Marra Capital Investments Pty Ltd, in the matter of Tri-City Trucks (NSW) Pty Ltd (in liq) v Smith

facts 4 The transactions which are the subject of this appeal concern companies in the control of members of the same family: Michael Gerace was, at all relevant times, the sole director, secretary and shareholder of Tri-City Trucks, a company which was incorporated on 12 April 2002; Ralph Gerace, who is Michael Gerace's brother, was, at all relevant times, the sole director, secretary and shareholder of Smeaton Grange. Smeaton Grange was the trustee of the Smeaton Trust which owns the property at 10 Dunn Rd, Smeaton Grange from which Tri-City Trucks' business is conducted. On 27 June 2014 Dunn Property Holdings Pty Ltd (Dunn), a company also in the control of Ralph Gerace, replaced Smeaton Grange as the trustee of the Smeaton Trust; and Rocco (also referred to as Roy) Papallo (Mr Papallo), who is Michael and Ralph Gerace's nephew, is the sole director, secretary and shareholder of STMC, which was incorporated on 1 March 2010. 5 Tri-City Trucks carried on a business of selling new and used trucks and machinery and spare parts, servicing trucks and machinery and providing finance for their purchase. The business was a family affair. Mr Papallo was employed by Tri-City Trucks from about February 2008 until 1 April 2012 when STMC acquired its business in the circumstances described at [10]- [11] below; Nick Papallo, Mr Papallo's father, was Tri-City Truck's administration manager and Michael Gerace would often confer with Ralph Gerace and Nick Papallo about the business.

Facility provided to Tri-City Trucks by St George 6 In May 2006 St George provided a commercial overdraft facility to Tri-City Trucks (TCT Overdraft) which was secured by two registered fixed and floating charges granted by Tri-City Trucks dated 31 July 2006 and 12 October 2006 respectively. 7 At some point in 2006 Smeaton Grange, in its own right and as trustee of the Smeaton Trust, entered into a guarantee and indemnity in favour of St George by which it guaranteed, in effect, payment of all amounts that at any time are payable, are owing but not currently payable, or are contingently owing by Tri-City Trucks to St George including amounts paid by St George on Tri-City Trucks' behalf. 8 On 29 November 2010 the TCT Overdraft was amended to require the provision of additional security.

Sale of Tri-City Trucks' business 9 Before the primary judge the Liquidator relied on evidence given by Mr Papallo in an affidavit sworn by him on 22 February 2016 (February 2016 Affidavit) in a proceeding commenced by Tri-City Trucks against STMC, Michael Gerace and Mr Papallo in the Supreme Court of New South Wales described at [46] below (Supreme Court Proceeding). 10 In the February 2016 Affidavit Mr Papallo gave evidence of discussions he had which led to STMC's acquisition of the Tri-City Trucks business as follows: (1) commencing in late 2009, Mr Papallo had a number of discussions with Michael Gerace and others about the future of Tri-City Trucks and putting in place a succession plan with Mr Papallo to take over the business. In one such conversation with Michael and Ralph Gerace and Nick Papallo, Mr Papallo said that he would only be comfortable taking over the business if he "had the support of" Michael and Ralph Gerace and Nick Papallo in running the dealership. Michael Gerace assured Mr Papallo that they would be there to assist him. Mr Papallo gave evidence of another conversation with those same gentlemen to the following effect: Ralph said: When Bruno finishes school, more likely that not he is going to be working here also and eventually once he has learnt the ins and outs of the dealership he will also be here to help you. [Mr Papallo] said: That sounds good. I probably couldn't see myself doing it on my own. In years to come, it would be handy to have other family involved in the dealership. Bruno is Ralph Gerace's son. As at the date of the February 2016 Affidavit he was 22 years old and employed by STMC as an assistant truck and sales manager; (2) between late 2011 and 12 March 2012 Mr Papallo had approximately four discussions with Michael Gerace about putting the succession plan in place. Mr Papallo recalls that one of those discussions was to the following effect: [Michael] Gerace said: Also, you will have to take over Tri-City's overdraft as you will need to transfer the current overdraft. The combination of the overdraft and the trade debtor/creditor adjustment should account for the total purchase price. The overdraft typically sits at $700,000 to $800,000. You will have to sort this out with St George. [Mr Papallo] said: OK that sounds good to me, I agree. I'll have to work out how to transfer the floor plans and the other finance, if we can. I'll have to work on the information that the floor plan financiers are requesting which is probably what St George will be after as well. [Michael] Gerace said: Once all of this has been organised I think that we have covered all of the areas needed to complete the deal. [Mr Papallo] said: What about goodwill? [Michael] Gerace said: Well in dealings I have had in the past I have never considered goodwill in selling the dealership. If I've offered Tri-City to others in the past without goodwill I'm not going to ask my nephew to pay goodwill. [Mr Papallo] said: Once I've sorted out all the other stuff I think we're done. (3) Mr Papallo understood, based on his discussions, that the agreement he had reached with Michael Gerace in relation to the acquisition of the Tri-City Trucks business meant that STMC would take on liabilities in excess of the value of the assets it would acquire and thus, as those liabilities would be offset against the value of the assets, no amount would be payable by STMC. 11 On or about 1 April 2012 Tri-City Trucks and STMC entered into a sale of assets agreement (Sale Agreement) which provided that, with effect from 1 April 2012, Tri-City Trucks agreed to sell and STMC agreed to buy the "Assets". STMC was required to pay the "Purchase Price" (as particularised in schedule 1) to Tri-City Trucks subject to an adjustment equal to 70% of the employee entitlements set out in cl 7.2 in relation to "Transferring Employees". Transferring Employees were employees who accepted an offer of employment from STMC and commenced employment with it on 1 April 2012. 12 In the February 2016 Affidavit Mr Papallo gave evidence that the Sale Agreement did not reflect the terms of the agreement he had reached with Michael Gerace. He said that it was a term of that agreement that STMC would be liable to pay out the TCT Overdraft and he was not aware that the Sale Agreement did not include that requirement. 13 From 1 April 2012 STMC conducted the Tri-City Trucks business and Tri-City Trucks ceased to trade. In doing so, STMC used the TCT Overdraft until 8 March 2013. 14 It is, perhaps, not irrelevant that when STMC took over the use of the TCT Overdraft it was in credit in an amount of approximately $317,000. It was the subsequent drawings on the facility by STMC over the following 11 months which created the indebtedness of approximately $800,000.00 as at March 2013. The closeness of the relationship between Michael Gerace, Ralph Gerace and Mr Papallo would indicate they were all aware of the state of the TCT Overdraft in 2012 and 2013. Moreover, they would have all been aware that STMC created the indebtedness on the TCT Overdraft whilst conducting the business on its own account.

Tri-City Trucks goes into liquidation 15 By way of originating process filed on 11 December 2012 in this Court, the Deputy Commissioner of Taxation sought orders that Tri-City Trucks be wound up and that a liquidator be appointed to it. 16 On 26 February 2013 administrators were appointed to Tri-City Trucks. 17 On 8 March 2013 the Court ordered that Tri-City Trucks be wound up and that the Liquidator be appointed.

Subsequent arrangements with St George 18 After the appointment of the Liquidator but prior to September 2013, St George, STMC, Smeaton Grange, Michael and Ralph Gerace, Nick Papallo, Mr Papallo and TCT Management Services Pty Ltd (TCT Management) entered into a deed (Overarching Deed) which governed the relationship going forward between St George and, relevantly, Smeaton Grange and STMC. The recitals to the Overarching Deed provided: Background A. On 20 February 2013 St George Bank issued the STMC Facility Offer to STMC. B. One of the new facilities offer to STMC under the STMC Facility Offer was the STMC Commercial Overdraft. C. STMC accepted the STMC Facility Offer by signing and returning the document. D. St George Bank is yet to provide the STMC Commercial Overdraft to STMC because STMC has yet to satisfy all of the conditions precedent specified in the STMC Facility Offer. E. One of the proposed guarantors of STMC under the STMC Facility Offer is Smeaton Grange. F. Tri-City Trucks was placed in liquidation on 8 March 2013. G. Smeaton Grange is a guarantor of the obligations of Tri-City Trucks to St George Bank pursuant to the TCT Guarantees. H. Pursuant to the TCT Guarantee St George Bank has demanded payment from Smeaton Grange of the Tri-City Trucks debt. I. To fund Smeaton Grange to meet its obligations under the TCT Guarantee, St George Bank has issued the Smeaton Grange Variation Facility. J. St George Bank and the Non-SGB Parties have agreed to the arrangements in this Deed concerning the provision and conduct of the STMC Facility and the Smeaton Grange Variation Facility. 19 The following definitions were included in the Overarching Deed: Non-SGB Parties means all parties to this deed apart from St George Bank Smeaton Grange Funds means the additional funds to be made available to Smeaton Grange by St George Bank under the Smeaton Grange Variation Facility Smeaton Grange Variation Facility means the extension facility to be provided by St George Bank to Smeaton Grange described in Schedule 1 STMC Commercial Overdraft means the commercial overdraft facility with a proposed limit of $1,000,000 forming part of the STMC Facility TCT Guarantee means the guarantee given by each of Tri-City Trucks and Smeaton Grange to St George Bank for the obligations of each of Tri-City Trucks and Smeaton Grange under the Tri-City Trucks Facilities Tri-City Trucks Debt means the amount of $679,874.23 as at 30 April 2013 together with interest and cost accrued but not yet allocated and interest and costs that accrue in the future 20 The Overarching Deed relevantly provided at: (1) cl 2.1 that the Non-SGB Parties acknowledged, covenanted and warranted that Smeaton Grange was liable to St George under the TCT Guarantee in the amount of the Tri-City Trucks Debt; (2) cl 3.1 that upon St George receiving executed counterparts of the Overarching Deed and the conditions precedent in the STMC Facility Agreement being met or waived, and subject to cl 3.3, St George would provide the STMC Commercial Overdraft; (3) cl 3.2 that STMC may draw the funds made available under the STMC Commercial Overdraft up to a limit of $1m less the amount outstanding under the Smeaton Grange Variation Facility from time to time; (4) cl 4 titled "The Smeaton Grange Variation Facility" that: 4.1 Subject to clause 4.4, the Smeaton Grange Variation Facility will be provided by St George Bank to Smeaton Grange upon receiving the counterpart or counterparts of this deed duly executed by all the Non-SGB Parties. 4.2 The facility limit of the Smeaton Grange Variation Facility will be the amount of the Tri-City Trucks Debt as at the date on which the Smeaton Grange Variation Facility is provided by St George Bank to Smeaton Grange. 4.3 Smeaton Grange irrevocably authorises and directs St George Bank to apply the Smeaton Grange Funds in satisfaction of the liability of Smeaton Grange to St George Bank under the TCT Guarantee. 4.4 Smeaton Grange shall grant to St George Bank priority as a secured creditor over all other secured creditors of Smeaton Grange and it is a condition precedent for the provision of the Smeaton Grange Variation Facility that all other secured creditors of Smeaton Grange acknowledge the priority of St George Bank by executing a deed of priority acceptable to St George Bank in its discretion. (5) cl 5 for mutual releases between St George and the Non-SGB Parties in relation to the TCT Guarantee. In particular, cl 5.1 provided that upon receiving the Smeaton Grange Funds, and subject to no claim being made by the Non-SGB Parties in relation to the receipt of the Smeaton Grange Funds, St George releases Smeaton Grange from its obligations under the TCT Guarantee. 21 The provision by St George of the STMC Commercial Overdraft to enable it to pay Smeaton Grange the monies it had drawn down on the Smeaton Grange Variation Facility constituted what the parties referred to as the "second leg" of the transaction contemplated by the Overarching Deed. 22 On 11 September 2013 Kemp Strang, the solicitors for St George, wrote to Tri-City Trucks notifying it that, because of the appointment of the Liquidator, an event of default had occurred under each of the facilities made available by St George to Tri-City Trucks, namely the TCT Overdraft, a bank guarantee facility and a multi option facility. Kemp Strang said that as a result those facilities were no longer available to Tri-City Trucks and St George could now demand repayment of the monies outstanding under the facilities. St George demanded the immediate payment of $821,988.99, being the amount outstanding under the TCT Overdraft. 23 Also on 11 September 2013 Kemp Strang wrote to Smeaton Grange informing it, among other things, that: Pursuant to a Guarantee and Indemnity executed by Smeaton Grange, Smeaton Grange guaranteed the obligations of Tri-City Trucks (NSW) Pty Limited (In Liquidation) (Tri-City Trucks) to St George Bank. On 8 March 2013, a liquidator was appointed to Tri-City Trucks pursuant to an order of the Federal Court of Australia. On 11 September 2013, St George Bank demanded from Tri-City Trucks the amount owing under a Commercial Overdraft Facility it had provided to Tri-City Trucks. The amount demanded from Tri-City Trucks was $821,988.99, being the amount outstanding under the Commercial Overdraft Facility as at 11 September 2013. St George Bank has provided Smeaton Grange with financial accommodation in the form of, among other things, two Commercial Bill facilities as follows: … 24 St George, STMC, Smeaton Grange, Michael and Ralph Gerace, Mr Papallo, Nick Papallo and TCT Management subsequently entered into a deed of variation (Deed of Variation) which varied the terms of the Overarching Deed. The recitals to the Deed of Variation included: B. Since the execution of the Overarching Deed by the Non-SGB Parties, the amount owing by Smeaton Grange under the TCT Guarantee has increased from $679,874.23 (plus interest and costs) as at 30 April 2013 to $813,299.16 (plus interest and costs) as at 25 June 2013. C. As a consequence of that increase, Smeaton Grange has requested that St George Bank provided additional finance to it to meet its obligations to St George under the TCT Guarantee. 25 The Deed of Variation provided that the Overarching Deed be varied by, among other things: (1) replacing the definition of Tri-City Trucks Debt so that it reflected the amount owing as at 25 June 2013 of $813,299.16 together with interest and costs accrued but not yet allocated and interest and costs that accrue in the future; and (2) increasing the amount of the Smeaton Grange Variation Facility limit to $820,000. 26 In December 2013 Smeaton Grange issued a drawdown notice to St George for $733,175 to be paid from account no. 553 710 731 (SG Account) to account no. 552 595 786 in the name of Tri-City Trucks (TCT Overdraft Account). St George statements of account show that on 11 and 19 December 2013 respectively the amounts of $733,175 and $10,076.95 were debited to the SG Account and credited to the TCT Overdraft Account, resulting in the closure of that account. 27 By letter dated 7 January 2013, which the parties agreed should have been dated 7 January 2014 (St George Letter), St George informed Smeaton Grange and STMC that: … In accordance with the Overarching Deed and the Facility Offer Letter dated 27 June 2013, following settlement the amount of $733,175.00 was drawn from the Smeaton Grange Commercial Loan - Variable (account number 553 710 731) (Smeaton Grange Commercial Loan) and credited to the Commercial Overdraft account 552 595 786. This was done so to satisfy Smeaton Grange's guarantor obligations in respect of Tri-City Trucks (NSW) Pty Ltd (In Liquidation). The Tri-City Trucks (NSW) Pty Ltd (In Liquidation) Account 552 595 786 has been closed. 28 The St George Letter then noted that "[i]n accordance with the Overarching Deed and the Facility Offer Letter dated 27 June 2013, the second leg of the transaction … [needed] to occur". That required the balance of the Smeaton Grange commercial loan facility to be transferred to the STMC Commercial Overdraft as a result of which the Smeaton Grange commercial loan would be repaid in full, the SG Account closed and the limit of the STMC Commercial Overdraft would increase from $180,000 to $1m. 29 On 4 and 5 March 2014 there was an email exchange between Mr Papallo and Guy Howes, senior manager in St George's Loans Management Unit, concerning a proposed "refinance of the exposure". In his email dated 4 March 2014 Mr Papallo informed Mr Howes that they were seeking "approval form (sic) another financier for the Smeaton Grange loan". In his response dated 5 March 2014 Mr Howes queried whether, in light of the proposed refinance, there was "any point in completing the second leg of the restructure - moving the $743k debt from Smeaton Grange Holdings Pty Ltd to STMC?" 30 On 28 March 2014 St George wrote to each of Smeaton Grange, STMC and TCT Management informing them that St George required each of them to refinance all facilities by 13 June 2014. 31 In the February 2016 Affidavit Mr Papallo gave the following evidence about the Overarching Deed and the subsequent dealings with St George: 103. The effect of the financial arrangement set out in paragraphs 81 to 102 above was that, in accordance with the agreement reached with [Michael] Gerace as set out above, the overdraft of Tri-City Trucks was paid out by Smeaton Grange, effectively on behalf of STMC. 104. STMC had the ultimate obligation to repay those funds and that arrangement was recorded as a loan provided by Smeaton Grange in the financials of both STMC and Smeaton Grange. Exhibited at pages 211 to 218 of RP-1 is a copy of STMC's Management Report for the year ended 30 June 2014 which identifies a loan by Smeaton Grange in the sum of $948,974.53. Exhibited at pages 219 to 226 of RP-1 is a copy of Smeaton Grange's Management Report for the year ended 30 June 2014 which identifies an amount of $948,974.53 owed by STMC.

Smeaton Grange's accounts and St George statements of account 32 The management reports for the "Trustee for the Smeaton Trust" for each of the years ended 30 June 2014 and 30 June 2015 showed the following: (1) the profit and loss statement for the year ending 30 June 2014 recorded under "other income" interest received of $36,912.01. Note 2 to the accounts indicated that of that amount, $36,238.02 came from "other corporations"; (2) the profit and loss statement for the year ending 30 June 2015 recorded under "other income" interest received of $6,977.06. Note 2 to the accounts indicated that of that amount, $6,889.75 came from "other corporations"; and (3) the balance sheets as at 30 June 2014 and 30 June 2015 recorded as a non-current asset under the heading "trade and other receivables" an amount of $948,974.53 against STMC. 33 Smeaton Grange's general ledger for the St George commercial loan for the period 1 July 2013 to 20 April 2017 showed that: on 11 and 31 December 2013 amounts of $733,175.00 and $10,076.95 respectively were credited to STMC; and on the last day of each month up to 31 July 2014 amounts were credited to St George with a corresponding debit entry at the beginning of the subsequent month against "Sydney Trucks & Machinery". 34 St George statements of account for STMC for the period 1 January 2014 to 28 February 2015 for account no. 553 413 569 each show an entry "LOAN PMT 553710731 SMEATON GRANGE H" against which an amount is debited. St George statements of account for the period 1 January 2014 to 31 August 2014 for the SG Account each show an entry "SYDNEY TRUCKS LOAN PMT 553710731" against which an amount is credited in each month which corresponds to the debit amount for those same months in the STMC statements of account. 35 In his evidence given before the primary judge, Mr Papallo said that he was unaware at the time that interest payments were being made by STMC to Smeaton Grange; he became aware of those payments about eight months later; notwithstanding that, he believed that it was appropriate for STMC to make the payments; and they were made "to cover the interest portion of the overdraft loan" which he understood to mean "the payments made to the Tri-City overdraft account". Mr Papallo understood that STMC was liable to repay those monies as part of the Overarching Deed. He said: …it was essentially going to go ahead and have that overdraft in its own facility in the near future, but that did not proceed in the end.

Mr Carlo's evidence 36 Vincenzo Mario Carlo, a partner of GDC Chartered Accountants, has been the accountant for the Smeaton Trust since about 2007 and for STMC since about 2011. He was the accountant for Tri-City Trucks from about 2007 to 2012. In his affidavit sworn on 12 April 2017, Mr Carlo gave evidence that: (1) at the time he prepared the ledgers and balance sheets for the Smeaton Trust for the 2014, 2015 and 2016 financial years, he treated the transfer of $733,175 from the Smeaton Grange commercial loan to the TCT Overdraft as a loan from the Smeaton Trust to STMC; (2) he initially did this for the 2014 year because he expected that the "second leg" of the transaction would take place. For each subsequent financial year, he continued to treat the transfer from the Smeaton Trust to the TCT Overdraft as a loan from Smeaton Grange; (3) he realised that this was an error on his part and that the "second leg" of the transaction did not occur as the Smeaton Grange commercial loan was never transferred to the STMC Overdraft and the Smeaton Grange commercial loan was not repaid to the Smeaton Trust; (4) his mistake was that he overlooked that the Smeaton Trust refinanced with the National Australia Bank (NAB) by which time he knew that the "second leg" of the transaction had not occurred and was never going to occur; (5) the true position is that there was no loan from the Smeaton Trust to STMC for $733,175 but only a debt owed by Tri-City Trucks to the Smeaton Trust for that amount for the payment made by Smeaton Trust to St George for the TCT Overdraft; (6) the balance sheets and ledgers for the Smeaton Trust referred to by Mr Carlo earlier in his affidavit need to be corrected to reflect the true position that the amount of $733,175 remains owing by Tri-City Trucks to the Smeaton Trust, rather than by STMC to the Smeaton Trust; and (7) at the time of swearing his affidavit, as far as Mr Carlo was aware, Tri-City Trucks remained indebted to the Smeaton Trust in respect of the amount drawn down from the Smeaton Grange commercial loan and credited to the TCT Overdraft in the sum of $733,175. 37 Mr Carlo was cross-examined. He accepted that when he prepared the accounts for STMC and the Smeaton Trust he relied on instructions received from the director of STMC and the trustee of the Smeaton Trust in relation to transactions entered into by those entities. In relation to the arrangements with St George, Mr Carlo gave the following evidence: Q: And as you understood it, the liability for paying out the Tri-City overdraft to St George was the responsibility of STMC; is that not so? A: Was meant to be, yes. Q: Yes. STMC, as you understood it, was responsible for paying out the overdraft facility, correct? A: I believe that was that - what was meant to happen, yes. Q: Yes. And - but the way in which that transaction was structured with the bank, to your knowledge, was this - that the moneys were actually drawn down on a facility in the name of - of the Smeaton Trust; correct? A: I don't recall the specifics that they discussed with the banks. That was them and the banks. My recollection of it was that STMC was - to achieve its own overdraft facility and pay out the TCT overdraft. Q: Yes. And in the meantime, whilst that process was happening, STMC borrowed moneys from the Smeaton Trust in order to discharge its obligations under the Tri-City overdraft; correct? A: I'm not sure that's the case. That's how we treated it, but that - I don't. Q: But that's how you did treat it in the accounts. Yes? A: That's how we treated it. Q: Yes? A: Yes. Q: And so her Honour should proceed on a basis that your understanding of the transaction was this, wasn't it, that Smeaton - the Smeaton Trust loaned moneys to SMTC and STMC used those moneys to discharge the liability under the Tri-City overdraft, correct? A: In a round about way, correct. Q: Yes. And to accommodate for that transaction, the STMC paid interest to the Smeaton Trust in respect of the facility that had been drawn down with St George Bank in the name of the Smeaton Trust, correct? A: That - mate, that's how we interpret it, yes. Q: Well, not only is it how you interpret it, that's, in fact, what happened? A: That's how we recorded it, yes. Q: Yes? A: That's how we interpret it. 38 Mr Carlo was shown statements of account issued by St George for Smeaton Grange and STMC. His evidence in relation to those statements of account included that: Q: And so, as you understood it, what had been arranged was that there was a loan between STMC and the Smeaton Trust for the moneys that appear on the first statement, the 733,000 and the $10,000. And in respect of the interest that was charged by the bank in respect of that drawdown - all those drawdowns, that interest was ultimately paid by STMC; correct? A: Yes. That's how we understood it. Q: Yes. And that was because, as you understood it, the transaction was a loan, wasn't it, yes? A: Yes. That's how we understood it. 39 Mr Carlo also gave the following evidence about the nature of the transaction between Smeaton Grange and STMC: Q: Yes. And so at the time when the relevant moneys were paid from or drawn down on the Smeaton Trust facility, as you understood it, what had been agreed was that those moneys were being loaned to STMC? A: That's how I understood it, yes. Q: Yes. And they were being loaned to STMC, as you understood it, because STMC had the liability under the Tri-City overdraft? A: ....the agreement. Yes. Q: Yes. They were the ones that were spending the moneys on the overdraft, as you understood it? A: As I understood it, yes. … Q: - - - what I'm suggesting to you is this: that in respect of the subsequent leg of this transaction, that is, that STMC would open up its own overdraft and then use the moneys to pay out the Smeaton Trust facility - that was to be done by way of a repayment by STMC of the moneys it had borrowed from the Smeaton Trust. Correct? A: Yes. Yes. Q: And all that happened was that it just didn't pay those moneys at that time, did it? A: It didn't get the loan, no. Q: No? A: Yes. Q: But it still owed the moneys to the Smeaton Trust? A: ...yes. Q: Yes. That's correct, isn't it? A: Yes. 40 However, when it was put to Mr Carlo that, contrary to the evidence in his affidavit, there was no error in treating the transfer from Smeaton Grange to the TCT Overdraft as a loan from Smeaton Grange to STMC, Mr Carlo gave the following evidence: Q: Yes. You see, I suggest to you that the second leg had nothing to do, other than a timing of when STMC would pay out its loan. Do you agree with that? A: Yes. Q: Yes. And so there was, let me suggest to you, no error on your part when you treated those moneys as loans in the respective accounts for STMC and the Smeaton Trust, was there? A: No, I disagree. The loan by STMC was made properly to Tri-City Trucks, to pay out the loan on behalf of Smeaton Trust. Q: I understand that STMC was paying out - - -? A: Tri-City Trucks - - - Q: - - - the Tri-City Trucks overdraft? A: - - - to pay out Smeaton Trust. Q: But STMC borrowed the moneys from the trust, didn't it? A: I don't recall STMC borrowing money from the trust. Q: Well, sir, I suggest to you that you've already given answers, on half a dozen occasions - - -? A: Yes. But - - - Q: - - - consistent with that proposition? A: Okay. Yes. Q: Do you disagree with it? Yes. It was a loan from the trust to STMC, wasn't it? A: To continue using an overdraft that was under the name of Tri-City Trucks. Q: To pay out the overdraft in the name of Tri-City Trucks, wasn't it? A: That's what we suggested, yes. Q: Yes. Well, that's what was agreed, as you understood it, wasn't it? A: Yes. 41 Mr Carlo later said that he treated the TCT Overdraft as a liability of STMC and that was his "interpretation". He gave the following evidence: Q: And there is nothing unusual about, in effect, moneys being actually paid from the Smeaton Trust into the Tri-City account, as being treated as a loan by the Smeaton Trust to STMC, to be used to pay out the Tri-City overdraft, is there? A: Maybe …..be. But I don't know what their thoughts were at the time, no. Q: Yes. Well, you've- - -? - - - already given evidence, haven't you, that in respect of the actual overdraft standing to the Tri-City facility - that was a liability of STMC, wasn't it? A: That's the way I treated it, yes. Q: Yes. Well, when you say that's the way- - -? A: That was my interpretation. Q: Sorry. Had you finished? A: That was my interpretation. Q: Yes. And you had that interpretation because of discussions that you had with the various directors of STMC and the trustee of the Smeaton Trust. Correct? A: Expectations. Yes. Q: Yes. And they were the ones that were telling you how you should treat transactions, weren't they? A: Yes. 42 The primary judge found that ultimately Mr Carlo maintained that his accounting treatment reflected his expectation "that STMC was going to pay out the overdraft". Her Honour did not accept Mr Carlo's explanation for his "error" in the way he prepared the ledgers and balance sheets for the Smeaton Trust for the 2014, 2015 and 2016 financial years.

Subsequent steps taken by the Liquidator and Smeaton Grange 43 In his report to creditors dated 13 January 2015 the Liquidator reported on the Sale Agreement and the causes of action that may be available to Tri-City Trucks arising out of it against STMC as well as various causes of action against the directors of Tri-City Trucks and STMC and potentially the advisers to Tri-City Trucks, among others. 44 On 27 January 2015 Smeaton Grange lodged an informal proof of debt with the Liquidator in the amount of approximately $1.195m for "debt, rental expenses & bank overdraft". The Liquidator accepted in cross-examination that from this date he was aware that Smeaton Grange had paid out the TCT Overdraft. 45 A meeting of creditors of Tri-City Trucks was held on 28 January 2015. The minutes of that meeting record that Smeaton Grange was admitted to vote at the meeting for an amount of $363,065.27 representing the "proved value of Smeaton Grange's claim and related to an amount paid to the ATO by Smeaton Grange on behalf of [Tri-City Trucks]". At the meeting resolutions were passed authorising Mr Morris to enter into costs agreements and a funding agreement in relation to the proposed litigation. 46 On 5 June 2015 Tri-City Trucks commenced the Supreme Court Proceeding. As against STMC, Tri-City Trucks sought judgment for the amount payable under the Sale Agreement and for the credit amount of the TCT Overdraft as at 1 April 2012, which monies it alleged STMC had used, and declarations and orders the effect of which were to require STMC to account to it for monies collected by it from Tri-City Trucks' trade debtors. Each of STMC and Mr Papallo filed a defence in which they relevantly pleaded that STMC assumed Tri-City Trucks' liabilities, including the TCT Overdraft and that, if STMC was liable to pay any amount pursuant to the Sale Agreement, it was entitled to a set-off in respect of the payments made for the TCT Overdraft owed to St George. 47 On 10 August 2015 STMC filed a cross-claim in the Supreme Court Proceeding against Tri-City Trucks and Vince Macri, the solicitor who drafted the Sale Agreement. As against Tri-City Trucks, STMC alleged: Assumption by STMC of liability for St George Bank Limited Overdraft 13. From at least late 2006 St George Bank Limited provided an overdraft facility to Tri­City. 14. After Tri-City was placed into liquidation, St George Bank Limited demanded payment of the monies owing to it. 15. In furtherance of the essential terms, STMC was to, and did, assume responsibility for the payment of all amounts payable by Tri-City to St George Bank Limited in respect of the overdraft facility provided by St George Bank Limited to Tri-City. 16. STMC assumed responsibility for the payment of all amounts payable by Tri-City to St George Bank Limited in respect of the overdraft facility in the following circumstances: (a) In or about February 2013 STMC applied to St George Bank Limited for a commercial overdraft facility. (b) The application was part of a suite of facilities sought by STMC and Smeaton Grange Holdings Pty Ltd (Smeaton Grange); (c) After negotiations had between STMC, Smeaton Grange and St George Bank Limited, St George Bank Limited agreed to issue facilities to STMC and to Smeaton· Grange (the New Facilities). (d) The New Facilities, in effect, provided that: (i) Smeaton Grange would apply the funds advanced to it pursuant to the new facility to discharge its obligations as guarantor of the debt owed by Tri-City to St George Bank Limited; and (ii) STMC would apply the funds advanced to it pursuant to the new facility to discharge the debt Smeaton Grange incurred in order to discharge its obligations as guarantor of the debt owed by Tri-City to St George Bank Limited. (e) The ultimate effect of the application of the funds pursuant to the New Facilities was that STMC discharged in full the obligations of Tri-City to St George Bank Limited pursuant to the overdraft. Particulars Overarching Deed dated 5 June 2003 between St George Bank Limited, STMC, Smeaton Grange and others. Deed of Variation dated 18 September 2013 between St George Bank Limited, STMC, Smeaton Grange and others. 17. On or about December 2013, monies were was (sic) transferred from a Smeaton Grange account with St George Bank Limited to the Tri-City St George overdraft account with the effect that the overdraft account was paid in full and the account was closed. Particulars The sum of $733,175 was paid on 11 December 2013. The sum of $10,076.95 was paid on 19 December 2013. 18. Upon payment of the monies identified in paragraph 17 above, STMC became indebted to Smeaton Grange for the total sum of $743,251.95. Particulars Overarching Deed dated 5 June 2003 between St George Bank Limited, STMC, Smeaton Grange and others. Deed of Variation dated 18 September 2013 between St George Bank Limited, STMC, Smeaton Grange and others. Letter dated 7 January 2013 (sic 2014) from St George Bank Limited to STMC and Smeaton Grange. 19. The payment of Tri-City's overdraft account and the corresponding assumption of the liability by STMC, referred to at paragraphs 17 and 18 above, represented a component of the consideration advanced by STMC to Tri-City for the purchase of the assets of Tri-City, in accordance with paragraph 5 above. 20. In the premises, the payments identified in paragraphs 17 above were made by STMC pursuant to an essential term under the Agreement, referred to at paragraph 5 above. 21. In the event that the Court does not order rectification of the Sale Agreement in accordance with the Agreement, Tri-City has been unjustly enriched by the amount of $743,251.95 paid by STMC as referred to in paragraph 17 above and Tri-City is liable to STMC to: (a) apply the sum of $743,251.95 as a set off to any amount of damages awarded against STMC in favour of the plaintiff; or (b) repay the sum of $743,251.95 as monies had and received. 22. In the alternative, in circumstances where STMC has paid in full the monies owed by·Tri-City to St George Bank Limited pursuant to the Tri-City overdraft, as pleaded at paragraph 17 above, STMC: (a) is entitled to all of the benefits of the securities held by St George Bank Limited in respect of the Tri-City overdraft; (b) by operation of s 3 of the Law Reform (Miscellaneous Provisions) Act 1965 is entitled to an implied assignment of all rights held by St George Bank Limited in respect of the Tri-City overdraft; and (c) is entitled to be subrogated in equity to the security held by St George Bank Limited in respect of the Tri-City overdraft. 23. In consequence of the facts pleaded at paragraph 22 above, STMC is a secured creditor of Tri-City to the amount of $743,251.95. 48 On 15 September 2015 O'Neill Partners, solicitors for Smeaton Grange, wrote to Watson Mangioni, solicitors for the Liquidator, alleging that because it paid an amount of $743.251.95 to St George in full and final satisfaction of Tri-City Trucks' obligations pursuant to the TCT Overdraft, Smeaton Grange was entitled to be subrogated to any securities given by Tri-City Trucks to St George. 49 On 15 December 2015 Watson Mangioni responded to O'Neill Partners denying any entitlement on the part of Smeaton Grange to be subrogated to any securities given by Tri-City Trucks to St George and noting that Smeaton Grange had not suffered any loss as STMC had repaid to Smeaton Grange the debts it incurred and that Smeaton Grange is not a secured creditor of Tri-City Trucks. 50 On 16 April 2016 Smeaton Grange and Marra entered into a deed of assignment of debt (Deed of Assignment) pursuant to the terms of which, in consideration of payment of $10.00, Smeaton Grange assigned to Marra all of its "right, title and interest in the debt and subrogated rights together with all interest which has accrued or which may accrue in the future on the debt and all amounts payable by the debtor". The term "debt" is not defined but it is apparent from the recitals that it is intended to be the amount that Smeaton Grange paid to St George to pay out the TCT Overdraft. 51 By letter dated 18 April 2016 Marra informed the Liquidator that it "has had the overdraft/facilities (St George Bank) of [Smeaton Grange] … assigned to [Marra]". 52 On or about 24 October 2016 the Supreme Court Proceeding settled and the parties to it entered into a deed of settlement and release pursuant to the terms of which STMC, Michael Gerace and Mr Papallo: (1) were required to pay a sum of money to Tri-City Trucks; (2) agreed to surrender any security interest and any legal or equitable interest any of them may have over the assets of Tri-City Trucks; and (3) agreed to procure from, among others, Smeaton Grange an agreement that it would withdraw any proof of debt lodged in the liquidation of Tri-City Trucks and not lodge a proof of debt.

the primary judge's reasons 53 The primary judge found that there was "no doubt that the $743,251.95 used to pay out the overdraft facility was paid from Smeaton Grange's funds, borrowed from St George for that purpose" and that there was "also no doubt that Smeaton Grange was a guarantor of [Tri-City Trucks'] obligations to St George under the TCT overdraft facility": see PJ [78]. 54 The primary judge accepted that the matters identified by Marra, set out at PJ [81], supported a conclusion that the payments to St George to discharge the TCT Overdraft were made by Smeaton Grange on its own behalf. However, her Honour was of the opinion that the evidence that the payments were made on behalf of STMC pursuant to a loan from Smeaton Grange to STMC was stronger. At [83] of her Honour's reasons, the primary judge referred to the following matters in support of that conclusion: (1) Tri-City Trucks' administrators' file note dated 1 March 2013 recorded a statement made to the administrators to the effect that no cash consideration was paid for the sale of Tri-City Trucks' assets because the liabilities assumed by STMC exceeded the value of the assets acquired. The primary judge found that the file note was consistent with the evidence given by Mr Papallo in the February 2016 Affidavit of the arrangement between him and Michael Gerace and noted that, on Mr Papallo's version of events, the discharge of the TCT Overdraft by STMC was required to give effect to that arrangement and supported the contention made previously to Tri-City Trucks' administrators and subsequently in the Supreme Court Proceeding that STMC had no outstanding obligation to Tri-City Trucks for the purchase of Tri-City Trucks' assets; (2) the 14 monthly payments totalling $85,692.36 made by STMC to Smeaton Grange from January 2014 to February 2015 were consistent with the asserted loan to STMC. Her Honour noted that Mr Carlo treated the payments as payments of interest and, even if they were made by way of direct debit, of which Mr Papallo was unaware for some time, that did not detract from the "probable character of the payments as interest for Smeaton Grange's advance of funds to STMC"; (3) Smeaton Grange did not assert at the January 2015 creditors' meeting that it had any right of subrogation in relation to the pay out of the TCT Overdraft in December 2013; (4) Mr Carlo treated the transfer of $733,175 from the Smeaton Grange commercial loan to the TCT Overdraft as a loan from the Smeaton Trust to STMC when he prepared the ledgers and balance sheets for the 2014, 2015 and 2016 financial years. Her Honour referred to Mr Carlo's understanding that the TCT Overdraft was meant to be the responsibility of STMC and that Smeaton Grange lent money to STMC which it then used to discharge the liability under the TCT Overdraft; (5) in 2015 STMC, Michael Gerace and Mr Papallo defended the Supreme Court Proceeding on the basis of a claim that STMC had assumed responsibility for the TCT Overdraft as part of its agreement made in 2012 for the purchase of Tri-City Trucks' assets and in reliance upon the contention that STMC discharged the obligations of Tri-City Trucks to St George Bank under the TCT Overdraft. Her Honour noted that STMC's defence was supported by reference to the fact that both STMC and Smeaton Grange had recorded the pay out as a loan; (6) in the February 2016 Affidavit Mr Papallo gave detailed evidence on oath of an arrangement between St George, STMC, Smeaton Grange and others pursuant to which Smeaton Grange was to be granted a variation of an existing facility which would be applied to pay out the TCT Overdraft on behalf of STMC on the basis that STMC would repay Smeaton Grange the amount paid; (7) the intended "second leg" of the transaction is consistent with a loan from Smeaton Grange to STMC, which was an earlier part or "first leg" of the transaction. It was intended to discharge a loan from Smeaton Grange to STMC using funds to be advanced by St George; (8) her Honour did not accept that the fact that the "second leg" of the transaction did not occur provided a basis for concluding that there was no loan from Smeaton Grange to STMC. Her Honour found that when the TCT Overdraft was paid out both Smeaton Grange and STMC expected that there would be a "second leg" and that it was on the basis of that expectation that Smeaton Grange was prepared to make the loan to STMC. The primary judge also found that "[t]here [was] no contemporaneous evidence to suggest that the parties made an agreement that the advance would not be considered as a loan in the event that the 'second leg' did not occur". Accordingly, her Honour rejected Mr Carlo's evidence that Smeaton Grange's refinancing with the NAB and the fact that the "second leg" did not "and was never going to occur" were matters that affected his earlier and correct understanding that Smeaton Grange lent money to STMC which STMC used to discharge the liability under the TCT Overdraft; and (9) it made commercial sense that Smeaton Grange would loan funds to STMC to pay out the TCT Overdraft, whether the payment was for the purchase of Tri-City Truck's assets or for STMC's use of the TCT Overdraft, because such a loan would provide the more likely avenue by which Smeaton Grange could obtain repayment of the funds that needed to be paid by reason of its guarantee. Her Honour noted that STMC was conducting a business while, on the other hand, there was no reason to think that Smeaton Grange had any expectation in December 2013 that the liquidation of Tri-City Trucks would provide the means to recover funds. 55 Her Honour referred to two further matters in support of her conclusion. First, St George's characterisation of the payments was not determinative and reflected the opinion of its officer who looked to Smeaton Grange to repay the TCT Overdraft pursuant to the guarantee. Her Honour found that STMC had no legal obligation to St George to repay the TCT Overdraft and the fact that the funds were drawn from a facility extended by St George to Smeaton Grange, leaving it exposed to liability to St George, was not inconsistent with a loan from Smeaton Grange to STMC. 56 Secondly, that the principal of the loan had not been repaid and there was an absence of loan documentation were not matters of significant weight given the context of the familial relationships between the directors of STMC, Smeaton Grange and Tri-City Trucks. The primary judge discounted Mr Papallo's evidence that STMC had only a "moral obligation" to Smeaton Grange arising from the payout of the TCT Overdraft, noting that that evidence was given with the acceptance that the loan was recorded in the management accounts in anticipation of the "second leg" of the transaction. 57 The primary judge concluded that the payment of $743,251.33 in discharge of the TCT Overdraft was made by STMC from funds loaned to it by Smeaton Grange as trustee for the Smeaton Trust, that Tri-City Trucks did not incur a debt of $743,251.33 to Smeaton Grange and Smeaton Grange did not acquire rights of subrogation by reason of the discharge of the TCT Overdraft.

Marra's contentions 58 Marra's notice of appeal raises five grounds of appeal challenging the primary judge's characterisation of the payments made by Smeaton Grange to St George to discharge the TCT Overdraft and her Honour's conclusion that Smeaton Grange was not entitled to be subrogated to the rights of St George against Tri-City Trucks. 59 Marra submitted that the primary judge erred in finding that the payments that discharged the TCT Overdraft were made "on behalf of STMC" or "by STMC", rather than by Smeaton Grange as surety. It further submitted that the evidence did not support the primary judge's finding and compelled the contrary conclusion, namely that the payments were made by Smeaton Grange as surety. Marra said that the error could be characterised in three ways: first, the primary judge failed to apply "settled principles" of general law to "incontrovertible facts"; secondly, the error is one of fact insofar as the primary judge misidentified the maker of the payment; and thirdly, the primary judge made an error of law insofar as she, in effect, characterised Smeaton Grange as an agent of STMC in making the relevant payments. 60 Marra made detailed submissions as to why it said the primary judge had erred in her identification of the maker of the payments and her characterisation of the payments. 61 First, Marra submitted that the primary judge should have found that Smeaton Grange as surety paid the debt owed by Tri-City Trucks to St George in full and was subrogated to St George's rights as secured creditor against the principal debtor, Tri-City Trucks, for two reasons, namely: (1) St George, Smeaton Grange and STMC expressly agreed by the Overarching Deed that Smeaton Grange would pay out the TCT Overdraft pursuant to its obligations as surety and Smeaton Grange did so as surety; and (2) neither the subjective beliefs of STMC's director, Mr Papallo, the external accountant, Mr Carlo, and Tri-City Trucks' former director, Michael Gerace, nor the representations made by Michael Gerace, Mr Papallo and STMC in pleadings in other proceedings are relevant to the proper characterisation of the payments. Marra said that the primary judge erred in relying on those matters to displace the parties' contractually prescribed characterisation of the payments made by Smeaton Grange to St George to discharge the TCT Overdraft. 62 Secondly, Marra submitted that the finding at PJ [83] that Smeaton Grange made the payments that discharged the TCT Overdraft "on behalf of STMC" is erroneous. It submitted that there was no evidence of any express agency agreement and that it could not be implied from the facts of the case. 63 In relation to the former, Marra submitted that neither the terms of the Overarching Deed nor any other document recorded any such agreement; there was no evidence of any oral conversation between the directors and the controlling minds of Smeaton Grange and STMC giving rise to any such agreement; and the Liquidator did not adduce evidence from Ralph Gerace. It contended that the Liquidator's failure to adduce evidence in chief from Mr Papallo to prove an oral agreement with Ralph Gerace gave rise to an inference that such evidence would not have assisted him to establish the existence of such an agency arrangement. 64 In relation to the latter, Marra submitted that the facts positively contradicted the ability to imply an agency agreement in that Smeaton Grange could not have made the payments "on behalf of" STMC when STMC had no obligation to make them as found by the primary judge at PJ [84]. Marra contended that the legal construct that Smeaton Grange made the relevant payments "on behalf of" STMC not only lacked support but was contradicted by the finding at PJ [84], the terms of the Overarching Deed and the evidence. 65 Thirdly, Marra submitted that the primary judge's conclusion at PJ [83] and [86] is inconsistent with her findings at PJ [36] and [78] and that contradiction can only be resolved by an unarticulated and unsubstantiated hypothesis that the funds used to pay the TCT Overdraft were first lent by St George to Smeaton Grange; on lent by Smeaton Grange to STMC; and then used to pay out the TCT Overdraft. Marra said that, apart from lacking an evidentiary basis and commercial sense, such a hypothesis is contradicted by cl 4.3 of the Overarching Deed, which the primary judge found was carried into effect. Marra also contended that, even if there was an unwritten arrangement whereby STMC had to reimburse Smeaton Grange the amount paid or to be paid by Smeaton Grange to discharge the TCT Overdraft, such an arrangement would not displace Smeaton Grange's right of subrogation, absent an express term to that effect. 66 Finally, Marra submitted that the primary judge's finding that there was a "loan" lacked a proper evidentiary basis. It relied on six matters which it said led to that conclusion. We do not propose to set those matters out here but address them below.

The nature of the appeal 67 Marra's success in this appeal depends on it establishing that the primary judge erred in her characterisation of the payment made to discharge the TCT Overdraft. There is, as we understand it, no challenge to the underlying facts on which her Honour's findings were based. Rather, Marra challenges the primary judge's evaluation of those facts. 68 Marra relies on Fox v Percy (2003) 214 CLR 118 at [25] and [28] where, in addressing the power and functions of an appellate court, Gleeson CJ, Gummow and Kirby JJ said: 25 Within the constraints marked out by the nature of the appellate process, the appellate court is obliged to conduct a real review of the trial and, in cases where the trial was conducted before a judge sitting alone, of that judge's reasons. Appellate courts are not excused from the task of "weighing conflicting evidence and drawing [their] own inferences and conclusions, though [they] should always bear in mind that [they have] neither seen nor heard the witnesses, and should make due allowance in this respect". In Warren v Coombes, the majority of this Court reiterated the rule that: [I]n general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge. In deciding what is the proper inference to be drawn, the appellate court will give respect and weight to the conclusion of the trial judge but, once having reached its own conclusion, will not shrink from giving effect to it. As this Court there said, that approach was "not only sound in law, but beneficial in … operation". … 28 Over more than a century, this Court, and courts like it, have given instruction on how to resolve the dichotomy between the foregoing appellate obligations and appellate restraint. From time to time, by reference to considerations particular to each case, different emphasis appears in such reasons. However, the mere fact that a trial judge necessarily reached a conclusion favouring the witnesses of one party over those of another does not, and cannot, prevent the performance by a court of appeal of the functions imposed on it by statute. In particular cases incontrovertible facts or uncontested testimony will demonstrate that the trial judge's conclusions are erroneous, even when they appear to be, or are stated to be, based on credibility findings. (footnotes omitted) 69 In Aldi Foods Pty Ltd v Moroccanoil Israel Ltd (2018) 358 ALR 683; [2018] FCAFC 93 at [43]-[54] Perram J (Allsop CJ and Markovic J agreeing) discussed the nature of appellate review where the conclusions reached by the Court below involved an evaluative assessment of unchallenged facts. At [45]-[48] his Honour said: 45 How should this Court in the exercise of its appellate jurisdiction approach the review of such findings? One begins with the proposition that this Court's appellate jurisdiction involves an appeal by way of rehearing (Branir Pty Ltd v Owston Nominees Pty Ltd (No 2) (2001) 117 FCR 424; [2001] FCA 1833 (Branir) at [20] per Allsop J, Drummond and Mansfield JJ agreeing). Next, it is established that in an appeal by way of rehearing what is involved is the correction of error (Branir at [22]). Error is not demonstrated merely because the appellate court disagrees with the primary judge. At the risk of stating the obvious, error is demonstrated where it is shown that some aspect of the trial judge's reasoning is wrong. How the trial judge's reasoning may be shown to be wrong depends on what that reasoning is about (Branir at [24]). At one extreme, where no deference at all is shown to a trial judge's conclusions, are errors of law. An appellate court is not influenced in its view of the law by the conclusions of a trial judge and, in this case, mere disagreement on the part of the appellate court with the trial judge will justify the conclusion that an error has been made. 46 At the other extreme are a trial judge's finding of fact where the credibility of witnesses is involved. In such cases, it is accepted that the trial judge enjoys very considerable advantages over an appellate court by reason of having seen the witnesses and having been immersed in the milieu of the trial. Where this is so it is commonly said that the appellate court will not depart from the trial judge's conclusions unless they are shown to be wrong by reference to 'incontrovertible facts or uncontested testimony' (Fox v Percy (2003) 214 CLR 118; 197 ALR 201; 38 MVR 1; [2003] HCA 22 (Fox v Percy) at [28]) or otherwise be 'contrary to compelling inferences' (Fox v Percy at [29]). 47 Between these two extremes lies a grey area in which the amount of deference shown to a trial judge's conclusions is a function of the relative advantage enjoyed by the trial judge over the appellate court. That the appellate court can review in such cases is not in doubt. Speaking of the question of when an appellate court can review inferences drawn from facts already found, the High Court explained it this way in Warren v Coombes (1979) 142 CLR 531 at 551; 23 ALR 405 at 423 (Warren v Coombes): [I]n general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge. In deciding what is the proper inference to be drawn, the appellate court will give respect and weight to the conclusion of the trial judge, but, once having reached its own conclusion, will not shrink from giving effect to it. 48 It has been subsequently explained, if it were necessary, that the last sentence means that the appellate court should not eschew review once it has perceived error (see Minister for Immigration, Local Government and Ethnic Affairs v Hamsher (1992) 35 FCR 359 at 369; 26 ALD 406 per Beaumont and Lee JJ; Branir at [14]-[15]).

The doctrine of subrogation 70 Ultimately, Marra seeks to be subrogated to the rights of St George against Tri-City Trucks. That, in turn, depends on a finding that Smeaton Grange made the payments in its capacity as guarantor to discharge the TCT Overdraft. In Bofinger v Kingsway Group Ltd (2009) 239 CLR 269 (Bofinger) the Court (Gummow, Hayne, Heydon, Kiefel and Bell JJ) considered the operation of the doctrine of subrogation. At [4] and [6]-[8] their Honours said: 4 The right of subrogation in favour of a surety recently was described by Sir Andrew Morritt V-C as follows: The right operates so as to confer on the surety who has paid the debt in full the rights against the debtor formerly enjoyed by the creditor or by imposing on the creditor the obligation to account to the surety for any recovery in excess of the full amount of his debt. (Emphasis added.) That statement is important for this case because the indebtedness to the first mortgagee had been paid in full and the securities held by the first mortgagee discharged. The remedies equity provides must, as will appear, found upon the obligation of the first mortgagee to account. … 6 In Orakpo v Manson Investments Ltd Buckley LJ remarked that the relevant equitable considerations respecting a claim to subrogation may differ, for example, where the basis of subrogation is a contract of indemnity, or concerns ultra vires borrowings by a corporation, or the lending of funds to complete a purchase or pay off an existing mortgage. To that list may be added the subrogation of creditors of a trustee to the trustee's lien over the trust property. Therefore, if for no other reason, it is unhelpful to speak of subrogation as if it were a "cause of action" in the sense recognised at common law. 7 In its widest sense, that apparently used by Buckley LJ in Orakpo, an indemnity includes a contract obliging one person to make good the loss suffered by another, and contracts of guarantee and those of insurance fall within that description. The authorities dealing with the writing requirements of s 4 of the Statute of Frauds 1677 with respect to guarantees (but not indemnities) sought to distinguish between guarantees and indemnities by emphasising the secondary liability of the guarantor and the primary liability of the indemnifier. But as Mason CJ pointed out in Sunbird Plaza Pty Ltd v Maloney, there is in this distinction "an element of ambiguity … unless the reference to primary liability is understood to mean ultimate liability". His Honour added: Once default has occurred, the party having the benefit of the guarantee can call on the guarantor to honour his promise before calling on the principal contracting party to perform his obligation, but the guarantor, having honoured his promise, can hold the principal contracting party to account by virtue of the doctrine of subrogation. 8 This notion of the ultimate liability of the principal provides a foundation for the application of subrogation in aid of the surety. Thus, where a claim to the benefit of securities held by the creditor is made by a surety, it was said by Turner V-C that the equity for subrogation is derived from the obligation of the principal debtor to indemnify the surety. There is "nothing hard" in the act of a court of equity in placing the surety in exactly the situation of the creditor with respect to those securities, because it would be unconscientious for the debtor to recover back the securities from the creditor while the debtor was obliged to indemnify the surety. (footnotes omitted) 71 At [52] the High Court of Australia identified two exclusions to the application of the doctrine as follows: The respondents seek to outflank any conclusion such as that just expressed in several ways. A starting point is provided by Equity Trustees Executors & Agency Co Ltd v New Zealand Loan & Mercantile Agency Co Ltd where Lowe J said: When a guaranteed debt is paid by the surety he is entitled, unless the right is excluded by agreement or his conduct makes it inequitable to enforce it, in respect of the amount he has paid under his guarantee to the securities which the creditor holds for the debt guaranteed. This right arises not from any agreement between the surety and the creditor, though it may be excluded by agreement between them. It rests on equitable principles." (Emphasis added.) That statement of principle is plainly correct. The respondents, however, draw from the emphasised words two propositions of exception and rely upon them as an answer to any success the appellants' submissions otherwise might enjoy. First, the respondents say any right of the appellants was excluded by agreement, in particular by the terms of their guarantee of the second mortgage. Secondly, the respondents contend that this and other circumstances rendered it inequitable as between the appellants and the first mortgagee to rely upon Drew v Lockett. … (footnotes omitted)

consideration 72 Marra contended that this case involves "a simple application of settled principle to incontrovertible facts". The "settled principle" relied on by Marra is as set out in Bofinger at [4]-[8] (see [70] above). The "incontrovertible facts" relied on by Marra are: (1) the establishment of the TCT Overdraft and the guarantee provided by Smeaton Grange in 2006; (2) the entry into of the Sale Agreement on or about 1 April 2012; (3) the appointment of the Liquidator to Tri-City Trucks on 8 March 2013, which was an event of default under the TCT Overdraft and the two fixed and floating charges held by St George; (4) the entry into of the Overarching Deed in or about 5 June 2013 by, relevantly, St George, Smeaton Grange and STMC and, in particular, cl 4.3 thereof; (5) that the "second leg" of the transaction provided for in the Overarching Deed never occurred; (6) the demand issued on 11 September 2013 by St George for Tri-City Trucks to make immediate payment of the amount outstanding under the TCT Overdraft; (7) the payments made by Smeaton Grange on 11 and 19 December 2013 to St George in accordance with the Overarching Deed discharging Tri-City Trucks' indebtedness to St George under the TCT Overdraft; and (8) the letter sent by St George in January 2014 (wrongly dated 7 January 2013) confirming that the funds drawn from Smeaton Grange's account were credited to the TCT Overdraft to satisfy Smeaton Grange's guarantor obligations in respect of Tri-City Trucks. 73 In short Marra said that, based on those facts, having discharged Tri-City Trucks' indebtedness to St George, Smeaton Grange acquired rights of subrogation which would not be excluded by the existence of a debtor creditor relationship between Smeaton Grange and STMC. Marra further submitted that it was bound to succeed before the primary judge for three reasons: first, there was no agreement excluding the right of subrogation; secondly, the primary judge rejected the Liquidator's allegation of inequitable conduct; and thirdly, the fact of the Deed of Assignment pursuant to which Smeaton Grange assigned its rights which it acquired when it paid out the TCT Overdraft. 74 But this is not a case where all of the facts were "incontrovertible" and uncontested such that the primary judge would find that Smeaton Grange acquired rights of subrogation upon discharging the TCT Overdraft. The facts highlighted by Marra cannot be viewed in isolation. Marra fails to include, nor have any regard to, other facts, some of which were disputed, which were considered by the primary judge. It was the consideration of the totality of the evidence which led her Honour, in the context of what she recognised as a somewhat finely balanced case, to make the findings she did, including, critically, that the evidence supporting the existence of a loan from Smeaton Grange to STMC was stronger than the evidence on which Marra relied in support of its proposition that Smeaton Grange paid out the TCT Overdraft as surety. 75 In summary, Marra says that the primary judge erred in taking certain matters into account or in her treatment of aspects of the evidence. Having considered the evidence before the primary judge and the parties' submissions, in our opinion, there was no error in her Honour's treatment of the aspects of the evidence identified by Marra. The inferences drawn from the facts as found by the primary judge were open and we would not depart from the conclusion she reached. Our reasons for coming to this view follow. 76 It is convenient to commence with the Overarching Deed on which Marra placed significant reliance. Taken in isolation, that deed would establish the case propounded by Marra both before the primary judge and on appeal. But as the primary judge found, the transaction the subject of the Overarching Deed had two legs. The first put in place the Smeaton Grange Variation Facility to be used to pay out the TCT Overdraft, and the second was to create the STMC Commercial Overdraft which, subject to satisfying certain conditions precedent, would be advanced to STMC by St George and was to be applied to pay out the Smeaton Grange commercial loan. 77 As the primary judge found, the objective purpose of the "second leg" was that STMC would repay Smeaton Grange the payments it made to discharge the TCT Overdraft and is consistent with a loan. Marra submitted that it was also consistent with it having a right of subrogation. That may be so absent the other factors which led the primary judge to find that there was a loan from Smeaton Grange to STMC. Putting that to one side, if, as Marra contended, there was no loan, the "second leg" of the transaction would have no purpose and would not have been included in the Overarching Deed because, as submitted by the Liquidator, liability for repaying Smeaton Grange would have rested with Tri-City Trucks not STMC. 78 Central to the appeal is Marra's contention that the primary judge's finding that there was a loan between STMC and Smeaton Grange lacked a proper evidentiary basis. That contention cannot be sustained. 79 First, the absence of a written agreement evidencing the loan from Smeaton Grange to STMC did not preclude the primary judge from determining that there was such an agreement. As submitted by the Liquidator, the absence of a written agreement meant that the determination of who made the payments and their character required consideration of the objective facts and conduct of the relevant parties viewed in light of the surrounding circumstances with a view to deciding whether, by inference or implication, the agreement contended for by the Liquidator existed: see Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 at [369]. Her Honour undertook that task at PJ [83]-[87] setting out those facts and other matters which led her to infer that there was a loan from Smeaton Grange to STMC. Her Honour had regard to the parties' conduct, including what was said and done, what was not said and not done and the commercial circumstances and aims of the parties. 80 At PJ [85] her Honour found that, in the circumstances, the lack of loan documentation was not a matter of significant weight having regard to the familial relationships between the directors of STMC, Smeaton Grange and Tri-City Trucks. Marra contended that familial relationships were simply not relevant to an assessment of the characterisation of the payments. But they are part of the relevant surrounding circumstances and context in which the transactions occurred. Insofar as those relationships were concerned the evidence before the primary judge was that: (1) Nick Papallo was Tri-City Trucks' administration manager and Michael Gerace often conferred with him and Ralph Gerace about the business; (2) Mr Papallo was employed by Tri-City Trucks until 1 April 2012 when STMC acquired the Tri-City Trucks business pursuant to the Sale Agreement; and (3) the transfer of the business from Tri-City Trucks to STMC followed family discussions over a number of years between Michael and Ralph Gerace, Nick Papallo and Mr Papallo about succession planning. Those discussions, which were set out in the February 2016 Affidavit, included statements made by Michael and Ralph Gerace that they would support Mr Papallo's takeover of the business and a statement by Ralph Gerace that he expected his son to be involved in the business at a later stage, which in fact occurred. 81 Mr Papallo gave evidence before the primary judge who accepted the truthfulness of the portions of the February 2016 Affidavit that were accepted into evidence and which her Honour said were "generally unchallenged during Mr Papallo's cross-examination". 82 Secondly, the absence of an oral conversation between Ralph Gerace, the sole director of Smeaton Grange, and Mr Papallo, the sole director of STMC, creating the loan arrangement, of itself is not conclusive. 83 Parts of Mr Papallo's February 2016 Affidavit were read into evidence, he was examined by the Liquidator, cross-examined by Marra and then, with leave, cross-examined by the Liquidator in relation to one aspect of his evidence given in cross-examination. Mr Papallo's evidence given in the February 2016 Affidavit was that the arrangements between St George, STMC, Smeaton Grange and other parties reflected in the Overarching Deed were put in place in order to enable the TCT Overdraft to be paid out; that those arrangements included the grant of a variation of an existing Smeaton Grange facility by St George to be applied to pay out the TCT Overdraft on behalf of STMC; and that the effect of the Overarching Deed and the financial arrangements that followed was that the TCT Overdraft was paid out by Smeaton Grange on behalf of STMC. 84 In his oral evidence Mr Papallo said that he had the discussions with Mr Howes from St George about a loan for the purposes of paying out the TCT Overdraft and the establishment of the STMC Commercial Overdraft - in other words Mr Papallo was the point of contact and was driving negotiations in respect of St George's dealings with STMC and Smeaton Grange. He said that he understood that Smeaton Grange paid out the TCT Overdraft on behalf of STMC; that STMC was liable to Smeaton Grange to repay the monies that it had paid into the TCT Overdraft; and that, although he could not recall, it was possible that the proposal involved STMC paying interest to Smeaton Grange, which he acknowledged was paid for the duration of the facility that was operated by Smeaton Grange. 85 Mr Papallo's evidence was given and considered against the background that, pursuant to the agreement struck with Michael Gerace at the time of the acquisition of the Tri-City Trucks business, STMC took over the TCT Overdraft which was then in credit and in the interim had the use of that facility. The indebtedness created in that account was generated by STMC's operation of the Tri-City Trucks' business and was, in substance, its liability. 86 Neither party called Ralph Gerace to give evidence despite the fact that, according to Mr Marra, he was available to give evidence. The Liquidator submitted that, as sole director of Smeaton Grange, the assignor, he was in Marra's "camp". Marra submitted that the fact of the assignment did not put Ralph Gerace in its camp and the circumstances did not make it "unrealistic" for the Liquidator to call him. We do not accept that to be so. Marra asserts that it has acquired certain valuable rights as a result of the Deed of Assignment which it entered into with Smeaton Grange. Ralph Gerace as the sole director of Smeaton Grange, the company that made the payments and was the assignor of the rights, is clearly in Marra's camp and it would be unrealistic in the circumstances of this case for the Liquidator to call him: see Manly Council v Byrne [2004] NSWCA 123 at [53]. Despite it being open for the primary judge to do so, her Honour did not draw an inference that Ralph Gerace's evidence would not have assisted Marra's case. 87 The primary judge placed reliance on the defences filed by Michael Gerace, STMC and Mr Papallo in the Supreme Court Proceeding. Smeaton Grange was not a party to the Supreme Court Proceeding and thus nothing can be inferred from those pleadings insofar as its position is concerned. Those defences were not treated as admissions on the part of, relevantly, STMC and Mr Papallo by the primary judge: see Laws v Australian Broadcasting Tribunal (1990)170 CLR 70 at 85-86. Her Honour considered them as part of the factual matrix which led her to find that there was a loan from Smeaton Grange to STMC. The defences were each verified by affidavits sworn on 7 August 2015. Her Honour could infer that the allegations contained therein were properly made. 88 Thirdly, we turn to consider the financial records and book entries, another factor on which the primary judge relied to draw an inference that there was a loan from Smeaton Grange to STMC. Marra submitted that those records and book entries do not create an agreement nor establish indebtedness or payment of money in discharge of indebtedness. 89 Both parties relied on Manzi v Smith (1975) 132 CLR 671 (Manzi) which involved an application by a liquidator for a declaration that a payment made by the company was void as a preference and that further payments made by the company to other individuals were a debt owed by the recipients of those payments. The only evidence before the trial judge in that case were entries in the company's books of account. Barwick CJ observed that it was not shown that the appellants were parties to, had agreed to or had knowledge of the journal entries. At 673-674 his Honour said: … But whilst the entries might in appropriate circumstances afford evidence against the company, they did not constitute evidence in favour of the company and against the appellants; certainly they did not constitute a payment of $35,859 on the 22nd February 1974; nor evidence of such a payment. We were referred to cases in which a payment of money was held to have been made by means of entries in books of account. But in those cases the entries represented the agreement of the appropriate parties… These decisions, quite clearly, are not authority for the proposition for which they were advanced, namely, that a payment of money was made by the making by the company of a journal entry in the books of account without reference to, or without the agreement of, the persons said to be the recipients of the money. The company's assertions in its books of account did not establish the indebtedness of the appellants or any payment of money in discharge of that indebtedness. 90 In Electrical Enterprises Retail Pty Ltd v Rodgers (1988) 15 NSWLR 473 (Electrical Enterprises) Kearney J said at 489, referring to Manzi, that book entries relied on in that case of themselves did nothing to create an agreement and that to have any effect they must represent the agreement between the parties involved. His Honour also observed at 489 that "provided there is a real agreement or liability the parties can in order to avoid circuity, put their agreement into effect through entries in books of account which represent the balance struck between them". His Honour made the following findings, also at 489: It seems to me that the subject entries in the books of NEE, supported by the annual accounts and supplemented by the explanations given by Mr Langley to Mr Nygh when considered in the light of corresponding entries in the books of EER, and its annual accounts together with the consolidated accounts of EEL provide evidence establishing an agreement for NEE to on-sell to EER at cost the stock purchased by NEE from suppliers, and consequentially to render the sales to and receipts of payments by franchisees, transactions undertaken by NEE as agent on behalf of EER. Within a group of associated companies, it is not surprising for internal arrangements to be made informally. Here the inference is readily available of compliant directors of the respective companies agreeing to or tacitly accepting the arrangements propounded by Mr Wright. Mr Langley's statements to Mr Nygh support this conclusion as do the recorded transactions and discussions of the directors of EEL and the adoption by the directors of the various companies of the annual accounts based on such arrangements having been made. 91 A number of observations can be made about the role of the book entries in this case. In contrast to the position in Manzi, the primary judge did not rely on the entries to find that there was a loan agreement between STMC and Smeaton Grange. Her Honour considered that the entries were one element of a number which led her to infer that Smeaton Grange had agreed to loan monies to STMC to pay out the TCT Overdraft. So much is evident from her Honour's reasons at PJ [83]. As was the case in Electrical Enterprises, it was open to her Honour to find that the internal arrangements between STMC and Smeaton Grange were made informally but were supported by the entries in the accounts of STMC and Smeaton Grange. 92 Marra submitted, relying on Cross on Evidence (11th edition, Lexisnexis Butterworths Australia, 2017) at [41130], that s 1305(1) of the Corporations Act 2001 (Cth) (Corporations Act) "does not create any presumption that the books are prima facie true and correct or accurate". It further submitted, citing Whitton v Regis Towers Real Estate Pty Ltd (in administration) (2007) 161 FCR 20 (Whitton) at [59], that the books can be no more than prima facie evidence that an unknown person formed an opinion on an undisclosed basis that the given figure should appear in the accounts. 93 Section 1305(1) of the Corporations Act provides that a book kept by a body corporate under a requirement of the Corporations Act is admissible in evidence in any proceeding and is prima facie evidence of any matter stated or recorded in the book. That section does not make a company's books conclusive evidence of the matters contained therein but recognises that the books are prima facie evidence of the matters stated in them. The weight to be given to that evidence is "to be measured in accordance with the common sense of the tribunal of fact": Australian Securities and Investments Commission v Rich (2009) 236 FLR 1; [2009] NSWSC 1229 at [397]. 94 In Whitton commencing at [50] Buchanan J (with whom Marshall and Tracey JJ agreed save in one respect which is not presently relevant) considered the primary judge's finding that a proof of debt provided by the administrator of Regis Towers Real Estate Pty Ltd (Regis Towers) to Mr Whitton, the trustee of Mr Rose's bankrupt estate, was rightly rejected by the trustee. His Honour observed that the primary judge made his decision principally because the books of Regis Towers, which had been relied on for the purpose of the proof of debt, were insufficiently reliable. At [52] his Honour referred to the primary judge's findings, including that Regis Towers had conceded that "there weren't proper books and records kept in relation to [Regis Towers]" and that the administrator had reported the deficiency in the books and records to the Australian Securities and Investments Commission and Regis Towers' creditors. In those circumstances, the primary judge held that the evidentiary value of Regis Towers' books was significantly eroded, comparing s 1305 of the Corporations Act. 95 At [55] Buchanan J described the accounts observing that they were compiled two years after the year to which they related and included "many journal entries, including 'balancing entries' which were the outcome of an undisclosed process of judgment or inference by the staff in the accounting firm which compiled the accounts retrospectively". At [59] his Honour said: The particular entry (and many others) is not a direct record of an actual transaction. Section 1305 of the Corporations Act does not elevate the entry to prima facie evidence that any such transaction (or series of transactions) exists. It can be no more than prima facie evidence that an unknown person formed an opinion on an undisclosed basis that, in the absence of any directly recordable transaction nevertheless, as a balancing entry, such a figure should appear in the accounts. Mr Harris took the matter no further and, indeed, eroded any weight the entry may have had. 96 But, as the Liquidator submitted, Whitton is a different case to this one. Here the accounts were drawn by Mr Carlo. Mr Carlo gave evidence on behalf of Marra which included, as summarised by the primary judge at PJ [83(4)], that when he prepared the ledgers and balance sheets for the Smeaton Trust for the 2014, 2015 and 2016 financial years, he treated the transfer of $733,175 from Smeaton Grange to the TCT Overdraft as a loan from the Smeaton Trust to STMC; that he understood that the TCT Overdraft was meant to be the responsibility of STMC; and that Smeaton Grange loaned money to STMC which it, in turn, used to discharge the liability under the TCT Overdraft. 97 Contrary to Marra's submission, in our opinion, Mr Carlo's evidence that he made an error in his preparation of the ledgers and balance sheets for the 2014, 2015 and 2016 financial years because he overlooked Smeaton Grange's refinancing with the NAB and because the "second leg" of the transaction did not occur and was never going to occur did not erode any weight that those ledgers and balance sheets may have had. First, her Honour did not accept that evidence. Secondly, unlike in Whitton, there was no evidence that the accounts were compiled retrospectively or that they were the subject of an undisclosed process of judgment or inference. On the contrary, Mr Carlo's evidence was that he had been the accountant for STMC and the Smeaton Trust for some time and that he prepared the ledgers and balance sheets on instructions from those entities. 98 Fourthly, the primary judge found that the 14 monthly payments by STMC to Smeaton Grange, which Mr Carlo treated as interest payments, were consistent with the asserted loan to STMC. Marra conceded that those payments may evidence a loan by Smeaton Grange to STMC but it also contended that Mr Papallo, STMC's sole director, gave evidence that the payments may have been set up by a STMC employee in anticipation of the "second leg" of the transaction which never ultimately proceeded and the monthly transfers were never cancelled. The primary judge found that even if they were made by way of a direct debit of which Mr Papallo was unaware for some months, that did not detract from their probable character as interest payments. The monthly payments from STMC, each equating to the interest payable by Smeaton Grange to St George on its facility, were entirely consistent with a loan. Further, Mr Papallo's evidence was that it was appropriate to make the payments because it was his understanding that STMC was liable to Smeaton Grange for the monies it had paid into the TCT Overdraft. 99 Fifthly, we do not accept Marra's submission that the primary judge's reasoning at PJ [83(8)] was unsound. Marra's criticism is focused on her Honour's observation that there was no contemporaneous evidence to suggest that the parties made an agreement that the advance would not be considered as a loan in the event that the "second leg did not occur". It contended that the primary judge sought to support the finding of a loan by pointing to the absence of a document negating its existence which effectively put the onus on it to prove the non-existence of a loan and contradicted the principle that the party asserting must prove. However, her Honour's reasoning must be considered in context. 100 At PJ [83(8)] the primary judge first, did not accept that the fact that the "second leg" of the transaction did not occur provided a basis for concluding that there was no loan and secondly, accepted that, when the TCT Overdraft was paid out, Smeaton Grange and STMC expected that there would be a "second leg". Her Honour found that it was on that latter basis, namely the expectation that there would be a "second leg" to the transaction, that Smeaton Grange was prepared to make the loan to STMC. The impugned reasoning then follows. Thereafter, her Honour rejected Mr Carlo's evidence that Smeaton Grange's refinancing with the NAB and the fact that the "second leg" did not proceed and was never going to proceed were matters that affected his earlier and correct understanding that Smeaton Grange lent money to STMC which STMC used to discharge its liability under the TCT Overdraft. There was no reversal of the onus of proof. 101 Her Honour did not rely on a lack of evidence to find the existence of a loan. Rather, as submitted by the Liquidator, the primary judge was explaining why Mr Carlo's evidence about why he said he was mistaken in his preparation of the ledgers and balance sheets for the 2014, 2015 and 2016 financial years should be rejected. 102 Sixthly, that the primary judge gave weight to what occurred at the creditors' meeting in January 2015 in the context of an enquiry into whether there was a loan agreement between Smeaton Grange and STMC does not undermine the findings her Honour made. 103 Seventhly, there is no inconsistency in the primary judge's findings at, on the one hand, PJ [36] and [78] and, on the other, PJ [83] and [86]. At PJ [36] and [78] her Honour finds that the payments that discharged the TCT Overdraft came from an account in the name of Smeaton Grange as trustee of the Smeaton Trust from funds borrowed from St George. At PJ [83] and [86] the primary judge finds that the payments made by Smeaton Grange were made on behalf of STMC pursuant to a loan from Smeaton Grange. That the payments came from a Smeaton Grange account is not inconsistent with a finding that Smeaton Grange had agreed to loan those monies to STMC which in turn would make the payment so as to discharge its liability to Tri-City Trucks for its use of the TCT Overdraft. As the primary judge found at PJ [83(9)], it made commercial sense that Smeaton Grange would loan the funds to STMC because the loan would have provided the more likely avenue by which Smeaton Grange could obtain repayment of the funds for which it was liable by reason of its guarantee.

other matters 104 As identified at [3] above, the Liquidator has filed a notice of contention. In Part A of the notice of contention the Liquidator identifies further matters that were before the primary judge which he contends her Honour was entitled to and ought to have relied on in support of the finding that the payments made by Smeaton Grange were made on behalf of STMC. Some of those matters were addressed in the Liquidator's submissions and are referred to in these reasons. Parts B and C concern the findings made by the primary judge at PJ [88] and [92] respectively that, if she was wrong about the characterisation of the payments and Smeaton Grange paid out the TCT Overdraft as surety, then it acquired a right of subrogation and there was no abuse of process. 105 Given the conclusion we have reached about the finding that there was a loan from Smeaton Grange to STMC we do not propose to address the notice of contention. 106 In its notice of appeal Marra also seeks an order that there be an inquiry pursuant to s 536 of the Corporations Act (now s 90-5 in Sch 2 of the Corporations Act, Insolvency Practice Schedule (Corporations)) into the conduct of the Liquidator in the liquidation of Tri-City Trucks or alternatively, that the matter be remitted to a single judge of this Court for consideration of whether an order should be made for such an inquiry. Although Marra's written submissions refer to the fact that it raised its concerns about the Liquidator's conduct in closing submission with the primary judge and provided this Court with a brief summary of steps it said the Liquidator took, it did not address in its oral submissions nor, in more than a cursory way, in its written submissions why such an order should be made. We would decline to make that order in the context of this appeal. If Marra wishes to pursue relief of that nature, it is able to do so by way of a separate proceeding.

conclusion 107 The appeal should be dismissed and Marra should be ordered to pay the Liquidator's costs. We will make orders accordingly. I certify that the preceding one hundred and seven (107) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Davies, Markovic and Derrington.