Verge v Devere Holdings Pty Ltd

KEY STATUTORY PROVISION 9 The statutory provision central to the applicants' case is s 120 of the Bankruptcy Act which relevantly provides: 120 Undervalued transactions Transfers that are void against trustee (1) A transfer of property by a person who later becomes a bankrupt (the transferor) to another person (the transferee) is void against the trustee in the transferor's bankruptcy if: (a) the transfer took place in the period beginning 5 years before the commencement of the bankruptcy and ending on the date of the bankruptcy; and (b) the transferee gave no consideration for the transfer or gave consideration of less value than the market value of the property. … Refund of consideration (4) The trustee must pay to the transferee an amount equal to the value of any consideration that the transferee gave for a transfer that is void against the trustee. … Protection of successors in title (6) This section does not affect the rights of a person who acquired property from the transferee in good faith and by giving consideration that was at least as valuable as the market value of the property. Meaning of transfer of property and market value (7) For the purposes of this section: (a) transfer of property includes a payment of money; and (b) a person who does something that results in another person becoming the owner of property that did not previously exist is taken to have transferred the property to the other person; and (c) the market value of property transferred is its market value at the time of the transfer.

AN OVERVIEW 10 In about 1997, Mr Giacomino (also known as Jack) Fazio (Mr Fazio) became involved with Mr Andony in attempts to develop the Dongara Land and to raise funds for that purpose. Mr Fazio, through corporate entities he controlled, attempted from time to time to purchase a half interest in the Dongara Land but was unable to complete those transactions because of a lack of available funds. 11 Ultimately, in 2001, one of those companies, Packham, obtained a half interest in the Dongara Land. In substance, Packham acquired 50% of the shareholding in Devere which by then owned the whole of the Dongara Land. The Andonys held the other 50% shareholding. 12 At a later time, between 2003 and 2004, the Andonys 50% shareholding in Devere was also transferred to Packham. 13 Dealing first with the one-third interest in the Dongara Land, the applicants allege that in 2001 the Andonys transferred their one-third interest in the land to Devere so that the land would be wholly owned by Devere and so that Packham in turn could then take, in effect, a 50% interest in the Dongara Land by acquiring half of the shareholding in Devere. The transfer from the Andonys to Devere was effected by a transfer of land dated 11 April 2001. It was registered on 23 May 2001. 14 The consideration shown in the printed transfer form is expressed as being only $45,000. The applicants argue that, in fact, even this amount was not given by Devere to the Andonys for the transfer. 15 On the applicants' case, the market value of the Dongara Land at that time in 2001 was, as to the whole of the land, between $710,000 and $725,000. It follows that a one-third interest (on the applicants' case) was worth between $236,666 and $241,666. 16 These events took place prior to the respective bankruptcies of the Andonys. Mrs Andony became bankrupt in August 2003 and Mr Andony was made bankrupt in June 2004. 17 The applicants, therefore assert the rights set out in the Bankruptcy Act which entitle the trustee in bankruptcy to recover (for the benefit of creditors), property transferred by bankrupts at an undervalue within five years prior to the commencement of the bankruptcy. This provision (s 120(1) of the Bankruptcy Act) applies in circumstances where the transferee gave no consideration for the transfer or gave consideration of less value than the market value of the property. Either of these limbs contained in s 120(1)(b) of the Bankruptcy Act is applicable according to the applicants. 18 Another focus of debate has been whether 'consideration' in s 120(1) may be a contractual obligation to give consideration as distinct from the actual giving of the consideration as a fact. The applicants contend that the relevant 'consideration' for the section is that which has actually been given not that which has been promised, agreed or intended to be given. 19 Further, according to the applicants, it is only that consideration which is given by the transferor that will be relevant in determining the applicability of s 120(1) of the Bankruptcy Act, not consideration given by a person or entity other than the transferor. 20 It is common ground that the time at which the market value of the property is to be assessed is at the actual time of transfer (s 120(7)(c)). 21 In circumstances where the section is enlivened, if the transfer is avoided as against the trustee pursuant to s 120(1), then the transferee must also be repaid by the trustee an amount equivalent to the value of the consideration actually given by the transferee (s 120(4) of the Bankruptcy Act). The applicants argue that this subsection is not triggered in the present circumstance as no consideration was ever given by Devere for the transfer of the one-third interest in the Dongara Land. 22 A number of responses to the contentions by the applicants have been raised by Devere and Packham although not all responses were actively pursued at trial. 23 Devere and Packham contend that consideration was given for the Andonys' one-third interest pursuant to an agreement which was made in 2001 (the 2001 Agreement). 24 To this the applicants stress that s 120(1) of the Bankruptcy Act is concerned not with 'agreed' consideration but with consideration actually 'given'. The applicants contend that Devere, in fact, gave no consideration for the transfer, the reason being that it was a company controlled by the Andonys and that the transfer was simply to facilitate Packham subsequently obtaining a 50% interest in the Dongara Land by acquiring 50% of the shareholding in Devere. 25 The applicants stress that the agreed payment of $45,000 was never made. There is, however, as acknowledged by the applicants, an indication in the financial statements of Devere that the payment was treated as an interest free loan from the Andonys to Devere. There is no evidence that that loan was ever repaid. 26 The applicants contend that it cannot be argued under the 2001 Agreement that the issue of shares to the Andonys was consideration of any value. This is for the reason that before the share issue, the Andonys together owned all of the shares in Devere. After the share issue, they owned only half because at the same time, Devere issued a number of shares to Packham. 27 Devere and Packham have also pleaded that miscellaneous payments were made by companies associated with Mr Fazio between 1997 and 2001 totalling approximately $132,000 which are also to be included as consideration given for the transfer of the one-third interest in the Dongara Land. No evidence was led at trial in support of this contention. 28 The applicants point out that any such contention should not be accepted as there was no reference under the 2001 Agreement to the making of such payments or any other evidence that the parties had agreed that those payments would constitute consideration for the transfer. Further, as indicated, in respect of many of the payments there was no evidence of the payments actually being made or that the payments were made by Devere and received by the Andonys. 29 Packham and Devere also strenuously dispute the market value of the Dongara Land at the date of the transfer of the Andonys' one-third interest in Devere. The amounts which they contend the land was worth vary slightly from each other but each of Packham and Devere contend that the land was worth much less than contended by the applicants. 30 Much of the trial focussed on the expert valuation evidence given in respect of the land at various dates. 31 Moving then to the second land transaction, it is necessary to consider the circumstances surrounding the transfer of the Dongara Land to Castleworld. This transfer occurred after the commencement of these proceedings in the Federal Magistrates Court. (The proceedings were transferred from that Court to this Court). 32 The relevant statutory provision triggered in connection with s 120 of the Bankruptcy Act is subsection (6) which provides that the section does not have application or does not affect the rights of a person who acquired property from a transferee in good faith and by giving consideration that was at least as valuable as the market value of the property. 33 In the absence of those features, it is contended for the applicants that even if the first transfer had not been void, the transfer to Castleworld would be void. 34 It is necessary to consider the meaning of 'good faith' for the purpose of subs (6) and this will be discussed further in due course. A further question arising in relation to the Castleworld transfer is who bears the onus of proof as to 'good faith'. The applicants argue that the burden is on the transferee. That position is contested. 35 The agreement under which the Dongara Land was transferred from Devere to Castleworld was dated 30 May 2007 and the purchase price expressed in the agreement and actually paid by Castleworld was $1.6 million. For the applicants it is contended that Castleworld did not give consideration at least as valuable as the market value of the land which at the date of the transfer was at least $3.2 million. 36 Once again, the respondents (even more) strenuously dispute the Dongara Land was then worth $3.2 million. 37 The applicants draw on the content of and circumstances surrounding loan facility agreements entered into between Castleworld and a financier, Investec Bank (Australia) Ltd (Investec) to fund the purchase of the Dongara Land. It was a condition precedent to that facility agreement that Investec approve a valuation of the Dongara Land disclosing a valuation of not less than $6 million. It is the case that Investec, in fact, was provided with a valuation of the land of $6 million from Colliers International (Colliers) but there is debate as to whether that figure played any role at all in the agreement by Investec to advance the purchase price of $1.6 million. 38 Castleworld is owned and controlled by Mr Alfred Naude who also owns and controls Project Planning Management and Development Pty Ltd (PPM). The circumstances giving rise to the Castleworld transfer were complex and extensive. It was not a transaction consummated quickly. From about April 2005, Castleworld had discussions and negotiations with Devere with a view to purchasing the Dongara Land or an interest in it. In consequence of that, in October 2006, PPM entered into an in principle agreement with a company controlled by Mr Fazio to enter into a joint venture contract and commercial arrangement with Devere. Under that agreement PPM was to provide project management and development services in relation to the Dongara Land. 39 There was evidence that Mr Naude attempted to attend a meeting of creditors of the Andonys' bankrupt estate held by the applicants on 29 November 2006 and some suggestion that at or around this time Mr Naude was being kept up to date by Solomon Brothers, solicitors for Mr Fazio and his entities, in relation to the position with respect to caveats which the applicants had lodged over the Dongara Land. Indeed, by a letter dated 13 December 2006, Solomon Brothers wrote to Carles Solicitors, (then acting on behalf of the applicants) indicating an intention to seek compensation under s 140 of the Transfer of Land Act 1893 (WA)(TLA) in relation to the applicants having lodged a caveat over the Dongara Land without reasonable cause. 40 It was a week after this that Mr Naude, acting in his capacity as the Director of PPM, instructed Colliers to undertake a valuation of the Dongara Land. 41 The remaining caveat over the Dongara Land was withdrawn on 22 December 2006 in response to the threat contained in the Solomon Brothers 13 December 2006 letter. Neither Devere nor Castleworld at any time prior to the transfer of the Dongara Land notified the applicants of the sale agreement they had entered into or their intention to transfer the land between them. The applicants contend that this shows that the transfer was taking place in clandestine circumstances so as to not trigger awareness on the part of the applicants who would have attempted to restrain the transfer. 42 Mr Naude strongly rejects that contention being, as he described it, part of a 'conspiracy theory' and simply points out that once the caveats had been removed in response to the demand by Solomon Brothers, his belief was that any underlying claim which might have been relied upon to support the caveats, (of which he had little or no knowledge) disappeared with the withdrawn caveats. The applicants contend that this assumption is implausible given the extensive business interests and experience which Mr Naude had accumulated by 2007.

RELIEF CLAIMED BY APPLICANTS 43 The claims under the Bankruptcy Act to set aside the transactions have been mentioned.

Claims in equity 44 Over and above claims setting aside the transfers, the applicants also raise a separate equitable claim in respect of the Dongara Land. In that regard, the effect of the Bankruptcy Act is that the property of the bankrupt vests in the trustee on the debtor becoming bankrupt. The effect of s 120 of the Bankruptcy Act is to render a transfer voidable (rather than void) at the election of the trustee in bankruptcy. If the trustee exercises such an election and avoids the transfer pursuant to s 120 of the Bankruptcy Act, then if the property continues to exist in specie at the commencement of the bankruptcy, it will be treated as having vested in the trustee when the debtor becomes a bankrupt. 45 In relation to this claim, Devere sold to Castleworld the whole of the Dongara Land and had received by way of proceeds of sale the sum of $1.6 million. The applicants argue, therefore, that Devere is obliged to account to the applicants to the extent that those proceeds represent the sale of the applicants' one-third interest in the Dongara Land as money had and received for the use of the applicants. The applicants point to the fact that of the total proceeds of sale of $1.6 million for the sale of the Dongara Land, $1,597,780.70 has in fact been received by Packham. 46 However, Packham owns all of the shares in Devere. The applicants contend that Packham has received the funds with knowledge of the applicants' interest in the Dongara Land and, therefore, is obliged to account to the applicants to the same extent as Devere. Unlike Castleworld, Packham did not contend, nor did Devere, as Mr Fazio did not give viva voce evidence, that it thought the applicants' claims had been withdrawn or resolved when the caveat over the Dongara Land was withdrawn. 47 In addition, it is argued that (because of the allegedly void share transaction), Packham has held the shares in Devere on trust for the applicants since the commencement of the bankruptcy of the Andonys. The receipt of the proceeds of the sale of the whole of the Dongara Land by Packham in its capacity as shareholder, it is said, represents money had and received by Packham for the use of the applicants' shares and for which Packham is obliged to account in its entirety to the applicants. 48 The applicants argue that the claims they have against Devere and Packham to account are in addition to, rather than being in substitution for, or as an alternative to the right to claim a one-third interest in the Dongara Land. The applicants point to the fact that the land has now been encumbered by Castleworld with a mortgage in favour of Investec from which the monies received by Devere and Packham were advanced. It is argued that the accounting of those monies to the applicants will permit them to eliminate or reduce the liability under the mortgage. 49 As to Devere, the applicants also contend it has breached its fiduciary duty (as trustee of the applicants' one-third interest in the Dongara Land) to act in the best interests of the applicants in relation to the sale of the land. It is asserted that there has not been compliance with the obligation to exercise the power of sale with respect to the applicants' interest in the land reasonably and in good faith and to account to the applicants for the proceeds of the sale of the interest in the land. Again, this, as with most of the arguments, turns on the contention that there was a significant undervalue of the land and that Devere was aware of the applicants' interest in the land but did not notify the applicants of the intended transfer or give the applicants any opportunity to prevent the sale. 50 The applicants argue that they are entitled to equitable compensation for a breach of duty by Devere. That compensation, it is said, is equivalent to the market value of the applicants' one-third interest in the Dongara Land at the date of the transfer to Castleworld. On the applicants' case, that is $1,066,666. Castleworld denies any liability but contends that the value at the date of the transfer to it was far less than the sum contended for by the applicants.

The shares claim 51 Separate claims are also made by the applicants with respect to shares in Devere. 52 The applicants raise five claims with respect to the shares in Devere. They are: (a) a claim that the issue of 1,111,113 shares in Devere to Packham in November 2001 is void against the applicants pursuant to s 120(1) of the Bankruptcy Act; (b) a claim that the transfer in June 2003 to Packham of Mr Andony's interest in 1,111,111 held jointly with Mrs Andony is void against the applicants pursuant to the same provision; (c) a claim that the registration in January 2004 of Packham as the holder of Mrs Andony's interest of 1,111,111 shares in Devere held jointly with Mr Andony was of no effect because Mrs Andony did not agree with or consent to the transfer of that interest to Packham; (d) as an alternative to (c), a claim that the transfer in June 2003 to Packham of Mrs Andony's interest of 1,111,111 shares in Devere held jointly with Mr Andony is void against the applicants pursuant to the same provision; and finally (e) a claim that the registration in January 2004 of Packham as the holder of 1 share in Devere belonging to Mrs Andony and 1 share in Devere belonging to Mr Andony was of no effect because neither Mrs Andony nor Mr Andony authorised or consented to the transfer of those shares to Packham. 53 Those claims will be examined below.

THE MAIN PERSONALITIES AND THEIR ACCOUNTS 54 Against that background and in light of those issues, the explanations given by witnesses as to their involvement in and circumstances surrounding the transactions assume importance. 55 As it transpired, despite the extent of evidence given by key factual witnesses, little of it was of assistance in ascertaining the true nature of the circumstances surrounding the agreements under consideration and the agreements themselves. The passage of time together with the surrounding complexity of the earlier transactions resulted in little assistance in this regard being available from the Andonys. Mr Fazio did not adduce oral evidence. Mr Naude in aspects of his evidence was defensive and more concerned to argue his position than give frank testimony.

Mr Andony 56 Mr Andony explained that the Dongara Land is close to Dongara, Western Australia and was zoned rural when his family and he purchased it. After the purchase, the family spent 'substantial time and money' on planning approvals. They ultimately succeeded in having the land rezoned for tourism after obtaining planning approvals from the local Shire and the Western Australian Planning Commission (WAPC). 57 Although specifics were not supplied, Mr Andony estimated the costs of that exercise as being in excess of $630,000. Those costs, he said, included holding costs on the land and approval costs. 58 They also engaged an architect, Mr James Christou, to draw up plans and make presentations to the Council. They engaged planners and environmental consultants to carry out environmental studies necessary to obtain the approval. As at the date of the trial, Mr Andony had not retained any records relating to those matters. They had either been destroyed or passed onto Mr Fazio. 59 In about September 1989, the zoning was changed and they attempted unsuccessfully to enter into a joint venture with project managers to develop the land. They estimated it would cost somewhere between $10 million and $20 million to bring the project to fruition and did not have the money for that. This included the cost of headworks, such as subdivision, roads, electricity, water and such like. At that stage the Dongara Land was mortgaged and the Andonys did not have sufficient funds to buy out the other members of the family who wanted to sell. Accordingly, they borrowed $230,000 from the National Australia Bank (NAB) (the NAB loan). Although the loan was taken out in the Andonys' own names, the funds were actually used by Devere to acquire its interest in the Dongara Land secured in turn by a mortgage over both the Andonys' interest and the interest of Devere. Those funds were used to pay out the existing bank loan and to pay a relatively small amount to remaining family members. 60 It was a feature of the relationship between the Andonys that Mr Andony handled all the finances and all business decisions. He rarely discussed those issues with his wife, particularly 'when things were going badly'. The Dongara venture was not successful. The holding costs for the Dongara Land between 1997 and 2000 exceeded their net income and burdened them with debt which they continued to refinance. They had other significant financial difficulties through the 90's and it became impossible to service the debt on the Dongara Land. 61 Mr Fazio whose company, Topfox Corporation Pty Ltd (Topfox) owned the land adjacent to the Dongara Land had approached Mr Andony in 1997 offering to buy the whole of the Dongara Land for $350,000. Mr Andony refused. He indicated that he would sell Mr Fazio half of the land for $350,000. Between mid-1997 and 2001, the Andonys entered into several contracts with Mr Fazio and/or companies controlled by him in order to proceed with the sale of 50% of the Dongara Land but none of those contracts was pursued. They were not pursued, according to Mr Andony, because Mr Fazio himself could not raise the finance. 62 In 2000, Mr Fazio told Mr Andony that he wished to obtain a valuation of the Dongara Land. Mr Andony agreed with this step being taken. As a result, Mr Fazio instructed Egan National Valuers (WA) (Egan) to prepare a valuation of both the Dongara Land and the adjacent property owned by Topfox. Egan provided the valuation in September 2000. 63 By that valuation Mr RJ Bracewell of Egan assessed the market value of the Dongara Land at September 2000 as being $710,000 if it were free of all encumbrances. That report will be considered in greater detail below. 64 For the adjacent Topfox land, he considered an appropriate market value was $517,000. 65 Mr Andony noted that by 2001 the Andonys were indebted to the NAB for about $310,000. This comprised the original borrowings to fund Devere's purchase of its two-third interest from the Andony family and some of the holding costs for the Dongara Land. Again, his old records were no longer available. In financial statements prepared by the Andonys' then accountants, the debt to the Andonys from Devere was shown as being $274,326 by 30 June 2000. 66 Devere's only asset was its interest in the Dongara Land. The debt to the Andonys was its only material liability. 67 A proposal was developed in discussions between Mr Fazio and Mr Andony. Instead of paying the Andonys cash for their half interest in the Dongara Land, Mr Fazio proposed that he would transfer two units from his development of commercial units in Strang Street, Beaconsfield to the Andonys. This was of little interest to the Andonys who needed cash to repay the NAB loan as well as other debts. 68 Mr Andony introduced Mr Fazio to Mr Wayne Greenwood at Statewest Credit Society Limited of Western Australia (Statewest) in early 2001. Mr Fazio assured Mr Andony that he would arrange for Packham to borrow $475,000 from Statewest using both the Dongara Land and one of the commercial units at Strang Street, Fremantle (also referred to as Strang Street, Beaconsfield) (the Unit) owned by Packham as security (the $475,000 loan). Although the Andonys were much more interested in obtaining cash at this stage, they were conscious that the Strang Street unit, if it was transferred to them, could be used as security to raise borrowings. 69 Mr Andony says that it was some time in 2000 that Mr Fazio first raised the idea of Packham holding its 50% interest in the Dongara Land through Devere. The issue of shares in Devere, so that 50% of the interest in the Dongara Land could occur, was also an idea advanced by Mr Fazio. 70 In April 2001, Mr Andony arranged for the transfer of the Dongara Land signed by him and his wife to Devere at a nominated consideration of $45,000. 71 Mr Andony says that he never received any payment in respect of the $45,000 for the transfer. There is no evidence that the payment made was ever made. 72 The transfer of the Dongara Land and the registration of the mortgage to Statewest were affected on or shortly after 23 May 2001. The evidence of Mr Andony is that he and his wife received the sum of $163,364.92 from Packham which was paid into the Statewest account and around the same time, the liability of $308,864.58 to NAB was discharged. After these transactions in May 2001, Mr Andony began paying (direct to Statewest) at the request of Mr Fazio interest on $300,000 of the $475,000 loan borrowed by Packham. Mr Andony said that when he expressed concerns about paying interest for $180,000 of the $300,000 borrowing to Mr Fazio, Mr Fazio pointed out that Mr Andony would be able to get rent for the Unit which would pay for that portion of the interest which should otherwise have been met by Mr Fazio. 73 Through this time, the Andonys were running two businesses known as Tot Spot Childcare and Star Pacific Travel. Mr Andony would make the interest payments direct to Statewest from one of the two cheque accounts held by those two businesses. Again, the records for these payments are no longer held by the Andonys. Despite the assurances from Mr Fazio about receipt of rent, Mr Andony says that at no stage did they ever receive any rent from the Strang Street Unit and they were continually 'fobbed off' by Mr Fazio. Mr Fazio assumed the running of Devere after the discharge of the NAB loan and payment into the Statewest account of $163,364.92 in May 2001. 74 The evidence of Mr Andony was that documents and accounts were prepared either by his in-house accountant or his external accountant. At that stage, according to Mr Andony, Mr Fazio was represented by Mr Paul Fletcher, solicitor of Solomon Brothers Solicitors, Perth (Mr Fletcher). 75 Mr Andony said that the documents drawn up to reflect the share transfer were presented to him either by Mr Fazio or Mr Fletcher. Mr Andony was not concerned about the mechanics of how the transaction was structured providing that the practical effect was that he and his wife owned 50% of the Dongara Land and Packham owned the other 50%. He did not retain nor did Mr Fazio or anyone else on Mr Andony's behalf give him any records relating to Devere. For that reason he says that he did not examine closely the documents prepared by advisors to Mr Fazio. He says that the loan agreement and Shareholders' Agreement signed by Mr Fazio and the Andonys were just put in front of him by Mr Fazio and he signed. They do not reflect, he says, the true nature of the transaction. 76 Between 2001 and 2002, the development of the Dongara Land continued to be hampered by a lack of funds. Mr Fazio and Mr Andony continued to look without success for a developer or joint venture partner to build the project. Mr Andony was still struggling financially and Mr Fazio told him that he was also short of funds. 77 In 2002, it was agreed that an up to date sworn valuation of the Dongara Land should be obtained in order to assist in obtaining further borrowings in order to meet some of the accrued holding costs. Mr Robert Elliott was approached. Mr Elliott subsequently produced other valuations and was called by the applicants as an expert witness as to the value of the Dongara Land. 78 On 12 March 2002, Mr Elliott issued a report which was intended to be provided to Statewest (Mr Greenwood) who had previously assisted the Andonys with borrowings. In that valuation document, Mr Elliott concluded that the Dongara Land was then worth $1,425,000. Mr Elliott observed that the Dongara Land being the land component of the proposed Bookara Beach Resort had undergone an extensive and costly involvement through the State planning process since 1989. It enjoyed a 'coveted zoning status' of Special Use, Tourism and Recreation within an absolute coastal and beach front environment where similar approvals continued to be more difficult to obtain due to the ever increasing constraint imposed by all of the various local and government authorities in Western Australia. Mr Elliott observed that enquiries made within the Shire of Irwin which was the governing authority indicated a strong ongoing support for the project which would again benefit from an application to further subdivide the land into five 'Superlots' due to go before Council on 20 March 2002. The report also indicated that he had taken into consideration various comprehensive reports and servicing proposals submitted by the planners, architects and engineers and he was also aware of the previous assessments and valuation reports which were also considered in their context at the time to which they applied. 79 That sworn valuation was used to approach Statewest for additional funding. On 20 May 2002, as a result, Statewest agreed to grant one facility to Packham for $150,000 and another to Packham for $122,000. Mr Andony says the purpose of the first loan was to repay costs already spent on the Dongara Land and to meet future costs associated with its development. The loan of $122,000 was to be for the use of the Andonys, according to Mr Andony. It was secured by the mortgage already granted by Packham in 2001 over the Strang Street Unit. Of the $122,000, $120,979 was paid into the Andonys' Statewest account. Again, the Andonys continued to pay the interest on the loan directly to Statewest from the business cheque accounts held with the Bendigo Bank. 80 As to the $150,000 loan, Mr Andony says that the Andonys received $25,000 on about 28 May 2002. Mr Andony and Mr Fazio had agreed that they would each take $25,000 on account of holding costs previously incurred. 81 Notwithstanding receipt of these funds, the financial circumstances of the Andonys continued to deteriorate. 82 In the meantime, Mr Fazio sold the Strang Street Unit without reference to the Andonys. 83 On 1 April 2003, an agreement was executed by some or all of the Andonys, Packham, Devere and Mr Fazio (the 2003 Agreement). The 2003 Agreement was not stamped until 10 June 2004. There is a debate about the execution of the 2003 Agreement but I will come to that shortly. 84 Recitals to the 2003 Agreement recorded that by an undated Shareholders' agreement executed in 2001, the Andonys and Packham as equal shareholders in a then undefined company set out the terms by which the Dongara Land and the company affairs would be managed. The company was not defined by this agreement but I infer from all the extraneous documents and evidence that it was intended that the company be Devere. The recitals further indicated that Packham as trustee for Devere's holding trust had previously secured loans from Statewest of $355,000, $150,000 and $120,000, all secured by mortgage against the Dongara Land. It continued that Packham, on behalf of the Andonys, had also previously secured a loan from Statewest of $122,000 secured against the Unit, that Mr Fazio was director of Packham and of a total of $625,000 Packham loans, the Andonys acknowledged that an amount of $375,000 was received for their separate use and $250,000 was received by Packham. The recitals recorded that the Andonys had failed to refinance the loan in respect of the Unit and failed to transfer ownership of the Unit and now authorised Packham to sell the Unit for $160,000. It also recorded that the Andonys acknowledged an amount of $32,000 was owed to Packham in respect of an overdraft facility obtained by Packham from Statewest for the Andonys' use. The Andonys, also by the recitals, purportedly acknowledged that they owed the balance of debts outstanding by Devere to Solomon Brothers and a firm known as MGY Accounting (MGY). 85 The agreement then noted that on the sale of the Unit, Statewest would receive repayment of the $122,000 loan. Packham would receive repayment of the $32,000 debt. Rates, rental and taxes in respect of the Unit were to be adjusted in the balance of sale proceeds that were to be paid to Solomon Brothers and MGY and that following settlement of the sale of the Unit, the Andonys and Packham were to continue making the required payments on the Packham loans in the agreed portions of $375,000 to $250,000 respectively and that within 12 months of settlement of the sale of the Unit, the Andonys were to repay any balance still owing in respect of the Solomon Brothers and MGY debts. The Andonys also under this agreement purportedly guaranteed and indemnified Devere and Mr Fazio in respect of the Solomon Brothers and MGY debts and undertook to pay all outstanding liabilities to Solomon Brothers and MGY and a further amount of $5,000 in reduction of the $355,000 account under the Packham loans and the amount required to fully repay the $120,000 account in the Packham loans. 86 The agreement continued that in the event that Mr Fazio had been previously required to repay the Solomon Brothers and MGY debts, the Andonys undertook to reimburse Mr Fazio within 12 months of settlement of the sale of the Unit for the amount paid by Mr Fazio. 87 Clause 7 of the 2003 Agreement recorded: 7. In the event of: (a) issue of any notice by Statewest Building Society in respect of the Packham Loans due to the Andonys' failure to make the required repayments as and when due; or (b) the Andonys' failure to make the required repayments under Clause 3; the Andonys authorise Packham to immediately register the share transfer form held under clause 4 in full satisfaction of the Andonys' debts to Packham and Fazio and the parties agree that they and all their related companies shall have no further claims against each other. 88 This 2003 Agreement is one of many documents produced in the course of the proceedings which, to say the least, is of dubious content. 89 The 2003 Agreement refers to Packham continuing to hold 'the share transfer form executed by the Andonys in respect of their shareholding in Devere as security for repayment by the Andonys of their liability in respect of the Packham loans'. I am asked to infer that this is the share transfer form in which signatures supposedly being the Andonys' as sellers bearing date 17 May or 17 June 2003 appear. This transfer form purports to transfer 1,111,111 shares in Devere held jointly by the Andonys for the sum of $311,111.08. However, the date of the share transfer form is after the date of the 2003 Agreement. The share transfer form would have been of little use to Devere, Packham and Mr Fazio if it had not been signed by the Andonys. The 2003 Agreement refers to the share transfer form having been executed but it could not have been executed as at the date of that agreement as the 2003 Agreement was purportedly made on 1 April 2003 but the share transfer form purportedly made on either 17 May 2003 or 17 June 2003. (It was, in any event, only stamped on 21 November 2003). 90 As to the 2003 Agreement, Mr Andony says that he does not know the identity of the witness who was purported to sign as a witness to his signature and the signature of his wife. He is unable to recall his wife signing any documents and cannot recall whether he showed them to her or discussed them with her. He denies signing any documents on behalf of his wife and denied having had the authority to do so. 91 Mr Andony says that it was after the event that he learned that Mr Fazio had caused the 50% owned by the Andonys in Devere to be transferred to Packham by way of share transfer forms of 17 May/June 2003 (stamped in November that year) for the transfer of 1,111,111 shares for $311,111 and by transfer of June 2004 from each of the Andonys said to be for the same amounts but for only one share each. Mr Andony denies ever having given power of attorney to Mr Fazio even though the share transfer forms for the transfer of each of the shares held by the Andonys purports to have been signed by Mr Fazio under a power of attorney. Mr Fazio did not give evidence. 92 Mr Andony gave evidence that he did not receive $311,111 or any portion of it or any sum at all from Packham in 2003 with respect to the 2003 share transfer. He says neither he nor his wife received any monies from Packham or Devere since the Statewest advances in May 2002. He has had no access to the books and records of Devere since the May 2001 transaction. 93 In a supplementary statement, Mr Andony responds to a number of matters which would have been raised by Mr Fazio had he been called to give evidence. It is unnecessary and inappropriate to consider that material other than to the extent that it may have arisen in the course of Mr Andony's cross-examination or through other aspects of the evidence. 94 As Mr Andony's evidence at trial unfolded, it emerged that despite running a number of business activities, at the time of his bankruptcy, he owed $304,000 by way of unpaid superannuation contributions for employees. He also accepted having borrowed several hundred thousand dollars from family and friends all of which, as at 2004, remained unpaid. 95 He was tested about his knowledge as to the difference between subdivision and development and claimed familiarity with those concepts as he also controlled a real estate company. He confirmed that he understood that although he had achieved or helped to achieve an amendment to the town planning scheme so that the zoning of the Dongara Land was changed, any development of the land would need separate approval from the local authority. Additionally, if not in parallel, approval would be needed from the WAPC to subdivide the Dongara Land. Subdivision in effect would have to precede any development approval. Accordingly, it was necessary to get subdivisional approval before any development application could be submitted to the local authority. 96 The statement 'we have total government approval to develop a fully integrated resort' used in a document to attract the interest of other potential investors was clearly inaccurate. Equally so was the statement 'we are now in a position to commence detailed plans and proceed with construction'. He explained that the subdivision application was made 'at the recommendation of Mr Fazio' by a business known as 'Development Planning Strategies' but that subdivision application to the WAPC was refused and an appeal was lodged with the Town Planning Appeal Tribunal. As a result, subdivisional approval was then obtained pursuant to consent orders made by the Tribunal. The subdivision was for five lots. 97 Mr Andony accepted that Mr Fazio took over the activity from Mr Andony because there had been little progress under Mr Andony. 98 In a preliminary investigation commissioned by engineers in May 1988 a range of development estimates of between $800,000 and $1.8 million for earthworks, water supply, waste water disposal, Telecom, SEC Power, engineer and survey fees were given. Additionally in a report prepared by architects in September 1989, a figure was postulated in excess of $32 million to develop a resort on the land. 99 As to the proposition that the land was in the middle of nowhere, Mr Andony protested that it was on the ocean and had ocean frontage. It was also within about five kilometres of the Greenough River Resort and a caravan park which was closer again. He accepted that the sort of resort which was contemplated in the engineering and architectural reports would have been beyond the capacity of he and his family to develop. For that reason, the project was languishing until Mr Fazio came along and drove the subdivisional application. He had not previously made an application for subdivision or for development approval but did not consider that the idea of the resort was just an unrealistic dream. 100 It was Mr Andony who suggested to Mr Fazio that Mr Elliott might be a suitable valuer. At that stage Mr Fazio had a valuation from Egan (Mr Bracewell) dated 25 September 2000 valuing the land at $710,000. It was Mr Andony who asked Mr Elliott in March 2002 for a valuation on the property so that Mr Fazio could borrow from Statewest because he could not get the finance from anywhere else. He did not supply the 1988 and 1989 costings from the engineers and the architects to Mr Elliott. 101 Mr Andony reaffirmed that for the whole of his married life of 40 years he had been the only person to deal with the financial or business affairs of the family. His wife would just sign documents that he put in front of her. This included loans, security documents and such like. 102 Mr Andony accepted that he did borrow $122,000 secured over the Unit. He did not provide any security for it and in fact could not. The $122,000 loan in May 2002 was to be repaid from the proceeds of the sale of the Unit. That money was used for Mr Andony's own personal purposes. He also accepted that he lent Mr Greenwood from Statewest, prior to his dismissal, $25,000 for the purchase of shares. He denied, however, that the loan of $25,000 was by way of thanking Mr Greenwood for providing the advance of $122,000. 103 He also accepted assisting his wife in relation to her statement of affairs which the cross-examination of Mrs Andony showed was conspicuously inaccurate. 104 Mr Andony says he treated the $122,000 as a loan secured against the Unit which would be repaid on the sale of that property. He also expected that he would receive the balance of the sale price when that occurred. However, he made the point that this did not take place as Mr Fazio took the balance of the sale price. He subsequently entered into an agreement with Mr Fazio, part of the effect of which was that he would be providing to Mr Fazio security over the shares that he held in Devere. This was required before the proceeds of the Unit could be disbursed to pay out the $122,000 loan. That was not something he discussed with his wife. In relation to how Mrs Andony's signature appeared on the 2003 Agreement, or the identity of the witness to his own signature, Mr Andony was not at all helpful. Equally, however, Mr Fazio did not give evidence on this topic.

Mrs Andony 105 Mrs Andony was vague about all business matters. 106 She purported to corroborate the general background evidence of her husband but had little to contribute on any of the detail. She left the decisions in relation to the Dongara Land and all other business matters to her husband. She did not use the cheque account and did not have card access to any bank account. If she needed money, she asked her husband for it. They both ran the Tot Spot Childcare business but she worked in that business full-time with her husband doing the books and accounts with the assistance of an accountant who prepared the financial accounts and tax returns. It was her husband who ran the travel agency, Star Pacific Travel. 107 At no time did Mrs Andony authorise her husband to sign any documents relating to the Dongara Land or any other activity on her behalf. 108 Mrs Andony had very little communication with the Fazios other than once or twice socially with Mr Fazio. She identified her signature on the 11 April 2001 Transfer of Land document, on the mortgage granted by Devere to Statewest, on the 2001 agreement stamped on 10 June 2004, on the Shareholders' Agreement of 2001 (but stamped 10 June 2004), on the Loan Agreement between the Andonys and Devere of 2001 (stamped on 10 June 2004), and on the Notice of Resignation of Director on 3 November 2001. However, she expressly denied signing the 2003 Agreement. Although the words 'signed by the said Joan Elizabeth Andony' appear at the end of the 2003 Agreement with a signature purporting to be hers appearing next to those words, she denied it was her signature. Nor did she recognise the signature of the witness to her purported signature on that document. 109 It is not possible to decipher with any certainty the name of the person who has signed as witness to that document. There is no printed legible inclusion of the name or occupation or address. 110 Similarly, Mrs Andony denies ever signing the share transfer form of 17 May/June 2003 stamped 21 November 2003 for the transfer of 1,111,111 shares in Devere from the Andonys to Packham. The first time she saw those documents was subsequent to her bankruptcy. 111 Again, she says the share transfer form transferring one share in Devere belonging to her for supposedly $311,111 purporting to have been signed by Mr Fazio under power of attorney was never so authorised. She did not give Mr Fazio a power of attorney of any nature and says that she never received any payment or benefit for the transfer of that share. For Mrs Andony's part, she was not aware that Packham had sought funding from Statewest in 2002 or that Statewest had lent any money to it that year. Indeed, she was not aware that any of the money lent to Packham by Statewest had been paid into the Andonys' Statewest account that year. 112 Mrs Andony says that she did not agree to transfer her remaining 50% to Devere, to Packham or to anyone else. Although she was aware that under the 2001 agreement the Andonys or their nominees were to receive the Unit, she denies receiving the Unit or any benefits from it. Further, the Andonys control another company, Gold River Holdings Pty Ltd which, Mrs Andonys says, also did not receive any benefit from the Unit. 113 Mrs Andony confirmed that in her statement of affairs in connection with her bankruptcy, she relied very substantially on advice from her husband. She said that although she was well aware that she was liable to banks in respect of loans secured against properties jointly owned, she did not record any of those liabilities because she 'didn't realise that everything had to be put down, I guess'. 114 The inaccuracies in that statement were significant. They appeared there on the advice of her husband. This was consistent with the pattern of all of her business conduct.

Conclusion on the Andonys 115 Neither of the Andonys presented as particularly reliable witnesses on these business transactions. They could not satisfactorily explain the transactions purportedly completed or the surrounding financial or transactional circumstances. 116 With some effect, Mr Andony's business judgement was challenged. Also emphasis was placed on the extent to which he had secured considerable financial assistance over several years from family and friends who were not repaid. Despite these aspects of focus in cross-examination, there was no reason to conclude that Mr Andony's evidence was fabricated. I accept his evidence that the various agreements presented to him bore little resemblance to reality. I also accept his evidence, there being nothing of any cogency to the contrary, that no consideration was in fact received by him arising out of the transfers purportedly reflected in those documents or otherwise. 117 The position with Mrs Andony was similar. Her evidence, while more vague about business dealings was not susceptible to challenge on the same point about receipt of consideration. While her credibility was directly challenged by the attack on the content of the statement of affairs jointly completed for her bankruptcy, no such direct challenge was made on her evidence as to lack of receipt of consideration by her and lack of execution by her of key documents. I infer from the absence of cross-examination on those topics that propositions to contest the accounts of Mrs Andony on those topics could not properly be put to her. Mr Fazio was not called to give evidence contrary to that of Mrs Andony.

Mr Verge - identification of some documents 118 Mr Evan Verge (the first named applicant), gave evidence which was primarily directed to chronologically proving the exchange of a deal of correspondence on his own behalf as Trustee with various entities involved in the transactions which have been described. 119 On 9 November 2004, Mr Verge (or his subordinate) wrote to Mr Fazio saying that the various deeds sent were not sufficient to satisfy the enquiries which had been raised. Documentary evidence of the specific individual transactions, particularly financial transactions which involved the Andonys was sought. That was pursued again on an urgent basis on 6 December 2004 and Mr Fazio was then advised that without receipt of the documentation, it would be Mr Verge's view that Mr Fazio was unable to sustain an interest in Devere at all. That correspondence concluded with a paragraph reading: Please note that you are expressly forbidden to conduct any further dealings in respect to shareholdings or assets of Devere, and should you ignore this direction, I will seek to recoup any loss suffered by the Administration directly from you. 120 On 10 December 2004, the applicants lodged a caveat against the Dongara Land on the basis of an interest in equity as Trustees in Bankruptcy of the Andonys pursuant to a Constructive Trust by virtue of the interest held by the Andonys in the Dongara Land as reflected in the supporting statutory declaration of Mr Verge. The statutory declaration referred to legal advice in respect of the Constructive Trust. On the same day he wrote to Mr Fazio pressing for the documentation which had previously been requested on several occasions. Mr Fazio's then solicitors, Mullins Hancock, responded on 29 December 2004 indicating that they had received instructions to review all of Mr Fazio's documents in order to facilitate a response to the applicants. 121 In fact, no correspondence other than that letter from Mullins Hancock was received from either the Fazios or Mullins Hancock. 122 On 15 June 2005, as a result of Mr Verge making an inquiry, Mullins Hancock informed him that they had ceased receiving instructions from Mr Fazio. The next chain of correspondence ensued throughout September and October 2005 between Mr Verge and Solomon Brothers. In that exchange some further information was provided. 123 In the meantime, following the September/October exchanges between Mr Verge and Solomon Brothers, ultimately at the request of Mr Verge, the Official Receiver in Bankruptcy, on 21 October 2005 served Notices to Produce on Devere, Packham and the Fazios pursuant to s 77C of the Bankruptcy Act. The Notices were, relevantly, in the following terms: 05-10-21=01 … Devere Holdings Pty Ltd 51 La Fayette Blvd BIBRA LAKE WA 6163 WHEREAS: Evan Robert Verge, as trustee of the bankrupt estates of Arthur John Andony and Joan Elizabeth Andony ('the Andonys'), is currently investigating the financial affairs of the bankrupts in accordance with Section 19AA of the Bankruptcy Act, 1966. Devere Holdings Pty Ltd (ACN 009 220 615) is the recipient of this notice in its own capacity. By way of background, as at 2 November 2001, the Andonys held, as tenants in common, an undivided one-third interest in land situated at Lot 2 Wakeford Road, Bookara ('the Bookara property'), with Devere Holdings Pty Ltd ('Devere') holding the remaining undivided two-thirds share. The Andonys held two fully paid shares in Devere, which at the time represented 100% ownership of Devere's share capital. The Andonys, and Mr John Arthur Andony, were the directors of Devere. Various Deeds have been executed between various parties, namely the Andonys, Packham Pty Ltd, Devere Holdings Pty Ltd, Giacomino (Jack) Fazio and Maria Rita Fazio which purportedly detail transactions between the parties which have resulted in the transfer of the Andonys interests, rights and entitlements being taken from them without apparent compensation or consideration. The documentation requested below, seeks to obtain evidence of those transactions, including whether valuable consideration has been paid if those transactions have occurred. I, Andrew Alan Henderson, of Level 12 Durack Centre, 263 Adelaide Terrace, Perth Official Receiver for the Bankruptcy District of the State of Western Australia, require you pursuant to Section 77C(1)(a) of the Bankruptcy Act 1966, to provide me with the following information/documents relating to the examinable affairs of the Andonys:- 1. All documents in your possession relating to the subscription and purchase of 1,111,113 fully paid shares ('Packham shareholding') in Devere Holdings Pty Ltd (ACN 009 220 615) ('Devere'), by Packham, including but not limited to; 1.1. Correspondence, other communications, or documentation relating to the subscription of the Packham shareholding, 1.2. Documents evidencing details, including source and amount, of the consideration paid for the Packham shareholding, 1.3. Documents evidencing the par value of the shares, and how and why the particular number of shares issued was determined, 1.4. Where the consideration for the Packham shareholding was either all or partly by non cash consideration, documents supporting the valuation of the non cash consideration (i.e. if land, a copy of the valuation). 2. All documents in your possession relating to Packham's borrowing of $355,000 from the Statewest Credit Society ('Statewest'), and secured by way of 1st registered mortgage over the Bookara property owned by Devere, including but not limited to; 2.1. Documents evidencing Packham's purpose for the $355,000 such as loan applications, minutes of Directors authorising the loans, business plans and or budgets evidencing the research into the purpose of the loan, Packham's capacity to repay the loan, without the Bookara property, including reasons why Packham needed to use the Bookara property as security for the $355,000, 2.2. Evidence of Packham's receipt of the $355,000 from Statewest supported by bank statements or similar showing the deposit of the funds, 2.3. Evidence of Packham's utilization or disbursement of the $355,000, including evidence of receipt by the recipient entity supported by bank statements or similar showing the dispersal of the funds, and an explanation as to the reasons for the disbursements effected. 3. In respect to the Bookara property, all documents in your possession to evidence the value to be $710,000, or such other value. 4. All documents in your possession evidencing, as at 2 November 2001, Packham's ownership of Unit 2, 18 Strang Street, Fremantle ('Strang Street') (also described as Unit 2, 18 Strang Street, Beaconsfield) including but not limited to; 4.1. Original or Duplicate Original Certificate of Title for Strang Street, and evidence of Packham's purchase of the property, 4.2. Documents evidencing all debts secured against Strang Street by registered charge, equitable mortgage or similar, 4.3. Documents evidencing any other debt owed by Packham or any other entity in respect to Strang Street, in which Strang Street has been used as an incentive or collateral to advance funds to Packham, 4.4. Documents evidencing the value of Strang Street on or before 3 November 2001, 4.5. Documentation to evidence the transfer of the beneficial ownership of Strang Street to Devere, 4.6. Documentation to evidence Packham's right to mortgage Strang Street after beneficial ownership had been transferred to Devere, 4.7. Documentation is (sic-in) respect to any subsequent borrowings against, or sale of any interest in Strang Street. 5. All documents in your possession relating to the 'Unit' in Gold River Holdings Pty Ltd, transferred to the Andonys by declaration of bare trust, including but not limited to; 5.1. Documentation evidencing Packham's ownership of the Unit, 5.2. Documentation evidencing Packham's entitlement to transfer ownership of the Unit to any party, but in particular, the Andonys, including such things as minutes of Gold River Holdings Pty Ltd authorising the transfer, evidence the Unit was not subject to escrow or other restrictive dealing issues, 5.3. Documentation evidencing the Unit's value as at 30 June 2000, 30 June 2001, 3 November 2001, and 30 June 2002 including such things as financial statements (e.g. balance sheets, profit and loss statements), 5.4. Documentation supporting the existence of the bare trust effecting the transfer of ownership to the Andonys, 5.5. Documentation evidencing the current status and value of the Units, including the current contact address, and names of the directors. 6. All documents in your possession relating to the loan by Packham to Devere in the amount of $180,000 which was secured by a second ranked mortgage over the Bookara property, including but not limited to; 6.1. Documentation evidencing the actual transfer of moneys from Packham to Devere, including bank statements etc, 6.2. Documentation evidencing the justification for the loan, including minutes of meetings of Packham directors where the provision of the loan was discussed, as well as any correspondence from Devere requesting the loan, 6.3. Documentation evidencing Packham's ability to advance the moneys, without the $355,000 loan from Statewest effected on or about the same time, 6.4. Reasons why the loan to Devere is interest bearing, 6.5. Reasons why the Deeds executed between Packham and Devere states that Packham is not obliged to repay the $355,000 loan until after Devere repays the $180,000, 6.6. Reasons why Devere advanced the $180,000 loan directly on to the Andonys, when it could have been lent directly between Packham and the Andonys. 7. All documents in your possession relating to the Deed executed between the Andonys, Packham, Devere and Giacomino Fazio (dated sometime in 2003), including but not limited to; 7.1. Documentation evidencing the three loan amounts totalling $625,000 detailed at Recital B of the Deed, i.e. the $355,000, $150,000 and $120,000 loans all secured against the Bookara property, 7.2. Documents evidencing details, including source and original amounts of the loans, the amounts repaid, 7.3. Copies of any loan agreements, or other acknowledgements of debt 7.4. Recital E of the 2003 Deed states that of the $625,000 loans secured by Packham from Statewest, $375,000 was received by the Andonys for their separate use, with the remaining $250,000 being received by Packham. Please explain and identify how that break-up was determined, and provide documents evidencing the advance of those moneys. 7.5. Please explain how the $250,000 referred to in Paragraph 7.4 above, received by Packham was expended, including evidence of the actual disbursements for the moneys (i.e. receipts, bank statements etc). 8. All documents in your possession relating to the transfer of the 1,111,113 shares held by the Andonys to Packham, including but not limited to; 8.1. Documentation evidencing the fact that the shares held by the Andonys were fully paid, 8.2. Documentation evidencing the transfer of the shares, and the value at which the shares were transferred, 8.3. Documents evidencing the consideration paid for the shares by Packham, including any amounts paid on behalf of the Andonys evidenced by invoices addressed to them, the source of the funds used by Packham or other parties to pay those invoices, and receipts from the party receiving the funds, 8.4. Documentation evidencing the Andonys acknowledgement of the debts referred to in Paragraph 8.3 above, including their admission of liability, 8.5. Documentation evidencing the Andonys authorisation for Packham or other parties to pay those liabilities on their behalf, and that upon payment the Andonys would reimburse the party paying on their behalf, 8.6. To the extent Packham claims the transfer of the Andonys shareholding was effective due to the issue of default notices or other forms of demand for payment, documentation evidencing the issue of the demands and that the Andonys had been advised of those demands, including evidence of the Andonys liability to those demands, 8.7. Documents evidencing the adjustment of moneys claimed by Packham against the Andonys to reflect a net debt. 9. All documents in your possession relating to Devere's acquisition of its original 2/3 interest in the Bookara property, including evidence of the consideration paid by it to the former owners. … 124 By letter of 1 November 2005 to the applicants, Solomon Brothers for Mr Fazio set out a detailed schedule by which an explanation was given both as to the supporting documents for and consideration for the various transactions in respect of which Mr Verge had been making inquiries. That letter advised as follows: 1 November 2005 Jones Condon PO Box 8258 Perth Business Centre PERTH WA 6849 Attention: Mr Ross Thompson By facsimile: 9328 4949 (minus annexures) Confirmation by post

Dear Sir BANKRUPT ESTATE - A. ANDONY We refer to your letter dated 19 October 2005. As requested in that letter:- 1. we confirm that we are authorised to accept service of documents on behalf of Devere Holdings Pty Ltd ("Devere"), Jack and Maria Fazio and Packham Pty Ltd ("Packham"); and 2. we enclose copies of the following duly executed and stamped documents:¬ 2.1 Agreement dated 2001 between the Andonys, Packham, Devere and the Fazios ("the 2001 Agreement") (Doc 1); 2.2 Shareholders Agreement dated 2001 (Doc 2); 2.3 Loan Agreement dated 2001 between Packham and Devere (Doc 3); 2.4 Loan Agreement dated 2001 between Devere and the Andonys (Doc 4); and 2.5 Deed of Agreement dated 2003 between the Andonys, Packham and Jack Fazio (Doc 5). You have not responded to our letter dated 20 October 2005, which requested that you attend at a meeting at our office to discuss the exact documents which you consider relevant, and which you claim have not been provided to you to date (or that you particularise the same in a letter to us). We understand from our recent telephone conversation that you are seeking evidence of the completion of each of the transactions referred to in the 2001 Agreement. We have already provided you with a substantial number of these documents, however we set out the following further information for clarity:-

No. TRANSACTION SUPPORTING DOCUMENTS CONSIDERATION SUPPORTING DOCUMENTS 1. Devere acquired a 2/3 interest in the Bocara (sic) property from Archie Andony, Anthony Andony, Pamela Andony and Alexandra Louise Andony ("the Sellers") (the Andonys retained a l/3rd interest in the property). DOLI transfer of land G382966 (registered 29 January 1997) (Doc 6) · $216,666.00 (as per the transfer of land) · This transaction occurred substantially before the 2001 Agreement: our clients do not therefore know how or when Devere paid $216,666.00 to the Sellers. No amount was payable by Devere to the Andonys. Even assuming (without knowing) that the Andonys lent $216,666.00 to Devere to enable Devere to pay the said amount to the Sellers, this amount must have comprised part of the $310,000.00 loan from the Andonys to Devere referred to in recital C of the 2001 Agreement, which has been repaid to the Andonys in full (see paragraph 6 below) 2. Transfer by the Andonys of their 1/3 interest in the Bocara (sic) property to Devere (clause 2 of the 2001 Agreement). DOLI transfer of land H756450 (registered 23 May 2001) (Doc 7) · the issue to the Andonys of 1,111,111 fully paid shares in Devere; and · Resolution of Directors of Devere dated 3 November 2001 (Doc 8) and Share Certificate No. 3 (Doc 9). · the payment by Devere to the Andonys of $45,000.00, to be treated as a loan from Andonys to Devere (see paragraph 6 below) · The 2001 Agreement is, of itself, evidence of this loan. This loan from Andony's (sic) to Devere has been repaid by Devere to the Andony's (sic) in full (see paragraph 6 below) 3. The issue to Packham of 1,111,113 shares in Devere (clause 3 of the 2001 Agreement) Resolution of Directors of Devere dated 3 November 2001 (Doc 8) and Share Certificate No. 4 (Doc 10) The payment by Packham to Devere of $355,000.00, which was satisfied as follows: · This payment was satisfied by Packham paying this amount directly to the Andonys in satisfaction of Devere's liability to pay the Andonys the same amount (see paragraph 5 below). See letter from Statewest to Packham dated 23 May 2001, which shows that an amount of $308,864,58 (i.e. substantially in excess of $175,000.00) was credited by Packham to the Andonys' loan account with NAB (Doc 11). · the payment by Packham to Devere of $175,000.00, less the amounts expended by Packham up to the date of the 2001 Agreement on behalf of Devere · Clause 3 of the 2001 Agreement is sufficient, of itself, to transfer beneficial ownership of the Strang Street property from Packham to Devere (and it was assessed to stamp duty on this basis). See further note 1. · the transfer by Packham to Devere of beneficial ownership of Unit 2, 18 Strang Street, Fremantle 4. Packham borrows $355,000.00 from Statewest Credit Society ("Statewest") (clause 4.1 of the 2001 Agreement) Loan number 143628 L78 advanced by Statewest to Packham on 23 May 2001 (see letter from Statewest to Packham dated 23 May 2001 (this $355,000.00 loan is comprised in the loan of $475,000.00) (Doc 11) 5. Packham lends $180,000.00 to Devere See loan agreement dated 2001 between Packham and Devere (Doc 3). This payment was satisfied by Packham advancing this amount directly to the Andonys (ie, Devere was required to advance the same amount to the Andonys (see paragraph 7 below)). 6. Devere repays the $310,000.00 loan which it owes to the Andonys and the $45,000.00 loan referred to above by · Of the $475,000.00 advanced to Packham by Statewest, Packham paid $308,864.58 (ie, an amount exceeding $175,000.00 by approximately $134,000.00) to Andonys in reduction of their NAB loan (see letter from Statewest to Packham dated 23 May 2001) (Doc 11) (see also paragraph 3 above). • repaying $175,000.00 off Andonys loan account at NAB · See Note I below. • transferring (to the benefit of the Andonys and at their direction) the beneficial ownership of the Strang Street property to Gold River Holdings Pty Ltd. 7. Devere lends $180,000.00 to the Andonys The loan agreement dated 2001 between Devere and the Andonys (Doc 4). On 23 May 2001 (from the proceeds of the $475,000.00 loan referred to in paragraph 6 above) an amount of $163,364.92 was credited to the Andonys' account (being 135310 S82). Further, part of the additional amount of approximately $134,000.00 (see paragraph 6 above) paid to the Andony's in reduction of their loan with NAB makes up the difference. This leaves a payment of approximately $118,000.00 made by Packham to the Andonys unaccounted for (see Note 1). See letter from Statewest to Packham Pty Ltd dated 23 May 2001 (Doc 11). 8. Packham borrows $150,000 from Statewest See letter from Statewest dated 22 May 2002 (Doc 12) - 50% of this amount was paid to the Andonys - see page 1 of bank statement dated 5 February 2003 (account 135310 is the Andonys' account and account 152620 is either the Andonys' account or was paid to that account at the direction of the Andonys) (Doc 13). The Andonys were to be responsible for the interest on this portion of the loan. The Andonys did not repay this portion of the loan.

Note 1: Clause 4.3 of the 2001 Agreement is sufficient, of itself, to transfer beneficial ownership of the Strang Street property from Devere to Gold River Holdings Pty Ltd and was assessed to stamp duty on this basis. This stamp duty was paid on behalf of the Andonys by Packham (see item 008-002 on stamp duty assessment notice dated 10 March 2004 (Doc 14)). Legal ownership of that property was not ultimately transferred to Gold River Holdings Pty Ltd at the request of Mr Andony who did not wish to pay the stamp duty on that transfer (which had been paid by Packham). Packham arranged to borrow from Statewest, in addition to the $355,000.00 required to fund payment of the cash component of the issue price for the Devere shares ($175,000.00) and to make the loan (of $180,000.00) to Devere, and at the request of the Andonys, a further amount of $120,000.00 (i.e. equating to the total loan received of $475,000.00), which amount was paid by Packham to the Andonys (see Doc 11). This amount of $120,000.00 was secured over the Strang Street property (thus effectively enabling the Andonys to access the equity in this property which they beneficially owned). This amount was not repaid by the Andonys to Statewest. Mr Andony then subsequently arranged for a further loan (numbered 143628L79) to be made to Packham of $122,000.00, which was secured by the mortgages registered against the Strang Street property and Bookara Property (which loan was made without our clients' knowledge), and the full net proceeds of this loan of $120,979.00 were paid to the Andonys (see letter from Statewest to Packham Pty Ltd dated 22 May 2002 (Doc 15) and Statewest Statement No. 5 (Doc 16)). Account number 143628 S76 is the Andonys' account. The Strang Street property was sold on 18 March 2003 and the full proceeds of the sale of this property were applied in paying out loan 143628 L79 (see letter from Statewest dated 19 March 2003 (Doc 17) and Statewest Acknowledgment dated 2003 (Doc 18)). The shortfall from the loan payout figure was provided by Mr Andony. Accordingly, it is quite clear that Mr Andony received the benefit of the proceeds of the sale (they were used to repay a loan which was advanced to him). Accordingly, Mr Andony received $242,000.00 (i.e. $120,000.00 plus $122,000.00) on account of the Strang Street property.

A substantial number of the abovementioned documents were attached to our letter to you of 30 September 2005. Nevertheless, a further copy of these documents is attached to this letter. In these circumstances, notwithstanding your assertions to the contrary we consider that we have provided evidence that all of the transactions referred to in the 2001 Agreement were completed. If there is any further evidence which you seek, please let us know immediately. It is also clear that the Andonys received from Devere (only made possible by payments made to Devere by Packham) the following payments: 1. from Packham's $475,000.00 loan, $472,229.50; 2. from Packham's $150,000 loan, $ 75,000,00; and 3. from the sale of Strang Street, $120,979.00. TOTAL - $668,208.50 To the extent that any portion of the above amounts constituted a loan to the Andony's only, the transfer of Andonys' 1,111,113 shares in Devere to Packham in accordance with the 2003 Agreement was made in full satisfaction thereof. The fact that the loans made by Statewest to Packham were secured over the Bookara property is not relevant: Packham had the liability to repay these amounts. Further, and in any event, whilst Packham is now the sole shareholder of Devere (the owner of the Bookara property), the $475,000.00 loan and the $150,000 loan (which are interest only loans) are still secured over the Bookara property (of which the Andonys received the majority of funds). Thus, it is quite clear from the above (supported by the attached documents) that there is no legitimate basis upon which you can assert any interest to the Bookara property, or in Devere and/or Packham. … 125 Advice was also given that while Mr Fazio did not wish to resort to litigation, unless the caveat earlier lodged by the applicants was withdrawn within seven days of that letter, Mr Fazio would make an application pursuant to s 138B of the TLA for removal of the caveat. Further detailed information was given in a Solomon Brothers' letter dated 23 November 2005 in response to a letter from Mr Verge dated 4 November 2005. The indication of intent to file an application for removal of the caveat was repeated. 126 Despite Mr Verge's 6 June 2004 demand, Mr Fazio for Devere had met with Mr Naude of Castleworld to discuss a proposal concerning the possible sale of the Dongara Land to Castleworld. 127 The documents also show that shortly after these events, Mr Naude was in communication with Statewest by letter of 20 December 2005 which referred to the caveat lodged over the interest of Devere in the Dongara Land. Mr Naude confirmed that he had been in negotiations with the Fazios for the previous eight months. He explained that he knew about the existence of the dispute concerning the caveat. Apparently he was not concerned about it as he was protected by the terms of an option that he had with Mr Fazio. He was not bound to proceed with the acquisition of the Dongara Land and, of course, could not proceed while the caveat remained on the land. The purpose of that communication was to confirm to Statewest that Mr Naude was still interested in proceeding with the purchase of the Dongara Land and therefore discharging the mortgage over the land as soon as the caveat was lifted. At that stage, Mr Naude confirmed in that correspondence to Statewest that he had instructed Mr Alan Peter Murphy (Mr Murphy) of Colliers to prepare a sworn valuation for the Dongara Land. He indicated that he would be happy to supply the valuation and any supporting documents if Statewest required them and considered that the then current indications were that the Dongara Land was worth approximately $3.2 million at current value and $5 million when the structure plan was endorsed. 128 Matters did not proceed swiftly in the first half of 2006 but on 23 September 2006, Mr Naude wrote to Mr Fazio pointing out that although the option had been granted on 30 April 2005 in the sum of $1.6 million for a 50% share, that was on the basis that Devere could deliver the property for settlement in a few weeks. In fact there had been a delay of 16 months. Pursuant to the option, according to Mr Naude, a penalty of $50,000 per month effectively reduced the purchase price to $800,000. Mr Naude accepted that the letter incorrectly records the amount of $1.6 million rather than $1.2 million. 129 Mr Naude suggested that the appropriate solution was to pay $1.6 million exclusive of GST, (instead of $1.2 million) for 100% of the property rather than 50% of the property. He attached a fresh Option Deed for the proposal which was to be signed and returned to him within 14 days, failing which he intended to continue to apply the penalty of $50,000 per month. 130 In the same month, Devere commenced a Supreme Court action seeking orders for the removal of the caveat and on 28 September 2006, the applicants' then solicitors wrote to Solomon Brothers contending that the 2003 Deed prepared by Mullins Hancock, then solicitors for Mr Fazio, was void and invalid and indicating that it would be necessary for proceedings to be commenced in the Federal Magistrates Court. 131 Mr Verge explained that during the course of the Supreme Court proceedings it became clear to him that the caveat and supporting statutory declaration lodged on 12 December 2004 did not accurately reflect the true nature of the interest the Trustees had in the Dongara Land which had become clearer as a result of the documentation and information Mr Fazio and his group had provided to Mr Verge since the caveat had been lodged. 132 Accordingly, on 7 November 2006, he made a statutory declaration in support of a second caveat (J981891) which was lodged by his solicitor on 10 November 2006. 133 On 13 December 2006, Justice Murray in the Supreme Court of Western Australia ordered the removal of the first caveat. The second caveat, however, was withdrawn on instructions from Mr Verge on 21 December 2006. Mr Verge said that the reason for doing this was because his solicitor at the time had received the 13 December 2006 letter from Solomon Brothers for Mr Fazio advising that if the second caveat was not withdrawn, Mr Fazio would pursue a claim in damages against Mr Verge. As Mr Verge held no funds in the bankrupt estate with which to meet a damages claim, he resolved to withdraw the second caveat. 134 During this time, in late 2006, there was activity concerning litigation in the District Court of Western Australia in which Topfox (which it will be recalled was the owner of the property adjacent to the Dongara Land and was controlled by Mr Fazio) was being sued by various investors (the Kevill Litigation). While the relevance of that may not be immediately apparent, the connection with the current litigation is that Castleworld subsequently, pursuant to the agreement under which it acquired the Dongara Land, undertook (in broad terms) to assume the responsibilities of Topfox in settling the litigation in the District Court. I will revert to this in more detail shortly. 135 Around this time, Mr Naude attended a meeting at Solomon Brothers with Mr Doug Solomon (Mr Solomon) and Mr Fletcher on 21 November 2006 concerning the 'caveat problem on Bookara'. He noted advice given to him as to the dates of bankruptcies of the Andonys and the fact that under the Bankruptcy Act transfer can be avoided. He was assured, however, that the Andonys received money and shares and the market value was supported by a valuation. He was told it was unlikely that the applicants would succeed but if they did, it would be necessary to repay money if the applicants could prove that the transaction was not at market value. He was also informed about an imminent meeting of creditors. 136 Indeed, Mr Naude attended that meeting of creditors of each of the Andonys which was held on 29 November 2006. There could be no suggestion that Mr Naude himself was a creditor of the Andonys. The minutes record that he entered the room at which the meeting was held at 10.35 am. The Trustee (Mr Verge) explained to him that he was not legally entitled to remain in attendance given that he could not produce a proxy form and on the face of it, the documents he produced which had purportedly been prepared by a Mr F Mignacca, who Mr Naude claimed he was representing, did not bear any relevance to the meeting. The minutes record that at approximately 10.48 am, Mr Naude reluctantly left the meeting room after requesting that he be permitted to delete his details from the attendance register. He remarked that he would seek further advice from Mr Mignacca and return to the meeting if so directed. 137 The documents purportedly related to work completed by Mr Mignacca. The documents were shown to Mr Andony who disclaimed any involvement of Mr Mignacca, particularly at the Strang Street Unit in Beaconsfield and denied having approved any work to be carried out by Mr Mignacca or even knowing either Mr Mignacca or Mr Naude. Mr Andony at that meeting commented that it appeared the work purportedly undertaken by Mr Mignacca had been authorised by Mr Fazio and that Mr Fazio had no connection to Mr Andony. The minutes record: Mr Naude then proceeded to ask the Trustee and Mr Andony who Mr Fazio was and for his full name and Mr Andony provided those details. Mr Naude then queried whether Mr Fazio was a partner of Mr Andony and the Trustee responded that those individuals were not partners in any sense and reemphasised his reasons for asking that Mr Naude excuse himself from the meeting. Mr Naude continued to ignore the Trustee's requests that he excuse himself from the meeting, and after several minutes and further explanation by the Trustee, as to the inappropriateness of Mr Naude's presence, he reluctantly left the room and remarked that he may return after telephoning Mr Mignacca for further advice. 138 The minutes also record amongst other things that the Trustee provided a detailed explanation of his submission to the litigation funder, Hillcrest Litigation Services Pty Ltd (Hillcrest) and that the Trustee was expecting a response from Hillcrest within the next 10 days or so. If it be at all relevant and I do not consider it is, I have inferred that the applicants' litigation is funded by Hillcrest. The topic arises only from an answer given in cross-examination given by Mr Verge as to why he was prepared to continue to leave a subsequent caveat on the Dongara Land. His explanation was that at that stage, he had the backing of a litigation funder. It is improbable that a litigation funder would, on the one hand, be willing to accept a risk of indemnifying the applicants for compensation arising from an unjustified lodging of the caveat without, on the other hand, funding the litigation. 139 The inference I am asked to draw by the applicants, partly only from the attendance of Mr Naude at the meeting of creditors, is that he was far more aware of the underlying circumstances in ongoing proposed claims by the applicants than he suggests. He wanted to ascertain how serious the applicants were about proceeding with a claim. If the minutes, which record the query raised by Mr Naude as to who Mr Fazio was, are correct, then this was indeed a curious question for Mr Naude to raise. 140 It may well be a reasonable inference that the true reason for Mr Naude being at that meeting was to ascertain whether the Trustees proposed to pursue the claim which had supported the lodging of caveats over the Dongara Land which Mr Naude, through Castleworld, proposed to acquire. Mr Naude is a very experienced businessman. Having spent months in negotiations with Mr Fazio and having met with Mr Fazio's solicitors who had outlined the nature of the dispute a few days prior to the meeting, it is reasonable to and I do infer that Mr Naude's real reason for attendance at the meeting was to ascertain whether the applicants intended to pursue a claim. The Mignacca link seems incidental at best. 141 I note also at this time that correspondence from Solomon Brothers (Mr Fletcher) to Beere & Meyer (Mr Dennis Beere) concerning resolution of the Kevill Litigation was seemingly copied to each of Mr Naude and Mr Fazio. Mr Naude denies receiving this correspondence. If he had received it, he would have been aware that the underlying dispute concerning the caveat lodged over the Dongara Land was ongoing. The correspondence is the subject of an evidentiary ruling which I will address below. I will also come back to Mr Naude's evidence as to his actions and knowledge. 142 The exchanges concerning settlement of the Kevill Litigation continued through into March 2007 and beyond. 143 At the same time, the valuation report which had been requested by Mr Naude was supplied by Colliers in respect of the Dongara Land. The valuation placed on the Dongara Land was far in excess of any valuation prior to that time and far in excess of any actual payment ever made for it. The valuation given for the Dongara Land was described as '$16,000,000 to $20,000,000 at a site rate of $112,483 to $140,604/hectare'. I will come back to more detailed comment in relation to that valuation but it did refer to an unidentified offer of $20 million that was purportedly made by a Mr John Taylor, a director of Buffalo Holdings Pty Ltd on 20 March 2007 to Ms Maria Miller of Summit Realty in Mandurah, Western Australia. The valuation itself is only dated 9 March 2007. Mr Naude has noted on that document that it had been given to him by Mr Fazio but he was unable to make contact with the people and that it appears to be 'junk!'. The applicants suggest that this is just a self serving note to disguise the fact that Mr Naude knew full well that there was no such offer. It does seem somewhat unusual in the face of all this and the other surrounding claims against Mr Fazio or his companies that Mr Naude was still quite confident about negotiating and dealing with Mr Fazio. 144 The new solicitors for the applicants, Jackson MacDonald wrote to Statewest, now care of Home Building Society (following a merger) on 12 April 2007 noting their interest and the fact that they had been instructed to commence proceedings against Devere and Packham relating to the transfer by the Andonys to Packham of their interest in Devere and the Dongara Land. It was pointed out that if the applicants succeeded, the transfer from the Andonys would be avoided subject to the payment by the Trustees of any consideration that may have been paid. A copy of the valuation by Mr Elliott commissioned by Statewest was also requested. 145 A summary of that valuation was provided together with confirmation of the loan facilities with Packham. In the meantime, while these problems were still subsisting and the present litigation was ensuing, Castleworld was approaching a finance company, Investec, in June 2007 for finance for the acquisition of the Dongara Land. Colliers provided its final valuation report for Investec on 25 June 2007 noting that the Dongara Land was under offer for $20 million but that the current market value in the estimate of Colliers was $6 million. 146 On 2 July 2007, the Dongara Land was transferred from Devere to Castleworld for $1.6 million. This, it transpired, was the total amount that Investec was prepared to lend to Castleworld on security of the Dongara Land. The Packham facilities with Home Building Society were fully discharged. 147 Shortly after by an urgent letter from Jackson MacDonald to Solomon Brothers (on 5 July 2007) the applicants recorded their grave concern that in the face of these proceedings, Mr Fazio (or precisely, Devere and Packham) had without notice to the applicants or their own solicitors disposed of the Dongara Land. The letter continued 'our clients are concerned that your clients may be seeking to avoid meeting any judgment by disposing of the asset the subject of the proceedings'.

Mr Murphy - a valuer 148 Mr Murphy, a licensed valuer was called by the applicants to give non-expert evidence. He was, in 2006, employed by Colliers. He confirmed that Colliers was engaged in late 2006 to prepare a valuation of the Dongara Land. After receiving the instructions, he received copies of the two offers annexed to his valuation, one of them, at least to the best of his recollection coming from Mr Fazio by facsimile. He also had various meetings with Mr Naude and Mr Fazio individually and occasionally with both of them at Mr Naude's office in West Perth. The updated 'offer' from Buffalo Holdings Pty Ltd was to his recollection handed to him at one of those meetings. He had sought more information about the offer including the identity and background of the offeror. He asked about the ability of the offeror to complete the proposed sale. He did not receive information or sufficient information to enable him to be satisfied that it was an arm's length offer that would result in a sale at the price of $20,000,000. He referred to the offers in his valuation and at no time was he actually informed that they were not genuine. He put a value on the Dongara Land of $6,000,000.

Mr Carey - a property analyst 149 The applicants called two witnesses to attempt to prove that Mr Naude obtained finance for Castleworld to purchase the Dongara Land by fraudulent means. Specifically, the applicants sought to show that Mr Naude was involved or complicit in very inflated values for which there was no true support, knowingly being provided to a financier, Investec, to ensure finance could be obtained to support the Castleworld purchase. 150 The first such witness was Mr Carey, a property analyst who was employed in that capacity within Investec at the relevant time. He received the application by Castleworld for finance for the purchase of the Dongara Land. He also met Mr Naude, Castleworld's Director on a number of occasions, usually with another Investec employee. He received a statement of assets and liabilities for the Naude Entities prior to approving the loan and had access to it during the course of undertaking due diligence. In accordance with standard Investec procedure he requested a valuation report from Colliers and assisted Mr Hamer in preparation of the proposal which was submitted to Investec's Credit Committee for consideration. 151 There was reference in the valuation to the borrower obtaining substantial interest in parts of the site from organisations such as the RSL for a retirement village and Mount Gibson Mines for housing for fly-in/fly-out workers and 'three offers have been received for the entire site ranging from $17.0 to $23 million'. There was no independent support for any of these statements. 152 He was unable to recall whether that part of the report was contributed to by Mr Hamer of Investec or by him but believed that he did not have direct conversations with Mr Naude concerning those matters. 153 Mr Naude at that time had other borrowings with Investec and so Mr Carey did due diligence at the request of Investec's Credit Committee to confirm ownership of some of the other properties listed in the statement of assets and liabilities but did not seek formal valuations for those. 154 His evidence was that at no time prior to the settlement did Mr Naude say anything to him to suggest the Dongara Land did not have a value of $6 million. Also Mr Naude never suggested that the offer of $20 million referred to in the Colliers' valuation was not genuine. Mr Naude did not say anything to suggest that the offers of $17-23 million referred to in the body of the proposal were not genuine. Mr Carey proceeded on the basis that the value attributed by Mr Murphy of $6 million was the value of the Dongara Land.

Mr Hamer - an investment banker 155 Mr Hamer, an investment banker also met with Mr Naude of Castleworld whilst employed with Investec. Mr Naude told him in substance that he had been lucky enough to get an option to purchase the Dongara Land for $1.6 million two to three years beforehand. The original option had expired but he had rolled it over with a further option. 156 Mr Naude told him that in order to preserve the relationship with the landowner, he needed to exercise the option because the owner had received offers on the site ranging from $17 to $23 million. Mr Naude said he needed to exercise the option as soon as possible. He gave Mr Hamer a copy of Mr Murphy's evaluation report and Mr Hamer together with Mr Carey prepared the credit application for Investec's Credit Committee. The content of the report referring to interest from the RSL and Mount Gibson Mines and the three offers ranging from $17 to $23 million, he said, were derived from statements made by Mr Naude to him or to Mr Carey prior to completion of the valuation. 157 Mr Hamer also spoke with Mr Murphy of Colliers who remained content with the valuation of $6 million for the Dongara Land. 158 Prior to the proposal being considered by Investec's Credit Committee, Mr Hamer attended an informal meeting with company executives, Mr Roy Kaplan and Mr Mike Sargeant in Sydney to discuss the proposal. Mr Sargeant was the head of the Credit Committee of Investec. In the course of that meeting, Mr Kaplan and Mr Sargeant rang Mr Murphy of Colliers and spoke at length with him in the presence of Mr Hamer. They asked questions of Mr Murphy concerning the sales evidence that he relied upon and following the conversation, according to Mr Hamer, Mr Sargeant said in substance that he would adopt prudent banking practice and look to lend the lesser of the purchase price and the valuation. In reference to the purchase of the Dongara Land valued at $6 million for $1.6 million, he expressed the view that it sounded too good to be true. 159 Ultimately Investec did agree to offer Castleworld $1,820,193 by way of a land facility and $2,500 GST facility. Under the offer from Investec Credit Committee there was a requirement that Castleworld make a $200,000 repayment within three months of the first drawdown and pay the stamp duty on the transfer. No one ever suggested to Mr Hamer that the offers between $17 and $23 million to which he referred in the credit application were not genuine.

Evidentiary ruling 160 As is often the position, the parties in this litigation agreed a large number of documents would constitute a 'Library' for the conduct of the trial. It was not accepted that all the documents in the Library were admitted into evidence. Those that were not in evidence were removed at the end of the trial. On the ninth and last day of the trial I reserved an evidentiary ruling either to be dealt with in the substantive reasons or, alternatively, advised to the parties should the need or desirability to do so arise. It did not. 161 To understand the debate to which this ruling relates, it is necessary to consider an earlier ruling made in the course of the applicants' case. 162 On 12 November 2009, during the presentation of the applicants' case, counsel for the applicants sought to adduce two witness statements signed by Ms Bartlett, an instructing solicitor for the applicants. The first written statement was admitted unopposed (it became Exhibit A9). 163 The tender of the second witness statement (Exhibit A10), was objected to in part. What the applicants had sought to establish was an exchange of correspondence in the course of which the first and second respondents withdrew 'an admission' (in the nature of a proposed agreed fact). The fact was that a letter dated 9 January 2007 had been sent from Solomon Brothers to Mr Fazio and/or Mr Naude and duly received. The withdrawal was explained in a letter from Solomon Brothers, solicitors for the first and second respondents. The change in position was said to be due to receipt of defence amendments proposed by Castleworld which asserted non-receipt of the letter. With this advice as to the amendment, Solomon Brothers became aware for the first time that the particular letter was one that Castleworld had denied receiving. On the basis of that denial, they and their clients, Devere and Packham were no longer prepared to accept that the letter was sent to either Mr Fazio or to Mr Naude and received. 164 The applicants tendered the correspondence in which (in the first instance), dispatch and receipt of the letter had been admitted. 165 The respondents opposed the tender of that correspondence on the ground of relevance. As the respondents indicated, it was simply an exchange of correspondence prior to trial with a view to attempting, as part of the trial, to reach an agreement on certain facts and directions. The fact that agreement was not reached, despite the fact that there had been earlier indications that it would be reached, was not a fact relevant to the triable issues. 166 I allowed the objection on the grounds advanced for the respondents. The procedure of inviting parties to agree facts and issues, if possible, is designed to facilitate an efficient trial process. But there is no obligation on parties to agree to facts when they have no instructions to do so and when the alleged facts are in dispute. There seemed to me to be at least a plausible basis explained for subsequently declining to agree notwithstanding the original agreement. I observed that if the respondents went into evidence there may be an opportunity to put the issue in cross-examination. Although the withdrawal of the agreement was late prior to the trial, it was always incumbent on a party to prepare its case on the basis that it may be necessary to prove all relevant documents. 167 Against that background, on the last day of trial, although the applicants had by that stage closed their case and evidence had also been given for all of the respondents, a difficulty of a different nature arose concerning whether or not a document was in evidence. The document was number 180 within the Library. The document is an affidavit of Mr Fazio with annexures, together comprising 107 pages. Agreement to the admission of the document to the Library had not been given at any time by the respondents and inclusion of it within the Library was opposed by Devere and Packham in the course of the argument on the final day of the trial. 168 Counsel for the applicants made the point that Exhibit A9, (the witness statement of Ms Bartlett), which identifies the document and its source was admitted into evidence without objection. The context in which reference to the affidavit of Mr Fazio appears in Exhibit A9 is as follows: 2. On 20 July 2007, Federal Magistrate Lucev ordered the first and second respondents to file and serve an affidavit deposing, among other things, as to the full particulars of the sale of the land the subject of Certificate of Title Volume 1773 Filio 315 ("the Dongara Land") to Castleworld Pty Ltd ("Castleworld"). 3. On 26 July 2007, Jackson McDonald was served with a copy of an affidavit sworn by Giacomino Fazio ("Mr Fazio") on 26 July 2007 in compliance with that order. The document numbered 07-07-26-01 in the trial bundle is a true copy of that affidavit. 169 The affidavit of Mr Fazio was filed while the proceeding was in the Federal Magistrates Court before transfer to this Court. Ms Bartlett deposed to having received that document subsequent to the order made by Lucev FM requiring Mr Fazio to depose to the full particulars of the sale of the Dongara Land to Castleworld. 170 It was contended by counsel for the applicants that in the circumstances of the affidavit being sworn by Mr Fazio and filed and served by his solicitors in response to a Court direction, that the affidavit had 'prima facie evidentiary value as to the truth of its contents'. As counsel for the applicants made clear, the reality was that the necessity of seeking to rely upon the affidavit came about because Mr Fazio chose not to give evidence at trial. The applicants say that they were, in effect, taken by surprise by this because by the amended defence of Devere and Packham (para 15A), those respondents themselves raised the same factual allegations that are the substance of Mr Fazio's affidavit. In those circumstances, it was said that there was no reasonable basis for opposing its inclusion in the proceedings as evidence of its content. 171 There is, in my view, little substance in these arguments as the applicants had to be prepared to prove their case in any event regardless of what may be pleaded in a defence. 172 Counsel for the first and second respondents pointed to the fact that the debate in connection with Exhibit A9 in which I ruled against the admission of the pre‑trial correspondence, revealed that the express purpose of the witness statements from Ms Bartlett was 'to establish the provenance of certain documents' on which the applicants wished to rely. The complaint raised was that what was sought to be done now was to 'go wider than that' and seek to have the affidavit of Mr Fazio admitted into evidence as if it had been evidence in the trial. The point was made that under s 47 of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act) evidence at trial should be given by witness statement and orally and evidence by affidavit may only be received under s 47(3) by leave of the Court. The respondents complained that the inclusion of Mr Fazio's affidavit was effectively a backdoor attempt to introduce, after the trial, evidence which would otherwise not have been available at the trial unless the applicants had chosen to call Mr Fazio or proven it in some other way. 173 The applicants contended that the explanation given as to the provenance of the documents was not a means of avoiding requirements of the Federal Court Act for adducing evidence to be given at trial but was rather a mechanism to put that evidence before the Court in a form that was 'absolutely guaranteed of integrity', by reason of the fact that Mr Fazio swore the affidavit in response to a specific Court order. The applicants complain that if Mr Fazio's affidavit is not admitted, they would be put to the unnecessary burden of subpoenaing a large number of business documents in order to prove what was effectively dealt with by the Federal Magistrate identifying those documents which were to be identified on oath by Mr Fazio. 174 Further, the applicants' argued that Exhibit A9 which referred to Mr Fazio's affidavit and its provenance was tendered without objection being taken to the inclusion of Mr Fazio's affidavit as a document in the Library. 175 Counsel for the respondents pointed to the fact that the reason the argument advanced on day 9 of the trial was not raised was because of an earlier agreement between the parties as to the limited purpose for which Mr Fazio's affidavit could be used. In response to objections which had been raised as to the content of Ms Bartlett's statement prior to trial, an email was forwarded from Ms Bartlett to the solicitors for the respondents on 1 September 2009 in relation to Exhibit A9 saying It's very clear from the content of my statement that I am doing no more than deposing as to where particular documents came from during the course of the proceedings, for example, a party's discovery subpoenaed documents and the like. I find it difficult to believe that you have raised this as a serious issue. 176 The respondents say they proceeded on the basis that it was simply the provenance of the documents that was sought to be relied upon, not the actual content of them. 177 I proposed to counsel that I reserve my ruling on the admissibility of Mr Fazio's affidavit until the time at which I was completing my substantive reasons following the trial. Counsel for the respondents indicated there was no difficulty with that approach from their perspective. 178 In my view, Mr Fazio's affidavit has been proven and it will form part of the Library. My reasons for that ruling are these. It was clear at all times that the statement of Ms Bartlett (Exhibit A9) could only go to the provenance of documents, that is, the circumstances in which they came into existence, their source and purpose. Nothing in Mr Fazio's affidavit was a matter on which Ms Bartlett could give any direct evidence as to the facts. The only purpose of her statement was to identify a document and its provenance in order that it might go into evidence. Otherwise her statement could not be relevant to the issues and would not have been admitted into evidence. Having regard to the nature of the document and the circumstances in which it was required to be brought into being by Lucev FM, if the applicants wish to rely upon it, it can be regarded, in effect, as an admission against interests going to the actual proceeds of sale of the Dongara Land after transfer to Castleworld. It is Mr Fazio's own affidavit and while he did not give evidence at the trial, having been called by no party, nevertheless it was a relevant communication made to the Court and the applicants by Devere and Packham on a specific topic prior to the trial. 179 It may not have been a voluntary communication but it nevertheless was a relevant communication on a topic on which the applicants seek to rely. If Mr Fazio had wished to qualify the content of the affidavit in any sense, he could have provided a further affidavit prior to trial or given evidence at the trial. It was always clear that the applicants intended to prove Mr Fazio's affidavit as it was included some time prior to the trial in the proposed Library of documents. 180 Significantly, at no stage did Mr Fazio seek leave to appeal from the order made in the Federal Magistrates Court compelling him to disclose on affidavit the full particulars of the sale to Castleworld. The account that Mr Fazio gave of the sale, in compliance with the order, included details as to which company received the sale proceeds. Further, the 'backdoor' proof of the destination of funds following the Castleworld transaction was given, in any event, by Mr Naude and was not challenged (nor susceptible to valid challenge). The same material being in evidence, no prejudice arises from proof by the method proposed.

Mr Fazio's affidavit 181 Mr Fazio did not give evidence at the trial but in the affidavit he swore on 26 July 2007 in these proceedings and which is included in the Library of documents for the trial, he describes the circumstances surrounding the sale to Castleworld and the destinations of the proceeds of the sale. Despite a strenuous debate over the admissibility of the affidavit and prejudice arising from its inclusion, its content seems unremarkable. It is confined primarily to documents and has received little attention in the applicants' closing submissions. Mr Fazio refers to an option being granted to Castleworld on 30 April 2005 to which previous reference has been made and then a further option on 30 September 2006 to which reference has also been made. 182 On 30 May 2007, Castleworld exercised the second option. It exercised the option by notifying Mr Fazio that notice was given to Devere by Castleworld 'that it irrevocably exercises the Option to purchase the property as granted and pursuant to the Deed of Option to Purchase Land executed between the parties and dated 30th September 2006'. 183 Mr Fazio deposes to the fact that pursuant to the exercise of the option Devere entered into a contract of sale with Castleworld with respect to the Dongara Land and settlement occurred on 2 July 2007 from which $882,465.78 was paid to the Home Building Society at settlement (Home Building Society had by this time merged with Statewest). Mr Fazio says that the balance of $715,314.92 available at settlement after payment to Home Building Society was paid, at the direction of Devere, directly to Packham from which Packham made cheque payments through a variety of persons including State Revenue ($80,100), various members of the Fazio family, Solomon Brothers ($60,000), Able Lott ($230,000), land tax ($29,295) and sundry others. (Able Lott provided demolition and site decontamination services on another property which Packham was seeking to purchase). 184 Mr Fazio said that the assets of Devere after its sale of the Dongara Land to Castleworld were nil and the assets of Packham were the benefit of its proceedings against a third party in the Supreme Court, its interest in a caterpillar front end loader with approximate value of $20,000 subject to a hire purchase contract on which $12,000 was owing and the shares owned by Packham in Devere. He referred to the fact that a value of $224,311 was a value placed by the Valuer General's office on the one-third interest in the Dongara Land transferred to Devere under the agreement of 10 November 2000 and also under the 2001 Agreement.

Mr Naude - the Castleworld transaction 185 Mr Naude has been mentioned in the course of discussion of the evidence on a number of occasions but I will now deal more comprehensively with his involvement. Mr Naude holds qualifications in a variety of fields. He holds a Batchelor of Science majoring in building technology, a Master of Science majoring in construction management and economics, he is a member of the Australian Institute of Project Management, a member of the Institution of Engineers Australia (Environmental), Associate of the Australian Institute of Quantity Surveyors, member of the Property Council of Australia and a member of the Institute of Arbitrators and Mediators Australia. 186 He is a director of PPM which commenced business in Western Australia in 2003. Its business is to provide services in the development of land including initiation of land development projects, feasibility studies, costs estimating, statutory authority applications, lease negotiations, liaison with real estate consultants, assisting in obtaining of finance, due diligence inquiries, operation of special purpose vehicle companies for property development, management of design and documentation, project management, contract management, quality control and programming. 187 In early 2005, Mr Naude decided to investigate the purchase of land somewhere between Joondalup and Geraldton, Western Australia on which to develop a retirement village. He was introduced to Mr Fazio who informed him at a casual meeting in March 2005 that he owned two properties south of Geraldton, one being 212 hectares in Gingin and the other, 142 hectares in Bookara, Western Australia (the Dongara Land). Mr Fazio told Mr Naude he intended to develop both properties but had struck delays with both of them. Mr Fazio told him he could inspect the Dongara Land any time he wished. Mr Naude duly inspected it and had another meeting with Mr Fazio. He made notes of that meeting which he then had typed, recording that Mr Fazio's preference had been to sell 50% of the Dongara Land but he would not rule out a total sale, if the price was right. Mr Fazio had suggested Devere had some tax losses and it may be a good idea for Castleworld or its nominee to buy into Devere which Mr Naude resisted. He noted that preliminary due diligence showed that the 'file had been inactive for some time' and that the meeting had been called by Mr Naude so that Mr Fazio could explain the delay and also elaborate on the last formal contact made with the Shire of Irwin which appeared to be 16 April 2002. He recorded that Mr Fazio explained that he had purchased the site some time before 1998 and had another partner who got into financial difficulties unrelated to the property, except that his partner could not pay any contribution on the property and that Mr Fazio had taken over all payments and 'bought out the other partner'. He recorded that Mr Fazio confirmed that the council approval for the subdivision was to subdivide the property into five lots. In May 1998, application was made to subdivide the property into six superlots which had not been approved by the WAPC, but Mr Fazio advised that WAPC would approve once provided with some consultant reports, some of which had apparently been done. Mr Fazio advised Mr Naude that there were caveats or intended caveats on the property which related to old disputes but that he would have them all lifted before Castleworld was ready to purchase. He anticipated the caveats would be removed in about one to two months. Mr Naude advised that the due diligence and funding would take at least two months. There was discussion as to the need for an option before spending a lot of fees and the introduction of a penalty if the caveats were not lifted after spending a lot of money on the property. Mr Naude advised that they could be spending up to $50,000 per month. 188 Mr Fazio mentioned that a former partner/shareholder of Devere, namely, Mr Andony had subsequently been declared bankrupt and that a trustee had threatened to lodge caveats over the title to the Dongara Land. Mr Fazio said the Trustees had no basis because their argument is 'against one of his companies, based on untruths and had little documentation'. Mr Fazio said he had discussed this with lawyers and was confident the whole issue would soon be resolved. He said that the Trustees' claim had no merit because 'the shares had been bought and paid for years before the bankruptcy'. Mr Naude said that he could not be expected to delve into old arguments and Mr Fazio assured Mr Naude that the Dongara Land would be likely to be free to deal with soon and that Mr Fazio had been advised that if the caveats were not lifted, they could be set aside in court. Mr Naude made it clear that they would not be interested in the Dongara Land unless all or any of the caveats were lifted in the short term which Mr Fazio assured him would be the case. Mr Fazio advised that all the problems which had delayed the progress to date would soon be resolved and he was definitely in the market to sell either as to 50% by area or 50% of a new special purpose company or 50% of Devere. Mr Naude said he was not interested in 50% of Devere. Mr Fazio also said that he may sell 100% if the price was right. Mr Fazio was vague about the price, suggesting up to $17,000 per hectare. The figures suggested by Mr Fazio equated on Mr Naude's computation to $1.2 million for a 50% purchase price. 189 There was a further meeting arranged with the Mr and Mrs Fazio following which Mr Naude presented a letter option agreement which was signed by both parties. The option agreement was to purchase a 50% share in the Dongara Land for $1.2 million plus GST. Devere was to assist Castleworld with project management advice in relation to the rezoning or approvals which Devere and Castleworld decided to apply for. There was to be a formal documented option incorporating the following terms: (1) The Grantor of the Option is Devere Holdings Pty Ltd, of 5 Beach Road Fremantle ABN Number 009 220 615 (2) The Grantee of the Option is Castleworld Pty Ltd, of 50 Ord Street West Perth ABN Number 073 225 715 (3) The Option will not be subject to obtaining from the Shire of Irwin of a Rezoning or Development Application (DA) approval in accordance with plans and outline specifications prepared by the Grantor or the Grantee. (4) The Grantor and the Grantee shall work co-operatively to further the approvals processes with the Shire of Irwin until such time as the Option is exercised or lapses. (5) During the period of the Option the Grantee and the Grantor will share costs equally for preparation of any Rezoning application or DA application lodged with the Shire of Irwin, up to the time when this Option comes to an end. (6) The Grantee shall use its best endeavors to ensure that any Rezoning approval or DA shall be approved by the Shire of Irwin within 60 days of application, however, the Grantee makes no representation that the Shire of Irwin or State Government will grant the Rezoning approval or DA. (7) The Grantor will grant to the Grantee an irrevocable Option to purchase the land for the sum of $1,200,000, inclusive of GST. (8) The purchase price will be payable as follows:- (a) The sum of $1,000 payable at the time the Option is exercised, shall become due by the Grantee to the Grantor (b) The balance, being $1,199,000. shall be payable within 45 days of the latest date between the date of the exercising of the Option and the date of the executed Contract for Sale of Land. (9) The Contract for Sale of Land, not annexed to the Option, shall incorporate the terms of this letter and the 2000 Edition of the REIWA and Law Society of Western Australia joint form of General Conditions for the Sale of Land or subsequent amendments. (10) There shall be no special conditions unless the parties shall both agree. (11) This Offer to agree an Option shall be open for thirty days from the date of receipt of this letter after which time the offer of the Option shall lapse. (12) The Option to purchase is available to be exercised for 12 months form the date at which the Grantor is in a position to transfer title to a special purpose company in which the Grantor and the Grantee will each own 50%. (13) The Option shall lapse time in the event that the Grantee is unable to or fails to exercise the Option within 3 years of the date of the Option. (14) Within 14 days of exercising the Option, the Grantee will prepare a Contract for Sale of Land containing the above described terms and conditions and submit this to the Grantor and the Grantor shall sign and execute this Contract. (15) The Grantor and the Grantee shall use their best endeavors to ensure that settlement takes place within 45 days of the date of execution of the Contract for Sale of Land. (16) The parties agree that there will be a penalty and incentive to ensure the Grantor provides the Grantee with delivery to transfer the Property, after the Grantee has provided services in relation to the Property. In the event that the Grantee carries out significant project management work on the Property for more than three months and the Grantee gives notice of intent to exercise the Option, but the Grantor is unable to deliver, then the Grantee will reduce the price by $50,000 per month delayed. (emphasis added) 190 Mr Naude says that in about early December 2005, Mr Fazio showed him a copy of the caveat saying that it was the caveat he had mentioned in an earlier meeting. He says that Mr Fazio requested he send a letter to Statewest to confirm the interest of Castleworld in purchasing 50% of the shares in Devere and to explain to Statewest why there was a delay in Castleworld agreeing to purchase those shares. That letter was duly sent to Statewest and has been referred to above (at [127]). 191 There was a further meeting with Mr Fazio in September 2006 at which Mr Fazio explained that he was also a shareholder in Topfox into which 14 investors had put money and which they now wished to have repaid. He requested the assistance of Mr Naude in mediating a settlement involving a proposal for the investors to settle the Kevill Litigation by each of them being given a lot in the proposed subdivision of the Dongara Land. Mr Naude agreed to assist. 192 Mr Fazio then rang Mr Fletcher from Solomon Brothers using a teleconference facility and explained that Mr Naude had agreed to assist in the mediation. In that discussion Mr Fletcher explained that he welcomed the assistance of Mr Naude and that he would send to him a draft of the proposal he intended to put to the investors. A few days after that meeting with Mr Fazio, Castleworld sent a letter to Devere noting that the option was granted on 30 April 2005 for $1.6 million (sic) for a 50% share. The letter continued to observe (as previously noted), that at that time Mr Fazio 'believed that' Devere could deliver the Dongara Land for settlement within a few weeks but had been unable to do so due to matters relating to Devere's history over which Castleworld had no control and amounting to a delay of 16 months. Mr Naude continued to observe that the penalty of $50,000 per month agreed in the option as a reduction in the purchase price for 50% effectively reduced the purchase price to $800,000. Mr Naude said that he understood the predicament that Mr Fazio was in and that he needed more than the balance to settle the loan and as discussed, he proposed to buy the entire property for $1,600,000 exclusive of GST under the same terms of the option as before but without the penalty clause. He attached an option deed to that end. 193 Mr Naude received an email on 26 September 2006 from Mr Fletcher with a draft letter to Messrs Beere & Meyer concerning the Kevill Litigation and seeking Mr Naude's comments. Mr Naude's comments were given to Mr Fletcher by phone and he says that the comments related to the timing of the proposed subdivision of the Dongara Land. He suggested to Mr Fletcher that they have a meeting with the investors, which Mr Fletcher told him he did not consider necessary at that stage. A meeting was, however, held on the following day between the Fazios and Mr Naude at Castleworld's offices in West Perth for the purpose of signing the new option agreement. Mr Naude prepared that agreement following one which had been used in an earlier property acquisition in 2003 in Armadale, Western Australia. It was not well prepared as he now recognises. Nevertheless it was signed by the Fazios and he also signed the Notice of Exercise of Option. 194 Between April 2005 and September 2006, Mr Naude made inquiries on behalf of Castleworld for the purpose of advancing potential development of the Dongara Land and persisted during that time with inquiries of Mr Fazio as to whether or not Mr Fazio had been able to remove 'all claims against Bookara'. 195 In November 2006, Mr Naude sought the quotation from Mr Murphy of Colliers to provide a valuation on the Dongara Land in order to assist with the settlement negotiations involving Topfox. Also, on 21 November 2006, Mr Naude met with Mr Fletcher and Mr Solomon from Solomon Brothers for the meeting described above (at [135]). 196 He says that in late November 2006, Mr Fazio told him that the application to remove the caveat lodged by the applicants in 2004 was listed for hearing in December 2006 in the Supreme Court of Western Australia but the applicants had registered a second caveat on the title. Mr Naude says that he did not see any copy of the actual caveat of 8 November 2006 or the supporting statutory declaration of 7 November 2006 until after the time at which Castleworld was joined as a party to the proceeding. 197 There is a further document of some importance being a letter of 14 December 2006 from Solomon Brothers to Beere & Meyer, solicitors for the plaintiffs in the Kevill Litigation. That letter also bears the endorsement 'cc. Alf Naude & Jack Fazio'. Mr Fazio was not called to give evidence but Mr Naude says he did not receive the letter. 198 The letter records that Solomon Brothers had been engaged in an escalating argument concerning the removal of the caveat over the Dongara Land and in a debate concerning a second caveat recently lodged by the Trustees. The lodgement of the second caveat, they asserted, was an abuse of process. The letter continued: … it was ordered by Murray J on Monday last, 11 December 2006, that the caveat be removed and the trustees pay our client's costs. We shall also be pursuing the Trustees personally for damages. We've now put the trustees on notice that unless they forthwith remove the second caveat we shall make application for its removal also and pursue the trustees for additional damages and costs. Until the decision on Monday in favour of our client, there was considerable uncertainty as to whether the proposed settlement was feasible. As a consequence of the analysis of the issue surrounding the trustees' claims in relation to both caveats, we are now confident that the second caveat will also be removed, although the time required to effect its removal is unknown and depends largely upon the attitude which the trustees now adopt. 199 Mr Naude also denies receiving a further letter on this topic. This letter was a letter from Solomon Brothers to Beere & Meyer of 9 January 2007 bearing the same endorsement of being copied to Mr Naude and Mr Fazio. In relation to this letter, Solomon Brothers confirm that both of the caveats lodged by the Trustees had been withdrawn. 200 It continues as follows: 1. The acquisition by the Fazios' company, Packham Pty Ltd, of 50% of the shareholding in Devere occurred in May 2001 at the same time as Devere acquired from the Andonys the remaining one-third interest in the Bookara Land that Devere did not already own. The trustees in bankruptcy of the Andonys are now asserting that the acquisition by Devere of that one-third interest in the land and by Packham of a 50% shareholding in Devere are transactions that, by virtue of the subsequent commencement of the bankruptcy of each of the Andonys within a five year period, are void under section 120 (and/or section 122) of the Bankruptcy Act. 2. The remaining 50% of the issued shares in Devere were acquired by Packham in 2003 as a result of a breach by the Andonys of their obligation to meet certain financial commitments to Packham in respect of which the Andonys had granted certain rights, by way of security, to Packham over their shares in Devere. The trustees in bankruptcy are now asserting that the acquisition of that 50% shareholding is also a void transaction under the Bankruptcy Act. 3. The trustees in bankruptcy have threatened to commence proceedings in the Federal Magistrates Court in relation to the allegedly void transactions. No such proceedings have yet been commenced. (emphasis added) In summary, therefore, although our client has, as anticipated, succeeded in achieving removal of both of the caveats lodged by the trustees in bankruptcy, there remain unresolved issues arising out of the untimely bankruptcies of Mr & Mrs Andony. Those issues involve an attack on the ownership of Devere. In the circumstances, it is our view that it is not appropriate to expend any more time, effort and money on any proposed resolution of the issues between Topfox and your clients by means of a settlement involving Devere and its land until such time as we have had an opportunity to thoroughly examine all of the issues now thrown up by the trustees in bankruptcy and have reached an opinion as to the prospects of their latest claims being defeated. Clearly unless we can establish that Devere, under the control and ultimate ownership of the Fazios, is free to arrange its affairs as it sees fit without the threat of a challenge initiated by the trustees of the bankrupt estates of former shareholders, there is little point in proceeding further. (emphasis added) We will now devote our attention to examining the complex factual and legal issues raised by the trustees and will advise you once we have reached a concluded opinion on the matter and/or some resolution of the trustees' claims is achieved. It is unfortunate that the intervention of the trustees has had the effect of derailing, at least for the time being, settlement of the disputes between our respective clients. Escalation of the bankruptcy issues beyond the question of the improperly lodged first caveat was not anticipated. … 201 Mr Naude says that if he had seen the 9 January 2007 letter prior to 3 July 2007, Castleworld would not have proceeded to settle the purchase of the Dongara Land. Castleworld had been making inquiries since 2005 but did not 'agree to buy' the Dongara Land earlier than late January 2007 because Mr Naude knew that it was subject to claims by the Trustees. It was in late January 2007 that Mr Fazio told him at a meeting at Ord Street that both of the caveats that had been lodged by the applicants on the Dongara Land title had been removed and that Mr Fazio was now free to deal with the title. He said that Devere would sell the Dongara Land for $1.6 million subject to Castleworld bearing the responsibility of providing the 14 lots to the Topfox investors. Agreement in those terms was reached subject to Castleworld obtaining finance and preparing the necessary contract. 202 Mr Naude accepts that in the updated Asset and Liability Statement which he provided to Investec at the request of Mr Ian Hamer, he referred to the Dongara Land as having a value of $6 million. He did so, he says, based on the valuation provided by Colliers. Ultimately, however, Mr Hamer told him that Investec did not accept the Colliers' valuation and was not prepared to lend more than the purchase price of $1.6 million. 203 In the Sale of Land Agreement which he prepared himself, special condition 1.4 required Castleworld to take on the responsibilities of Devere in resolving the dispute in the Kevill Litigation but Castleworld has never been asked to comply with any obligation under cl 1.4. (Mr Naude considered that it required him to deliver 14 lots to the 14 investors making claims against Topfox in the Kevill Litigation). 204 At about this time, in June 2007, another curious document was created in Mr Naude's office. A trainee project manager prepared a report in relation to the Dongara Land referring to an offer of $4.6 million for the land. No such offer exists. The report was not put to any use. 205 Mr Naude's position is that being aware that the caveats had been removed, he understood that any underlying claim initially supporting the lodging of the caveats had also been resolved. He says that he assumed that the applicants had no further claims in the Dongara Land and that Devere was free to deal with the land. 206 He denies secretly proceeding swiftly with the acquisition of the Dongara Land when the earlier caveats were removed. He says he was of the opinion that any underlying claims had also been resolved. 207 Mr Naude also denies attempting to influence Colliers in any respect in relation to the valuation provided. He denies telling Mr Hamer or Mr Carey that Castleworld had obtained substantial interest in parts of the Dongara Land from potential purchasers, let alone saying that there had been offers ranging from $17 million to $23 million. 208 On or about 17 June 2007, Investec informed Castleworld that it was prepared to offer a loan facility in the amount of $2,238,247 to acquire the Dongara Land. After Colliers produced the valuation report for the Dongara Land dated 25 June 2007 addressed to Investec, Investec offered financial accommodation to Castleworld by letter dated 26 June 2007 in the amount of $1,820,193 and a $2,500 GST facility. 209 Castleworld accepted the offer from Investec and on 2 July 2007, Investec advanced to Castleworld $1,606,699.75. The following day, on 3 July 2007, Castleworld became the registered proprietor of the whole of the Dongara Land. 210 Mr Naude (independently of Mr Fazio in his affidavit) explains that at the settlement of the purchase of the Dongara Land, Castleworld, at the direction of Devere, paid $715,314.92 of the $1.6 million provided by Investec to Packham. 211 Mr Naude confirmed that from an early stage Mr Fazio had explained to him that the Trustees were pursuing a claim in relation to the Dongara Land but at those early stages he did not have any knowledge of the detail of that claim. 212 He was also aware that there was another difficulty facing Mr Fazio in relation to investors who required 14 lots to be subdivided from one of the Superlots. Mr Fazio had explained to him that he was having an argument with them and that they had lost their deposits which had been paid with respect to development of the land. Mr Fazio had told him that Mr Greenwood had 'absconded with the deposit money'. However, none of this put him off pursuing investigations about buying an interest in the land. He understood that Mr Fazio needed time to sort out his position with the Trustees in bankruptcy and the investors and as a consequence of doing that, would be in a position to have the caveats removed. This would enable his purchase of the Dongara Land. 213 Generally speaking, Mr Naude was defensive and at times evasive in cross‑examination. I took into account the possibility that such a reaction can sometimes be induced by justifiable indignation about the nature of accusations which are raised. However, I concluded there was additional objective material which would support the basis and appropriateness of some of the assertions being raised. The following is an example of the argumentative demeanour he adopted at times in his evidence: What this letter reflects is the true position at the time that you and Mr Fazio had agreed between you that the special purpose vehicle was now to be Devere? Complete rubbish. That's nonsense. You're making quantum leaps there. I hadn't even got to the first base of that and I would never buy - no prudent property developer would buy into a company that's been engaged in litigation prior to getting an audited statement from a - that it's a "cleansed company", a "clean skin" I think is the term they use, … 214 The chain of documents in which fanciful valuations of the Dongara Land presented for the purposes of obtaining finance, revealed more than mere optimism as to the value. I find that at the very least, Mr Naude was content that such values which he knew to be artificial and inflated might play a positive role in suitable finance being provided to Castleworld promptly after it was sought. 215 I will deal further (in the Analysis below) with the extent to which the applicants' case is supported by these features of Mr Naude's evidence.

THE DONGARA LAND AND ITS VALUATION 216 As mentioned at the outset, a central issue in this case was the value of the Dongara Land and whether it passed hands below market value. The Dongara Land is a 142.2 hectare, coastal site north of Dongara in Western Australia. It has never been developed but is zoned 'Tourism-Special Use'. On the applicants' case, it has potential for development as a tourist centre/beach resort. The respondents argue that virtually no premium should be attributed to the market value of the Dongara Land on account of its zoning. As will be seen, I consider that answer lies between these positions but much closer to the position taken for and by the respondents. 217 For reasons which I will develop below, it appeared to me that counsel for Devere and Packham made significant inroads into the expert evidence for the applicants as to the value of the Dongara Land. I concluded that the Dongara Land was substantially less valuable than suggested by Mr Elliott. 218 Three licensed valuers gave evidence at trial. Mr Elliott was called by the applicants. Mr Wade Kalajzich was called for Devere and Packham and Mr David Moore was called for Castleworld. Generally speaking, the approach taken by each of them to the valuation of the Dongara Land was that it was to be on the basis of comparable sales.

Methodology 219 In Commonwealth v Milledge (1953) 90 CLR 157 (at 162), Dixon CJ and Kitto J said that the judicial task in arriving at a valuation is a 'jury question' in the sense that it would be decided: ... not by a strict adherence to precise arithmetical calculations, but by a commonsense endeavour, after consideration of all the material before the Court, to fix a sum satisfactory to the mind of the Court as representing the value contained in the land [on the date for valuation]. ... The problem was not to eliminate the idiosyncrasies of the individual [valuers'] opinions; it was to form an estimate which really satisfied his Honour's mind as being the value of the property to the plaintiff on the material date. 220 In Tyler v Thomas (2006) 150 FCR 357, Branson J (at [52] - [56] with the agreement of Bennett J (at [107]) said that a court is not obliged to accept the evidence of a particular valuer, even in a case where only one expert opinion as to value is adduced. Her Honour said that, in making adjustments to a valuation, the Court must find support for the adjustment in the evidence, applying proper principles and must not cast itself in the role of an additional expert. Her Honour referred to Pullen J's remarks in Arcus Shopfitters Pty Ltd v Planning Commission (WA) (2002) 125 LGERA 180 (at [76]). 221 The comparable sales method of valuation is a traditional and unexceptional method (Maurici v Chief Commissioner of State Revenue (2003) 212 CLR 111 (at [19])). Valuation is an art not a science. The formation of an opinion on value has been likened to the exercise of judicial discretion. 'There is scope for legitimate variations in approach and method and it is inappropriate to formulate rigid rules as to what is required': Western Australian Planning Commission v Arcus Shopfitters Pty Ltd [2003] WASCA 295 per McLure JA (at [51]). 222 For comparable sales to have benefit they must be sufficient in volume to justify their adoption for valuation purposes. What is sufficient in volume may vary from case to case: Western Australian Planning Commission v Arcus Shopfitters (at [51]). 223 The Bankruptcy Act is concerned with market value at the time of the transaction (s 120(7)(c)) rather than true value in the light of subsequent events. The distinction was evident in HTW Valuers (Central QLD) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 where the High Court noted (at [46]) that a value calculated upon what willing but not anxious buyers and sellers would agree on, without taking account of subsequent events, may correspond with market value; but they do not necessarily correspond with true value because the market can operate under some material mistakes. In particular, some material factor may not be apparent to it. 224 The 1996 amendments replaced the notion of 'valuable consideration' in s 120 with that of 'market value' consideration. Section 120 in its current form is intended to make it easier for the trustee to succeed: Sellers v One Step Plumbing and Concrete Pty Ltd (2002) 190 ALR 716 at [98]. The focus is shifted from the motive for the transaction to whether or not full market value consideration has been given: Clout v Markwell [2001] QSC 091 at [24]. 225 In Anscor Pty Ltd v Clout (2004) 135 FCR 469 (at [66]), Lindgren J said: … s 120(1)(b) of the Act requires the Court to consider the "value" of the consideration given for the transferred property. That is something to be determined on an objective basis: see Sutherland v Brien (1999) 149 FLR 321 at 332. Undoubtedly, it is necessary to have regard to surrounding circumstances, but, as Sutherland v Brien makes clear, the value of the consideration is not to be determined by the special needs of the debtor/bankrupt or the special value he or she places on it. If recovery could be defeated by exigencies personal to the debtor/bankrupt, the policy underlying s 120 would be seriously compromised. 226 In the present situation, no directly comparable sales evidence is available, as acknowledged by all valuers who gave evidence. However, the debate which emerged in the course of the valuation evidence was whether Mr Elliott had relied upon sales of land that were in any sense comparable to the Dongara Land. I will examine this more closely but the applicants' response to the complaint of the respondents is that they have overreacted to the sales which are not directly comparable because while Mr Elliott did refer to some quite comparable sales, he referred to others on an illustrative basis, those being sales which were self-evidently of limited comparability but provided some indication of market activity for tourist developments. 227 A central issue of debate was the premium that Mr Elliott applied for the Special Use zoning for the Dongara Land. On any view, Mr Elliott's premium was significant. His reasoning was that there was demonstrated support and demand for coastal tourist developments evident in other parts of Western Australia. Some of those developments attracted values up to $40,000 per hectare but Mr Elliott acknowledged that the locations in which such developments were found were very different from the location of the Dongara Land. Greater expected infrastructure and servicing costs would apply for the Dongara Land. A real question is whether Mr Elliott adequately explained the increase in value he ascribed to the Dongara Land from 2001 to 2002.

Mr Bracewell 228 The earliest relevant contemporaneous report was by Mr Bracewell. It was prepared on 28 September 2000 and valued the Dongara Land at $710,000. (He did not give evidence and reference to the content is for comparison purposes only). That Report recorded discussions with the Shire of Irwin and the Shire of Greenough and indicated that it had become extremely difficult to obtain a rezoning for tourist use mainly due to the planning requirements of the WAPC, the EPA and other authorities involved in beachfront development. It recorded that the coastal sand dunes were increasingly being considered a heritage location, placing some premium on the subject property and that it had a 'tourist' zoning in place. The Report recorded that all that was required to reactivate the former subdivisional approval to re-subdivide the land into six lots was to reapply to the Shire of Irwin and the WAPC for a fresh approval. New conditions may be required. Mr Bracewell found that recent sales indicated rates of $2,623 and $3,000 per hectare for larger sites. Mr Bracewell adopted a rate of $5,000 per hectare.

Mr Elliott 229 In his 2002 report for the Dongara Land on instructions from Mr Andony and Devere, by way of preface, Mr Elliott recorded that the Dongara Land had undergone an extensive and costly involvement through State Planning process since 1989 saying: The land now enjoys a coveted zoning status of Special Use, Tourism and Recreation within an absolute coastal and beachfront environment where similar approvals continue to be more difficult to obtain due to the ever increasing constraints imposed by all of the various Local and Government Authorities in WA. 230 As at 12 March 2002, Mr Elliott recorded a valuation for the Dongara Land of $1,425,000. Despite the fact that his approach was, in substance, very similar to that recorded by Mr Bracewell, Mr Elliott's valuation was double that fixed by Mr Bracewell the year before. 231 Mr Elliott compared 12 other properties and noted that concerns as to future development had been professionally assessed by engineers and architects. He noted that the average values evident on sales between Dongara and Geraldton were between $2,500 per hectare and $5,000 per hectare depending somewhat on the scale of relativity, all of which fall within a category of zoning of general farming only. He also noted that similar category proposed developments in the southwest of Western Australia disclosed much higher rates and yields and in some cases up to $40,000 per hectare. He reached the conclusion that as against the average value of the properties he assessed, rather than the average value being from $2,500 to $5,000 per hectare the value per hectare for the Dongara Land was $10,000 per hectare by reason of its zoning. Very little other explanation was provided to explain an increase of twice to four times as much simply because of the Special Zoning characteristic. 232 In contrast, Mr Kalajzich did specify the need to take into account the differences in the choice of properties as to the date of sale or the size of the properties. Mr Kalajzich applied multipliers to take into account those differences given that there was a paucity of sales which were in any sense comparable. Mr Kalajzich, at least in my assessment, did apply a relatively reasoned and balanced approach to the comparisons. This approach was more reliable than Mr Elliott's evidence which at times relied on anecdotes and hearsay and on offers that were not accepted or expressions of interest or on sales that had fallen through. 233 Mr Elliott, of course, was not fully independent as an expert in the sense only that his valuations had also been sought and obtained by the then owners at the times of the events which are the subject of challenge by the applicants. Having reached those values and expressed those values for the Dongara Land at the time of the events, it was relatively improbable that he would depart from those views at the time of giving evidence. He was in a position where he was less able to give a detached clinical and objective analysis. 234 I accept the submission for Devere and Packham that in contrast to that approach, Mr Kalajzich and Mr Moore did approach their task on the basis of no previous history and no obligation other than to bring to bear their independence and provide the reports for the purpose of the proceeding. 235 I have already referred to the valuation given by Mr Elliott of the property as at March 2002, which was $1,425,000 as compared with the Bracewell valuation at late September 2000 of half that and Mr Elliott's own retrospective valuation at slightly less than a year before in April 2001 at $725,000. This is an increase of almost 100% in an eleven month period. Nothing contained in his report adequately explains that very substantial increase in value in land remotely located and with no indicated development prospects of any substance. 236 In contrast with that 2002 valuation, Mr Elliott's valuation at April 2001 of $725,000 (whilst slightly higher), is much closer to the valuations of Mr Kalajzich at $600,000 and Mr Moore at $425,000. 237 The next difficulty is that the subsequent valuations of Mr Elliott repeated the unexplained substantial increase in 2002. The subsequent valuations adopted at later dates embraced a revision of the uplift that he had originally provided and which was inherent in the March 2002 valuation. 238 On his evidence, this uplift or premium relies almost entirely on the zoning. Mr Kalajzich and Mr Moore deny that there was a basis to provide an uplift in the valuation based on the rezoning of lot 2 that occurred in 1989. Although Mr Elliott increased the dollar per hectare rate from 2001, (without express explanation) by a factor of 66 to 100% for the Dongara Land, as April or May 2001, there was still no subdivisional approval. This approval in fact was not forthcoming until orders were made by the Town Planning Appeal Tribunal on 2 July 2001. 239 Be that as it may, I could not discard altogether a relatively imminent event given that the orders were made by the Tribunal shortly after the dates at which the 2001 valuation was fixed. Nevertheless, it remained the case that there was no development application, let alone an approval for any development that might have been contemplated on the subject property. Indeed, I find that there was no proven realistic prospect whatsoever, while the land was held by any of the parties to this proceeding, of development of a multi-million dollar resort occurring. Development of a resort was something of an aspiration or a dream. It was necessary to consider a use of that nature because it was not open to subdivide the property for the purpose of residential development. (A further rezoning in order for that use to be permitted would be required because the Dongara Land is within a Town Planning policy area known as 'E' and has a coastal frontage. It was rezoned in 1989 and became a Special Use 1 under the Shire of Irwin Town Planning Scheme No 4. The effect of that rezoning had the result that residential use was not one of the permitted uses. It would require a change to the Scheme or a rezoning to occur before residential usage could be permitted). 240 As discussed by Mr Kalajzich in his first report, in order for land in Policy Area E to progress rural small holding development it requires, in effect, a large scale tourist development. If there were a large scale tourist development then there is already provision within the Scheme that would permit the further subdivision of land which formed part of or was adjacent to and was therefore an incident of the tourist development. 241 I prefer the evidence of M Kalajzich to that of Mr Elliott who significantly increased the value of the land by reason only of its zoning. Mr Kalajzich, however, recognised that the development potential of the Dongara Land was no greater than the development potential of any other property in the Policy Area E or perhaps even less due to the absence of any capacity to proceed with residential subdivision. Any of the land in Policy Area E had the potential for tourist development. 242 In the report prepared by Mr Elliott of 31 October 2006 for Statewest he valued the Dongara Land at $2,850,000. By way of sales evidence, he drew on the sales of numerous properties both nearby and at considerable distance away. Mr Elliott conducted an exercise of tabling all of the properties chosen (some 12 properties). By deleting the lowest and highest rates per hectare, an average rate was produced of approximately $19,505 per hectare which suggested to him that the value for the Dongara Land was $2,775,000 rounded up to $2,850,000. While Mr Elliott did not initially concede that the properties chosen were not relevant for the purpose of comparison, when taken to the properties one by one he did accept the limited reliance that could be placed on the particular properties chosen. For example, he introduced residential land. It was difficult to see how this could be comparable for the purpose of the exercise of valuing land zoned general farming or in the case of lot 2, zoned Special Use category 1. 243 On 30 June 2007, Mr Elliott produced a 'Revision and Valuation Report' of the Dongara Land as at April 2001 and April-June 2003. As noted above, for the April 2001 value he concluded that the Dongara Land was worth $725,000. As at April-June 2003, he expressed the view that the Dongara Land was worth $1,500,000 and at May-June 2007, he expressed the view the land was worth $3,200,000. 244 For the period of April-June 2003, Mr Elliott drew on several sales of interest in other areas of coastal Western Australia which clearly illustrated 'significant upper category increases in values where potential development or rezoning for subdivision was evident'. He relied on three categories of property comparisons for that purpose acknowledging expressly that directly comparable sales remained limited around the same immediate location and time sector and observing 'clearly, the illustrations vary significantly due to widely varying locations and other characteristics involved'. 245 For the period of June 2007, he drew on seven sales which were all situated north of Geraldton and therefore a substantial distance from the Dongara Land and he then drew on seven properties south of Geraldton including one sale which was at the head of his list and in respect of which by using it as a comparator, he adopted a 50% premium for the 'Special Use Zoning' of the Dongara Land to increase its value. The 14 sales of land actually in and around Geraldton in the preceding 12 to 24 months disclosed and average rate per hectare of $166,398. 246 The properties on which Mr Elliott drew his comparisons for what he described as the 'old school' method bore such little resemblance to the Dongara Land that the utility of those comparisons was extremely limited. 247 In contrast, Mr Kalajzich was not criticised in relation to those properties he chose to include in his report by way of comparison. The main criticism levelled at Mr Kalajzich was that the mathematical model that he employed to test comparability was imperfect.

Mr Kalajzich 248 The position taken by the valuer for Devere and Packham, Mr Kalajzich, was similar in principle but modified by an adjustment. Thus his approach differed from that of Mr Elliott and also from that of Mr Moore, the valuer called by Castleworld. 249 Mr Kalajzich made use of comparable sales evidence to derive a number of 'multipliers' to adjust the value of the Dongara Land for size, capital growth and zoning against the handful of 'most' comparable sales. 250 Mr Kalajzich explained his use of multipliers in this way: Due to the paucity of directly comparable sales evidence over the period of the valuation, 2000 to 2007, and also because of the disparity of comparable sale prices my analysis is, in the first instance, of a statistical approach. Where possible I have analysed and compared sales to calculate; - percentage changes in value (growth rate) - the premium applicable to land of different zoning types - the adjustment required to compare land of different sizes (but being otherwise comparable) In all instances the calculation methods have been explained and tested for validity, within the confines of the available data. The calculations are transparent so as to be open to scrutiny. All adjustments have been applied to sales in a uniform manner so as to avoid the outcomes of same being manipulated to 'fit' a predetermined or desired answer. It is to be noted that not all of the listed sales have been used in arriving at the subject's value. Some of the sales share little if none of the subject's features or attributes. Never the less these 'non-comparable' sales are of significance to my assessment. Without them, calculating growth rates, zoning and scale multipliers would have been more difficult and the results less reliable. As a result of same, following the calculation the relevant rates and multipliers and a comprehensive description of each of the sales the valuation conclusions are based on a small number of the most comparable sales.

After examining the data, Mr Kalajzich summarised his findings thus:

SUMMARY OF ADJUSTMENTS - CAPITAL GROWTH, ZONING AND SCALE Growth The analysed sales indicate an average 'straight line' rate of growth for the region of 21.9% per annum. The rate is an average of the individual rates listed. (Appendix 8 includes a table of all sales analysed and rates calculated). The rate in valuation one was 17.0%. I have included 6 additional transaction comparisons in this valuation. Having regard to the size of the sample 'population' the correlation in the rates appears to confirm my earlier analysis within an acceptable degree of error. A review of the growth rates and sale dates reveals that there has been a much steeper rate of growth within the 2004 to 2009 period then (sic-than) the preceding 1999 to 2003 period. In addition to the straight line growth rate I have also calculated the average compound rate, based on the same sales. The average compound rate is 15.9% per annum. In valuation two some sales have been adjusted (discounted). This has been necessary due to the lack of sales at or around the respective dates. In these calculations the compound rate of 15.9% is used to calculate present values. Note: the rate of growth is derived from a mathematical calculation. It does not reflect or have regard to 'good' or 'bad' buying or transactions that fall outside of the definition of market value. Zoning The analysed sales indicate an average applicable zoning multiplier for the region of 1.9 based on all available comparable sales. The rate is an average of the individual multipliers. The rate in valuation one was 2, excluding the 2 additional transaction comparisons in this valuation. Having regard to the size of the sample 'population' the correlation in the rates appears to confirm my earlier analysis within an acceptable degree of error. Accordingly I have adopted an unchanged zoning multiplier of 2. Note: the zoning multiplier is derived from a mathematical calculation. I does not reflect or have regard to 'good' or 'bad' buying or transactions that fall outside of the definition of market value. Scale This is the most problematic of the multipliers. This is because of the very limited amount of available evidence. It is accepted without question, that on a like for like basis, real property demonstrates a diminishing value, per square metre, (or other pro rata measure), as the scale of the property increases. Therefore there is a demonstrable inverse relationship between price (per square metre) and size (square metre), or other unit of comparison. The scale multiplier is an extrapolation of the relationship established by the 3 most comparable examples. Comment It is acknowledged that, upon analysis, some sales will not conform to the adopted multipliers. Application of same may result in an erroneous indicated subject value. Testing of the zoning multiplier against sale 7B and sale 21 confirms same. In all instances multipliers are based on 'the weight of evidence' and not on selective statistics. Accordingly, multipliers used in adjusting sales to arrive at the subject's value are valid, unless based on sales that do not conform to the market (as per available sales and evidence) at the date of the respective sale. 251 Then, (as an example only) of the process undertaken by Mr Kalajzich on the first available comparator, he deals with it as follows: Sale 1A 31567 (Lot 2316) Brand Highway, Bookara, Irwin 1839 I SW & SE Sale Date August 2000 Sale Price $425,000 exclusive of GST - reported to be sale under duress Site Area 40.4686 hectares Improvements 1998 170 sqm General purpose agricultural shed and 20,000 gallon rain water tank (central moiety), 1998 kit style 4 bed 2 batt dwelling with 160 sqm deck and 5,000 gallon rain water tank (western moiety). Connected to mains power and telephone. Added value $130,000 Zoning General Farming Policy Area 'E' Location One lot North of Seven Mile Beach Road Coastal Frontage & Access Southwest corner and portion of Southern boundary meet reserve. Beach access over same. Western frontage 445 metres. Access to Property Right of Way along northern boundary of 316 Brand Highway. Unsealed sand track Land value X improvements Englobo $300,000 / $7,413 per hectare.

Description Regular rectangular lot, Heavily undulating, no arable land, water course and small mildly undulating section over south-eastern moiety (~10%). Land is predominantly stable but with small to medium blowout on north west corner. Good unimpeded beach access and views from dwelling. Good quality sand beach. Comparative Comments 3.5 times smaller than subject. Comparable zoning. Comparable beach access and utility. Superior road access (Brand Highway). Closer to Dongara town site. Indicates a subject land value of August 2000 - $686,258 Adjustment for scale 0.65 (subject 3.5 fold larger) equating to subject rate $4820/ha 252 Mr Kalajzich was criticised for this multiplier method as being too scientific. It was said that the multiplier method ignores the fundamental principle that valuation is an art not a science and that the formation of an opinion as to a value has a discretionary aspect. Further, it was suggested that multipliers were applied in a way that averages or standardises data and ignores the reality of a dynamic market. Thus, an average growth multiplier arrived over a period of say five or more years would ignore movements up and down or at varying rates in market activity which actually occur within that period. Accordingly, it was suggested than an average scale multiplier will not identify whether the value of land of a certain size is affected at certain points in time by development potential, location and the like. Similarly, it was argued, an average zoning multiplier does not account for differing levels of demand at different points in time for land of particular character or type of development potential. Because it depended on applying multipliers to the limited number of directly or most comparable sales of this subject land, a sample would usually not remain in these circumstances representative and sufficient in volume. While this complaint certainly has some logical validity, in circumstances where there are minimal comparable sales, the multiplier method is at least a valid attempt to rationalise the applicability of movements over an admittedly longer period to the value of the land at any given time. Mr Kalajzich was the first to concede that the multiplier method was not perfect by any means but it was an attempt to be more realistic about the likely value having regard to market movements as qualified by those multipliers. 253 Although the applicants were very critical of this approach, I was more impressed with the methodology and independence of Mr Kalajzich as an expert witness than I was of Mr Elliott. 254 Mr Kalajzich in cross-examination accepted that there were limitations to his approach. He was not critical of the approach taken by Mr Elliott but readily conceded the limitations that all valuers faced in relying upon comparable sales in circumstances where such sales simply had not occurred. Nevertheless, the approach that he took was to seek to verify his impression of the value of the land and the relevance of the data he took into account rather than to draw on the broad range of at least partially irrelevant sales examined by Mr Elliott. 255 In short, Mr Kalajzich did not purport to assert that the multiplier method produced a precisely correct outcome. It was simply a means by which he analysed comparable sales in order to reach a conclusion. 256 The applicants also criticise Mr Kalajzich for misunderstanding the hierarchy of applicable planning policies and seeking to treat land within the overarching 'Policy Area E' of the Local Planning Strategy as land 'zoned' for a particular permitted use. It was said that this error infected the entirety of Mr Kalajzich's analysis as to the relevance to value of the zoning and planning context of the land. It was not clear from the cross-examination or from the closing submissions as to how and the extent to which such an error, if it was an error, infected the entirety of Mr Kalajzich's analysis. It appears to me that it would work more in favour of increasing the value of the land rather than decreasing it. As such, if there were any error, it would be an error in favour of the applicants. The better view, as a matter of reality, is that zoning at the relevant transfer dates was not a particularly significant factor warranting a substantial premium being applied to the value of the Dongara Land.

Mr Moore 257 In relation to Mr Moore, while the applicants accept that his general approach and methodology was similar to that adopted by Mr Elliott, the critical differences were Mr Moore's treatment of the 'Special Use' zoning of the Dongara Land and his assessment of the market activity prevailing at the time. 258 The applicants contend that there is added value in Mr Elliott's valuation because he valued the property at July 2007 contemporaneously whereas Mr Moore's valuation was retrospective over two years later. It is said that there is a greater degree of subjectivity and possible 'margin of error' in a retrospective valuation. There is, at least at a theoretical level, merit in this contention. The Bankruptcy Act does focus on market value at the time of the transaction. 'True' value as evidenced by and assessed by events as they unfold, is not the criterion. So, to say, for example, that lack of demand for the property is demonstrated by the fact that there is still no interest in it is not proof of the level of interest the market held in the property at the date of the transaction. 259 More to the point was the difference in the views of Mr Moore and Mr Elliott as to whether the market was particularly strong in 2007. Mr Moore considered that the property 'boon' in Western Australia from about 2004 had effectively ended by July 2007. The applicants rely upon the fact that Mr Moore was not working in the Midwest region at the time of the valuation, as Mr Elliott was in the capacity of a real estate agent as well as a valuer. They argue that Mr Elliott was particularly well positioned to make the assessment. 260 The applicants complain that Mr Moore was aware of the sale from Devere to Castleworld (for $1.6 million in July 2007) whereas Mr Elliott prepared his valuation without regard to that sale as he was unaware of it at the time. Again, I think there is limited value in this point. Given the level of analysis in his report, there is no foundation for concluding that Mr Moore arrived at his value of the property only on the basis of the actual transaction which is now the subject of scrutiny. 261 One of the most contentious differences between Mr Elliott and Mr Moore is the question of whether there should be a premium attributed to the Special Use zoning. I lean towards the evidence of Mr Moore who considered that if, and the extent to which, any premium should be attributed to that zoning was highly subjective and that there should be no premium attached. (I nevertheless consider that some modest premium would attach). It is true that Mr Moore placed reliance upon the lengthy period of time that the land had remained undeveloped despite its zoning but the applicants fairly, I think, complain that it is wrong to take this into account without understanding the underlying reasons such as the financial capacity of the owners and the ongoing disputes. Nevertheless, I was more impressed with the approach of Mr Moore on this topic. If the land had the value attributed to it by Mr Elliott, it is more likely, at any time up to the impugned Castleworld transaction, that solutions would have been found to resolve the disputation which has occurred. 262 Mr Moore took the view that while areas such as Dongara and Geraldton had potential for tourist development, the Dongara Land located between the two of those places, about half way, did not. He is criticised by the applicants for lack of substantiation for that viewpoint and, it is said, that his approach is unduly negative or conservative especially against the background of the evidence referred to of the attempts made by Mr Fazio and Mr Naude to persuade Investec to lend funds for development of the purchase of the land. This proves only that Mr Fazio and Mr Naude may (I stress 'may') have considered the land to have particular value. When I have the advantage of considering independent expert evidence that is the evidence I will prefer.

CONCLUSION ON VALUE OF DONGARA LAND 263 I have already indicated that I preferred the approach of Mr Kalajzich of employing a scientific model to collect sales which were comparable in many respects but differed in others, for example, the time of sale, size of the property and the zoning. I consider that Mr Kalajzich correctly accepted that the approach he took was subject to statistical error and was a best endeavours approach in the circumstances, but that limitation on the approach taken was significantly less objectionable than relying upon those sales which Mr Elliott chose to include in his comparisons. 264 The contention for Devere and Packham is that the valuation of Mr Elliott starting with 2002 and all subsequent valuations which build on the 2002 valuation being so far out of kilter and unsupported in principle should be discarded with the result that the true value of the Dongara Land as at April 2001 was no more than $600,000 and at April 2003, no more than $800,000. I accept this submission as at both of those dates. 265 As at the period of April 2001, Mr Moore for Castleworld valued the Dongara Land at $425,000, Mr Kalajzich for Devere and Packham valued it at $600,000 and Mr Elliott valued it at $725,000. Mr Moore was unaware there was a development approval for the land and although he considered the approval did not affect the value of the Dongara Land and there was no basis to value the land higher than comparable land zone General Farming, in my view, his estimated value was a little conservative. 266 Mr Moore took the view that to value the land because of its Special Use zoning would required a feasibility study but because there was no study and no available information to enable a study to be prepared, it was inappropriate to attempt to value the land other than by direct comparable sales. 267 The difficulty, however, is in the lack of comparable sales. It seems to me that some value must be given for the development approval but I do not accept that the value is as high as that adopted by Mr Elliott. 268 Mr Kalajzich in fixing the value at $600,000 took the view that the Special Use zoning was to be comparable if not inferior in comparison with the land zoned Farming within the Shire of Irwin Policy Area E. That reasoning has been explained above. He valued the Dongara Land by comparable sales adjusted by premiums for zoning, scale and capital growth at 16.8% per annum. He acknowledged that there was very limited number of 'off-coastal' lots within Policy Area E and that scale was the most problematic of the multipliers he adopted. In my view there is a higher degree of subjectivity in his valuation than that of Mr Elliott but it is, nevertheless, justified by reference to analysis. 269 The April 2001 Report of Mr Elliott fixing a value of $725,000 for the Dongara Land, in my assessment, was in essence simply an adoption of the Bracewell Report. The terminology in Mr Elliott's Report actually adopted a cut and paste exercise of parts of the Bracewell Report. Sales evidence at 8.a.1-12 was extracted word for word from the Bracewell Report. The Bracewell Report, of course, not having been tested in cross-examination has limited value. Mr Bracewell looked at comparable sales analysing the Dongara Land to be worth $2,623 to $3,000 per hectare and then increased the value of the Dongara Land to $5,000 per hectare to reach a conclusion that it was worth $710,000. This itself was a premium of 67% to 91%. That valuation was carried out in September 2000. Mr Elliott's valuation in respect of April 2001 to which a further $15,000 was added, does not identify an adequate basis for the premium in my view. 270 I accept the evidence of Mr Kalajzich and most of his reasoning. 271 I conclude that the value of the Dongara Land as at April 2001 was $600,000. That figure, in my assessment, does include a modest premium for its special zoning. 272 As at 2007, Mr Moore concluded that the value of the Dongara Land was $1,550,000 on a basis similar to that explained in relation to his first report addressing the 2001 value. 273 Mr Kalajzich reached a very similar figure concluding that the value of the Dongara Land between 30 May 2007 and 20 July 2007 was $1,600,000. This was an increase in value of $1 million or 266% over six years, an average of 44% each year. 274 By this time, Mr Kalajzich was able to refer to more comparable sales to prepare the report and apply to capital growth at 15.9% per annum. He provided a table of calculations referring to eight comparable properties and valuations at nine dates adjusting them for scale and capital growth. No adjustment for the zoning multiplier was applied or, in the view of Mr Kalajzich, justified. The eight comparable properties which he selected were not criticised in cross-examination. Both Mr Kalajzich and Mr Moore were unwilling to apply a percentage based premium to the value of the Dongara Land in the absence of a calculation as to the viability of a development. 275 Mr Elliott, however, was of the view that the value of the Dongara Land at 30 June 2007 was $3,200,000. I have previously commented on the fact that this valuation depends in turn on the earlier valuations and, in my view, cannot be sustained. It is clear that Mr Elliott relies on the Bracewell Report and on his own reports of March 2002 and October 2006. He acknowledged that there was little or no further useful sales evidence and that the sales examples relied on were mainly closer to the City of Geraldton. The value per hectare of $22,500 was arrived at by attributing a significant value for premium for the Special Use zoning. Mr Elliott was in a difficult position because he had already concluded on 31 October 2006 that the value was $2,850,000. But there is nothing in that report to explain the premium attached to the Special Use zoning. There was no suggestion as to how the premium should be calculated and Mr Elliott, as with the other valuers, conceded that it was not possible to do a hypothetical development analysis. 276 I accept the submission of Castleworld that the methodology adopted by Mr Elliott has been ambulatory including: · use of the hearsay report by Bracewell as a base value; · comparable sales with a premium; · non-comparable sales with no premium; · percentage increases with no premium; · where premiums have been expressly or by implication applied, using different percentages. 277 The approach taken by Messrs Moore and Kalajzich, in my view, was more consistent and supported by transparent analysis. Nevertheless, it seems to me that some modest premium must be given for the slight advantage gained in obtaining the zoning. The valuation of Mr Kalajzich goes close to fixing a value which I would adopt for that purpose but I consider that it is slightly conservative. Applying a modest premium (which is substantially less than the supposed unverified costs of attaining the zoning), I conclude that the value of the Dongara Land as at June 2007 was $1.9 million. 278 I reach these conclusions, needless to say, based only on the evidence adduced in the hearing and, as is also evident particularly in relation to the 2007 valuation, by concluding that I am not bound to accept the figures struck by any of the valuers but can arrive at a different figure adequately explained by reference to the evidence.

VALUATION OF THE UNIT 279 This topic appeared to be relatively uncontentious. Evidence was given by both Mr Tony Gorman for Devere and Packham and by Mr Moore for Castleworld valuing the Unit at 2/8 Strang Street, Fremantle, occasionally referred to as Beaconsfield, as at April/May 2001. Their reports were not challenged. Mr Gorman was not substantively cross-examined and valued the Unit at $152,000 in April 2001 and $161,500 in May 2001. Mr Moore ($160,000) was not cross-examined at all. For my part, I consider the approach taken by each of them to be acceptable and accordingly conclude that the value of the Unit as at April/May 2001 was $160,000.

Mr Morgan 280 Mr Russel Morgan was an accountant called to give expert evidence by Devere and Packham. Mr Morgan prepared a report in which he provided an expert opinion as to: (a) the value of the consideration provided by Devere for the transfer to it of the Andonys' undivided one-third interest in the Dongara Land at 30 April 2001 based on different value scenarios; and (b) the fair market value of the 1,111,113 shares in Devere that were issued to Packham on the same date based on similar different scenarios. 281 In preparation of his report, Mr Morgan worked on the assumption that the fair market value of the Dongara Land at 30 April 2001 was $725,000, that the fair market value of the Andonys' undivided one-third interest in the Land was $241,666.67. The views that Mr Morgan expressed were summarised by him as follows: 1. The value of the consideration provided by Devere to Mr and Mrs Andony for the transfer of their undivided one-third interest in the land In my opinion the value of the consideration provided by Devere to Mr and Mrs Andony under the two perspectives set out in this report, for each of the different assumed values for the Land, is as follows: 1.1 Components of the consideration

For Scenarios 1, 2 and 3 At Valuation At Valuation At Valuation At Valuation $600,000 $700,000 $710,000 $725,000 $ $ $ $ Fair market value of the 1,111,111 shares in Devere at 30 April 2001 after the transfers 300,000 350,000 355,000 362,500 Cash consideration provided by Devere 45,000 45,000 45,000 45,000 Total consideration provided by Devere for the Andonies' (sic) one-third interest in the Land 345,000 395,000 400,000 407,500

There are two additional components for consideration, being the provisions of a loan of $180,000 by Devere to Mr and Mrs Andony and the entering into of the shareholders agreement, however I am unable to quantify a financial value for these components. 1.2 The change in the relevant net assets of Mr and Mrs Andony (where Packham was not entitled to deduct the payments totalling $128,637 made by it on behalf of the Andonies (sic) from the consideration payable by Packham to Devere) Where Packham was not able to deduct the payments totalling $128,637 from the consideration payable by it to Devere for the shares issued by Devere to Packham, in my opinion the change in the fair market value of the net assets of Mr and Mrs Andony before and after the transfers that occurred on 30 April 2001 is: Change in relevant net assets of the Andonies (sic) Assumed fair market value of the Land Scenario 1 Scenario 2 Scenario 3

$600,000 183,635 183,635 180,866 $700,000 133,635 133,635 130,865 $710,000 128,635 128,635 125,865 $725,000 121,135 121,135 118,365

1.3 The change in the relevant net assets of Mr and Mrs Andony (where Packham was entitled to deduct the payments totalling $128,637 made by it on behalf of the Andonies (sic) from the consideration payable by Packham to Devere) Where Packham was able to deduct the payments totalling $128,637 from the consideration payable by it to Devere for the shares issued by Devere to Packham, in my opinion the change in the fair market value of the net assets of Mr and Mrs Andony before and after the transfers that occurred on 30 April 2001 is: Change in relevant net assets of the Andonies (sic) Assumed fair market value of the Land Scenario 1 Scenario 2 Scenario 3

$600,000 54,999 54,999 52,229 $700,000 4,998 4,998 2,228 $710,000 (2) (2) (2,772) $725,000 (7,502) (7,502) (10,272)

2. The fair market value of the 1,111,113 shares in Devere that were issued to Packham, as at 30 April 2001 In my opinion the fair market value of the 1,111,113 shares in Devere issued to Packham for each of the assumed fair market values for the Land, as at 30 April 2001 was: Devere at 30.4.2001 (after the transfers) Shares issued to Packham Land Value Net Tangible Assets No. of Issued Shares Value per share Value of 1,111,113 shares $ $ $ $ 600,000 600,002 2,222,226 0.2700 300,001 700,000 700,002 2,222,226 0.3150 350,001 710,000 710,002 2,222,226 0.3195 355,001 725,000 725,002 2,222,226 0.32625 362,501

3. The fair market value of the 1,111,113 shares in Devere that were issued to Packham, as at 30 November 2001 In my opinion the fair market value of the 1,111,113 shares in Devere issued to Packham, as at 30 November 2001 where the assumed fair market value of the Land at that date was $1,425,000, was: Net Tangible Assets No. of Issued Shares Value of Share Value of 1,111,113 shares $ $ $ 1,425,002 2,222,226 0.64125 712,501

4. Alternative scenarios involving the value of the Unit I have examined several scenarios involving different values for the Unit, the beneficial ownership of which was transferred by Packham to Devere as part of the consideration for the 1,111,113 shares issued by Devere to Packham. Where the value of the unit was nil, $120,000 or $180,000 the net assets of Devere and the Andonies (sic) after the transfers was the same (i.e. unaffected by the different values for the Unit). 5. Alternative scenarios involving entry into the Shareholders Agreement I have considered the alternative scenarios of where the Shareholders Agreement was entered into and where the Shareholders Agreement was not entered into. My opinions on the value of the consideration provided by Devere to Mr and Mrs Andony and the value of the shares in Devere issued to Packham are unaffected by whether the Shareholders Agreement was entered into. 6. Alternative scenarios for calculating the value of the consideration provided by Devere to Mr and Mrs Andony: the Verge Methodology I have examined whether the methodology adopted by Mr Verge at paragraph 22 of his affidavit provides a different methodology for calculating the consideration provided by Devere to Mr and Mrs Andony. In my opinion Mr Verge's methodology is the same as the methodology used in his report for comparing the net assets of Mr and Mrs Andony before and after the transfers. I have noted that it appears that the information available to me for the preparation of this report may have been more detailed than the information available to Mr Verge at the time of the preparation of his calculation.

The operation of s 120 of the Bankruptcy Act 282 It is common ground that s 120(1) of the Bankruptcy Act provides a transfer of property will be void against the trustee in bankruptcy where the transfer took place in the period within five years before the commencement of the bankruptcy and ending on the date of the bankruptcy and the transferee gave no consideration for the transfer or consideration of less value than the market value of the property. In the Explanatory Memorandum to the Bankruptcy Legislation Amendment Bill 1996, paras 23 to 28, the following was said of the amendment effected under s 120: 23 A fundamental feature of the law of bankruptcy is that in certain circumstances, it operates to enable property and money given or transferred by a person who subsequently becomes a bankrupt to be recovered by the bankruptcy trustee, to enable its sale, and the distribution of the proceeds of the sale to the bankrupt's creditors. The current law provides for a period of 'relation back', and makes specific provision in relation to 'settlements' of property (section 120), fraudulent transactions (section 121) and preferential payments or transfers to creditors (section 122). The provisions focus largely on the nature of the transaction being impugned, and the intention of the parties to the transaction. The Bill proposes changes to this area of the law to simplify it, and to change the focus of the provisions away from the intention of the parties to particular transactions, to the nature of the transactions and the likely effect on the creditors. To the extent that a person's intention in dealing with property is relevant, as it will be in relation to proposed section 121, objective criteria are laid down which can be used to draw inferences as to the likely intention of the transferor of property. The Bill also proposes the insertion of a new section under which provisions of trust deeds which provide for some forfeiture or qualification of the interests of a beneficiary in a trust fund in the event that the beneficiary becomes a bankrupt or insolvent will be void against the trustee of the beneficiary's bankrupt or insolvent estate (item 189, proposed section 302B). … 28 The Bill proposes the replacement of section 120 with a much simplified provision, under which a transfer of property by a person who later becomes a bankrupt is void against the trustee if it took place not earlier than 5 years before the commencement of the bankruptcy, and the transferee gave no consideration or consideration less than the market value of the property concerned, as at the time of the transfer. If the transfer took place more than 2 years but not more than 5 years before the commencement of the bankruptcy, the transfer will be valid against the trustee if the recipient of the property proves that the transferor was not 'insolvent' at the time. The term 'insolvent' is proposed to be defined in new subsections 5(2) and 5(3). The new subsections correspond with subsections 95A(1) and (2) of the Corporations Law, which define when a person is insolvent. A person is taken to be insolvent when he or she is not able to pay all of his or her debts when they become due and payable. (emphasis added) 283 The presently relevant feature of importance in relation to s 120(1) of the Bankruptcy Act is that the consideration for the transfer must be consideration in fact given not simply consideration promised, agreed or intended to be given. (emphasis added). 284 For the following reasons the only conclusion open in relation to the transfer of the one‑third interest in the Dongara Land from the Andonys to Devere, was that it was in order to effect a transfer of a 50% interest in the Dongara Land to Packham using Devere as the vehicle. 285 The transfer was effected by a land transfer executed by the Andonys on 11 April 2001. The expressed consideration for that transfer ($45,000) was nominal. It was not in any way referable to the market value of the interest in the Dongara Land. The most conservative expert evidence placed a value on the one-third interest at April/May 2001 of not less than $140,000, that is, one-third of $425,000. That transfer was lodged for registration on 23 May 2001. The Andonys were the only directors and shareholders of Devere at the time. 286 Although there are other surrounding agreements, the suggestion that they evidence a wider transaction cannot be accepted. Neither of the Andonys was in any position to explain how this took place and to explain the role that the surrounding agreements at various dates played. 287 Those surrounding agreements purported to be a loan agreement between Devere and the Andonys recording a borrowing by Devere of $180,000 for five years from Packham and a loan of $180,000 from Devere to the Andonys on the same terms and conditions substantially as the Packham loan. And there is also the Packham loan itself, each of those documents being lodged for stamping on 9 March 2004. There are then two further agreements of an unspecified date in 2001 which were not lodged for stamping until 9 March 2004. 288 Those agreements were signed by the Andonys and apparently signed by the Fazios. Mr Fazio was not called to give evidence and the Andonys did not have the capacity to explain these relatively complex commercial transactions or their context. 289 The solicitors who drew the documents for Mr Fazio, Devere and Packham may have been able to clarify the position but none of them was called to give evidence. 290 Without intending to suggest that the Andonys' evidence in relation to these agreements was manufactured, in the absence of any other clarification of the circumstances surrounding the entry into the agreements and in light of the absence of the parties who might reasonably be expected to explain those circumstances and the agreements, I am unable to conclude that their unclear content bears any relationship to the consideration of $45,000 to be paid on the transfer 291 Further, the four documents were apparently executed, at the earliest, after 11 May 2001, subsequent to the execution of a land transfer. At this stage Mr Fletcher of Solomon Brothers was still preparing agreements for Mr Fazio's interests and providing drafts of those agreements to the Andonys. The reasonable inference is that the agreements were executed substantially later than the date of registration of the land transfer, as Mr Fazio signed the Shareholders' Agreement in his capacity as a director of Devere. The execution clause was apparently drawn and inserted by the solicitors who prepared the agreement and expressly nominated Mr Fazio as a director of Devere. He also signed the loan agreement as a director of Devere. His directorship of Devere did not occur until a date well after the registration of the transfer. To the extent their evidence was reliable (which, as I have said, was limited), each of the Andonys contended that all of the agreements were executed at the same time. However, the agreement on which Devere and Packham rely did not come into effect until the Shareholders' Agreement was executed on 3 November 2001. The agreements were not stamped until 2004, unlike the land transfer which was stamped on 7 May 2001 when it was registered. 292 I infer that the transfer of the one-third interest in the Dongara Land which was effected at April 2001 was a transfer separate from and preparatory to the later transaction in which Packham took, indirectly by a shareholding in Devere, a 50% interest in the whole of the Dongara Land. 293 Again, I note that neither Mr Fazio nor Mr Fletcher was called to give evidence and I infer that the unexplained absence of those witnesses leads to a conclusion that any evidence they could give would be unlikely to be of assistance to the contention raised by Devere and Packham that there was a link between the land transfer from the Andonys to Devere and the wider conveyancing transaction said to be evidenced by the suite of four agreements. Not only is this inference open but also that I may more readily draw the additional inference contended for by the applicants that the consideration for the transfer was, at best, notionally $45,000 (Payne v Parker (1976) 1 NSWLR 191 per Glass JA at 200-202). 294 There is no dispute that the transfer occurred within five years of the commencement of the respective bankruptcies of the Andonys and that $45,000 is consideration of less value than the market value of the one-third interest in the Dongara Land at May 2001. 295 Moreover, there is real doubt on the evidence as to whether the Andonys' in fact received $45,000 for their one-third interest in the Dongara Land. If this is so, the applicants will be required to make no refund pursuant to s 120(4) of the Bankruptcy Act. 296 Devere and Packham do contend that significant consideration was received by the Andonys. 297 The applicants argue and I accept, that Devere in fact gave no consideration for the transfer. It was a company controlled by the Andonys. The transfer was simply to facilitate Packham subsequently obtaining a 50% interest in the Dongara Land by acquiring 50% of the shareholding in Devere. In any event, cl 2 of the 2001 Agreement specifies consideration to be given for the one-third interest of an issue of shares in Devere and a payment of $45,000. The evidence of the Andonys is that the payment of $45,000 was never made. While there is some suggestion in the 2001 Agreement that the payment was treated as an interest free loan from the Andonys to Devere, it was a loan that was never repaid. 298 I conclude that no consideration was given for this transfer. 299 It is unnecessary in those circumstances to consider the further submission for the applicants that s 120 of the Bankruptcy Act is not concerned with 'transactions' that may be comprised of multiple or consecutive transfers of one or more items of property. The applicants argue that the section does not permit multiple or consecutive transfers of one or more items of property to be valued together but rather the section is intended to facilitate the recovery of property for the benefit of creditors in respect of a transfer of property by a bankrupt to a transferee. 300 Next, as to the issue of shares at about the same time, the issue of shares to the Andonys was, again, not consideration of any value. Prior to the share issue, the Andonys together owned all of the shares in Devere. Following the share issue, they owned only half. This was because at the same time, Devere issued a similar number of shares to Packham. (The claim concerning the shares is addressed at [378] onwards). 301 There was no increase in the net asset position of Devere at or near the time of the share issue. Accordingly, the value of the Andonys' 50% interest in Devere was always limited, at the most, to 50% of the value of the Dongara Land. 302 Although Devere and Packham pleaded that there were miscellaneous additional payments made on behalf of the Andonys and said to have constituted additional consideration given for the one-third interest in the Dongara Land, no attempt was made to prove the elements of that pleading and I am unable to accept the contention. 303 In relation to Castleworld, after the commencement of these proceedings Devere transferred the whole of the Dongara Land to Castleworld. In relation to this transfer, s 120(6) of the Bankruptcy Act provides that s 120 does not affect the rights of a person who acquired the property from the transferee 'in good faith and by giving consideration that was at least as valuable as the market value of the property' (emphasis added). 304 Where a transfer does not have both such features, the transfer will be void. For the purpose of s 120(6) of the Bankruptcy Act 'good faith' means conduct without knowledge that any fraud or preference contrary to statute is intended (Hyams, Re; Official Receiver v Hyams (1970) 19 FLR 232 at 256). 305 In the present case, however, the requirement of good faith may be found to be of little importance in view of the requirement of full consideration. 306 On good faith, one of the issues is where the onus of proof lies. Prior to the substantive amendment in 1996, it was considered that the trustee bore the onus of proof with respect to the then equivalent of s 120(6) of the Bankruptcy Act (Official Trustee in Bankruptcy v Mitchell and Another (1992) 38 FCR 364 at 369-370). 307 With the new version of s 120 and since the introduction of the Bankruptcy Legislation Amendment Act 1996 (Cth), the issue of the onus does not appear to have been considered. However, in Re Jury; Ashton v Prentice (1999) 92 FCR 68, in the context of a similar provision in s 121(4) of the Bankruptcy Act, the Full Court observed (at [67]): Having considered the matter, it is our view that, on its proper construction, the burden under the subsection is on the transferee. In that connection, we draw particular attention to the fact that one of the three matters dealt with in the subsection is the transferee's own state of knowledge about a matter at a particular time. The allocation to a party of the burden of persuasion in connection with matters depending upon his or her state of knowledge is a commonplace and if, as we think it is, it be proper to conclude that the burden of persuasion with respect to one of the three matters dealt with in s 121(4) was intended to be on the transferee, it seems to follow inevitably that the same result was intended with respect to the other two matters. 308 In Ashton however, the wording of the then Act in s 121(4), under consideration, while similar in thrust, was a deal more complex, relevantly providing: (4) Despite subsection (1), a transfer of property is not void against the trustee if: (a) the consideration that the transferee gave for the transfer was at least as valuable as the market value of the property; and (b) the transferee did not know that the transferor's main purpose in making the transfer was the purpose described in paragraph (1)(b); and (c) the transferee could not reasonably have inferred that, at the time of the transfer, the transferor was, or was about to become, insolvent. 309 At first instance in Re Jury, the primary judge had proceeded on the basis, favourable to the appellant, that because the trustee carried the overall onus of proof (as to which see, for example, P.T. Garuda Indonesia Ltd v Grellman (1992) 35 FCR 515), the trustee was required, not only to prove the matters referred to in subs 121(1), but also to negative the defence afforded by subs 121(4). His Honour did so without expressing a concluded view on the allocation of the burden of persuasion under subs 121(4). 310 The reasoning of the Full Court was in the context of a provision in which it was clear that there were other factors the transferee should prove. That is not necessarily so in the provision now under consideration. 311 Alternatively, as observed in Andrew v Zant Pty Ltd (2004) 213 ALR 812 (at [20]), even if the onus does lie with the trustee, it would only be a 'very slight degree of proof' required to shift the burden to the purchaser/transferee given that all the facts concerning the transaction are within the knowledge of persons other than the trustee. 312 In the present instance the point may be moot as I consider the transfer to Castleworld was below market value. But on the good faith point I would accept that there was sufficient doubt surrounding the bona fides of the Castleworld purchase for the onus to shift to Castleworld to prove 'good faith' within the meaning of s 120(6) of the Bankruptcy Act and Hyams. 313 There was, on this issue, a strenuous debate as to whether or not Castleworld had notice of the preference to the applicants' interests occasioned by the transfer from Devere to Castleworld. 314 The applicants contend that Castleworld did know of this preference by reason of the following facts. Castleworld is owned and controlled only by Mr Naude. Mr Naude is also a director of PPM and an experienced property developer. Mr Naude met with Mr Fazio on 22 April 2005 to discuss the possibility of Castleworld purchasing the Dongara Land or an interest in it. From that meeting onwards Mr Naude understood from Mr Fazio that the applicants had lodged a caveat or caveats against a certificate of title to the Dongara Land, that Mr Fazio was in dispute with 14 actual or potential investors who each required as part of the development of the Dongara Land a 250 square metre lot and that Mr Fazio thought it would take about one or two months to sort out those matters including having the caveats removed from the title. Following that meeting, Mr Naude entered into an option agreement with Devere to purchase a half interest in the Dongara Land at a price of $1.2 million. That agreement which was actually drawn by Mr Naude contemplated (by cll 3-6 inclusive) that Castleworld and Devere would work cooperatively during the option period to progress approvals to rezone and develop the Dongara Land. The applicants argue that cl 12, in effect, provided that the mutual intention of Devere and Castleworld was that once the caveats were removed, the Dongara Land would be transferred to a special purpose company in which Devere and Castleworld or their nominees each held 50% of the shares. The applicants contend that this position never changed and that the option agreement was simply a mechanism to secure the performance of that obligation by Devere for the benefit of Castleworld. Also by cl 16 of the agreement, it was provided that the option had to be exercised by Castleworld before there was an entitlement to reduce the purchase price. Again, Mr Naude drafted this term himself and was aware of its effect. 315 Although months passed after the execution of the agreement, the resolution of the issues with the 14 investors or with the applicants with respect to the caveats had still not been resolved. Accordingly, it was not possible for the Dongara Land to be transferred in the manner purportedly contemplated by the 2005 Option Agreement. 316 Therefore, in December 2005, Mr Naude wrote a letter to Statewest confirming that he was negotiating to purchase 50% of the shares in Devere and that he had been monitoring 'from a distance' the negotiations Devere had been having with the Trustees to remove the caveats. He also advised Statewest that the Dongara Land was worth $3.2 million. 317 The applicants contend strenuously that what was really occurring at this stage was the pursuit of a common intention by Devere and Castleworld to hold the Dongara Land via a 'special purpose vehicle' in which Castleworld and Devere (or the nominees of each or either) would each hold half the shares. While there is some support for this submission, it was firmly resisted by Mr Naude. 318 Support for the assertion includes the fact that between January and August 2006, Mr Naude and Mr Fazio together became shareholders and directors of several other companies said to be 'sole purpose' companies to pursue other potential property development projects. The applicants argue that it is reasonable to infer from the Statewest letter, the period of time that had lapsed since Mr Naude was first advised of the caveats (together with his understanding that it would probably take one or two months to remove them), and the increasingly close business relationship between Mr Naude and Mr Fazio, that between April 2005 and June 2006, Mr Naude in fact knew or came to know more about the status of the applicants' caveat and the content of their underlying claim as to an interest in the Dongara Land, than Mr Naude now contends. I accept that submission. 319 By no later than September 2006, Mr Naude had become involved in or was at least privy to the negotiations Mr Fazio was having with the 14 investors in the Kevill Litigation. Those negotiations comprised the 'land option' offer to settle the Kevill Litigation in the District Court of Western Australia between Topfox (controlled by Mr Fazio) and those 14 investors. The land option offer was for the relevant investor to be given a strata titled lot created out of the Dongara Land. 320 Against the background of all those circumstances, Castleworld proposed that it and Devere make a new option deed and in fact that deed was executed on 30 September 2006. Pursuant to this proposal, Castleworld would now purchase the entire interest in the Dongara Land rather than a half interest but for a price of only $1.6 million compared with the previous price under the 2005 option of $1.2 million for a half interest in the Dongara Land. 321 The applicants contend that there was no realistic basis for Castleworld to argue for such a substantial reduction in the purchase price, not having exercised the 2005 option. It was argued that the new price of $1.6 million for the whole of the Dongara Land was exactly half its value at the time as Mr Naude understood it to be from what Mr Fazio had told him. 322 The reason given for the reduction in price was because of the penalty of $50,000 per month payable in respect of delay in exercising the option. The applicants appear to contend that this reason was disingenuous. There is certainly no proof that any such expense was actually incurred by Castleworld. 323 In any event, prior to 5 October 2006, PPM agreed in principle with Devere on terms to enter into a joint venture contract and commercial arrangement with Devere under which PPM would provide certain property management services for the development of the Dongara Land. 324 Although some of the agreements drawn by Mr Naude were not particularly sophisticated and contained, as he acknowledged, errors, nevertheless it was clear that he was taking a relatively close interest in developments concerning the Dongara Land and in acquiring that land and did so as a businessman with considerable experience, especially in property. 325 The applicants argue once again that the correspondence reflecting the arrangement between PPM and Devere reveals again the 'common continuing intention', this time subsequent to execution of the 2006 option deed, to develop the Dongara Land through a sole purpose corporate vehicle in conjunction with Mr Fazio, Devere and/or related interests. From all these facts, the applicants argue that it should be inferred that the 2006 option deed was in fact nothing more than a device to ensure that should it become necessary to do so, Castleworld could exercise the option to purchase the Dongara Land in order to effectively 'warehouse' it so as to quarantine it from the applicants' claims. The applicants argue that the common continuing purpose of Devere and Castleworld remained to ultimately use a special purpose corporate vehicle to own and develop the Dongara Land in which each of them or their nominees held 50% of the shares. The absence of Mr Fazio to give evidence on these matters, it is suggested, leads properly to an inference that his evidence would not assist in satisfying the Court that the transaction with Castleworld was an arms length commercial transaction. 326 Mr Naude remained emphatic that the suggestion of warehousing in the sense described was 'absolute nonsense'. 327 It will be recalled that Messrs Beere & Meyer were the solicitors for the 14 investors in the Kevill Litigation. Mr Naude received via Mr Fletcher, who was Mr Fazio's solicitor, a copy of the letter from Beere & Meyer for the 14 investors dated 5 October 2006. 328 That letter included a paragraph reading: Whichever option is selected, the agreement shall constitute full and final satisfaction of all claims, including for interest and costs, the subject of each of the District Court proceedings CIV Bunbury 1 to 14 of 2005 ("the Disputes") and must be the subject of a deed of compromise and release on terms acceptable to Topfox and Devere ("Deed"). The Deed shall include a provision to the effect that settlement is subject to Devere achieving, by an agreed date, removal of the Caveat (and resolution of any incidental dispute with the Bankruptcy Trustees that may impede the development of the Bookara property). (emphasis added) 329 On receipt of a copy of this communication, Mr Naude knew that there had been no resolution of the dispute between the applicants and Devere in relation to the caveat and its removal and that a resolution was required, as the dispute might otherwise impede the development of the Dongara Land. Mr Naude himself confirms in a letter of 16 October 2006 to one of his clients in relation to the Dongara Land: There have been caveats on the property since 2003, however, these caveats are now close to being lifted. An agreement has been struck between the disputing parties. The formalities will be completed well before any retirement village activities are ready to be lodged with the Shire. 330 At this time (which was well before the transfer to Castleworld) the reasonable inference is that Mr Naude was aware of the existence of the caveats and the existence of the dispute. 331 As noted from Mr Naude's evidence, on 13 November 2006, he intended to exercise the 2006 option and for that purpose and also to facilitate the 14 investors' acceptance of the 'land option' offer, Mr Naude sought valuation of the Dongara Land from Colliers. However, at about this time, the applicants had lodged the second caveat on the title of the Dongara Land to address what they perceived as being apparent deficiencies in the first caveat. 332 Mr Naude asserts that he did not see the second caveat until after the commencement of these proceedings. The applicants submit that evidence should be rejected. Mr Naude met with Mr Fazio's solicitors, Mr Fletcher and Mr Solomon on 21 November 2006 to discuss the claim brought by the applicants. I infer that this meeting, (whose attendees were not called to give evidence), was brought about, at least in part, (but not, according to Mr Naude, with his knowledge) by the lodgement of the second caveat. From that meeting, Mr Naude learned that the applicants were seeking to avoid the transfer of the Andonys' one-third interest in the Dongara Land to Devere; that Mr Fazio's position was that he had acquired shares in Devere by an agreement with the Andonys and payment of money; that the Trustees in order to unwind the transfer of land and shares had to prove that those shares were not at market value; and if the Trustees were successful in 'unwinding' the transfers, the consideration given would have to repaid. 333 From Mr Naude's notes of the meeting, the focus was as to the nature and consequences of the applicants' claim underlying the second caveat. 334 Mr Naude contends that when he became aware that the caveat was subsequently withdrawn, he assumed that the underlying claim supporting the caveat also became resolved. The applicants contend that there is nothing in Mr Naude's notes which would support this assertion. I accept that there is not but then if Mr Naude thought the two issues were synonymous, there may have been no need to note each aspect, for example, withdrawal of the caveat as well as withdrawal of any claim. It is to be noted that Castleworld chose not to call Mr Solomon or Mr Fletcher to support that contention. For a person of Mr Naude's considerable business and property experience and who I find to have been considered and cautious about his dealings in connection with the Dongara Land, it is implausible that he would not satisfy himself that there was no impediment to Castleworld's secure acquisition of the Dongara Land. 335 The applicants argue that the attendance by Mr Naude 'out of the blue' at the meeting of creditors of the Andonys' bankrupt estate on 29 November 2006 supports this. His attendance, it is argued, was only for the reason of ascertaining the applicants' capacity and enthusiasm to press claims in respect of the Dongara Land and the Devere shares. Whatever explanation was given by Mr Naude in relation to attendance at that meeting, the preferable conclusion is that Mr Naude at this time well understood that the applicants had an underlying claim that could be pursued irrespective of whether or not the second caveat was removed from the title and that Mr Naude was attempting to ascertain the intentions of the applicants in that regard. 336 On the question of Mr Naude's knowledge, there are two letters that Mr Naude is adamant he did not receive although little explanation or corroboration is given of non‑receipt of those crucial letters. They are the only letters he says he did not receive. The first is the communication from Solomon Brothers to Beere & Meyer of 14 December 2006 which records that: As a consequence of the analysis of the issues surrounding the trustees' claims in relation to both caveats we are now confident that the second caveat will also be removed, although the time required to effect its removal is unknown and depends largely upon the attitude which the trustees now adopt. 337 The other is the Solomon Brothers letter of 9 January 2007 (referred to at [163] above) in which Solomon Brothers advised the Trustees had threatened to commence proceedings in the Federal Magistrates Court in relation to the allegedly void transactions. 338 Each of those letters was sent to Beere & Meyer and were, on their face, copied to Mr Naude and Mr Fazio. There would be good reason for them to be so copied. Although Mr Naude denied receiving those letters, had they been received they would clearly have fixed him with knowledge that even if the caveats were withdrawn, if the proceedings were issued, there was an ongoing claim by the applicants, indeed, one which was likely to result in court proceedings. 339 The applicants submit that the conclusion should be drawn, contrary to Mr Naude's denials, that he did receive a copy of the 9 January 2007 letter because the letter is marked 'CC Alf Naude & Jack Fazio' and further because Mr Naude did not discover that letter in the ordinary course, but later produced it and further because Mr Naude wrote an email to Mr Fletcher after the commencement of these proceeding which, it is said, is wholly self-serving and evidently intended to be so, revealing that Mr Naude well understood the implications for Castleworld's defence if he was found to have received a copy of the 9 January 2007 letter. The 'letter' (or email, in fact) reads: From: Alfred Naude [an@ppmwa.com.au] Sent: Monday, 13 August 2007 7:59 PM To: pfletcher@solbros.com.au Subject: RE: De Vere (sic-Devere) Paul, I refer to your recent query for me to confirm what correspondence you sent me in connection with De Veere (sic-Devere) Holdings, prior to the sale of the Bookara Property. The only emails I got from you were 2 drafts in September and October last year, to the solicitor of the 14 Shareholders, Beere & Myer (sic-Meyer), the Busselton solicitor representing the 14. I can confirm that I did not get any email of the 9th January. I know you mentioned that the bottom of the email correspondence of that day, which you sent to Beere & Myer (sic-Meyer), had CC to myself and CC to Jack Fazio, but I did not receive it. Our office was closed on the 9th January for Builders Holidays, I was also away on that day. The previous 2 email drafts which you sent me both had CC Jack Fazio on the bottom, but I believe that Solomon Brothers actually sent Jacks (sic-Jack's) by fax because as we all know he does not have email. I think what probably happened is that you sent the Beere & Myer (sic-Meyer) email, meaning to fax me, when you faxed Jack, but perhaps because whoever faxed it to Jack saw that it had CC to me on an email, they simple (sic-simply) assumed I already had the email. Our system here shows no emails or faxes around that time on this matter and at no stage have I received any other emails about Deveere's (sic-Devere's) activities. I had no idea that Deveere (sic-Devere) was still been (sic-being) sued and no idea that Jack Mac was involved. At some stage someone may raise the issue of an email on the 9th January and I believe it is probably that you do not send it to me to me, even now so that I can truthfully say that I have never seen it. (sic) Tomorrow morning I will arrange to send you a copy of the heads of agreement between Jack Fazio and myself (I think it is between Topfox and PPMD) which is a short document. Regards, Alfred Naude DIRECTOR 340 It is argued that that email rather supports the inference that Mr Naude did in fact receive a copy of the letter at the time but now seeks, untruthfully, to deny having done so. 341 I am not persuaded that I should draw that inference. Were it the case that I rejected Mr Naude's evidence entirely, then that inference may be reasonable. I do not reject Mr Naude's evidence entirely but there are aspects of it that I do not accept. I am not persuaded that he did receive the 9 January letter. 342 The applicants argue that whether or not Mr Naude received the 9 January 2007 letter, it is a reasonable inference to draw that Mr Naude would have been well aware of the fact that the applicants were threatening to press their underlying claim in respect of the Dongara Land in the Federal Magistrates Court. Castleworld had an option to purchase the Dongara Land and Mr Naude had an extensive business relationship with Mr Fazio. He was in contact with Mr Fazio's lawyers in relation to the settlement negotiations with the 14 investors in which he was directly involved in delivering the 'Land Option' offer and in all those circumstances is implausible that a person of Mr Naude's experience and attention to detail would remain ignorant of the most basic of matters on which investors had been apprised, namely, the existence of the ongoing claim by the applicants. 343 This, it is said, is supported, and I find it to be so supported, by the content of the Agreement ultimately made by Devere and Castleworld which provided in cl 1.4 for Castleworld to assume responsibilities in respect of the Kevill Litigation with the investors. Clause 1.4 makes it most unlikely that Castleworld was unaware of the status of the settlement with the investors immediately prior to execution of that agreement on 30 May 2007. Equally, it is most unlikely that Mr Naude would not have satisfied himself as to the extent of potential exposure on the claims by the applicants. 344 Despite the existence of the option, Mr Naude considered that the relationship he had with Mr Fazio in business was sufficiently close such that there was no need for Castleworld to lodge a caveat against the title of the Dongara Land to protect its own interests under the 2006 option deed. The applicants argue from this omission to lodge a caveat that the obvious inference is that the transfer was not at arms length and neither Castleworld nor Devere wished to alert the Trustees to the pending transfer. A transfer which was designed to and would in fact frustrate any claim by the Trustees. The Castleworld Agreement, was drafted, executed and settled without the assistance of solicitors who had been otherwise quite closely involved, at least, for Mr Fazio. That, it is said, evidenced that Mr Fazio and Mr Naude well knew and intended that the transfer would frustrate the applicants' claims and that their solicitors would be unlikely to condone or facilitate the transfer in those circumstances. 345 The applicants contend that Mr Naude has effected a fraud in that regard and also effected a fraud on behalf of Castleworld upon Colliers and Investec in relation to the value of the Dongara Land. This, it is said, provides further evidence and corroboration of the common purpose and objective of Mr Fazio/Devere and Mr Naude/Castleworld. The fraud, it is argued, was perpetrated to effect the transfer of the Dongara Land in order to frustrate the Trustees' claims to an interest in the Dongara Land. 346 The applicants also point to events subsequent to the transfer of the Dongara Land to Castleworld. The effect of Castleworld's case and the evidence of Mr Naude is that Devere transferred the Dongara Land to Castleworld without informing Castleworld that these proceedings had been commenced and that the applicants still had a claim to an interest in the Dongara Land despite the removal of any caveats over the land. It is argued that despite this omission, all the respondents continued to work together cooperatively to preserve an interest in the Dongara Land for their mutual benefit. This occurred because Castleworld defaulted under its finance facility with Investec so that Investec entered into possession of the Dongara Land as mortgagee. At this point, not just Mr Naude but also Mr Fazio made efforts to repurchase the Dongara Land from Investec at or close to the value of the loan that had not then been repaid. One proposal was to use a 'special purpose vehicle' known as Aussie Jack Distillers Pty Ltd to purchase the Dongara Land for little over the value of the Investec loan and for Castleworld and Devere to acquire shares in that company. A second proposal was for an employee of Mr Naude's, Mr Ben Crawford, to either directly or via his nominee, purchase the Dongara Land for $1.2 million. 347 Despite these events, Mr Naude firmly denied in cross-examination that there was an ongoing intention for Mr Fazio and Mr Naude to jointly own the Dongara Land. Mr Fazio, of course, was not called to give evidence and could not support or corroborate Mr Naude's denial or otherwise clarify the position. I infer that Mr Fazio's evidence would not have assisted Mr Naude's contentions that he was unaware that the applicants had not abandoned their claim or withdrawal of the caveats. I do not think it is necessary on the pleaded case to reach a view as to whether the transfer to Castleworld was all part of a grander scheme between Mr Fazio and Mr Naude to warehouse the Dongara Land (against the applicants' claims) and for the benefit of the joint interests of Mr Fazio and Mr Naude.

Defences of Castleworld 348 Castleworld raises a number of defences. They are mostly based on representations by the Trustees. One of those defences is based on estoppel. Broadly speaking, Castleworld contends that the failure on the part of the applicants to lodge a caveat led Castleworld to believe that the claim which had previously supported the caveat had been resolved and on that basis Castleworld proceeded to purchase the Dongara Land. Castleworld contends that in those circumstances, the applicants are estopped from contending to the contrary, that is, that their claim can be recognised. 349 Associated claims are raised on similar factual foundations. Those associated claims include misrepresentation, negligent misrepresentations and statutory breaches encompassing misrepresentations. They are mostly based on representations by the Trustees, effectively by silence as to their claim continuing after removal of the caveats. 350 Those defences must fail if Castleworld had notice of the preference to the applicants' claim occasioned by the transfer of the one-third interest in the Dongara Land from Devere to Castleworld. I find that Mr Naude and Castleworld had notice of the claims by the applicants. I do not accept that Mr Naude considered that those claims had disappeared with the withdrawal of the applicants' caveats. I conclude that Mr Naude knew the claims were open to be pursued but simply hoped that they would not be pursued after the transfer of the Dongara Land to Castleworld. 351 Despite Mr Naude's assertions, I am satisfied that he well appreciated the distinction between the purpose of a caveat to protect an underlying claim and the continuing validity and existence of the underlying claim. The defences fail. 352 Castleworld also raises the indefeasibility provisions of the TLA. Castleworld contends that the indefeasibility provisions of the TLA override the provisions in s 120(6) of the Bankruptcy Act. 353 The indefeasibility of title which is conferred under the Torrens system of registration and in this instance by s 68 TLA is subject to personal rights, in law or in equity, against the registered proprietor: Frazer v Walker [1967] 1 AC 569 at 585. A personal right or claim in personam is a claim against a person to compel him or her to do a particular thing or to not do something. There is no reason why proceedings may not be brought against the registered proprietor by a person setting up matters which depend upon the personal acts of the registered proprietor himself. In Breskevar v Wall (1971) 126 CLR 376, Barwick CJ (at 384-385) said (footnotes omitted): The opinions held in some places in the past that the conclusive quality of the certificate of title did not enure for the benefit of a registered proprietor, other than the proprietor firstly registered on the land being brought under the provisions of The Real Property Act seem to me to be more than difficult to maintain in the light of the provisions to which I have referred but, in any case, they were shown to be untenable by the decision of the Privy Council in Assets Co. Ltd. v. Mere Roihi where Lord Lindley pointed out that "the sections making registered certificates conclusive evidence of title are too clear to be got over". "In dealing with actions between private individuals, their Lordships are unable to draw any distinction between the first registered owner and any other." This is also made clear by the more recent decision of the Privy Council in Frazer v. Walker. Proceedings may of course be brought against the registered proprietor by the persons and for the causes described in the quoted sections of the Act or by persons setting up matters depending upon the acts of the registered proprietor himself. These may have as their terminal point orders binding the registered proprietor to divest himself wholly or partly of the estate or interest vested in him by registration and endorsement of the certificate of title: or in default of his compliance with such an order on his part, perhaps vesting orders may be made to effect the proper interest of the claimants in the land. Also s. 124 gives the Supreme Court power to cancel an entry in the register book and to substitute another entry in the event of the recovery of any land by ejectment from a fraudulent proprietor or from any of the persons against whom an action of ejectment is not expressly barred by the Act. This is the only power of the Supreme Court to amend the register. See Assets Co. Ltd. v. Mere Roihi; Frazer v. Walker. Section 85 of the Land Transfer Act 1952 (N.Z.) with which the last-mentioned case was concerned gives the power of amendment upon the recovery of any land estate or interest by any proceeding whereas s. 124 of the Act deals only with the recovery of land by action of ejectment. The suit for declarations and orders for amendment of the register brought by the appellant in Frazer v. Walker was held by the Privy Council in that case to be an action for the recovery of land:. The appellants' suit in this case was not an action of ejectment but it was, in my opinion, an action for the recovery of land and, in any case, so far as it concerned the first respondent was within the exceptions contained in s. 123. Such a suit not within those exceptions would be effectively barred by s. 123. Thus, except in and for the purposes of such excepted proceedings, the conclusiveness of the certificate of title is definitive of the title of the registered proprietor. That is to say, in the jargon which has had currency, there is immediate indefeasibility of title by the registration of the proprietor named in the register. The stated exceptions to the prohibition on actions for recovery of land against a registered proprietor do not mean that that "indefeasibility" is not effective. It is really no impairment of the conclusiveness of the register that the proprietor remains liable to one of the excepted actions any more than his liability for "personal equities" derogates from that conclusiveness. So long as the certificate is unamended it is conclusive and of course when amended it is conclusive of the new particulars it contains. 354 The right which is established under the statutory provision in s 120 of the Bankruptcy Act is enforceable by personal action against the registered proprietor and is accordingly an action in personam. As such it is unaffected by the indefeasibility provisions. In Hillpalm Pty Ltd v Heaven's Door Pty Ltd (2004) 220 CLR 472 at [53] where McHugh A‑CJ, Hayne and Heyden JJ said: If the consent to the subdivision did create a right in rem, that would be a right or interest in the land not shown on the Computer Folio Certificate. There would then be a real and lively question about how the two statutory schemes (the scheme under the EPAA and the Torrens system for which the Real Property Act provides) were to be reconciled, and questions of implied repeal or amendment might arise. But those questions are not raised by this matter. That is because it was common ground that the appellant's title was not and is not now subject to any interest of the kind which the respondent asserted it was entitled to have the appellant create in its favour. If the respondent has any such right, it is a right to have an interest in land created and that is said to be a right enforceable by personal action against the appellant, not by any action or application to rectify the Register maintained under the Real Property Act. That right, if it exists, is not a right in rem. 355 Further, while it is not necessary to consider this aspect, s 109 of the Constitution would necessarily operate to invalidate the indefeasibility provisions to the extent necessary to give s 120(6) of the Bankruptcy Act effect and operation according to its terms. Section 109 of the Constitution provides as follows: 109 Inconsistency of laws When a law of a State is inconsistent with a law of the Commonwealth, the latter shall prevail, and the former shall, to the extent of the inconsistency, be invalid. 356 The effect of s 120 of the Bankruptcy Act is to render a transfer of property from a bankrupt to a transferee void against the trustee in bankruptcy in certain circumstances. Where the transfer is void, subs (6) provides for only limited protection to a successor in title. Except where the protection operates, that is, where the transfer is in good faith and for not less than market value, the effect of s 120 of the Bankruptcy Act as a whole is that the successor takes nothing, that is, the title is void. Nothing in the Bankruptcy Act purports to limit the type of property or the nature of the acquisition to which that subsection refers. 357 If the provisions of the TLA were to operate to create an interest in the Dongara Land held by Castleworld such that the interest would take priority over any interest claimed by the applicants under s 120 of the Bankruptcy Act, then those provisions of the TLA would be invalid to the extent of their inconsistency with s 120. The provisions of the TLA would alter, impair or detract from the operation of s 120(6) of the Bankruptcy Act, a Commonwealth statute. As stressed, though, it is unnecessary to resort to s 109 of the Constitution as the claim is in personam. 358 The additional response for the applicants in relation to the assertion that the indefeasibility provisions prevail over the provisions under the Bankruptcy Act is that the indefeasibility provisions must give way to fraud. Fraud as an exception for the purpose of s 68 TLA, is a narrower concept than fraud at general law (Bank of South Australia Ltd v Ferguson (1998) 192 CLR 248 (at [10]-[11]). Nevertheless, actual fraud, personal dishonesty or moral turpitude lie at the heart of the section: Bahr v Nicolay (No 2) (1987) 164 CLR 604 at 614. It must be the fraud of the registered proprietor, in this case through the guiding and controlling mind of its sole director. There has been authority for the proposition that fraud by a registered proprietor against a party other than that seeking to assert an interest against the registered proprietor does not bring the case within the fraud exception to s 68 TLA (Bank of South Australia Ltd v Ferguson at [19]). 359 In the present circumstance it is said that the fraud was perpetrated by the registered proprietor for the intended purpose of achieving registration of the title so as to frustrate or defeat the applicants' claimed interest in the Dongara Land. For this fraud to be established, a finding is required that Castleworld through Mr Naude knew of the preference of Castleworld's interest to the applicants' claimed interest in the Dongara Land occasioned by the transfer from Devere to Castleworld. The applicants argue that from at least late December 2006, Mr Fazio and Mr Naude pursued the common intent to quarantine the Dongara Land from the applicants' claim. Mr Naude's intention was to procure 100% finance for the purchase of the Dongara Land and he well understood that the achievement of that goal was dependent upon obtaining a valuation of the land which supported a loan to value ratio of at least 50%. In reality, he thought at the time that the Dongara Land was only worth $2.8 million but must have appreciated that he needed to procure a valuation in excess of the true value of the land on his understanding in order to obtain finance of at least $1.6 million to fund the purchase under the 2006 option deed. 360 Because of that requirement, the applicants argue, Mr Naude knowingly permitted Mr Fazio to provide Mr Murphy with expressions of interest of $16 million and $20 million even though Mr Naude did not believe at the time there were any such expressions of interest and does not now assert that there were. The applicants argue that Mr Naude raised those expressions of interests with Mr Murphy and intended that Mr Murphy would rely upon those expressions of interest to increase his valuation of the Dongara Land. 361 Mr Naude was very firm in his denial of all these accusations. His evidence was that he told Mr Murphy he did not know anything about an expression of interest. The applicants say, however, that this evidence should be rejected as it is inconsistent with Mr Murphy's evidence. The applicants argue that Mr Naude's evidence about when and how he first saw the expressions of interest was inconsistent and unreliable and his evidence under cross-examination reflected poorly on his credibility. 362 The applicants go further and assert that against the background of Mr Naude's knowledge of the applicants' claim and their threat to pursue it, it should be inferred that Mr Naude's purpose in encouraging Mr Murphy to rely upon false documents to increase his valuation was in order to ensure that Castleworld would procure finance to fund the purchase of the Dongara Land and thereby frustrate the applicants' claim. 363 I am unwilling to accept this submission for the applicants. I do accept that on the balance of probabilities Mr Naude did know that the claim for the applicants was still live at least as a possibility and that in giving effect to the transfer of the Dongara Land to Castleworld, that was a risk that he was accepting, hoping the claim would not be pursued. In my assessment, Mr Naude was simply hoping that the problem would go away, was receiving some assurances as to the likelihood that it would be resolved and took that risk. In relation to the contemporaneous valuation evidence, although reference to the expressions of interest appears in the valuation given by Mr Murphy of Colliers, it is certainly clear that Investec wisely took no notice of the supposed expressions of interest. It seems unlikely to me that an experienced valuer or financier, in the absence of far more detail and supporting information, would pay such vague references any regard at all. Equally, a person of Mr Naude's experience, while preferring to leave such vague references in the valuation rather than remove them, would not seriously have expected such references to influence Investec. 364 Mr Murphy's oral evidence to the effect that he had 'no or limited regard' to the expressions of interest for the purpose of valuing the Dongara Land on the balance of probabilities, in my view, is correct. 365 The applicants say that Mr Naude told Mr Hamer from Investec that he had received offers on the site ranging from $17 million and $23 million. I am not satisfied that that is the state of the evidence which, as it played no role in Investec's offer, was understandably imprecise as to its source. Certainly, it was not the case that he had received such offers. It is also submitted for the applicants that Mr Naude also lied to either Mr Carey or Mr Hamer of Investec about the level of interest in the Dongara Land that had been expressed by the RSL and Mt Gibson Mining. The applicants point to the fact that there was no evidence adduced or even attempted to be adduced to support the truth of such statements. It is also argued that Mr Naude lied on the statement of assets and liabilities provided to Investec by including in the document a reference to the $20 million expression of interest that he knew was not genuine. He made no attempt at any time before finance was extended by Investec or the transfer of the Dongara Land settled to disabuse either Colliers or Investec of the representations that he knew to be untrue. 366 There is some force in the submissions by the applicants. Certainly, the information provided by Mr Naude or information which Mr Naude knew Investec to hold in relation to expressions of interest or offers on the property was very loose. It is not unreasonable to infer that it was deliberately loose so that Mr Naude could not be pinned down to anything in relation to these so-called expressions of interest or offers. It is of little surprise that Investec was not interested in advancing anything like the amount which a valuation of the Dongara Land at $6 million might have suggested. 367 I do not accept the applicants' submissions that it is clear that the Credit Committee of Investec relied upon the $6 million valuation to support its decision to approve the finance. Rather, the Credit Committee appeared to accept that if the Castleworld offer was genuine, the Credit Committee would support finance being advanced only to the extent necessary to support that offer which was far less than the $6 million valuation. 368 For those reasons, I do not consider that the actions of Mr Naude in relation to Investec constitute a relevant fraud for the purpose of the exception to the indefeasibility provisions of the TLA. That said, I do not accept in any event, for reasons stated, that the indefeasibility provisions apply in the present circumstances.

Alternative claims by the applicants for equitable relief with respect to the one-third interest in the Dongara Land 369 Section 120 of the Bankruptcy Act operates to render a transfer voidable, not void, at the election of the trustee in bankruptcy. If the trustee exercises the election and avoids a transfer pursuant to s 120 of the Bankruptcy Act then if a property continues to exist in specie at the commencement of the bankruptcy, it is treated as having vested in the trustee at that time (Anscor Pty Ltd v Clout (at [43])). 370 As a result, the owner of a property where the trustee does elect to avoid the transfer holds it on trust for the trustee in bankruptcy. If the property is sold after the date of the bankruptcy, the owner will be accountable to the trustee for the proceeds of the sale as monies had and received. In this instance Devere sold to Castleworld the whole of the Dongara Land for $1.6 million. The applicants argue Devere is therefore obliged to account to the applicants to the extent that those proceeds represent the sale of the applicants' one-third interest in the Dongara Land as money had and received for the use of the applicants. 371 The evidence from Mr Naude and from Mr Fazio's affidavit is that $1,597,780.70 of the total proceeds of sale of $1.6 million was actually ultimately received by Packham at the direction of Devere. Packham was the owner of all of the shares in Devere. The only reasonable inference is that Packham received those monies or the benefit of them by virtue of its position as Devere's sole shareholder. Mr Fazio who was not called to give evidence and could have rebutted that inference, did not do so. Packham has received those sums with the knowledge of Mr Fazio (its controlling mind and will) of the applicants' interest in the Dongara Land. It follows that Packham is obliged to account to the applicants to the same extent as Devere. 372 Additionally, Packham has held the shares in Devere on trust for the applicants since the commencement of the Andonys' bankruptcy. This is because the transfer of the Devere shares to Packham was a voidable transaction under s 120 of the Bankruptcy Act or, alternatively, because the transfer was unauthorised, by Mrs Andony in particular, and therefore invalid. 373 The receipt of the proceeds of the sale of the whole of the Dongara Land by Packham in its capacity as a shareholder represents money had and received by Packham for the use of the applicants' shares for which Packham is obliged to account to the applicants. 374 The applicants contend that the claims they have against Devere and Packham to account are in addition to, not in substitution of the applicants' right to a one-third interest in the Dongara Land. I accept these claims are additional or separate subject only to the proviso that the applicants should not be permitted to be compensated more than once in the sense of 'double dipping': Deckers Outdoor Corporation Inc v Farley (No 5) (2009) 262 ALR 53 (at [76]) per Tracey J. 375 As will be evident from the analysis of the evidence, the Dongara Land has now been encumbered by Castleworld with a mortgage in favour of Investec from which the monies received by Devere and Packham were procured. The accounting of those monies to the applicants will permit the applicants to eliminate or reduce the liability under the mortgage. Devere in its capacity as trustee of the applicants' one-third interest in the Dongara Land, by virtue of the effect of the Bankruptcy Act, owed the applicants from the commencement of the bankruptcy duties of a fiduciary nature to act in the best interests of the applicants with respect to that interest. Those duties include duties to exercise any sale with respect to the applicants' interest in the Dongara Land reasonably and in good faith and to account to the applicants for the proceeds of the sale of the interest. 376 The power of sale exercised by Devere in relation to the one-third interest, however, was not exercised reasonably and, I find, was not exercised in good faith. The Dongara Land was sold at an undervalue. Devere at the time was well aware of the claim by the applicants in respect of the land, proceedings having been commenced, yet it did not give them the opportunity to intervene and it did not notify them of the intended transfer. Devere's sale of the Dongara Land to Castleworld could only have been calculated to, at least in part, frustrate or defeat the claims of the applicants to interest in the land. 377 Devere has not accounted to the applicants for the proceeds of the sale. The applicants are entitled to equitable compensation for Devere's breach of duty. Precisely how that should be formulated is a matter for further submission but it would take into account the market value of the applicants' one-third interest in the Dongara Land as at the date of the transfer to Castleworld. It would also take in to account any amounts actually received by the applicants from Devere and/or Packham for their restitutionary claims and amounts required to eliminate the Investec mortgage on the Dongara Land.

The claims with respect to the shares in Devere 378 Devere and Packham contend that the share issue did not constitute a transfer. I disagree. In my view, the issue is a 'transfer' for the purpose of the definition set out in s 120(7)(b) of the Bankruptcy Act. This occurred after the transfer of the Andonys' one-third interest in the Dongara Land to Devere arguably pursuant to the 2001 Agreement. I have had little regard to the precise content of the agreements but have had regard to their effect. (As to the content and circumstances, no reliable witnesses have been called to give evidence and it cannot be said that the agreements speak for themselves). Under the 2001 Agreement, Devere agreed to issue 1,111,111 shares in Devere to the Andonys jointly and 111,111,113 shares in Devere to Packham. The shares were issued to Packham and the Andonys on 3 November 2001. As a result, whereas there had been only two shares on issue in Devere prior to that time (those held by Mr and Mrs Andony), the effect of the Agreement was to issue the additional shares in Devere to Packham and the Andonys. The obvious result and purpose was to divest the Andonys of 50% of the total shareholding of Devere and for Packham to acquire that 50%. 379 Under s 120(7)(b) of the Bankruptcy Act a person who does something that results in another person becoming the owner of property that did not previously exist is taken to have transferred that property to the other person. Again, there appears to be no previous authority discussing the scope and application of this paragraph, however, in Peldan v Anderson (2006) 227 CLR 471, Gummow A-CJ, Kirby, Hayne, Callinan and Crennan JJ discussed the operation of s 121(9) of the Bankruptcy Act, which is in the same terms as s 120(7) but operates in circumstances of transfers to defeat creditors. 380 In that case a man who later became a bankrupt unilaterally severed a joint tenancy so that he and his wife became tenants in common in equal shares of their matrimonial home. Some months later his wife passed away and shortly afterwards a sequestration order was made against the man's estate. The trustees in bankruptcy applied for declarations that the unilateral severance of the join tenancy was void against them because its purpose had been to place one half of the matrimonial home out of the reach of the bankrupt's creditors. 381 In their joint judgment, Gummow A-CJ, Kirby, Hayne, Callinan and Crennan JJ said (at [26]-[28]) (footnotes omitted): [26] As remarked earlier in these reasons, provisions in the terms of s 121(9) appeared at the same time as ss 120(7) and 122(8) of the Bankruptcy Act. It is to be expected that the sub-section has the same meaning in each provision. In the Explanatory Memorandum to the House of Representatives upon the Bill for the 1996 Act, it was said at para [84.10] of the inclusion of the provision in the undervalued transactions provision (s 120) that: "where a person creates an interest in property, for example by allowing a mortgage or charge to be created over it, the person will be taken to have transferred property, for the purposes of the section." Other examples were given, including the conferral of a trademark or patent licence. Further instances would include the grant of a lease over freehold property and a declaration of a trust over property vested in the "transferor". In all of these cases, the same act both creates the property in question and vests it in the other person. [27] In other cases to which the sub-section would apply, the creation of property will occur at a later time. Instances of this relate primarily to the diversion of future property (necessarily constituting property that did not previously exist) from coming into the hands of the person who later becomes bankrupt. This may occur by the assignment, whether absolutely or by way of charge, of property such as future income, royalties yet to be earned, and damages which may be recovered in pending litigation. (Consideration is required for the assignment to be effective, but that issue is dealt with by s 121(4) of the Bankruptcy Act.) In such cases, the assignment operates immediately upon acquisition by the assignor and vests the property in the assignee. [28] However, in all these cases (and it is not suggested that the examples are exhaustive), the property that did not previously exist is "carved out" of "property" which is held, or which comes to be held, by the person who later becomes bankrupt. 382 Section 120(7) was introduced by the Bankruptcy Legislation Amendment Act 1996 which notes in the Explanatory Memorandum (at [84.10]) relevantly that: The Bill is intended to simplify the law and change the focus of the provisions away from the intention of the parties to particular transactions, to the nature of the transactions and the likely effect on creditors. The word "transfer" will have its ordinary meaning in the new and revised provisions except to the extent that it is given an expanded definition by proposed subsections 120(7) and 121(9) and 122(8) so that it encompasses a payment of money or doing of some act or thing which results in another person becoming the owner of property which did not previously exist. By way of explanation, it is said: Thus where a person creates an interest in property, for example by allowing a mortgage or charge to be created over it, the person will be taken to have transferred the property for the purposes of the section. Likewise if Frank who subsequently became a bankrupt constructed a residence on a block of land owned by Eugenie, Frank would be taken to have transferred the property to Eugenie. Another example might be a situation where three years before the commencement of her bankruptcy, Gertrude conferred a licence to Harold to use a trade mark, or an item the subject of a patent where no licence to use the item previously existed. Gertrude would be taken to be transferring property to Harold and if this was done for less than what might be expected to be the market value of the rights conferred by the licence the transfer would be void unless Harold could prove that Gertrude was not insolvent at the time of giving the licence. 383 In the present circumstances, the Andonys were the only directors and shareholders of Devere. They entered into the 2001 Agreement in their own right. Mr Andony entered into that Agreement on behalf of Devere and by entering into the 2001 Agreement they created an obligation on the part of Devere to issue shares in Devere to Packham and to themselves. 384 Then Mr Andony in his capacity as a director of Devere resolved in November 2001 to issue the shares to Packham and to himself and Mrs Andony. That resolution apparently was made immediately after Mrs Andony's resignation as a director of Devere. By her resignation or in any event, by her tacit approval of all business dealings by her husband, Mrs Andony permitted the resolution to issue the shares to Packham. The Andonys were the sole proprietors of the total shareholding of Devere prior to the issue of shares in Packham. They evidently acted together and consensually to effect the issue of the shares. They together created or 'carved out' from their own property their shareholding in Devere, property that did not exist. It is not an instance where the bankrupt has created property from property belonging to a third party. The Andonys are persons who have 'done something' that has resulted in Packham becoming the owner of property and of 1,111,113 shares in Devere. That property did not previously exist. 385 The second aspect of this transaction was that it occurred at an undervalue. The consideration given by Packham for the shares issued on 3 November 2001 was limited to a payment from Packham to the Andonys in the sum of $172,229.50 by the method discussed below. 386 The consideration given for the shares cannot be assessed or determined by reference to the 2001 Agreement or the suite of agreements executed at the time. There is no evidence that those agreements were performed substantially in accordance with their terms or at all. 387 Devere and Packham argue that Packham also gave value by way of consideration in the beneficial ownership of the Unit. However, this contention is not at all supported on the evidence. Packham remained the registered proprietor of the Unit. The 2001 Agreement, while contemplating that Packham would transfer the beneficial ownership of the Unit to Devere and then Devere would transfer the beneficial ownership to a company which the Andonys were interested, namely, Gold River Holdings Pty Ltd, each by means of a declaration of bare trust, that never occurred. No stamp duty was paid in respect of any purported transfer of beneficial ownership until 10 March 2004. This was long after Packham had sold the Unit to a third party. 388 Packham, however, did use the beneficial ownership it retained in the Unit in order to provide security for borrowings from Statewest in the amount of $475,000. 389 Had the beneficial ownership in fact been transferred to the Andonys, they or their nominee company could have used the equity in the Unit to borrow themselves directly from a financier rather than through Packham. The fact that Packham was the primary debtor accords with the fact that beneficial ownership in the Unit clearly remained with Packham. The Andonys did not receive any rent or profits or any income from the Unit. It was sold without reference to them. They received nothing from the proceeds of the sale of the Unit. 390 It is common ground that Mr Andony did receive the proceeds of the $122,000 loan from Statewest to Packham made at a later time in May 2002 and that this was secured by the Unit. Mr Andony, however, assumed responsibility for making repayments of that loan. In any event that transaction does not evidence a transfer of any beneficial ownership from Packham to the Andonys. The primary debtor for that loan was Packham not the Andonys. The beneficial ownership remained with Packham and was not transferred to them. 391 There is no documentary evidence or evidence at all to support an inference that the Andonys received the beneficial ownership of the Unit. 392 I have previously commented on the absence of any other witness to support the contentions advanced by Devere and Packham. Mr Fazio could have, but did not, give evidence about these matters. Nor did his solicitors. I infer that the evidence of neither Mr Fazio nor his solicitors would have been able to support the pleaded contention of Devere and Packham that Packham gave the Andonys the beneficial ownership of the Unit. There is no evidence to support that assertion other than the pleading itself. 393 Further, Devere and Packham did not seek to prove those aspects of their defence by which they allege that miscellaneous additional payments were made on behalf of the Andonys. I find against that assertion. 394 The only identifiable payments available to be characterised as consideration given for the issue of the shares are those made from the amount of $475,000 that Packham borrowed from Statewest on 16 May 2001. On 23 May 2001, $163,364.92 was paid from the proceeds of the $475,000 loan to Statewest account number 135310 in the name of the Andonys. At the same time, $308,864.58 was paid from the proceeds of the $475,000 loan to the NAB to discharge the Andonys' loan from the NAB. 395 It is an agreed fact that from those sums paid to or for the benefit of the Andonys, $180,000 was a loan from Devere to the Andonys. That loan was not consideration given by Packham but rather a loan from Devere and was not consideration of any value or consideration at all as it had to be repaid and the Andonys paid interest to Statewest on the loan. Devere and Packham have not advanced an argument that that $180,000 loan had any particular value. 396 In relation to the balance of the proceeds of the $475,000 loan, a further $120,000 was a loan from Packham to the Andonys. 397 As with the $180,000 loan from Devere, the $120,000 loan was not consideration of value or any consideration given for the shares. It had to be repaid and the Andonys paid interest on that loan to Statewest. 398 It follows, accordingly, that it is only the balance of the $475,000 loan, namely, $172,229.50 that was not a loan. That appears to be the amount that constitutes consideration given by Packham for the transfer of the shares. 399 The value of the shares in Devere that Packham acquired in 2001 was 50% of the value of the whole of the Dongara Land because at the date of the issue of the shares to Packham, Devere owned all of the Dongara Land. The Andonys owed Devere $180,000; Devere owed Packham $180,000 (Devere may also have owed the Andonys $45,000; Devere had no other assets or liabilities). 400 The net assets of Devere equated to no more than the value of the Dongara Land. 401 The transfer of the Dongara Land was made at an undervalue. I have concluded that it was worth $600,000 (see [271]). The consideration given by Packham of not more than $172,229.50 was less than 50% of the value of the land at this time. 402 The applicants must repay to Packham pursuant to s 120(4) of the Bankruptcy Act $172,229.50 if they elect to avoid the transfer. 403 Further, I find that Mrs Andony did not sign the 2003 Agreement or the share transfer form. The issue was not pressed in cross-examination of Mrs Andony. It was however put to Mr Andony, in effect, that he forged his wife's signature on the 2003 Agreement. Mr Andony denied the allegation when it was put to him. His evidence was that he gave the 2003 Agreement to Mr Fazio with only his signature on it rather than that of Mrs Andony. At that time his signature was not witnessed. In any event, the allegation does not sit well with the previous course of conduct on the part of Mr Andony which I accept. That previous course of conduct was that Mrs Andony signed all previous documents herself on being presented with them by Mr Andony with little or no explanation. All decisions in relation to such business activities were made by Mr Andony himself. If he had presented the agreement at all, Mrs Andony would have signed it if he had asked her to do so. 404 Again, Mr Fazio could have been called but was not. He did not give evidence as to the state of the 2003 Agreement when he received it from Mr Andony. He did not give evidence as to whether it bore the signature of Mrs Andony or any witness. I infer from Mr Fazio's unexplained failure to give evidence on this topic that he would have been unable to assist the contention raised by Devere and Packham to the effect that the Agreement and share transfer had been executed by Mrs Andony or by Mr Andony having forged her signature at the point in time when they were provided to Mr Fazio. 405 Mrs Andony's interest in the jointly held shares, therefore, was not affected by the subsequent registration of the share transfer form because she had neither agreed nor consented to the transfer of her interest. The interest remained hers until the commencement of the bankruptcy when the interest vested in the applicants. In those circumstances, the applicants are 'aggrieved persons' for the purposes of s 175 CA and are entitled to have Devere's Share Register of Members corrected. The applicants themselves are also entitled as a result of s 1072E(6) CA to be registered as the holders of that interest. 406 There is no challenge to the fact that Mr Andony signed both the 2003 Agreement and the share transfer form. As a result, as far as his interest in the jointly held shares were concerned, the effect under the 2003 Agreement was that the Unit was to be sold to repay the loan of $120,000 from Statewest to Packham of which $120,979 had been on-lent to the Andonys. Packham was to receive the balance of the proceeds of sale of the Unit after the $122,000 loan had been repaid. If Mr Andony failed to make certain repayments to Statewest of other debts when required, Packham was at liberty to register the share transfer form to transfer the joint shares to Packham and the registration of the share transfer form would discharge all debts owed by Mr Fazio and the Andonys and their respective related companies to each other. 407 The share transfer form was subsequently registered by Packham in June 2003. The consideration which was expressed in the share transfer form for the joint shares was the sum of $311,111.08. 408 However, the only evidence is that this sum was never paid. 409 At most the consideration given by Packham for the shares was $265,979. This was comprised of Packham forgiving or discharging the debts owed to it by the Andonys of $120,000 (advanced by Packham at the time of the 2001 Agreement), $120,979 (advanced by Packham in May 2002 from monies borrowed by Packham from Statewest on security of the Unit), $25,000 (being the amount on-lent by Packham to the Andonys from the $150,000 loan Packham took out with Statewest in May 2002). These payments have been agreed. If the applicants elect to void the transfer this sum is to be repaid pursuant to s 120(4) of the Bankruptcy Act. 410 Finally, I find that there was also an invalid transfer of the Andonys' individual shareholding. 411 After the transfer or purported transfer of the Andonys' joint shareholding of 1,111,111 shares in June 2003, each of the Andonys retained a single share held in Devere from the outset. Unbeknown to them however, by undated share transfer forms stamped on 10 June 2004, those shares were purportedly also transferred to Packham. 412 There is no contention that the Andonys consented to or authorised the transfer of their respective remaining share. It is clear that Mr Fazio purported to sign as seller of each share pursuant to a power of attorney under the Shareholders' Agreement. However, the relevant clause of the Shareholders' Agreement relied upon to authorise the transfer had no application. The purported transfer was obviously not made pursuant to any provision of the Shareholders' Agreement and there was no other power of attorney. At some time before 10 June 2004, Packham became the registered holder of those shares. 413 In relation to those individual shares held by Mr and Mrs Andony, the position is the same as those with respect to those held jointly. The interest they had in those shares was not affected by the subsequent registration of the share transfer form. It remained their interest until the commencement of their respective bankruptcies when the interest vested in the applicants by operation of law. Accordingly, the applicants are entitled, in those circumstances and pursuant to s 175 and s 1072E CA to orders for correction of Devere's Register of Members and the registration of the applicants as the holders of those shares.

SUMMARY OF CONCLUSIONS 414 I will therefore summarise my conclusions from the foregoing analysis. 415 The May 2001 transfer from the Andonys to Devere of the one-third interest in the Dongara Land is void against the applicants pursuant to s 120(1) of the Bankruptcy Act. No consideration was given by Devere for the transfer. The market value of the one-third interest in the Dongara Land as at the date of the transfer was $200,000, the Dongara Land having a total value of $600,000 (see [271] above). 416 As to the June 2007 transfer to Castleworld, the transfer of the Andonys' original one-third interest in the Dongara Land from Devere to Castleworld in June 2007 is void against the applicants pursuant to s 120 of the Bankruptcy Act. The Dongara Land then had a value of $1,900,000 (see [277] above). 417 I reach this conclusion regardless of the onus of proof in relation to s 120(6) of the Bankruptcy Act. I have treated the onus as resting on the applicants but being an onus which readily shifts to the 'transferee' insofar as matters solely within the knowledge of the 'transferee' are concerned. Castleworld did not acquire the one-third interest in the Dongara Land from Devere in good faith. The consideration given by Castleworld for the transfer of the one-third interest in the Dongara Land was not at least as valuable as the market value of that interest. 418 I do not accept the indefeasibility argument raised by Castleworld. In that regard and relevantly to this particular case I do not consider that the rights created by s 120 of the Bankruptcy Act in favour of the applicants were affected by any of the indefeasibility provisions under the TLA and in particular, by ss 52, 63, 67, 68, 134, 199 and 202. 419 If I am wrong in that regard, I would consider that s 120 of the Bankruptcy Act would be inconsistent with those provisions of the TLA and accordingly pursuant to s 109 of the Constitution, s 120 of the Bankruptcy Act would prevail over the State provisions to the extent of any inconsistency. I reiterate, however, that I do not consider that the indefeasibility provisions operate in the circumstances. 420 If the indefeasibility provisions do prevail, then I do not accept the applicants' contention that Castleworld procured its registration as proprietor of the Dongara Land by fraud such that its interest is subject to the rights of the applicants created pursuant to s 120 of the Bankruptcy Act with respect to the one-third interest in the land. 421 The Castleworld defence of estoppel is not made out. 422 The Castleworld defence under the Fair Trading Act is not made out. Further, the applicants have not breached any duty of care owed to the respondents. 423 There is, therefore, no set-off available to Castleworld in respect of loss or damage caused to it. 424 Both Devere and Packham are liable to account to the applicants for the proceeds of the sale of the one-third interest in the Dongara Land to Castleworld as monies had and received for the use of the applicants. 425 The applicants are entitled to equitable compensation from Devere arising from the sale of the one-third interest in the Dongara Land to Castleworld as the transfer of the one-third interest constituted a breach of trust. The amount of the equitable compensation is to be the subject of further submissions. 426 The issue of 1,111,113 shares in Devere to Packham in November 2001 is void against the applicants pursuant to s 120(1) of the Bankruptcy Act. The consideration given by Packham for the issue of the shares was at most $172,229.50. The market value of the shares as at the date of transfer was $300,000, the Dongara Land then having a value of $600,000. 427 The transfer to Packham in June 2003 of Mr Andony's interest in 1,111,111 shares in Devere held jointly with Mrs Andony is void against the applicants pursuant to s 120(1) of the Bankruptcy Act. There being no proven consideration given by Devere for the transfer of Mr Andony's interest whereas the market value of Mr Andony's interest in the shares as at the date of transfer was $200,000, being an undivided half share in 50% of the Dongara Land, which I have found to have a value of not more than $800,000 at that time (see [264] above). 428 The purported transfer to Packham of Mrs Andony's interest in 1,111,111 shares in Devere held jointly with Mr Andony was not a valid transfer. 429 The transfer to Packham in June 2003 of the 1,111,111 shares in Devere jointly held by the Andonys, alternatively, was void against the applicants pursuant to s 120(1) of the Bankruptcy Act. Consideration for the shares being $265,979 and the market value for the shares as at the date of transfer was $400,000. 430 The transfer of the remaining two shares in Devere to Packham by each of Mr Andony and Mrs Andony were both invalid.

INTERIM DISPOSITION 431 The parties have requested, quite appropriately, that at least in the first instance, I record my findings of fact and conclusions on the law to enable them to consider their respective positions. 432 I propose publishing judgment, in effect, by two steps. These reasons will be published in open court and counsel will be invited to make further submissions as to the appropriate final orders which should follow. The following orders will be made: 1. The applicants do file and serve within 21 days a minute of orders and submissions to reflect these reasons and conclusions. 2. The respondents do file and serve within 21 days a minute and submissions in response. 3. There be general liberty to apply. I certify that the preceding four hundred and thirty-two (432) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher.