but legitimate claim arising from her contribution of the bulk of the funds to purchase the property, proceeded in a way that was unconventional. Each of Ms Conroy, Mr Conroy and Ms Lucas apparently subscribed, in various ways, to non-mainstream philosophies. According to Mr Conroy, the property itself had been acquired with an intention to get aligned friends in the community involved as a philanthropic project with the establishment of beehives and the growing of food. Ms Conroy was a signatory to the Articles of Agreement of an organisation known as the “Connective Energies Foundation”. According to those Articles the Foundation is a community service organisation established to “joyfully foster and support humanity through the advancement of the ‘Sui Generis Suveran [sic] Sentient Rights’ of humankind, the socially and environmentally sustainable self sufficiency for humankind, the spiritual dimensional advancement, learning and regeneration of humankind, the advancement of true healing for humankind, and all life of Mother Earth, including specifically the advancement of science and the arts, and any other purposes supporting the global New Humanity Collaborative Communities as defined in Article Eleven.” The Articles state that “Suveranty itself remains with the individual by whom and for whom all government exists and acts. Suveranty is not subject to law for it is the author and source of law.” Given such a context, Mr Cheshire is not on solid ground when he asks the Court to draw inferences from the absence of documentation and conduct of the kind normally associated with a conventional conveyance of real property.
The submission that the consideration paid by Ms Conroy was nil rests principally on the amount stated in the transfer and the submission, which amounted to nothing more than an unsupported hypothesis that Ms Conroy made the payments she did to assist her son in finalising the financial aspects of his separation from Ms Lucas. The hypothesis is artificial and flies in the face of objectively established facts.
The amount stated in the transfer did not determine the substance of what happened and can be explained by Mr Conroy’s attempt to avoid stamp duty. The evidence established that Mr Conroy had tried to make the transfer exempt from stamp duty and, in pursuit of that goal, had sought to “create a new narrative” to represent that Ms Conroy was a beneficiary of the trust and that the transfer to her was a distribution of trust property without consideration. He admitted in evidence that he had deliberately made various false statements to government authorities for this purpose. However, the incontrovertible evidence was that Ms Conroy had paid $665,076 for the property and, notwithstanding the contents of the transfer form, had paid stamp duty of $26,590 on the transfer on the basis of the valuation opinion that the property was then worth $700,000.
The evidence of Ms Conroy, which was accepted by the primary judge, was that she was not involved in her son’s attempts to get a stamp duty exemption in respect of the purchase of the property. Her evidence was corroborated by Mr Conroy, who said that he was not talking to Ms Conroy about the stamp duty exemption; he was “just getting it done for her”. His evidence is consistent with Ms Conroy’s evidence that she did not discuss these matters with him, her interest being limited to helping her son and obtaining clear title to the property, which was to be in her name. Mr Conroy gave evidence that:
These conclusions dispose of Mr Cheshire’s primary argument and of grounds 10, 11 or 12.
Mr Cheshire also submitted that the finding of “no evidence” in J [135] could not be reconciled with Wall & Co’s email dated 24 August 2022 to Mr Conroy and Ms Conroy which attached the transfer form which recorded the transfer as being “without monetary consideration”. He submitted that in circumstances where the email was addressed to both Mr Conroy and Ms Conroy and it can be inferred that she opened the settlement statement attachment (because she paid the amount specified in it), it could not be said that she was unaware of the contents of the transfer form which was the other attachment to the email.
That Ms Conroy received and read the email and opened the attachment which comprised the settlement statement can be inferred from the circumstance that she transferred the amount set out in it to the trust account of Wall & Co. However, the transfer form, which was a separate attachment, was identified in the body of the email as a document for Mr Conroy to sign and return. Ms Conroy had no need to read the transfer form attachment and had no part to play in its preparation. She did not sign it herself; Ms Moses certified it on her behalf.
That Ms Conroy had access to the transfer form and therefore had the opportunity to read it and, potentially, accept and approve of its contents, was insufficient to establish that she had availed herself of that opportunity. Whether she did so or not was a matter of conjecture since the evidence was equivocal and could not form the basis of a positive inference: Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1 at 5 (Dixon, Williams, Webb, Fullagar and Kitto JJ), extracted and applied in Luxton v Vines (1952) 85 CLR 352 at 358 (Dixon, Fullagar and Kitto JJ); [1952] HCA 19. If Grapple wanted to contend that Ms Conroy was aware of, or agreed with, the contents of the transfer form because she opened the attachment which comprised it, it was incumbent on Grapple’s trial counsel to put that to her in cross-examination: Jones v Dunkel. No admission having been elicited that Ms Conroy was aware of or accepted that she had seen the transfer form or had even opened that particular attachment to the email, the primary judge’s finding that there was no evidence that she was aware of, or approved the contents of, the transfer form was correct.
These conclusions dispose of ground 3.