McMillan v Warner (Trustee) [2022] FCAFC 20

Federal Court of Australia

Appeal from:	Warner (Trustee), in the matter of McMillan (Bankrupt) v McMillan [2020] FCA 1759

File number(s):	NSD 191 of 2021

Judgment of:	LOGAN, FARRELL AND HALLEY JJ

Date of judgment:	23 February 2022

Catchwords:	BANKRUPTCY – appeal – where property was transferred to the appellant for $1 and the transferor subsequently became bankrupt – where 16 years had elapsed between the transfer and bankruptcy – where there was no temporal nexus between the creditors at the time of the transfer and the subsequent bankruptcy –where the primary judge rejected the transferor’s evidence as to his purpose in making the transfer – whether the transferor’s main purpose was to prevent the property becoming divisible among creditors or to hinder or delay the process of making that property available for division among creditors in contravention of s 121(1)(b) of the Bankruptcy Act 1966 (Cth) – whether the primary judge erred in concluding that a reasonable and definite inference was available that the transferor’s main purpose was to defeat creditors – whether the primary judge made findings that went outside the pleaded case – whether the primary judge erred in making an adverse credibility finding against the transferor – whether the transferor had embarked upon a risky venture –– appeal allowed EVIDENCE – whether the primary judge erred in drawing Jones v Dunkel inferences

Legislation:	Bankruptcy Act 1966 (Cth) ss 120, 121 Evidence Act 1995 (Cth) s 140

Cases cited:	Abalos v Australian Postal Commission (1990) 171 CLR 167; [1990] HCA 47 Brunskill and Another v Sovereign Marine & General Insurance Co Ltd and Others (1985) 62 ALR 53; [1985] HCA 61 Cannane v J Cannane Pty Ltd (in Liq) (1998) 192 CLR 557; [1998] HCA 26 Chong & Anor v CC Containers Pty Ltd & Ors (2015) 49 VR 402; [2015] VSCA 137 Devries v Australian National Railways Commission (1993) 177 CLR 472; [1993] HCA 78 Ebner v Official Trustee in Bankruptcy (1999) 91 FCR 353; [1999] FCA 110 Ex parte Russell; In re Butterworth (1882) 19 Ch D 588 Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 Jadwan Pty Ltd v Rae & Partners (A Firm) (2020) 278 FCR 1; [2020] FCAFC 62 Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 Jones v Hyde (1989) 85 ALR 23; [1989] HCA 20 Lee v Lee (2019) 266 CLR 129; [2019] HCA 28 Mackay v Douglas (1872) LR 14 Eq 106 Micheletto (Trustee), in the matter of El-Debel (Bankrupt) v El-Debel [2020] FCA 1031 Official Trustee v Alvaro (1996) 66 FCR 372 Owners of SS Hontestroom v Owners of SS Sagaporack [1927] AC 37 at 47 Prentice v Cummins (2002) 124 FCR 67; [2002] FCA 1503 The Trustees of the Property of Cummins (A Bankrupt) v Cummins (2006) 227 CLR 278; [2006] HCA 6 Trkulja v Markovic [2015] VSCA 298 Warner (Trustee), in the matter of McMillan (Bankrupt) v McMillan [2020] FCA 1759 Warren v Coombes (1979) 142 CLR 531 Williams v Lloyd (1934) 50 CLR 341; [1934] HCA 1

Division:	General Division

Registry:	New South Wales

National Practice Area:	Commercial and Corporations

Sub-area:	General and Personal Insolvency

Number of paragraphs:	221

Date of hearing:	24 August 2021

Counsel for the Appellant:	Mr J Stoljar SC with Mr JR Willis

Solicitor for the Appellant:	Somerset Ryckmans

Counsel for the Respondent:	Mr T Alexis SC with Mr D Mackay

Solicitor for the Respondent:	Diamond Conway

ORDERS

		NSD 191 of 2021

BETWEEN:	KARIN ELISABETH MCMILLAN Appellant
AND:	ANTHONY JOHN WARNER IN HIS CAPACITY AS TRUSTEE IN BANKRUPTCY OF THE ESTATE OF BRIAN MCMILLAN Respondent

order made by:	LOGAN, FARRELL AND HALLEY JJ
DATE OF ORDER:	23 FEBRUARY 2022

THE COURT ORDERS THAT:

1. The appeal be allowed.

2. The orders made by the Court on 9 February 2021 be set aside and in lieu thereof it be ordered that:

(a) the application be dismissed; and

(b) the applicant, Anthony John Warner in his capacity as trustee in bankruptcy of the estate of Brian McMillan, pay the costs of the respondent, Karin Elisabeth McMillan.

3. The respondent to the appeal, Anthony John Warner in his capacity as trustee in bankruptcy of the estate of Brian McMillan, pay the appellant’s costs of the appeal.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

Introduction

1 These reasons concern an appeal from orders of a judge of this Court made on 9 February 2021, giving effect to reasons published on 10 December 2020: Warner (Trustee), in the matter of McMillan (Bankrupt) v McMillan [2020] FCA 1759 (J).

2 The proceedings before the primary judge concerned an allegation by the trustee of the bankrupt estate of Mr Brian McMillan (Trustee) that a transfer of his interest in a property at 23 Hedges Avenue, Strathfield, New South Wales (Strathfield property) to his wife, the appellant, Mrs Karin Elisabeth McMillan, was void pursuant to ss 120 or 121 of the Bankruptcy Act 1966 (Cth) (Act).

3 The primary judge found that the transfer by Mr McMillan of his interest in the Strathfield property in around May 2002 (Property Transfer) was void pursuant to s 121 of the Act because his main purpose in transferring the Strathfield property into the sole name of Mrs McMillan was either to prevent the property becoming divisible among his creditors or to hinder or delay the process of making that property available for division among his creditors.

4 Mrs McMillan broadly contends in her Notice of Appeal that the primary judge:

(a) wrongly departed from the case that had been pleaded against her (Ground 3);

(b) erred in rejecting Mr McMillan as a witness of truth and rejecting his evidence as to purpose in making the Property Transfer (Ground 3);

(c) erred in finding that the main purpose of Mr McMillan in transferring his interest in the Strathfield property to her was, in substance, to prevent, hinder or delay the property from becoming divisible among his creditors (Ground 4(a) to (p));

(d) erred in drawing Jones v Dunkel inferences by reason of the failure of Mrs McMillan and the McMillans’ accountant, Mr Geoffrey Vince, to give evidence (Ground 5); and

(e) by reason of the above errors, erred in declaring the Property Transfer void as against the Trustee pursuant to s 121 of the Act and in declaring that Mr McMillan’s one half share in the Strathfield property vested in the Trustee pursuant to s 58(1) of the Act (Grounds 1 and 2).

5 For the reasons that follow we have concluded that the primary judge did not wrongly depart from the case that was pleaded against Mrs McMillan, did not err in rejecting Mr McMillan’s explanation for the Property Transfer or in drawing Jones v Dunkel inferences, but did err in finding that the main purpose of Mr McMillan in making the Property Transfer was, in substance, to prevent, hinder or delay the Strathfield property from becoming divisible among his creditors.

Legal principles

6 Sections 121(1) to (3) of the Act provide as follows:

121 Transfers to defeat creditors

Transfers that are void

(1) A transfer of property by a person who later becomes a bankrupt (the transferor) to another person (the transferee) is void against the trustee in the transferor’s bankruptcy if:

(a) the property would probably have become part of the transferor’s estate or would probably have been available to creditors if the property had not been transferred; and

(b) the transferor’s main purpose in making the transfer was:

(i) to prevent the transferred property from becoming divisible among the transferor’s creditors; or

(ii) to hinder or delay the process of making property available for division among the transferor’s creditors.

…

Showing the transferor’s main purpose in making a transfer

(2) The transferor’s main purpose in making the transfer is taken to be the purpose described in paragraph (1)(b) if it can reasonably be inferred from all the circumstances that, at the time of the transfer, the transferor was, or was about to become insolvent.

Other ways of showing the transferor’s main purpose in making a transfer

(3) Subsection (2) does not limit the ways of establishing the transferor’s main purpose in making a transfer.

7 Section 121(9) provides as follows:

Meaning of transfer of property and market value

(9) 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

8 In contrast to the current language of s 121(1), the predecessor provision to s 121(1) was expressed in terms of a “disposition of property … with intent to defraud creditors, not being a disposition for valuable consideration in favour of a person who acted in good faith…” With reference to this provision, Brennan CJ and McHugh J in Cannane v J Cannane Pty Ltd (in Liq) (1998) 192 CLR 557; [1998] HCA 26 (Cannane) at [10] concluded:

… The critical term for present purposes is “with intent to defraud creditors”. Provisions of this kind, based on 13 Eliz I c 5, have been considered by courts in various jurisdictions and it is clearly established that the party seeking to avoid a disposition of property has the onus of proving an actual intent by the disponor at the time of the disposition to defraud creditors. The creditors whom the fraudulent disponor of property might intend to defeat need not be existing creditors; they may be future creditors. The intent prescribed by s 121(1) is an intent to defraud any present or future creditors. But, as the intent must accompany the disposition, it must relate to the effect of disposing of property then existing.

(Footnotes omitted, emphasis in original.)

9 Their Honours continued at [13] and [14]:

13 If property be disposed of by sale and the sale price received by the disponor is equal to the true value of the property at the time of the disposition, the creditors have an undepleted fund against which to prove their debts. But if property is sold for an undervalue or is given away, that fact is relevant to the intent to be attributed to the disponor in disposing of the property. The value of property at the time of disposition may reflect, of course, the prospect of its future increase or decrease in value. But disposition of property at an undervalue is only a fact from which, dependent on the surrounding circumstances, an inference of fraudulent intent may be drawn …

14 Section 121 is not enlivened merely by showing that the disposition has reduced the assets available to the creditors when the disponor is adjudicated bankrupt. It is the disponor’s intent to deprive creditors of assets against which (or against the proceeds of which) they would otherwise be entitled to prove their debts that enlivens the operation of s 121.

(Footnotes omitted.)

10 Justice Gummow observed in Cannane at [54]:

The expression “with intent to defraud” does not have any universal connotation applicable in all statutory contexts in which it is found…. However, the appellants properly relied upon a passage in the judgment of Dixon CJ in Hardie v Hanson [(1960) 105 CLR 451]. This case arose under s 281 of the Companies Act 1943 (WA) and concerned the personal responsibility of a director for the debts or other liabilities of a company whose business had been carried on in the course of the winding-up “with intent to defraud creditors of the company or creditors of any other person”. Dixon CJ said:

“The phrase ‘intent to defraud creditors of the company’ suggests that present or future creditors of the company will, if the intent is effectuated, be cheated of their rights. An intent to defraud creditors has been described, for the purposes of bankruptcy legislation, as an intent by deceit to deprive creditors of something to which they are entitled.”

In the same case, Kitto J said that the onus lay on the liquidator:

“to prove affirmatively that the carrying on of the company’s business during the relevant fifteen months was characterized by an intent – which in the circumstances means an intent on the part of [the director] – to defraud creditors of the company. An actual purpose, consciously pursued, of swindling creditors out of their money had to be established against [the director] before a declaration under the section could be made.”

(Footnotes omitted.)

11 The following principles in relation to the operation of s 121 of the Act, in its current form, emerge from the decision of Sackville J in Prentice v Cummins (2002) 124 FCR 67; [2002] FCA 1503 (Prentice).

12 First, if a trustee does not rely on the presumption in s 121(2) it will be necessary for the trustee to establish that the transferor’s subjective purpose fell within the purposes described in s 121(1)(b): Prentice at [95].

13 Second, the expression “main purpose” is not defined in the Act. As Sackville J explained in Prentice at [96]:

The relevant dictionary definition of “main” is “chief; principal; leading”. The concept is similar to that of the “dominant purpose” used in s 177A(5) of the Income Tax Assessment Act 1936 (Cth) (ITAA) (although the “dominant purpose” under Pt IVA of the ITAA is to be assessed objectively by reference to its objective facts). In Federal Commissioner of Taxation v Spotless Services Ltd (1996) 186 CLR 404 at 416, the joint judgment interpreted “dominant” as meaning “the ruling, prevailing or most influential” purpose. A transfer of property will be within s 121(1)(b) if the transferor's principal or leading purpose was to prevent the transferred property from becoming divisible among his or her creditors, or to hinder or delay the process of making property available for division among the creditors. The transfer can be caught by s 121 even though the transferor had other purposes in mind.

14 Third, a trustee, as the party seeking to impugn the transfer, bears the onus of establishing that the terms of s 121(1) have been satisfied: Prentice at [97].

15 Fourth, a Court can infer that in all the circumstances, independently of the solvency of the transferor, a transferor’s main purpose was that described in s 121(1)(b): Prentice at [98].

16 Fifth, a transferor’s main purpose may fall within s 121(1)(b) even if at the time of the transfer the transferor has no creditors or is able to satisfy all of his or her creditors: Prentice at [99].

17 Sixth, if a person makes a voluntary settlement immediately before entering into a “financially hazardous venture”, this could establish an intention to defraud his or her creditors notwithstanding that there were no outstanding creditors at the time of the transfer: Prentice at [99]; citing Mackay v Douglas (1872) LR 14 Eq 106 (Mackay) at 118-20, (Malins V-C); Official Trustee v Alvaro (1996) 66 FCR 372 (Alvaro) at 419-21 (Wilcox and Cooper JJ); see also Ex parte Russell; In re Butterworth (1882) 19 Ch D 588 (Russell) at 598-9 (Jessel MR), 601 (Lindley LJ); Williams v Lloyd (1934) 50 CLR 341; [1934] HCA 1 (Williams) at 361 (Starke J) (in the minority in the result, but citing with approval Mackay and Russell).

Background facts

18 The following facts, most of which come from factual findings made by the primary judge, are relevant to a resolution of this appeal.

19 In 1990, Mr McMillan commenced a panel beating and spray painting business. The vehicles that he repaired included prestige motor vehicles. He conducted the business under the name of McMillan Prestige Car Repairs Pty Ltd (McMillan Prestige Car Repairs).

20 In May 1995, Mr and Mrs McMillan purchased the Strathfield property as joint tenants. The purchase price for the property was $320,000. The purchase was partially funded by a $103,000 loan from the Commonwealth Bank (CBA loan agreement). The deposit of $32,000 was provided by a loan from Mrs McMillan’s mother.

21 The primary judge did not make any express findings as to how the balance of the purchase price was paid. The evidence before the primary judge otherwise disclosed, however, that Mr and Mrs McMillan sold a property at 77 Amaroo Avenue, Georges Hall, New South Wales, (Georges Hall property) for a sale price of $280,000 in May 1995. Mrs McMillan submits, and we accept, that the balance of the purchase price for the Strathfield property was provided from the proceeds of the sale of the Georges Hall property.

22 The Georges Hall property had been purchased in March 1991 from the proceeds of the sale of two properties owned solely by Mrs McMillan.

23 In the period from late 2000 to the beginning of 2001, a proposal emerged from Rolls-Royce that Mr McMillan would operate a car dealership in addition to his prestige car repair business. In a letter dated 31 January 2001, the Regional Manager, Australia and New Zealand, for Rolls-Royce and Bentley, proposed that McMillan Prestige Car Repairs would be appointed as the sole authorised dealer for Rolls-Royce & Bentley Motor Cars for New South Wales and the Australian Capital Territory (Bentley Dealership). A condition of the proposed appointment was that the premises at the corner of Queens Road and Regatta Road in Canada Bay, Sydney were to be redeveloped by 1 August 2001. The proposed date of commencement of the Bentley Dealership was 1 February 2001 and Rolls-Royce was to provide an interest free loan of $450,000 for the stated purpose of supporting “the establishment of this new operation”.

24 On 1 February 2001, McMillan Prestige Car Repairs entered into a “Dealer Agreement” with Rolls-Royce & Bentley Motor Cars Limited (Agreement). The Agreement included terms with respect to the maintenance of stock and demonstrator vehicles, spare parts and several appendices, including an appendix 5, which relevantly provided in clause 9 that:

Unless otherwise agreed in writing between the parties, the full net price for Contractual Products shall be paid by the Dealer prior to delivery.

25 The effect of clause 9 was that McMillan Prestige Car Repairs had to secure finance for the full net purchase price for each vehicle prior to the delivery and completion of the sale of a vehicle.

26 On 18 April 2001, the Commonwealth Bank approved a loan facility to McMillan Prestige Car Repairs to facilitate the purchase of two vehicles (CBA business loan). The security provided to support the CBA business loan included a “Guarantee Joint and Several unlimited as to amount” from both Mr and Mrs McMillan and a second registered mortgage over the Strathfield property.

27 By a letter dated 11 June 2001, Mr Mark Tennant, the then managing director, Asia-Pacific, of Rolls-Royce and Bentley Motor Cars, wrote to Mr McMillan in these terms:

Dear Brian,

I thought it would be useful ahead of my visit with Neil Morley in a couple of weeks, to give you some notice of the main areas we would like to discuss when we are with you. As you know, Neil’s role is, in broad terms, to ensure that our retail network develops the appropriate processes, practices and presentation for the Bentley marque – in short, to make sure our dealers are ready for MSB. In this context, Neil was the co-sponsor for Paul Evans’ recent visit to you, and much of our agenda is therefore derived from Paul’s findings.

FINANCE

This remains one of our biggest concerns, but in good part because we have absolutely no visibility of the financial state of your business.

It is of paramount importance that you establish the business on a solid financial footing. The impression we get at the moment is of an absence of financial separation between your personal situation and that of the business. Given the volumes we anticipate for NSW with MSB, you run the risk of being unable to make the best of the opportunity due to cash flow constrains. For example, you should anticipate a high volume of trade-ins against MSBs, both Rolls-Royce & Bentley product and other luxury marques. Our concern is that you will be unable to sustain the through-put of trade-ins, and thereby turn away MSB business.

As I hope you realize from our discussions on floor planning, and most recently the introduction to Volkswagen Financial Services, we are very keen to support you in this respect – but VWFS or any other finance company will require far greater transparency of your financial situation before agreeing terms.

Most immediately, therefore, I hope you have a good meeting with Oliver Schmitt and his colleague this week, and can come to some interim floor planning arrangements on your two landed cars to release funds for payment of the two units now at Crewe.

28 By late June 2001, Mr McMillan was taking steps to arrange for a “temporary facility” to put in place until the Bentley Dealership was “up and running in Jan 2002”.

29 On 2 July 2001, Mr McMillan responded to Mr Tennant’s letter, stating in part that his “personal investment” was involved in the Bentley Dealership and he had no alternatives to “separate until a financial group is willing to support a floor plan – let’s hope VW come through”.

30 At this time, the corporate structure of the McMillan group of companies and trusts was as follows:

(a) Classic Auto Search Pty Ltd (Classic Auto Search) held 40% of the shares in McMillan Prestige Car Repairs and the other 60% were held by Mr McMillan;

(b) Mr and Mrs McMillan each held 50% of the shares in Classic Auto Search;

(c) Classic Auto Search was the corporate trustee of the McMillan Family Trust, the McMillan Investment Trust and the McMillan Superannuation Fund;

(d) Mr and Mrs McMillan were the only members of the McMillan Superannuation Fund; and

(e) the McMillan Superannuation Fund was the sole unitholder in the McMillan Investment Trust.

31 On 19 September 2001, the St George Bank provided McMillan Prestige Car Repairs with an “Indicative Finance Facilities Offer”. The St George offer included a bailment facility of $2,000,000 and an import letter of credit facility of $1,500,000. The security sought to support the facilities comprised:

(a) a first ranking fixed and floating charge over all the assets and undertakings of McMillan Prestige Car Repairs;

(b) a first ranking mortgage over the Strathfield property; and

32 The proposed securities were stated to secure the “sum of the total amount owing for all facilities and other amounts” with no limits on the amounts to be secured.

33 On 21 September 2001, the Commonwealth Bank approved an increase of $975,000 to the CBA loan agreement against an existing approved limit of $300,000. The increase in the limit permitted Classic Auto Search, as the trustee of the McMillan Investment Trust, to purchase the properties at 21 and 23 Regatta Road, Five Dock. The purchase price for each property was $536,250. The security to be taken by the Commonwealth Bank to secure the increase in the limit of the CBA loan agreement was recorded in a security schedule provided by the bank as comprising:

(a) a joint and several guarantee unlimited in amount from each of Mr and Mrs McMillan;

(b) a guarantee from McMillan Prestige Car Repairs supported by a first mortgage over its assets;

(d) a first registered mortgage from Classic Auto Search and the McMillan Investment Trust over the properties at 19, 21 and 23 Regatta Road; and

(e) an equitable mortgage from Classic Auto Search and the McMillan Investment Trust “over the whole of its assets”.

34 Notwithstanding the increase to the CBA loan agreement offered by the Commonwealth Bank, Mr McMillan decided to proceed with the facilities offered by the St George Bank (St George facilities).

35 In November 2001, Mrs McMillan ceased to be a director of McMillan Prestige Car Repairs.

36 On 19 November 2001, the St George Bank paid out the Commonwealth Bank a total amount of $899,479.05, comprising a payout of the CBA business loan in an amount of $522,211.67 and a payout of two “CBA Home Loans” in the amounts of $162,120.14 and $215,165.24, respectively. As foreshadowed above, the security taken by the St George Bank to support the St George facilities included a guarantee from Mrs McMillan.

37 On the same date, Mr McMillan in his own right and pursuant to a power of attorney on behalf of Mrs McMillan executed a mortgage over the Strathfield property in favour of the St George Bank.

38 On 19 April 2002, McMillan Prestige Car Repairs and Volkswagen Financial Services Australia Limited (VWFS) entered into a financing facility (VWFS floor plan facility). The agreement was executed by Mr McMillan as the sole director of McMillan Prestige Car Repairs. The agreement was secured by a fixed and floating charge and collateral securities. The collateral securities were identified as:

Guarantee and Indemnity given by Brian Douglas McMillan, Classic Auto Search Pty Limited in its own right and as trustee for McMillan Family Trust in favour of VWFS dated on or about the date of this Charge.

39 The maximum prospective liability under the VWFS floor plan facility was stated to be $5,000,000.

40 In May 2002, Mr and Mrs McMillan retained a law firm to provide advice on “General Personal Affairs” and “Estate Planning”, including with respect to “the change in Trustee”. In a letter dated 3 May 2002, the law firm noted:

Geoff has asked us to assist by preparing documents to facilitate the change in Trustee of the McMillan Family Trust, from Classic Autosearch Pty Limited to another company which Geoff will incorporate. In order to do so, we will ask Geoff for a copy of the McMillan Family Trust Deed, together with a copy of your VW financing documents. At that time, we will advise further on what is necessary.

41 The reference to “Geoff” was a reference to Mr Geoffrey Vince, the accountant for the McMillan group of companies and also to Mr and Mrs McMillan.

42 On 22 May 2002, Mr and Mrs McMillan obtained a valuation of the Strathfield property from a firm of property consultants in an amount of $800,000.

43 By a transfer dated 25 May 2002, but executed sometime between 19 June 2002 and 8 July 2002, the ownership of the Strathfield property was transferred from the joint names of Mr and Mrs McMillan into the sole name of Mrs McMillan for a stated consideration of $1.

44 On 26 June 2002, Douglin Pty Ltd (Douglin) replaced Classic Auto Search as the trustee of the McMillan Family Trust. The McMillan Family Trust retained its 40% shareholding in McMillan Prestige Car Repairs. Classic Auto Search remained as trustee of the McMillan Investment Trust and the McMillan Superannuation Fund.

45 On 18 July 2002, Mrs McMillan executed a mortgage over the Strathfield property in favour of the St George Bank recording Mrs McMillan as the sole mortgagor.

46 On 12 December 2002, the Commonwealth Bank provided an $850,000 facility to Douglin, as the trustee of the McMillan Family Trust, secured by, inter alia, mortgages over the Strathfield property and personal guarantees from Mr and Mrs McMillan and McMillan Prestige Car Repairs.

47 In 2004, Mr McMillan’s business was expanded when McMillan Prestige Car Repairs entered into a car dealership with Volkswagen (VW Dealership).

48 On 6 November 2018 a sequestration order was made against the bankrupt estate of Mr McMillan and the Trustee was appointed on that date over Mr McMillan’s bankrupt estate.

Mr McMillan’s explanation of his purpose

49 In assessing whether the Trustee had established that the main purpose of Mr McMillan in transferring the Strathfield property to Mrs McMillan was to defeat creditors, the primary judge first considered the explanation provided by Mr McMillan for the transfer.

50 His Honour observed that Mr McMillan gave evidence that shortly after the death of Mrs McMillan’s father in February 2002, he had a conversation with her to the following effect:

Karin: I want the house to be in my name. It should have been anyway given I paid for Georges Hall and it was used to buy Strathfield.

[Mr McMillan]: I am happy with that.

51 The primary judge then reproduced the following extract from the cross examination of Mr McMillan in his reasons at J [63]:

And I gather that your response to that was to accept what she asked and said, in effect, yes? –It took me a whole of a moment to answer yes. Whatever she asked, I said yes. It was done out of love. It was done out of her request. I put no reason behind it. I didn’t have any thinking behind it. I didn’t give it any consideration whatsoever.

So is this the position, then, that your wife expressed to you a belief that the home should be in her name because it was effectively hers anyway, is that how we understand it?––That’s how I always saw it.

…

So there was no issue between you and your wife as to your wife, as she would have it, effectively owning the home, is that right?––No issue whatsoever.

But at the time, as you would have his Honour accept, the request was made you knew that VW had not asked for a personal guarantee from her in relation to the new facility and did not require a mortgage over Strathfield; correct?––Correct.

And the purpose of transferring the property into your wife’s name was simply to protect the family home for your wife and your children in case the expanding business did not succeed as planned; correct?––100 per cent incorrect.

You see, I want to suggest to you …?––Incorrect. I’m sorry.

… that having regard to what we know was occurring at the time, the real purpose of the transfer was to protect the property – screen assets in your wife’s name from risks that were perhaps then unknown in relation to your expanding business venture; correct?––Incorrect.

Do you accept that in April 2002 there was risk associated with your expanding business at all?––I accept every business has a risk. I’m a businessman. I accept every business has risk.

And the purpose, may I suggest to you, based on Mr Vince’s advice to transfer the family home into your wife’s name, was so that it would be put out of reach of your creditors?–– Totally incorrect. I – I – if I could help you, I’ve only learnt about this terminology that you’re putting forward recently. At the time it was done out of integrity; it was done out of love. It was done – we didn’t have any thinking whatsoever – what you’re trying to frame, whatsoever, at all.

52 After expressly referring to this evidence from Mr McMillan, the primary judge concluded at J [64]:

Without necessarily rejecting the evidence of Mr McMillan, reasons for reservation spring from a series of challenges made to his credit and the reliability of his evidence by Senior Counsel on behalf of the Trustee. Although other Particulars separately expose further reason to question the reliability of Mr McMillan’s evidence, for present purposes it is difficult to unquestioningly accept his account that the Strathfield property was “hers anyway” in circumstances where:

• the finance provided by the Commonwealth Bank by way of mortgage to (inter alia) purchase the Strathfield property was a joint mortgage executed by both Mr and Mrs McMillan;

• the deposit of $32,000 initially provided by Mrs McMillan pursuant to a loan provided by her mother was repaid by McMillan Prestige Car Repairs Pty Ltd; and

• the mortgage repayments were paid by McMillan Prestige Car Repairs.

53 The primary judge considered that a “residual reason” for reservation was that Mr McMillan was a person somewhat “loose with truth”. He referred to an incorrect declaration that Mr McMillan had made in a statement of personal assets and liabilities in September 2005 in which he had listed his assets as including the Strathfield property and the two Stockton properties, each of which at that time was registered in Mrs McMillan’s name.

54 The primary judge stated that an additional reason for questioning the reliability of the account given by Mr McMillan was the failure of Mrs McMillan to give evidence, not directly as to main purpose, but rather as to the circumstances in which she had the conversation with Mr McMillan shortly after the death of her father and whether any advice had been given by Mr Vince, its content and any discussions she may have had with Mr McMillan concerning any such advice. The primary judge considered similar reservations arose by reason of the failure of Mr Vince to give evidence, particularly with respect to the advice he had given regarding the transfer of Mr McMillan’s interest in the Strathfield property to Mrs McMillan.

55 The primary judge then concluded at J [69] that Mr McMillan’s account of the circumstances in which the transfer of his interest in the Strathfield property to Mrs McMillan could not be accepted.

56 Mrs McMillan submits that any assessment of the weight to be given to the explanation given by Mr McMillan as to the purpose of the transfer of his interest in the Strathfield property to Mrs McMillan also needed to take into account the following evidence given by Mr McMillan immediately before the extract from the transcript relied upon by the primary judge at J [63], reproduced at [51] above:

So is your evidence that the idea or the concept to transfer the property into your wife’s name – that’s the family home property – was something that came from your wife and no one else, is that what you say?---That’s exactly what it is. That’s exactly what happened. My first – I just wish to assist you – my first factory was given to me by her father and her family, and that was in 1987 – I – 85. I ended up with the Rolls Royce and Bentley franchise, which was an enormous appointment in 1987. I got that due to their family. The home that I – when I first got married, was due to their family. My wife said to me in the kitchen of our home in early 2002, I think the Hedges Avenue property should be in my name. And I said no problem, talk to Geoff Vince. I didn't need any time to think about it. I didn’t know where it came from. I didn’t know what she was thinking. But my wife did not – she was a good –she’s a great woman, and she was going through an awfully, awfully sad time with her father. And I said speak to Geoff Vince and he will organise it. And that is – that is it. Everything I had was because of that family; everything I had was because of her. I was given everything. My father died on Christmas day when I was 13 and I met her father when I was 15. He was my best friend. He was like a father. The question that was asked to me was so simple to give an answer to. I’m sorry, your Honour.

HIS HONOUR: No, don’t worry about it, Mr McMillan. If you want a break, just let me know.

MR ALEXIS: So, Mr McMillan, should we understand that after being married for about 15 years, your wife said to you that she wanted the house to be in her name, is that how we should understand what happened?---It’s a simple question. Exactly that.

57 We accept that this extract from the cross examination of Mr McMillan is relevant to an assessment of Mr McMillan’s stated purpose but we are not satisfied that the failure of the primary judge to expressly refer to it in his reasons demonstrates any appellable error in his rejection of Mr McMillan’s evidence as to his purpose in making the Property Transfer. It provides further context to the nature of his relationship with Mrs McMillan and her father but does not provide an alternative or materially different explanation of the decision by Mr McMillan to proceed with the Property Transfer.

58 The primary judge then turned to consider each of the particulars relied upon by the Trustee, in isolation, and then cumulatively. Before considering that reasoning of the primary judge it is necessary to determine whether the pleading and credit grounds of appeal have been established.

Pleading and Credit Appeal Grounds

Particulars do not support the inference of “main purpose” (Ground 3)

59 Mrs McMillan submits that the primary judge made findings which went beyond the pleaded case (pleading point).

60 The pleading point was advanced by Mrs McMillan in the context of Ground 3 of the Notice of Appeal. That ground of appeal was in these terms:

The trial judge erred in concluding that the Particulars relied on by the Respondent [at 55], when considered cumulatively or overall, supported the inference that the Bankrupt’s “main purpose” at the time he transferred his share of the Strathfield Property was for either of the purposes stated in s121(1)(b) of the Bankruptcy Act 1966 (Cth). Rather, the trial judge should have found that the Bankrupt’s main purpose for the transfer was because the Appellant had asked him to do it and it was “done out of love” or that there were conflicting inferences of equal degree of probability such that the Respondent did not discharge its onus of proof.

61 The Trustee provided the following particulars to paragraph 23 of the statement of claim in support of his contention that Mr McMillan’s main purpose was a purpose that fell within s 121(1)(b) of the Act (Main Purpose Particulars):

Particulars

(i) The market value of the Strathfield property as at 25 May 2002 was well in excess of $1.

(ii) At the time of the Purported Transfer the Bankrupt had creditors which included a mortgage to the St George Bank dated 19 November 2001 (mortgage number 8367685L) with the respondent for a loan up to the amount of $1.5 million.

(iii) At the time of the Purported Transfer the Bankrupt had guaranteed the facility provided by VWFS to the trustee of the McMillan Family Trust.

(iv) The Purported Transfer took place at the same time as the trustee of the McMillan Family Trust was replaced so the transfer appears to be part of a reorganisation of the McMillan Prestige Group of companies.

(v) Following the Purported Transfer:

(A) The respondent was not a director of any trading companies in the McMillan Prestige Group of companies; and

(vi) The Bankrupt was the sole director of all trading companies in the McMillan Group; At the time of the transfer the Bankrupt had embarked on a risky venture as follows:

(A) the replacement of the trustee of the McMillan Family Trust;

(B) companies with McMillan Prestige Group of companies held the VW dealership for Five Dock and the Sydney dealerships for both Bentley and Rolls Royce);

(C) companies within the McMillan Prestige Group of companies had recently purchased in September 2001 new premises at 21 and 23 Regatta Rd Five Dock NSW for the Bentley and Rolls Royce Dealership.

62 The primary judge considered each of the Main Purpose Particulars in turn but was not satisfied that any of them, in isolation, established a main purpose that would engage s 121(b) of the Act. We note that the allegation in sub-paragraph (vi)(B) with respect to the VW dealership was incorrect, that dealership was obtained subsequently. The primary judge did not make any findings or make any reference to the VW dealership except when quoting the content of particular (vi) at J [55] and [107].

63 The primary judge found that although none of the individual particulars was sufficient to establish a main purpose of preventing the Strathfield property from being divisible among creditors, or hindering or delaying the process of making the property available for creditors, once the “dots are joined” and the Main Purpose Particulars are considered “cumulatively or overall”, the conclusion is one that can “comfortably be reached”.

64 The primary judge found that the process of “joining the dots” necessarily focused primary attention on the circumstances and transactions preceding the transfer of the Strathfield property in around May 2002, together with a comparison of the objective facts in the period prior to mid to late 2001 and the facts which prevailed in the period prior to mid to late 2002.

65 The primary judge ultimately concluded at J [128]:

The simple facts are that prior to the May 2002 transfer, the Strathfield property was in joint names and Mr and Mrs McMillan had jointly guaranteed the debts being incurred; thereafter there was a gradual but consistent withdrawal of Mrs McMillan from any exposure to liability. The withdrawal from exposure to liability on the part of Mrs McMillan was not the result of any single isolated event but was a course which emerged from a series of events being pursued by Mr and Mrs McMillan over a number of years. Part of that withdrawal from exposure to liability and the protection of property from the claims of creditors or potential creditors was the transfer of the Strathfield property. And Mr McMillan facilitated that transfer – that was, it is concluded, his “main purpose” in signing the transfer. The fact that the sequestration order which resulted in Mr McMillan’s bankruptcy was made in 2018, some 16 years after the transfer of the Strathfield property, certainly invites scrutiny but ultimately says little as to the objectives being pursued by Mr McMillan at the time of the transfer.

(Emphasis added.)

66 Mrs McMillan contends that there was no pleaded case in relation to the period from mid 2001 to late 2002 nor to a series of events being pursued by Mr and Mrs McMillan over a number of years. The appellant further submits that, despite there being no pleaded allegations against Mrs McMillan herself, the primary judge made a finding that the Property Transfer was “part of a joint enterprise” involving Mrs McMillan “as an active agent”.

67 The appellant submits that given the seriousness of the allegations made by the Trustee, in effect, depriving creditors of their otherwise legitimate, expected and timely rights, s 140(2) of the Evidence Act 1995 (Cth) is engaged and allegations of that nature need to be pleaded precisely and with particularity.

68 The Trustee submits that no pleading point was taken at trial and no objection was ever raised that the detailed opening of the Trustee, tender of documents, cross examination of Mr McMillan or submissions by the Trustee went “beyond” the particulars. Moreover, the Trustee submits that there was no “joint enterprise” finding by the primary judge.

69 Mrs McMillan submits that neither she nor the Trustee “squarely addressed” the Court as to whether there had been a “gradual and consistent withdrawal” by her from any exposure to liability over a period of years and maintains that the “joint enterprise” finding while not expressly made was the “effect” of the withdrawal from liability findings made by the primary judge.

70 We accept that allegations of seeking to prevent property becoming divisible among creditors and hindering or delaying the process of making property available for division among creditors are serious and need to be pleaded and particularised with precision.

71 We are not satisfied, however, that the pleading point has been established.

72 First, the approach of the primary judge in assessing whether the particulars of Mr McMillan’s main purpose “considered cumulatively and overall” justify the finding of a purpose that enlivens s 121(1) of the Act is neither exceptional nor demonstrative of any error.

73 Second, the use of the phrase “joining the dots” is in context and in substance no more than a restatement in more colloquial terms of considering the particulars “cumulatively and overall”.

74 Third, the characterisation of the particulars considered cumulatively and overall as a “gradual but consistent withdrawal of Mrs McMillan from liability” does not give rise to a new case or a case outside the particulars. The matters relied upon to give rise to the alleged “main purpose” remain those identified in the Main Purpose Particulars. No application was made to enlarge or amend those particulars. The Main Purpose Particulars encompassed the transfer of the Strathfield property for $1, the mortgage with the St George Bank, Mr McMillan’s guarantee of the VWFS floor plan facility, the replacement of the trustee of the McMillan Family Trust, the resignation of Mrs McMillan as a director of any trading companies in the McMillan Prestige Group of companies and the purchase of the new premises at 21 and 23 Regatta Road.

75 The exercise undertaken by the primary judge in contrasting the position of Mr and Mrs McMillan before and after the Property Transfer and characterising the Bentley Dealership as a “risky venture” was not a new unpleaded case. Rather, they formed part of an evaluative assessment undertaken by the primary judge to determine whether an inference could be drawn from the Main Purpose Particulars, considered cumulatively and overall, that the main purpose alleged by the Trustee had been established.

76 Fourth, any evaluation of the main purpose of Mr McMillan alleged to arise from the Main Purpose Particulars, considered cumulatively and overall, needs to be assessed against all the objective circumstances. The primary judge did not err by considering or otherwise having regard to matters that might go beyond those particularised in order to provide a necessary context to the Main Purpose Particulars, including for the purpose of undertaking a before and after comparison of the respective positions of Mr and Mrs McMillan. In this regard it is important to bear in mind that the matters particularised were not limited to matters that occurred at the time of the Property Transfer. For example, necessarily, particular (v)(A) to the effect that “following” the Property Transfer, Mrs McMillan was “not a director of any trading companies in the McMillan Prestige Group of companies” was, in context, addressing her resignation as a director of McMillan Prestige Car Repairs in November 2001. The particular could not sensibly be construed as an allegation that Mrs McMillan ceased to be a director of the company at the same time or a time after the Property Transfer. By the time of the Property Transfer, Mrs McMillan had not been a director of the company for more than six months.

77 With respect, the primary judge correctly stated (at J [118]) that any inference as to the purpose of the transfer of Mr McMillan’s interest in the Strathfield property to Mrs McMillan must necessarily “be an inference primarily drawn from facts contemporaneous with or preceding May 2002” and that “[e]vents which took place thereafter may nevertheless potentially be confirmatory of a purpose previously being pursued”. We observe, at this point, that an apparent corollary of the second proposition is that subsequent events that might cast doubt on the existence of a postulated purpose may also be taken into account.

78 We also observe that we did not understand that by these statements that the primary judge was suggesting that he was seeking to expand the pleaded case beyond the Main Purpose Particulars, but rather, that he was making clear that any inference to be drawn from those particulars had to be considered in an appropriate context.

Adverse credibility finding against Mr McMillan

79 Mrs McMillan also challenges the adverse credit findings made by the primary judge against Mr McMillan, pursuant to or otherwise incidental to Ground 3 of the Notice of Appeal.

80 Mrs McMillan submits that the credit findings made by the primary judge against Mr McMillan that contributed to his Honour’s rejection of Mr McMillan’s evidence as to his main purpose in making the Property Transfer are susceptible to challenge because they were not stated to be based on “matters of demeanour”. She then submits that this Court should regard any adverse credit findings with some caution given the “ambiguity inherent” in the primary judge’s reasons. She also submits that in casting doubt on Mr McMillan’s evidence by referring to the Main Purpose Particulars, the primary judge’s reasoning is circular because it assumes the case against Mr McMillan and then relies on that assumption to cast doubt on Mr McMillan’s evidence.

81 With respect, we accept that there is some measure of ambiguity in the credit findings made by the primary judge. At J [64], after considering the evidence given by Mr McMillan as to his main purpose in making the Property Transfer, the primary judge noted that “[w]ithout necessarily rejecting the evidence of Mr McMillan” there were “reasons for reservation” that were stated to arise from a “series of challenges made to his credit and the reliability of his evidence by Senior Counsel on behalf of the Trustee”. At J [65], the primary judge stated a residual reason for “reservation” was that Mr McMillan was prepared to “present himself in a manner which best suited his purposes, with little regard for the factual accuracy of what was being said or represented”. As noted above, at J [66] to [68], the primary judge identified the failure of Mrs McMillan and Mr Vince to give evidence as additional reasons for “reservation”. At J [69], the primary judge concluded that:

Given these reasons for reservation, Mr McMillan’s account as to the circumstances in which he transferred the Strathfield property to his wife cannot be accepted.

82 The primary judge, however, also made the following observations at J [70]:

Such reasons for reservation in the acceptance of Mr McMillan’s evidence as to his purpose, however, do not necessarily lead to the acceptance of the Trustee’s claim. Reservation as to the reliability or credibility of Mr McMillan’s stated purpose for the transfer of the Strathfield property should not necessarily be translated into a total rejection of his evidence as being so implausible or unreliable that it should be rejected in its entirety. Reservation is simply a reason for caution in accepting (or not accepting) his evidence and a reason for testing his stated purpose against the inferences the Court was otherwise invited by the Trustee to draw from the available documents.

83 In context, the primary judge was expressing “reservations” as to the reliability of Mr McMillan’s evidence — not rejecting his evidence in its entirety. At J [71], his Honour found that his “reservations” as to the acceptance of the evidence left “open for resolution” the question of Mr McMillan’s main purpose.

84 The primary judge returned to the issue of the reliability of Mr McMillan’s evidence as to his main purpose at J [125] to [126]. In those paragraphs the primary judge found that, had “the reliability of Mr McMillan’s evidence or his credit been accepted”, it was possible that the inference sought to be drawn by the Trustee could have been answered by his evidence. The primary judge found, however, that the “unquestioned acceptance” of that evidence was “shaken” by inferences drawn from the Main Purpose Particulars that told against the credibility of his account, and by reason of persuasive challenges made to the reliability and credibility of his evidence.

85 At J [129], the primary judge stated that his conclusion as to Mr McMillan’s main purpose drawn from inferences drawn from the Main Purpose Particulars was only “reinforced or confirmed by”, inter alia, “an adverse assessment as to the reliability and credibility of his evidence”. The primary judge then concluded that Mr McMillan “did not present, in very summary terms, as a credible witness or a witness who gave reliable evidence”.

86 We are not satisfied that Mrs McMillan has demonstrated any appellable error in the primary judge’s rejection of the evidence of Mr McMillan as to his purpose in making the Property Transfer.

87 His Honour’s rejection of Mr McMillan’s evidence was based on reservations as to the reliability of that evidence which were driven in part by adverse credit findings. The making of those adverse credit findings was not limited to the inferences drawn by the primary judge from the Main Purpose Particulars but rather extended to the manner in which Mr McMillan “presented” as a witness and his credit more generally. Mr McMillan’s inclusion of the Strathfield property and the Stockton properties in his statement of assets and liabilities prepared in September 2005 was misleading and false, it was signed in connection with commercial leasing arrangements and misrepresented that those properties were his assets. It was a matter that the primary judge was entitled to give weight in forming a view as to the credibility of Mr McMillan.

88 The primary judge first considered whether he could accept Mr McMillan’s evidence as to his purpose in making the Property Transfer but concluded that this was not possible given the reservations that he had formed as to the reliability of that evidence. His Honour then tested Mr McMillan’s stated purpose against the inferences that the Court was otherwise invited by the Trustee to draw from the Main Purpose Particulars in the context of the contemporaneous documents. The reasons for rejecting Mr McMillan’s evidence in both cases included credibility findings and those credibility findings were not limited to inferences drawn from the Main Purpose Particulars.

89 The rejection by the primary judge of Mr McMillan’s stated purpose was a finding of fact. An appellate court may not set aside a finding of fact based on the credibility of a witness even if it considers that the probabilities of the case are against, or even strongly against, that factual finding unless the primary judge “failed to use or has palpably misused his [or her] advantage” or acted on evidence that was “inconsistent with facts incontrovertibly established by the evidence” or which was “glaringly improbable”: Devries v Australian National Railways Commission (1993) 177 CLR 472; [1993] HCA 78 (Devries) at 479 (Brennan, Gaudron and McHugh JJ) citing Brunskill and Another v Sovereign Marine & General Insurance Co Ltd and Others (1985) 62 ALR 53; [1985] HCA 61 at 57; Jones v Hyde (1989) 85 ALR 23; [1989] HCA 20; Abalos v Australian Postal Commission (1990) 171 CLR 167; [1990] HCA 47 and Owners of SS Hontestroom v Owners of SS Sagaporack [1927] AC 37 at 47. In our view, the primary judge did not fall into any of those sorts of errors.

90 The financial contributions made by Mrs McMillan to fund the acquisition of the Strathfield property were relevant considerations to take into account in assessing whether Mr McMillan’s stated purpose should be accepted, as was the nature of the relationship between Mr McMillan and Mrs McMillan’s father, particularly in the context of decisions made immediately after his death. At the same time, these considerations had to be weighed against the following findings by the primary judge at J [64], none of which are challenged: first, the CBA loan agreement was secured by a joint mortgage executed by both Mr and Mrs McMillan; second, the deposit of $32,000 provided by Mrs McMillan’s mother to purchase the Strathfield property was repaid by McMillan Prestige Car Repairs; and third, the mortgage repayments to the Commonwealth Bank were paid by McMillan Prestige Car Repairs.

91 Neither the pleading point nor the challenge to the appeal grounds based on credibility have been established.

Inferences as to Main Purpose Appeal Grounds

Introduction

92 Mrs McMillan’s second principal ground of appeal is that, even assuming the reasoning and conclusion of the primary judge was open on the pleadings and Mr McMillan’s stated purpose is not accepted, the inference drawn by the primary judge as to Mr McMillan’s main purpose was inconsistent with the evidence before the primary judge, was premised on matters of no material relevance and was no more available than other contrary inferences that were, at least, equally plausible.

93 The specific bases upon which this ground is advanced are the various sub-paragraphs of paragraph 4 of the Notice of Appeal. Broadly speaking, it is contended in these sub-paragraphs that the primary judge erred in not making particular factual findings and then drawing inferences based on those findings. The appellant submits that consideration of these issues would have “militated against” the drawing of an inference that Mr McMillan’s main purpose was, in substance, to prevent, hinder or delay the Strathfield property from becoming divisible among his creditors. The particular factual findings sought are not relevantly in dispute, rather the appeal grounds are in substance directed at the inferences that it is alleged that should have been drawn from those facts.

94 As set out above, the primary judge did not find that any of the Main Purpose Particulars, in isolation, established the main purpose of the Property Transfer advanced by the Trustee. The relevant enquiry is therefore whether the various grounds of appeal advanced in paragraph 4 of the Notice of Appeal, if they are otherwise established, individually or in combination, demonstrate that the primary judge erred in finding that Mr McMillan’s main purpose in making the Property Transfer was, in substance, to prevent, hinder or delay the Strathfield property from becoming divisible among his creditors.

Relevant principles

95 An appellate court is in as good a position as a primary judge to determine the proper inferences to be drawn from undisputed facts or facts that had been disputed but had subsequently been established by findings of the primary judge. It should give respect and weight to the conclusion of the primary judge but, after reaching its own conclusion, should not shrink from giving effect to it: Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [25] (Gleeson CJ, Gummow and Kirby JJ) citing Warren v Coombes (1979) 142 CLR 531 at 551; Robinson Helicopter Co Inc v McDermott (2016) 90 ALJR 679, at 686-687, [43]; Jadwan Pty Ltd v Rae & Partners (A Firm) (2020) 278 FCR 1; [2020] FCAFC 62 at [413] (Bromwich, O’Callaghan and Wheelahan JJ).

96 The weight that an intermediate appellate court should give to the findings of a primary judge was explained in Fox v Percy at [23] (Gleeson CJ, Gummow and Kirby JJ) in the following terms:

The foregoing procedure shapes the requirements and limitations, of such an appeal. On the one hand, the appellate court is obliged to “give the judgment which in its opinion ought to have been given in the first instance”. On the other, it must, of necessity, observe the “natural limitations” that exist in the case of any appellate court proceeding wholly or substantially on the record. These limitations include the disadvantage that the appellate court has when compared with the trial judge in respect of the evaluation of witnesses’ credibility and of the “feeling” of a case which an appellate court, reading the transcript, cannot always fully share. Furthermore, the appellate court does not typically get taken to, or read, all of the evidence taken at the trial. Commonly, the trial judge therefore has advantages that derive from the obligation at trial to receive and consider the entirety of the evidence and the opportunity, normally over a longer interval, to reflect upon that evidence and to draw conclusions from it, viewed as a whole.

(Footnotes omitted.)

97 The role of an intermediate court was stated by the High Court in Lee v Lee (2019) 266 CLR 129; [2019] HCA 28 at [55]-[56] (Bell, Gageler, Nettle and Edelman JJ) in these terms:

55 A court of appeal is bound to conduct a “real review” of the evidence given at first instance and of the judge’s reasons for judgment to determine whether the trial judge has erred in fact or law. Appellate restraint with respect to interference with a trial judge’s findings unless they are “glaringly improbable” or “contrary to compelling inferences” is as to factual findings which are likely to have been affected by impressions about the credibility and reliability of witnesses formed by the trial judge as a result of seeing and hearing them give their evidence. It includes findings of secondary facts which are based on a combination of these impressions and other inferences from primary facts. Thereafter, “in general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge”. Here, the trial judge’s findings of primary fact were not disturbed. However, in material respects, the Court of Appeal found that the inferences that his Honour drew from those findings were wrong. Notably, the trial judge’s finding that the driver was not wearing the seatbelt not only was contrary to each party’s case but, if correct, on the Court of Appeal’s analysis, would lead to the conclusion that there was no real prospect that the appellant was the driver. And the trial judge’s acceptance of the RACQ’s case, that the appellant had been pulled from the driver’s seat to the passenger seat immediately behind in something less than 90 seconds, was, in the Court of Appeal’s analysis, unlikely.

55 Having rejected the essential planks of the trial judge’s reasoning, it was not to the point for the Court of Appeal to formulate the question as which of the two hypotheses the trial judge considered to be the more probable. Nor was it to the point to consider whether the trial judge had been unduly influenced by the DNA evidence. It was an error for the Court of Appeal to dismiss the appeals in this “very closely balanced” case on the footing that the trial judge’s decision was neither glaringly improbable nor contrary to compelling inferences. It was the duty of the Court of Appeal to decide for itself which of the two hypotheses was the more probable. It was the duty of the Court of Appeal to persist in its task of “weighing [the] conflicting evidence and drawing its own inferences and conclusions”, and, ultimately, to decide for itself which of the two hypotheses was the more probable. It did not. The appellant’s second ground is made good.

(Emphasis added and footnotes omitted.)

98 In a much quoted passage, the Full Court in Branir Pty Ltd and Others v Owston Nominees (No 2) Pty Ltd and Another (2001) 117 FCR 424; [2001] FCA 1833 at [28] (Allsop J [as his Honour then was], with whom Drummond and Mansfield JJ agreed) explained that four propositions as to the role of an intermediate appellate court flowed from Warren:

First, the appeal court must make up its own mind on the facts. Secondly, that task can only be done in the light of, and taking into account and weighing, the judgment appealed from. In this process, the advantages of the trial judge may reside in the credibility of witnesses, in which case departure is only justified in circumstances described in Abalos v Australian Postal Commission; Devries v Australian National Railways Commission and Earthline. The advantages of the trial judge may be more subtle and imprecise, yet real, not giving rise to a protection of the nature accorded credibility findings, but, nevertheless, being highly relevant to the assessment of the weight to be accorded the views of the trial judge. Thirdly, while the appeal court has a duty to make up its own mind, it does not deal with the case as if trying it at first instance. Rather, in its examination of the material, it accords proper weight to the trial judge’s views. Fourthly, in that process of considering the facts for itself and giving weight to the views of, and advantages held by, the trial judge, if a choice arises between conclusions equally open and finely balanced and where there is, or can be, no preponderance of view, the conclusion of error is not necessarily arrived at merely because of a preference of view of the appeal court for some fact or facts contrary to the view reached by the trial judge.

99 Inferences of purpose of equal degrees of probability, however, are not sufficient to enliven s 121 of the Act. As the High Court explained in The Trustees of the Property of Cummins (A Bankrupt) v Cummins (2006) 227 CLR 278; [2006] HCA 6 (Cummins) at [34] (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ):

What had been required for the trustees to succeed at trial was that the circumstances appearing in the evidence gave rise to a reasonable and definite inference, not merely to conflicting inferences of equal degree of probability, that, in making the August transactions, Mr Cummins had the “main purpose” required by the statute. Further, counsel for the trustees accepted that, in determining the inferences to be drawn from the primary facts, regard was to be had to the seriousness of the allegations made against Mr Cummins (although he was not a party) and the gravity of the consequences of findings adverse to him. Reference was made to the well-known judgment of Dixon J in Briginshaw v Briginshaw. (Footnotes omitted.)

Mrs McMillan did not “step out of the picture” from mid 2001

100 We note at this point that Mrs McMillan did not press the ground of appeal in paragraph 4(a) of the Notice of Appeal.

101 Mrs McMillan advances the following interrelated grounds of appeal in paragraphs 4(b) and (c) of the Notice of Appeal:

b. the trial judge should have found that the granting of the 2002 Mortgage by the Appellant to discharge the 2001 Mortgage was inconsistent with the Respondent’s contention that the Bankrupt’s main purpose was for either of the purposes enunciated in s121(1)(b) of the Bankruptcy Act 1966 (Cth) in that the transfer did not have the consequence of preventing the transferred interest in the property from becoming divisible among the Bankrupt’s creditors, which at the time included St George Bank under the 2001 Mortgage, nor did it have the purpose of hindering or delaying the process of making the transferred interest in the property available for division among the Bankrupt’s creditors;

c. the trial judge should have found that the concurrent registration on 29 July 2002 of the instruments of transfer of the Bankrupt’s share in the Strathfield Property, the discharge of the 2001 Mortgage and the registration of the 2002 Mortgage did not prevent the Bankrupt’s interest in the property being divisible among the Bankrupt’s creditors as the Strathfield Property was mortgaged by the Appellant to St George Bank to secure the liabilities previously owed by the Bankrupt and the Appellant to St George Bank under the 2001 Mortgage as well as future liabilities for which the 2002 Mortgage provided security at a time when the property was independently valued at $800,000;

102 The primary judge found that the objective facts permitted the drawing of an inference that there had been a “gradual but consistent withdrawal of Mrs McMillan from any exposure to liability”: J [128].

103 Mrs McMillan submits that critical to the primary judge’s reasoning was his Honour’s finding that Mr and Mrs McMillan had, in effect, engaged in a joint enterprise from at least mid to late November 2001 to late 2002, or over a “period of years”, pursuant to which Mrs McMillan “stepped out of the picture”.

104 The primary judge made the following findings at J [79] as to the significance of the provision by Mrs McMillan in November 2001 of a personal guarantee and the entry by Mr and Mrs McMillan of a mortgage over the Strathfield property to secure the St George facilities (2001 St George Mortgage):

But one of the recurring submissions made by Senior Counsel on behalf of the Respondent wife was that the personal guarantee being provided by the wife was inconsistent with the Trustee’s underlying proposition that the wife was trying to extricate herself from personal liability, and seeking to protect her assets from a claim being made in the future by potential creditors. Any “purpose” sought to be pursued by Mr McMillan in seeking to preclude creditors gaining access to the Strathfield property, so the submission ran, was inconsistent with the wife continuing to personally guarantee and thereby make her own personal assets available to creditors. This recurring submission, with respect, has considerable merit. Unanswered, it provides an obstacle to success on the part of the Trustee. Although the November 2001 St George Bank facility and securities provided preceded by some months the transfer of the Strathfield property in around May 2002, it nevertheless assumes considerable relevance in determining the “purpose” sought to be achieve by effecting the transfer.

105 As noted above, the St George facilities were used to provide working capital for McMillan Prestige Car Repairs and to discharge the CBA mortgages over the Strathfield property.

106 Mrs McMillan submits that finding at J [79] that the submissions made on her behalf had “considerable merit”, the primary judge erred in not engaging with them, nor giving them weight in his Honour’s process of “joining the dots”.

107 In addition, Mrs McMillan submits that the primary judge failed to take into account that subsequent to the Property Transfer, Mrs McMillan remained exposed to creditors by giving a mortgage over the Strathfield property to the St George Bank (2002 St George mortgage) and in late 2002, the Strathfield property was again provided as security to support a $850,000 loan from the Commonwealth Bank to Douglin, as trustee of the McMillan Family Trust (CBA Douglin loan).

108 The 2002 St George mortgage, however, as accepted by Mr McMillan in the course of his cross examination, only secured the home loan of about $200,000. The previous joint mortgage provided by Mr and Mrs McMillan to St George was discharged at the time of the Property Transfer to permit the transfer of the Strathfield property to be registered. It was then replaced by the 2002 St George mortgage that secured the same home loan as the joint mortgage.

109 Moreover, the primary judge did have regard to Mrs McMillan’s personal guarantees and the mortgages to St George in his before and after exercise that he conducted at J [123], in which he contrasted the position as at “mid to late 2001” with that at “mid to late 2002”.

110 In the former, his Honour took note of the guarantee that Mrs McMillan had given to the Commonwealth Bank and subsequently St George and the CBA mortgage and later the 2001 St George mortgage.

111 By “mid to late 2002”, his Honour observed that the Strathfield property was no longer the subject of any mortgage guaranteeing the business operations of McMillan Prestige Car Repairs. Rather, it was subject to the 2002 St George Bank loan granted by Mrs McMillan in her sole name. He further noted that Mrs McMillan had not provided any guarantee of the VWFS floor plan facility that had been executed in April 2002.

112 The primary judge thus “answered” the potential “considerable merit” finding by incorporating and taking into account the findings at J [79] as part of his “joining the dots” exercise to demonstrate the “change in position”.

113 Subject to our comments below in relation to the CBA Douglin loan, we are not satisfied that the primary judge erred in finding that there had been a “gradual but consistent withdrawal of Mrs McMillan from any exposure to liability” in respect of the business operations of Mr McMillan, as conducted through McMillan Prestige Car Repairs, in the period between November 2001 and late 2002.

114 The more relevant issue, however, is the significance or weight to be given to that finding in drawing inferences as to the main purpose of Mr McMillan in making the Property Transfer. We address that question below in our consideration of the conclusion to be reached on main purpose.

Failure to take account of subsequent inconsistent dealings

115 Mrs McMillan contends in paragraph 4(d) of the Notice of Appeal that:

the trial judge should have found that subsequent dealings with the Strathfield Property by the Appellant following transfer of the Bankrupt’s interest in the property, including the refinance and granting of security to Commonwealth Bank, were inconsistent with any contention that the transfer of the Bankrupt’s interest in the Strathfield Property was undertaken for the purpose of protecting the Bankrupt’s prior interest in the property from being made available to meet the debts or claims of his creditors or that the Appellant was seeking to limit her personal exposure and liability to creditors of the Bankrupt or to subtract the Strathfield Property from the assets available to the Bankrupt’s creditors;

116 Mrs McMillan submits that the primary judge’s conclusions as to the main purpose of the Property Transfer omitted two critical features.

117 First, the security given to secure the Douglin CBA loan in late 2002 included a mortgage over the Strathfield property and a guarantee given by Mrs McMillan.

118 Second, the guarantee given by Mrs McMillan to the Commonwealth Bank with respect to the loan made to Classic Auto Search, as trustee of the McMillan Investment Trust, to acquire the commercial properties at 19, 21 and 23 Regatta Road, Five Dock (Regatta Road Guarantee) remained in force after the Property Transfer.

119 The Trustee submits that the primary judge made no findings in relation to transactions or dealings in late 2002 for a good reason; namely, unless it could be demonstrated that they were in contemplation at the time of the Property Transfer, they are irrelevant. The Trustee also submits that the Regatta Road Guarantee was only a guarantee of the loans made to acquire the Regatta Road properties and was limited to $1.275 million.

120 Given the fundamental reliance by the primary judge on the “before and after” exercise at J [123] in reaching his conclusion on the main purpose of Mr McMillan in making the Property Transfer, it must necessarily follow that events that took place within the time period the subject of that exercise may be taken into account in any determination of the main purpose of Mr McMillan, irrespective of whether they were expressly contemplated at the time of the Property Transfer. Those events may confirm a purpose previously pursued, as the primary judge recognised at J [118], or have the effect of casting doubt on the existence of that purpose, if the subsequent conduct was inconsistent with such a purpose.

121 Neither the provision of security to secure the advance of $850,000 from the Commonwealth Bank in late 2002, some six months after the Property Transfer, nor the decision to leave the Regatta Road Guarantee in place were consistent with an intention to shield Mr McMillan’s prior interest in the Strathfield property from his creditors, limit Mrs McMillan’s personal exposure or subtract the Strathfield property from the assets available to his creditors.

122 We are satisfied that the primary judge erred in not taking these events into account in drawing inferences as to Mr McMillan’s main purpose in making the Property Transfer. They present significant hurdles to drawing an inference that the main purpose of the Property Transfer was, in substance, to prevent, hinder or delay the Strathfield property from becoming divisible among Mr McMillan’s creditors.

Failure to take into account no connection between creditors at time of Property Transfer and bankruptcy

123 Mrs McMillan advances the following interrelated grounds of appeal in paragraphs 4(e), (g), (m) and (o) of the Notice of Appeal:

e. the trial judge should have found that St George Bank and Commonwealth Bank were not creditors of the Bankruptcy estate so that no inference can be drawn that the Bankrupt transferred his interest in the Strathfield Property in July 2002 to ensure that the property would not be made available to either St George Bank or Commonwealth Bank, who were at the time of transfer, or shortly thereafter, creditors of the Bankrupt;

…

g. the trial judge should have found that VWFS was not a creditor of the Bankruptcy estate so that no inference can be drawn that the Bankrupt transferred his interest in the Strathfield Property in July 2002 to ensure that the property would not be made available to VWFS, which at the time of transfer was a creditor of the Bankrupt;

…

m. the trial judge should have found that no creditors arising from the Bentley and Rolls Royce dealership were creditors of the Bankruptcy estate so that no inference can be drawn that the Bankrupt transferred his interest in the Strathfield Property to prevent the Bankrupt’s interest in the property being divisible among those creditors;

…

o. the trial judge should have found that there was no temporal nexus between the transfer of the Bankrupt’s interest in the Strathfield Property and the taking on of liabilities that ultimately resulted in the Bankrupt’s bankruptcy.

124 Mrs McMillan submits that the primary judge should have given much greater significance to the absence of any temporal nexus between the Property Transfer and the liabilities that ultimately resulted in Mr McMillan’s bankruptcy 16 years after the Property Transfer. She further contests that insufficient weight was placed on the fact that none of the Commonwealth Bank, VWFS and Rolls-Royce and Bentley were creditors of the bankrupt estate. Mrs McMillan submits that these matters should have resulted in the primary judge being “slow in drawing an inference” to the effect that Mr McMillan had an impugned purpose in making the Property Transfer.

125 The Trustee submits that, first, no submissions concerning an absence of a temporal nexus between the liabilities that led to the bankruptcy and the liabilities as at the time of the Property Transfer were made to the primary judge, and second, no authority was cited in support of the contention. The Trustee submits that, in any event, the absence of any temporal nexus or outstanding creditors at the time of the Property Transfer is irrelevant because a transferor’s creditors include anticipated or future creditors: Ebner v Official Trustee in Bankruptcy (1999) 91 FCR 353; [1999] FCA 110 at [62], [64].

126 It can readily be accepted that a transferor’s creditors for the purposes of s 121 of the Act include “anticipated and future creditors”. Rather, the alleged error was that the primary judge should have given “greater significance” to the absence of a temporal nexus between the liabilities that led to the bankruptcy and the liabilities as at the time of the Property Transfer. The expression “greater significance” speaks to a matter relevant to a conclusion to be drawn from a consideration of multiple matters, rather than a matter to be considered and determined in isolation of other matters.

127 On balance, we accept that the absence of a temporal connection between the liabilities that might have led to the bankruptcy and the liabilities as at the time of the impugned transfer is a factor that is relevant to take into account in drawing inferences as to the purpose of a person in making a transfer of property. The weight to be given to the factor is inherently fact specific. Little weight, for example, could expect to be given to the absence of a temporal connection if a voluntary settlement of property was made shortly prior to entry into a hazardous business venture. Similarly, little weight could be expected to be given to the absence of a temporal connection if the absence arose by reason of a subsequent refinancing of loans or liabilities current as the time of the impugned transfer but which refinanced loans or liabilities led to the bankruptcy of a person.

128 In the circumstances of this case, given we do not accept that the Bentley Dealership could relevantly be characterised as a risky venture (as to which, see [175]ff below) , we are satisfied that the absence of any temporal connection between the liabilities of Mr McMillan as at the time of the Property Transfer and the liabilities that ultimately led to his bankruptcy was a significant consideration that should have been given significant weight in any determination of the main purpose of the Property Transfer.

Mrs McMillan not guaranteeing liability to VWFS

129 Mrs McMillan contends in paragraph 4(f) of the Notice of Appeal that:

the trial judge should have found that although the Bankrupt guaranteed a floorplan finance facility entered into between McMillan Prestige Car Repairs Pty Ltd (MPCR) and Volkswagen Financial Services (VWFS), VWFS never required security over the Bankrupt’s share of the Strathfield Property but only took as primary security a fixed and floating charge over the assets of MPCR which included the Rolls Royce and Bentley motor vehicles which as at 30 June 2002 had a value in excess of the debt due under the facility;

130 The primary judge found that, considered in isolation, there was no reason for Mr McMillan to question necessarily whether the security to be provided by way of the fixed and floating charge over the assets of McMillan Prestige Car Repairs would be sufficient to cover the debts owed to VWFS pursuant to the VWFS floor plan facility. His Honour nevertheless considered that “what assumes some potential relevance is that Mrs McMillan was no longer a guarantor”: J [93].

131 Subsequently, as part of his “before and after” comparison at J [123], the primary judge drew attention to the fact that Mrs McMillan had been a guarantor of the loans made by the Commonwealth Bank and the St George Bank as at mid to late 2001 but by mid to late 2002 she had not provided a guarantee to VWFS with respect to the VWFS floor plan facility that had been provided in April 2002.

132 Mrs McMillan submits that the fact that she did not give a guarantee to VWFS does not support an inference that she and Mr McMillan were engaged in a joint venture over a number of years whereby she “stepped out of the picture”. She submits that the only inference that can be drawn is that VWFS did not request a guarantee from her and that McMillan Prestige Car Repairs, as the borrower, did not volunteer or insist on her providing a guarantee.

133 We accept that the absence of a guarantee from Mrs McMillan of the VWFS floor plan facility, in contrast to the earlier guarantees that she had provided of the Commonwealth Bank and St George Bank facilities, is consistent with the proposition that Mrs McMillan was “stepping out of the picture”.

134 There is no evidence, however, that VWFS had requested that Mr McMillan provide or otherwise procure a guarantee from Mrs McMillan. The fact that she did not provide a guarantee can therefore not assist in drawing any inference that the main purpose of Mr McMillan in making the Property Transfer was, in substance, to prevent, hinder or delay the Strathfield property from becoming divisible among his creditors. It is a neutral consideration for the purpose of drawing any inferences as to Mr McMillan’s relevant purpose.

Mrs McMillan’s resignation as a director of McMillan Prestige Car Repairs

135 Mrs McMillan contends in paragraph 4(h) of the Notice of Appeal that:

the trial judge should have found that the resignation of the Appellant as a director of MCPR took place some 7 months before the Bankrupt transferred his interest in the Strathfield Property so that it could not be inferred that the resignation was undertaken as part of or in connection with the subsequent transfer of the Bankrupt’s interest in the property;

136 The primary judge found that, in isolation, Mrs McMillan’s resignation as a director of McMillan Prestige Car Repairs provided an “uncertain factual foundation” for the inference of main purpose sought to be drawn by the Trustee. He stated, however, that when considered together with the fourth particular (replacement of the trustee of the McMillan Family Trust), the “impetus towards drawing the inference is again gaining in momentum”.

137 The primary judge then concluded at J [106]:

Whatever else may be said as to the relevance of her resignation as a director, if the Particulars are taken together, there is at least a basis emerging of steps being taken from late 2001 through to early-to-mid 2002 of Mrs McMillan “stepping out of the picture” from any potential exposure to corporate liability for the activities of McMillan Prestige Car Repairs. Mrs McMillan, it is to be recalled, remained a director and 50% shareholder of Classic Auto Search in contrast to her distancing herself from her former position as director of McMillan Prestige Car Repairs.

138 Mrs McMillan submits that there was no clear connection between Mrs McMillan’s resignation as a director of McMillan Prestige Car Repairs on 8 November 2001 and the Property Transfer that took place seven months later. Further, she submits that the resignation as a director is irrelevant to a person’s personal liability to their creditors, unless a company is trading when insolvent, which was not alleged in the present case.

139 We accept that in a general sense Mrs McMillan’s resignation as a director of McMillan Prestige Car Repairs is consistent with the proposition that she was “stepping out of the picture” with regard to any of the activities of the company. Given that in the absence of insolvency Mrs McMillan would have no potential personal liability to creditors as a director of the company, her resignation provides little support for the proposition that it formed part of any plan to reduce her “personal exposure” to the activities of the company.

140 We conclude that Mrs McMillan’s resignation as a director of McMillan Prestige Car Repairs could not assist in drawing an inference that the main purpose of Mr McMillan in making the Property Transfer was, in substance, to prevent, hinder or delay the Strathfield property from becoming divisible among his creditors.

Mrs McMillan did not retire as a director of the trustee of the McMillan Investment Trust

141 Mrs McMillan advances the following appeal grounds in paragraph 4(i) and (j) of the Notice of Appeal:

i. the trial judge should have found that the Appellant did not resign as a director of Classic Auto Search Pty Ltd (CAS) because it was the trustee of the McMillan Superannuation Fund and the Appellant as a member of the fund was required to be a director of the corporate trustee of the fund.

j. The trial judge should have found that if the Appellant had sought to limit her exposure to liability by resigning as a director of MCPR it would have been expected that CAS would have also retired as trustee of the McMillan Investment Trust, and not simply the McMillan Family Trust;

142 Mrs McMillan submits that the fact that she did not resign as a director of Classic Auto Search tells against any contention that her resignation as a director of McMillan Prestige Car Repairs could assist in drawing any inference that the main purpose of Mr McMillan in making the Property Transfer was, in substance, to prevent, hinder or delay the Strathfield property from becoming divisible among his creditors.

143 Mrs McMillan acknowledges that while at the relevant time s 17A(1) of the Superannuation Industry (Supervision) Act 1993 (Cth), as it then was, required her to remain as a director of Classic Auto Search, it was “unclear” why Classic Auto Search would have remained a trustee of the McMillan Investment Trust, rather than incorporating a new entity to act as trustee, if Mr McMillan’s purpose was to minimise Mrs McMillan’s exposure to any liabilities associated with Mr McMillan’s business operations. These liabilities included the holding of the Regatta Road Properties that were used in, and financed by, the business.

144 The difficulty with the submission made by Mrs McMillan and the errors alleged in these paragraphs of Ground 4 is that following the appointment of Douglin as trustee of the McMillan Family Trust, Classic Auto Search was released as a guarantor of the VWFS floor plan facility and Douglin entered into a new guarantee with VWFS in its capacity as the trustee of the McMillan Family Trust. The effect of the release was to interpose a new trustee as guarantor, a trustee that was not also the trustee of the McMillan Investment Trust, and thus ensure that on no view could the assets of the McMillan Investment Trust, being the Regatta Road Properties, be exposed in the event that there was any call upon the guarantee.

145 Paragraphs 4(i) and (j) of the Notice of Appeal do not establish any error by the primary judge.

Retirement of Classic Auto Search as a trustee and replacement with Douglin

146 Mrs McMillan contends in paragraph 4(k) of the Notice of Appeal that:

k. The trial judge should have found that no inference can be drawn between the retirement of CAS and replacement with Douglin Pty Ltd as trustee of the McMillan Family Trust and ascertaining what was the Bankrupt’s main purpose in transferring his interest in the Strathfield Property. The trial judge should have found that the new trustee had a right to be indemnified out of the assets of the McMillan Family Trust for liabilities incurred by the new trustee and that the new trustee was contractually liable to indemnify CAS for the liabilities incurred by it;

147 The “before and after” comparison undertaken by the primary judge at J [123] included the retirement of Classic Auto Search as the trustee of the McMillan Family Trust and its replacement with Douglin.

148 Mrs McMillan submits that the replacement of the trustee of the McMillan Family Trust could not be relevant, as any debts or liabilities incurred by Classic Auto Search in its capacity as trustee of the McMillan Family Trust, had it remained in that role, could only ever be met from the assets of the trust. Such debts or liabilities could never have been met from the assets of the McMillan Investment Trust or the McMillan Superannuation Trust (the two other trusts of which Classic Auto Search remained a trustee following its replacement as the trustee of the McMillan Family Trust).

149 The submission by Mrs McMillan overlooks, as we explain above, that the effect of the replacement of Classic Auto Search as trustee of the McMillan Family Trust was to interpose a new trustee as guarantor, a trustee that was only the trustee of the McMillan Family Trust.

150 Paragraph 4(k) of the Notice of Appeal does not disclose any error by the primary judge.

Entry into the Bentley Dealership was not a risky venture

151 Mrs McMillan advances the following interrelated appeal grounds in paragraphs 4(l) and (p) of the Notice of Appeal:

l. the trial judge should have found that the entry into the Bentley dealership was not a risky venture or at least not a risky venture that would justify any inference being drawn between the transfer of the Bankrupt’s interest in the property and his subsequent bankruptcy some 16 years later;

…

p. The trial judge should have found that the Bankrupt was not significantly exposed to potential personal liabilities at the time of transfer of his interest in the Strathfield Property which could not be satisfied out of the Bankrupt’s available assets (excluding the transferred interest in the Strathfield Property).

152 These appeal grounds are directed at the primary judge’s findings in respect of particular (vi), reproduced earlier at [61] above, and below:

(vi) The Bankrupt was the sole director of all trading companies in the McMillan Group; At the time of the transfer the Bankrupt had embarked on a risky venture as follows:

(A) the replacement of the trustee of the McMillan Family Trust;

(B) companies with McMillan Prestige Group of companies held the VW dealership for Five Dock and the Sydney dealerships for both Bentley and Rolls Royce);

(C) companies within the McMillan Prestige Group of companies had recently purchased in September 2001 new premises at 21 and 23 Regatta Rd Five Dock NSW for the Bentley and Rolls Royce Dealership.

153 The primary judge concluded that Mr McMillan’s stated optimism for the Rolls-Royce Dealership was misplaced and ill-founded and that as at April 2001, Mr McMillan’s business, consistently with an assessment that Mr McMillan had subsequently made in 2003, was in a “certain amount of financial turmoil” and was confronting “finance problems”. The “assessment” was a reference to the following statements made by Mr McMillan in an affidavit that he swore in proceedings in the District Court of New South Wales in July 2003, reproduced by the primary judge at J [115]:

Around this time, in the month of April 2001, the finance companies from which Bentley Sydney obtained finance to floor plan vehicles changed their policy on payment for cars imported to Australia whereby finance would only he provided on vehicles once they were in the country. This in effect meant that Bentley Sydney had to restructure its arrangements with my financers in order to obtain money upfront to purchase the vehicles prior to being shipped to Australia. This created numerous problems with its financers as most of them were unwilling to provide this money upfront because of the risks involved. As a result, the business was in a certain amount of financial turmoil around this time and I was trying to gather together as much money as possible, in order to keep the business running. In particular, around this time, due to these finance problems it was necessary for Bentley Sydney to purchase a Rolls-Royce for approximately $320,000.00 without finance which resulted in a temporary cash flow problem. …

154 In reaching his conclusion as to the main purpose of Mr McMillan in making the Property Transfer, the primary judge placed some emphasis on the additional challenges that Mr McMillan faced in operating a car dealership, in addition to his car repair business, but placed more emphasis on the financial performance of Mr McMillan’s business in the period leading up to the Property Transfer.

155 The primary judge observed at J [116]:

Little hesitation is expressed in finding that very much to the forefront of Mr McMillan’s thinking, when he signed the transfer of the Strathfield property in favour of his wife in around May 2002, was the fact that the new dealership was performing well under the budget he had set for himself, albeit a budget described by him as “crystal ball stuff”, but more importantly the dealership was performing at repeated and recurring monthly losses.

156 The primary judge concluded that the repeated and recurring losses during the period from August 2001 through to June 2002 provided a factual foundation to question whether they played some part in Mr McMillan’s purpose in making the Property Transfer. The monthly financial statements for Prestige during that period recorded the following net profits or losses:

Month

August 2001

September 2001

October 2001

November 2001

December 2001

January 2002

February 2002

March 2002

April 2002

May 2002

June 2002

Net profit

$49,442.00

– $84,262.00

– $102,725.00

$4,269.00

– $38,638.00

– $33,637.00

$81,753.00

$110,148.00

$142.00

– $100,492.00

$33,359.00

157 Further, a financial statement prepared by Mr Vince recorded a loss on the revenue account for McMillan Prestige Car Repairs for the financial year ending 30 June 2001 of $77,774.31.

158 Mrs McMillan submitted as a threshold issue that, while any business carries risk, Mr McMillan was able to continue trading for some 16 years after the Property Transfer. She submitted that this provided strong evidence that Mr McMillan had sufficient assets, as at the time of the Property Transfer, to meet the existing and expected future liabilities of the business.

159 The Trustee submitted in response that this submission by Mrs McMillan overlooks the fact that receivers were appointed to McMillan Prestige Car Repairs on 2 February 2007 and that it was subsequently wound up by the New South Wales Supreme Court on 24 July 2007.

160 We make two observations in response to the Trustee’s submission.

161 First, it is important to bear in mind that, ultimately, the relevant issue is whether an inference can be drawn that Mr McMillan’s main purpose was to defeat his creditors, not whether his main purpose was to defeat the creditors of McMillan Prestige Car Repairs. Of course, to the extent that he had personally guaranteed the obligations of McMillan Prestige Car Repairs the distinction would not be material. The critical consideration in the present context is that whatever the arrangements may have existed between Mr McMillan and McMillan Prestige Car Repairs, Mr McMillan did not commit an act of bankruptcy until 21 March 2018 and a sequestration order was not made against the estate of Mr McMillan until 6 November 2018.

162 Second, in the absence of any consideration as to the reasons for the appointment of receivers to McMillan Prestige Car Repairs on 2 February 2007, nearly five years after the Property Transfer and after the commencement of the VW Dealership in 2004, it is not possible to determine what, if any, weight can be placed on this event in determining with any degree of certainty the risk inherent in the business of the company as at the time of the Property Transfer.

163 Mrs McMillan advanced the following further submissions in support of her challenge to the finding of the primary judge that the entry into the Bentley Dealership could be characterised as a risky venture.

164 First, Mr McMillan had been operating a very successful repair business for Rolls-Royce and Bentley since 1987. It was Rolls-Royce that had regarded Mr McMillan’s business as sufficiently promising to approach him to set up what appeared to be a flagship and exclusive dealership in New South Wales and the Australian Capital Territory. Further, Rolls-Royce were prepared to provide Mr McMillan with an interest free loan of $450,000 that he would not be required to repay if the dealership continued for three years.

165 Second, the core repair business of Mr McMillan was continuing unchanged in addition to, not in substitution for, the new dealership business.

166 Third, the best picture as to how Mr McMillan’s new combined dealership/repair business was performing at the time of the Property Transfer emerges from the financial statements of McMillan Prestige Motors as at 30 June 2002 (June 2002 financial statements).

167 The June 2002 financial statements record net assets of $648,656.62, cash at bank of $564,277.00, total current assets of $4.443 million and total current liabilities of $4.264 million, resulting in working capital of some $180,000. The statements also record that the amount outstanding on the VWFS floorplans was $2.188 million against inventories for new vehicles of $1.410 million and stock used vehicles of $0.959 million, in aggregate an amount of $2.369 million. This aggregate figure was in excess of the amount owing to VWFS.

168 The profit and loss statement for the year ended 30 June 2002 included in the June 2002 financial statements, recorded a gross profit of $2,571,700.75 but a net loss of $35,996.32. The gross profit for the previous financial year was recorded as $1,605,866.48 with a net loss of $77,774.31.

169 The net loss of $35,996.32 for the 30 June 2002 financial year was generated from gross revenue from ordinary activities of $9,496,967.43.

170 Fourth, the monthly profit and loss statements for McMillan Prestige Car Repairs, summarised by the primary judge at J [112], record that in August 2001, the first month of the new dealership, a net profit of $49,442.00 was achieved and in six of the twelve months a net profit was recorded. In analysing the profit and loss statements, consistently with the approach taken by the primary judge at J [112], the budgeted profits could be ignored. In July 2002, the month immediately following the last month considered by the primary judge, the profit and loss statements recorded a net profit of $101,744.00. In the following three months, net profits of $78,598.00, $7,133.00 and $7,460.00 respectively and then in November 2002 a net loss of $42,760.00 were recorded in the profit and loss statements.

171 The Trustee submits that it is necessary to have regard to the accumulated year to date losses and the variations from budget recorded in the monthly profit and loss statements.

172 The year to date losses as at September 2001 were $62,789. By the end of calendar year 2001, they had increased to nearly $200,000 against a budgeted year to date profit of $444,402. In March 2002, there was a monthly profit of just over $110,000 but a year to date loss in excess of $41,000. By the end of May 2002, the year to date loss had increased to a figure of over $140,000 against a budgeted year to date profit of $921,623.

173 The Trustee submits that the monthly profit and loss statements beyond May 2002 are of little relevance because the decision to make the Property Transfer and the “other associated arrangements” were well in place by the beginning of May 2002.

174 The Trustee further submits that, irrespective of any considerations of solvency, the authorities, citing Alvaro, Mackay, Russell and Williams, establish that if a person intends to embark on a commercially or financially hazardous undertaking and moves to secure assets against claims of future creditors a disposition of property is made that falls within s 121(1) of the Act.

175 We have concluded that the primary judge erred in finding that the entry into the Bentley dealership was a risky venture and erred in placing weight on that finding in drawing an inference that the main purpose contended for by the Trustee had been established. We have reached that conclusion for the following principal reasons.

176 First, we do not consider that the entry by Mr McMillan into the Bentley Dealership could be construed as analogous to the circumstances in which courts have concluded that dispositions of property made by voluntary settlements shortly prior to the entry into a risky or hazardous undertaking were made for the purpose of defeating creditors.

177 Mr McMillan was diversifying an existing, profitable business into a related activity in the same industry. He was dealing with the same products and customers. The dealership had the added complexity of the need to have in place floor plan financing but Rolls-Royce assisted him in that regard by introducing him to VWFS. However, Mr McMillan had been personally selected by Rolls-Royce to operate the Bentley Dealership and appeared to have its full support, not least by reason of his exclusive appointment and the financial support that he was offered.

178 This was not an entry into a business activity that could be characterised as “a rather reckless” business, such as was found in Mackay. In that case the bankrupt had entered into a partnership in which the operation of a new business was left entirely to another partner and where the voluntary settlement was made only months before the new business failed and the bankrupt became insolvent: Mackay at 118-20 (Malins VC). Nor was it an entry into an entirely new business activity, as was the position in Russell in which a baker commenced a new business as a grocer: Russell at 599 (Jessel MR). Nor was it equivalent to the making of speculative investments by a retiree in companies promoted by another person: Williams at 359-60 (Starke J).

179 Further, the extension of an existing successful business to include a dealership was of a very different character to the position in Alvaro. In that case, the establishment of trusts and the application of funds through those trusts to purchase and improve real estate properties raised likely exposure to investigations as to the source of all income earned, assessments for tax and potential penalty tax and criminal sanctions; which in fact occurred: Alvaro at 421-2 (Wilcox and Cooper JJ).

180 Second, we consider that the financial information concerning the performance of McMillan Prestige Car Repairs in the period leading up to the Property Transfer was equivocal and provided little material support for any “risky venture” finding. The dealership component of the combined dealership/car repair business was in a start-up phase and there were significant fluctuations in the performance of the business from month to month.

181 Moreover, as submitted by Mrs McMillan, for the financial year ending 30 June 2002, there was a surplus of working capital, current assets exceeded current liabilities, there was significant cash at bank, and the operating loss of $35,996.32 was relatively insignificant when compared with gross revenue from ordinary activities.

182 Third, on balance we consider that little weight can be placed on the failure to achieve the budgeted profits.

183 As the primary judge observed at J [112], the basis upon which those budgeted profits had been prepared “was left unexplored” in the evidence, save that they had been prepared in consultation with Rolls-Royce.

184 This finding would appear to have been made in the context of the following evidence given by Mr McMillan in the course of his cross examination:

Do you accept from me that Mr Dixon became your financial controller of McMillan Prestige Car Repairs from approximately July 2001?---Yes.

…

And you typically set the budget, I gather, with Mr Dixon at the beginning of the financial year, or at some point?---No.

When did you normally set the budget?---I set the budgets the beginning of the year, but I never gave those to the internal financial controllers to set.

I see. And were those budgets influenced, to some extent, by any targets that Rolls Royce and Bentley management required of you under the dealer agreement?---Yes, there was consideration; so there would be some influence, yes.

Yes. So your budgets were intended to meet and satisfy the requirements of Rolls-Royce and Bentley, is that how we should understand things?---They were two separate distinctions, but as you previously asked the question, the answer is yes. There’s a level of consideration given, yes.

185 The primary judge found at J [116] that the “new dealership was performing well under the budget [Mr McMillan] had set for himself, albeit a budget described by him as ‘crystal ball stuff’”. This finding would appear to have been based on the following evidence given by Mr McMillan:

And so it would have been obvious to you, I gather, that by the end of August 2001the business was operating under budget?---Under my budget, yes, which was created sometime before that.

All right?---Yes. Crystal-ball stuff.

186 When pressed further about failure to reach budgeted profit Mr McMillan gave the following evidence (at T85.22-31):

And so his Honour should understand that, by the month of May 2002, you well understood that the business was operating under budget to the tune of over $1 million?---To my budget.

And did that not concern you?---I set the budget 12 months in advance. I wasn't going to change my mind in front of my managers; I wasn't going to change my mind in front of my staff.

Alright?---You know, I’m there to drive the business, and if I set a high budget and a hard budget, that’s how I look at it.

187 Fourth, in the absence any forensic accounting evidence as to the significance or implications that can be drawn from this conflicting or incomplete evidence as to profitability and financial performance, we do not consider that it is possible to draw any definitive conclusions as to the significance of any losses or failure to meet budget to the prospects of success or risks inherent in the new combined dealership/car repair business, including, whether any monthly losses were due to timing issues or the incurring of costs incidental to the commencement of a new business operation.

No risk in the acquisition of the Regatta Road properties

188 Mrs McMillan contends in paragraph 4(n) of the Notice of Appeal that:

the trial judge should have found that there was limited or no risk involved in the acquisition of real property for the conduct of the Bentley and Rolls Royce dealership such as would justify an inference being drawn as to the main purpose of the Bankrupt transferring his interest in the Strathfield Property;

189 Mrs McMillan submits that the fact that the McMillan Investment Trust had equity of about 22% in the Regatta Road properties tells against Mr McMillan embarking on what might be characterised as a “risky venture”. The submission was not substantively developed beyond that bald proposition.

190 The primary judge found at J [77] that the guarantee provided by Mrs McMillan to the Commonwealth Bank was limited to $1.275 million in circumstances in which the Regatta Road properties had been purchased for about $1.65 million; and thus it would appear that Mr and Mrs McMillan had equity of about $372,500 in the properties. More precisely, the entity with the equity was Classic Auto Search as the trustee of the McMillan Investment Trust.

191 The difficulty with this ground of appeal is that the primary judge did not seek to place any reliance on the acquisition of the Regatta Road properties as supporting or justifying any inference that the entry by Mr McMillan into the Dealership was a risky venture.

192 Moreover, it is not apparent how making the finding sought in this paragraph of Ground 4 would have otherwise led the primary judge to reach a different conclusion on main purpose. The risk relied upon by the primary judge was the conduct of the Bentley Dealership, in particular, the necessity for floor plan financing, not the acquisition of real property and the extent of any equity in that property.

193 We do not accept that the primary judge erred in not making the finding sought in paragraph 4(n) of the Notice of Appeal.

Conclusion on main purpose

194 We have concluded that the primary judge erred in drawing an inference, from all the relevant circumstances, that the main purpose of Mr McMillan in making the Property Transfer was to prevent the Strathfield property from becoming divisible among his creditors, or was to hinder or delay the process of making that property available among his creditors.

195 An inference that the main purpose of a bankrupt in making a transfer of property was to defeat his or her creditors must be a reasonable and definite inference, not merely one of a number of conflicting inferences with equal degree of probability: Cummins at [34].

196 While it might be safely concluded that the evidence before the primary judge established, at least in general terms, that there was a gradual withdrawal by Mrs McMillan from the business operations of her husband, Mr McMillan, this did not, in context, provide a sufficient foundation for the drawing of a reasonable and definite inference of Mr McMillan’s main purpose in making the Property Transfer for the following principal reasons.

197 First, an equally compelling inference was that the making of the Property Transfer was attributable to the 11 June 2001 letter from Mr Tennant to Mr McMillan. The letter advised Mr McMillan of the concern of Rolls-Royce that there was an “absence of financial separation between your personal situation and that of the business” and informed him that “VWFS or any other finance company will require far greater transparency of your financial situation before agreeing terms”.

198 The drawing of such an inference is supported by Mr McMillan’s 2 July 2001 response to Mr Tennant’s letter in which he agreed his “personal investment” was involved in his business but he did not have an alternative until a financial group was prepared to support a floor plan and in which he noted “let’s hope VW come through”.

199 We acknowledge that this explanation of Mr McMillan’s purpose was not an explanation advanced by him in his evidence for making the Property Transfer. The primary judge rejected Mr McMillan’s explanation. As a result of that rejection, the question of Mr McMillan’s purpose for making the Property Transfer became an objective enquiry to be determined by drawing inferences from factual findings. Those factual findings included that the exchange of correspondence constituted by the 11 June 2001 letter from Mr Tennant to Mr McMillan and Mr McMillan’s 2 July 2001 response to Mr Tennant had occurred. There was never any suggestion that Rolls Royce’s counselling, as conveyed by Mr Tennant, as to an “absence of financial separation between your personal situation and that of the business”, was a contrivance.

200 In that context, it would be somewhat perverse if it were to be suggested that an inference could be drawn that an explanation of purpose that had been advanced by Mr McMillan but rejected by the primary judge and which rejection had not been overturned on appeal, nevertheless was an explanation of purpose that was equally probable to inferences of another purpose or purposes drawn from the same objective circumstances that had earlier led to the rejection of subjective purpose.

201 It might be thought to be equally perverse if it were suggested that it was not open to an appellate court to conclude that an inference of main purpose drawn by a primary judge was of no greater probability to an alternative inference of main purpose, unless that alternative inference had been advanced by the transferor as his or her stated purpose in making the transfer. It was always for the trustee to prove his case on the balance of probabilities: s 34A of the Act. A rejection of Mr McMillan’s evidence did not prove the case.

202 Second, there was no evidence that the creditor most affected by the Property Transfer, VWFS, unlike the Commonwealth Bank and the St George Bank, had requested or otherwise sought any security over the Strathfield property. This consideration, particularly when combined with the first consideration, tells strongly against the drawing of an inference that Mr McMillan’s main purpose in making the Property Transfer was to prevent the Strathfield property from becoming divisible among his creditors or was to hinder or delay the process of making that property available among his creditors

203 Third, following the Property Transfer, the Commonwealth Bank remained a mortgagee of the Strathfield property and the net equity in the property was only in the order of $400,000. At the time of the Property Transfer the total amount owing under the VWFS floor plan facility was less than the value of the new vehicles and stock used vehicles held by McMillan Prestige Car Repairs.

204 Fourth, the strength of any inferences available from Mrs McMillan’s gradual withdrawal from any exposure to Mr McMillan’s business are materially diminished by the continuation after the Property Transfer of the Regatta Road Guarantee from Mrs McMillan and the mortgage granted over the Strathfield property to support the $850,000 loan from the Commonwealth Bank to Douglin, as trustee of the McMillan Family Trust, to discharge the St George facilities and provide working capital for McMillan Prestige Car Repairs.

205 Fifth, for the reasons outlined above, the financial and contextual evidence before the primary judge did not conclusively establish that the extension of Mr McMillan’s business operations to include the Dealership was a hazardous or speculative business venture. Nor was it ever suggested by the Trustee that there was any doubt as to Mr McMillan’s solvency at the time of the Property Transfer.

206 Sixth, the significant elapse of time between the Property Transfer and the bankruptcy of Mr McMillan, in the context of the reasons advanced above, makes the drawing of an inference that Mr McMillan’s main purpose was to prevent the Strathfield property from becoming divisible among his creditors or was to hinder or delay the process of making that property available among his creditors inherently problematic.

Drawing of Jones v Dunkel inferences

207 Mrs McMillan contends in paragraph 5 of the Notice of Appeal that:

The trial judge erred in finding that the failure to call the Appellant or Mr Vince to give evidence supported an inference that their existence would not have corroborated the account given by the Bankrupt or supported the case advanced by the Appellant.

208 Mrs McMillan submits that no Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 (Jones v Dunkel) inferences should have been drawn by the primary judge by reason of the failure to call her and the failure to call Mr Vince because, first, the relevant inquiry was as to Mr McMillan’s state of mind at the time of the Property Transfer; second, no inferences can be drawn by reason of any failure to call a witness to meet an unpleaded case; and third, any inference should be given little weight given the relevant events took place 18 years ago, and therefore the fact finding should focus on contemporaneous records and the objective logic of events. Given our findings with respect to the alleged “unpleaded case”, the second contention must necessarily be rejected.

209 The general principle that a failure by a party to call an available witness may give rise to an inference that the evidence of that witness would not have assisted the party’s case, if the uncalled witness may be presumed to be able to put the true complexion on the facts relied upon, is well established and equally applicable in a bankruptcy proceedings: Jones v Dunkel at 308 (Kitto J); Trkulja v Markovic [2015] VSCA 298; at [94] citing Chong & Anor v CC Containers Pty Ltd & Ors (2015) 49 VR 402; [2015] VSCA 137 at [212]. It is more readily drawn where the absent witness is a party: Micheletto (Trustee), in the matter of El-Debel (Bankrupt) v El-Debel [2020] FCA 1031 at [120]-[123].

210 The primary judge drew Jones v Dunkel inferences both in the course of rejecting Mr McMillan’s evidence as to purpose and in drawing inferences as to Mr McMillan’s objective main purpose in making the Property Transfer.

McMillan’s stated purpose

211 As to the Jones v Dunkel inferences drawn in respect of Mr McMillan’s stated purpose, the primary judge accepted that while it was Mr McMillan’s purpose that was the relevant purpose both Mrs McMillan and Mr Vince could have given evidence relevant to that issue.

212 The primary judge considered that Mrs McMillan could have given evidence on issues such as:

• the circumstances in which she had the conversation with her husband “shortly after” the death of her father and the request she then made to have the property transferred into her name; and

• whether any advice had in fact been given by Mr Vince, whether the advice addressed any question as to asset protection from potential creditors and whether she had canvassed that advice with her husband.

213 The primary judge considered that Mr Vince could have potentially given evidence as to the advice he had given concerning the transfer of the Strathfield property. His Honour observed that no letter of advice was in evidence but noted that Mr McMillan had confirmed in the course of his cross examination that Mr Vince had given advice in relation to the transfer of the “family home” and provided instructions to the McMillans’ solicitor in that regard albeit that the concession was to the effect that the transfer took place only after Mrs McMillan had asked him to do it.

214 We do not accept that the primary judge erred in drawing Jones v Dunkel inferences in rejecting Mr McMillan’s explanation of his reasons for making the Property Transfer. Mr McMillan’s explanation was based on the alleged requests made to him by Mrs McMillan. Mr Vince was providing advice to Mr and Mrs McMillan concerning the Property Transfer. Both were in a position that they could be presumed to have been able to give evidence that would have assisted in determining whether Mr McMillan’s explanation of his purpose in making the Property Transfer could be accepted.

Inferences as to main purpose

215 We next address the Jones v Dunkel inferences drawn by the primary judge in relation to his determination of the objective main purpose of Mr McMillan in making the Property Transfer.

216 At J [127], the primary judge stated that the “rejection of Mr McMillan’s evidence stands separate to, but the ultimate drawing of the inference sought by the Trustee is only bolstered by, the failure to call Mrs McMillan as a witness”. He considered that Mrs McMillan could have given evidence relevant to such matters as:

• the exchange with her husband in February 2002 and the request for the transfer;

• the reasons advice had been sought in May 2002 from Aitken McLachlan & Thorpe in respect to “General Personal Affairs” and “Estate Planning”; and

• the advice given by Mr Vince.

217 The primary judge also found at J [127] that the failure to call Mr Vince “further bolstered” the drawing of the inference advanced by the Trustee, as Mr Vince could have given advice to matters such as:

• his involvement in the drafting of the Dealer Agreement with Rolls-Royce and Bentley Motor Cars dated 1 February 2001 and whether it extended beyond the alterations suggested on 25 January 2001;

• the reasons why he was appointed as a second director of McMillan Prestige Car Repairs, albeit for a short period of time;

• the state of the financial affairs of McMillan Prestige Car Repairs as at April/May 2002 and whether his assessment was the same as Mr McMillan’s that as at April 2001 “the business was in a certain amount of financial turmoil”;

• the nature of the advice being sought by Mr and Mrs McMillan, and the instructions being given;

• the consideration being given, and as part of the advice being given as recorded in the 3 May 2002 letter, to such matters as the relevance of the “VW financing documents” and the reasons why it was considered appropriate for Mrs McMillan to resign as a director of McMillan Prestige Car Repairs but not Classic Auto Search; and

• the advice in fact given and the reasons for that advice.

218 We accept, given the 18 years that have passed since the Property Transfer, that contemporaneous documents and the objective logic of events are more likely to assist in making factual findings from which inferences relevant to main purpose can be drawn. Further, the evidentiary issues identified by the primary judge in this context, unlike the position with respect to Mr McMillan’s alleged stated purpose, appear to be more in the nature of matters that might further illuminate objective circumstances rather than matters necessary to put a true complexion on the facts relied upon.

219 Given the scope of the Main Purpose Particulars and the relevance, albeit at times somewhat peripheral, of the specific evidentiary issues identified by the primary judge, we do not accept that the primary judge erred in concluding that his confidence in drawing the inference as to the main purpose of Mr McMillan sought by the Trustee was “bolstered”, at least to some extent, by the absence of any evidence from Mrs McMillan and Mr Vince.

220 Nevertheless, we do not consider that the strength of the Jones v Dunkel inferences drawn by the primary judge would be sufficient to otherwise displace our assessment of the conflicting inferences that can be drawn from the primary facts and intermediate inferences from those primary facts as to the main purpose of Mr McMillan in making the Property Transfer.

Disposition

221 It follows that the appeal should be allowed. The orders made by the primary judge should be set aside. The Trustee should pay Mrs McMillan’s costs of the proceedings before the primary judge and of this appeal.

I certify that the preceding two hundred and twenty-one (221) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Logan, Farrell and Halley.

Associate:

Dated: 23 February 2022

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