Pascoe v Voukidis Holdings Pty Ltd

Parties' submissions 158 The Respondents contended that Peter and Kathy were in default under the Loan Agreement because they did not use their "best endeavours" (clause 3.2) to provide a mortgage in registrable form to Voukidis Holdings. They also contended that, notwithstanding Peter and Kathy's failure to provide a mortgage in registrable form, the terms of the Loan Agreement created an immediate equitable security interest in the Property. 159 The Applicant submitted that clause 3.1 is properly to be regarded as a "contingent condition", in that it merely provides that the performance of two of the obligations of the lender (to provide funds, and to observe the requirement regarding the timing of repayment under clause 6.1) are subject to the contingency that the lender has received the documents prescribed by sub-clauses 3.1(a)-(b). He submitted that this construction is supported by the best endeavours clause, on the basis that if clause 3.1 was a "promissory term" there would be no need for a best endeavours clause. 160 The Applicant further submitted, by reference to Joseph Finance and Investment Pty Ltd v Eastwood Retirement Pty Ltd [2023] VSC 731, that a best endeavours clause does not impose an absolute obligation, with the result that the appropriate remedy is damages and not specific performance. The Applicant concluded that: "The provision of a mortgage in registrable form would have effected the creation of an equitable security, but a less than absolute obligation to provide it does not achieve the same result".

Consideration 161 As noted above, based on the authorities (principally Investwell) the critical question is whether the Loan Agreement evinces an intention to create an immediate proprietary interest or an immediate right of recourse to identifiable property. 162 Clause 3.1 did not create an equitable mortgage or equitable charge. The Loan Agreement does not evince an intention on the part of the parties for the creation of an immediate proprietary interest or right of recourse against the Property. Rather, the effect of clause 3.1 was that Voukidis Holdings was not obliged to advance funds to Peter and Kathy if no mortgage in registrable form was provided. The clause did not itself purport to create a security interest in the Property. The evident intention of the clause was to entitle Voukidis Holdings to insist on provision of a mortgage in registrable form before advancing funds under the Loan Agreement. 163 The fact that the Loan Agreement did not specify the terms of the proposed mortgage, but instead referred to it being "on terms acceptable to the Lender" also tends against any conclusion that the parties intended to create an immediate interest in the Property (as was the case in Investwell at [32]). 164 The existence of a best endeavours obligation, imposed by clause 3.2, does not assist the Respondents. It does not impose an absolute obligation. All that clause does is to require Peter and Kathy to use their best endeavours to provide (inter alia) a mortgage in registrable form which, had it been provided, would have created a security interest in the Property. 165 Consequently, and in accordance with the position agreed by the parties, the Loan Deed and Mortgage are void and Voukidis Holdings stands as an unsecured creditor. 166 It also follows that the first caveat (lodged on or about 25 August 2020) was not supported by the Loan Agreement, which was the stated basis for the interest claimed. 167 However, it is still necessary to determine whether the Loan Agreement should be set aside, as the sum for which Voukidis Holdings can prove in the bankruptcies of Peter and Kathy as an unsecured creditor depends on the interest rate to be applied. If the Loan Agreement is not set aside, the amount will be calculated in accordance with the contractual terms of the Loan Agreement (including as to compounding interest).

SHOULD THE LOAN AGREEMENT BE SET ASIDE ON THE BASIS OF HAVING BEEN PROCURED BY UNCONSCIONABLE CONDUCT AND/OR UNDUE INFLUENCE? 168 The Applicant contended that the Loan Agreement should be set aside on the basis that it was procured by unconscionable conduct and/or undue influence. 169 On the basis of my earlier finding that the Applicant has not established that the Loan Agreement was not entered into on the date on the face of the document, the circumstances relevant to whether a presumption of undue influence arises, and the facts relevant to whether the Loan Agreement was procured by unconscionable conduct, are to be established as at 2010. (If that finding is wrong and the Loan Agreement was entered into in 2020, then it was common ground that the Loan Agreement would be void under s 120 of the Act and it would not be necessary to consider undue influence or unconscionable conduct.)

Unconscionable conduct 170 The Applicant contended that the Loan Agreement was procured by unconscionable conduct on the part of Voukidis Holdings, acting via Christos. That claim was advanced in equity and also pursuant to statute. While the Applicant pleaded reliance on s 12CA of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act), he made an oral application for leave to also rely on the equivalent provisions of the Australian Consumer Law (ACL) in the event that the Respondents were correct in their contention that the ASIC Act provisions did not apply because Voukidis Holdings did not provide a "financial service" pursuant to s 12BAB(9) of the ASIC Act. The grant of leave was not resisted beyond counsel for the Respondents submitting that Voukidis Holdings was not acting "in trade or commerce" in entering into the Loan Agreement. 171 The principles concerning unconscionable conduct in equity are reasonably well-established. Those principles were summarised by the plurality in Thorne v Kennedy (2017) 263 CLR 85; [2017] HCA 49 (Thorne v Kennedy) at [37]-[40] (Kiefel CJ, Bell, Gageler, Keane and Edelman JJ) (citations omitted): Unconscionable conduct There was no controversy on this appeal concerning the principles of unconscionable conduct in equity. Those principles were recently restated by this Court in Kakavas v Crown Melbourne Ltd. A conclusion of unconscionable conduct requires the innocent party to be subject to a special disadvantage "which seriously affects the ability of the innocent party to make a judgment as to [the innocent party's] own best interests". The other party must also unconscientiously take advantage of that special disadvantage. This has been variously described as requiring "victimisation", "unconscientious conduct", or "exploitation". Before there can be a finding of unconscientious taking of advantage, it is also generally necessary that the other party knew or ought to have known of the existence and effect of the special disadvantage. In Commercial Bank of Australia Ltd v Amadio, Deane J said that the equitable principles concerning relief against unconscionable conduct are closely related to those concerned with undue influence. The same circumstances can result in the conclusion that the person seeking relief (i) has been subject to undue influence, and (ii) is in a position of special disadvantage for the purposes of the doctrine concerned with unconscionable conduct. For instance, in Diprose v Louth [No 1], the trial judge, King CJ, observed that both doctrines were satisfied where the defendant "was in a position of emotional dominance which gave her an influence over the [plaintiff] which she exercised unconscientiously to procure the gift of the house". Before the High Court in that case, Mr Diprose relied only upon the ground of unconscionable conduct. Although undue influence and unconscionable conduct will overlap, they have distinct spheres of operation. One difference is that although one way in which the element of special disadvantage for a finding of unconscionable conduct can be established is by a finding of undue influence, there are many other circumstances that can amount to a special disadvantage which would not establish undue influence. A further difference between the doctrines is that although undue influence cases will often arise from the assertion of pressure by the other party which might amount to victimisation or exploitation, this is not always required. In Commercial Bank of Australia Ltd v Amadio, Mason J emphasised the difference between unconscionable conduct and undue influence as follows: "In the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position." 172 A party seeking to set aside a transaction on the basis of unconscionable conduct in equity must establish: (1) that one party to the transaction is placed at a "special disadvantage" vis-à-vis the other by reason of some condition or circumstance which seriously affects the ability of the innocent party to make a judgement as to their own best interests; and (2) that the other party unconscientiously took advantage of that special disadvantage: Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 (Amadio) at 462 (Mason J); Thorne v Kennedy at [38] (Kiefel CJ, Bell, Gageler, Keane and Edelman JJ). For a finding of unconscientious taking of advantage to be made, it is also generally necessary that the other party knew or ought to have known of the existence and effect of the special disadvantage: Thorne v Kennedy at [38], citing Amadio at 462. 173 Determining cases of unconscionable conduct: [C]alls for a precise examination of the particular facts, a scrutiny of the exact relations established between the parties and a consideration of the mental capacities, processes and idiosyncrasies of the [weaker party]. Such cases do not depend upon legal categories susceptible of clear definition and giving rise to definite issues of fact readily formulated which, when found, automatically determine the validity of the disposition … "A court of law works its way to short issues, and confines its views to them. A court of equity takes a more comprehensive view, and looks to every connected circumstance that ought to influence its determination upon the real justice of the case". (Jenyns v Public Curator (Qld) (1953) 90 CLR 113 at 118-9 (Dixon CJ, McTiernan and Kitto JJ), quoting The Juliana (1822) 2 Dods 504 at 522 (Lord Stowell). See also Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315; [2003] HCA 57 at [23] (Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ); Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392; [2013] HCA 25 at [122]-[123] (the Court); Thorne v Kennedy at [43] (Kiefel CJ, Bell, Gageler, Keane and Edelman JJ); Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1; [2019] HCA 18 at [150] (Edelman J).) 174 The relevant circumstances in which the Loan Agreement was entered into include the following. 175 At the time the Loan Agreement was entered into, Peter and Kathy were already elderly. In 2010, they were 78 and 73 years old, respectively, and had retired in 2000. Peter and Kathy had run a café, which was sold in about 1989, and Peter had then worked as a courier from 1990 to 2000. After his retirement in 2000, Peter had worked from time to time as a pedestrian crossing supervisor. Given his background, work history and the absence of any evidence that Peter was financially sophisticated, I infer that he was not financially sophisticated (contrary to the Respondents' contention that Peter had "substantial business acumen" and that he and Kathy were "savvy business people"). 176 While Peter and Kathy were, on Olga's evidence, "sharp as a tack" around 2010, her perception of their "sharpness" in relation to the ordinary interactions between a woman and her parents-in-law does not suggest that Peter and Kathy were financially sophisticated. There was no suggestion that Olga had any engagement with Peter and Kathy in relation to their financial affairs. 177 Peter and Kathy trusted Christos with their financial affairs and had, prior to 2009, already advanced significant funds ($500,000) to Christos to invest on their behalf, without questioning how he was investing the funds or requiring him to sign any documents in respect of the transaction. 178 Kathy was particularly vulnerable. She could not read English and left her business affairs to Peter and Christos. 179 At least from the time of their retirement, Peter and Kathy relied on financial support from Christos. When giving evidence in another proceeding in the Supreme Court of Victoria, Christos' evidence was that, from 2003 to May 2017, he was providing them with between $50,000 and $70,000 per annum to meet their living expenses. The evidence showed that Peter and Kathy were receiving regular monthly payments, organised by Christos, from the account of Voukidis Holdings (initially $2,500, then $3,500 and later $4,200). 180 Peter and Kathy were not in receipt of an aged pension in 2010 (only receiving a pension from around May 2017). 181 Christos was aware of Peter and Kathy's financial affairs. He prepared Peter's tax returns after Peter retired in 2000. 182 As noted above, in 2009, Peter and Kathy applied to refinance their AMP loan, which then stood at $162,000, into a new $720,000, interest only loan secured against the Property. This loan was taken out in order to provide the funds to Christos, who used them in connection with his legal expenses. Christos assisted in putting together the loan application and did so making false statements as to Peter and Kathy's income in order to give the appearance that they could service the loan. In fact, Peter and Kathy would quickly become dependent on Christos to provide funds to enable them to meet their interest obligations to AMP. 183 Initially, Peter and Kathy were able to meet their interest obligations to AMP by using funds drawn down on the AMP loan, but that capacity was exhausted by late 2010. Christos was aware of his parents' financial circumstances. Christos, and thereby Voukidis Holdings, were aware that Peter and Kathy did not have the capacity to repay the loan being advanced by Voukidis Holdings under the Loan Agreement. Even on a best case scenario, they would be subject to interest compounding monthly at 12% indefinitely. There is no suggestion that any attempt was made to obtain finance on less onerous terms. 184 The monthly interest expense incurred on the AMP loan was in the order of around $3,000 to $4,000. Despite this, the Loan Agreement provided for a loan facility of up to $3 million at an interest rate of 12% per annum, compounding monthly, and a default rate of 24% per annum, also compounding monthly. 185 The prospective impact of these interest provisions is illustrated by the fact that gross advances of only around $373,650 (net advances being $268,650) between 4 November 2010 and 20 July 2021 have resulted in an asserted indebtedness of $1,852,200 by 31 August 2021, driven by the monthly compounding of interest and the application of the default rate of interest from 1 July 2011.

Parties' submissions 186 The Applicant contended that Peter and Kathy were subject to a special disadvantage of the requisite kind as they were elderly, retired, relied heavily on Christos in respect of their financial affairs, depended on Christos for financial support and, in Kathy's case, could not read English. 187 The Respondents submitted that, regardless of whether the ASIC Act applies, the transaction was not unconscionable because: (a) it was not open to the Applicant to allege that Voukidis Holdings took unconscientious advantage of any special disadvantage on the part of Peter and Kathy, because Peter and Kathy were in fact directors of Voukidis Holdings at the relevant time; and (b) the transaction in question was for the benefit of Peter and Kathy (in that it averted the risk of having their home repossessed) and it is inappropriate to "ignore the effect of this transaction and impose the subsequent adverse outcome of another transaction (being the loan to Christos) in order to demonstrate unconscionability". 188 The Applicant submitted that the derivation of a benefit by Peter and Kathy (in allowing them to service the AMP loan and thereby avert the risk of losing their home) was not to the point because the unconscionable conduct enquiry focuses on the transaction which is sought to be set aside, which transaction included "extraordinary" terms as to default interest at 24% per annum, compounding monthly. 189 The Respondents accepted that Christos' actions and knowledge could be attributed to Voukidis Holdings but maintained that the actions and knowledge of Peter and Kathy were also to be attributed to Voukidis Holdings as they were also named directors in 2010.

Consideration 190 Having regard to the matters set out above, I find that Peter and Kathy did suffer from a special disadvantage. They were in a position where they had already mortgaged their home to take out a loan to provide funds to their son, and had no way to meet their obligations to the bank other than by the funds that Christos provided to them. They were elderly and retired, and had no means to earn income to meet their obligations to AMP and avoid the bank taking enforcement action against them and enforcing the mortgage on the Property, which was their home. Peter and Kathy were dependent on Christos and had no real option but to put their trust in him in relation to ensuring that they had funds to meet their obligations to AMP. I do not accept Christos' evidence that Peter positively wanted to ensure that he and Kathy had no equity left in the Property. The first time that defensive point was raised was when Christos gave evidence and there is no supporting evidence to substantiate it; it smacks of recent invention. Given Christos' abject lack of credibility, I do not accept his evidence even in the absence of contradictory evidence. 191 Christos, on behalf of Voukidis Holdings, arranged for his parents to take out a loan from Voukidis Holdings on extremely disadvantageous terms. Voukidis Holdings, through Christos, took advantage of Peter and Kathy's vulnerability. At the time the Loan Agreement was executed in October 2010, COV held 1000 out of 1004 ordinary shares in Voukidis Holdings and one dividend variable share. It was not suggested that Peter and Kathy had any entitlement to benefits that may flow through COV or the trusts of which it was trustee. Although Peter and Kathy each held one dividend variable share in Voukidis Holdings at that time (as did Christos and Olga), there is no evidence that Peter and Kathy would stand to benefit from the Loan Agreement by that means. 192 Although, as the Respondents emphasised, Peter and Kathy were both also listed as directors of Voukidis Holdings as at October 2010, there was no evidence that they were active in managing the affairs of Voukidis Holdings. I infer they were directors in name only. While I accept that Peter and Kathy being directors of Voukidis Holdings is a relevant fact to be considered in evaluating whether Voukidis Holdings acted unconscionably, it was Christos who controlled Voukidis Holdings and its funds. 193 I also accept that Peter and Kathy received some benefit in that they were put in funds to pay the interest due to AMP. However, that benefit does not absolve the conduct of Voukidis Holdings in having Peter and Kathy commit to such an improvident and harsh loan. Rather, their dependence on Christos to put in place a funding structure so that they were not at risk of losing their home provided the platform for Voukidis Holdings' exploitation of their vulnerability to put in place a loan that was all but certain to strip them of their equity in the Property given the interest rates set, the monthly compounding of interest and Peter and Kathy's lack of any means by which to pay the interest and stop the debt spiralling. 194 I conclude that the Loan Agreement was procured by unconscionable conduct and should be set aside. 195 Having regard to my conclusion that the Applicant has established unconscionable conduct in equity, it is not necessary to determine whether unconscionable conduct under the ACL or the ASIC Act has also been established.

Undue influence 196 Given my conclusion on unconscionable conduct it is not strictly necessary to address the undue influence claim, but I will do so for completeness. 197 In Amadio, Mason J (as his Honour then was) explained the difference between unconscionable conduct and undue influence as follows at 461: In the latter [undue influence] the will of the innocent party is not independent and voluntary because it is overborne. In the former [unconscionable conduct] the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position. 198 As set out above, in Thorne v Kennedy the plurality explained (at [39]), by reference to the judgment of Deane J in Amadio, that the same circumstances can give rise to unconscionable conduct and undue influence (citations omitted): In Commercial Bank of Australia Ltd v Amadio, Deane J said that the equitable principles concerning relief against unconscionable conduct are closely related to those concerned with undue influence. The same circumstances can result in the conclusion that the person seeking relief (i) has been subject to undue influence, and (ii) is in a position of special disadvantage for the purposes of the doctrine concerned with unconscionable conduct. 199 A presumption of undue influence arises in respect of certain classes of relationships, such as "parent and child, guardian and ward, trustee and cestui que trust, solicitor and client, physician and patient and cases of religious influence": Johnson v Buttress (1936) 56 CLR 113 (Johnson v Buttress) at 119 (Latham CJ); see also Thorne v Kennedy at [34] (Kiefel CJ, Bell, Gageler, Keane and Edelman JJ); McFarlane v McFarlane [2021] VSC 197 (McFarlane) at [43] (Richards J); Permanent Mortgages Pty Ltd v Vandenbergh (2010) 41 WAR 353; [2010] WASC 10 (Permanent Mortgages) at [169] (Murphy JA). 200 It was common ground that the relationship at issue here fell outside the established categories where a presumption of undue influence arises. However, the established categories "do not constitute an exhaustive list of the cases in which undue influence will be presumed from personal relations": Johnson v Buttress at 119 (Latham CJ); see also Thorne v Kennedy at [34]: "the classes are not closed" (Kiefel CJ, Bell, Gageler, Keane and Edelman JJ); McFarlane at [43] (Richards J); Permanent Mortgages at [171] (Murphy JA). 201 In order for a presumption of undue influence to arise outside the established categories, it must be demonstrated that an antecedent relationship exists between the parties in which one party occupies a position of ascendancy or influence over the other, with the other in a corresponding position of dependency or trust: Johnson v Buttress at 134-5 (Dixon J); Thorne v Kennedy at [34] (Kiefel CJ, Bell, Gageler, Keane and Edelman JJ); McFarlane at [43] (Richards J); Permanent Mortgages at [171] (Murphy JA). See Johnson v Buttress at 134-5 (Dixon J): [T]he doctrine which throws upon the recipient the burden of justifying the transaction is confined to no fixed category. It rests upon a principle. It applies whenever one party occupies or assumes towards another a position naturally involving an ascendancy or influence over that other, or a dependence or trust on his part. 202 Similarly, in Thorne v Kennedy the plurality stated at [34] (quoted in McFarlane at [43]): Outside recognised categories, the presumption can also be raised by proof that the history of the particular relationship involved one party occupying a similar position of ascendency or influence, and the other a corresponding position of dependency or trust. 203 This principle was articulated by Latham CJ in Johnson v Buttress (at 119) as arising where one party occupied "a position to exercise dominion over the former by reason of the trust and confidence reposed in the latter". 204 Where a presumption of undue influence is held to arise, a court has jurisdiction to set aside the transaction in equity unless the presumption is rebutted: Johnson v Buttress at 119 (Latham CJ). 205 To rebut the presumption of undue influence, the "stronger" party must establish "that the particular transaction or transfer, in its particular circumstances, was nevertheless the result of the weaker party's free will": Thorne v Kennedy at [34] (Kiefel CJ, Bell, Gageler, Keane and Edelman JJ), quoted in McFarlane at [44] (Richards J); see also Johnson v Buttress at 123 (Latham CJ), 134 (Dixon J). As stated by Murphy JA in Permanent Mortgages (at [176]): "The doctrine of undue influence looks to the quality of the consent, or assent, of the weaker party". To this end, the caselaw emphasises the importance of obtaining independent legal and/or financial advice. See, for example, Johnson v Buttress at 120 (Latham CJ): But evidence that such advice has been given is one means, and the most obvious means, of helping to establish that the gift was the result of the free exercise of independent will; and the absence of such advice, even if not sufficient in itself to invalidate the transaction, would plainly be a most important factor in determining whether the gift was in fact the result of a free and genuine exercise of the will of the donor. 206 This enquiry involves consideration of the particular circumstances of the parties to the transaction. For example, in Johnson v Buttress, Latham CJ noted (at 120): In the case of an illiterate or weak-minded person it will be more difficult for the donee to discharge the prescribed onus of proof than in other cases. The burden will be still heavier upon the donee where the donor has given him all or practically all of his property. 207 Further, in circumstances such as the present proceeding where the transaction does not involve a gift, the "[a]dequacy of consideration becomes a material question. Instead of inquiring how the subordinate party came to confer a benefit, the court examines the propriety of what wears the appearance of a business dealing": Johnson v Buttress at 136 (Dixon J).

Parties' submissions 208 The Applicant did not assert that the Loan Agreement had been procured by actual undue influence. The Applicant also accepted that the relationship between parent and child is only an established category of case in which there is a presumption of undue influence where the transaction is to the benefit of the parent(s), meaning that the present case did not fall within an established category. Rather, the Applicant's case was that the characteristics of the relationship between Christos and his parents were such that a presumption of undue influence arose in relation to Peter and Kathy's entry into the Loan Agreement. In support of this contention, the Applicant relied on essentially the same facts advanced to establish unconscionable conduct as giving rise to the presumption of undue influence. 209 The Respondents accepted that the relationship between particular persons may be such as to give rise to a presumption of undue influence outside the established categories, but disputed that any such presumption arose in relation to Peter and Kathy's dealings with Christos giving rise to the Loan Agreement. 210 The Respondents contended that the actual relationship at issue did not give rise to a presumption of undue influence pursuant to Johnson v Buttress. The Respondents argued that Peter and Kathy were the donees under the impugned transaction because they received funds under the Loan Agreement to service their obligations to AMP and thereby remain in possession of their home. They contended that it is only when other issues are brought into the analysis - the existence of the prior loan to Christos and the interest rate on the borrowings - that the Applicant made any real attempt to impugn the fairness of the transaction. The Respondents contended that the loan to Christos was extraneous and the interest rate was explicable as matching the interest rate on the prior loan to Christos. They also submitted, as they did in respect of unconscionable conduct, that Peter and Kathy were "savvy business people" and were (on Olga's evidence) "sharp as a tack" around 2010. The Respondents also drew attention to the fact that Peter and Kathy were directors of Voukidis Holdings at the relevant time, and that Christos and Voukidis Holdings were not one and the same.

Consideration 211 In my view, the relationship between Peter, Kathy and Christos was a relationship of such dependency, and the Loan Agreement was so onerous, that a presumption of undue influence arises. That is for the same reasons that I concluded that the Loan Agreement was procured by unconscionable conduct. The history of their relationship also shows Peter and Kathy handing over significant sums to Christos, including the proceeds from the sale of the Belmore St Property, and taking on the 2009 AMP loan so as to provide funds to Christos. The history of their relationship is relevant to considering whether the presumption of undue influence arises: Thorne v Kennedy at [34] (Kiefel CJ, Bell, Gageler, Keane and Edelman JJ). 212 As set out above, it is well accepted that the same matters can support a finding of unconscionable conduct and a presumption of undue influence (see Amadio at 461, and Thorne v Kennedy at [40]). While Peter and Kathy did, as the Respondents submitted, obtain a benefit from the Loan Agreement - being able to meet their interest obligations and not face enforcement action by AMP - the fact that some benefit was obtained does not mean that a presumption of undue influence cannot arise. 213 The benefit obtained by Peter and Kathy must be assessed in its context. That context included the magnitude of the loan facility (up to $3 million) relative to their monthly interest obligations to AMP (which were approximately $3,000 to $4,000 in 2010) and the imposition of interest at 12% per annum (and 24% on default), compounding monthly. The Loan Agreement imposed onerous obligations on Peter and Kathy, which they had no hope of meeting (given they were retired, had no established income, and depended on Christos for their living expenses). 214 In respect of the Loan Agreement, Voukidis Holdings was acting under the direction and control of Christos. Peter and Kathy were not actively involved as directors of the company. Accordingly, I do not consider that the fact that Peter and Kathy were formally directors of Voukidis Holdings, or that Christos and Voukidis Holdings are different legal persons, means that the relationship was not one in which a presumption of undue influence arises. 215 Nor do I consider (as the Respondents contended) that the characterisation of the relationship as one in which a presumption of undue influence arises depends on the 2009 Loan Agreement between Peter, Kathy and Christos, having "gone sour". That is so whether or not it is accepted that the 2009 Loan Agreement was in fact entered into in 2009. 216 The Respondents did not contend that they had successfully rebutted the presumption of undue influence, should that presumption arise. Nevertheless, for completeness, I note that there was a suggestion that legal advice was obtained by Peter and Kathy regarding the Loan Agreement (cf the Mortgage in 2021, which included declarations from Peter and Kathy as to having been advised by a solicitor in respect of the transaction). Even if, as Christos and Ms Calagis suggested, Peter said when they gathered to sign the Loan Agreement that he had had some contact with a social acquaintance who was a solicitor, that does not establish that legal advice was obtained by Peter and Kathy regarding the obligations they were assuming under the Loan Agreement.

On what conditions should the Loan Agreement be set aside? 217 Where a party is entitled to rescission in equity and restitutio in integrum is not possible, the caselaw emphasises that relief must be fashioned to achieve practical justice and restore the parties to the status quo as far as possible: Maguire v Makaronis (1997) 188 CLR 449 (Maguire v Makaronis) at 496-7 (Kirby J); Jams 2 Pty Ltd v Stubbings (No 4) (2019) 59 VR 1; [2019] VSC 482 (Jams 2) at [12] (Robson J). In Jams 2, Robson J opined at [12] (quoting Alati v Kruger (1955) 94 CLR 216 at 223-4) (citations omitted): At common law, a party would not be entitled to rescission where it was unable to restore the parties to their original position before the contract, for example, money repaid and property returned. This requirement is known as restitutio in integrum. However, where a transaction is set aside by reason of a wrong recognised by equity, more flexible relief is available. This was explained by the High Court in Alati v Kruger: If the case had to be decided according to the principles of the common law, it might have been argued that at the date when the respondent issued his writ he was not entitled to rescind the purchase, because he was not then in a position to return to the appellant in specie that which he had received under the contract, in the same plight as that in which he had received it. But it is necessary here to apply the doctrines of equity, and equity has always regarded as valid the disaffirmance of a contract induced by fraud even though precise restitutio in integrum is not possible, if the situation is such that, by the exercise of its powers, including the power to take accounts of profits and to direct inquiries as to the allowances proper to be made for deterioration, it can do what is practically just between the parties, and by so doing restore them substantially to the status quo. 218 Similarly, in Maguire v Makaronis, Kirby J stated at 496-7 (citations omitted): Whatever the rationale, and whether or not it is a species of the equitable maxim that those who seek equity must do equity, the ordering as a condition of rescission of a contract flawed by breach of fiduciary duty, that the party seeking relief should restore to the other what was secured under the contract, is neither new nor surprising. It is ancient and very common. Where the contract impugned involved the payment of money, the beneficiary seeking relief from a contract is ordinarily required, as a term of such relief, to repay the moneys actually advanced, together with reasonable interest. If such condition is not, or cannot be, offered, the court may refuse relief altogether. Alternatively, other and different relief may be fashioned to do "practical justice". 219 While a higher rate of interest than the rate incurred by the wrongdoer will not be allowed, the court will identify a suitable alternative rate where evidence of the actual rate of interest is not available. For example, in Maguire v Makaronis (at 477), the plurality ordered interest at rates allowed by the Supreme Court of Victoria where the appellants had not adduced evidence as to the rates they paid to the Commonwealth Bank. 220 The Applicant accepted that, if the Loan Agreement were to be set aside on the basis of undue influence or unconscionable conduct, it should be set aside on terms that provided for Voukidis Holdings nevertheless to claim as an unsecured creditor in the bankruptcies of Peter and Kathy for the amounts advanced to the date of the bankruptcies, together with simple interest at a moderate rate to reflect the time value of money. The Applicant agreed with the Respondents' calculation that the gross total of the amounts advanced to Peter and Kathy by Voukidis Holdings in the period 4 November 2010 to 20 July 2021 was $373,650. 221 Voukidis Holdings suggested that interest should be calculated at the rates charged by AMP on the 2009 loan taken out by Peter and Kathy. While the Applicant suggested that interest be calculated at the Reserve Bank of Australia cash rate, he accepted that the AMP rates would also be sensible as they constituted third party commercial rates of interest. 222 In my view it is appropriate that simple interest be calculated at the rates charged by AMP. The parties agreed that they could calculate the interest payable on that basis after delivery of my reasons.

DID PETER AND KATHY AGREE TO THE TRANSFER OF THEIR SHAREHOLDINGS IN VOUKIDIS HOLDINGS TO ZVAM IN MAY TO AUGUST 2020? 223 The parties agreed that, if Peter and Kathy did not agree to transfer their shares in Voukidis Holdings to ZVAM, then those shares would remain vested in the Applicant as Peter and Kathy's trustee in bankruptcy. 224 As set out above, Peter and Kathy each held one ordinary and one dividend variable share in Voukidis Holdings at incorporation. On 1 May 2014, shortly prior to entering into liquidation, COV transferred its 1000 ordinary shares in Voukidis Holdings to Peter and Kathy (500 shares each), and transferred its one dividend variable share to Peter. On 29 April 2016, shortly before he entered into bankruptcy, Christos transferred his one ordinary share and one dividend variable share in Voukidis Holdings to Peter. 225 On 5 August 2020, an ASIC Form 484 was lodged with ASIC by ZM Partners. It stated that it had been signed by Christos the same day, although the form itself did not bear any signature. 226 The 5 August 2020 form stated that Peter had ceased as a director and secretary of Voukidis Holdings effective 15 May 2020, Christos was appointed director and secretary of Voukidis Holdings on 15 May 2020, and Peter had transferred 502 ordinary shares, and Kathy had transferred 501 ordinary shares, to ZVAM. The "earliest date of change" specified in respect of the share transfers was 15 May 2020 in each instance. 227 A second copy of the ASIC form, dated 4 August 2020, was in evidence. That form had not been lodged with ASIC. That document was signed by both Christos and Peter and their signatures dated 5 October 2020. 228 The Respondents also produced two pdf documents, both headed "Transfer of Shares" and both dated 15 May 2020. One bore the signature of Peter, and the other bore the signature of Kathy. The document with Peter's signature stated that he was transferring 502 ordinary shares in Voukidis Holdings to ZVAM. Christos admitted that he found this document with no date on it, filled in the date, and then re-scanned the document. He also accepted that he applied the digital signatures. 229 The document bearing Kathy's signature stated that she was transferring her 501 ordinary shares in Voukidis Holdings to ZVAM. 230 Mr Ganas' expert evidence was that Peter and Kathy's signatures on these documents were identical to other instances of their signatures, indicating that this was a "cut and paste forgery". However, if a digital signature is applied with the consent of the person concerned, then it would not be a forged signature. As Christos had access to the digital signatures of Peter and Kathy (and Mr Leidl, who is recorded as having signed the transfers in his capacity as a director of ZVAM), Mr Ganas' evidence does not suggest that Peter and Kathy did not approve the application of their signatures, or did not agree to the transfer of their shares. 231 In view of the knowledge that Peter and Kathy had been unsuccessful in their claim in the COV Proceeding, and would be liable for significant costs to Break Fast, the transfer of their shares in Voukidis Holdings was entirely consistent with the modus operandi of ensuring that a family member heading towards bankruptcy (or family company headed towards liquidation) offloaded assets. Christos' evidence was that the shares in Voukidis Holdings were transferred as a "precaution" against his parents' impending bankruptcy so as to try and put them out of the reach of a trustee in bankruptcy. 232 While the transfer of Peter and Kathy's shares in Voukidis Holdings appears to have been orchestrated by Christos, so as to put them out of reach of a trustee in bankruptcy, I have no reason to consider that his parents were not in agreement with the transfers. Accordingly, while the documentary record raises some questions about timing, the evidence does not support any conclusion that Peter or Kathy were not in agreement with their shares in Voukidis Holdings being transferred prior to their bankruptcy. 233 That is so notwithstanding that Christos applied Olga's digital signature to a document transferring her ordinary share and her dividend variable share in Voukidis Holdings to Christos without her authorisation. In 2020, Olga and Christos were already separated, which explains why Christos would take steps to take any interest in Voukidis Holdings out of Olga's hands without her consent. By contrast, Peter and Kathy were facing bankruptcy due to the failed COV Proceeding and their willingness to transfer their shares in Voukidis Holdings to ZVAM is readily explicable. 234 Nor does Mr Zappacosta's lack of awareness of the transfer of shares in Voukidis Holdings to ZVAM tell against the proposition that Peter and Kathy agreed to the transfer. Mr Zappacosta was not a director of ZVAM at the time of the transfers (having resigned on 16 June 2014), and although he was a 50% shareholder in ZVAM, it appears he had little to no involvement in its affairs.

WERE THE LOAN AGREEMENT AND ADVANCES OF MONEY TO PETER AND KATHY MADE BY VOUKIDIS HOLDINGS AS TRUSTEE OF THE KC TRUST? 235 The question of whether Voukidis Holdings acted as trustee of the KC Trust in entering into the Loan Agreement and advancing funds to Peter and Kathy arises because the answer to that question informs the value of the shares in Voukidis Holdings and whether they were transferred at an undervalue. The Applicant accepted that, if Voukidis Holdings did act as trustee in the relevant transactions, the shares held by Peter and Kathy in Voukidis Holdings would be worthless. 236 Voukidis Holdings became the trustee of the KC Trust in 2003. The immediately prior trustee of the KC Trust was Kepp Co. The bank account held by Kepp Co was explicitly styled as an account held in its capacity as trustee for the KC Trust. In addition, NAB bill facilities taken out by Kepp Co state that they were taken out by Kepp Co "atf The Kepp Co Unit Trust". 237 Records of Voukidis Holdings' bank account since 2001 were in evidence. It was not suggested that Voukidis Holdings had more than one bank account. This account, which was operating before Voukidis Holdings became the trustee of the KC Trust in 2003, was not overtly held in a trustee capacity when it was opened. Nor did the capacity in which the account was held change after Voukidis Holdings became trustee in 2003. 238 The Loan Agreement did not make any reference to the KC Trust or Voukidis Holdings entering into that agreement as trustee of the KC Trust. 239 The complete absence of any statement that Voukidis Holdings was acting in a trustee capacity in entering into the Loan Agreement, and the fact that its bank account was, unlike the bank account of Kepp Co, not stated to be held as trustee, are both strong indications that Voukidis Holdings did not relevantly act in a trustee capacity. That is so particularly in light of Christos' acceptance that he was aware, since at least 1994 and possibly earlier, of the distinction between a company acting on its own behalf and acting as trustee. He also accepted that he was "well aware" of the need to maintain records that draw a distinction between a company acting in its own right and as trustee. 240 The Applicant also relied on the fact that the KC Trust has never had an Australian Business Number (ABN) as undermining the assertion that Voukidis Holdings only operated in a trustee capacity, whereas Voukidis Holdings had (from 20 May 2010) an ABN in its own capacity. He further relied on the fact that other trusts operated by the Voukidis family - the Voukidis Family Trust and the Voukidis Family Trust No. 2 - both had ABNs. The lack of any ABN in respect of the KC Trust provides some further support for the conclusion that Voukidis Holdings operated on its own account, and not as trustee, in advancing funds to Peter and Kathy and in entering into the Loan Agreement. However, that additional support is limited as the necessity for the KC Trust to have an ABN was not fully explored during the trial. 241 For their part, the Respondents relied on certain financial statements (in pdf format), purportedly prepared in respect of the KC Trust for the period between June 2016 to June 2022, as showing that Voukidis Holdings acted as trustee of the KC Trust at the relevant times. The financial records comprised certain balance sheets and profit and loss statements. These statements recorded loans extended to Peter and Kathy as assets of the KC Trust. 242 These documents were only produced by the Respondents on 30 May 2023. As noted, they were produced as pdfs and those pdf documents were created on 29 May 2023. No native files were produced. In a letter dated 9 June 2023, the Respondents' solicitors offered some further information about the production of those documents as pdfs created in late May 2023. They said that: (a) the balance sheet and profit and loss statement for 2016 was "a printout from MYOB but the datafile no longer exits"; and (b) the balance sheets for 2017 to 2022 had been "recently created on excel by our client to assist with the request for documents". The solicitors also said "[o]ur client was only recently in a position to prepare and bring the Kepp Co Unit Trust books up to date, using Microsoft Excel work sheets". 243 Given the dubious provenance of the KC Trust financial statements, I give them no weight. The fact that, even on the Respondents' case, no contemporaneous trust records could be produced further undermines the suggestion that Voukidis Holdings acted as trustee of the KC Trust in making advances to Peter and Kathy. That is particularly so where the effective controller of the trust, Christos, is a trained accountant, and cognisant of the need to maintain accurate records. 244 The fact that shares in Voukidis Holdings have been transferred multiple times as the holder was on the precipice of an insolvent winding up, or bankruptcy, suggests that the shares were perceived by those holding them as having real value. If the shares were merely shares in a trustee entity, which had no assets of its own, there is no apparent reason why the holders of the shares would transfer them as they did. As such, the transfer of shares in Voukidis Holdings by COV shortly before its liquidation, by Christos shortly before his bankruptcy and by Peter and Kathy shortly before their bankruptcy, all tell against the proposition that Voukidis Holdings merely acted as a trustee. 245 In the absence of any reliable documentary support for the contention that Voukidis Holdings acted as trustee of the KC Trust in entering into the Loan Agreement and in making advances to Peter and Kathy, and having regard to the lack of credibility of Christos, his mere assertion that Voukidis Holdings acted as trustee does not establish that it acted in that capacity. 246 The Respondents also relied on the evidence of Mr Zappacosta, an accountant. He swore an affidavit which stated that his firm, ZM Partners, had been the tax agent for Voukidis Holdings since about 2002. He deposed that: From the time that I have been the tax agent and accountant, the only activity of Voukidis Holdings is that of trustee of the Kepp Co Unit Trust. Voukidis Holdings has not traded or generated income in its own right. ZM Partners has not prepared or filed company tax returns on behalf of Voukidis Holdings or prepared financial statements for Voukidis Holdings in its own right. 247 Mr Zappacosta was also the author of a letter dated 21 April 2022, and addressed "To Whom it May Concern". That letter stated (emphasis added): We at ZM Partners act as the accountants for Voukidis Holdings Pty Ltd. This letter is to confirm that Voukidis Holdings Pty Ltd does not trade or operate in its own capacity as its only role is to act as trustee for Kepp Co Unit Trust. We enclose the signed Deed of Retirement and Appointment of Trustee for the Kepp Co Unit Trust, confirming the company's appointment as trustee on 30th June 2003. We note that the units in Kepp Co Unit Trust were transferred to ZV Asset Management Pty Ltd in late 2008. We further confirm that ZM Partners has no financial records on hand for the company, and that no tax returns or financial statements have been prepared for the company by ZM Partners. 248 The evidence of Mr Zappacosta regarding the capacity in which Voukidis Holdings operated must be rejected. In cross-examination, it emerged that while his firm was listed as the tax agent for Voukidis Holdings, they had never actually done any work for the company. Rather, he based his statement that Voukidis Holdings acted in a trustee capacity on what he had been told by Christos, and on the fact that there was a deed appointing Voukidis Holdings the trustee of the KC Trust in 2003. It was disgraceful for Mr Zappacosta to swear an affidavit utilising his claimed position as accountant and tax agent to the company to put forward a position without any foundation, based only on the (undisclosed) say-so of Christos. It also does not stand to Voukidis Holdings' credit that it put forward this affidavit of Mr Zappacosta as part of its case. Either it knew that his evidence was worthless, or it failed to make even the most basic enquiries as to the basis upon which he could so boldly assert that Voukidis Holdings only acted in its trustee capacity. 249 Accordingly, I find that the sums advanced by Voukidis Holdings to Peter and Kathy pursuant to the Loan Agreement and the subsequent Load Deed were not advanced by Voukidis Holdings in its capacity as trustee of the KC Trust, and were instead advanced in its own capacity.

SHOULD THE TRANSFER OF PETER AND KATHY'S SHARES IN VOUKIDIS HOLDINGS TO ZVAM BE AVOIDED PURSUANT TO S 120 OR S 121 OF THE ACT?

Transfer at an undervalue: s 120 250 The Applicant contended that if, as I have determined to be the case, Voukidis Holdings did not act as trustee in respect of the Loan Agreement and the advances to Peter and Kathy, it follows that Voukidis Holdings held a valuable asset in its own right: viz, the receivable. He then contended that Peter and Kathy transferred their shares in Voukidis Holdings at an undervalue for the purposes of s 120 of the Act. 251 Section 120 of the Act provides, relevantly, that: Transfers that are void against trustee (1) A transfer of property by a person who later becomes a bankrupt (the transferor) to another person (the transferee) is void against the trustee in the transferor's bankruptcy if: (a) the transfer took place in the period beginning 5 years before the commencement of the bankruptcy and ending on the date of the bankruptcy; and (b) the transferee gave no consideration for the transfer or gave consideration of less value than the market value of the property. 252 The Applicant's contention that s 120 was engaged was advanced on two bases. First, that the assertions that ZVAM provided consideration for the shares should not be accepted. Secondly, and in any event, the amount purportedly paid for the shares - $2,000 - was an undervalue. 253 The Respondents' principal contention in response was that the Applicant had not established the value of the shares in Voukidis Holdings and, accordingly, had not established the proposition that the shares were transferred at an undervalue. The Applicant's response to this issue was that, although he accepted he bore the onus of establishing that an impugned transaction was at an undervalue for the purposes of s 120 of the Act, as Voukidis Holdings did not have any proper or reliable accounts, he could not practically be expected to prove the value of the shares in Voukidis Holdings beyond establishing that it had an asset of value, namely the amounts owed to it by Peter and Kathy pursuant to the Loan Agreement. 254 The general rule is that the burden of proving all facts essential to a civil claim rests on the claimant or moving party: eg Currie v Dempsey (1967) 69 SR (NSW) 116 at 125 (Walsh JA). While this general rule applies in respect of claims under s 120 of the Act, the authorities confirm that the burden may lie on transferees in respect of certain matters. In Sutherland v Vale (2008) 170 FCR 112; [2008] FCAFC 148 at [52], Lindgren J (in the minority as to the result) explained that: The trustee in bankruptcy bears the onus of proving that a transfer is void against the trustee pursuant to s 120(1) of the Act, namely, that: (a) the transfer of property took place in the period beginning five years before the commencement of the bankruptcy and ending on the date of the bankruptcy; and (b) the transferee gave no consideration for the transfer or gave consideration of less value than the market value of the property. The transferee bears the onus of proving that the transfer was not void against the trustee because it fell within s 120(3), that is to say, of proving, relevantly, that: (a) the transfer took place more than two years before the commencement of the bankruptcy; and (b) at the time of the transfer, the transferor was solvent. (See Halse v Norton 76 FCR [389] at 398.) 255 His Honour then confirmed that, subject to a pleading point, the trustee bore the onus of establishing the value of a particular property. The majority (Gray and Tracey JJ) similarly observed (at [30]) that: "In the normal case it will be necessary for a trustee to obtain a valuation of property to which it is said that s 120 of the Act applies." 256 The burden in cases under s 120 of the Act was also helpfully summarised by Moshinsky J in Gomez v Carrafa (Trustee) [2018] FCA 201 at [118] as follows: While the trustee in bankruptcy, as the moving party in an application under s 120 of the Bankruptcy Act, has the onus of proving the elements of s 120(1), if the respondent seeks to rely on an equity of exoneration by way of defence, the onus lies on the respondent to establish the equity. This is an application of the general principle that the burden of proof lies on a plaintiff "if the fact alleged … is an essential element in his cause of action" and the onus is on the defendant "if the allegation is not a denial of an essential ingredient in the cause of action, but is one which, if established, will constitute a good defence, that is, an 'avoidance' of the claims which, prima facie, the plaintiff has": Currie v Dempsey (1967) 69 SR (NSW) 116 at 125 per Walsh JA; see also Heydon JD, Cross on Evidence (11th Aust ed, LexisNexis Butterworths, 2017) at [7060]-[7075]. 257 Here, the Respondents contest that the Applicant has established the elements of s 120(1). They do not advance a positive defence such as might attract the burden in accordance with the principles set out above. 258 While the burden rests with the Applicant to establish that the shares in Voukidis Holdings were transferred at an undervalue, that is not to say that the analysis of whether the burden has been satisfied is insensitive to the practicalities of the capacity of the trustee to prove certain matters. 259 The difference between the legal onus and an evidentiary onus was explained by Gleeson and Kirk JJA in Creak v Ford Motor Company of Australia Ltd (2023) 112 NSWLR 272; [2023] NSWCA 217 at [26]: The difference between the legal onus of proof and an evidentiary onus (as opposed to a "tactical" one) is that the latter involves an obligation to show that there is sufficient evidence to raise an issue such as to require determination; once that has been done, it falls to the party bearing the legal onus to make out the relevant facts: note, for example, discussion in CR Williams, "Burdens and standards in civil litigation" (2003) 25 Sydney Law Review 165 at 166-169; Cross on Evidence at pars 7005 and 7210; Commissioner of Police (New South Wales Police Force) v Zisopoulos (2020) 299 IR 314; [2020] NSWCA 236 at [61]-[62], [74]-[75], [96]-[99]. 260 However, in determining whether a party bearing the burden of proving an issue on the balance of probabilities has discharged that burden "regard must be had to that party's ability to adduce evidence relevant to the issue and any failure on the part of the other party to adduce available evidence in response": G v H (1994) 181 CLR 387 at 391-2; [1994] HCA 48 (Brennan and McHugh JJ). 261 In Andrew v Zant Pty Ltd (2004) 213 ALR 812; [2004] FCA 1716, which relevantly concerned an application by a trustee in bankruptcy to void transactions under s 121 of the Act, Hill J stated (at [20]) the following relevant propositions, which he described as being "not controversial": • The burden of proof will lie upon the trustee of the bankrupt estate to show that the property over which the trustee asserts title was property which vested in the trustee as a result of the bankruptcy: ... • However, where all the facts concerning a particular transaction are within the knowledge of persons other than the trustee in bankruptcy (and where, as here the person who was insolvent is dead) a "very slight degree of proof should be sufficient to shift that burden": Re Trautwein; Richardson v Trautwein (1944) 14 ABC 61 at 75; Michael v Thompson (1894) 20 VLR 548 at 552. 262 In Commissioner of Taxation v Oswal (No 6) (2016) 339 ALR 560; [2016] FCA 762, Gilmour J said at [64]: "I apprehend Hill J in Andrew to have been referring to the shifting of an evidentiary burden not the ultimate burden of proof." That is consistent with Goldberg J's analysis in Re Maxwell William Ebner; Ex parte Official Trustee and Ingrid Ebner [1998] FCA 751 at 9 (emphasis added): The burden of proof lies upon the applicant to establish the necessary factors required to be established by ss 120 and 121: Re Trautwein; Richardson v Trautwein (1944) 14 ABC 61, 75 - 76 affirmed on appeal to High Court: Trautwein v Richardson (1946) ArgLR 129; Official Receiver v Marchiori (1983) 69 FLR 290, 297; Re Barton; Ex parte Official Receiver v Barton (1983) 52 ALR 95, 105 affirmed on appeal: Barton v Official Receiver (supra) 75; In Re Windle; Ex parte Trustee [1975] 1 WLR 1628, 1632; PT Garuda Indonesia Limited v Grellman (1992) 35 FCR 515, 526; Official Trustee in Bankruptcy v Mitchell (1992) 38 FCR 364, 369 - 370. However it has been suggested that where all the facts concerning the transaction are within the knowledge of the parties to it and not within the knowledge of the creditors, although the burden lies upon the party seeking to impugn the transaction, "a very slight degree of proof should be sufficient to shift that burden": Michael v Thompson (1894) 20 VLR 548, 552; Official Receiver v Marchiori (supra) 297. I am prepared to adopt this suggestion, recognising that the ultimate burden nevertheless remains on the applicant. 263 The proposition that, in circumstances where the facts lie in the knowledge of the other side, "a very slight degree of proof" should shift the evidentiary burden was accepted by a Full Court of this Court in El-Debel v Micheletto (Trustee) (2021) 153 ACSR 15; [2021] FCAFC 117 at [104] (Markovic, Derrington and Colvin JJ), quoting the decision of Gleeson J below in Micheletto (Trustee), in the matter of the El-Debel (Bankrupt) v El-Debel [2020] FCA 1031 at [76] (Gleeson J). 264 In the present case, the Applicant has established that the shares in Voukidis Holdings were not worthless. The litigation proceeded on the basis that the question of whether the shares had any value turned on whether Voukidis Holdings acted in the relevant respects as trustee. In his affidavit of 14 September 2023, Christos said: "Because [Voukidis Holdings] holds no assets in its own right, at all material times the shares in VH have been of no or negligible value." As I have determined that Voukidis Holdings did not act as trustee of the KC Trust in entering into the Loan Agreement and advancing funds to Peter and Kathy, the Respondents' contention that the shares in Voukidis Holdings were valueless as shares held in a mere trustee must be rejected. 265 In addressing the position - were I to conclude, as I have, that Voukidis Holdings did not relevantly act in a trustee capacity - the Respondents' argument in closing was that the Applicant had not established that the liabilities of Voukidis Holdings exceeded its assets, on the basis that an excess of liabilities relative to assets would make the shares valueless. 266 Voukidis Holdings was one of the Respondents. The Applicant had no real capacity to prove Voukidis Holdings' assets and liabilities other than by reference to Voukidis Holdings' financial statements and bank account statements. 267 The Applicant sought, and I made, orders requiring that Voukidis Holdings produce for inspection by the Applicant the original of any financial statements and tax returns prepared by or for Voukidis Holdings in the period from 1 July 2010 to 30 June 2022, the books of account of the KC Trust and any financial statements and tax returns in respect of the KC Trust in the period from 1 July 2010 to 30 June 2022. The Respondents' solicitors then informed the Applicant that no tax returns or financial statements had been prepared for Voukidis Holdings (which the solicitors described as the "trustee company"), that financial statements and records from 2016 in respect of the KC Trust were available, but that no tax returns for the trust existed as it had not generated any profit. 268 The documents then produced by the Respondents were limited to documents purporting to be the following: (1) KC Trust balance sheet and profit and loss statement for the financial year 2016. (2) KC Trust balance sheet and profit and loss statement for the financial years 2017 to 2022. (3) KC Trust cashbook transactions for the financial years 2017 to 2022. (4) Voukidis Holdings loan statements for the financial years 2020 to 2022. (5) Loan statements of ZVAM showing advances from Voukidis Holdings to it during the period from 1 June 2016 to 30 June 2022 (which were produced on the basis that they formed part of the KC Trust's books of account). 269 As noted above, on 9 June 2023, the Respondents' solicitors confirmed that: (a) the cashbook discovered by a pdf scanned on 29 May 2023 was generated from a native document in Excel, which had been "updated recently by our client"; (b) the loan statements of ZVAM had been scanned on 29 May 2023 (but no further explanation was given as to the documents from which the scanned versions were created); (c) the KC Trust balance sheet and profit and loss statement for 2016 was scanned on 29 May 2023 and was a "printout from MYOB but the datafile no longer exists"; and (d) the KC Trust balance sheet for 2017 to 2022 "was recently created on Excel by our client". 270 As the Applicant submitted, and as I have accepted above, the documents discovered by the Respondents purporting to be records of the KC Trust are wholly unreliable. They were mostly admitted to be Christos' recent creations, or "updated" by him. That collection of documents did not provide any reliable basis upon which the Applicant (or the Court) could hope to establish the value of the shares in Voukidis Holdings. 271 Nevertheless, the Applicant has adduced evidence, principally the bank account statements of Voukidis Holdings, obtained on subpoena, establishing the transfers made to Peter and Kathy by Voukidis Holdings. These transfers establish a valuable receivable on the part of Voukidis Holdings that well exceeds the amount purportedly paid by ZVAM as consideration for the transfer of Peter and Kathy's shares in Voukidis Holdings ($2,000). Against that, there was no acceptable proof that Voukidis Holdings had any liabilities, let alone liabilities that exceeded the value of the receivable (being an asset). 272 In my view, the Applicant established that Voukidis Holdings had a receivable of real value, and that the proffered evidence of Voukidis Holdings' financial affairs was unreliable. It follows that, because the capacity to establish Voukidis Holdings' financial affairs rested with the Respondents, the Applicant has done more than enough to put the evidentiary burden on the Respondents to establish the liabilities of Voukidis Holdings. The provision of a cluster of recently created and dubious financial statements and a recently created cashbook falls far short of establishing that Voukidis Holdings had liabilities such that the shares transferred were not worth more than $2,000. 273 In any event, I am not satisfied that any consideration was in fact paid by ZVAM for the transfer of the shares. The Respondents' case was that there was valuable consideration for the transfer, in the sum of $2,000. Christos' evidence was that amounts had been expended for the benefit of Peter and Kathy in relation to works on their home and they did not want or accept any additional payment for the transfer of their shares. The relevant passage of Christos' evidence was as follows (emphasis added): Well, rather than speculating on your parents' mind, just explain how you want to characterize the transaction?---Okay. They - when we discussed the need for consideration, my parents acknowledged that they had received consideration in the form of the works that were being done at their home, and they did not require direct - further payment for the transfer of those shares, and this is part of the consideration that relates to what they offset in their - what they offset against the consideration for their shares back in 2020. Okay. And at what point in time did you determine that the payments said to be for your parents' benefit, which are identified as the transactions in paragraphs - sorry, the document at page 21 and 22 - constituted the payment to them by ZV Asset Management of consideration for their transfer of their shares?---No. At the time when we actually held that meeting, or the discussion about the transfer of shares, they were not specific about which transactions or which amounts would constitute the offset but, in general, they said, "You've paid more than enough for that, so we're happy." Okay?--- "There's no need to pay an additional amount." They refused to consider or accept anything further. Okay. So my question was, when did you decide which of the various payments that had been made by ZV Asset Management, apparently for the benefit of your parents, would be the ones which amounted to the payment to them of consideration for their shares?---I don't know. I don't recall when we specifically identified which payments constituted, but I do - I - I don't recall specifically when we actually made the decision or selected which payments amount to the - an amount similar to that which was the consideration for their shares. Okay. Well, I will suggest to you that it was a unilateral decision made by you, in or about April 2023, to justify the other documents that you were producing at that time with respect to the alleged share transfer. What do you say?---No, that's not correct. 274 Consideration for a transfer is that which moves the transfer: see, in the duties context, Commissioner of State Revenue (NSW) v Dick Smith Electronics Holdings Pty Ltd (2005) 221 CLR 496; [2005] HCA 3 at [72] and [75] (Gummow, Kirby and Hayne JJ); Commissioner of State Revenue (Vic) v Lend Lease Development Pty Ltd (2014) 254 CLR 142; [2014] HCA 51 at [49]-[51] (French CJ, Hayne, Kiefel, Bell and Keane JJ). 275 Christos' evidence was to the effect that his parents declined receipt of payment for the transfer of the shares, the apparent basis being that enough had already been done for them by Christos or ZVAM (who is not clear from Christos' evidence). In any event, the post-hoc labelling of payments that were not in fact made to Peter and Kathy as somehow representing consideration to them, due to the expenditure of amounts for their benefit, does not render those payments consideration "for" the transfer. The payments nominated, I infer by Christos, to represent consideration totalled a different amount - $2,202.61 - than the consideration for the shares identified by Christos, which was $2,000, and the amounts described as being payable to each of Peter and Kathy on the share transfer forms ($502, or $1,004 total). 276 Accordingly, s 120(1) falls to be applied on the basis that Peter and Kathy did not receive any consideration for the transfer. Unless the shares in Voukidis Holdings were worthless (which they were not) it follows that the transfer was at an undervalue.

Transfer to defeat creditors: s 121 277 Section 121 of the Act operates upon transfers that are intended to defeat creditors. It provides, relevantly, that: Transfers that are void (1) A transfer of property by a person who later becomes a bankrupt (the transferor) to another person (the transferee) is void against the trustee in the transferor's bankruptcy if: (a) the property would probably have become part of the transferor's estate or would probably have been available to creditors if the property had not been transferred; and (b) the transferor's main purpose in making the transfer was: (i) to prevent the transferred property from becoming divisible among the transferor's creditors; or (ii) to hinder or delay the process of making property available for division among the transferor's creditors. Showing the transferor's main purpose in making a transfer (2) The transferor's main purpose in making the transfer is taken to be the purpose described in paragraph (1)(b) if it can reasonably be inferred from all the circumstances that, at the time of the transfer, the transferor was, or was about to become, insolvent. 278 Christos characterised Peter and Kathy's transfer of the shares in Voukidis Holdings to ZVAM as a "precaution" against their impending bankruptcy. That amounts to a concession that the transfer was made to defeat, hinder or delay creditors for the purposes of s 121(1)(b) of the Act. 279 Even if that admission were not binding on Voukidis Holdings for some reason - noting, however, that Christos has been a named director of Voukidis Holdings from 15 May 2020, and remains a director of Voukidis Holdings - the inference that the transfer was made for the purposes referred to in s 121(1)(b) is inescapable. 280 As detailed above, a costs order was made against Peter and Kathy in the COV Proceeding on 14 June 2018. The summons for taxation of costs was issued on 4 May 2020, and an interim order was made on 27 July 2020 that Peter and Kathy pay $100,000 on account of costs. 281 The transfer of Peter and Kathy's shares was effected either in May 2020 or August 2020. Either way, I infer that the summons for taxation triggered the precautionary action to transfer the shares out of Peter and Kathy's names and put them beyond the reach of their creditors. To the extent that the steps to effect the transfer had not been completed by the time the interim order was made on 27 July 2020, I infer that triggered the action of lodging documents concerning the transfer with ASIC on 5 August 2020.

IF THE TRANSFER OF PETER AND KATHY'S SHARES IN VOUKIDIS HOLDINGS TO ZVAM WAS EFFECTIVE, WAS ZVAM'S TRANSFER OF THE SHARES TO CHRISTOS VOID PURSUANT TO S 37A OF THE CONVEYANCING ACT 1919 (NSW)? 282 On 13 January 2023, Christos lodged an ASIC Form 484 recording the transfer of 1003 ordinary shares in Voukidis Holdings by ZVAM to Christos. That form stated that the earliest date of the change was 6 September 2022. 283 The evidence also included a document dated 6 September 2022 stating that ZVAM was transferring 502 ordinary shares in Voukidis Holdings to Christos for $2,000. As that document also stated that the shares being transferred were "numbered 1, 3, 4 and 5 to 1004 inclusive", it appears the reference to 502 shares was an error. That transfer was signed by Christos both as transferee and for ZVAM as transferor. Minutes of a meeting Voukidis Holdings ostensibly held dated 6 September 2022, and at which Christos was the only supposed attendee, refer to the transfer of 1003 shares, again suggesting the reference to 502 shares was a typographical error. 284 The Applicant raised s 37A of the Conveyancing Act 1919 (NSW) (Conveyancing Act) as an "alternative pathway" by which the ultimate transfer of the shares in Voukidis Holdings to Christos could be set aside. The Respondents did not contend that, if Peter and Kathy's transfer of the shares in Voukidis Holdings to ZVAM was effective but did not survive challenge under ss 120 or 121 of the Act, ZVAM's transfer to Christos would nonetheless be effective. As such, it appears unnecessary to determine whether, as the Applicant also contended, ZVAM's transfer of its shares in Voukidis Holdings to Christos is void pursuant to s 37A of the Conveyancing Act, but I will do so for completeness. 285 Section 37A of the Conveyancing Act is in the following terms: 37A Voluntary alienation to defraud creditors voidable (1) Save as provided in this section, every alienation of property, made whether before or after the commencement of the Conveyancing (Amendment) Act 1930, with intent to defraud creditors, shall be voidable at the instance of any person thereby prejudiced. (2) This section does not affect the law of bankruptcy for the time being in force. (3) This section does not extend to any estate or interest in property alienated to a purchaser in good faith not having, at the time of the alienation, notice of the intent to defraud creditors. 286 The Applicant accepted that if I concluded that Voukidis Holdings acted as trustee in advancing funds to Peter and Kathy, he would fail on the s 37A issue. However, as I did not so conclude, the Applicant's concession does not dispose of this issue. 287 It was common ground that the principles governing the operation of s 37A of the Conveyancing Act were set out by the High Court in Marcolongo v Chen (2011) 242 CLR 546; [2011] HCA 3 (Marcolongo). In Zreika v Royal (2019) 271 FCR 65; [2019] FCAFC 82 (Zreika), the Full Court (Besanko, Farrell and O'Callaghan JJ) summarised the relevant principles from Marcolongo as follows (at [88], emphasis added): The relevant principles in relation to the elements of s 37A of the Conveyancing Act and, in particular, the intent to defraud creditors, may be briefly stated. The High Court considered s 37A of the Conveyancing Act in Marcolongo v Chen. French CJ, Gummow, Crennan and Bell JJ referred to the history of s 37A and its predecessor, the Statute 13 Eliz. 1 c. 5. (the Elizabethan Statute). Their Honours made the point on two occasions in the course of their reasons that s 37A, like the Elizabethan Statute before it, should receive a liberal construction in effecting the purpose of suppressing fraud (at [20] and [58]). Section 37A refers to an intent to defraud creditors and means delay, hinder or [otherwise] defraud creditors as the Elizabethan Statute had provided (at [19]). Whether there is an intent to defraud creditors involves a question of fact concerning actual knowledge and is to be distinguished from the purely equitable doctrine of constructive notice or constructive knowledge (at [26]-[28]). However, it is not necessary to prove a desire to cheat or swindle those prejudiced. Furthermore, whilst it is necessary to show the existence of an intention to hinder, delay or defeat creditors, it is not necessary to show that the debtor wanted creditors to suffer a loss or that the debtor had a purpose of causing loss (at [32]). Finally, it is not necessary that the intent to defraud creditors be the sole or predominant intention (at [57]). 288 In Young v Smith (2015) 18 BPR 35; [2015] NSWSC 400, Sackar J considered an application to set aside a transfer of property pursuant to s 37A of the Conveyancing Act. His Honour observed (at [37]) that "[i]t is not necessary, for the purposes of s 37A, that there be actual proof that the alienator had in his mind an intention to defraud creditors; the court can attribute to the alienator the requisite fraudulent intent if, from all the surrounding circumstances, it appears that the effect might be expected to be, or has in fact been, to defeat creditors".

Parties' submissions 289 The Applicant submitted that the transfer of the Voukidis Holdings shares from ZVAM to Christos took place on 13 January 2023 - being the date that Christos lodged the ASIC Form 484 recording the change in Voukidis Holdings' shareholding - which was the day after the Respondents were given notice of the Applicant's intention to commence this proceeding seeking to set aside the share transfers by Peter and Kathy to ZVAM in 2020. 290 In those circumstances, the Applicant contended that the requisite intention referred to in s 37A of the Conveyancing Act was "readily established". 291 The Applicant further submitted that the meeting minutes and share transfer, said to support the Respondents' claim that the transfer from ZVAM to Christos had occurred on 6 September 2022, were created by Christos in April 2023 (and backdated). In an annexure to his closing submissions, the Applicant relied on the following evidence in support of the alleged falsity of these documents and the allegation that they were created by Christos: (1) the evidence of Mr Le, that the pdf document comprising the share transfer and meeting minutes was first created (scanned from physical documents) on 21 April 2023; (2) the evidence of Mr Le, that the pdf document comprising the Voukidis Holdings Members' Register was first created (scanned from a physical document) on 21 June 2023; (3) the evidence of Mr Ganas, that Christos' and Mr Leidl's signatures were digital facsimiles and affixed to the documents electronically (in circumstances where Christos accepted he had access to Mr Leidl's digital signature); (4) the failure of the Respondents to provide native files of the unexecuted or original versions of the share transfer despite orders requiring their production, and despite the evidence of Mr Le establishing that a physical document was scanned in April 2023; (5) the absence of any evidence, other than from Christos, that the $2,000 payment by him recorded in a ZVAM bank statement was intended to be paid as consideration for the transfer of the shares, including the fact that: (a) the sum appears to be arbitrary and does not correspond in any way to the number of shares transferred or the value of those shares which, on the Respondents' case, was "nil or nominal"; and (b) the transaction is not described as being for that purpose; (6) the Respondents' unexplained failure to call Mr Leidl to give evidence regarding the use of his digital signature on the share transfer; and (7) the Respondents' unexplained failure to call Peter Voukidis junior (Christos' son and the sole director of ZVAM in 2022). 292 In the event that the transfer from ZVAM to Christos was found to have taken place on 6 September 2022, the Applicant submitted that the transfer "was wholly the creation of Christos, at a time when he knew of the value of the claims of Voukidis Holdings against Peter and Kathy's bankrupt estate, that the shares held by ZVAM constituted a valuable or potentially valuable asset, and where he had been the sole architect of the (purported) transfer of the shares by Peter and Kathy to ZVAM in 2020". On those bases, the Applicant submitted that the Court should infer the requisite fraudulent intent and set aside the transfer. 293 As against the Applicant's claim to set aside the transfer, the Respondents raised three points. First, that the only assets held by ZVAM were shareholdings in a bare trustee company. Secondly, that in the transfer of shares from ZVAM to Christos nothing of value was transferred and therefore there could be no actual knowledge or any intention to defraud. Thirdly, that there was no allegation that ZVAM alienated its unitholding in the KC Trust, which was the asset of value (cf the shareholding in a bare trustee company).

Consideration 294 Given I have concluded that Voukidis Holdings did not relevantly act as trustee, the Respondents' arguments necessarily fail. 295 I do not accept that the shares were transferred on 6 September 2022. Although a transfer document bearing that date was in evidence, it was signed by Christos purportedly as director of ZVAM. However, Christos was not a director of ZVAM at that time. The only director was his son, Peter Voukidis junior. Peter Voukidis junior was not called to give evidence. 296 Although the failure to produce the relevant documents in any form other than in the form of pdfs created in 2023 is not determinative, on the balance of probabilities, I conclude that the transfer of shares in Voukidis Holdings from ZVAM to Christos was effected by Christos alone in January 2023. The ASIC Form 484, being the only document whose date is established conclusively - as distinct from on Christos' evidence - was submitted on 13 January 2023. The transfer of shares in Voukidis Holdings to Christos, once alerted to the Applicant's intended action, is consistent with a pattern of conduct by which the shares in Voukidis Holdings were transferred, at Christos' instigation, as events unfolded revealing a risk of the shares coming into the hands of a liquidator or trustee in bankruptcy (see above concerning the transfer of shares in Voukidis Holdings by COV to Peter and Kathy in May 2014 just before its liquidation, the transfer by Christos to Peter in April 2016 just before Christos' bankruptcy and the transfer by Peter and Kathy to ZVAM just before their bankruptcy in July 2021). Christos' chequered history of misdating and manipulating documents is a further reason why I reject his evidence. 297 All told, the only available conclusion is that Christos sought to transfer the shares in Voukidis Holdings in order to put them out of the reach of Peter and Kathy's trustee in bankruptcy, or at least to make it harder for the trustee to recover those shares for the benefit of their bankrupt estates, by adding a further transfer to the chain once alerted to the Applicant's intention to challenge Peter and Kathy's transfer of the shares to ZVAM: Zreika at [88]. 298 Accordingly, in my view the Applicant has established that the transfer of shares in Voukidis Holdings by ZVAM to Christos is void pursuant to s 37A of the Conveyancing Act.

DISPOSITION 299 The parties are to confer and provide a proposed form of order giving effect to these reasons to chambers by 23 August 2024. I certify that the preceding two hundred and ninety-nine (299) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Button.