Halse v Norton

The Cross Claim After the amendment of Mr Ashton's application to the Court the Trustee filed a cross claim. In essence, it repeated matters that were alleged in the notices. By the cross claim the Trustee sought a declaration that the transfer by Mr Jury, pursuant to a contract of sale, of the home to Mr Ashton was void as against the Trustee. It sought consequential relief in the form of an order to transfer the home to the Trustee. An alternative claim was made that a lease which was said to have been granted by Mr Ashton to Mr Jury, his wife and son was void as against the Trustee and orders were sought that he deliver up possession of the house. This latter matter no doubt explains why Mr Jury, his wife, Houda, and his son and daughter (William and Sonia) are cross respondents and thus parties to the cross claim.

The cross claim alleges that the home was transferred to Mr Ashton in circumstances which would bring into play the provisions of s 121 of the Act. That section provides as follows: "(1) A transfer of property by a person who later becomes a bankrupt (the transferor) to another person (the transferee) is void against the trustee in the transferor's bankruptcy if: (a) the property would probably have become part of the transferor's estate or would probably have been available to creditors if the property had not been transferred; and (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. (4) Despite subsection (1), a transfer of property is not void against the trustee if: (a) the consideration that the transferee gave for the transfer was at least as valuable as the market value of the property; and (b) the transferee did not know that the transferor's main purpose in making the transfer was the purpose described in paragraph (1)(b); and (c) the transferee could not reasonably have inferred that, at the time of the transfer, the transferor was, or was about to become, insolvent. (5) The trustee must pay to the transferee an amount equal to the value of any consideration that the transferee gave for a transfer that is void against the trustee. (6) For the purposes of subsections (4) and (5), the following have no value as consideration: (a) the fact that the transferee is related to the transferor; (b) if the transferee is the spouse or de facto spouse of the transferor - the transferee making a deed in favour of the transferor; (c) the transferee's promise to marry, or to become the de facto spouse of, the transferor; (d) the transferee's love or affection for the transferor. (7) This section does not apply to a transfer of property under a debt agreement. (8) This section does not affect the rights of a person who acquired property from the transferee in good faith and for at least the market value of the property. (9) For the purposes of this section: (a) transfer of property includes a payment of money; and (b) a person who does something that results in another person becoming the owner of property that did not previously exist is taken to have transferred the property to the other person; and (c) the market value of property transferred is its market value at the time of the transfer."

There is nothing in the cross claim which suggests that the transaction or any part of it was void as against the Trustee pursuant to s 120 of the Act. That section provides as follows: "(1) A transfer of property by a person who later becomes a bankrupt (the transferor) to another person (the transferee) is void against the trustee in the transferor's bankruptcy if: (a) the transfer took place in the period beginning 5 years before the commencement of the bankruptcy and ending on the date of the bankruptcy; and (b) the transferee gave no consideration for the transfer or gave consideration of less value than the market value of the property. (2) Subsection (1) does not apply to: (a) a payment of tax payable under a law of the Commonwealth or of a State or Territory; or (b) a transfer to meet all or part of a liability under a maintenance agreement or a maintenance order; or (c) a transfer of property under a debt agreement; or (d) a transfer of property if the transfer is of a kind described in the regulations. (3) Despite subsection (1), a transfer is not void against the trustee if: (a) the transfer took place more than 2 years before the commencement of the bankruptcy; and (b) the transferee proves that, at the time of the transfer, the transferor was solvent. (4) The trustee must pay to the transferee an amount equal to the value of any consideration that the transferee gave for a transfer that is void against the trustee. (5) For the purposes of subsections (1) and (4), the following have no value as consideration: (a) the fact that the transferee is related to the transferor; (b) if the transferee is the spouse or de facto spouse of the transferor - the transferee making a deed in favour of the transferor; (c) the transferee's promise to marry, or to become the de facto spouse of, the transferor; (d) the transferee's love or affection for the transferor. (6) This section does not affect the rights of a person who acquired property from the transferee in good faith and by giving consideration that was at least as valuable at the market value of the property. (7) For the purposes of this section: (a) transfer of property includes a payment of money; and (b) a person who does something that results in another person becoming the owner of property that did not previously exist is taken to have transferred the property to the other person; and (c) the market value of property transferred is its market value at the time of the transfer." The Difference Between the Principal Proceedings and Cross Claim - Onus of Proof There is no scope for any argument to the contrary of the proposition that where proceedings are brought by a trustee to recover property vested in another which is said to arise from a transaction void as against the trustee the onus of proving the elements bringing about voidness lies solely upon the trustee.

The same is not so with proceedings to set aside a notice which is given pursuant to s 139ZQ of the Act. Section 139ZQ forms part of Division 4B of Part VI of the Act, enacted, inter alia, with the object being: "(b) to enable the recovery of certain money and property for the benefit of the bankrupt's estate."

Section 139ZQ provides for the giving of a notice by the Official Receiver addressed to a person who has received any money or property as a result of a transaction that is void against the trustee of a bankrupt requiring that person to pay to the trustee an amount equal to the money or the value of the property received. The notice is required to set out the facts and circumstances because of which the Official Receiver considers that the transaction is void against the trustee.

Section 139ZS of the Act then provides in subs (1): "If the Court, on application by a person to whom a notice has been given under section 139ZQ or by any other interested person, is satisfied that this Subdivision does not apply to the person on the basis of the alleged facts and circumstances set out in the notice, the Court may make an order setting aside the notice." It has been held by the majority of a Full Court of this Court in Halse v Norton (1997) 76 FCR 389 (Lee and Nicholson JJ) that an applicant under s 139ZS is obliged to adduce some evidence to show that there was a real issue to be decided in the proceedings but that the onus of proving that the provisions of subdivision J applied to the applicant and, therefore, that the provisions of Division 3 applied to the transaction would rest on the respondent. Black CJ, in a separate judgment, suggested that the applicant has to put before the Court "sufficient evidence to call the validity of the notice into question" (at p 392). It may be doubted whether this test produces any real difference. The explanation for this view is, at least in part, that the giving of a valid notice is conditioned upon the receipt of money or property by a person as a result of a void transaction, and that once the notice is called into question it is essential that the trustee show the transaction to be void. In the same case Black CJ pointed out that s 139ZS was not an exclusive means of challenging a notice. His Honour suggested that there could well be cases in which there is good reason for the Trustee to bring what in effect would be a cross application for a declaration that the transaction was void. His Honour observed: "It would be strange if the position of the trustee varied according to the procedure adopted in the particular case." Perhaps this suggestion explains the cross claim in the present case. However, there can be a difference, as the present case shows. In the proceedings to challenge the notice, the only parties possible would be the Trustee and the recipient of the notice. However, in the declaration proceedings by way of cross claim (one may doubt whether it really should be a separate application, with the two matters then being dealt with together, rather than strictly a cross claim, but nothing turns on this) it may be possible for other parties to be joined, as indeed happened in the present case. Among the parties joined was Mr Jury. While at first blush the fact that the Bankrupt is a party to the cross claim may not appear to have any significance, it may do so where, as here, an attempt is made to admit into evidence a transcript of the public examination of the Bankrupt both in proceedings to set aside a notice and proceedings for declaratory relief by way of cross claim. In Colonial Mutual Life Assurance Society Ltd v Donnelly (1998) 154 ALR 417 a Full Court of this Court (Wilcox, O'Connor and Sackville JJ) considered the interrelationship between s 81(17) and s 255 of the Act in relation to the admissibility of transcripts of examinations conducted under s 81. Their Honours held that s 81(17) did not authorise the admissibility into evidence of a transcript of evidence where otherwise that transcript would not be admissible. So, for example, in proceedings to which the Bankrupt is not a party, such as proceedings to set aside a notice given under s 139ZQ, an admission against interest by a person not a party could not ordinarily be admitted into evidence unless that admission had been adopted or authorised by the party against whom it is tendered: see Colonial Mutual at 429. However s 255(2) effected a change in the law following upon its enactment in 1966. Thereafter the transcript of an examination could be admitted into evidence, even if hearsay evidence and not otherwise admissible in accordance with the ordinary rules of evidence, provided the transcript is sought to be admitted in proceedings under the Bankruptcy Act to which the examinee is a party. Section 255 is qualified by the power of the Court to make an order to the contrary: s 255(2) and thus preclude admissibility. The Court in Colonial Mutual Life Assurance Society did not consider (and the matter was likewise not argued before me) the relationship between the Court's power under s 255 and the discretion to reject evidence under, for example, the Evidence Act 1995. However, in the circumstances of the case the Court, considering the exercise of discretion for itself, did not find the facts appropriate for the making of an order. This was so notwithstanding that the Trustee could have called the Bankrupt in the Trustee's case and had the Bankrupt cross-examined by leave. It was also so notwithstanding that the evidence once admitted in proceedings to which the Bankrupt was a party was admissible against other parties. For the reasons given by the Full Court I rejected a tender of the transcript in the proceedings brought by Mr Ashton to set aside the notice. No request was made that I reject the tender in the proceedings to which Mr Jury was a party by making an order under s 255(2) of the Act. In the circumstances I held the material admissible in the cross claim. In the result the evidence in the two proceedings differed to this extent. This may not matter in the present case, but it is clearly undesirable. It may be, I do not need to decide here, that where the two proceedings are essentially the same an order should be made rejecting the evidence in the proceedings by way of cross claim. As it happens I have found no need to resort to the evidence of Mr Jury in the examination proceedings. I should say here that there is little doubt that evidence has been called by the Applicant which at least casts doubt on the validity of the notice. Hence, in both proceedings it can be said that the onus lies on the Trustee to show that the transaction into which Mr Ashton entered with Mr Jury was void against the Trustee.

The Issues in the Original Proceedings and the Cross Claim Both the original proceedings and the cross claim on any view of the matter raise s 120. Since the notice merely states facts and a conclusion that there was a void transaction, it is open to the Trustee to defend the notice on the basis that s 120 operates to avoid the transactions to which it refers. The same is not true of the cross claim. After the evidence had concluded and indeed after the Applicant had, at my request, made oral submissions (both parties filed pursuant to orders made written submissions), senior counsel for the Trustee sought leave of the Court to amend the cross claim to raise squarely s 120. Clearly that was rather late in the day. The important question is whether there was any prejudice to the Applicant. In the rather special circumstances of this case it is hard to see how there could be. First, the s 120 issue was open to the Trustee to raise in connection with the application to set aside the notice under s 139ZQ. Second, counsel for Mr Ashton had, in his submissions, actually dealt with s 120, as well as s 121. Indeed, it has to be said that the case proceeded on the basis that both sections were at issue. It is only for these reasons that I would accede to the Application to give to the Respondent, the Cross Claimant, leave to amend the cross claim to raise directly s 120. As will ultimately appear, it is of no consequence to the outcome of the case. The written submissions for the Trustee raised as a first submission that the transaction sought to be avoided was a sham. On no stretch of the imagination is there anything in the notice, or for that matter the cross claim, which would suggest that the transaction was a sham, a mere facade. Indeed, if it were, one would think the proper application would be one to which the Bankrupt was the principal respondent, and indeed, for that matter the recipient of the notice. No application was made to amend the cross-claim to raise sham. No doubt this is because clearly that would be to present a quite different case from the one which the Applicant had come to court to deal with. Although there is certainly some evidence which would, as it presently stands, support a conclusion of sham I do not propose to embark upon a consideration of that matter. It is, in any event, inconsistent with the case which the Trustee puts forward relying on ss 120 and 121. Finally, it should be said by way of repetition that the Applicant seeks to support the setting aside of the notice upon the basis that the original notice was given by Mr Maurice, who was merely Acting Official Receiver, whereas s 139ZQ requires that a notice be given by the Official Receiver, not an Acting Official Receiver. Then it is said that the so-called "Amended Notice" must likewise fail, because although given by the Official Receiver, it purported to amend an invalid notice, and was thus itself invalid. This second proposition is untenable for the amended notice, although called that, did not purport to amend anything. It was a fresh notice. The Facts In making findings of fact very much turns upon the credit of Mr Ashton. I have, in this respect, formed a view which is adverse to his credit. I will, therefore, before setting out my findings as to the facts relevant to the present proceedings summarise Mr Ashton's evidence and the discrepancies in it. It will serve to explain why, in addition to seeing him in the witness box and concluding that he was quite evasive and not prone to tell the truth, I formed an adverse view of his credit. Two affidavits were filed in Mr Ashton's case, the one sworn on 10 October 1997 and filed with the original application and the other sworn on 26 February 1998 after the cross claim had been filed. In the latter, which is more detailed, Mr Ashton swore that he had been retained by Mr Jury in or about January 1994 to provide accounting services and professional assistance in defending proceedings commenced by Westpac Banking Corporation, ("Westpac") and Bill Acceptance Corporation, ("BAC"),on or about 25 November 1994. Those proceedings, it may be added, ultimately resulted in judgment being obtained against Mr Jury by Westpac in the sum of $15,352,210.12. Mr Ashton is, so his letterhead proclaims, a Chartered Accountant. Mr Ashton then outlined in a general way the nature of those services and said that when the Commercial Division Proceedings finished in about November 1995, Mr Jury's accounting work took only about 80% of his time, and other clients the balance.

According to this affidavit, Mr Ashton kept records of the services he performed in his diaries. He said that he had "recently examined" the diaries and "constructed invoices" addressed to Mr Jury setting out the number of hours, the rate per hour and total amount due for the months of January 1994 to August 1995 - a total amount of $240,090. He detailed percentages of time spent for other clients in the period and concluded that the amount owing by Mr Jury to him was $241,560.00. However, he says, at no time, even to the time of swearing his affidavit, had he rendered or attempted to render an invoice or account to Mr Jury. He says, rather that he continued to render services in the expectation that Mr Jury would eventually pay him once the Westpac proceedings ended. Of the transaction involving the purchase of the home he says no more than that he purchased it from Mr Jury for $550,000, that an amount of $345,000 was raised for first mortgage finance and paid to Mr Jury and that the balance of $205,000 had been offset against: "fees for services rendered by me to Mr Jury." The affidavit then continues by narrating an attempt to obtain finance for Mr Jury from PW Smyth King & Son ("Smyth King") , which firm later advanced Mr Ashton the money by way of first mortgage after rejecting the loan to Mr Jury. He says that although the first mortgage was repayable by 1 September 1997, he had never intended to repay it then but to roll it over, planning to rely on his practice income to pay the interest. Mr Jury, says Mr Ashton, received only $345,000 on settlement, the difference being what he terms "an income benefit for services I had rendered to Mr Jury in the period between January 1994 and August 1995." The balance of the mortgage, being $47,878, was, he says, provided to Castrission & Co and Smyth King as retention against future interest liabilities on the mortgage advance. Although in an answer to a requisition on title Mr Ashton said there would be no lease, (he had disclosed that Mr Jury as vendor was currently in possession) he says that he later advised that he had been asked by the Jurys whether they could continue to live in their house and rent it and that he had no objection to this.

The earlier affidavit of 10 October 1997, is more formal. It however, contains the following clause: "I kept a record of the time spent in performing services for Mr Jury in my diaries. I have recently examined by [sic] diaries and have constructed invoices addressed to Mr Jury setting out the number of hours, the rate per hour and the total amount due for the months of January 1994 to August 1995. The total amount of cost incurred by Mr Jury for my services during the period January 1994 to August 1995 is $240,090.00." The affidavit annexes copies of the invoices addressed to Mr Jury which Mr Ashton had "recently constructed." Except, perhaps, for a quibble as to how long the word "recently" might be regarded as accurate, there is no particular discrepancy between the two affidavits. This was the evidence in chief, except for some documentary evidence and evidence from Miss Sonia Jury as to payment of some monies out of an account in payment of Mr Jury's legal costs, and presumably those of his company as all were involved in the litigation with Westpac.

The Oral Evidence of Mr Ashton Mr Ashton then gave oral evidence. In chief Mr Ashton said that he made the calculation of the amount he was owed in July-August 1995 by reference to his diaries. One of these, the 1994 diary, he had misplaced. He said that while no account had been rendered to anyone in respect of the amounts during the January 1994 to July-August period in 1995, accounts, being a series of monthly invoices, had been rendered in July-August 1995. It will be noted that this is in contradiction to the evidence he gave in his affidavit of 26 February 1998. If believed, it would no doubt assist the case of set-off which was outlined on his behalf by his counsel. He said that he had had a conversation with Mr Jury at 155 Castlereagh Street, Sydney, in respect to the payment of these accounts in late July in connection with the purchase of the home in which he had said he was prepared to buy 4 Molloy Avenue but wanted some of the monies owed to him to be a part consideration of the purchase price. He said that the amount of $205,000 was "contra'd off against the $240,000" owing to him, but that he had done nothing about the difference between $205,000 and the balance owing of approximately $240,000. According to Mr Ashton he knew of Mr Jury's financial position at the time - it would not have been credible if he had not, given the role he played in Mr Jury's affairs. However, he said that Mr Jury was meeting his commitments when they fell due, although he had difficulty funding the litigation but that he had not spoken to Mr Jury before he purchased the home regarding Mr Jury's actual financial position, because he didn't need to.

Mr Ashton's Evidence in Cross Examination Mr Ashton then was cross-examined. Not surprisingly, one avenue of attack was the apparent discrepancy between the affidavits filed and the oral testimony in chief as to the accounts said now by Mr Ashton in his oral evidence in chief to have been rendered to Mr Jury in July-August 1995. Initially in cross-examination Mr Ashton said that he constructed the invoices probably just after completion of the purchase of the home - about August- September 1995 and, it may be interpolated, certainly not "recently" as the affidavits of 26 February 1998 and 10 October 1997 had said. Confronted with this Mr Ashton said that he would be surprised if he had not done it straight after the settlement. He conceded, as his written testimony had made clear, that he had not prepared or rendered any invoice to Mr Jury prior to settlement - nor had he calculated any figure which he claimed to be owing to him at that time. The cross-examination then turned to the examination of Mr Jury under s 81 of the Act which had taken place in August and October 1997. Certainly no invoices had been produced in connection with the examination in August 1997 although Mr Ashton denied that they had not existed at that time. He said that he had given the invoices to Mr Jury around the time they were prepared, but that Mr Jury had never thereafter referred to them. This too was inconsistent with Mr Ashton's affidavit of 26 February 1988. When confronted with the inconsistency Mr Ashton claimed that his oral testimony was correct. The invoices had not been rendered on a monthly basis as work was done because Mr Jury was not in a position to pay and Mr Ashton was "happy to carry him" until the litigation was finished when Mr Ashton could be paid out of "any settlement that arose". Given the outcome of the litigation one might wonder what settlement was likely to arise. It should be here noted that the invoices first appeared after the examination of Mr Ashton conducted on 21 August 1997 in response to a notice from the Trustee given in anticipation of a continuation of the examination on 22 October 1997. I would find that the invoices were first prepared some time around the date they were forwarded to the Trustee, namely 14 October 1997 and indeed around the date they first surfaced, that is to say, with the affidavit of 10 October 1997. No doubt this means that the affidavit of 10 October 1997 and the subsequent affidavit of 26 February 1998 was, in this respect, correct. It means also that Mr Ashton's oral testimony can not be accepted on this point. The cross-examination then moved to the negotiations with Castrission & Co for financial accommodation for Mr Jury to pay legal fees required to be met by Mr Jury and the companies in the litigation. On 19 June 1995 Mr Ashton wrote to Mr Castrission certifying that Mr Jury earned $129,000 from his various companies and could service a loan of $450,000. That figure was false, as Mr Ashton well knew. It represented, said Mr Ashton, the net profits of the Jury companies. Mr Jury's own income as per his income tax return which Mr Ashton had prepared was in the order of $10,000 to $12,000. He said initially that he had just made a mistake. He then conceded that that answer was likewise false. He later reverted to saying that the letter was "a mistake". It reflects somewhat badly however on Mr Ashton's credit. Accompanying the letter was what purported to be a statement of assets and liabilities of Mr Jury. That document was not in evidence. However, a document purporting to be a statement of assets and liabilities of Mr Jury as at 30 June 1995 was also forwarded to Mr Castrission, although presumably after the letter of 19 June. In addition to shares in public companies said to be worth $1 million (it is clear, at least as a result of the litigation, that they are now worthless) and motor cars, the home was shown to be worth $650,000 to $700,000. A liability was shown of a mortgage to Kothellic Holdings Pty Ltd of $450,000 (to be fair that sum was stated to include anticipated legal costs in another matter). Mr Ashton said he knew nothing about Kothellic Holdings Pty Ltd. It turned out not to be an Australian company but a Netherlands company - since nothing was apparently paid in discharge of that mortgage I would infer that this was a company which Mr Jury controlled, having, it may be assumed, something to do with tax. The Kothellic Holdings liability was said, in another letter, this time addressed to Smyth King to amount to $200,000 with legals of $100,000. Mr Ashton said that the figure of $200,000 had come from Mr Jury. When a letter of confirmation was requested that the loan was up to date it was provided in a day. It is not clear whose signature is on the letter although it may be noted that Mr Jury's signature appears on the mortgage as a director with a member of the New South Wales Bar as another director. By the time of this letter the application for finance had been reduced to $350,000. In Mr Ashton's letter of 11 July 1995 he wrote that: "A most conservative valuation of the property would be at $650,000 which would give a LVR of 54%. We consider the property would value at $700,000 which would give an LVR of 50%." LVR is an abbreviation for "loan-value ratio". According to Mr Ashton the application was knocked back by Smyth King because Mr Anderson of that firm was uncomfortable with the value of the house as well as being uncomfortable with having Mr Jury as the borrower because of the litigation. It may be interpolated here that Smyth King obtained a valuation of the home as at 25 July 1995. That valuation (an affidavit of the valuer attaching this valuation was read) which was sought in mid July showed, at least in typed form, the borrower to be Mr Jury, although it had been altered in ink to accord with the later developments discussed below. The valuation was of a market value of $595,000, of average marketability. It suggested that a market rental for the home would be $450-$500 a week. In a postscript to the letter to Smyth King, Mr Ashton added: "Would it be easier if I bought the house Cost $600,000 loan $350,000 Loan $350,000 less costs Interest est 50,000 12 mths in advance & legals ------------ Net 300,000" On 19 July 1995 Mr Ashton wrote to Mr Anderson saying that it was his intention to purchase the property and that he wished to borrow the maximum available on first mortgage, ie. $395,000. He submitted a statement of his own assets and liabilities. It contained no reference to the money which Mr Jury owed him for fees. Although it did show in an income statement fees said to be received from clients in the period to 10 June 1995 of $128,156 which Mr Ashton said represented time charged out at $120 per hour. Mr Ashton made no enquires of valuers concerning the real value of the home. He said that he was not interested to ascertain what a valuer would say about the property. According to Mr Ashton the change in arrangements came about as a result of a discussion with Mr Jury about the problem of arranging finance. It may be added that Mr Ashton conceded that at that time he knew that the home was the only asset of value which Mr Jury had. He knew too that, if either Westpac or BAC succeeded in the litigation that they would move to recover the house from Mr Jury, as well as the fact that in that event his prospect of recovering fees from Mr Jury would be zero. The cross-examination then turned to the question of the lease which Mr Ashton had entered into with Mr Jury. That lease, headed "Residential Tenancy Agreement" purports to have been made on 1 July 1997. It is for a term of three years beginning on 8 January 1996 and ending on 1 July 1999 at a weekly rent of $450.00. Four options take the available tenancy to 7 January 2011. In the event of exercise of the options rent is to be market rent. In response to requisitions given in regard to the mortgage Mr Ashton indicated that the property was purchased with vacant possession on settlement, that the vendor, Mr Jury, was in possession and that there were no current leases. He agreed that whatever happened. Mr Jury's occupancy was not to be disturbed, an occupancy that included, of course, Mr Jury's family. However, according to Mr Ashton he had subsequently spoken to Mr Anderson saying that he wanted to give a lease to the Jurys to give them security of tenure, with which Mr Anderson acquiesced. He said he might have provided Mr Anderson with a copy. It may be interpolated that in reply to a requisition whether he had ever been bankrupt, Mr Ashton said no, although he said in evidence that he had been bankrupt, although the bankruptcy had subsequently been annulled. However, he said he had disclosed this verbally to Mr Anderson. The contract by which Mr Ashton purported to purchase the property was drawn up by a Mr Baker who worked for Mr Ashton. The signature purporting to be Mr Ashton's as purchaser was not, Mr Ashton said, his. Whose it was does not appear from the evidence. Mr Baker also prepared a settlement sheet indicating what went on at the settlement. It is interesting to note that nothing appears to have been paid out on the mortgage to Kothellic Holdings. Mr Ashton said he received the settlement statement some two to four months after the settlement on 11 August 1995. It showed a deposit paid to the vendor, when none was paid. The contract, as is usual provided for a 10% deposit. That no deposit was in fact paid in cash came about, said Mr Ashton, as a contra arrangement against fees payable. The balance payable to Mr Jury on settlement, according to the settlement sheet, $495,370.91, was banked to a company of which Mr Jury was neither a director nor a shareholder. The settlement sheet suggested that an amount of $100,370.91 was paid by Mr Ashton from his own funds and included in the $495,370.91. This, of course, was not true either - no such amount was paid by Mr Ashton, nor was $495,370.91 ever received by Mr Jury. There was only one cheque, in essence the money provided by Mr Ashton's mortgagee which was in the order of $345,000. A year's interest was deposited with Smyth King on an arrangement that half of each quarterly interest payment would be debited from this account with the balance of interest to be provided by Mr Ashton. In the examination before a Registrar, Mr Ashton said on oath that from August 1995 to January 1996 he had received $150 per week rent from Mr Jury's daughter or son in cash. After January that figure changed to $450 per week. If Mr Ashton's income tax returns are to be believed that was clearly also untrue. Mr Ashton said in evidence before me that he had first received rent from Mr Jury in August 1995 of $100 per week, paid in cash. Nothing turns on the figure of $100 rather than $150 for Mr Ashton said he was unsure which was the correct figure. Cash would be handed over sometimes by Mr Jury, sometimes by his daughter. If Mr Ashton had regularly received rent in the amount he claimed the receipts in the year ended 30 June 1996 would have been in the order of $15,000. What Mr Ashton received was $9,600 according to his tax return. There were no records to verify the matter. The mathematics of rent payable as against tax return records indicate clearly enough that at least in the initial period from August 1995 to January 1996 Mr Ashton could not have been paid anything like either $100 or $150 per week. He made, it would seem, no complaint about his being out of pocket; nor did he attempt to recover arrears. When the figures were put to him Mr Ashton accepted that prior to January 1996 payments of rent to him were irregular. The date on the lease agreement of 1 July 1997 can not be accepted. In response to a notice regarding his examination by the Trustee in July 1997 Mr Ashton said that there was no documentary evidence of a lease, except for rent statements. The latter Mr Ashton said he "constructed", whatever that expression may be taken to mean. It follows that the lease agreement was probably prepared after that date, although Mr Ashton continued to protest that it had been prepared around the date it bore. However, in the course of his examination under oath by the Trustee Mr Ashton had said that it had been prepared about two weeks before the examination which took place on 21 August 1997. When confronted with this Mr Ashton said the truth was what was stated in the transcript. It is easy to infer that the continuing bankruptcy enquiries prompted the preparation of the lease. The successive options display both Mr Ashton's and Mr Jury's preoccupation with securing Mr Jury's continued occupation of the home at the expense of creditors.

Conclusions as to Mr Ashton's Credit and Findings Not all of the inconsistencies in Mr Ashton's evidence have been reproduced above. I should say that seldom, if ever, have I seen a witness in the witness box who seemed so incapable of telling the truth as Mr Ashton. He would change his testimony when confronted with inconsistent evidence and then change again as it appeared to suit his case. I would not accept any of his evidence unless it was corroborated or against interest. I have no doubt that Mr Ashton knew when the negotiations were first conducted with a view to finding finance for Mr Jury that Mr Jury was, even if able to meet pressing immediate commitments, in a position where he could not meet Mr Ashton's fees, nor the legal costs of the Westpac/BAC proceedings. He knew too that there was a reasonable chance that Mr Jury would lose those proceedings and become bankrupt and that Mr Jury's house was in jeopardy. He knew obviously that in the event Mr Jury lost he would be hopelessly insolvent. I find that Mr Ashton, in collaboration with Mr Jury, devised a plan, when it seemed that an application for finance by Mr Jury was unlikely to succeed, for Mr Ashton to enter into a contract of purchase with Mr Jury. It is clear enough that one purpose of this plan was to obtain finance for the litigation which had already commenced. Another purpose was to secure Mr Jury's home from creditors. Were these two purposes equal or was one of them the main purpose? Certainly the last course Mr Jury was likely to adopt was the sale of the home. Clearly he wanted to live in and secure it. There would, no doubt, have been other courses open to him, even if finance was needed in a hurry. Although more costly, it would have been possible for Mr Jury to have transferred the home to a company, or to his children and have either borrow - perhaps getting Mr Ashton to guarantee. However, such courses were not, so far as the evidence disclosed, discussed. The only proposal was the Ashton one. This suggests that the main advantage of the scheme to Mr Jury, and in consequence his main purpose of transferring the home to Mr Ashton, was to ensure that the home was not available to creditors. This inference, for it is only an inference, is in my view open on the evidence and the failure to call Mr Jury to give evidence allows me to assume that Mr Jury's evidence would not assist Mr Ashton, and allows me also to draw the inference more easily. Although Mr Ashton in his evidence suggested that he was of the view that the home was worth $550,000 and that this figure was selected because it was what he was prepared to pay, I accept neither his evidence that this was the market value (I prefer the valuation of an expert valuer prepared but a few days from the transaction) nor his evidence that the figure of $550,000 was selected as the amount he was prepared to pay. Although it probably is not relevant for present purposes I think it is clear that in all things, including his giving of evidence, Mr Ashton was acting as the tool of Mr Jury and that the figure was selected by Mr Jury (perhaps after consultation with Mr Ashton) by reference to the ease with which it would be possible to obtain finance. I find there was no contra arrangement between Mr Ashton and Mr Jury reached on settlement, or for that matter at any time before or after that, including the time when the deposit was supposed to have been paid. The idea of a contra came as an afterthought. At the time of the transfer only two things mattered, to secure Mr Jury's home and to provide finance. I think it is open to find, and I do find, that the contractual relations between Mr Jury and Mr Ashton (Mr Jury may well have been acting as agent for his companies in any event) for services to be performed by Mr Jury provided that Mr Ashton would be paid only after the litigation and perhaps only if the litigation was successful, or out of any settlement monies which it produced. This is consistent with the fact that no invoices were ever "constructed" by Mr Ashton or for that matter any attempt made to quantify how much, if anything, was owing to Mr Ashton until around October 1997. I find the invoices were never given to Mr Jury by Mr Ashton, but were prepared merely to assist Mr Ashton and, through him, Mr Jury for the purposes of the bankruptcy case. I find that Mr Ashton did work for Mr Jury of a substantial amount - as well as work for the various Jury companies. It is likely that Mr Jury employed Mr Ashton not personally, but on behalf of the companies as well as himself. I think it is most likely that had the litigation been successful Mr Ashton would have billed the companies and not Mr Ashton. It is impossible on the evidence to conclude what work he did for which company. This is made even more difficult because it is likely that the invoices overstate the work performed. This conclusion follows from mathematical exercises which can be performed to show that Mr Ashton was unlikely to have been able to do the work for Mr Jury of the number of hours which the invoices purport to show, when clearly at some times he did substantial work for other clients. I find that the arrangement under which Mr Jury was to reside in the house was not formalised in any way until around October 1997. Until that date I think all that is likely is that some monies were paid from time to time by Mr Jury or his family, probably to assist Mr Ashton make the payments under the mortgage for interest. It has already been noted that the mortgage arrangement provided that half the interest payable for the two year term of the mortgage was to be deposited in the name of Smyth King and came from the funds advanced, so that for the first two years at least Mr Ashton only had to meet half the interest payable. I would find that receipts of rent, particularly until January 1996 were irregular.

Section 121 Section 121 in its present form was substituted for the previous section by the Bankruptcy Legislation Amendment Act 1996. It covers more or less the same area as the section it replaced, although, if anything, it is now framed in such a way as to make it rather easier for a Trustee to succeed than was earlier the case. The Trustee must establish the following matters: (1) That there was a transfer of property. There is a definition of this expression in subsection (9). However, it is not in dispute that the home was transferred to Mr Ashton, subject to the mortgage to a third party. (2) That the transferor's main purpose was that set out in s 121(b). (3) Alternatively, that 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. (4) That the consideration (if any) given for the transfer was not at least as valuable as the market value of the property. "Market value" is defined in subsection (9)(c) as the market value at the time of transfer. (5) The transferee could reasonably have inferred that at the time of the transfer, the transferor was, or was about to become, insolvent. (6) That the transferee was not a person who acquired the property in good faith and for at least the market value of the property. The matters I have listed in the above paragraphs (4), (5) and (6) are, perhaps, defences which the transferee may rely on, rather than matters which the Trustee must directly prove, although, obviously some of them overlap with matters which on any view of the matter the Trustee must prove. Since it is clear that the Trustee has the overall onus: cf Official Trustee in Bankruptcy v Alvaro (1996) 138 ALR 341 at 381 and PT Garuda Indonesia Ltd v Grellman (1992) 35 FCR 515 at 527-8, I propose to proceed upon the basis that the Trustee must prove the negative of the defences. Clearly if the Trustee can, it follows that the transferee can not, in any event, rely upon the defences. Whether the better analysis is that upon proof of the first three matters the onus shifts to a transferee to prove the matters subject to a defence is not a matter which need concern us in the present case. I turn now to deal with the elements of the section as set out above.

Would the property have been available or probably available to creditors if not transferred? The section requires the hypothesis to be made that the property in question was not transferred (contrary to the actual facts) and for a conclusion to be formed, inter alia, as to what probably would then have happened. I think that on the facts of the present case no conclusion could be drawn other than that Mr Jury would have continued to own the home. It was the family home and the arrangement that he in fact entered into with Mr Ashton reinforces the conclusion that it was a significant matter for Mr Jury that he and his family continue to live there. Accordingly, I find this element of s 121 to be satisfied. It may be mentioned that little was said on behalf of Mr Ashton in support of a contrary conclusion.

Can it reasonably be inferred that at the time of transfer Mr Jury was insolvent or about to be? This element looks objectively at the financial position of the transferor at the time the relevant transfer was made. The term "insolvent" is defined in s 5(3) as the negative of "solvent". Pursuant to s 5(2) of the Act: "A person is 'solvent' if, and only if, the person is able to pay all the person's debts, as and when they become due and payable." The evidence of Mr Ashton, who was in all ways privy to Mr Jury's affairs as his accountant, was that while Mr Jury was able to pay out of current assets or income, accounts as they fell due he was unable to pay current legal expenses or future legal expenses from these sources. More significantly, as was ultimately found by the Supreme Court of New South Wales, Mr Jury at the time owed a large sum, which he could not pay, to Westpac and BAC. The outcome of that litigation is now clear. It does not mean that the debt arose when judgment was given, it was a debt which came into existence, no doubt, at the latest when Mr Jury was called upon to pay under his guarantee. That is to say, it was a debt which existed and was due and payable at the time the transaction was entered into. This element is satisfied with the result that Mr Jury as transferor is deemed to have the main purpose required to be established by s 121(1)(b) of the Act. Although I have found as a fact that Mr Jury had, in fact, this purpose as his main purpose, it is not necessary for that matter to be considered further.

The consideration for the transfer Counsel for the Trustee submits that there was no consideration for the transfer. He says that I should find that no money ever reached Mr Jury. This is because it appeared in evidence that the monies which were paid on settlement, that is to say, in essence, the cash provided by the mortgagee less the amount deposited with Smyth King, went into an account with a company called World Wisdom Pty Ltd, a company of which Mr Jury was neither a director nor shareholder. No books or records of World Wisdom were available to be adduced in evidence. Perhaps they have been mislaid, perhaps there is something more sinister. I make no finding about that. However the evidence does establish that monies from that account were used, at least among other things, to pay solicitors and barristers in the litigation, that is to say on behalf of either Mr Jury or his companies. The account of World Wisdom had been reconciled by an external accountant who was able to give evidence that legal expenditure on the litigation came from the account. That evidence does not require the conclusion that the deposit of monies from Smyth King was used to pay legal expenditure as a matter of trading. There may well have been both other deposits or other outgoings from the account. I would not, therefore, conclude that there was no consideration and indeed, on the contrary, would conclude that the cash ultimately paid on settlement was part of any consideration. Was there any other consideration? It may be said that because Mr Ashton was a party to a contract to purchase for $550,000, his promise to pay the purchase price under that contract constituted consideration. That argument was not advanced by Mr Ashton, and one may understand why. It is not difficult to conclude that there was never a real agreement to pay that money in whole at all. The case for Mr Ashton is that the fee set off arrangement should be seen as providing the balance of the consideration. With respect that is not so. First, there never was such an arrangement in fact, as I find. This conclusion is reinforced by the fact that, as I have found, the invoices were never even sent to Mr Jury or quantified to him, nor was there any evidence of anything which Mr Ashton ever said to Mr Jury from which a conclusion could be drawn as to the terms of any fee set off arrangement. Second, there could not be a set off until the fees became due and payable. At the time of the transfer I would find that they had not yet become payable. If fees were payable at all they were not payable until the litigation was at an end, and probably were not intended to be payable unless the litigation ended with a settlement favourable to Mr Jury. It is thus unnecessary to pursue the question whether the monetary amounts could be accepted, or whether all the amounts shown on the constructed invoices were liabilities of Mr Jury personally or liabilities of his companies. The market value of the property was, as I have found, the figure of $590,000. In the result it is obvious that the consideration was considerably less than the market value of the property.

Did Mr Ashton know of the insolvency? The matters in s 121(4) are cumulative. So long as the Trustee can establish, for example, that the consideration was less than market value that is sufficient. However, I am left without doubt that Mr Ashton was well aware of Mr Jury's insolvency at the time of the transfer. He acted for Mr Jury at least in all matters involving the litigation and attempts to obtain finance. He prepared Mr Jury's tax returns. He prepared the accounts of the company. He knew of the scarcity of Mr Jury's assets, the rather small income he had, the liabilities for legal expenses and, of course, the guarantee of the liabilities to Westpac and BAC. There can be no conclusion open, other than, that Mr Ashton could reasonably have inferred that at the time of the transfer Mr Jury was, or was about to become, insolvent.

Did Mr Ashton know of Mr Jury's main purpose? Just as it is unnecessary to decide upon what Mr Jury's main purpose was, so it is unnecessary to decide whether Mr Ashton knew of it. However, if it were necessary to make a finding on the matter I would conclude that Mr Ashton was well aware of Mr Jury's purposes for transferring the property, and which of them was the main purpose, namely the preservation of the lease from the creditors.

Did Mr Ashton acquire the home as a transferee in good faith and for at least market value? The conclusions I have drawn above suffice to answer each of these matters in the negative. Mr Ashton did not acquire the home at market value, nor was he a transferee in good faith. The question of the meaning of "good faith" was considered in the PT Garuda case to which reference has already been made. In the context of the then statute it meant without notice of any fraud or preference contrary to the statute, or whether the transferee was privy to the fraud: see at 528. The same idea can be carried into the present statute, save, of course, that the notions of fraud or preference have been substituted by the notions contained in s 121(b) and perhaps the notion of solvency in s 121(2). It is submitted on behalf of Mr Ashton that Mr Ashton had no knowledge of any main purpose of Mr Jury to, in effect, defeat or delay creditors, nor, if it be relevant, of the immediate or impending insolvency of Mr Jury. With respect I do not agree for the reasons I have already expressed above. In my view it can not be said that Mr Ashton was a purchaser in good faith, even if he had provided a full consideration. It follows that the Trustee must succeed in his case under s 121.

Section 120 It is unnecessary for a conclusion to be reached under s 120, if s 121 itself applies. However, in case the matter goes elsewhere I shall deal with s 120, albeit briefly. The transfer took place in the period of five years before the commencement of the bankruptcy and ending on the date of the bankruptcy. That is not controversial. For the reasons which I have set out above there was a consideration given by Mr Ashton, but that was less than the market value of the property. Mr Jury was not at the time of the transfer solvent, nor was Mr Ashton a transferee in good faith giving consideration at least as valuable as the market value. The ingredients of s 120 are accordingly all made out.

Orders Required to be Made It is provided both by s 120(4) and s 121(5) that where a transfer occurs for consideration the Trustee must pay to the transferee an amount equal to the value of any consideration that the transferee gave for the transfer. On the evidence, I would conclude that that amounted to $345,000. Hence, the relief to the Trustee should be conditioned upon the Trustee paying that amount. Under both sections the rights of those who acquired in good faith and for a full consideration are protected. That must, of necessity, include the mortgagee. Accordingly, I would propose to declare the transfer of the house void and order that Mr Jury execute a transfer in registrable form, but subject to the mortgage in favour of Robert Stewart Anderson and Wayne Scott Hibbert (both of Smyth King) as joint tenants. In the circumstances, it seems appropriate to dismiss the application to set aside the notice as having been superseded by the cross claim. There is no need to consider the question whether the notices were valid having regard to the intervention of the Acting Official Receiver. I would, however, direct the Trustee within seven days of the date these reasons are published to file and serve short minutes of order to give effect to these reasons. The matter will be listed for argument on the terms of the orders on the following Monday at 9.30 am.

Whether I should have disqualified myself? On the first day of the hearing I was asked for a second time by counsel for Mr Ashton to disqualify myself. The application was put on the basis that I had disclosed:

1. That a trust of which I and my family are beneficiaries has shares and convertible notes in Westpac. The number of shares and convertible notes involved was disclosed to the parties.
2. That I am (and the trust is) a customer of Westpac and conduct both cheque and savings accounts there, as well as having money on term deposit. The term deposits are in the trust name. I do not owe any money, nor for that matter does the trust or any member of my family, to Westpac.
3. That some time in the past while I was at the bar I advised Mr Jury through solicitors and his then accountant Mr Milton on some tax matter. I should say that I have never met him.
4. That I was friendly with Mr Arnold Milton who had been Mr Jury's accountant in the past and who was to give evidence. Indeed I disclosed that I had recently dined with Mr Milton (and others). It might be noted that Mr Milton's evidence was ultimately agreed - he was not cross-examined. It was uncontroversial. I refused to disqualify myself, indicating that I would give reasons at the time of giving judgment. I now do so, albeit briefly. No actual bias is, of course, alleged. The case is one put on the basis of apprehended bias. I would, with respect, adopt as a correct statement of the law the following passage from the judgment of the Full Court of this Court in Jury v Westpac Banking Corporation (unreported, Burchett, Foster and O'Connor JJ, 18 March 1998) at p 2 where their Honours said: "To prove a case of apprehended bias, what must be shown is that, in all the circumstances, 'fair minded people might reasonably apprehend or suspect that the judge has prejudged or might prejudge the case': Webb v The Queen (1994) 181 CLR 41 at 47; and see The Queen v Watson; Ex parte Armstrong (1976) 136 CLR 248 at 263; Livesey v The New South Wales Bar Association (1983) 151 CLR 288 at 293-294, 300; Re JRL; Ex part CJL (1986) 161 CLR 342 at 350, 351, 370-1; Vakauta v Kelly (1989) 167 CLR 568 at 575; Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70 at 87, 99-100." There is no doubt that where a case of apprehended bias is made out it is important in the interests of the confidence which public policy requires be afforded to the judicial process that a judge disqualify himself or herself from hearing the matter. This is summarised in the significant aphorism that justice must not only be done, but be seen to be done: Livesey at 293-4. This does not mean that the mere allegation of apprehended bias requires such a disqualification, for it is in the interests of justice that judges proceed to hear and dispose of cases, where disqualification may lead to further delays in the litigation. Automatic disqualification would, it may be presumed, lead to allegation of bias being made in every case. First, it must be said that Westpac is not a party to the proceedings. It is, of course, a creditor entitled, like other creditors whose proof is accepted, to receive pro rata a distribution in the bankrupt estate. Second, the holding of what is a relatively insignificant number of shares, or for that matter accounts in Westpac is so insignificant when the magnitude of the monies presently at stake, is compared with the assets and liabilities of Westpac. In other words, it is obvious that I could expect no benefit or detriment whatever the outcome. With all respect to counsel I am unable to conclude that either the parties or the public might entertain a reasonable apprehension that I would not bring an impartial and unprejudiced mind to the resolution of the case and the issues in it. The fact that some time over ten years ago I gave advice, through solicitors who had briefed me at the bar, to Mr Jury or his accountant is in the same position, particularly when I had never met him and the issues had absolutely nothing to do with the present case. No conclusion necessary to found apprehended bias could reasonably be drawn. Finally, the fact that I knew a person who was a witness in the case, whose evidence was uncontroversial, indeed as a school friend, is in the same position. It is not difficult to conclude that the submission was made to avoid the case proceeding on the merits, rather than because there was thought to be any substance in the matter.

Costs The First Cross-Respondent should pay the Cross-Claimant's costs of the cross claim. I would make no order as to the costs of the application itself, but direct that the costs of the cross claim include all costs on a solicitor and client basis relevant to bringing the matter to trial without the necessity of endeavouring to apportion those costs between the cross claim and the application itself. I certify that this and the preceding twenty-eight (28) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Hill

Counsel for the Applicant and Mr A J McQuillen Cross Respondents:

Solicitor for the Applicant and Duker & Associates Cross Respondents:

Counsel for the Respondent and Mr W H Nicholas QC Cross Claimant: Mr J A Halley

Solicitor for the Respondent and Clayton Utz Cross Claimant:

Date of Hearing: 7, 8 & 9 September; 13 & 15 October 1998