Rothmore Farms Pty Ltd v Belgravia Pty Ltd

6. To the extent necessary, inquiries and accounts be conducted by the Registrar of the Court or by such other person or persons empowered to conduct such inquiries and accounts for the following purposes: (1) to identify all and every of the assets of the Jill Cooper Family Trust as vested in Andrew Charles Cooper on 19 May 1998 and as subsequently transferred by him on 7 August 1998 to Tennyson Turner (2) to identify all moneys received by Tennyson Turner or by Agri-Steel Pty Ltd in the conduct of the farming business and the engineering business conducted by them or either of them on and from the property known as Rothmore Farms from 7 August 1998 (3) to identify all moneys paid by Tennyson Turner or by Agri-Steel Pty Ltd or either of them in the conduct of the farming business or in the conduct of the engineering business on and from the property known as Rothmore Farms from 7 August 1998

and so that the declarations made in pars 1 to 5 hereof may be given their proper force and effect. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

1 Rothmore Farms Pty Ltd (in provisional liquidation) ("Rothmore Farms") was placed in provisional liquidation on 14 September 1998. John Sheahan ("Mr Sheahan") was appointed provisional liquidator.

2 The Jill Cooper Family Trust ("the Trust") was established on 6 October 1981 by Deed between the settlor and Rothmore Farms as trustee ("the Trust Deed"). It was varied by a further deed on 25 June 1985, but not in any relevant respect for present purposes. The primary beneficiaries of the Trust included Jillian Helen Cooper (formerly Marshall) ("Mrs Cooper") and her sons the second respondent Andrew Charles Cooper ("Andrew Cooper"), Simon Vincent Cooper ("Simon Cooper"), Richard John Cooper ("Richard Cooper") and Martin James Cooper ("Martin Cooper"). They were not the only beneficiaries of the Trust. In the course of these reasons I will refer to Mrs Cooper and her sons as "the Cooper Family" when it is not necessary to distinguish between them. 3 The directors of Rothmore Farms have been Mrs Cooper from 1981, Richard Cooper from 7 September 1983, Simon Cooper from 14 November 1984 and Andrew Cooper from 1 September 1989. On 20 April 1998, sequestration orders were made against the estates of Mrs Cooper, Richard Cooper and Simon Cooper. Mr Sheahan was appointed as trustee of each of those estates. The only significant indebtedness upon which those orders were made was to Commonwealth Bank of Australia ("CBA") by reason of guarantees given to support advances by CBA to Rothmore Farms referred to below. At that time, Rothmore Farms had ten issued shares, of which seven were held by Mrs Marshall and one each by Richard Cooper and Simon Cooper. The remaining share is held by Andrew Cooper. Mr Sheahan therefore holds as trustee of those three estates 90 per cent of the issued shares in Rothmore Farms. From the date of sequestration, only Andrew Cooper remained eligible to be a director of Rothmore Farms, due to the operation of s 244 of the Corporations Law ("the Law"). 4 Rothmore Farms, as trustee of the Trust, conducted the business of the Trust from its appointment on 6 October 1981 until 10 February 1993. That business was largely, but not exclusively, the conduct of farming operations on a property known as Rothmore Farms. In the course of so acting as trustee, Rothmore Farms incurred liabilities to CBA and to Commonwealth Development Bank of Australia Ltd ("CDB") in respect of advances and financial accommodation to operate that business. Where it is convenient I shall refer to CBA and CDB together as "the Banks". 5 Mrs Cooper, Simon Cooper and Richard Cooper were directors of Rothmore Farms when it granted the first of four registered charges over its assets in favour of CDB on 24 June 1985, and those persons and Andrew Cooper were directors when it granted other registered charges over its assets on 16 June 1989 in favour of CDB, and on 4 July 1991 and 22 September 1992 both in favour of CBA. At 30 June 1992, Rothmore Farms was indebted to the Banks in the sum of $1,012,717. That overall liability had not reduced by 10 February 1993. 6 The assets of Rothmore Farms were all personal assets: plant and equipment, farming stocks and supplies, crops, and entitlement to the proceeds of crops, and the like. The property on which the farming business was carried on was farming land at Moonta in South Australia. That land was separately owned by Rothmore Pty Ltd, Mrs Cooper and her four sons. 7 It is not disputed that in general terms Rothmore Farms had a right of indemnity against the assets of the Trust in respect of its liability to the Banks, both under the Deed and at common law. Clause 16 of the Trust Deed provides:

"The Trustees shall be entitled to be indemnified out of the assets for the time being comprising the Trust Fund against liabilities incurred by them in the execution or attempted execution or as a consequence of the failure to exercise any of the [Trust's] authorities powers and discretions hereof or by virtue of being the Trustees hereof but the Trustees shall not be entitled to be indemnified by any beneficiary personally in respect of any liabilities or any matters aforesaid other than in respect of any duty or tax which they are entitled to recover from the beneficiary by law."

8 At common law, the position is recognised for example in Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 371 per Stephen, Mason, Aickin and Wilson JJ. The evidence clearly indicates that the liability to the Banks was incurred by Rothmore Farms in the administration of the Trust. The respondents disputed that that right of indemnity existed in the particular circumstances of the case. I will consider that contention later in these reasons. Nature of the action

9 This action is brought to have Rothmore Farms' claimed interest in the assets of the Trust recognised notwithstanding three transactions. In the alternative, Rothmore Farms seeks to impugn those three transactions concerning the Trust or the assets of the Trust.

10 The first transaction occurred on 10 February 1993. On that date Rothmore Farms ceased to be trustee of the Trust. On 9 February 1993, the first respondent Belgravia Pty Ltd ("Belgravia") was registered. On 10 February 1993, Belgravia was appointed as trustee of the Trust in lieu of Rothmore Farms. It became the legal owner of the assets of the Trust. The directors of Belgravia are the fifth and sixth respondents, Noelene Michelle Cooper ("Noelene Cooper") and Robert John Mills ("Robert Mills") respectively. Noelene Cooper is the wife of Richard Cooper and Robert Mills is the uncle of Noelene Cooper. 11 I shall call that transaction "the first transaction". 12 After the first transaction, Belgravia as trustee of the Trust continued to operate the farming business of the Trust. Then, by resolution of 19 May 1998, the directors of Belgravia first varied the Trust Deed by making 19 May 1998 the vesting day of the Trust, and then vested the Trust in Andrew Cooper. 13 It has been accepted by the parties that, subject to the issues particularly to be determined in this proceeding, it was within the power of Belgravia as trustee of the Trust to vest the whole of the assets of the Trust in Andrew Cooper. 14 I shall call that transaction "the second transaction". 15 Between 19 May and 7 August 1998 Andrew Cooper continued to conduct the farming business in his own name, but in a practical sense it was the farming business previously operated by Belgravia as trustee of the Trust. 16 From about 1990, there was also an engineering business conducted on the property. It was carried on by Rothmore Farms, and from the time of the first transaction, by Belgravia. After the second transaction, Andrew Cooper also continued to operate the engineering business. There is a dispute as to whether the engineering business was carried on by Rothmore Farms and then by Belgravia as trustee for the Trust, or by Rothmore Farms and Belgravia successively as an independent business activity. It will be necessary to make a specific finding on that issue in these reasons. 17 On 7 August 1998, Andrew Cooper entered into a Memorandum of Agreement with the fourth respondent, Tennyson Turner ("Tennyson Turner"), of 2 Edwin Terrace, Gilberton ("the Agreement"). The Agreement is in writing. It provides for Tennyson Turner to sell, and Andrew Cooper to purchase, "70 Carats of genuine Gilson black unpolished opal stones" for $700,000, payable as to $10,000 forthwith, as to $79,000 on or before 10 August 1998, and

"The balance of Six Hundred and Eleven Thousand Dollars ($611,000) by transferring assigning and delivering to [Tennyson Turner] all the farming and engineering plant machinery equipment tools and sundry stocks work-in-progress in on or about the property at Balgowan Road Moonta or used in the farming or engineering operations carried on by [Andrew Cooper] as at the date hereof and by the assignment by [Andrew Cooper] to [Tennyson Turner] of all grain payments now standing to the credit of [Andrew Cooper] and the crops now growing on the land used by [Andrew Cooper]."

18 The Agreement recorded an acknowledgment that it was not an agreement for sale and purchase of the business. It provided that delivery of the assets was to be effected upon payment of the full cash price component, on or by 10 August 1998, and that property then passed to Tennyson Turner in the farming and engineering businesses, and in the plant and equipment. The Agreement also specifically provided for Tennyson Turner to take over liability for a certain leased gleaner harvester under a consumer mortgage agreement, including the liability to make three annual payments of $57,000 each in March of 1999 and in the subsequent two years. 19 On 10 August 1998, Agri-Steel Pty Ltd was registered with Tennyson Turner as its sole director. Its principal place of business was and is at 2 Edwin Street, Gilberton, namely Tennyson Turner's premises. It appears to have operated the engineering business and at least in part the farming business since that time. 20 I shall call that transaction "the third transaction". The first transaction

21 There are two separate minutes of a meeting or meetings of the directors of Rothmore Farms on 10 February 1993. They each record that all four directors were present. One minute records:

"The Secretary presented the meeting with a Deed of Appointment dated 10 February 1993 executed by Mrs Jillian Helen MARSHALL appointing Belgravia Pty Ltd as trustee of the Jill Cooper Family Trust. Accordingly it was agreed that Rothmore Farms Pty Ltd retire as trustee of the said trust forthwith. It was further agreed to execute such documents as are necessary in order to effect the retirement as trustee including the transfer of any assets held on trust." 22 The other minute records: "The posiiton (sic) of the Company as Trustee of "The Jill Cooper Family Trust" was considered. It was determined that it was no longer desirable for the Company to continue to act as such Trustee. Accordingly IT WAS AGREED that Rothmore Farms Pty Ltd retire as Trustee of the said Trust forthwith and to execute such documents as are necessary in order to effect the retirement as trustee including the transfer of any assets held on trust. The Secretary was directed to informally appoint or named in the Trust Deed accordingly."

23 Belgravia was appointed as Trustee by Mrs Cooper on the same date pursuant to a Deed of Appointment also of 10 February 1993 in accordance with the Trust Deed. The directors of Belgravia resolved to accept that appointment. Mrs Cooper was empowered under the Trust Deed to dismiss a trustee and to appoint a new trustee of the Trust. The Deed of Appointment also recorded that Rothmore Farms was dismissed as trustee of the Trust. 24 Legal property in the assets of the Trust thereby passed to Belgravia. The transfer was effected by the physical change in possession following the first transaction, and by various accounting book entries. (b) Rothmore Farms' claims

25 Rothmore Farms' primary claim is that it has a right of indemnity in respect of its liability to the Banks up to the time of the first transaction, and interest accumulated thereon after that time. The existence of that right of indemnity is clear. I have referred to the foundation for that claim earlier in these reasons.

26 Rothmore Farms contends that the right of indemnity in respect of the property of the Trust at the time of the first transaction persisted after its removal as trustee of the Trust, and gave rise to an equitable charge or lien over the assets of the Trust, and its income. It also claims that that equitable interest in the assets and income of the Trust has remained an interest superior to the interest of the beneficiaries, and that it operated as against Belgravia after it became trustee of the Trust. It submits that that equitable interest remains enforceable against all but a purchaser for value without notice of that interest. 27 The respondents accept that, up to the time of the first transaction, the trustee's indemnity against the assets of the Trust gave it an equitable charge or lien over those Trust assets. They claim however that Rothmore Farms lost its right to indemnity by its mismanagement of the Trust in the period up to the first transaction. They also contend that, by the time of the first transaction, Rothmore Farms was no longer indebted to the Banks at all. They dispute in any event that the indemnity, and the claimed equitable lien or charge, could or did survive the first transaction. 28 Finally, they contend that any entitlement to the indemnity claimed by Rothmore Farms and supported by its claimed equitable lien or charge over the assets of the Trust has been lost by laches on the part of the Banks. 29 Rothmore Farms' alternative claim is that its dismissal as trustee of the Trust, the appointment of Belgravia as trustee of the Trust, and the transfer of the assets of the Trust to Belgravia, was a disposition of property which is void against Mr Sheahan under s 565 of the Law. 30 Section 565 of the Law provides:

"A settlement, a conveyance or transfer of property, … before the commencement of Part 5.7B, by a company that, if it had been or incurred by a natural person, would, in the event of his or her becoming a bankrupt, be void as against the trustee in the bankruptcy, is, in the event of the company being wound up, void as against the liquidator."

31 Part 5.7B came into effect on 23 June 1993. It created a new structure for recovering property or compensation for the benefit of creditors of insolvent companies. Section 565 is the saving provision in the Law in respect of transactions which took place prior to 23 June 1993, and is therefore applicable to the present transaction. Thus, in a practical way, it enlivens the application of s 121 of the Bankruptcy Act 1966. Section 121(1) of that Act provides: "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 the property available for division among the transferor's creditors."

32 Rothmore Farms alleges that the first transaction was undertaken with the intent to defeat its creditors and for the purposes of defeating delaying or interfering with the rights of the creditors of Rothmore Farms, in particular the Banks, and so is void pursuant to s 565 of the Law. (c) The claim to an equitable interest

33 Rothmore Farms' right of indemnity against the assets of the Trust gave it a first charge on those assets: Re Pumfrey (1882) 22 Ch D 255 at 262; Jennings v Mather [1902] 1 KB 1 at 6, 9; Commissioner of Australian Federal Police v Cornwell (1990) 98 ALR 677 at 681. The assets of the Trust include its corpus and its income: Stott v Milne (1884) 25 Ch D 710; Dowse v Gorton [1891] AC 190. In Jennings (above), the Court of Appeal described the trustee's equitable right as a "lien" on the trust assets (per Collins M.R. at 6) or as an "equitable lien" on the trust assets (per Mathew LJ at 9), so that a judgment creditor of the trustee could not execute against those assets so as to impair that right.

34 In Octavo (above), Stephen, Mason, Aickin and Wilson JJ described the position in the following way (at 367):

"… [the trustee] is entitled to be indemnified against those liabilities from the trust assets held by him and for the purpose of enforcing the indemnity the trustee possesses a charge or right of lien over those assets: Vacuum Oil Co. Pty. Ltd. v. Wiltshire. The charge is not capable of differential application to certain only of such assets. It applies to the whole range of trust assets in the trustee's possession except for those assets, if any, which under the terms of the trust deed the trustee is not authorized to use for the purposes of carrying on the business: Dowse v Gorton [1891] A.C. 190. In such a case there are then two classes of persons having a beneficial interest in the trust assets: first, the cestuis que trust, those for whose benefit the business was being carried on; and secondly, the trustee in respect of his right to be indemnified out of the trust assets against personal liabilities incurred in the performance of the trust. The latter interest will be preferred to the former, so that the cestuis que trust are not entitled to call for a distribution of trust assets which are subject to a charge in favour of the trustee until the charge has been satisfied: Vacuum Oil Co. Pty. Ltd. v. Wiltshire."

35 Later in their reasons, their Honours said (at 369-370):

"Property which is an asset of a trading estate carried on by a trustee is properly described as trust property: Dowse v. Gorton [1891] A.C. 190; Jennings v. Mather [1901] 1 Q.B., at p. 111. However, as we have already indicated, that does not mean that the cestuis que trust are necessarily entitled to call for the delivery of the property. If the trustee has incurred liabilities in the performance of the trust then he is entitled to be indemnified against those liabilities out of the trust property and for that purpose he is entitled to retain possession of the property as against the beneficiaries. The trustee's interest in the trust property amounts to a proprietary interest, and is sufficient to render the bald description of the property as "trust property" inadequate. It is no longer property held solely in the interests of the beneficiaries of the trust …" Octavo supports Rothmore Farms' claims to the indemnity, and to the equitable charge or lien over the assets of the Trust in support of it. 36 The next issue to address is whether the removal of Rothmore Farms as trustee, so that it relinquished its possession of the assets of the Trust, resulted in that lien or charge being lost. In my judgment, it did not. It would be a strange result if that equitable interest were capable of being lost by a transaction such as the first transaction. The persons controlling Rothmore Farms and the main beneficiaries under the Trust were the Cooper Family. Mrs Cooper alone under the Trust Deed had power to change trustees. The transfer of assets in many cases (as in this case) could be effected by a notional change in possession or by book entries. The ease with which that equitable interest could thus be lost if the respondents are correct tends to suggest that the proposition urged by the respondents should be carefully scrutinised. 37 Authority also indicates that the equitable interest of the trustee in trust assets, to the extent of the trustee's right of indemnity against the trust assets, is not lost by a change of trustee or by the giving up of possession of the trust assets by that former trustee. Jennings v Mather (above) recognised that the trustee's right of access to the trust assets for that purpose was not lost by the trustee's bankruptcy; it was maintainable by his trustee in bankruptcy. That position is also recognised in In Re Suco Gold Pty Ltd (1982) 33 SASR 99 where the trustee had been placed in liquidation. King CJ at 109 said:

"The trustee's lien is an equitable lien which confers on him a charge over the trust property, whether in his possession or not, for the purpose of protecting and enforcing the right of indemnity … The rights conferred by the lien passed to the liquidator. They would enable him to obtain and retain possession of the trust property until the right of indemnity has been exercised, and to realize the trust property in the course of exercising it."

38 Master Burley applied that decision in All Benefit Pty Ltd (In Liq) v Registrar General (1993) 11 ACSR 578 at 582.

39 Anderson J in Coates v McInerney (1992) 6 ACSR 748 was confronted with the argument that the right of indemnity itself was lost upon removal of the trustee. In that case it was argued that that consequence flowed from the terms of the indemnity clause in the trust deed. His Honour said (at 749-750):

"It is said that under this clause only the trustee actually in office is indemnified. However, I must disagree. Any right of indemnity would arise upon the liability arising and the question is whether that right of indemnity, arising at that time, that is to say, during the holding of the office by the trustee who held office at the time that the liability was incurred, is then lost by subsequent loss of office. There is abundant authority that it is not so lost. I do not need to refer to all of the authorities. It is, I think, sufficient to refer to Kemtron v Commissioner of Stamp Duties (1984) 15 ACR 627 at 634. The question is whether there is anything in cl 12 which would affect the general equitable doctrine that loss of office does not terminate the right of indemnity. In my view there is nothing in cl 12 which would modify the general equitable doctrine."

40 In Trautwein v Richardson [1946] Argus LR 129 there had been an order that the appellant held a hotel property in trust for the bankrupt, and so should transfer it to the bankrupt's trustee. Part only of the purchase price had been paid, and as between the vendor and the appellant, the appellant would be obliged to complete the contract. Dixon J said at 134:

"As trustee the appellant is entitled to be indemnified out of the asset in respect of this liability. That is to say, for anything he paid on account of purchase money he would be entitled to a lien or charge over the interest in the land to which the contract and the payment of purchase money gave rise. His lien or charge, would, of course, attach also to the legal estate, if the contract were completed by conveyance to him and his sister. As his sister and he appear to have been trustees for his father absolutely, that is as a person entitled to the full beneficial interest in the contract of sale, they would, prima facie, be entitled, before his bankruptcy, to be indemnified by him personally. "Where the only cestui que trust is a person sui juris, the right of the trustee to indemnity by him against liabilities incurred by the trustee by his retention of the trust property has never been limited to the trust property: it extends further and imposes upon the cestui que trust a personal obligation enforceable in equity to indemnify his trustee" - Hardoon v. Belilios, [1901] A.C. 118 at p.124, per Lord Lindley for the Privy Council. This doctrine applies equally to a cestui que trust who takes his equitable title by assignment from the original beneficial owner, that is if he becomes the only and absolute cestui que trust - Hardoon v. Belilios, ibid; Ashburner, Equity (2nd ed.), 160-162.

41 The result was that the appellant was entitled to be indemnified by the trustee for the bankrupt to the extent that he paid the balance of the purchase price, and was entitled to a lien or charge over the assets of the bankrupt to the extent of that indemnity. 42 In my judgment, therefore, Rothmore Farms' right to indemnity against the assets of the Trust, to the extent of its indebtedness to the Banks, survived the first transaction. I also find that at the time of the first transaction, and thereafter, Rothmore Farms had an equitable charge or lien over the assets of the Trust to the extent of that right of indemnity. An illustration of the recognition of those principles is provided by Kemtron Industries Pty Ltd v Commissioner of Stamp Duties [1984] 1 Qd R 576 where the value of the interest in a trust transferred by a beneficiary was assessed, for the purposes of ad valorem stamp duty, having regard to the trustee's equitable claim over the trust assets to protect the trustee's indemnity against those assets. (d) Consideration of the respondents' contentions

43 The respondents contend that Rothmore Farms was not, at the time of the first transaction, entitled to the indemnity claimed because it was not indebted then to the Banks as is alleged. They also contend that Rothmore Farms forfeited any right to indemnity in respect of its liability to the Banks, and so any equitable claim against the Trust assets, because it had been delictual in the performance of its duties as trustee of the Trust. Finally, they contend that such entitlement as Rothmore Farms may have had was lost by laches on the part of the Banks.

44 The respondents generally indicated that they did not accept the level of indebtedness to the Banks which Mr Sheahan as provisional liquidator of Rothmore Farms, and as trustee of the three bankrupt estates has accepted. 45 The documentary evidence is quite clear. 46 On 19 March 1985, Rothmore Farms as trustee for the Trust applied for, and was granted an advance comprising an overdraft, a farm loan, and a rural loan from the Commonwealth Development Bank, totalling $400,000. It was proposed that the Commonwealth Bank provide facilities in lieu of the existing bank arrangements with another bank. The facilities provided were progressively extended over the succeeding years. As at 1 July 1992, facilities made available were as follows:

Overdraft $ 90,000.00 Advance $435,000.00 Bill discount facility $190,000.00 Term Loan $168,415.00 Residual on Lease $ 40,000.00 Total $923,415.00 That level of indebtedness is recognised in the financial accounts of Rothmore Farms and of the Trust at 30 June 1992. 47 Those various advances were secured by a registered mortgage granted by Rothmore Pty Ltd over part of the land on which the farming operations were carried out, a registered second mortgage granted by Rothmore Pty Ltd over an undivided moiety in certain further land also used for that purpose, and by registered second mortgages granted by Mrs Cooper over an undivided moiety in certain further land also used for that purpose. 48 In 1991, a registered second equitable mortgage over the whole of the assets and undertakings of Rothmore Farms was granted to further secure the Banks' debt, and further registered second mortgages over undivided moieties in further farming property were also granted. 49 In addition, by deed dated 1 September 1986, Mrs Cooper, Richard Cooper, Simon Cooper and Rothmore Pty Ltd each guaranteed that indebtedness to CBA to better secure the advances to and the financial accommodation provided to Rothmore Farms. Those guarantees were upheld as against Mrs Cooper, Richard Cooper and Simon Cooper and Rothmore Pty Ltd in proceedings in the Supreme Court of South Australia. The principal, but unsuccessful, line of attack in those proceedings seems to have been that Richard Cooper and Simon Cooper were co-guarantors with Andrew Cooper and Martin Cooper and the guarantee was generally unenforceable because Andrew Cooper and Martin Cooper were minors at the time the guarantee was executed by them. So far as the reasons for judgment of the Full Court of the Supreme Court reveal, it was not alleged in those proceedings that Rothmore Farms had no indebtedness to the Banks. 50 Furthermore, Mrs Cooper, Richard Cooper and Simon Cooper have each acknowledged that substantial indebtedness to those levels (or thereabouts) in their proofs of debt filed in their respective bankruptcies. 51 On 16 June 1998, the CBA applied for Rothmore Farms to be wound up. It alleged a failure to comply with a statutory demand served on Rothmore Farms in respect of the then indebtedness. Rothmore Farms opposed the application on the technical ground that the notice of demand had not in fact been served upon it, and on the substantive ground that there was a genuine dispute as to the alleged indebtedness which was being litigated in the Supreme Court of South Australia. In fact, the asserted genuine dispute only related to the fact that proceedings in the Supreme Court of South Australia had been commenced against Belgravia, rather than against Rothmore Farms, to recover the debt. It did not suggest there was no indebtedness. CBA had in fact commenced proceedings against Belgravia in the Supreme Court of South Australia at the same time as the proceedings against Mrs Cooper, Simon Cooper and Richard Cooper, but it did not pursue those proceedings. 52 One searches in vain for any cogent evidence that there was by the time of the first transaction no existing indebtedness of Rothmore Farms to the Banks. 53 The respondents called only two witnesses, namely Mrs Cooper and a valuer James Frederick Baines Bruce ("Mr Bruce"). Mrs Cooper's evidence-in-chief touched only upon the first transaction. The respondents led no evidence from any of the persons involved in the second transaction, or in the third transaction. Mr Bruce's evidence dealt only with the value of the opals which were transferred in the third transaction and is separately considered. 54 No evidence was called from Andrew Cooper, Simon Cooper, Richard Cooper, Noelene Cooper, Robert Mills or Tennyson Turner. In my view, they were each persons from whom it was natural for the respondents to adduce evidence. Andrew Cooper, Simon Cooper and Richard Cooper were directors of Rothmore Farms, and Noelene Cooper and Robert Mills were directors of Belgravia. In obvious ways, they were variously directly involved in the first transaction and in the second transaction. As is plain from Jones v Dunkel (1959) 101 CLR 298 per Menzies J at 312-313, the fact that none of them gave evidence cannot prove any fact in issue if there is no other evidence which tends to do so. If the evidence supports an inference on a fact or matter in issue, the absence of witnesses who might naturally have been called by the respondents means that that inference might be more readily drawn from the admissible evidence. 55 The only evidence that there was no debt to the Banks by the time of the first transaction was the assertion of Mrs Cooper to that effect. For reasons which appear below, I did not find Mrs Cooper to be a reliable witness. I reject her evidence on this particular topic. It is inconsistent with her acknowledgment of that indebtedness in her statement of affairs. It is inconsistent with a mass of contemporaneous documentary evidence. It is inconsistent with the financial accounts of Rothmore Farms, and later of Belgravia. 56 I find that Rothmore Farms was indebted to the Banks in the amounts specified above as at the time of the first transaction. I also find that Rothmore Farms incurred that debt only as trustee for the Trust. 57 The second ground upon which the respondents submitted that Rothmore Farms' indemnity had been lost was, in the circumstances, a remarkable one. It was that Rothmore Farms had lost that right of indemnity by 10 February 1993 because it had not managed the business of the Trust properly, and because it had acted outside its powers as trustee for a number of years including in its financial, accounting and taxation arrangements all of which "led to the large debts". They also submitted that those matters were the reason for the first transaction. 58 That submission is remarkable because: · the issue was not pleaded. · the respondents led no evidence to support the claim. Their only witness of fact on matters relating to that period was Mrs Cooper. She did not touch on the issue. The short cross-examination of Mr Bartholomaeus, the then accountant for Rothmore Farms, did not explore the issue except to allege unsuccessfully that he had failed to give sound accounting advice to Rothmore Farms. · the directors of Rothmore Farms were the Cooper Family. On the evidence it was Mrs Cooper and her sons who ran the farming activities of the Trust through Rothmore Farms, and (it seems) continued to do so until the third transaction. Consequently, the submission is in reality the Cooper Family alleging that the corporate trustee of the Trust of which they were among the principal eligible beneficiaries cannot assert or enforce its right of indemnity because they, as directors of that corporate trustee, failed to act in their own proper interests. To state the proposition is to demonstrate that it is flawed. 59 I reject it for those reasons. 60 I also reject the contention that somehow Rothmore Farms' entitlement has been lost by laches on the part of the Banks. 61 That question was not pleaded, nor litigated in the proceeding. It was only advanced in submissions. The evidence does not support the assertion in submissions that the Banks "slept" on their rights as against Rothmore Farms until 10 August 1998 when CBA issued a statutory demand upon Rothmore Farms for recovery of its debt. 62 The evidence indicates that the Banks continued to assert to the Cooper Family their entitlement to recover their debts at material times. It was that pressure which led to the first transaction. I find that it was not until 22 August 1994 that CBA was informed of the first transaction. In February 1995, it instituted various proceedings in the Supreme Court of South Australia to enforce its securities, including to recover under the guarantees given by Mrs Cooper, Simon Cooper and Richard Cooper. I have referred to the detail of those claims elsewhere in these reasons. Judgments were ultimately obtained in certain of those proceedings on 22 August 1997. They were affirmed on appeal on 20 March 1998. It was shortly after that date that the sequestration orders were obtained against the estates of Mrs Cooper, Richard Cooper and Simon Cooper. Also, following the resolution of the proceedings in the Supreme Court, in May 1998 CBA proceeded to serve a statutory demand in respect of the then indebtedness upon Rothmore Farms. 63 In addition, in my view, the relevant conduct is not that of the Banks but of Rothmore Farms itself. In the period of time up to the appointment of Mr Sheahan as trustee of the bankrupt estates of Mrs Cooper, Simon Cooper and Richard Cooper, Rothmore Farms remained in the control of the Cooper Family. They were its sole directors and shareholders. It is not, in my view, correct that the Cooper Family could now effectively complain that the company of which they were sole directors and shareholders lost its rights against them by any inactivity in enforcing those rights whilst they had that control. Following the appointment of Mr Sheahan as provisional liquidator, Rothmore Farms has acted promptly to enforce its rights. 64 Finally, I do not think that the claimed detriment by any delay is made out. In Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221 at 239-240, the Judicial Committee of the Privy Council said:

"Now the doctrine of laches in Courts of Equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases, lapse of time and delay are most material." In my judgment, the evidence does not show that either Rothmore Farms or the Banks intended to, or did, abandon their respective claims, or that any delay has in any relevant sense prejudiced the respondents (cp Allcard v Skinner (1887) 36 Ch D 145). It does not show that, in the period between the first transaction and the present, the respondents or any of them have altered their position upon the basis that those claims would not be pursued. On the contrary, as these reasons record, the first transaction and the second transaction were each clearly prompted by the awareness of the liability of Rothmore Farms to the Banks and of the prospect of Rothmore Farms exercising its right against the assets of the Trust so as to meet that liability. 65 It was submitted for the respondents that the deficiency of assets against liabilities of Rothmore Farms at 30 June 1992 was only $166,721 and that the delay has led to that shortfall now exceeding some $2.5 million. That level of indebtedness is the consequence of two things. First, the fact that the assets of the Trust were transferred in the first transaction to Belgravia, so that Rothmore Farms was left with its indebtedness to the Banks but (subject to the outcome of this action) no value in its right of indemnity against the Trust assets increased its apparent level of irrecoverable debt. Second, interest has continued to accumulate on that indebtedness to the present time. The assets of the Trust at 30 June 1992 were reported as $845,996 and the shortfall of assets against liabilities was $166,721. That shortfall was almost entirely due to the indebtedness to the Banks. The removal of those assets from the reach of Rothmore Farms' right of indemnity (if that occurred) would mean that the shortfall of assets in Rothmore Farms was then, in effect, its total indebtedness to the Banks. Rothmore Farms has not traded since the first transaction. The increase to its present level of indebtedness to the Banks is solely due to interest accumulating on that indebtedness. In the meantime, the assets of the Trust have been used to support the continued operation of the farming activities of the Trust, including the procuring of financial accommodation from another financial institution. The indebtedness to CBA as at 1 April 1999 is $1,948,370 and to the CDB is $356,170 at the same date, making a total of $2,304,540. 66 I note also that that indebtedness to the Banks was recognised in the financial accounts of Belgravia from 30 June 1993 to 30 June 1997. That is the date of the last Belgravia accounts in evidence. The financial accounts of Rothmore Farms in that period also erroneously disclosed that it had no assets and no liabilities. Whilst it was correct to recognise the debt, it was erroneous following the first transaction to treat it as a debt of Belgravia. There is now no issue that such indebtedness to the Banks as does exist has at all times remained with Rothmore Farms. (e) The claim under s 565 of the Law

67 The alternative way in which Rothmore Farms contends that it may avoid the first transaction is under s 565 of the Law. As I have found that the first transaction did not have the effect of impairing Rothmore Farms' right to indemnity against the Trust assets, and that that right to indemnity was supported by an equitable charge or lien over the Trust assets, it is not really necessary to address this contention. However, as the parties spent some considerable time on it in their submissions, it is desirable that I do so. The contention would only really arise for consideration if my view about the claim to an equitable interest by Rothmore Farms were erroneous.

68 The terms of s 565 are noted above, as are the terms of s 121(1) of the Bankruptcy Act which is effectively incorporated into s 565 by reference. 69 It is necessary to determine whether, if that transfer effected by the first transaction had been made by a natural person, in the event of that natural person becoming a bankrupt it would have been void against the trustee in bankruptcy. To so qualify, it is necessary first to establish that the property transferred would probably have become part of Rothmore Farms estate or would have been available to Rothmore Farms' creditors if it had not been transferred, and second that Rothmore Farms' main purpose in making the transfer was to prevent the transferred property from becoming divisible amongst its creditors, or to hinder or delay the process of that property becoming available for division amongst its creditors. 70 Subject to the contention I have already rejected that Rothmore Farms had no entitlement to indemnity at 10 February 1993, it is not seriously contested that the property transferred to Belgravia by the first transaction would have been available to creditors of Rothmore Farms if the first transaction had not occurred. 71 I turn to consider under s 121(1)(b) of the Bankruptcy Act whether the first transaction was undertaken with intent to remove the Trust assets from the reach of the Banks, as they were the main creditors of Rothmore Farms. 72 Sections 121(2) and (3) of the Bankruptcy Act provide: "(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 transfer was, or was about to become, insolvent. (3) Subsection (2) does not limit the ways of establishing the transferor's main purpose in making a transfer."

73 In respect of the period up to 30 June 1992, Rothmore Farms' accounts show that its principal current asset was the right of indemnity from the Trust, and its current liabilities principally but not exclusively were financial facilities owing to CBA. 74 The Trust financial accounts to 30 June 1992 show a net trading profit from farming of $85,843, but an excess of liabilities over assets of $166,721. The farming wages were minimal. It appears that the profit was achieved because none of the Cooper Family were paid wages, although Simon Cooper, Andrew Cooper and Richard Cooper worked on the farm (and in the agricultural equipment engineering business, to which I shall refer below). During 1991/1992, they each took drawings by way of loans from Rothmore Farms of about $18,000, so that the Trust assets included the entitlement to recover that increased indebtedness. The indebtedness of the Cooper Family to Rothmore Farms increased over the 1991/1992 financial year by $95,692 to a total of $513,205. There is no evidence to indicate whether those advances in fact were recoverable. If they were not, there was a very significant shortfall of assets against liabilities in the Trust. 75 As noted earlier in these reasons, the security net of the Banks was progressively tightened. It is also clear that in the later part of 1992, the Banks had concerns about Rothmore Farms exceeding its overdraft limit. On 22 September 1992, a crop lien security was taken and registered, and notified to the Australian Wheat Board and to the Australian Barley Board. 76 In early January 1993, Rothmore Farms had exceeded its overdraft limit with the CBA. The CBA was concerned about that, and conveyed that concern by its local branch manager Mr Riley to a member of the Cooper Family, who I find on the basis of Mrs Cooper's evidence to have been Richard Cooper. Mr Riley told Richard Cooper that Rothmore Farms should not draw further cheques, and that if CBA were not kept informed of the cropping progress and of Rothmore Farms' financial position, then CBA would dishonour its cheques. 77 On 10 February 1993, CBA was notified by the Australian Wheat Board that Richard Cooper on behalf of Rothmore Farms disputed the entitlement of the CBA to receive the proceeds from a crop delivered to the Australian Wheat Board under the crop lien. On the same day CBA cancelled Rothmore Farms' overdraft facility. It indicated that no further cheques would be met on presentation to the CBA. Rothmore Farms obviously had a serious cash crisis. Its assets were heavily secured. There is nothing to suggest it had other resources to enable it to continue the farming operations for the Trust. 78 The only evidence led by the respondents to explain the circumstances of, and the reasons for, the first transaction was from Mrs Cooper. 79 I did not find Mrs Cooper to be a reliable witness. I do not know whether it was the passage of time, or some other reason, but her evidence was a curious and unsatisfactory mix of dogmatic assertions or denials on significant issues and of a lack of any real knowledge on other issues of much the same significance. Those dogmatic assertions or denials in a number of cases were clearly erroneous, but she would not be swayed from them nor, when pressed, did she provide any real reason for those views. 80 Her evidence in chief asserted, without any explanation, that in the early 1990's she and her family were of the view that there were no longer monies owing to the CBA, and that the advances and facilities had all been repaid with interest. That is simply not so. The documentary evidence is clearly to the contrary. She acknowledged the debt, as guarantor, in her statement of affairs. The accounts of Rothmore Farms of which she was a director recorded the increasing level of bank indebtedness up to 1992 and thereafter Belgravia's accounts acknowledged the fact of that indebtedness. The granting of the securities by Rothmore Farms, when she was a director, to support the ongoing financing from the Banks also contradicts her assertion. Her own evidence-in-chief then later contradicted that statement. 81 Her evidence was that the first transaction occurred solely on the express advice of Rothmore Farms' former accountant, Rodney Bartholomaeus ("Mr Bartholomaeus"), and that Tennyson Turner played no role in relation to the first transaction. That evidence provides an illustration of her specific recall of some matters and her inability to recall anything of other matters occurring more or less contemporaneously. It also provides an illustration of the specific recall being apparently unreliable. She had known Tennyson Turner for many years. She said that, on the basis of Mr Bartholomaeus' advice, she went with Richard Cooper and Simon Cooper to Tennyson Turner's office to have Belgravia formed. She had no recollection of what transpired at that meeting. How or why she and her sons went to see Tennyson Turner to form Belgravia, especially when (as she said) they did not attend by any appointment was not explained. Her detailed recollection of the advice said to have been given by Mr Bartholomaeus at the time contrasts sharply with a total inability to recall any matter upon which Tennyson Turner gave advice or even commented. She advanced no reason for Mr Bartholomaeus being unable to arrange for another person to register Belgravia (or a new corporate trustee), or to refer them to another person to do so. 82 The Cooper Family had the practice of meeting Mr Bartholomaeus on an annual basis, about October or November of each year, when he would go through the financial records they brought with them to clarify any issues and to obtain any relevant information for the preparation of financial accounts. From 1988, the primary financial records were maintained by Richard Cooper. Mr Bartholomaeus would then prepare financial accounts for the previous financial year and send them to the Cooper Family to consider and, subject to any queries, to sign them. Initially, in her cross-examination, Mrs Cooper said that after the annual meeting in about October 1992 with Mr Bartholomaeus, the next meeting with Mr Bartholomaeus was in about October or November 1993. She only recalled another meeting with Mr Bartholomaeus when it became clear that the annual meeting in 1992 could not have been the occasion of any discussion about the first transaction, because the financial pressure from the CBA which gave rise to it had not then occurred. She then said that there was a meeting with Mr Bartholomaeus prompted by CBA's notice of "foreclosure" ie. termination of the overdraft facility. She identified CBA's letter to Rothmore Farms of 10 February 1993 as being that notice. When it was pointed out that that notice was given only by letter of 10 February 1993, and the first transaction itself occurred on that date, so there was no time to have seen Mr Bartholomaeus, she asserted that the notice of foreclosure was received in December 1992, by hearing it from one of her sons who had been told it by Mr Riley. Apart from what I regarded as her inappropriate flexibility in the course of her evidence to meet the independently verifiable facts, there is no evidence of any such conversation between Mr Riley and any of her sons. The CBA's records in evidence do not disclose, as must have been the case if she is correct, a decision to "foreclose" made in December 1992. 83 I have given weight to her evidence only where it is corroborated by other documentary or oral evidence, or where it relates to matters of apparently uncontentious history. 84 Her evidence confirms that she and Richard Cooper received advice in early 1993 that Rothmore Farms should retire as trustee of the Trust and that a new company should be appointed as trustee "so that the new trustee could keep the farm going" in the face of the debt of Rothmore Farms to the Banks, and in the face of CBA's claimed crop lien over the 1992/1993 summer harvest. It was CBA's position that the receipts from that harvest be appropriated to debt reduction, and not be available for working capital. Rothmore Farms had no other capacity to borrow further working capital. The advice also was that the new trustee should have directors who were not members of her immediate family. She asserted that the removal of Rothmore Farms as trustee, and its replacement by Belgravia, was not to defeat or delay any liability to the Banks, but "to help the whole position" including repaying the Banks. 85 I accept that the first transaction was done in part at least on advice from some other person. It is of a degree of complexity which I suspect Mrs Cooper and her family would not have employed without that advice. As I noted, she said that the advice was given by the accountant for Rothmore Farms and the Trust, Mr Bartholomaeus. Mr Bartholomaeus denied that. It is the applicant's case that it was given by Tennyson Turner. 86 I accept Mr Bartholomaeus' evidence that he did not advise the Cooper Family to undertake the first transaction. He impressed me as a straightforward and honest witness, with a sound recollection of events and a readiness to acknowledge limitations in his memory of events. His firm had been the accountants for Rothmore Farms, and for members of the Cooper Family, for many years. He had undertaken that role from and including the 1988/1989 financial year. He completed the Rothmore Farms' accounts, and also the Belgravia accounts, as well as the Trust financial accounts to 30 June 1996, but thereafter has not received instructions. In April 1998, he forwarded the financial records, other than his personal records, to Tennyson Turner on instructions from Richard Cooper. 87 Apart from being impressed by Mr Bartholomaeus as a reliable witness, his evidence is confirmed by the tenor of the correspondence and communications between himself and CBA, Rothmore Farms, and Richard Cooper on 18 and 19 March 1993, and by Rothmore Farms' letter of 22 March 1993 to CBA. 88 A stalemate in communications with the Banks apparently followed CBA's letter of 10 February 1993 to Rothmore Farms. On 18 March 1993, CBA contacted Mr Bartholomaeus and asked him to intervene with the Cooper Family and to participate in a meeting between CBA's officers and members of the Cooper Family to address the financial circumstances then applying to Rothmore Farms. CBA notified Rothmore Farms of that suggestion. Mr Bartholomaeus also wrote to Mrs Cooper, and Richard Cooper, Simon Cooper and Andrew Cooper on the same date concerning that suggestion. He concluded his letter as follows:

"I must say I prefer the above approach to the course you are currently taking with action groups, etc. It concerns me, as I believe a court battle with the Bank is not the way to go. Please treat this letter as urgent and contact me as soon as you have considered the above."

89 Richard Cooper on behalf of Rothmore Farms responded to the CBA by letter of 22 March 1993 in the following terms:

"This letter refers to your conversation on 18th March with Rod Bartholomaeus, who I must point out to you is only our Accountant for which he is contracted to lodge our Tax Returns and has No Authority to act on our behalf for any other purposes. In view that you have been trying to contact us, on the 3rd March I wrote to you telling that we were considering our position generally. You have requested a meeting to try and resolve your problems with us, however I am prepared to negotiate, but with terms and conditions NOT the same as before. You are to direct all future correspondence to me and all negotiation will be in writing and writing only."

90 Not surprisingly, soon afterwards the CBA gave notice of default to Rothmore Farms in respect of its facilities, and notified Rothmore Farms not to dispose of or sell any of its assets without the Banks' consent.

91 Mr Bartholomaeus also was contacted by Richard Cooper on 19 March 1993 in response to his letter. He was told, consistently with the Rothmore Farms letter of 22 March 1993 to CBA, that the Cooper Family did not intend to meet with CBA. He was also told that he was not to become involved with CBA in relation to the matter, as his role was as the "tax agent" and that Tennyson Turner was attending to issues concerning the CBA for Richard Cooper. He made a contemporaneous note of that telephone conversation which is consistent with his evidence. Effectively, Mr Bartholomaeus was then told that dealings with CBA were nothing to do with him, and he should not become involved. If he had played any part in the process of, or decision to, change the trustees of the Trust, it is improbable that his communications would have been in the terms expressed, or that Richard Cooper's response would have been in the terms expressed. 92 The fact that he played no role in advising on the first transaction is also borne out by his letter of 21 January 1994 to Tennyson Turner, including the following:

"We refer to previous telephone conversations regarding the affairs of the abovenamed. As we have not been involved in the change of trustee, etc. and considering sensitivity of affairs with the Commonwealth Bank, we now require your approval and assistance on a number of matters including the Statutory Records of the companies, Belgravia Pty. Ltd. and Rothmore Farms Pty. Ltd., and also the 1993 Financial Accounts for these two Companies 1. We understand that the company, Belgravia Pty. Ltd., has been appointed as trustee of The Jill Cooper Family Trust and the company, Rothmore Farms Pty. Ltd, has retired as trustee. a) Have minutes to effect the above been prepared? Assuming no minutes have been prepared, we enclose draft minutes for your approval. b) Has a Deed of Appointment, appointing Belgravia Pty. Ltd. as trustee, been prepared?"

93 The draft minutes enclosed were used for the purpose of recording the resolutions giving effect to the first transaction. The Deed of Appointment of Belgravia as trustee for the Trust was not prepared by Mr Bartholomaeus.

94 That course of communications strongly tends to confirm Mr Bartholomaeus' evidence that he was not aware of the first transaction at the time it took place, and did not advise with respect to it. His notes of the annual consultation with the Cooper Family towards the end of 1993 record that he was then told of the first transaction, and should contact Tennyson Turner in relation to it. Those notes provide the context for his letter to Tennyson Turner of 21 January 1994, and also support his oral evidence. 95 In the meantime, Belgravia on 1 July 1993 had applied to the Australian Taxation Office for a tax file number. The contact person was identified as Tennyson Turner. 96 I reject Mrs Cooper's evidence that the first transaction occurred on the advice of Mr Bartholomaeus. I accept his evidence that he did not know of the first transaction until after it had occurred. I also find that CBA was first told of the first transaction by letter from Rothmore Farms of 22 August 1994, and then in response to a specific request by CBA as to the then trustee of the Trust. 97 Why, then, was the first transaction undertaken? It is obvious that Rothmore Farms was under considerable pressure from CBA by the time of the first transaction. The CBA had claimed the proceeds of the 1992/93 harvest to reduce the indebtedness, pursuant to a crop lien. Those monies would otherwise probably have provided Rothmore Farms with its working funds to operate into the next financial year. The overdraft facility had been cancelled. Its assets were considerably less than its liabilities. There is also no evidence to suggest that the members of the Cooper Family who were indebted to Rothmore Farms had the capacity in the short term to repay that indebtedness. The progressively increasing level of indebtedness to the Banks, and the spectrum of securities which they had procured, tend to support the inference that there were no other ready sources of funds available to Rothmore Farms, including from members of the Cooper Family. 98 The intent to which s 121(1)(b) of the Bankruptcy Act refers does not necessarily connote deceit or dishonesty. Ryan J in Re World Expo Park Pty Ltd (1994) 12 ACSR 759 at 768 referred with approval to the following passage from Lewis' Australian Bankruptcy Law (4ed, 1955) at 45-46:

"The general principle may be stated that any dealing with property (other than by sale for a reasonable price) made with the object of putting it beyond the reach of present or future creditors comes within the definition of a fraudulent conveyance if the person concerned cannot immediately pay his debts, or anticipates some event which may render him unable to pay his debts in future; such a dealing will be treated as fraudulent irrespective of the presence or absence of a conscious fraudulent intent on the part of the debtor if the necessary result of the dealing is to put the property beyond the reach of the creditors. Typical examples are transfers of property to the debtor's wife, transfers to a trustee to hold for the debtor, and transfers to one or a group of creditors to stave off threatened action. The word "fraudulent" indeed has received an interpretation in bankruptcy matters somewhat wider than its ordinary use, and it may be defined as equivalent to "with an intention to deprive creditors of recourse against all or any of his assets"."

That passage is also cited in Garuda Indonesia Ltd v Grellman (1992) 35 FCR 515 at 523. 99 In Grellman, the Full Court (Wilcox, Gummow and von Doussa JJ) discussed the circumstances in which "an intention to defraud creditors" (a shorthand expression used to convey the purpose to which s 121(1)(b) of the Bankruptcy Act refers) may be inferred (at 523-524). It is not necessary to repeat the authorities to which their Honours had regard. Regard should be had to all the surrounding circumstances, including the effect of the transaction (or, in the present circumstances, the intended effect of the transaction). 100 I am satisfied that the intent of Rothmore Farms, together with that of its directors, by the first transaction was to deal with the assets of the Trust with the object of putting them beyond the reach of the Banks, as creditors of Rothmore Farms. The above considerations explain why I have reached that conclusion. The first transaction was undertaken against the background of the CBA's intense financial pressure on Rothmore Farms to reduce its level of indebtedness. Mrs Cooper confirmed that the decisions taken to effect the first transaction were taken by herself, her sons and Noelene Cooper and Robert Mills. They were all the directors of Rothmore Farms and of Belgravia. They all took part in the "family discussion" (as she described it) when it was decided to pass the Trust assets in the name of Rothmore Farms to Belgravia. That was done by notional physical transfer of the assets, and by book entries, as the assets did not include any real estate. Mrs Cooper said that, in those discussions, they were all aware as almost inevitably they must have been that · no further advances would be forthcoming from the Banks and that they were pressing for reduction of their debts · if they could not somehow procure funds from the proceeds of the crops, the farming operations of the Trust could not continue · Belgravia was part of their restructuring to get access to funds so that the farming operations of the Trust could continue, and · they were therefore trying to preserve the assets and the trading operations of the Trust. 101 What she did not acknowledge was that the purpose of the transaction was to preserve the Trust assets and the farming operations of the Trust from further claims upon them by the Banks. However, in my judgment, that is the purpose which underlies the first transaction. The Cooper Family and Rothmore Farms were faced with the very real prospect that the Banks' actions would lead to their claims against Rothmore Farms being directly enforced, and Rothmore Farms then exercising its right of indemnity against the Trust assets. The point had been reached where Rothmore Farms, due to the level of its obligations to the Banks and its dealings with the Banks through its directors, was likely to be unable to continue trading as it had no further cash resources to do so. Another entity was perceived as the means by which the Trust's trading activities could continue. Although it may not then have been directly addressed that the process was to put the Trust assets beyond the reach of Rothmore Farms' creditors, namely the Banks, so as to "defraud" the Banks, that was the intended effect of the transaction. It may have been the expectation that, in time, the farming operations of the Trust would have generated sufficient profits to enable the Banks to be repaid. Indeed, in the longer term, the Cooper Family may have hoped that by putting the Trust assets beyond the reach of Rothmore Farms, and the Banks, they could continue to trade and ultimately to repay the Banks. It may have been the intention that the debt to the Banks would somehow continue to be recognised. In fact, erroneously, the accounts of Belgravia at 30 June 1993 and thereafter recognised the ongoing indebtedness to the Banks as a debt of Belgravia (but not by any arrangement with the Banks). 102 However, applying the test which s 121(1)(b) dictates, in my judgment it is clear that at the time of the first transaction, its purpose was to put the assets of the Trust beyond the reach of Rothmore Farms so that its creditors, namely the Banks, could not preclude or prevent the Trust from continuing to trade by seizing those assets. 103 Accordingly, if the equitable lien or charge of Rothmore Farms over the Trust assets did not survive the first transaction, in my judgment the first transaction would be void against the trustee in bankruptcy of Rothmore Farms (if it were a natural person) and so is void under s 565 of the Law as against the liquidator of Rothmore Farms. 104 For reasons already given, however, the first transaction did not have that effect. The second transaction

105 Belgravia continued to carry on the farming operations of Rothmore Farms until the second transaction. In the meantime, as noted earlier, CBA had taken proceedings against Mrs Cooper and against Simon Cooper and Richard Cooper in the Supreme Court of South Australia under their guarantees. The appeals from judgments against them were dismissed only on 20 March 1998.

106 On 20 April 1998, sequestration orders were made against the estates of Mrs Cooper, Simon Cooper and Richard Cooper. On 14 May 1998, CBA served upon Rothmore Farms a statutory demand for monies then owing. 107 On 19 May 1998, the directors of Belgravia resolved:

"… that it would be in the best interests of both the eligible beneficiaries of the Trust and the company itself or the Trust to be vested as at the date of the meeting and for both the corpus and all and any accrued income of the Trust to be immediately distributed to Andrew Charles Cooper, one of the eligible beneficiaries of the Trust." 108 Belgravia then resolved, purportedly pursuant to the power contained in clause 18 of the Deed, to revoke the definition of "the vesting day" and to declare 19 May 1998 to be the vesting day. It further resolved that:

"consequent upon the termination/vesting of the Trust by virtue of the effluxion of time, both the corpus and all and any accrued income of the Trust are immediately and as at today distributed to Andrew Charles Cooper, one of the eligible beneficiaries of the Trust, who it is noted is properly entitled to same both at law and in equity."

Pursuant to instructions, a Deed of Variation of Trust was prepared to reflect that resolution redefining the vesting day. It was executed on 22 May 1998. 109 It is not entirely clear that clause 18 of the Trust Deed permitted such a resolution to vary the definition of vesting day. In any event, the definition of vesting day in clause 1(b) of the Deed is as follows:

"(iii) such other earlier date as the trustees may by Deed or Memorandum in writing appoint to be the vesting day."

110 It would have entitled the trustee for the time being to fix 19 May 1998 as the vesting day and thereby to achieve the same result. 111 The effect of the second transaction was to leave Rothmore Farms with its liabilities to the Banks, and a worthless asset, namely its right of indemnity against the assets of the Trust but with the Trust having been wound up. (b) The claim to an equitable interest

112 Rothmore Farms contends first that its equitable lien or charge over the assets of the Trust survived the second transaction. On the evidence, nothing occurred to disturb that interest between the first transaction and the second transaction. Nothing was suggested by the respondents to have had that effect. It submits that because Andrew Cooper was not, by the second transaction, a bona fide purchaser for value without notice, that equitable interest was not defeated by the second transaction.

113 By reason of my earlier findings, I find that Andrew Cooper was aware of the first transaction. I have found that as a director of Rothmore Farms, he participated in that transaction to remove the assets of the Trust from the reach of the creditors of Rothmore Farms. I have also noted earlier that the accounts of Belgravia erroneously reflected that the ongoing indebtedness of Rothmore Farms to the Banks was an indebtedness of Belgravia. During each of the years 1993 to 1997, in about October or November of each year, the Cooper Family made their annual visit to Mr Bartholomaeus. He prepared accounts following those visits. 114 In my judgment, Andrew Cooper was aware of the continued substantial (and increasing) indebtedness to the Banks up to the time of the second transaction. It is very likely that he was aware of the ongoing proceedings against members of his family up to 20 March 1998. His absence from the witness box enables me to draw that conclusion more confidently from the evidence. 115 It is also clear that he took the assets of the Trust by the second transaction without consideration on his part. He took them in a transaction which enabled him at law to assume those assets without having to assume the liabilities to the Banks. Even if, as counsel for Andrew Cooper contended, the second transaction was a lawful transaction, it does not follow that the equitable interest of Rothmore Farms in the Trust assets was thereby lost. 116 Counsel for Andrew Cooper did not put any submissions that that equitable interest did not survive the second transaction, apart from the contentions which I have rejected earlier in these reasons that there was no ongoing debt to the Banks and that no right of indemnity existed or equitable interest arose because of the wrongful conduct of Rothmore Farms as trustee. 117 There is, in my judgment, no reason in equity why Andrew Cooper's title to the Trust assets as a result of the second transaction was not subject to the equitable interest of Rothmore Farms in those assets. (c) The Law of Property Act 1936 (SA)

118 Rothmore Farms alternatively contends that s 86 of the Law of Property Act 1936 (SA) operates to render the transfer of the Trust assets to Andrew Cooper by the second transaction voidable at the instance of Rothmore Farms, and that it has avoided that transfer. It accepts that, even if s 86(1) so operates, if the third transaction occurred in circumstances such that Tennyson Turner may invoke the aegis of s 86(2), then it cannot effectively avoid the second transaction. Again, as I have found that Rothmore Farms' equitable claim over the assets of the Trust survived the second transaction, it is not strictly necessary to address this issue but I do so as the parties spent substantial time on their submission concerning it.

"(1) Every conveyance of property made with intent to defraud creditors shall be voidable at the instance of the party prejudiced thereby. (2) This section shall not extend to any estate or interest in property conveyed for valuable consideration and in good faith or upon good consideration and in good faith to any person not having, at the time of the conveyance, notice of the intent to defraud creditors." "Property" is defined in that Act to include any interest in real or personal property. It clearly encompasses the Trust assets. 120 The onus is upon Rothmore Farms to establish that the second transaction occurred with intent to defraud creditors: Williams v Lloyd (1934) 50 CLR 341 at 372. 121 The second transaction was undertaken by Belgravia through its directors Noelene Cooper and Robert Mills. Neither gave evidence. Nor was any evidence given by any members of the Cooper Family about the circumstances in which, or the reasons for which, the second transaction occurred. Mrs Cooper did not give evidence touching on those matters. The finding contended for by Rothmore Farms must be inferred from the facts proved in evidence, if it is to be established. 122 The evidence shows, as I have found elsewhere, that members of the Cooper Family, including Noelene Cooper and Robert Mills, were party to the consultations leading to the first transaction. Thereafter, in a practical sense, Mrs Cooper's sons continued to undertake the farming operations for the Trust in much the same way as they had previously done. The Cooper Family maintained their annual visits to Mr Bartholomaeus up to about November 1997. There was nothing to indicate that Noelene Cooper and Robert Mills operated Belgravia at arms length from the Cooper Family. What little evidence there is tends to point to the contrary. Shortly before the second transaction, on 20 April 1998, sequestration orders were made against the estates of Mrs Cooper, Simon Cooper and Richard Cooper. Also, a statutory notice of demand was given by CBA to Rothmore Farms on 14 May 1998 for the outstanding indebtedness. I find that Noelene Cooper and Robert Mills were aware of those matters. The fact that Andrew Cooper was the beneficiary of the second transaction, and was the only director of Rothmore Farms who was not bankrupt tends to support that conclusion. No other reason for selecting him as the person in whom the Trust should vest is apparent. 123 What was the intention of Belgravia through Noelene Cooper and Robert Mills in undertaking the second transaction? I conclude from those same facts, and the timing of the second transaction, that their general intention was to defeat or delay creditors of Rothmore Farms, and to defeat or delay Rothmore Farms in any claim it might have against Belgravia or the assets of the Trust, and also to defeat or delay creditors of Mrs Cooper, Simon Cooper and Richard Cooper: Glegg v Bromley [1912] 3 KB 474 at 492. It is difficult to conceive of some other reason why the second transaction occurred when it did. The coincidence of timing to the events referred to above speaks loudly. Furthermore, the fact that the vesting of Trust assets was in favour of Andrew Cooper speaks loudly as to its motivation. Counsel for the respondents did not suggest any other reason for the second transaction occurring as and when it did. The fact that they did not give evidence enables me more confidently to draw that inference. 124 Rothmore Farms was not, in my judgment, prejudiced by the second transaction because the second transaction did not then have the effect of impairing or otherwise reducing Rothmore Farms' equitable interest in the Trust assets. Andrew Cooper held his interest in the Trust assets subject to that interest. However, if the contrary were the case, then Rothmore Farms would clearly be prejudiced by the second transaction by the loss of that equitable interest. In that event I would find that the second transaction was avoidable by Rothmore Farms (subject to the operation of s 86(2) of the Law of Property Act 1936 (SA)) because it was undertaken by Belgravia in breach of s 86(1), and has been avoided by Rothmore Farms. I will address the impact of s 86(2) when considering the third transaction. The third transaction

125 Rothmore Farms contends that the third transaction also has not effected its equitable lien or charge over the Trust assets because Tennyson Turner took his interest in the Trust assets from Andrew Cooper with knowledge of that interest. Alternatively, it contends that the third transaction is in reality a sham, rather than a genuine transaction at all. Then, as a further alternative, it contends that the third transaction is avoidable at its instance, and has been avoided, under s 86(1) of the Law of Property Act 1936 (SA) because, although clearly some consideration was given for those assets by Tennyson Turner, he did not take them under the agreement "in good faith" because he had notice of the intention of Belgravia in respect of the second transaction and of Andrew Cooper in respect of the third transaction to "defraud creditors" in the sense of defeating or delaying creditors' claims, and additionally because the Agreement was undertaken with the intent to defraud creditors of Rothmore Farms. 126 There are further alternative claims against the respondents generally for breach of constructive trust, for breach of fiduciary duty by Belgravia, and for having conspired amongst themselves between 1 February 1993 and 31 August 1998 to defraud and injure Rothmore Farms by procuring its retirement and replacement by Belgravia as trustee of the Trust, then by the alteration of the vesting date of the Trust and the vesting of its assets in Andrew Cooper on 19 May 1998, and then by participating to the extent they did in the third transaction between Andrew Cooper and Tennyson Turner. A further alternative claim is based upon the respondents collectively intentionally inflicting economic loss on Rothmore Farms by unlawful means. (b) The consideration paid by Andrew Cooper under the Agreement

127 One issue touching the third transaction was the value of the respective consideration given by Andrew Cooper, and by Tennyson Turner, under the Agreement of 10 August 1998.

128 Tennyson Turner received the Trust assets and the right to the crops then sown on the property known as Rothmore Farms apparently by Andrew Cooper. There was some suggestion that those assets were not all assets of the Trust, but there was no evidence to support that suggestion. The farming operations of the Trust were carried on by Rothmore Farms, and then by Belgravia. Neither entity carried on any activity other than as trustee of the Trust. Nothing is shown to rebut the inference that, after the second transaction, Andrew Cooper carried on the same business in much the same way. There is one asset, namely an R72 AGCO Gleaner Harvester 1997 ("the leased harvester") to which it will be necessary to refer separately. 129 The consideration payable by Andrew Cooper for the opal sold to him by Tennyson Turner was $89,000 plus the transfer to Tennyson Turner of all the farming and engineering machinery plant and equipment, the work in progress in the engineering business, the assignment of grain payments standing to the credit of Andrew Cooper, and the crops growing on the land. Tennyson Turner was to assume responsibility for the three remaining lease payments each of $57,000 due in respect of the leased harvester, and to pay the costs of maintaining, harvesting and selling the crop. 130 Not all those assets were valued. The anticipated value of the crop was valued by John Prentice Clark ("Mr Clark"). Mr Clark is a licensed and experienced valuer. He gave his evidence in a straightforward way and I have no reason to reject it. He was not seriously challenged in cross-examination. There was no contrary evidence on those matters. 131 Mr Clark valued the crop comprising wheat, barley, peas, triticale, canola and chick peas, including a portion being share farmed following an inspection on 10 November 1998. He valued the crop then farmed by Andrew Cooper or Tennyson Turner alone as likely to realise $534,023, and the crop share farmed (full value) as likely to realise $111,788. He was told that the crops had been sown between 20 June and 12 July 1998. The crop's appearance was consistent with that information. Harvesting was due to commence on about 17 November 1998. His estimate was as to the gross value of crops delivered to Wallaroo, but as he indicated, the estimates of yields could vary depending upon weather conditions. On 4 January 1999, he again inspected the property. He observed that all crops had then been harvested, "with some crops yielding more, some less." He indicated that the overall value for crops could vary slightly because of the reduction in price per tonne of some varieties, and that certain of the crops had been delivered to Roseworthy. 132 Rothmore Farms also called Lindsay Walter Wapper ("Mr Wapper"), Rural Consultant and Valuer. He had been retained to consider whether the expenses incurred according to the schedules of expenditure on crops prepared by Tennyson Turner for the period 19 June to 14 December 1998 were reasonable, and whether the returns and profits reported were in accordance with normal expectations. His expertise both generally and in relation to the particular area is long standing. It was not really challenged. 133 The result of his analysis is demonstrated by the summary which he provided in the following terms: Rothmore Costs

Total area crop 2586 hectares Total Costs claimed by $ 600,958 Tennyson Turner Cost per hectare $ 232

Total area crop 2586 hectares Total Costs $ 349,556 Cost per hectare $ 135

Total area crop 2586 hectares Total Costs $ 471,873 Cost per hectare $ 182

134 PIRSA is an acronym for Primary Industries and Resources South Australia and EconSearch is a reference to data published by an entity called EconSearch which provides on an area by area basis gross margin analysis and statistics for various forms of crop on an annual basis. The data is used in the rural industry as a benchmark against which performance is measured by experts. EconSearch published for 1998 a Farm Business Planner through Rural Press (SA) Limited. The PIRSA statistics were taken from its 1998 publication entitled Crop and Livestock Gross Margin Estimates. The documents are in evidence. Mr Wapper assumed that the share farm expenses were all expenses incurred without separate allocation by the land owner, that the cropping was conducted in a manner usual for farmers in the area, that there were no special circumstances or difficulties with the crops which would result in significant differences in levels of expenses between farmers in the area, and that each of the items of expenditure were apportioned at an equal rate per hectare. 135 He acknowledged in his evidence-in-chief certain additional relevant reservations. The actual seed cost for the crop was less than those provided by the publications referred to but, as he noted, it is not uncommon for farmers to carry over seed from a previous years' crop. He did not make allowance for that. Also, he added to the fertiliser costs the sum of $173,745 paid for fertiliser in January 1998. He regarded that as a purchase of fertiliser on some form of "early bird" discount. He was unable to think of any other reason why that fertiliser would have been bought at that time other than for the 1998 crop. On the other hand, he did not include chemicals costing $75,540.60 acquired by Belgravia in December 1997 and April 1998. They were expenses included in Tennyson Turner's schedule of expenditure on cropping, and Mr Wapper could think of no reason why those chemicals would have been acquired other than for the crop, but they were not expenses incurred by Tennyson Turner. 136 His conclusion was that, allowing as much as he thought reasonable on the high side, the total expenses of the particular crops in the area should have been in the vicinity of $465,732 or $180 per hectare, rather than $232 per hectare as was reported by Tennyson Turner. He was prepared to accept the PIRSA estimates as a guide even though he considered that they are based on higher rainfall. He identified costs for fertiliser, fuel, repairs and chemicals as extremely high compared to standard costs. 137 Tennyson Turner had provided a schedule of cropping expenses. Mr Wapper did not himself attempt to verify those expenses by reference to invoices. He was unable to reconcile the schedule of expenses to the invoices actually presented because of lack of information. Mr Wapper was not aware of, and had not inquired into any extraordinary problems such as crop disease. He was generally aware of Rothmore Farms, but had not visited it or inspected it for many years. He regarded it as typical of land in that area. The cross-examination highlighted that his views were dependent upon the reliability of the statistical data to which he referred, but did not otherwise seek to demonstrate flaws in his process of reasoning. 138 I am unable to determine with accuracy the total receipts for the 1998/99 crop. It is likely to be in excess of $600,000. I am also unable to determine the expenses incurred by Tennyson Turner in maintaining, harvesting and selling that crop. The documentary evidence provided by Tennyson Turner to Mr Sheahan does not demonstrate that those expenses totalled as much as $600,000 as he claimed. If area standards are applied, according to Mr Wapper's evidence, the profits from the crop would be well in excess of $100,000. It is not necessary to make any finding on those matters, save to find that there is a significant net profit from the 1998/99 crop. 139 On 4 January 1999, Mr Clark in conjunction with Richard Cooper inspected the plant and equipment on the property. He valued it in total at $655,500.00 for plant, machinery, motor vehicles and sundries. The basis of his valuation was fair market value, based upon comparative sales and on the basis that there was a willing but not anxious seller and a willing but not anxious buyer. His valuation included the leased harvester, which he valued at $160,000. He treated it as owned by the Trust or Andrew Cooper or Tennyson Turner. He did not inquire as to its true ownership, or into the leasing arrangements. Subject to that qualification, I accept his evidence on that topic also. I find that Tennyson Turner had to meet the remaining lease obligations in respect of the leased harvester, and to pay the costs of maintaining, harvesting and realising the crops. The net value of the plant, equipment and machinery was thus about $500,000. 140 I am also unable to determine the net value of the work in progress in the engineering business at the time of the third transaction. Tennyson Turner has no doubt incurred expense since then in having that work in progress completed, and in any event would be entitled to be given credit for monies so expended. 141 In determining the value of the consideration received by Tennyson Turner, I have made no specific allowance for the value of the crop or the value of the work in progress of the machinery business. Nevertheless, the consideration was substantial. 142 I assume from the fact of performance of the third transaction that Andrew Cooper paid the $89,000. The evidence does not show the source of the $89,000 paid by Andrew Cooper. Additionally, Tennyson Turner received as consideration for the sale of the opals, the plant, equipment, and machinery, to the net value of about $500,000 and the right to the crop. The total consideration was therefore likely to be at least in the order of $600,000. (c) The engineering business

143 I find that the engineering operations carried on on Rothmore Farms were also activities initially of Rothmore Farms and later of Belgravia as activities of the Trust. I have not separately referred to them above.

144 Mr Bartholomaeus gave evidence that he was told that the engineering business was an additional activity of Rothmore Farms for the Trust during the 1989/1990 financial year, presumably at the annual review in late 1990. He included it in the accounts of the Trust which he prepared for each year thereafter until his instructions ceased. Those accounts were submitted for approval, and were signed, on an annual basis. Mrs Cooper said she had the practice of reading the accounts before signing them (I assume only whilst Rothmore Farms was trustee, up to the time of the first transaction). She did not correct that form of presentation. Mr Bartholomaeus was not instructed at any time that his inclusion in the Trust financial accounts of the engineering business details was erroneous. He was not directed by Noelene Cooper or Robert Mills to correct Belgravia's accounts in that respect. There is no other evidence. The engineering business assets were also insured in the name of Belgravia, and that insurance cost was treated as an expense of the Trust. (d) The value of the opals

145 Under the Agreement, Tennyson Turner sold to Andrew Cooper opals for $700,000. They are, in my judgment, worth very considerably less than that sum, and of the order of $2,000 to $10,000.

146 Evidence as to their value was given by Mr Alan Bartram ("Mr Bartram"), an opal dealer of long experience, and a retailer of opals. He has had considerable experience in valuing opals for insurers, auctioneers, Australian Customs and for other purposes. 147 The opals the subject of the Agreement are presently in storage at the State Bank of South Australia in a safety deposit box. Mr Bartram inspected those opals on 29 January 1999, for the purposes of valuing them. He examined and weighed them and prepared a description and valuation. His valuation dated 23 February 1999 described the opals as a parcel of synthetic opal comprising thirty-seven pieces of unfinished synthetic dark opal sawn rough, free form in shape and weighing in total 70.20 carats. He valued the opal at "wholesale replacement value" at $2,000. 148 His cross-examination tested his expertise and experience. It is sufficient to note that I was impressed with his expertise and his experience, his apparent ability to confront and respond to questions in a straightforward and laconic manner, and to answer questions honestly and without prevarication. Where it was appropriate to do so, he gave appropriate acknowledgments. He did not have any particular barrow to push. I accept him as an independent and reliable expert. 149 His business is essentially in dealing and retailing in natural opal. He is well aware of chemically produced or synthetic opal, including black opal, which has been on the market for a considerable time. It has not produced a threat to his business, although it is chemically similar to natural opal. Tennyson Turner cross-examined him at length, obviously with a perspective of a considerable working knowledge of opal. Mr Bartram acquiesced in a number of matters concerning the value of opal generally, including synthetic opal where it was sufficiently unique and special. He acknowledged that he had himself never dealt in Gilson opal (the type of synthetic opal involved), although he had had experience in relation to it a long time ago. One matter touching his expertise was said to be his acknowledged unawareness of the "PRW Index" for valuing opals derived from the O'Leary "Field Guide to Australian Opals". He was aware of the book and had read parts of it. He did not value pursuant to the PRW Index. He strongly disputed that that is an accepted method of valuation. He was challenged, but unsuccessfully in my view, that he had an inappropriate level of lighting to do the valuation. He was also careful to be fair in acknowledging that Gilson black opal which he had obtained some fifteen years ago appeared to have lost a little brightness of colour, but had not otherwise become unstable. 150 He was also strongly challenged that he had had regard to a valuation prepared by Mr Bruce for the purposes of his valuation. The suggestion was that he was not independent. He was adamant that his valuation was arrived at independently of Mr Bruce's valuation, and that he received Mr Bruce's valuation as a matter of interest only, after his own valuation had been completed and handed over. He was not prompted as to the valuation which he should procure. I accept that he arrived at an independent valuation. 151 He was also frank in accepting that the re-selling mark up for opal from wholesale cost varied substantially from dealer to dealer, and was sometimes a very high percentage mark up depending upon the quality and uniqueness of the opal in question. He was questioned particularly about a photographed opal and a valuation of it provided by Harlequin Opal on 27 March 1997 (a document marked for identification only). He was not prepared to comment without seeing the piece himself. He was also presented with another piece of opal which he identified as black synthetic opal on the back of a piece of coloured opal so as to constitute a bonded doublet. Again, he was not adamant where it was inappropriate to be so. In the light of his relative lack of particular experience in relation to Gilson opal, he had made enquiries for the purposes both of his valuation and for the purposes of giving evidence to confirm that, as a manufactured item, it could be obtained readily from a distributor with reasonably rapid delivery. He pointed out that labelling standards in South Australia imposed by the Department of Consumer Affairs, Standards Branch, obliged that synthetic opal be so labelled, and that such standards make its market a different market. Although he deposed to some synthetic opals being subject to fading, he indicated that the opal which he had inspected did not evidence fading. 152 The only other expert witness as to the value of the opal was Mr Bruce, auctioneer and valuer, who had also inspected the opal in question. He was called by counsel for the respondents other than Tennyson Turner and Agri-Steel. He is an auctioneer and valuer of considerable experience. He acknowledged that he was not a qualified gemmologist. For the purposes of his valuation, he procured an opal expert, a Mr Max Elphick, to assess and categorise the opal which he was asked to value. His evidence was that, once he had been able to ascertain from an appropriate expert what the opal was, he was an expert in indicating what realisable value that opal would have at public auction. 153 He initially provided a written valuation of the opal at $35,000 - $45,000 realisable value at public auction based upon Mr Elphick's evaluation of the opal. Mr Bruce's then view was on the basis that the opal was natural opal. He relied upon Mr Elphick's description as thirty-seven pieces of semi-black "created" opal stone of various sizes and weights totalling 70.28 carats, cut but not polished, but due to certain comments of Mr Elphick, Mr Bruce had deleted the word "created" and handwritten the word 'natural' on the document he had received from Mr Elphick. He then thought Mr Elphick was mistaken about the opal being synthetic or manufactured. I find that the opal is synthetic opal. The only evidence as to its character is to that effect. The respondents did not contend otherwise. On that basis, Mr Bruce's view is that it would fetch about $10,000 on the market by selling it by retail. Neither Mr Bruce's written valuation, nor the document which he received from Mr Elphick were put into evidence. Mr Elphick was not called to give evidence. 154 Mr Bruce was cross-examined at length by Mr Turner. Mr Turner sought to discredit him. I accept his evidence that he altered Mr Elphick's description of the opal in the way described in the preceding paragraph without any intention to mislead. That conduct does not cause me to doubt his evidence. Even if I were to do so, the only evidence of the value of the opal would then be that of Mr Bartram. 155 Mr Bruce had recently offered for sale for Mr Elphick a particular 10 carat Astra Australis created black opal pendant with a view to assessing the created opal market. He had, in accordance with his normal practice, accepted a pre-sale estimate of $8,000 - $10,000 when he received it from Mr Elphick on 15 September 1998. That opal did sell at auction for $10,700, but Mr Bruce was suspicious of the circumstances in which it sold. He acknowledged that he had no particular piece of information giving rise to that suspicion. He was mindful of the experience that artificial opal rarely came on to the market, and that he got "a feel" in respect of the sale. His suspicion as to the nature of the sale of that opal was compounded to some degree by the occasion of that sale being rather flat, with a very significant proportion of product offered for sale not being sold. He also had regard to the pre-auction arrangement with Mr Elphick: he had indicated that he did not think that the opal would sell for anywhere near Mr Elphick's estimated realisable price, and he had arranged with Mr Elphick to take the highest bid from the floor to him for his consideration. He further had regard to the fact that there were two vigorous bidders for the opal who were unknown to him, although the only advertising for the sale had been by catalogue which was circulated to the normal customers of Mr Bruce's business rather than being advertised generally. I accept his evidence that that particular sale does not provide any reliable indication of the value of manufactured black opal. Nor do I think that his independence as a valuer or the correctness of his views were effectively challenged by him having accepted the Astra Australis opal pendant for sale, by him having accepted Mr Elphick's pre-sale estimate of $8,000 - $10,000, or by that amount having been put into the catalogue as an indicative expected realisation value for bidders, nor by reason of the insurance arrangements (which he described) enabling stock deposited with his company for the purposes of auction to be insured at the estimated pre-sale realisable price. 156 I accept that Mr Bruce is not an expert in identifying, classifying, weighing and assessing opal. I find however that, given a description of opal, he is an expert in providing evidence of what value that opal would realise by public or retail auction. In forming his views, because of the relative rarity of synthetic black opal in the market in which he operates, he made enquiries within the trade of other auction houses. I accept his view that the opal would realise about $10,000 on the open market, although he did not think there was a real market for synthetic opal. 157 I do not think that there is any real inconsistency between the evidence of Mr Bartram and the evidence of Mr Bruce. One is speaking of a wholesale value or trade value and the other is speaking of a retail value. In either event, the value of the opal in question is relatively small. 158 In my judgment, on the evidence, the value of the opal relative to the consideration promised to be paid by Andrew Cooper was minimal. It did, however, have a value. 159 The disproportion between the value of the opal and the value of the consideration moving from Andrew Cooper may be relevant to the motives of, or the good faith of, the parties to the third transaction. (e) Agri-Steel

160 Before turning to consider Rothmore Farms' claims arising out of the third transaction, it is convenient to consider the position of the third respondent Agri-Steel Pty Ltd ("Agri-Steel").

161 Agri-Steel was registered only on 10 August 1998. Tennyson Turner indicated that he is its sole director. He was given leave to appear for Agri-Steel in effect because he was its alter-ego. It has been used by Tennyson Turner as a vehicle for operating the engineering business, and at least part of the farming activities, since the third transaction, although it does not appear that it has obtained title to any of the assets acquired by Tennyson Turner as a result of the third transaction. 162 To the extent to which Tennyson Turner may have to account to Rothmore Farms in this action, it will be sufficient in my judgment to make joint orders against Tennyson Turner and Agri-Steel and, on the other hand, to the extent to which Tennyson Turner or Agri-Steel may be entitled to any orders against Rothmore Farms to reflect their respective payment of expenses in respect of Trust assets or the use of Trust assets, to large measure also it will be convenient to make joint orders. Nothing is in evidence to indicate that Agri-Steel should be treated, in the result, in a way differently from Tennyson Turner, except in so far as it is necessary to reflect the fact of its registration having occurred only on 10 August 1998. (f) Tennyson Turner's earlier role in relation to the Cooper Family

163 The evidence indicates, and I find, that Tennyson Turner had in one way or another been an adviser to the Cooper Family for a number of years, at least from about the time of the first transaction.

164 Mrs Cooper confirmed that Belgravia was procured as a corporate trustee for the Trust by Tennyson Turner. I have rejected her evidence that it was Mr Bartholomaeus who advised that the first transaction be undertaken. However the plan for the first transaction arose, Tennyson Turner on the evidence was involved in its implementation. Mr Bartholomaeus was directed in late 1993 by the Cooper Family to seek from Tennyson Turner information as to how the first transaction was to be reflected in the accounts of Rothmore Farms and Belgravia, and he pursued those inquiries through Tennyson Turner. 165 The role of Tennyson Turner at the time of the second transaction was more explicit. The meeting at which Belgravia resolved to undertake the second transaction occurred at Tennyson Turner's premises. During April and May 1998, Tennyson Turner had frequent contact with members of the Cooper Family by telephone, as well as in the following months. Immediately after being appointed as trustee of the bankrupt estates of Mrs Cooper and of Simon Cooper and Richard Cooper, Mr Sheahan sought to confer with them. He was told by them that Tennyson Turner was their adviser, and should be party to the consultation. When Mr Sheahan sought information from Mr Bartholomaeus about the same time, Mr Bartholomaeus referred that inquiry to Tennyson Turner for his comments and direction. Immediately after the second transaction, Mr Bartholomaeus was told of its detail by Tennyson Turner and Richard Cooper together. In July 1998, he was requested to send his working files to Tennyson Turner for further accounting purposes. 166 The above material, in my judgment, leads to the inference that Tennyson Turner was aware of the nature of the first transaction, and of the financial pressure which gave rise to it. His absence from the witness box enables me to draw that inference with more confidence. It does not lead me to conclude that the first transaction was undertaken on his advice. There is some evidence from Mrs Cooper that there was another person consulted at about that time who also had been a professional adviser to the Cooper Family for some years. I find however that Tennyson Turner was aware in general terms of the poor relationship between the Banks and Rothmore Farms, and of Rothmore Farms' claim against and upon the assets of the Trust to the extent of its entitlement to indemnity by the time of the first transaction. 167 That material also leads me to conclude that Tennyson Turner played some part in advising on the second transaction. He was clearly by then an adviser more generally, at least to members of the Cooper Family. I find that he was aware of the nature and proposed effect of the second transaction. I also find that he was aware of and, in the sense of being involved in advice concerning it, a party to the reasons for it being undertaken. (g) Was the third transaction a sham?

168 The third transaction was clearly one in which Tennyson Turner was closely involved, not simply as an arms length participant. It was undertaken with the knowledge to which I have referred. It was undertaken, for his part, without any formal valuation of the assets to be transferred to him by Andrew Cooper and perhaps more surprisingly, without any valuation of the opals. The lists of documents of the respondents which were put into evidence disclose that no such valuations were discovered. I therefore infer that none were obtained.

169 There is no evidence to suggest that Andrew Cooper had any genuine reason for undertaking the third transaction. What was the use to him of the opals, whatever their value? The Cooper Family strategy to that point had been to keep the farming operations going. No reason for the sale was ventured on his behalf, or on behalf of any of the respondents, in submissions. 170 Tennyson Turner was, and had been, an adviser to the Cooper Family and Belgravia. He could not, in conscience, enter into such a transaction with those to whom he owed an obligation of loyalty with such a disproportion of consideration. It would be a breach of his fiduciary duty to Andrew Cooper, and to members of the Cooper Family to have done so: Boardman v Phipps [1967] 2 AC 46; Furs Ltd v Tomkies (1936) 54 CLR 583 at 590. He would clearly, in those circumstances, be obliged to account for all benefits he derived from that transaction. Given his relationship to the Cooper Family, I think that it is most unlikely that an adviser in Tennyson Turner's position would have put himself in that position. That matter, in my view, tends to point to the fact that the third transaction involved Tennyson Turner endeavouring with the Cooper Family to help them rather than to take a benefit at their expense. That help, I find, was to participate in the third transaction not for his own benefit but for theirs. It is more likely that he did not execute the Agreement as reflecting the real nature and extent of the then arrangement between them. 171 The disproportion in the consideration proffered by Tennyson Turner, together with those considerations, leads me to the conclusion that the third transaction was not a genuine transaction at all. In my judgment, the third transaction was undertaken to provide a screen which it was hoped that Rothmore Farms would be unable to penetrate. In reality, it was not a bona fide transaction at all. I suspect that behind that screen there is some understanding as to what would happen in the future if the screen which it created as against Rothmore Farms proved to be effective.

172 In any event, by reason of Tennyson Turner's awareness of the first transaction and his awareness of, and role in, the second transaction, I consider that the equitable charge or lien of Rothmore Farms in the Trust assets was not lost by reason of the third transaction. The knowledge of Tennyson Turner was sufficient to conclude that whatever interest he took in the Trust assets under the third transaction was subject to the ongoing equitable claim of Rothmore Farms against those Trust assets.

173 If I were wrong in those conclusions, so that the third transaction were a genuine transaction according to its terms, I would conclude that it was undertaken on the part of Andrew Cooper contrary to s 86(1) of the Law of Property Act. The only explanation for the conveyance of the Trust assets to Tennyson Turner in exchange for opals of such little relative value is one which activates s 86(1). That must be so in the light of my conclusion earlier in these reasons that Andrew Cooper knew of the potential ongoing claims of Rothmore Farms against those assets.

174 On the part of Tennyson Turner, I conclude that he had knowledge of the relevant intent on the part of Andrew Cooper, so that he cannot avail himself of the protection which s 86(2) might otherwise offer. 175 In the light of those findings, it is not necessary to address the other grounds upon which Rothmore Farms seeks to set aside the second transaction and the third transaction. The assets to which Rothmore Farms is entitled

176 There is a dispute as to what are the assets of the Trust. I find that those assets include the plant and equipment and machinery inspected by Mr Clarke, and recorded in his valuation. That includes the plant and equipment and machinery used for the farming business and for the engineering business.

177 Apart from monies received or receivable for the items completed in the engineering business since 7 August 1998, and monies received for crops, there are likely to be further sums for the proceeds of realisation of crops not just for the 1998/99 season but for earlier seasons. There is insufficient evidence to quantify those sums, but they are capable of quantification. 178 Rothmore Farms has provided a list of further items which it claims to be other assets of the Trust. That list comes from a list of items for which Rothmore Farms procured insurance (as at May 1996), from searches at the Registry of Motor Vehicles, and from the depreciation schedule attached to the Trust financial statements to 30 June 1996. I do not know whether all the items on that list existed at the time of the second transaction or of the third transaction. There are four motor vehicles on the list still registered, so I am satisfied that they do exist. I am unable to make a positive finding on all those matters. I do not regard it as necessary to do so. The appropriate declaratory orders can be implemented in respect of the uncontested items, and an inquiry and account conducted in relation to the balance. 179 Tennyson Turner submitted that any equitable charge or lien over the assets of the Trust could exist only in respect of the assets of the Trust as at the time of the first transaction. He contended that that interest could not exist in respect of after acquired assets, or in respect of income earned by Belgravia or by Andrew Cooper or by him in using the assets of the Trust (or formerly of the Trust) since the first transaction. He also submitted that the extent of Rothmore Farms' indemnity, and therefore of its equitable interest in the assets of the Trust, was also fixed at the time of the first transaction. Even though Rothmore Farms has not undertaken any activities since 10 February 1993, he contended that its indemnity did not extend to the interest liability which has accumulated since 10 February 1993. 180 In my judgment, the interest of Rothmore Farms is in the assets of the Trust for the time being and is not frozen so as to be available only over the assets of the Trust at the time of the first transaction, that is to the time when it ceased to be trustee. Nor do I consider that its indemnity claim is limited to the indebtedness as at 10 February 1993, so that it has no such claim in respect of the interest liability which has accumulated since then. 181 For reasons expressed earlier, I consider that the entitlement to indemnity under the Trust Deed, or at common law, is an ongoing one. Of course, it is limited to the liability incurred by Rothmore Farms in its capacity as trustee of the Trust. But that was Rothmore Farms' only activity. The evidence, and in particular its financial accounts for the period after the first transaction, shows that Rothmore Farms has not engaged in any activity since the first transaction. I can see no reason why its indemnity against the assets of the Trust should not extend to the interest liability which has continued to accumulate in respect of its debt to the Banks since that time. 182 In my judgment, so long as the Trust continued, that indemnity entitlement was secured by the assets of the Trust from time to time. Again, I can see no reason why that should not be so. The position subsequent to, and consequent upon, the second transaction does present different considerations. Thereafter, there was in my view an equitable entitlement against the then assets of the Trust even after they had been transferred to Andrew Cooper by the vesting of the Trust. Andrew Cooper, and later Tennyson Turner, have dealt with those assets. They may have disposed of some of those assets, and acquired others in replacement. They have farmed the property, and have operated the engineering business. They have received income, and incurred expenditure. 183 In respect of the Trust assets used by Andrew Cooper until the time of the third transaction, I do not consider that there was any intermingling of non-Trust assets with assets of the Trust nor any application of funds from resources of Andrew Cooper. Any expenditure by Andrew Cooper was, I find, from funds available from the day to day farming operations or engineering business. It was not from funds made available by Andrew Cooper from his own resources. Consequently, up to the time of the third transaction, there is no need to balance the interests of Andrew Cooper against the interests of Rothmore Farms. 184 After the third transaction, the position is different. Tennyson Turner apparently contributed his own funds to maintaining, harvesting and selling the 1998/99 crop. He appears also, either directly or through Agri-Steel, to have contributed funds toward the ongoing expenses of the engineering business. Those contributions were, I conclude, towards labour and material costs, rather than to the purchase of plant, equipment and machinery. The evidence indicates that Tennyson Turner or Agri-Steel paid some $261,590.53 towards the crop and $185,148.17 towards the engineering business up to about 21 March 1999. It does not show the current figures, and it may also be that the amounts referred to are incomplete. In my judgment, Rothmore Farms has the right to trace the assets of the Trust through Andrew Cooper and into the hands of Tennyson Turner. I also consider that it is entitled to the proceeds from realisation of the crop, and to the proceeds from realisation of the engineering business completing items of machinery: In re Diplock; Diplock v Wintle [1948] Ch 465. However, I consider that Tennyson Turner is entitled to be repaid the sums of money provided by him to enable the assets of the Trust to be used so as to produce after 7 August 1998 the revenue from the crop and from the operations of the engineering business. The joinder application

185 In the course of final submissions, Mr Sheahan sought to be joined as an applicant. The proposed amendments to the application consequent upon his joinder and to the statement of claim which were involved were minimal.

186 In the case of the proposed amended application, no relief was sought by Mr Sheahan which was not to be sought by Rothmore Farms in any event. The proposed further amended application added specific claims for relief which had been foreshadowed in the course of the hearing, and which the Court could grant in any event under O 35 r 1 of the Federal Court Rules were it appropriate to do so. Those additional claims for relief were based upon causes of action already pleaded and upon the evidence already given. They were not such as to take the respondents by surprise, or to cause the respondents any prejudice. 187 In the case of the proposed amended statement of claim, again the proposed amendments were simply to reflect the fact that there were two applicants. No allegation of substance was to be added, or was to be altered. 188 That application was strongly opposed by the respondents. They contended that it gave rise to a "whole new case", but in my view it did not. I have identified above the nature and extent of the additional matters proposed to be pleaded. They also contended that Mr Sheahan should not be joined as an applicant as he had a conflict between his position as trustee of the bankrupt estates of Mrs Cooper, Simon Cooper and Richard Cooper on the one hand and as the provisional liquidator of Rothmore Farms on the other. I do not accept that contention. No particular reason for the alleged conflict was identified. If it were that, as trustee of the three bankrupt estates, Mr Sheahan should not be supporting this action because there was no debt to the Banks, then I have determined that issue adversely to the respondents. If it were that he should be endeavouring to avoid the bankrupts' liability under their guarantees, then that issue has already been decided adversely to the bankrupts in the proceedings in the Supreme Court of South Australia to which I have already referred. In any event, given Mr Sheahan's role as provisional liquidator, any conflict by reason of him occupying those two offices existed before, and independently of, his proposed joinder as an applicant but the respondents have made no application to remove him as trustee or as provisional liquidator before or during the hearing. 189 It was further contended that, if Mr Sheahan had been a party to the action, the course of evidence would have been different in two ways. First, the respondents said that Mr Sheahan would not be a party "with clean hands", and that he would therefore have been ineligible for the relief in equity which Rothmore Farms presently seeks. The respondents would have cross-examined him to demonstrate that he should not be granted equitable relief. Tennyson Turner also submitted that he would have chosen to give evidence himself had Mr Sheahan then been a party. Although I am not persuaded that the course of the evidence would have been different had Mr Sheahan then been a party to the proceeding, I am not confident that the respondents would not have conducted the hearing differently had Mr Sheahan been a party. That is so, notwithstanding that Mr Sheahan gave evidence, and was cross-examined. It is clear from the respondents' submissions that they had strong views about Mr Sheahan's role and conduct, and it is also apparent that the decisions made by them as to how to cross-examine him, and whether to give evidence, were finely balanced ones. The Court is not privy to the thought processes leading to those decisions. It is not necessarily appropriate to weigh the contentions about the course of the hearing being different from the Court's measure of what is, or might have been, the appropriate decisions on those matters for that reason. I am therefore not prepared to reject those contentions on the part of the respondents. 190 If the joinder of Mr Sheahan were critical to Rothmore Farms getting the relief which it seeks, it would be necessary to balance the respective considerations on whether he should be joined, and to address how any unfairness to the respondents could be addressed, in determining where the interests of justice lay on the application. However, I have noted earlier that there is no particular reason for Mr Sheahan's joinder as a party in the interests of justice. 191 In those circumstances, I decline the application to join Mr Sheahan as an applicant. It is unnecessary to address further the application to amend the application and the statement of claim in the terms proposed. I am satisfied that the relief sought, as identified in that proposed further amended application, may be granted under O 35 r 1 without that amendment, if it is appropriate to grant it in the light of my findings. Relief

192 Rothmore Farms has established that it has an equitable charge or lien over the assets of the Trust which is enforceable against Belgravia, Andrew Cooper and Tennyson Turner. That equitable interest in those assets is to the extent of its entitlement to indemnity against the assets of the Trust in respect of its indebtedness to the Banks. Those assets include all the assets of the Trust up to 19 May 1998, and including the leased harvester (subject to the interest of the lessor). Rothmore Farms is also entitled to the monies received from the proceeds of sale of the 1998/99 crop or of earlier crops, and any proceeds received from the conduct of the engineering business. Additionally, but in the alternative, Rothmore Farms has established that each of the conveyances of the assets of the Trust by the first transaction, by the second transaction, and by the third transaction are void as against it. On that basis also, it becomes entitled to the assets of the Trust, including proceeds from the crops and from the engineering business. That relief, on either basis, requires that equity be done to the other parties to the transactions. There is no particular matter which that consideration prompts arising out of the first transaction or out of the second transaction. In respect of the third transaction, in my judgment, it is necessary that Tennyson Turner or Agri-Steel be entitled to

· the return of the opals, · the repayment of any lease payment which was made in respect of the leased harvester, · the amounts paid to maintain, harvest, and realise the proceeds of sale of the 1998/1999 crop (said by Tennyson Turner to be not less than $261,590.53), and · the amounts paid for labour or materials to maintain and conduct the engineering business (said by Tennyson Turner to be not less than $185,148.17). 193 It is clear enough, from my findings as to the value of the assets transferred pursuant to the third transaction, that the interest of Rothmore Farms in those assets will exceed their realisable value. There will be no residual equity left for Tennyson Turner. I have therefore concluded that he is entitled to the full amount for those four items: cp Kemtron (above, at 580). 194 I will make declaratory orders to reflect those entitlements, and orders for such inquiry and accounts as are necessary to resolve any issues as to the assets or other monies received by Tennyson Turner to which Rothmore Farms is entitled, and as to the amounts of expenditure by Tennyson Turner or by Agri-Steel for which they are entitled to credit. 195 There is one further observation I wish to add to these reasons.

196 Tennyson Turner submitted that the endeavours of the respondents at all times have not been 'asset stripping' but 'asset resuscitation'. I accept that the respondents generally have not set about concealing assets used in their farming activities or in the engineering business. They have not, prior to the third transaction, taken action to reduce the value of the assets of the Trust. Indeed, it may well be that the assets of the Trust up to the time of the second transaction and then those assets in the hands of Andrew Cooper up to the time of the third transaction increased in value. The basis of my findings is, however, that in their endeavours to continue to trade, the respondents generally (it is not necessary for the purpose of these observations to distinguish between the respondents) sought to defeat or delay the claims of Rothmore Farms and of the Banks by those transactions. Such findings do not carry with them the suggestion that the respondents were 'asset stripping'. I certify that the preceding one hundred and ninety-six (196) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.

Associate: Dated: 4 June 1999 Counsel for the Applicant: Mr R White QC with him Mr G Stevens

Solicitors for the Applicant: Piper Alderman

Counsel for the First, Second, Fifth Mr D Fitzgibbon and Sixth Respondents:

Solicitors for the First, Second, Fifth Alderman Consultant Solicitors and Sixth Respondents:

Fourth Respondent appeared in person and on behalf of the Third Respondent

Dates of Hearing: 24, 25 & 26 March 1999, 20 April 1999 and 7 May 1999

Date of Judgment: 4 June 1999