Jones v Hyde

IN THE FEDERAL COURT OF AUSTRALIA) ) QUEENSLAND DISTRICT REGISTRY ) QG 102 of 1994 ) GENERAL DIVISION )

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN: JAMES ANDREW BAKER, GOODGLINT PTY LTD, VESTOS PTY LTD and SERVICE AND PROPERTY PTY LTD Appellants AND: OFFICIAL TRUSTEE IN BANKRUPTCY Respondent CORAM: Burchett, Ryan and Carr JJ. PLACE OF HEARING: Brisbane DATE : 3 August 1995 ORDERS OF THE COURT THE COURT ORDERS THAT:

1. The orders made by the judge at first instance in respect of the art collection, so far as they concern the proceeds of dealings with works of art, be varied by the qualification that they do not extend to the proceeds of dealings therein consummated prior to the bankruptcy of the bankrupt. 2. Subject as above, the appeal in respect of the orders relating to the art collection be dismissed. 3. The appeal in respect of the sum of $286,000 paid to Vestos Pty Ltd be allowed, and the declaration relating to that sum and the judgment and order for the payment of that sum to the trustee be set aside. 4. The appellants be ordered to pay two thirds of the respondent's costs of the appeal, and the order for costs at first instance be varied so as to require the appellants to pay five sixths of the respondent's costs below. NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA) ) QUEENSLAND DISTRICT REGISTRY ) QG 102 of 1994 ) GENERAL DIVISION )

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: JAMES ANDREW BAKER, GOODGLINT PTY LTD, VESTOS PTY LTD and SERVICE AND PROPERTY PTY LTD Appellants

CORAM: Burchett, Ryan and Carr JJ. PLACE OF HEARING: Brisbane DATE : 3 August 1995

The appellant James Andrew Baker became a bankrupt by the presentation of his own petition on 16 January 1990. The Official Trustee in Bankruptcy then brought proceedings against Mr Baker and the other appellants, which were companies within a group of companies controlled by him, in order to recover a collection of contemporary art works, certain moneys representing art works, and a sum of $286,000 claimed as the proceeds of a fraudulent disposition of certain rights of Mr Baker in a partnership carrying on an accountancy business. The Official Trustee in Bankruptcy was successful in obtaining the orders he sought. The appellants appeal against all of these orders. Mr Baker commenced practice as a chartered accountant in about 1971. In 1985, he sold all his interest in the accountancy practice, except a 1% interest which he disposed of later, in 1987. Between 1977 and 1981, he also carried on a separate activity, generating over $1,000,000 in receipts paid to a number of companies controlled by him - Sopala Pty Ltd, Serula Pty Ltd, Larchwood Pty Ltd, Dalhouse Pty Ltd and Delline Pty Ltd. Each of these companies was the trustee of a discretionary trust. The activity by which such a substantial sum was amassed appears to have masqueraded as a business of taxation consultancy. On the learned judge's findings, what in fact took place was straight-out tax evasion. Of course, Mr Baker's clients may or may not have appreciated this; they may have thought they were paying for the application to their affairs of sophisticated techniques of tax minimization. At any rate, they were willing to pay substantial rewards for the services they thought they were receiving. No tax returns were lodged by any of Mr Baker's companies, or by any of the discretionary trusts, in respect of the proceeds of this separate business. When the matter came to the notice of the Commissioner of Taxation, he took the view that the rewards obtained by the tax evasion operations represented income of Mr Baker, not of the companies or the trusts. As a result, amended assessments issued to Mr Baker for amounts which, swelled by penalties, reached a total of $2,231,259.00. These assessments were affirmed by Pincus J. on appeal: Baker v Federal Commissioner of Taxation [1989] ATC 4,660; and by a Full Court on further appeal: Baker v Federal Commissioner of Taxation [1990] ATC 4,025. In the present matter, the trial judge has independently reached the conclusion that the sum of about $1,000,000 was received by Mr Baker personally as his own income. The companies were thus merely conduits through which payment was effected of Mr Baker's moneys at his direction. Counsel for the appellants conceded at the hearing of the appeal: "[W]e accept that that income, as originally derived, for the purposes of this case is to be treated as derived by Mr Baker personally". He also made it clear that, by "derived", he meant "received". In the late 1970s, Mr Baker commenced purchasing works of art for the art collection which the judge has held belonged to him at the date of his bankruptcy. It was the appellants' case at the hearing that in 1977 he set up a trust, called the Modern Art Trust, to which the collection belonged beneficially from 1977 until late 1983. The trustee was said to be a company controlled by Mr Baker, JAB Investments Pty Ltd. It was the trustee of his family trust, although Mr Baker was emphatic that "the family trust didn't own the art collection". But no trust deed in respect of the Modern Art Trust was produced, nor were any trust records. While, after about September 1981, some of the transactions by which Mr Baker purchased art works were put in the name of the Modern Art Trust, generally, receipts for works purchased were issued in the name of Mr Baker himself. According to his account, the funds for his purchases came through JAB Investments Pty Ltd and two other companies in his group, Runcorn Pty Ltd and Passero Pty Ltd; but the books of none of these give any indication that the purchases were made on behalf of the Modern Art Trust. In so stating, the trial judge added in respect of JAB Investments Pty Ltd, as the trustee of the Baker Family Trust: "Although it is clear that these works were not bought on behalf of the Baker Family Trust, the way these purchases are dealt with in the company's books for later years up to 1981/82 is such as to leave it otherwise unclear on whose behalf those purchases were made ... ." The judge discussed the matters that have been mentioned, and a number of other aspects of the evidence bearing upon the question whether the alleged Modern Art Trust ever existed. He pointed out that: "The only candidate the respondents [i.e. the present appellants] have put forward as owner of the collection prior to November 1983 is [JAB Investments Pty Ltd] as trustee of the Modern Art Trust." The evidence before him was that the art works, up to that date, had been purchased by Mr Baker utilizing funds made available through the companies which have been mentioned. At least a very large part of those funds, according to significant evidence given by Mr Baker himself, came from the tax evasion moneys paid, it has been held, to Mr Baker personally. His receipt of the sums involved was the subject of attempted camouflage by the diversion of the relevant cheques to the bank accounts of the various companies mentioned earlier. In his tax appeal, Mr Baker asserted that the trusts of which those companies were trustees had received from his taxation schemes, according to his "best guess", a sum of "probably a million dollars". He was then asked: "In practical terms, is the one million dollars represented now by the paintings?" He answered: "In practical sense [sic], it is represented by the pictures." Asked: "Where else has it gone apart from living?" he answered: "There is some equity in the museum building [the building in which he had housed the art collections], but not a lot." He expressed the view that the value of the pictures had gone up substantially, perhaps to $3,000,000, or even more, as at 1 June 1989. He was then asked: "So the money from the schemes ultimately went into buying pictures, into this building, and where else?" and he answered: "I do not have anything else, nor do the companies I control have anything else." Of course, Mr Baker was not idle during the period after the taxation schemes ended. He continued to earn income as an accountant, both through his practice and, after he sold it, through acting independently for some clients. Also, pictures were sold from time to time, the proceeds of which would have been available to go back into the collection, at least in some instances. The trial judge reached the conclusion that Mr Baker, whom he heard cross-examined, was "a person devoid of credibility". Being unable to accept Mr Baker's evidence, and having regard to the probabilities of a case in which virtually none of the documents could be produced that one might expect to see if the evidence were true, the trial judge concluded that the Modern Art Trust never existed. This is one of the findings challenged by the notice of appeal, but in the circumstances the challenge is hopeless. It was clearly open to his Honour to conclude that Mr Baker never took the formal step of constituting a trust under the name of the Modern Art Trust, or any trust in respect of his purchases of works of art during the period to November 1983, the period during which he alleged those purchases had been made on behalf of the Modern Art Trust. That, of course, is not a finding of a sham, as the appellants' argument suggested. A sham is a formal legal structure actually created or utilized in circumstances which enable the Court to find the structure, or its particular utilization, to have been an empty pretence. But here, the finding of the trial judge is that no structure was ever set up. The conclusion that the Modern Art Trust was never constituted is important in more than one way. It means that when Mr Baker arranged, as he did on 24 November 1983, for JAB Investments Pty Ltd to enter into a sale of the art collection in its then form, purportedly as trustee of the Modern Art Trust, to the trustee, Dacine Pty Ltd, of a new trust, the Dacine Trust, the transaction was quite ineffective. The works of art belonged to Mr Baker. JAB Investments Pty Ltd had no title to transfer, whether as trustee of a trust existing in name only, or otherwise. Nemo dat qui non habet. But the finding of the truth about the Modern Art Trust has even more serious consequences. The purported transfer to Dacine Pty Ltd as trustee of the Dacine Trust was followed (after a brief change of trustee, for purposes associated with the avoidance of stamp duty, to a company Thalia Pty Ltd on 19 June 1985, and then back again on 25 June 1985 to Dacine Pty Ltd) by a sale, into which Dacine Pty Ltd entered on 4 July 1985, to a company Axegrowers Pty Ltd, later to change its name to Art Holdings Pty Ltd, as trustee of the Contemporary Art Trust. On 31 January 1990, about a fortnight after his bankruptcy, Mr Baker arranged for Art Holdings Pty Ltd to transfer the art collection to Goodglint Pty Ltd, one of the appellants. Each of these successive transfers, so far as it related to works in the original collection, was necessarily as ineffective as the one preceding it. Still more importantly, Mr Baker's willingness to set in motion such a train of transactions, all depending upon a fictitious trust, must cloud every other dealing with the collection. The core of it, acquired up to 24 November 1983, belonged to Mr Baker, though deliberately disguised by him under a series of trust names. Why should credence be given to his claim that accretions to the collection belonged, not to himself as the owner of the original collection, but to the succession of trusts to which it had purportedly, but not in reality, been transferred? When attempting to answer this question, the trial judge referred to a number of aspects of Mr Baker's handling of the affairs of the companies and trusts he controlled. In various ways, Mr Baker appeared to disregard the legal forms he had created. Funds were freely transferred between companies, notwithstanding that they were purportedly trustees of distinct trusts. Funds were also obtained to pay the debts of companies managed by Mr Baker by the sale of pictures supposedly belonging to the Contemporary Art Trust. After his bankruptcy, just as before, Mr Baker has continued to control the companies absolutely, and to have, as the trial judge found, "sole and absolute dominion" over the art collection. Although, upon his bankruptcy, he arranged for a new trustee to take over the art collection, "it was always [Mr Baker's] intention", his Honour held, "to maintain effective control of the collection and the various companies. The new directors were merely his puppets", unaware at the public examination in the bankruptcy "of many of the companies of which they had been directors for some time". Much earlier, in 1984 and 1985 large transactions involving the family trust and several of the companies were documented, but according to the evidence of Mrs Baker which the judge accepted, the transactions had never in fact taken place. Mr Baker's disregard of trust obligations is illustrated by the way the transfers of the art collection were effected. The purported sale by JAB Investments Pty Ltd as trustee of the Modern Art Trust to Dacine Pty Ltd as trustee of the Dacine Trust is an example. Although what was supposed to be involved was a sale from one trust to another and different trust, no value passed. A consideration of $500,000 was expressed, but liability on a bill of exchange drawn for that amount was extinguished by the interposition of an application on behalf of one of the trustees for units in a unit trust at a huge premium, which were actually worthless. It is unnecessary to go through the tortuous details, for Mr Baker acknowledged in cross-examination, being driven to it by previous admissions, that he had always intended the amount of the bill would not be paid. Comment on such a transaction between two distinct trusts would be superfluous. But it was by a precisely similar exercise that the collection was transferred in 1985 to yet another trust, the Contemporary Art Trust, again in a manner preordained to deny to the transferring trust the receipt of any value, although there was a paper consideration of $700,000. In the case of that transfer, Mr Baker, having offered vague and conflicting justifications for it, was finally at a loss to explain it. He had, however, admitted during his tax appeal that "evasion of creditors" was one of its purposes. That purpose would have been irrelevant to such a transfer if the art collection had been already safely held in trust. It was in these circumstances, and after hearing Mr Baker's oral evidence, that the trial judge held the whole of the art collection was Mr Baker's, and now belongs to the Official Trustee. Mr Baker, his Honour reasoned, was anxious to remove his investments in pictures from the reach of his creditors. He knew, from before the time of the transaction by which he purported to effect a transfer of the art collection to Dacine Pty Ltd, that he was at risk of ultimately incurring judgment for an extremely large sum in tax and penalties. To render his collection, as it then was, immune from liability to meet his debts, he invented the story of an already existing Modern Art Trust. Then came the succession of transfers, designed to confuse any investigation, and also to provide documented trusts to shelter both the original collection, and the long series of accretions by which it grew. But the judge saw no difference between the original pictures and the later acquisitions: neither group was really intended to be subjected to a trust, as the former was certainly not. The trusts were so many smoke-screens behind which Mr Baker went on building the one collection for himself. His intention, the judge held, was to deal with the collection as he pleased, "in exactly the same way in which he would be free to deal with it if it were his own personal property". That this was his intention was confirmed by his failure to disclose the existence of the trusts to the public galleries potentially entitled to the benefit of them, a failure that left him free to juggle the assets between entities set up by him or consume them as he chose. So far as the trial judge's conclusion depends on his assessment of the oral evidence, and on his impression of Mr Baker himself, a catena of decisions of the High Court fences it off from the area of ready appellate interference. See Jones v Hyde (1989) 63 ALJR 349 at 351-352; Abalos v Australian Postal Commission (1990) 171 CLR 167 at 178-179; Devries v Australian National Railways Commission (1993) 177 CLR 472 at 479; and Daniels v Burfield (1994) 125 ALR 33 at 35. In Westpac Banking Corporation v Spice (1990) 12 ATPR 51,386 Wilcox and Burchett JJ., in their joint judgment, at 51,396-51,399 summarized the effect of a number of the earlier decisions of high authority, citing from them propositions that declare the nature of the burden undertaken when an appellant attacks findings based on the credibility of witnesses at a trial. The discussion concludes (at 51,399): "In these statements of principle the word clear', or some equivalent expression, keeps recurring. Whatever shifts of emphasis may have occurred to accommodate the differing key features of particular cases, it must always be clear, if a decision on credibility is to be overturned, that its acceptability has been destroyed by the revelation of some serious and demonstrable error." See also Donnelly v Edelsten (1994) 49 FCR 384 at 389. In the present case, no such serious or demonstrable error has been shown in the reasoning which led his Honour to conclude that Mr Baker never intended to subject his art collection to any of the various trusts put forward in his case. It is plain that into this conclusion there entered largely the judge's estimate of Mr Baker, so that the words of Lord Sumner in S.S. Hontestroom v S.S. Sagaporack [1927] AC 37 at 47 are applicable: "If his estimate of the man forms any substantial part of his reasons for his judgment the trial judge's conclusions of fact should, as I understand the decisions, be let alone." The finding of fact being invulnerable, the finding as to the legal consequence is equally so. In The Commissioner of Stamp Duties (Queensland) v Jolliffe (1920) 28 CLR 178, the High Court was concerned with the effect of a man's having paid a substantial sum into a savings account in the name of his wife, with his own name added as trustee. It had been held by the trial judge, as is stated in the joint judgment of Knox C.J. and Gavan Duffy J. at 181, that "it was not the real intention of the respondent to make a gift to his wife, but that the money was placed in the account for the sole purpose of procuring interest which the respondent believed would not be procurable ... if the money were placed in his own name". Their Honours added, at the same page, that there was "an insuperable obstacle" in the way of the appellant, who was seeking to show a trust. They said: "We know of no authority, and none was cited, which would justify us in deciding that by using any form of words a trust can be created contrary to the real intention of the person alleged to have created it. In our opinion the law is accurately stated in Lewin on Trusts, 11th ed., at p. 85: It is obviously essential to the creation of a trust, that there should be the intention of creating a trust, and therefore if upon a consideration of all the circumstances the Court is of opinion that the settlor did not mean to create a trust, the Court will not impute a trust where none in fact was contemplated.'" (Emphasis original.)

In Joyce v Ashfield Municipal Council (1967) 14 LGRA 133, in much more dubious circumstances (as was shown by the later decisions Joyce v Ashfield Municipal Council [No. 3] (1970) 20 LGRA 173 and Ashfield Municipal Council v Joyce [1978] AC 122 at 132), Walsh J.A. (with whom Holmes J.A. agreed) said (at 144): "I think it appears that the Court found itself in the position that the evidence placed before it concerning the transactions which took place and concerning the intention or the purposes of those who took part in them (that is, the appellants and the persons who were stated to be donors and lenders of money which was used in the transactions) did not satisfy it that the lands were held upon the trusts declared by the trust deed". As that case shows, when property is put in the name of a trust, there is always a question (however obvious the answer may generally appear to be) whether this was done with the necessary intention to subject the property to the terms of the trust. As the law is stated in Jacobs' Law of Trusts in Australia 5th ed. (1986) at para. 514: "For the creation of a trust the intention so to do must exist at the time of its creation." Counsel for the appellant attacked the conclusions of the trial judge, which have been discussed thus far, on the ground that they involved his Honour in finding the succession of trusts to be shams. It was argued such a finding should not be made without close consideration of the strictures said to have been expressed in Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449. According to the appellant, the trial judge's reasoning neglected this decision. The submission is somewhat startling, for his Honour actually discussed Sharrment at some length. But the appellant says that, unlikely as it may seem, the very decision that was so discussed had earlier in the reasons been overlooked. There is no substance in this contention. The earlier passages referred to were concerned with the logic of the finding that the Modern Art Trust never came into existence. A necessary deduction was the ineffectiveness of the purported transfer of that non-existent trust's beneficial ownership to the Dacine Trust, and of the further purported transfer of what had not been received to the Contemporary Art Trust. An inference, too, was the extreme dubiousness of the claim that accretions to the one continuing collection really belonged to trusts which had no title to the collection itself. None of this reasoning depended upon the principles which the courts have laid down in respect of legal forms so created or used as to require to be considered shams. But the judge did go on to consider the question of sham. He referred to Sharrment; Snook v London and West Riding Investments Ltd [1967] 2 QB 786 at 802 (where Diplock L.J. referred to a "sham" as meaning "acts done or documents executed by the parties to the `sham' which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create", but pointed out that all the parties involved must have a common intention to that effect, since the law will not allow the insincere act of a deceiver to prejudice a party who sincerely entered into the transaction in question); Re State Public Services Federation; Ex parte Attorney-General for the State of Western Australia (1993) 178 CLR 249 at 290 (where Toohey J. said that "the term [sham] has come to be applied where persons have entered into an ostensible transaction as a disguise to conceal their real transaction"); Dalco v Federal Commissioner of Taxation (1988) 82 ALR 669 at 670-671 (where it was said in the joint judgment of Sheppard and Gummow JJ. that neither artificiality nor complexity will establish a sham, and that "a vital question is whether transactions were not to take effect according to their terms"), a decision reversed on appeal, but not so as to affect the proposition cited: The Commissioner of Taxation for the Commonwealth of Australia v Dalco (1990) 168 CLR 614; Re La Rosa; Ex parte Norgard v Rocom Pty Ltd (1990) 21 FCR 270, a decision which was affirmed on appeal: Norgard as Trustee in Bankruptcy of the Estate of La Rosa v Rocom Pty Limited (Northrop, Davies and Lee JJ., unreported, 16 August 1990); Hancock v Federal Commissioner of Taxation (1961) 108 CLR 258 at 301-302 (where Windeyer J. pointed out that "going through a form" does not make "a pretended transaction real"); and Northumberland Insurance Ltd (in liquidation) v Alexander (1984) 8 ACLR 882 at 888-889. After referring to several passages, particularly in Sharrment, the judge emphasized that the actual intentions of the parties must be ascertained to decide whether a transaction is a sham, and that a heavy onus lay upon the Official Trustee to displace the natural effect of the documents. He said that "the Court will not lightly infer that documents do not reflect the true intention of the parties". Nevertheless, he concluded that Sharrment, where the architect of the scheme was unavailable to give evidence, being deceased, so that the whole of the case had to be decided upon inferences from the documents and the circumstances, was distinguishable upon its facts, and that in the present case the transactions by which the art collection was apparently made the property of Art Holdings Pty Ltd as trustee of the Contemporary Art Trust were shams. His Honour held that "Baker's true intention was that Art Holdings would acquire legal title to the collection not as trustee for the Contemporary Art Trust but rather for Baker personally. The same holds true for the transfer of 31 January, 1990 of the collection from Art Holdings to Goodglint." The judge clearly recognized that the authorities contain strong warnings against too ready an acceptance of an argument that artificiality or complexity suggests a sham. Transactions may be both complex and artificial, yet intended to have precisely the legal effect apparent on their face. It is not an intention to achieve an artificial result that makes a transaction a sham, but an intention to achieve a different result from that represented by the legal forms employed. In the evocative phrase adopted by the joint judgment of Neaves, Ryan and Lee JJ. in Donnelly v Edelsten (supra, at 390), the question is whether the legal forms were "merely scenery moved around by [the true owner of the property involved] to reflect whatever landscape he sought to construct". If that be so, as Cotton L.J. said in In re Watson. Ex parte Official Receiver in Bankruptcy (1890) 25 QBD 27 at 38, the Court is not "bound by the form of the agreement", and "when documents are mere shams or cloaks to hide the real nature of the transaction, the Court will not allow them to prevent it from going into the real transaction". There was a wealth of evidence to support the conclusion to which his Honour came. Some of it has already been referred to. Very much of it came out of the mouth of Mr Baker himself. As was the case in respect of the closely related question whether there was an intention to subject to the terms of a trust particular pictures acquired after its setting up in point of legal form, the question whether the trust itself and all the relevant transactions in relation to it were shams is a question of fact into the determination of which the credibility of Mr Baker's oral evidence, and the impression he made as a man, must have entered very largely. In his reasons, the judge commented on the actions of Mr Baker in connection with a number of matters concerning his property and affairs. In June 1987 he had, as his Honour said, "solemnly declared he held all his personal effects, including his wrist watch, on trust although he continued to enjoy the full use of them". He claimed he had done this so thoroughly that he "would not have been able to pay for a pie" to eat, except by borrowing from one of his companies. Yet he said that he had "good legal advice" that he was going to win the tax case, and his purpose was "just following the pattern that had been established for years that all the family assets were held by family trusts, regardless". The judge did not believe this. His reasons state of Mr Baker: "He is a person who has been prepared to fabricate documents and company records on a substantial scale for his own pecuniary advantage in carrying on his tax avoidance activities. He has disposed of company records to impede official investigations into his unlawful activities. He lied persistently to those investigators and sought in other ways to mislead them." The judge pointed out that Mr Baker, over a substantial period, utilized "loans" to a total of well over $500,000 from two of his companies, Vestos Pty Ltd and Service and Property Pty Ltd, to pay his living expenses. These companies carried on business solely as trustees of trusts. Yet Mr Baker, who controlled them, saw no problem in recording as actual legal transactions what purported to be his own extensive borrowings from them, not only without providing security, but without any intention of ever making any repayment. Ultimately, his indebtedness to Vestos Pty Ltd appears to have become an embarrassment, because it was borrowing money from Westpac Bank. Accordingly, it was desirable to remove such a large indebtedness from the company's books, which was achieved by transferring the debt to another company, Telminco Pty Ltd. It was put to him in cross-examination: "Now, one of the interesting things about it is that if you had companies in a group, what you say might be right. But these were not companies in a group, were they? These are trusts that we are talking about here. They are individual trusts, constituted by separate trust deeds. Is not that so?" He answered "Yes." He was then asked: "And you thought it was all right to amalgamate, as it were, the inter-trust situation too; consolidate the inter-trust accounts?" This also he answered: "Yes." On all of the evidence, the trial judge concluded that Mr Baker's intention was so to "arrange things that they would give to outsiders the appearance that the art collection was held in trust by Dacine, and then by Art Holdings, on certain trusts, when the reality was that the collection remained in the full beneficial ownership of Baker personally." He did not intend the books of the companies to record the true position in respect of his use of funds emanating from their bank accounts or with respect to the art collection. "They were instead merely camouflage to conceal the true position, at least so far as they recorded dealings with respect to the art collection and his personal expenses: Baker was taking funds available to his companies as he needed them for own purposes without ever intending to repay them. He was simply misappropriating them, not borrowing them. Writing them up as loans to himself in the companies' books does not alter this."

This aspect of the appeal should be resolved on the basis that his Honour's conclusion was amply supported by the evidence. In any case, being largely based on credibility, it could only be disturbed if its acceptability had been destroyed by the clear revelation of some serious and demonstrable error. Far from that, it is the correct conclusion on the evidence. But the statement in the passage lastly quoted from the judgment, that Mr Baker "was simply misappropriating" the moneys he obtained from his companies, opened the door to a further submission on behalf of the appellants. They submitted this amounted to a finding that the pictures were in part acquired, not as Mr Baker's purchases, but as property purchased, in some cases, with the moneys of various of the companies, and in some cases with moneys belonging to Mrs Baker (as to whom there was evidence that Mr Baker wrongfully procured from her a sum of $250,000 payable to her by the family trust). There are a number of things to be said about this final argument. In the first place, in context, the passage cited from his Honour's reasons does not appear to be using the word "misappropriating" in any strict sense. The logic of the passage is that the arrangements by which Mr Baker had divested himself of property were shams, and the legal transactions, by which moneys recorded as the moneys of the companies were made available to Mr Baker, were also shams. If taking moneys in the guise of payments pursuant to legal transactions, when in fact no such transactions have really been entered into, is misappropriating the moneys, then Mr Baker's taking of the moneys was a misappropriation. This appears to have been the judge's view. But in the light of the whole of the reasons, it seems that the moneys, like the pictures purportedly bought in the names of the various art trusts, may well have been Mr Baker's own. It is not at all clear that the judge meant to find otherwise. In the next place, the argument now advanced does not seem to have been put at the trial. If it had been, some attempt might have been made, in evidence, to trace the sources of the funds employed in particular purchases of works of art, or at least to isolate and identify the uses that were made of "misappropriated" moneys. At the trial, the appellants' case was that the art collection belonged to the Contemporary Art Trust, not that the pictures belonged beneficially to an assortment of companies, together with Mrs Baker, claiming ownership of the funds devoted to particular purchases. It is too late now for the appellants to be permitted to change their ground: Coulton v Holcombe (1986) 162 CLR 1. Furthermore, when Mr Baker, in 1987, transferred the art collection from his own home to premises owned by the appellant Vestos Pty Ltd, and then in 1990 arranged for the appellant Goodglint Pty Ltd to have charge of it, those companies, on the trial judge's findings, assumed the obligations of bailees or agents of Mr Baker. For he it was who was in reality asserting ownership, as he had always intended, and the companies, of which he was the directing mind, accepted the collection from him necessarily upon the same basis. It has long been the law that a person who accepts a deposit of goods or money, acknowledging the title of one person, cannot be permitted to set up the title of another who makes no claim: Biddle v Bond (1865) 6 B & S 225; 122 ER 1,179; Betteley v Reed (1843) 4 QB 511 at 517; 114 ER 991 at 993. In Biddle v Bond, Blackburn J., delivering the judgment of the Court, said (at 231): "We do not question the general rule that one who has received property from another as his bailee or agent or servant must restore or account for that property to him from whom he received it". His Lordship added (at 232-233): "The position of an ordinary bailee, where there has been no special contract or representation on his part, is very analogous to that of a tenant who, having accepted the possession of land from another, is estopped from denying his landlord's title, but whose estoppel ceases when he is evicted by title paramount. ... The position of the bailee is precisely the same, whether his bailor was honestly mistaken as to the rights of the third person or fraudulently acting in derogation of them. We think that the true ground on which a bailee may set up the jus tertii is that indicated in Shelbury v Scotsford (Yelv. 22, 3rd ed. translated), viz., that the estoppel ceases when the bailment on which it is founded is determined by what is equivalent to an eviction by title paramount. It is not enough that the bailee has become aware of the title of a third person." Blackburn J. thought that to decide otherwise would be to enable the defendant to keep for himself that to which he did not pretend to have any title. That this rule remains the law is confirmed by Palmer on Bailment 2nd ed. (1991) at 265 et seq. Biddle v Bond has been followed on numerous occasions, and in particular in Minichiello v Devonshire Hotel (1967) Ltd (No. 2) (1977) 79 DLR (3d) 656; Canadian National Railway Co v Hammill (1973) 43 DLR (3d) 731; Shields v Jeffries [1953] NZLR 666; and Remnant v Savoy Estate Ltd [1949] 1 Ch 622. The principle applies in the present circumstances, since neither Mrs Baker nor any of the companies through which funds for the purchase of works of art were provided has made any claim to any part of the collection. One of these companies, Vestos Pty Ltd, is an appellant. There was good reason for the failure of any of the companies or Mrs Baker to make a claim to any picture in the collection. That reason is that, on the evidence adduced, it was impossible to identify the ownership of the funds with which any particular picture was purchased. Certainly, funds for various purchases were advanced through identified companies. But, having regard to the way in which the companies operated, this fact did not establish that the company effecting a particular payment was beneficially entitled to the funds employed. The trial judge has held that "Baker operated all the companies he controlled as a group, freely transferring funds between them according to the particular needs of the time, even though each company was the trustee of a separate trust". Also, the moneys were passed through bank accounts, and at different times one or other particular company acted as banker for the rest of the group, maintaining a special account with each other company. All this would make tracing particularly difficult. "[I]t is a fundamental feature of the doctrine of tracing that the property to be traced can be identified at every stage of its journey through life ...": Bishopsgate Investment Management Ltd (in Liquidation) v Homan [1995] Ch 211 at 221, per Leggatt L.J., citing Buckley L.J. in Borden (U.K.) Ltd v Scottish Timber Products Ltd [1981] Ch 25 at 46. Furthermore, there are specific rules, which were also referred to in Bishopsgate Investment Management Ltd v Homan, limiting tracing to an amount not exceeding the lowest balance of an account, into which a sum to be traced has been paid, during the period following the payment into that account, and denying tracing through an overdrawn bank account - whether that account was already overdrawn at the time the relevant moneys were paid into it or is an account that, although then in credit, subsequently became overdrawn. The fact is that these difficulties were not confronted at the hearing because the present point was not taken. Even on the appeal, counsel for the appellants said: "[W]e wish to emphasize that in the present case, none of our clients has said that a particular work of art is the property of someone other than the applicant, except, of course, the property of one of the relevant art trusts. Rather, our case has been that if the property was not the property of the relevant art trust, then it does not follow that the trustee has discharged his onus of showing that it was the bankrupt's property, and in turn, his. It is not a case where any of the present appellants [was] seeking to set up any jus tertii, and indeed, having regard to the difficulty in identifying the source of funds used to purchase any particular item of property, it would not be a case where such a claim could be set up." This submission involves the clearest admission that tracing is not possible. So far as it seeks to reverse the onus on what is really a tracing issue, the submission cannot be accepted. Of course there was an onus to be discharged by the respondent, but there was ample evidence to show, as the trial judge found, that the purchases were in reality made by Mr Baker on his own behalf, utilizing, at least in the main, the proceeds of his tax evasion activities. If, nevertheless, the title of the Official Trustee in Bankruptcy was to be denied, the burden of showing that the funds of someone else were traceable into a particular purchase did not rest on the Official Trustee. For all these reasons, the appeal, so far as it relates to the ownership of the art collection, must be dismissed. There is, however, a question in respect of the relief which was granted to the applicant in relation to the art collection. The amended statement of claim included a prayer for a declaration that the art collection "is and has been at all material times the property of [Mr Baker] vesting in his estate on the date of bankruptcy". Further declarations were sought that various portions of the collection, particularly identified in the statement of claim, were "at the date of bankruptcy held upon trust for [Mr Baker]", and that these portions (including a portion, called the "E collection", constituted by works of art acquired after the date of the bankruptcy with the proceeds earned by the sale or rental, after the date of bankruptcy, of works forming part of the collection) "and the proceeds of the sale or rental of [the portions of the collection previously referred to] vested in the [Official Trustee] and at all material times after the bankruptcy were held on trust for the [Official Trustee]." Orders were sought "requiring the [appellants] to transfer to the [Official Trustee] the [whole collection] together with the proceeds of any sales or rental thereof since the date of bankruptcy". There was also a prayer for "Further or other relief, including all necessary accounts and consequential orders to give effect to the orders and declarations sought herein ... ." In support of the claims for relief, so far as they related to the proceeds of sale of works of art, the amended statement of claim included, in para. 38, an allegation that "[a]fter the date of bankruptcy [the appellants] derived proceeds" from the sale and rental of works of art, which were applied to their own use. There was no allegation pleaded which concerned the derivation and appropriation of proceeds of sales of works of art prior to the bankruptcy, except an allegation that "the source of income for additions to the collection was [Mr Baker's] personal exertion and the proceeds of sale of works held in the collection". This being the state of the pleading which the appellants came to court to answer at the hearing at first instance, they now complain that the orders made against them include orders in respect of property "which was acquired by [the appellants] or any of them with moneys being the proceeds of sale, hire or use of any work of art belonging to [Mr Baker]". The appellants point out that the language quoted is not, at least expressly, limited to sales, hirings and use which occurred after the date of bankruptcy. It is perhaps not entirely clear that the orders have the scope which is suggested. In the absence of a prayer for relief directed to dealings with works of art prior to the bankruptcy, and also in the absence of any pleaded allegation going directly to such dealings, orders with respect to them do seem unlikely, as well as inappropriate. Furthermore, there are provisions in the Bankruptcy Act 1966 identifying the particular requirements for the recovery by a trustee in bankruptcy of the proceeds of a dealing with the property of a person who afterwards became bankrupt. Circumstances falling within these requirements have to be shown before such a claim can be sustained, particularly against third parties. In the present case, not only were the appellants not on notice of a claim, unlimited as to the retrospective period covered, in the terms suggested; circumstances giving rise to such a claim were not specifically pleaded. The appellants did not come to court to answer such a case. In any event, the decision in Bishopsgate Investment Management Ltd v Homan (supra) would seem to throw a considerable obstacle in the way of an attempt to trace the proceeds of sales of art in the particular circumstances of the affairs of Mr Baker and his companies. The problem has already been outlined in relation to another aspect of the case. In these circumstances, the dismissal of the appeal, so far as it relates to the art collection, should be qualified by a variation of the orders so as to make it clear that they do not extend to the proceeds of dealings in pictures consummated prior to the bankruptcy. The final issue raised by the appeal relates to a quite separate matter. The Official Trustee claimed, at the hearing at first instance, that an assignment of certain debts said to total $286,000 to the appellant Vestos Pty Ltd was a fraudulent disposition within s. 121 of the Bankruptcy Act. This is the section, as the Full Court noted in Official Trustee in Bankruptcy v Mitchell (1992) 38 FCR 364 at 368, that "was intended to reflect generally the principles which have been worked out over the centuries, in relation to fraudulent dispositions, since the enactment in 1570 of 13 Eliz I c 5 (the Statute of Elizabeth)". See also PT Garuda Indonesia Ltd v Grellman (1992) 35 FCR 515. The claim in respect of the $286,000 was not pleaded in the way in which, as actually pursued, it has been set out; but there was no dispute at the hearing of the appeal that the claim, as pleaded, was abandoned in favour of a claim so formulated. The trial judge upheld it, making orders accordingly. It is necessary to refer in a little detail to the facts from which this issue arises. In 1984, Mr Baker was still carrying on practice as an accountant, with two partners, Mr Schmidt and Mr Doyle. Mr Baker's share in the partnership was the dominant one, being 60%. He was becoming increasingly engrossed in the art collection, and at the same time had by then every reason to be concerned about his own financial future. On 1 July 1984, he entered into transactions by which he disposed of half of his interest in the partnership, in part to a Mr Haworth and in part to Mr Doyle. The disposition created a debt owed by Mr Haworth to Mr Baker in the sum of $80,000. By a quite complex series of transactions, involving circular dealings with a bill of exchange and an issue of worthless shares at a high premium, Mr Baker arranged for the debt of $80,000 to be extinguished on the same day and replaced by a debt owed by Mr Haworth to one of his companies, Venmere Pty Ltd. There can be no doubt that the substitution of Venmere Pty Ltd as Mr Haworth's creditor, though achieved by extremely artificial arrangements, was not a sham. For Mr Haworth certainly intended that what was done should have its actual legal effect. But the trial judge held that Mr Baker's intention was "to put this asset [i.e. the debt of $80,000] of his beyond the reach of his major potential creditor, the Taxation Department, while retaining control of it through his control of Venmere", which, through him, had "knowledge of [his] fraudulent intention". Although there was no direct assignment by Mr Baker to Venmere Pty Ltd, the judge considered the effect of the steps taken was a disposition of the chose in action by Mr Baker to Venmere Pty Ltd, which was avoided by s. 121. His view may be supported, so far as concerns the beneficial interest in the debt, as being analogous to that taken by Dixon J. in Williams v Lloyd (1934) 50 CLR 341 at 373-374. On 1 July 1985, Mr Baker sold his remaining interest in the partnership, save for a 1% interest which he kept for the next two years, in three parcels distributed between Messrs Schmidt, Doyle and Haworth. The total price was $200,000, which was left outstanding. Again, somewhat complicated steps were taken to extinguish the debts and to substitute for them debts owed to Venmere Pty Ltd, all the transactions taking place on the one day, 1 July 1985. Again, the trial judge concluded that Mr Baker was "motivated to do this by his ongoing concern to put his assets beyond the reach of the Taxation Department whose investigations he knew were continuing". And again, the trial judge held that what was done amounted to a disposition in fraud of creditors which was caught by s. 121. A few days after his receipt on 26 May 1986 of notices of amended assessments in respect of income tax totalling $2.2 million, Mr Baker took steps to have his partners' indebtedness transferred from Venmere Pty Ltd to Mrs Baker. This was achieved by circular dealings with a bill of exchange in the sum of $280,000, so as to eliminate the existing debt, and entry by the partners into loan agreements with Mrs Baker, the term of each loan being five years, at interest. Interest payments of about $3,500 per month were in fact made to Mrs Baker for a period of five months. Although Mr Baker claimed his purpose in arranging for the debt to be in substance transferred to Mrs Baker was related to her needs at the time, the judge held that in this matter also Mr Baker was motivated by his concern to erect a barrier between a substantial asset and the Taxation Department. But there was no finding that Mrs Baker was similarly motivated. Indeed, his Honour appears to have accepted that Mrs Baker had no real understanding of the nature of the arrangement. It might be thought, in this situation, to be an inevitable conclusion that Mrs Baker obtained beneficial ownership of debts totalling $280,000. As she was a volunteer, that ownership would have been subject to the right of a trustee in bankruptcy, should her husband become bankrupt, to avoid the transaction. However, the trial judge appeared to take the view that the original arrangement by which the debt was vested in Venmere Pty Ltd was void as against the Official Trustee, and that therefore the later arrangement by which the debt was further transferred to Mrs Baker must be ineffective, because "as between the Official Trustee, Baker and Venmere, it was Baker who must be regarded as having title to [the debts]." With respect, this does not necessarily follow. When property is conveyed by a fraudulent conveyance, the title of the recipient is not for all purposes void. He may have a title which can be passed on, or which enables him to turn the property to some account, or to consume it. That title subsists unless and until steps are taken to avoid the transaction. Thus, in Higgins v The York Buildings Company [1740] 2 Atk. 107; 26 ER 467 Lord Hardwicke L.C. refused to order an account of profits against a defendant who had taken property under a fraudulent conveyance, saying: "I do not know in the case of fraudulent conveyances, that this court have ever done any thing more than remove such fraudulent conveyances out of the way ... ." In In re Maddever. Three Towns Banking Company v Maddever [1884] 27 Ch D 523 at 528 North J. said of creditors who had delayed taking action against a person to whom property had been conveyed by a fraudulent conveyance: "They left him in possession, but it does not appear that they had any notice or knowledge that he did deal with the property; still, if they left him in possession they must take the consequences, and any dealing he had the power of effecting by which they could be prejudiced they must submit to. It does appear that he has effected a mortgage which may very likely embarrass the Plaintiffs very considerably, and which in fact may be good against them. But as regards him he loses nothing by the mortgage. No doubt he created a charge on the property with an obligation to pay, but he actually got the money which is the subject of the mortgage, and he was content." In Harrods, Limited v Stanton [1923] 1 KB 516, a deed of gift of furniture was held to be caught by the Statute of Elizabeth. However, Bailhache J. said (at 520-521): "But in my opinion until a deed of gift is set aside the donee under the deed of gift is the true owner of the goods comprised therein. It is true that the donee has a defeasible title, but unless and until the deed of gift is set aside the title is a good title, and if the donee conveys to a purchaser for value without notice before the deed of gift is set aside he makes a good title." McCardie J. agreed, saying: "It was an actual gift from [the fraudulent donor] to his wife, and she therefore became the owner of the goods, though it is clear that her title was subject to defeasance upon an application by the creditors of her husband under 13 Eliz. c. 5 as being in fraud of creditors." This decision was cited with approval in the joint judgment of Dixon C.J. and Fullagar J. in Brady v Stapleton (1952) 88 CLR 322 at 333-334. The position seems to be analogous to that with which the Court of Appeal dealt in the recent decision Law Debenture Trust Corporation v Ural Caspian Oil Corporation Ltd [1995] Ch 152, where Sir Thomas Bingham M.R. said (at 166) of a transfer which was defeasible (though not on the present ground - it had taken place under a tortious dealing): "It was open to Law Debenture to seek an interlocutory injunction restraining Hilldon from making onward transfer and a final injunction ordering retransfer, but application had not been made and injunctions had not been granted. Until some injunction was granted, Hilldon was in my judgment entitled to do what it would with its own." Indeed, not only is the conveyance good until set aside. As in the case of a settlement avoided under s. 120 of the Bankruptcy Act, it has been held to be good, even upon an application to set it aside, except to the extent that it proves necessary to set it aside: Ideal Bedding Company, Limited v Holland [1907] 2 Ch 157 at 173-174. If the whole value of the property involved is not required to meet the bankrupt's debts, the balance should not be taken away from the person to whom he chose (though fraudulently) to convey it. As regards s. 120 of the Bankruptcy Act, the point was settled in Barton v Official Receiver (1984) 4 FCR 380 at 386, 389 and 397, where the order was limited to what was required to meet the bankrupt's debts. On 1 December 1986, six months after the vesting of the debts in Mrs Baker, yet another circular dealing with a bill of exchange was carried out in order to eliminate the debt to Mrs Baker, and Mr Baker's partners accepted an obligation to Vestos Pty Ltd, under loan agreements entered into with it, to pay sums totalling $280,000 lent at interest for five years. Mr Baker claimed that the purpose of vesting the debt in Vestos Pty Ltd was to enable it to service interest payments due to Westpac Bank in relation to the building in which he intended the art collection to be housed. But the judge rejected this explanation, and concluded that the reason for the transaction was related to the imminence of the proceeding by the Commissioner of Taxation which ultimately led to Mr Baker's bankruptcy. In the case of this transfer also, the judge appears to have taken the view that documents predicated on the assumption that the earlier transactions had been effective (and thus that Mrs Baker was the legal owner of the choses in action constituted by the obligations to pay the sums totalling $280,000) must be ineffective because Mrs Baker was not entitled to these debts, which Mr Baker had attempted to vest in her pursuant to arrangements amounting to fraudulent conveyances. For the reasons already given, this solution of the problems in the present case cannot be accepted as soundly based in law. Until action was taken to set aside Mrs Baker's title, she was entitled to the benefit of the agreements Mr Baker's partners had made with her. In the event, Vestos Pty Ltd was not challenged by any one, in relation to the loan agreements made with it on 1 December 1986, at any time prior to the repayment of the loans. That occurred early, in September 1988, by a payment made to it by Messrs Schmidt, Doyle and Haworth of $286,000 in full and final settlement of their obligations to the company. It was not until after Mr Baker's bankruptcy on 16 January 1990 that the Official Trustee made the claim now in question in respect of this amount. The judge upheld that claim on the basis that Vestos Pty Ltd was simply not entitled to receive the payment, since in his Honour's view the right to the debts had never been effectively transferred to it. The appeal was argued on the assumption that, despite the path of almost Byzantine tortuousness by which the original debts owed by the partners to Mr Baker became transmuted into debts owed by them to Vestos Pty Ltd, what was in question was indeed a fraudulent conveyance of the debts (or rather a series of fraudulent conveyances) by Mr Baker to Vestos Pty Ltd. As has been said, there is authority to support an argument in favour of this conclusion, so far as the beneficial interests in the debts owed to Vestos Pty Ltd are concerned. The problem then is whether the law permits the Official Trustee to recover from Vestos Pty Ltd, not the actual debts, which no longer exist, but the proceeds of the payment received long before any step was taken to set aside the fraudulent conveyances. No attempt was made in this case to trace the sum of $286,000 paid to Vestos Pty Ltd, so as to show that any part of the moneys, or any assets representing the moneys or any part of them, could now be identified. It is consistent with the evidence that the whole sum may have been consumed in the payment of debts or just by payment into an overdraft account. The decision under appeal does not rest upon principles of tracing, but upon the proposition that Vestos Pty Ltd was not entitled to receive the money, and must account for it simply on that basis. (An inconsistency in the claim, as so put, is that it includes $6,000 representing a final payment of interest on the $280,000, but does not include any of the earlier payments of interest totalling a much larger amount, and indeed Mrs Baker, the recipient of about $17,500, was not made a respondent to the claim.) In Brady v Stapleton (supra), as appears from the joint judgment of Dixon C.J. and Fullagar J. (at 331), the question before the High Court was whether, in the case of a fraudulent conveyance, "the transferee is liable at law to pay to the defrauded creditors the amount of the proceeds of a sale made by him to a bona fide purchaser for value before any steps have been taken to set the transfer aside". It had been held (as appears at 332) that the actual moneys received could not be identified, so the question, as in the present case, related to "a money sum equivalent to the amount received". Clyne J., the trial judge, had held that any right to set aside the alienation had been lost when the property the subject of it had passed to a bona fide purchaser for value without notice. Dixon C.J. and Fullagar J. (at 332) considered this view "to be in accord with principle and authority". They said: "[I]f the proceeds of a sale of any of that property by the company [i.e. the recipient under the fraudulent conveyance] to a bona fide purchaser for value could be identified in the company's hands, the case of In re Mouat; Kingston Cotton Mills Co. v Mouat [1899] 1 Ch. 831 would be authority for saying that the trustee would be entitled to have handed over to him any asset in the company's hands which represented the proceeds of sale". But they added (at 333), on the basis that the proceeds of sale could not be identified, that "it would seem contrary to principle to hold that there is any personal remedy against the company". They said too (also at 333): "The truth seems to be that, although the statute uses, and most emphatically uses, the word `void', the courts have always treated a fraudulent assignment as effective unless and until a creditor or creditors intervene by levying execution or taking legal proceedings." On the basis of the cases, to which they referred in some detail, their Honours said (at 334): "And, if the position created by the statute is that which is indicated in those cases, one can find no basis for a personal liability on the part of the company in the present case. It is only on the footing that the company sold something to which it had no title or that the sale was otherwise wrongful when made, that a personal liability on the part of the company could be based. But the company, when it sold the assets in question, sold something to which it had a title, albeit a defeasible title. The sale was not wrongful when made. If the company were selling something to which it had no title, it might well be that the trustee in bankruptcy could claim to stand in the shoes of the true owner, the bankrupt, and maintain money had and received. But this is not the position. The company had a title, though a defeasible title. The defeasance has, in the event, taken place, but it cannot relate back so as to make a sale by the company wrongful and impose a personal liability on the company." It should be borne in mind, when reading the last passage, that their Honours had already said (at 332) that "[t]he company in this case must be taken to have received the property with notice of the fraudulent character of the assignment to it". The situation was thus quite similar to that to which Sir Thomas Bingham M.R. referred in the dictum cited earlier in these reasons from his judgment in Law Debenture Trust Corporation v Ural Caspian Oil Corporation Ltd, where also the party alleged to be liable had acted knowingly. In both cases, the right of title to property which, though defeasible, had not yet been subject to defeasance, prevailed to entitle the proprietor to enter into the challenged dealing. It is impossible to distinguish what was involved in Brady v Stapleton from the situation in the present case, in point of principle. In Brady v Stapleton, properties received under fraudulent conveyances were sold to innocent purchasers and the proceeds of the sales could not be identified. The vendor, though privy to the fraud, was not liable in those circumstances because at the time of the sales it was entitled to the properties, no action having been taken at that stage to set aside the fraudulent conveyances. In the present case, choses in action were held, as a result of what were assumed to be fraudulent conveyances, and they were held by a company which was privy to the fraud. However, in this case also, at the relevant time no action had been taken to set aside the company's title to the choses in action. They were then discharged by innocent third parties who made full payment to the company. There is no reason why that payment, in point of principle, should be seen as qualitatively different from the payments in question in Brady v Stapleton. One of the ways in which property may be turned to account is by sale; another, if the property consists of a chose in action, is by receiving payment of the amount due under it. If the receipt of the proceeds of a sale cannot be attacked, there is no reason why the receipt, in the case of property being a chose in action, of a payment in discharge of the debt should be liable to attack. In each case, the effect of what happens is to put the item of property that was the subject of the fraudulent conveyance out of the reach of the creditors, substituting a sum of money in the hands of the person to whom the fraudulent conveyance was made. In each case, of course, if the proceeds can be traced, the creditors retain a remedy: Brady v Stapleton at 332. As no attempt has been made to justify the judge's order by the identification of the proceeds, or any part of the proceeds, in the hands of Vestos Pty Ltd, the appeal in this respect should be allowed. Most of the time at the hearing was taken up by those aspects of the case which were concerned with the art collection, which also, on the evidence, involves a very much greater sum of money. In all the circumstances, the only order as to the costs of the appeal which should be made is that the appellants pay two thirds of the respondent's costs. As for the costs of the hearing at first instance, the order made below should be varied so as to require the appellants to pay five sixths of the respondent's costs.

I certify that this and the preceding thirty-nine (39) pages are a true copy of the Reasons for Judgment herein of the Court.

Date: 3 August 1995 Counsel for the Appellants: Mr P.D. McMurdo Q.C. with Mr M.R. Bland Solicitors for the Appellants: Power & Power Counsel for the Respondent: Mr P.A. Keane Q.C. with Mr P.J. Murphy Solicitor for the Respondent: Australian Government Solicitor Dates of hearing: 10 and 11 November 1994