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.