FEDERAL COURT OF AUSTRALIA

Deryk Rowan Andrew as Trustee for Estate of Colin George Ward (Deceased) v Zant Pty Ltd & Ors [2004] FCA 1716

BANKRUPTCY – Bankruptcy Act 1966 (Cth), s 116 – application by trustee in bankruptcy for declarations that five properties registered in the names of various companies or individuals were beneficially owned by the bankrupt – bankrupt provided purchase monies for the properties – companies and trusts which prima facie owned the properties controlled by the bankrupt - whether properties held on resulting trust for the bankrupt

BANKRUPTCY - Bankruptcy Act 1966 (Cth), s 121 – whether bankrupt had main purpose of preventing property being divisible among creditors - whether bankrupt had main purpose of hindering or delaying creditors – bankrupt conducted business in cash and failed to lodge tax returns - bankrupt later filed income tax returns late in response to audit by Commissioner of Taxation- bankrupt gave purchase monies to a trust for the benefit ultimately of his son – whether bankrupt’s main purpose was to hinder or delay the Commissioner of Taxation recovering unpaid income tax

BANKRUPTCY - Bankruptcy Act 1966 (Cth), s 121 – burden of proof – trustee must show that property vested in the bankrupt – slight degree of proof required to shift the burden if all facts within knowledge of persons other than the trustee

Bankruptcy Act 1966 (Cth), ss 116, 121

Conveyancing Act 1919 (NSW), s 37A

Income Tax Assessment Act 1936 (Cth)

Jack v Smail (1905) 2 CLR 684 cited

Official Trustee in Bankruptcy v Alvaro (1996) 138 ALR 341 cited

Cannane v J Cannane Pty Ltd (1998) 192 CLR 557 referred to

Garuda Indonesia Ltd v Grellman (1992) 107 ALR 199 cited

The Official Trustee v Marchiori (1983) 69 FLR 290 cited

Re Trautwein; Richardson v Trautwein (1944) 14 ABC 61 cited

Michael v Thompson (1894) 20 VLR 548 cited

Dyer v Dyer (1788) 2 Cox 92 cited

Napier v Public Trustee (WA) (1980) 32 ALR 153 cited

Calverley v Green (1985) 155 CLR 242 cited

Nelson v Nelson (1994) 33 NSWLR 740 cited

Rochefoucauld v Boustead [1897] 1 Ch 196 cited

Sharrment Pty Ltd & Ors v Official Trustee in Bankruptcy (1988) 18 FCR 449 cited

Snook London & West Riding Investments [1967] 2 QB 786 cited

Houvardas v Zaravinos  (2003) 202 ALR 535 cited

Farrar v Commissioner of Stamp Duties (1975) 5 ATR 364 cited

Re Mendonca (1969) 15 FLR 256 referred to

Clyne v Deputy Commissioner of Taxation (1981) 140 CLR 1 referred to

Barton v Deputy Commissioner of Taxation (1974) 131 CLR 370 cited

R P Meagher & W M C Gummow, Jacob’s Law of Trusts in Australia, 6^th Edition

DERYK ROWAN ANDREW AS TRUSTEE FOR ESTATE OF COLIN GEORGE WARD (DECEASED) v ZANT PTY LTD & ORS

N 122 of 2003

HILL J

23 DECEMBER 2004

SYDNEY

THE COURT ORDERS THAT:

1. The applicant file with the Court on or before a date to be fixed a draft of the orders which the applicant submits should be made and such as to reflect the reasons for judgment.
2. The matter be stood over to a date to be fixed for the making of submissions as to the form of orders if the Court is of the view that further submissions are necessary.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

HILL J:

1                     The applicant is the trustee in bankruptcy of the Estate of Colin George Ward, deceased (“Mr Ward”).  Mr Ward died on 1 November 2002. His estate was bankrupt.  The only substantial creditor is the Commissioner of Taxation who is owed an amount which is approximately $3.7 million.  Except so far as it is claimed that the assets with which the present case is concerned formed part of the bankrupt estate, the estate had no assets.

2                     The applicant seeks declarations that five properties, which are registered in the names of various companies and individuals, respondents in the proceedings, were either beneficially owned by Mr Ward at the time of his death or were otherwise property of the bankrupt estate divisible among creditors and vested accordingly in the applicant.  He seeks orders that the Registrar-General, Land and Property Information New South Wales be directed to cancel the existing Certificate of Title for each of the properties and issue a new Certificate of Title in the name of the applicant, with certain mortgages, leases, orders, requests and/or caveats removed. The applicant also seeks a declaration that any rental income or license fees derived from the properties vested in Mr Ward at the commencement of his bankruptcy pursuant to s 116(1)(a) of the Bankruptcy Act 1966 (Cth) (“the Act”).

3                     The first property the subject of these proceedings is situated at 49-51 Thompson Street, Long Jetty (the “Long Jetty Property”) and comprises the whole of the land in Certificate of Title Folio Identifier 334/624472 (formerly Volume 14756 Folio 232, prior to that Volume 5397 Folio 67 and Volume 5397 Folio 68). The property is registered in the name of Zant Pty Ltd, the first respondent.  There is a mortgage to Fitstar Investments Limited (“Fitstar”) registered over this property.

4                     The second property is situated at 1405 Ourimbah Creek Road, Ourimbah (the “Ourimbah Property”) and comprises the whole of the land in Certificate of Title Folio Identifier 12/755249 (formerly Volume 13897 Folio 162). The property is registered in the name of Mr Raphael, the fourth respondent.  There are mortgages to St George Bank and to Fitstar registered over the property and a caveat lodged by Simon Ward.

5                     The third property is situated at 62 Darling Street, Balmain East (“the Balmain Property”) and comprises the whole of the land in Certificate of Title Folio Identifier 13055 Folio 151. It is registered in the name of Mr Ward.  There is a mortgage to Fitstar and a lease to Jifrin Pty Ltd (“Jifrin”) registered over the property.

6                     The fourth property is situated at 3/12 East Crescent Street, McMahon’s Point (“the McMahon’s Point Property”) and comprises the whole of the land in Certificate of Title Folio Identifier 3/SP13674 (formerly Volume 13782 Folio 113).   It is registered in the name of Mr Battisti, the eighth respondent.  There is a mortgage to Fitstar and a lease to Helen Johnson registered over the property.

7                     The fifth property is situated at 93 Roper Road, Doyalson (“the Doyalson Property”) and comprises the whole of the land in Certificate of Title Folio Identifier 93/755245. It is registered in the name of Ms Ross, the tenth respondent.  A caveat was lodged over the property by Yonder Investments Limited (“Yonder”) in relation to a purported mortgage.

8                     The remaining individual respondents are all persons who might have claims in respect of the respective properties.  The pleadings were served upon all respondents.  Appearances were filed on behalf of Zant Pty Limited (the first respondent), Ian Lawrence Struthers (the third respondent), Simon Anthony Ward (the fifth respondent) and Banalij Pty Limited (the sixth respondent).  Simon Ward filed a defence but withdrew it on the first day of the hearing as a result of an agreement reached with the applicant.

9                     Lynette Jean Ross, who is the tenth respondent, while not filing an appearance, gave evidence at the hearing. Fitstar (the second respondent) was served on 8 June 2004 in Hong Kong; Allan Charles Raphael (the fourth respondent) was served on 7 March 2003; Franco Battisti (the eighth respondent) was served in Italy; and Helen Rutherford Johnson (the ninth respondent) was served on 1 April 2003. None of these respondents (with the exception of Ms Ross in her capacity as a witness) appeared or took part in the proceedings.

10                  The remaining respondents, namely Jifrin (the seventh respondent) and Thomas James Harper (the eleventh respondent) do not appear to have been served with the statement of claim, although the applicant says that Jifrin has been served by virtue of becoming a director of it following its re-registration for the purpose of these proceedings. In an affidavit sworn by the applicant, it was said that service had been attempted unsuccessfully upon Mr Harper.  There was some suggestion in the evidence that he may had died, assuming he was not a fictitious person.

Background – the activities of Mr Ward

11                  Throughout the evidence in these proceedings looms the shadowy figure of Mr Ward.  He had been an accountant practising initially at Milsons Point, and later at North Sydney. He professed expertise in taxation and offshore investment. During the 1970’s and 1980’s he practised in partnership with a Mr Ken Crossman under the firm name Ward & Crossman. When that partnership dissolved Mr Ward  practised as a sole practitioner  under the name Colin Ward & Co.

12                  There was, however, more to Mr Ward’s business than just pure accounting and taxation advice. There is a suggestion in the evidence that he dealt in drugs and sold arms in the Philippines.  It is not necessary to decide whether either of these suggestions is true.  His passport reveals that he frequently travelled to Hong Kong and the Philippines.

13                  It appears from the evidence of a Ms Premila Lanny (formerly Casali), who swore an affidavit in the proceedings, that Mr Ward set up business with Ms Lanny forming companies under the name “Sixty Minutes Company Services”. A side office in his accountancy practice at Milsons Point was utilised for this purpose. Mr Ward and Ms Lanny worked together for approximately 2 years when in 1979 or 1980, the office moved to Berry Street, North Sydney. Thereafter Mr Ward and Mr Crossman commenced without Ms Lanny a different company formation business.

14                  It is clear that Mr Ward’s practice involved considerable cash payments.  According to Ms Lanny the middle drawer of Mr Ward’s filing cabinet was full of bundles of $100 notes, and on 5 or 6 occasions, Mr Ward had showed her a suitcase full of cash notes. She said that often people would come into Mr Ward’s office and ask for money, and many were “bruised or bashed-up looking”. She also said that:

“On many occasions I was in the office when people came in to sign things for him at his request, when they had no idea what they were signing.”

The inference from Ms Lanny’s evidence is that the people of whom she spoke were paid money for signing documents which they may not have read.  It seems that Mr Ward spent his time at the office, including time at weekends, preparing documents relating to resignation and appointment of directors. In her words:

“Colin never trusted anyone else to do this while I was there – he wouldn’t let anybody look at the documents he was working on.” 

15                  Ms Ross had been Mr Ward’s secretary as well as his lover for some time.  She gave evidence that it was not unusual for Mr Ward to make large purchases in cash and that he would have had more than $100,000 worth of $50 bills in his sock drawer. She said that Mr Ward was not afraid to use stand over tactics.  At one time in the Philippines, Mr Ward had used an ex-policeman to intimidate Ms Ross into signing a Transfer of the Doyalson Property back to him.  She had, however, refused. Ms Ross also said that Mr Ward would sometimes sign her name himself, and that she had once found a pad with a signature “L Ross” written on it many times.  The inference was that Mr Ward had been practising her signature for use as the occasion might have required it. Ms Ross gave a power of attorney to Mr Ward on 2 August 1983.

16                  The fact that Mr Ward held large amounts of cash was made apparent on 18 August 2000 when the New South Wales Police executed a search warrant at Mr Ward’s McMahon’s Point Property and found $104,500 beneath the floorboards.

17                  On 4 May 1987 the Australian Taxation Office (“ATO”) commenced an audit into Mr Ward’s affairs.  In the result the Commissioner of Taxation issued assessments for the years ended 30 June 1981 to 30 June 1987, for additional income tax, interest and penalties in the amount of $1,431,048.73 on 15 March 1988.  Objections against these assessments when disallowed were referred to the Administrative Appeals Tribunal but the reference was ultimately withdrawn by Mr Ward.  ATO investigations led to proceedings being brought for the recovery of the outstanding tax, interest and penalties in the Supreme Court of New South Wales. Applications for Mareva Injunctions restraining dealings with the five properties with which the present proceedings are concerned were granted by that Court.  The recovery proceedings were ultimately cross-vested to this Court.  As at March 1995 the amount of outstanding tax, interest and penalties amounted to  $2,932,614.

18                  A joint investigation between the ATO and the Australian Federal Police was commenced some time probably around 1990. Mr Ward was no stranger to the criminal law.  He had been convicted of a number of offences in the past, including possession of drugs, failing to pay for goods or meals and driving with high PCA whilst disqualified.  The joint investigation led to charges being laid against Mr Ward, namely: that he had given false testimony, that he had fabricated evidence, that he was guilty of forgery, that he had received an Australia Post Stamp, that he had received an ATO Stamp, that he possessed a prohibited weapon and that he possessed a pistol. The second charge was withdrawn and Mr Ward pleaded guilty to the rest.  The reference in the charge to “Australia Post Stamp” and “ATO Stamp” was a reference to a rubber stamp bearing on its face material similar to that on stamps used by Australia Post or the ATO as the case may be.  Although he was not charged with possession of a similar forged stamp, at some stage he was found to be in possession of a stamp or seal of a kind used by this Court to mark documents filed with the Court.  On 25 May 1994, he was sentenced to serve 12 months in prison for giving false testimony, fined $6,000 in relation to forgery and receiving the stamps, and sentenced to 2 months in prison for possession of a ruger rifle.

19                  In evidence before me there was a report of a forensic document examiner (Chris Anderson & Co Pty Ltd) which considered whether various documents purporting to be signed by numerous people and in respect of various companies which were parties to the transactions to be discussed shortly were all prepared on the same typewriter and signed by the same person.  The expert was of the opinion, although subject to some reservations which were stated, that they were.  In other words it would seem likely that Mr Ward not merely prepared documents which related to various companies but also forged the signatures appearing on those documents. Given Mr Ward’s conviction for fabricating evidence, the expert’s conclusions are not all that remarkable.

20                  Before considering the facts surrounding each of the properties it is convenient to set out some propositions of law which may be applicable.  They are not controversial.  The difficulty in the present case lies in their application.

Legal propositions

·                    The burden of proof will lie upon the trustee of the bankrupt estate to show that the property over which the trustee asserts title was property which vested in the trustee as a result of the bankruptcy: Jack v Smail (1905) 2 CLR 684 at 695, 697; Official Trustee in Bankruptcy v Alvaro (1996) 138 ALR 341 at 357; Cannane v J Cannane Pty Ltd (1998) 192 CLR 557 at 565-566; Garuda Indonesia Ltd v Grellman (1992) 107 ALR 199 at 211; The Official Trustee v Marchiori (1983) 69 FLR 290 at 294, 297. [Strictly speaking, the latter three cases stand for the proposition 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]

·                    However, where all the facts concerning a particular transaction are within the knowledge of persons other than the trustee in bankruptcy (and where, as here the person who was insolvent is dead) a “very slight degree of proof should be sufficient to shift that burden”: Re Trautwein; Richardson v Trautwein (1944) 14 ABC 61 at 75; Michael v Thompson (1894) 20 VLR 548 at 522.

·                    Where A purchases a property with funds provided by B then, unless the presumption of advancement applies, there is a presumption that A holds the property upon trust for B: Dyer v Dyer (1788) 2 Cox 92 at 93; Napier v Public Trustee (WA) (1980) 32 ALR 153 at 158; Calverley v Green (1985) 155 CLR 242 at 266.

·                    The presumption of advancement will only apply where the purchaser is the spouse or child of the person providing the funds: Nelson v Nelson (1994) 33 NSWLR 740 at 748.  In reality, as Deane J said in Calverley v Green at 267, it is more that in certain relationships, equity infers that any benefit provided by way of advancement has the result that the prima facie position is that the equitable interest remains at home with the legal interest (See R P Meagher & W M C Gummow, Jacob’s Law of Trusts in Australia, 6^th Edition at [1210] – [1212]). There is no presumption of advancement where the purchaser acts as trustee of a discretionary trust the beneficiaries of which include the spouse or child.

·                    Where A enters into a contract to purchase a property intending to do so as trustee of another, A can not later deny that he was trustee for that other: Rochefoucauld v Boustead [1897] 1 Ch 196.  It will be irrelevant that the terms of the trust have not been reduced to writing.

·                    A transaction will be a sham where there is a common intention of the parties to it that the transaction they have entered into will be a disguise for some other and real transaction (or for no transaction at all): Sharrment Pty Ltd & Ors v Official Trustee in Bankruptcy (1988) 18 FCR 449; Snook London & West Riding Investments [1967] 2 QB 786 at 802.

·                    Property not owned beneficially by the bankrupt may be recovered by the Trustee for the benefit of creditors if the provisions of s 121 of the Act apply.  The provisions of that section will be discussed in more detail later in these reasons.  Suffice it to say here that it will be necessary to show that the property was transferred by the bankrupt before bankruptcy; the property would have been available to creditors if it had not been so transferred and the bankrupt’s main purpose was either to prevent the transferred property from being divisible among creditors or to hinder or delay the process of making the property available for division among creditors.  It will be inferred that the main purpose fell within the latter alternative if at the time of the transfer the transferor was or was about to become insolvent.

·                    Section 37A of the Conveyancing Act 1919 may be seen as an alternative to s 121 of the Act.  The section has its origin in the provisions of the Statute of Elizabeth and operates to avoid an alienation of property made with “intent to defraud creditors.”  The obvious difference between s 121 of the Act and s 37A of the Conveyancing Act 1919 lies in the need to establish “main purpose” in s 121 rather than “an intent” in s 37A.  A case that would fall within s 121 would clearly fall within s 37A.  The obverse is not true.  It has been held that there is no constitutional inconsistency between the two sections (s 109 of the Commonwealth Constitution): Houvardas v Zaravinos  (2003) 202 ALR 535 (S Ct of NSW, Bergin J), at least unless there were inconsistent applications made, the one by the Trustee and the other by a creditor.  That issue has not been, so far as my researches reveal, raised where the facts are such that there is an “intent” proved within s 37A but there is no main purpose proven under s 121 and it is the Trustee who is seeking in the alternative to rely upon both provisions.  However, it is unnecessary, for reasons which will appear, to resolve this question in the present proceedings.

Long Jetty Property

21                  The Long Jetty Property was purchased in two parcels in 1981 in the name of Zant Pty Limited (“Zant”).  That company became the registered proprietor by registration of transfers dated 30 June 1981 and 7 September 1981. The consideration for one parcel was said to be $52,000; the consideration for the other $47,000. On 8 April 2003, Mr Andrew inspected the property and found it to be vacant land. He then had it valued and the valuation as at 1 March 2004 was $890,000.

22                  The purchase price for the two parcels was not paid at least wholly from any bank account of Zant.  The balance which Zant had in its account with Westpac Banking Corporation during the period 4 June 1981 to 2 October 1987 never rose beyond $30,099.  However, some part of the purchase price, ie $29,900 (of which $2000 had been deposited the same day  to that account by Mr Ward in cash)  was at least paid  by Zant.  As to the balance there would seem to be two possibilities.  One is that the balance of the purchase price came from cash which Mr Ward held and which he converted to telegraphic transfers in favour of a solicitor, who acted on the purchase.  The alternative is that money was withdrawn from the account of another company Verner Pty Ltd (Verner) and used to purchase telegraphic transfers in favour of the solicitor.

23                  The basis for the applicant’s assertion that the purchase price (or at least that part which did not come from Zant) was funded by Verner lies in the coincidence between withdrawals from Verner’s bank account and the payments made to the solicitors. On 18 June 1981, $25,000 was telegraphically transferred from the Bank of NSW and $23,000 from ANZ both to the solicitor.  On the same day $48,000 was withdrawn from Verner’s CBC Account. Then on 29 June 1981, after Mr Ward deposited $2000 into the Zant account, and $29,900 was transferred from that account to Hartcher & Co,  $80,000 was withdrawn from Verner’s CBC account which the applicant asserts was partly utilised to finance the purchase of the second parcel of land.

24                  The balance sheet of Verner as at 30 June 1981 shows no asset by way of loan to Zant, or for that matter by way of loan to Mr Ward.  This suggests either that the money in Verner’s bank account was not its money but belonged to someone else (for example, Mr Ward) or that the monies paid to the solicitor were monies which Verner had previously borrowed (for example, from Mr Ward) such that the payment to the solicitor involved a loan repayment.

25                  The balance sheet of Zant as at 30 June 1982 (the earliest balance sheet of that company available), although prepared on 11 October 1982 and signed by a Mr Harrison and a Mr Stephens, both apparently at the time directors of the company, and not by Mr Ward show no asset or relevant liability relating to the Long Jetty Property.  It should be noted, however, that in balance sheets purporting to be prepared in 1987 and lodged with the ATO in 1989 the Long Jetty Property is shown as an asset of Zant and there is shown a non current liability (unsecured) of $89,900.  There is a question as to which of these accounts I should accept.  Both documents purport to be signed by the same persons, so that to the extent that the signatures upon there are forged neither document might be thought to be reliable.  On the other hand the earlier accounts were prepared before any taxation assessment issued to Mr Ward and is more likely to reflect the true position as it was understood to be in 1981.

26                  Little more can be said of Verner.  It was incorporated on 8 November 1979 with Ian Sticpwich and Premila Lanny as the original subscribers and directors. The registered office was initially at 10/80 Alfred Street, Milsons Point but was eventually moved to 8 Fitzroy Street, Surry Hills, which happened to be Ms Ross’ address in Surrey Hills.  Ms Lanny and Mr Sticpwich resigned as directors on 16 November 1979 and Catherine McCarthy and William Day replaced them.  Mr Sukkar and Ms Garland were appointed directors on 26 October 1987.

27                  Neither Catherine McCarthy nor William Day can be located.  They may well be fictitious people.  The National Australia Bank sent its bank statements to Verner in care of Mr Ward and it is clear that Mr Ward controlled Verner, notwithstanding that he was not a director of it.  I am of the view that it is proper for me to draw the inference from the overall evidence in the case that on the balance of probability the money used to purchase the Long Jetty Property was provided to Zant by Mr Ward and accordingly that property was, as at Mr Ward’s death, held on resulting trust for Mr Ward.   It thus vested in the applicant as trustee of the bankrupt estate.  In so doing I rely upon the fact that the evidence is clear that Mr Ward had at all times large amounts of cash available to him that was not in bank accounts.  Had the funds for the purchase come from specific bank accounts it would have been possible to trace those bank accounts.  That has not proved to be the case.  Nor has any person sought to oppose the trustee’s application upon the basis that there was evidence that some person other than Mr Ward provided the funds to enable the purchase of the property to proceed.

28                  Zant was incorporated on 13 April 1981.  The original directors and shareholders were Premila Lanny and Ian Sticpwich.  It is likely, and I would find, that the company was created by Ms Lanny as a shelf company for sale.  This is consistent with her not remembering the name Zant Pty Limited and also with her holding the initial subscribing shares and being a director only for 17 days.  On 30 April 1981, John Harrison, Robert Stephens and James E McDonald were all appointed directors although McDonald resigned the day he was appointed along with Premila Lanny, and Ian Sticpwich.  Later on 9 October 1987, Anwar Sukkar and Dorothy Garland became directors and then on 6 December 1987 the shares in the company were transferred to them. It is unclear when Mr Harrison and Mr Stephens resigned as directors, but according to a company search of Zant conducted on 14 October 1993, only Anwar Sukkar and Dorothy Garland were directors in 1993.  There is also a more recent letter of Mr Ward to Mr Codrington dated 19 November 1999 which suggests that at that time, Mr Codrington too was a director of Zant.

29                  There is a question whether Mr Harrison and Mr Stephens were fictitious people.  I have already referred to the evidence which suggests that on some occasions at least Mr Ward would, in exchange for money, use people who came off the streets to sign documents; presumably those documents would have included acceptance of appointment as directors of companies such as Zant.  That does not prove that Mr Harrison and Mr Stephens were such people.

30                  The evidence shows that attempts have been made to locate Harrison and Stephens, initially in 1988 by Mr Struthers who was at the time the Receiver of Zant and later by the applicant.  Those attempts have included searches of the White Pages, searches of records held by the ATO and searches of records maintained by the Department of Social Security.  The searches have all been unsuccessful.  There is other evidence which suggests that Harrison and Stephens do not exist under those names.  For example, while Mr Harrison is described in a contract of sale as being “retired”, the birth date attributed to him in the annual return of Zant would, unless there was some accidental slip in the document, have had him as being only 17 at the time he signed the contract.  The evidence concerning whether Mr Stephens was a real person is more equivocal.  The address given for Mr Stephens in an unsigned consent to act as director, presumably prepared in April 1981 and repeated in the annual return of Zant dated 31 December 1984 was not an address of a property which he owned in October 1985, as the property at that address was sold in that year by an owner not named Stephens.  It is possible, perhaps, however, that Mr Stephens was, nevertheless, a tenant of that property.  Given that the attempts to locate both Mr Harrison and Mr Stephens have been unsuccessful and Mr Ward’s practice of using persons to sign documents so as to create a picture of an arms’ length relationship with companies which Mr Ward controlled, I think it is more probable than not that there were no real persons named Harrison and Stephens and that the names were just names used by Mr Ward to disguise his involvement with the management of Zant.

31                  Mr Ward was examined by a Mr Kemp of the ATO on 16 March 1989, inter alia, about his involvement with Zant.  The impression which the interview gives is that Mr Ward was attempting to distance himself from Zant.  Whether or not that is true, Mr Ward agreed that he had met each of Mr Harrison and Mr Stephens (as well as Dorothy Garland and Anwar Sukkar.)  However, he was unable, or unwilling to recall any address or phone number for any of them.  This was despite the fact that it is clear that it was money under Mr Ward’s control at the least, which financed the purchase by Zant of the Long Jetty Property.  More importantly, there is evidence which makes it clear that Mr Ward in fact administered the day to day affairs of Zant.  Westpac Banking Corporation (it may then have been named the Bank of New South Wales) in its records in 1981 gave Mr Ward or his firm Ward & Crossman as its contact for Zant.  A bank diary note dated 7 November 1986 shows that Ms Ross had attempted to cash a cheque drawn on Zant’s account and records that Mr Ward had given instructions not to take any action on behalf of Zant.  Cheques for rental payments received from an estate agent in respect of the Long Jetty Property had been endorsed by Mr Ward on behalf of Zant.  Wyong Council showed Mr Ward as the contact for payment of council rates.  In fact, council rates had been unpaid since 1992.  In 1990 Fitstar had paid what were then outstanding rates to that year.

32                  Perhaps more importantly, records of Zant were found at various properties associated with Mr Ward.  Thus there were found in the McMahon’s Point Property where Mr Ward lived unsigned statutory declarations from Mr Harrison and Mr Stephens purporting to say that they had exchanged contracts for the Long Jetty Property acting for Zant as trustee.  Just what that trust was is not elucidated by any evidence.  In Warrawee, at Mr Ward’s marital home were found consents to act as a director of Zant signed by Garland and Sukkar, resolutions dealing with the resignation as directors of Stephens and Harrison and the appointment of Garland and Sukkar and what appears to have been a list of things Mr Ward intended to do, such as “change directors and sec in Zant Pty Ltd.”

33                  Mr Ward also gave evidence at the Royal Commission into Productivity in the Building Industry in New South Wales on 2 December 1991 where he was asked about his knowledge of Zant and its investments.  Mr Ward said that he knew of Zant  and that it was involved in investment but denied  that he had ever been a shareholder or director.

34                  Mr Ward also gave evidence before the Administrative Appeals Tribunal in proceedings concerning the Balmain Trust and his own affairs, although the proceedings concerning his own affairs he ultimately withdrew.  In the course of that evidence Mr Ward denied that he had purchased Zant as a shelf company or that he had been involved in its formation, despite a letter addressed to him from Sixty Minutes Company Services in relation to completing the registration of Zant.  Cross-examined about the two rental cheques he had endorsed on behalf of Zant, Mr Ward swore that this had come about as a result of his mistaken belief that he was an officer of Zant.  He said also that he had never been a signatory to Zant’s bank accounts and that he had never deposited his own funds in those accounts.

35                  I have read the transcripts of evidence which Mr Ward gave to the Tribunal.  Although I did not have the benefit which the Tribunal had of observing Mr Ward in the witness box it is difficult to conclude other than as the Tribunal concluded at page 11 of the reasons it subsequently delivered, that:

“…W is completely untrustworthy and unscrupulous and that none of his evidence… is worthy of any credit.”

36                  Finally there was evidence given in a s 81 examination by Mr Codrington who, as is noted earlier, had much later become a director of Zant.  While Mr Codrington denied that he was a nominee director for Mr Ward,  he conceded that he did not concern himself on a day to day basis with Zant’s solvency.  He said that he relied upon what Mr Ward told him from time to time.

37                  These matters and, of course, the failure of any relevant person to give evidence opposed to the position of the applicant make it easier to conclude that Mr Ward in reality administered the affairs of Zant as if its assets were his assets, and more importantly that it was never intended that Zant be the beneficial owner of the Long Jetty Property but rather that the cash to finance the purchase of the Long Jetty Property came from Mr Ward.

Ourimbah Property

38                  The Ourimbah Property was purchased from independent third parties Wayne Patrick and Christine Savage on 26 October 1983 for the sum of $180,000.  The transfer was taken in the name of Maundem Pty Limited although there was, apparently, an intention initially that the transfer be taken in the name of another company called Fantome Pty Ltd. The property was as recently as 1 March 2004 valued at $730,000.  There is a mortgage over the property to St George Bank and in submissions it is said that the bank is seeking to exercise its power of sale.

39                  The purchase price of the property was clearly not provided by Maundem.  Its balance sheet just before the purchase shows only nominal assets of $2.  Evidence was given both by affidavit and orally concerning the purchase by Ms Ross.  In her affidavit evidence Ms Ross said that while Mr Ward provided the purchase monies her father had deposited nearly $20,000 into the bank account of Maundem.  In her oral evidence Ms Ross said that $10,000 of the purchase price was paid by her father.  No claim has been made by the father that he had any interest in the property.  It may be assumed that he would have been aware of the proceedings given his daughter’s participation in them.  Which ever version is correct, it is clear that the purchase monies did not come from Maundem.  Rather it is clear that whatever the source of funds the purchase price either came from Mr Ward in cash or was paid by some other entity at the direction of Mr Ward.  There is no evidence that any entity associated with Mr Ward in fact, whether at his direction or otherwise, paid for the property.  It follows that it is more likely than not, having regard to the amounts of cash which Mr Ward controlled, that the purchase price was paid directly by him from cash funds.

40                  The question which arises is, therefore, whether the Ourimbah Property was acquired by Maundem upon a resulting trust for Mr Ward who had paid the purchase money (the prima facie position) or whether when Maundem acquired the property it did so on some other basis.  Support for the latter view comes from a trust deed dated 6 May 1983 (ie dated before the purchase of the property) under which Ms Ross purported to settle $10 upon the terms there set out for the benefit of “the descendants of Colin George Ward”.  The trust was to be known as the “Ourimbah Capital Trust”.  Mr Ward was named as the appointor of the trust.   That deed was signed by Mr Ward as director of Maundem.

41                  Ms Ross, in her evidence said that she did not remember paying Mr Ward the $10 which the trust deed records as having been paid, although she remembered signing the deed at Mr Ward’s request when he had said to her “Just sign this for me quickly”.  She did not give evidence as to the date of execution, although ordinarily there would be no reason to doubt the date attributed to execution.  A notice of change of directors filed with the National Companies and Securities Commission on 3 December 1985 (more than two years after the appointment which was notified) and signed by Mr Ward shows that on 6 May 1983 the original directors of Maundem had retired and Ms Ross, a Mr Battisti and Mr Ward had been appointed directors in their place.  There is a similar document signed by Ms Ross but lodged, it would seem, with the Commission on 22 May 1985.  There is no explanation to be found in the evidence as to why either or both of these documents was or were filed some considerable time after the change of directors.  The time lapse raises doubts whether the deed of trust dated 6 May 1983 was actually signed on the date it bears or whether it was brought into existence later in 1985.

42                  So far as the documentary records are concerned the next thing which happened was that on 12 November 1983 the directors of Maundem (purporting to be Ms Ross and Mr Ward) resolved that the Ourimbah Property vest in Mr Simon Ward (the fifth respondent) and that it be transferred to him when he reached 40 years of age.  It seems that Simon was approximately 8 years of age at that time.  Ms Ross says of this resolution that she did not sign it.  The inference is that her signature was forged by Mr Ward.  According to Ms Ross the signature appeared similar to other forgeries of her signature by Mr Ward.  She said she would not have agreed to a vesting of the property in Simon as she was of the view that her father had an interest in the property.  Although there is a logical problem with this explanation in that the trust was for the benefit of Mr Ward’s descendants and thus her father was not a beneficiary, I accept Ms Ross’ evidence that she knew nothing about the trust as she had not read the trust deed, did not settle any money and did not participate in any resolution appointing the trust assets to Simon.

43                  The question is what conclusion to draw concerning the ownership of this property.  The question is not without difficulty.  While the fact that no money was settled would be of no moment assuming Maundem intended to buy the Ourimbah Property on the terms of the trust deed which Ms Ross signed: Rochefoucauld v Boustead,there is a real question as to what Maundem’s intention at the time was.  No doubt Mr Ward was the real governing mind of Maundem, so that it is his intention with which we are concerned.  To the extent that Ms Ross was a director of Maundem and her intention was relevant it can be concluded, I think, that she did not intend that Maundem purchase upon the trusts in the deed upon which her signature had been forged. Not without some doubt, I think that it is more probable than not that the idea of a trust, the appointment of new directors and the subsequent appointment in favour of Simon were all matters that arose much later than the acquisition of the property when perhaps for the first time Mr Ward gave consideration to the question of its ownership.  Subject to any evidence as to events after the acquisition of the Ourimbah Property which point to the contrary of this conclusion, I would conclude that the property was at all relevant times owned by Mr Ward and thus ultimately forms part of the property of the bankrupt estate.

44                   Subsequently, according to company records, Mr Ward resigned as a director of Maundem in May 1987 by which time the taxation investigation into his affairs was underway.  Jennifer Moore of whom the evidence tells nothing, was then appointed.  On 8 June 1988 Anwar Sukker,  who at that time was a director of Zant (appointed 9 October 1987) was appointed a director of Maundem.  In a letter dated 24 May 1990 from Mr Ward to the Commissioner of Taxation, Mr Ward asserted that the directors of Maundem at that time were Antonios & Yoleda Balonenos. However, this appears unlikely to have been true, because records of the Immigration Department showed that Mr and Mrs Balonenos had departed Australia for Greece on 21 March 1990.  There is no company record of their ever having been directors.  Maundem was removed from the register of companies on 27 February 1992. By then, if it had indeed been trustee of a trust which owned the Ourimbah Property it had ceased to be so.

45                  In an examination before an officer of the ATO held on 30 October 1989, Mr Ward admitted that he knew of Maundem and that he had been an officer of the company, probably a director. He claimed to have ceased being a director in 1987 and said that this was because of work pressures. Mr Ward said that he attended directors meetings, but without having the relevant documents in front of him he was unable to recall who attended. He asserted that Maundem was a trustee of a trust and claimed that the funds utilised to purchase the property were “capital funds”, whatever that may mean.  He said, and this could not be accepted, that he did not know the source of the funds.  If anything that statement rather supports the conclusion that Mr Ward himself provided the funds and was seeking to keep that fact hidden. 

46                  There are other documents which support the view that Mr Ward not only had an intimate connection with the Ourimbah Property and Maundem but in fact was the beneficial  owner of the property.  At least two invoices for products utilised on the property were issued to Mr Ward, one being for distillate on 22 December 1983 and the other being from Southern Cross Machinery dated August 1984.  Indeed the latter invoice was addressed to “Colin Ward 100 Ourimbah Creek Road Ourimbah”, as was the electricity bill for the period 5 January 1984 to 3 April 1984.  There are also statements from employees of Gosford Packing House testifying to the fact that Mr Ward ordered equipment and repairs for the property.  Even a cheque in favour of Wyong Shire Council for rates (presumably) was drawn upon the Ward & Crossman account.  It would seem that Mr Ward was living in the property at least some of the time.

47                  Later, when it clearly was advantageous for him to assert the trust against any claims made by the ATO, Mr Ward wrote letters on behalf of the Ourimbah Capital Trust.  One such letter was dated 15 January 1999 and was addressed to the Wyong Shire Council relating to the removal of dumped tyres.  Another, dated 26 August 2002 was sent to St George Bank enclosing financial statements for the trust for the years ended 30 June 2001 and 2002. On 29 May 1989 Mr Ward collected the conveyancing file relating to the acquisition of the property from John Conti.  That file may have been revealing both as to the intention, if there was one, to acquire the property as trustee and the provision of the purchase money.  By collecting it from the solicitor Mr Ward may have intended to prevent the ATO from obtaining information which might have been relevant.   Moreover, the billing address for Maundem in relation to Council rates was “C/- Colin Ward, 79 Braeside Street, Wahroonga”.

48                  On 6 March 1988 Mr Ward, who had been the appointor of the Ourimbah Capital Trust resigned as such and appointed his wife to that position.

49                  In 1988, after the taxation audit had been commenced, a Deed of Option purported to have been entered into between Ms Ross (presumably to the extent that she did sign this document she did so as a director of Maundem, although probably she did not have the power as a sole director to affix the common seal on behalf of the company if indeed the document was ever signed under seal) and Costwin Trading Company Ltd granting Costwin the option, until a time in 1989, to purchase the Ourimbah Property for $130,000.  The document states that the option was granted in consideration of the payment of $500.  Ms Ross does not deal with this so-called deed in her evidence.  Since the option was not exercised nothing really turns upon it, save that the option may have given Mr Ward greater control over the Ourimbah Property without revealing any beneficial ownership he might have.  A Caveat was lodged over the property by Costwin on 12 September 1988 to protect its rights under the deed. Nothing in the evidence tells us about Costwin.  All that is known is that a Mr Christie, solicitor, acted for Costwin on the option.  In the record of his s 264 examination held by the ATO Mr Christie is recorded as saying that his verbal instructions for the transaction came from Mr Ward.  Also it seems that Costwin was a shelf company purchased from Company Formations Far East Limited of Hong Kong who invoiced Mr Ward for their services in relation to Costwin.

50                  In 1989 the Ourimbah Property, with the consent of Costwin, was transferred to Razel Desmond.  On 7 December 1992 it was transferred to Mr Allan Charles Raphael, the fourth respondent.  The Memorandum of transfer described each of Ms Desmond and Mr Raphael as “trustee”. Mr Raphael was a client of Mr Ward at the time and had lent him $10,000 - $20,000 throughout the 1980s. It seems that Mr Raphael also paid the mortgage repayments on the property for Mr Ward while he was in prison during the 1990s.  Mr Raphael in an affidavit read in the proceedings swore that the mortgage repayments amounted to approximately $25,000. It can be inferred that prior to Mr Ward being in prison Mr Ward himself paid amounts owing to St George Bank on the mortgage over the Ourimbah Property.  Bank receipts for these repayments indicate that payments were made in cash.  After Mr Ward’s death no further payments were made.

51                  Mr Raphael’s affidavit makes it clear that he did not understand the nature of the transaction pursuant to which he became the registered proprietor of the Ourimbah Property.  According to his evidence Mr Ward had suggested that he go on the title so that he would have some security for the money he had lent Mr Ward.  Mr Raphael in his oral evidence said that he would have transferred the property back to Mr Ward on request subject to being repaid the money Mr Ward owed him.  However, it would seem that Mrs Ward, as appointor of the Ourimbah Capital Trust removed Ms Desmond as trustee and appointed Mr Raphael so that, assuming that the Ourimbah Property was indeed held on the trusts of the Ourimbah Capital Trust, Mr Raphael became trustee of that trust and the property was transferred to him accordingly.

52                  On 18 January 1988 Maundem gave a mortgage over the Ourimbah Property to Fitstar.  The mortgage was said to secure a loan for 40,000 Swiss Francs.  The mortgage was signed by Mr Ward on behalf of Maundem, notwithstanding that it would seem that he had, by the time the mortgage was entered into, ceased to be a director of the company.  I will deal with what is known about Fitstar later.  It suffices to say that Fitstar was under Mr Ward’s control.  The inference is quite clear that the mortgage was part of Mr Ward’s attempt to control the properties the subject of the present proceedings no matter in what name the properties were registered and to protect the properties from being taken by the ATO in payment of income tax outstanding.  It is not clear on the evidence either whether this mortgage was registered on the title, or whether it was ever discharged.

53                  Another mortgage was given over the property on 8 June 1993 to secure approximately $193,000 lent by the State Bank.  Just what happened to the amount lent is not clear.  It may well have gone to Mr Ward.  This mortgage was discharged by a refinancing from St George Bank of $196,000 on 27 August 1996. On 7 October 1993 Simon Ward lodged a caveat over the Ourimbah Property to protect the interest which he describes as “beneficial owner pursuant to vesting of the corpus being (title reference) by the trustee of the Ourimbah Property Trust to the named beneficiary Simon Anthony Ward”.

54                  A further mortgage was given over the property on 3 February 1997 purporting to secure the sum of $153,690 to Fitstar which was registered subject to the St George Bank security.  The amount of $153,690 was apparently the Australian dollar equivalent of 101,000 Swiss Francs said to have been lent by Fitstar.  Clearly Mr Raphael did not receive this amount.  It can only be assumed that it went to Mr Ward and ensured that the Ourimbah Property would not realise much for creditors if it became available to them.  It hardly seems that Mr Ward recognised any real interest of Simon in the property. 

55                  There was some evidence as to the use of the premises from the time of its acquisition which is generally inconclusive of the issues in the present proceedings.  There is some suggestion that Mr Ward may have grown kiwi fruit on the property.  There is also some suggestion that he cultivated indian hemp there.  The property was tenanted by a Mr Simpson from at least 1 March 1988 at a rental of $400 per month under a lease clearly negotiated by Mr Ward.  A subsequent lease was entered into in favour of a Mr Saunders by Mr Raphael.  Later three persons, Warren, Jill and Ken lived on the property and it is suggested that rent was passed on to Simon Ward.  There are no rent receipts and no direct evidence as to the destination of any rent paid.

56                  It seems that there is currently no tenant occupying the property and that it is in a state of disrepair. 

57                  The evidence which I have set out relating to the Ourimbah Property after its acquisition if anything supports the conclusion reached earlier that the Ourimbah Property was purchased in circumstances where Mr Ward was the beneficial owner of it.  It never became the property of any trust of which Simon Ward was a beneficiary.  It vests in the Applicant subject to the interest of the St George Bank.  As will later be seen I do not regard the Fitstar mortgages to be valid as against the applicant.

Balmain Property

58                  The Balmain Property became the subject of a contract of sale between various named individuals (acting as mortgagee under a power of sale) and Mr Ward entered into on 17 December 1982.  The consideration was $175,000.  In the contract Mr Ward was described as  “Trustee for the Balmain Trust”.  However, presumably before exchange, the word “Trustee” was crossed out, perhaps having regard to the decision of Sheppard J, then of the Supreme Court of New South Wales in Farrar v Commissioner of Stamp Duties (1975) 5 ATR 364.  While there is no suggestion of any relationship between the named vendors and Mr Ward, the registered proprietor of the property, NCJ Investments Pty Ltd had, as a director, a Mr Sticpwich who at some time was a director of Zant, and another mortgagee on the title was Wardic, a company of which Mr Ward was a director.  It is difficult to draw any inferences from these matters.

59                  The next question is where the purchase monies came from.  There is evidence that $87,000 was withdrawn on 22 February 1983 from the account of Verner.  On the same day a series of bank cheques amounting to $160,328 were drawn and paid to the vendors.  Even if it is accepted that $87,000 was sourced from the account of Verner, and that would seem quite possible, it does not account for the balance of the purchase price of nearly $90,000.

60                  Mr Ward when giving evidence in the Administrative Appeals Tribunal asserted that a man called Alan Cook provided both the $17,500 deposit in cash on 20 December 1982, which was then paid to Richardson & Wrench by the Balmain Trust, as well as the remainder of the purchase price.  In support Mr Ward pointed to a document purporting to be signed by Mr Cook and himself acknowledging that Mr Cook had advanced $160,328 at interest of 10%.  The document is rather surprising since it also contains an acknowledgment of a witness to having seen the flow of funds involved.  Just why such a document would be necessary or even contemplated where parties were at arms’ length is difficult to understand.  This transaction is made even more strange by the conclusion of a forensic handwriting expert that the signature of Mr Cook is in fact written by Mr Ward.  That this is likely appears on the face of the document itself by inspection.

61                  It might here be noted that cheques drawn upon the Balmain Trust account in January 1988 to cash totalling $54,500 show on their back a notation to the effect that they were paid to and received by Mr Cook on account of principal and interest.  I think it is unlikely that these cheques were ever cashed by a Mr Cook and much more likely that the proceeds of them went directly to Mr Ward.

62                  Before the Administrative Appeals Tribunal a Mr Ronald Norman Stonestreet confirmed that Mr Cook had provided the purchase monies.  He did not give evidence before me.  Similar evidence was given in the Tribunal by Ms Ross.  Indeed, she said, on oath, that she remembered counting the $17,500 in Mr Ward’s office in Mr Cook’s presence. 

63                  Before me Ms Ross contradicted her previous evidence in the Tribunal.  She said that in giving evidence before the Tribunal she was “fearful of the consequences of not giving Colin the evidence he wanted”.  I believe her when she says this.  Mr Stonestreet was not called to give evidence before me.  I would not rely upon a statement prepared by a witness who is not available to be cross-examined but prepared for the purpose of other proceedings.  On the evidence before me I would conclude on the balance of probabilities that there was no Mr Cook but rather that name was just an alias adopted by Mr Ward for the purpose.  There is no evidence to suggest the money was ever repaid, or for that matter that any interest was paid.  Since there is no record of any company associated with Mr Ward (other than Verner) providing the balance of the purchase money the only inference available is that Mr Ward used cash which he had accumulated to pay at least the balance of the purchase money.  If the Verner account was in part used to fund the purchase, again there is no evidence that any loan from that company was repaid and it would seem that the money in question came from Mr Ward.

64                  The real question is whether Mr Ward in entering into the contract did so as trustee of a trust.  Before the purchase it would seem that a trust was settled by Ms Thomas as settlor on 16 October 1982.  Mr Ward was the trustee of that trust.  The discretionary beneficiaries  included Ms Ross.  The beneficiaries were blood relatives of Mr Ward and Ms Ross.  This was not, however, the only trust which may be relevant   On the same day as Mr Ward entered into the contract  to purchase, (17 December 1982) a further deed of settlement was purportedly executed.  In this deed Ms Ross was named as settlor, Mr Ward as trustee, Mr Ward’s mother as appointor and the beneficiaries were the descendants of Mr Ward, not the descendants of Ms Ross.

65                  From the evidence of Ms Ross it would seem that Mrs Ward was unhappy with the terms of the October trust deed and it may be assumed she was unhappy that the beneficiaries included the blood relatives of Ms Ross.  The December trust deed was no doubt more along the lines which it might be expected Mrs Ward would embrace.  However, Ms Ross also says that she did not sign the December trust deed nor did she, as the deed says, pay over any money as settlor.  I am prepared to accept Ms Ross’ evidence.  There is no evidence to the contrary.  It follows that no trust was actually established by the December trust deed.  That, however, is not the end of the question.  There remains the question whether in entering into the contract to purchase the Balmain Property Mr Ward intended to do so on the terms of the trust deed, assuming that document to have been in existence on the date Mr Ward entered into the contract.

66                  The next thing which happened, at least on the documentary evidence is that Mr Ward signed a document styled “Resolution of trustee of the Balmain Trust” on 22 February 1983.  That document purports to be a resolution in accordance with “Provision 6” of the December trust deed vesting the corpus of the trust in Simon Ward and resolving that the corpus be liquidated or that the assets of it be transferred to Simon on his attaining thirty years of age.  There is nothing to indicate how it came about that between December and February Mr Ward changed his mind (if he did) from working with a trust with discretionary beneficiaries to working with a trust for the benefit of his son absolutely.  It seems that Mr Ward wrote a letter bearing on its face the date 30 March 1983 to Mr DF Ward, Simon’s godparent recording the resolution vesting the corpus.  There are also in evidence resolutions purporting to be resolutions of Mr Ward in the period from 30 June 1983 to 30 June 1987 resolving to distribute the income of the Balmain Trust to Simon Ward.  On 5 September 1983 there is a management agreement between Mr Ward and a real estate agency company which refers to the Balmain Trust.

67                  The Administrative Appeals Tribunal on the evidence which was before it (not all of which is before me) concluded that the trust deeds were not executed on the dates they bore but were brought into existence much later and as a result of the income tax investigations in 1987-88.  That finding is not binding upon me.  In fact, given that the evidence before the Tribunal and the evidence before me differed it is hard to see what use I could make of the reasons for decision of the Tribunal.

68                  On the evidence before me it seems more probable than not that Mr Ward did enter into the contracts to purchase the Balmain Property intending to do so as trustee of a trust the terms of which were those set out in the December trust deed.

69                  Upon the death of Mr Ward’s mother, Mr Ward became appointor of the Balmain Trust.  In evidence Mr Ward gave before a Registrar of the Supreme Court, Mr Ward said that he regarded there to be a conflict of interest where he was both trustee and appointor.  Accordingly he said that he had resigned as trustee and Banalij was appointed in his place by a Deed of Appointment dated 27 January 1988.  On 31 March 1988, Mr Ward also resigned as appointor and Frederick Johnson was appointed in his place.

70                  Banalij was incorporated on 28 October 1985 probably as a shelf company. The original directors and subscribing shareholders were Carole Anne Brunt and Philip Raymond Brunt. On 31 October 1985, Mr Brunt resigned as a director and transferred his $1 share to Mrs Ward. Similarly, on the same day, Mrs Brunt resigned as a director and transferred her $1 share to Harold Maxwell Bagnall, who also became a director. Mr Harker was appointed as the other director on 31 October 1985. For a short period of time, Mr Ward was also a director, having been appointed on 7 December 1987 but then resigning on 29 March 1988.   The registered office for Banalij was moved to Mr Ward’s family home at Warawee on 27 January 1988.

71                  The Certificate of Title for the property reveals that Banalij Pty Ltd became the registered proprietor on 11 March 1988, that a mortgage to Fitstar was registered on the same day and that a lease to Jifrin Pty Ltd was registered on 6 April 1988. The transfer to Banalij was for nominal consideration and proceeded by way of an Application executed by Mr Ward on 27 January 1988. The mortgage, which secured a sum of 60,000 Swiss Francs, was in fact granted by Mr Ward before this date on 18 January 1988. The lease over the property was executed on 9 March 1988 and contained an option to purchase the property for 5 plus 5 years. Surprisingly, however, what the Certificate of Title also reveals is that the original transfer of the property to Mr Ward, despite being dated 22 February 1983, was not registered until 11 March 1988, some five years later.

72                  Ian Lawrence Struthers was appointed as receiver of Banalij by the Supreme Court on 5 May 1988.  It seems that the Balmain Property is currently let to a commercial tenant and that Mr Struthers continues to receive all rents and income from the property in his capacity as Receiver. As at 27 February 2004, the Balmain Property was valued at $1,200,000.  A Caveat was placed by Mr Struthers over the property.

73                  Two of the directors of Banalij gave evidence before a registrar in a s 541 examination. The first was Mr Bagnall, who said that Banalij’s sole business was to act as trustee for the Balmain Trust.  He confirmed that Banalij accepted this trust in January 1988 and he recalled signing an acknowledgement to this effect.  Although a lease was executed over the property in favour of Jifrin Pty Limited, Mr Bagnall said that no income has been received by Banalij as trustee.  Given that Banalij was only registered proprietor of the Balmain Property from January 1988 and that a receiver was appointed in March 1988 it may not be too surprising that Banalij did not receive any rent. Mr Bagnall denied knowing that Banalij had mortgaged the property to Fitstar to secure a loan in Swiss Francs.

74                  Mr Harker, who was also examined, similarly confirmed that Banalij had consented to act as a trustee and that he had attended the meeting with Mr Ward and Mr Bagnall where the relevant resolution was passed. Although Mr Harker said that he agreed to become a director as a favour to Mrs Ward, he maintained that he attended all directors meetings and discharged his director obligations properly.

75                  Mr Ward’s own evidence, such as it is, takes the matter no further.  During the course of his examination by a Mr Kemp of the ATO on 16 March 1989 Mr Ward said in relation to the purchase of the Balmain Property that he “might have signed the contract as trustee for the Balmain Trust”.  Otherwise it seems that Mr Ward sought to distance himself from the Balmain Trust, as indeed he tried to distance himself from all of the five properties.

76                  The applicant places some significance upon the fact that Mr Ward operated the Balmain Trust bank accounts in justifying a conclusion that  Mr Ward seemed to have control of the property. It is true that on 9 February 1983, Mr Ward opened an account with the National Australia Bank in the name of the “Balmain Trust”. Also, some documents obtained from the bank appear to suggest that Mr Ward had sole authority to operate the account.  Later, another “Balmain Trust” account was opened with the Advance Bank on 5 January 1988, and the application form makes it clear that Mr Ward both opened and operated this account. However, if Mr Ward was, in fact, trustee of the Balmain Trust this is exactly what could be expected, at least until Banalij replaced Mr Ward as trustee.

77                  Likewise Mr Ward dealt with a real estate agency concerning the letting of the Balmain Property and the eviction of a tenant in 1983.  Council rate notices were addressed to Mr Ward personally.  Again, this would be the case whether Mr Ward purchased the Balmain property as beneficial owner or as trustee.  Another matter to which reference may be made is that a number of documents relating to Banalij were found in Mr Ward’s office.  This no doubt shows that Mr Ward was closely involved with the administration of the trust and the affairs of Banalij.  Given that his son was the beneficiary this is hardly surprising.  In any event I have no difficulty in concluding that Mr Ward actively controlled Banalij.  That, however, does not mean that he beneficially owned the Balmain Property.

78                  There are, however, two matters which could support the view that Mr Ward acquired the Balmain Property as beneficial owner rather than as trustee.  The first relates to the Fitstar mortgage.  It has been noted that the title documents show a mortgage from Ward to Fitstar to secure the sum of SF 60,000.  There is no record of this money ever being used for the benefit of Simon Ward and it may be assumed that Mr Ward used the proceeds for himself, that is, assuming any monies were in fact advanced under the mortgage.  The second matter is that between 20 January 1988 and 22 January 1988 Mr Ward drew and cashed cheques drawn on an account of the Balmain Trust in the sum of $54,500 and there would seem to have been other smaller cheques drawn payable to cash on that account which would seem to have gone into the pocket of Mr Ward.  I have already mentioned that the cheques totalling $54,500 show on their back a notation of payment to and receipt by Mr Cook for principal and interest and my conclusion that this notation is untrue.  Rather I think the situation is either that Mr Ward was acting in flagrant breach of the trust in favour of his son in withdrawing cash from the trust bank account or his actions are consistent with Mr Ward being the beneficial owner of the property.  Against the theory that Mr Ward was beneficial owner, however, is the considerable body of evidence to which reference has been made, some clearly contemporary, which supports the theory that Banalij purchased as trustee upon the terms of a trust deed.

79                  It follows that the applicant has not satisfied me that the Balmain Property was owned beneficially by Mr Ward so that it became property of the bankrupt estate.

80                  In the alternative the Trustee seeks to rely upon s 121 of the Act.  That section is relevantly in the following terms:

(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.

(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.

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

81                  The relevant property in the present case will be the money which I have found Mr Ward provided for the purpose of purchasing the Balmain Property.

82                  The first question which arises is whether s 121(2) permits an inference to be reasonably made that at the time the money was paid by Mr Ward (or at his direction from funds he otherwise owned) he was or was about to become, insolvent.  For this purpose I permitted further evidence to be filed dealing with Mr Ward’s financial position and particularly his assets at the relevant time.

83                  Mr Ward did not file income tax returns as and when required by the provisions of the Income Tax Assessment Act 1936.  As has already been noted assessments ultimately issued to him made under s 167 of that Act (ie default assessments) for the years ending 30 June 1981 to 1987 inclusive.  Details of these assessments and the dates they issued are to be found in paragraph 17 of these reasons.  There is a question whether the amounts assessed should properly be seen to be liabilities which arose at the end of each financial year of income when the liability crystallised, albeit there was no assessment and thus no amount in one sense due and payable or only at the date of assessment or the date notified as the date when the tax as assessed was due and payable.  That controversy (or the issues involved in it) is discussed in Re Mendonca (1969) 15 FLR 256 at 259 per Gibbs J and Clyne v Deputy Commissioner of Taxation (1981) 140 CLR 1 at 16-17.  It need not be resolved here.

84                  On 12 May 1998 Mr Ward’s Statement of Affairs showed assets of $458 (cash) and liabilities at that time of $3,878,165 said to be secured creditors.  This included the amount of $700,000 then estimated by him to be owing to the Commissioner of Taxation as well as amounts said to be owing to other creditors.  This was after the time when Mr Ward was seeking review of the assessments by the Administrative Appeals Tribunal.

85                  At the time of the purchase of the Balmain Property, even on the view espoused by Gibbs J in Re Mendonca,the tax liability of Mr Ward could not have exceeded approximately $220,000, being the amount of tax ultimately assessed for the 1981 and 1982 years of income excluding interest and penalties ultimately assessed.  There would not seem to have been any other substantial creditor at the time.

86                  It is more difficult to determine what assets Mr Ward had at that time.  The applicant has searched the Land and Property Information Register for details of assets which Mr Ward may have had registered in his name at any relevant time.  Apart from the assets the subject of the present proceedings and his residence at Wahroonga which was sold in 1985 and the proceeds used to purchase another property in Warrawee in the name of Mr Ward’s wife, there were no other assets at any time available to creditors to satisfy Mr Ward’s debts.  The Wahroonga property, while originally in his name was transferred to his wife in 1979.  There is no evidence before me which would establish that Mr Ward was the beneficial owner of the Wahroonga property at the time of the Balmain Property purchase although it seems that the applicant ultimately settled proceedings involving Mrs Ward and the Warrawee property on terms that money was paid to him for the benefit of creditors which may suggest that Mr Ward did have an interest in that property and perhaps therefore the Wahroonga property.  Other searches made by the applicant for assets have not revealed the existence of any assets that might at any relevant time have been available to Mr Ward to satisfy the demands of creditors.

87                  The applicant submits that it should be inferred that at the time of the purchase of the Balmain Property, Mr Ward was or was about to become insolvent.  The submission proceeds upon the basis that the only assets of Mr Ward were the McMahon’s Point Property, the Long Jetty Property and the purchase money used to purchase the Balmain Property.  The submission ignores any money ultimately used by Mr Ward in the latter half of 1983 to purchase the Ourimbah Property and the Doyalson Property.  It is hardly conceivable that these monies only became available to Mr Ward after the purchase of the Balmain Property.  The applicant has not, therefore, shown that at the time of the purchase of the Balmain Property Mr Ward was insolvent, even assuming that income tax is to be treated as a debt due and owing as at the last day of the year of income to which the assessment relates.

88                  Accordingly if the applicant is to succeed the applicant must show that Mr Ward’s main purpose at the time of the purchase of the Balmain Property and the payment of the purchase monies for the benefit of the Balmain Trust (the relevant transfer) was to prevent the transferred property from becoming divisible among creditors or to hinder or delay the making of property available for division among his creditors.  The applicant can not rely upon the inference of main purpose in s 121(2).

89                  Obviously the onus of proving main purpose lies upon the applicant.  Nevertheless it will not be necessary for there to be direct evidence of Mr Ward’s purpose.  The conclusion as to main purpose may arise by inference from all relevant circumstances.  As Brennan CJ and McHugh J said in Cannane v J Cannane Pty Ltd at 556-7:

“Although the party impugning the disposition of property must show an actual intent to defraud creditors at the time of the disposition, the intent may be inferred from the making of a disposition which, to adopt the words of Lord Hatherley LC in Freeman v Pope, ‘subtracts from the property which is the proper fund for the payment of [the] debts, an amount without which the debts cannot be paid’. The ‘proper fund’ may consist in assets out of which future creditors as well as present creditors would be entitled to be paid a dividend in respect of what is owing to them. Therefore a subtraction of assets which, but for the impugned disposition, would be available to meet the claims of present and future creditors is material from which an inference of intent to defraud those creditors might be drawn.”

90                  The intent would readily be inferred in a case where the effect of the alienation of property will be that the proper funds available for the payment of creditors become insufficient: PT Garuda Indonesia Limited v Grellman at 524.  Further, the purpose may be established by reference to future creditors: Barton v Deputy Commissioner of Taxation (1974) 131 CLR 370 at 374.

91                  It is submitted for the applicant that by the latest as at the time the Balmain Property was purchased (but indeed, earlier than that time), Mr Ward embarked upon a course of conduct which involved him in not lodging taxation returns (and accordingly not being easily assessed for taxation by the Commissioner of Taxation) while at the same time putting his assets beyond the reach of creditors or otherwise dealing with them in such a way that creditors would find it difficult, if not impossible to have those assets available to pay Mr Ward’s debts.  The matters which are said to be relevant in reaching such a conclusion are said to include the non-lodgement of taxation returns and the various transactions referred to in these reasons which involve the purchase of assets in the names of others, the use of forged signatures, or fictitious names and the steps taken by Mr Ward to ensure that at all times, whether through trusts, options or mortgages he retained control of the assets otherwise not in his name.

92                  That such a course of conduct was undertaken by Mr Ward is clear.  It is also clear that he had begun to do so before the purchase of the Balmain Property, indeed, at the latest by the time of the acquisition of the McMahon’s Point Property by Eband Pty Ltd.  The question therefore is whether this suffices to show that the main purpose of the use of the funds to purchase the Balmain Property as trustee for the Balmain Trust (and ultimately for the benefit of the son) was such as to fall within s 121 or whether the main purpose was nevertheless to benefit the beneficiaries of the Balmain Trust, that is to say, in effect, his son.

93                  There is little doubt that Mr Ward did intend to benefit his son in some way.  However, it is also obvious that Mr Ward’s desire to benefit his son was itself motivated by the desire to put his assets, which in addition to the properties by then acquired, still included a substantial amount of cash, beyond the reach of creditors or at least so as to delay creditors from gaining access to them.  I would find that at the time of the purchase of the Balmain Property Mr Ward’s main purpose in so doing was the desire to delay or hinder the recovery by the Commissioner of Taxation of income tax not yet assessed, and in respect of the years for which Mr Ward did not lodge returns or did not intend to lodge returns in the future.  I do so in particular having regard to the fact that his main intention in purchasing McMahon’s Point and Long Jetty both in the names of corporations which he controlled, was to delay or hinder the recovery of tax and it is not probable that the one purchase of the Balmain Property was mainly motivated by benevolence toward his family, even if such motivation was a purpose that he had.

94                  It follows that I would find that the Trustee was entitled either to the Balmain Property as representing the cash which he had transferred in a transfer which was void as against him in accordance with s 121 of the Act or perhaps the property itself.  Whether or not the property so acquired is to be regarded as property disposed of by the debtor or bankrupt to the donee is a question of fact to be determined in each case: Official Trustee v Alvaro at 357.  Since this has not been argued it should be dealt with when considering the orders to be made. It accordingly is not necessary to consider the application of s 37A of the Conveyancing Act 1919.

95                  I should say that in so far as I should be wrong in the conclusions I have reached in respect of the other properties the subject of the present proceedings, those properties would likewise form part of the bankrupt estate of Mr Ward having regard to s 121 of the Act.

McMahon’s Point

96                  On 27 June 1980, the McMahon’s Point Property was purchased from a third party, Satopa Pty Limited for $51,000 by Eband Pty Limited which as a result became the registered proprietor of it. There are no records which show whether the solicitors acting for Eband received the purchase price in cash or by cheque. Nor is there any evidence as to who provided the purchase money.  The accounts of Eband show a liability under an unregistered mortgage of $51,956.  The name of the mortgagee is not disclosed. The property was valued on 25 February 2004 at $580,000.  The 1984 accounts record a liability of “unsecured loan-unreg. Mortgage-FG Ward” in the sum of $42,000 indicating at the least that some part of the original loan had been repaid.  By 1988 this “unsecured loan – unreg mortgage” had been replaced by a mortgage from Fitstar in the sum of $43,295.

97                  The directors of Eband and its subscribing shareholders were Ian Sticpwich and Premila Lanny.  Mr Sticpwich did not give evidence.  Ms Lanny swore an affidavit which was read in the present proceedings in which she said that she was never aware that she was a director of Eband.  She swore that Mr Ward had said to her that “Eband is one of the most lucrative tax deals I’ve ever done”. A company search dated 14 October 1993 reveals that Eband was deregistered on 9 February 1988.  Eband’s registered office was the same address as Mr Ward’s previous office in Milsons Point.  Eband was removed from the register in February 1988.

98                  Before entering into the contract, Eband was party to a deed of settlement establishing what was to be called the “Ward Trust No 1” bearing the date 16 May 1980.  Under this deed the settlor was Ms Ross, Eband was to be the trustee and the beneficiaries were Mrs Ward and the descendants of Mr and Mrs Ward.  Accounts for the Ward Trust No 1 for the years ended 30 June 1980, 30 June 1984 and 30 June 1995 to 30 June 1998 were in evidence.  There is no evidence as to when these accounts were prepared.  All show the McMahon’s Point Property as an asset of the trust.  Associated profit and loss accounts of the trust show rent receipts from the trust property although in the years 1989, 1990, 1991, 1992, 1993 and 1994 it is recorded that the obligation of the tenant to pay rent was satisfied by the tenant paying outgoings.

99                  On 23 May 1980 Mr Ward signed as appointor a memorandum of wishes.  His signature was witnessed by Mr Raphael.  The document expresses Mr Ward’s wish or instruction that the trust property at McMahon’s Point vest in Simon Ward at the age of forty-five years.  Annual resolutions signed by Mr Ward as appointor purported to distribute net taxable income of the trust to Simon.

100               Prima facie the documentary evidence would support the view that the McMahon’s Point Property was acquired by Eband as trustee of the Ward Trust No 1 and that Mr Ward had no beneficial interest in it.

101               It is submitted, however, that the Court should hold that Mr Ward was nevertheless the beneficial owner of the property.  A number of matters are relied upon.

102               It seems that on 8 August 1980 a transfer was executed between Eband and a Mr Battisti, the eighth respondent for a consideration of $1.  That transfer was executed under the common seal of Eband and signed by Mr Sticpwich as director of the company.  On the same day Mr Battisti gave a general power of attorney to Mr Ward.   The transfer to Mr Battisti remained unregistered until 12 August 1986.

103               Another power of attorney from Mr Battisti to Mr Ward was executed on 9 March 1988 and  registered with the Land Titles Office.  That power of attorney purports to be witnessed by a Mr Geoffrey Adelstein, a solicitor.  Mr Adelstein in April 1989, however, swore that he had no recollection of witnessing the power of attorney.  It is possible that Mr Adelstein may simply have forgotten the occasion.

104               In an email dated 22 August 2004 addressed to the solicitors for the applicant Mr Battisti claimed that he had purchased the McMahon’s Point Property:

 “out of money I left in Australia when I returned overseas;  It was bought in 1980 long before investigation of Colin George Ward (sic) business.  Obviously, due to my own business in Italy, I could never directly take care of the property, but I let Colin Ward (my brother in law) run it on my behalf.  After all my intention in buying the property was to have a place in Australia to retire, so I didn’t care what happened in between times”

105               Given that the consideration shown in the transfer was nominal it could not be accepted that Mr Battisti purchased the property out of his own money.  The fact that the consideration was nominal would suggest that Mr Battisti was a trustee taking on a change of trustees.  However, it would seem from the email that Mr Battisti, at least, claims not to be a trustee, a matter consistent with the submission that it was Mr Ward who was the beneficial owner of the property and that it was not purchased by Eband as trustee.

106               Clearly it was Mr Ward, and neither Eband nor Mr Battisti who administered the McMahon’s Point Property.

107               The latter view is reinforced by the fact that while Mr Battisti seemingly had little to do with the property, Mr Ward, who was neither a trustee nor a director of Eband, appeared to be intimately connected to its affairs. Council rates on the property were last paid on 4 September 2002, shortly before Mr Ward’s death.  No rates, or strata levies have since been paid.  The second last rate payment made on 7 June 2002 was made by cheque drawn upon the account of Colin Ward & Co.  It is not clear who paid the last rate instalment, although it may be inferred that it was Mr Ward.  The records of North Sydney Council showed Eband still listed as owner with its address in care of Mr Ward at Braeside Street, Wahroonga even after Mr Battisti became the registered proprietor.

108               Moreover, not only did Eband appear to operate from addresses associated with Mr Ward, he clearly had authority over its operations, because on or about 22 February 1988, it would seem that Mr Ward collected the Certificate of Title for the property and the file in relation to Eband from Messrs. John Conti & Associates. Furthermore, rent and correspondence related to the rental of the property was sent by the real estate agent (R.B Kerr) to “F Battisti c/- Colin Ward”.  There would seem to be a distinct possibility that rent, which was paid in cash, found its way to Mr Ward personally.

109               In 1988,  Mr Battisti mortgaged the McMahon’s Point Property to Fitstar for $43,960.  Mr Battisti’s signature on that document appears to have been witnessed by Mr Ward.  Strangely the balance sheets from 1988 onwards disclose that the trustee of the trust was a Mr Shaw.  Just who Mr Shaw was is not clear.  He never became the registered proprietor and the property is still registered in the name of Mr Battisti.  A caveat was lodged by Ian Struthers on 3 June 1988 claiming an interest in the property as receiver.  Mr Struther’s interest is not explained on the evidence.   Then on 1 March 1988, a lease of the property with an option to purchase was executed in favour of Helen Johnson.  It would seem that prior to March 1988 the McMahon’s Point Property was occupied by Ms Ross.  Indeed, there is some suggestion that Ms Ross may have lived in the property continuously.  At any rate she said in her affidavit evidence in the present proceedings that she and Mr Ward occupied the property from 1996 to 1999.

110               While the burden of proof in these proceedings lies upon the applicant it must also be said that whether that burden is satisfied is a matter which will take into account that all the facts concerning the transaction will be within the knowledge of persons other than the trustee in bankruptcy and that will obviously be so where, as here, the individual who is claimed to have acted in fraud of creditors is dead.  So, as has already been noted, it has been said that in the context of fraudulent settlements “a very slight degree of proof should be sufficient to shift that burden”: Re Trautwein; Richardson v Trautwein.  The degree of control which Mr Ward exercised in the administration of the McMahon’s Point Property, the fact that at least one director of the so called trustee company Eband had no knowledge that she was a director and in consequence no knowledge that that company was trustee, the fact that Mr Battisti did not assert that he was a trustee but nevertheless gave to Mr Ward a power of attorney to enable Mr Ward to administer the property, the inexplicable reference to Mr Shaw as trustee, coupled with the inference that it was Mr Ward who provided the funds for the purchase and probably pocketed some at least of the rent of the property  and the fact that Mr Ward lived in the property with Ms Ross and treated the property as his own suggest that the appearance of a trust was but a façade for the reality that it was Mr Ward who was the beneficial owner.   I am satisfied that he was.

Doyalson Property

111               Pursuant to an Agreement for Sale of Land dated 5 August 1983, the Doyalson Property was purchased from a third party by a contract under which Ms Ross was purchaser for $130,000.  Ms Ross became the registered proprietor of it by a transfer dated 2 September 1983.  As at 1 March 2004, the value of the Doyalson Property was $650,000.

112               Prior to the purchase Ms Ross signed, it would seem, on 14 June 1983 a deed of settlement for a trust styled “the Doyalson Trust”.  The settlor was Ms Thomas, the appointor was Mr Ward and Ms Ross was trustee.  The potential beneficiaries were named as Alfred and Pamela Fisher, their descendants, Mrs Ward, the descendants of Mr and Mrs Ward and the sisters, parents and descendants of Ms Ross.  Ms Ross says nothing in her affidavit evidence about signing this trust deed.

113               Ms Ross in her affidavit records that she went with Mr Ward to the solicitor who acted upon the purchase.  Mr Ward had with him a cotton bank bag filled with rolled notes which he handed to the solicitor.  Present at the meeting was the person who was to be the first tenant of the Doyalson Property.  The tenant made out cheques for rent in favour of Ms Ross but addressed them to Mr Ward’s office.  Ms Ross never received any cash from the property and made no payments of rates.

114               Ms Ross said that on many occasions, of which, inferentially, this was one, Mr Ward asked her to sign documents which she did willingly.  If she sought to scrutinise a document she had been asked to sign Mr Ward would employ stand over tactics to get her to sign.  The solicitor who acted on the purchase issued trust account receipts reading “Received from Lynnette Ross for the Doyalson Trust” and “Received from Lynette Ross, Trustee for the Doyalson Trust”.  It would seem, however, that the reference to a trust on the first receipt issued was added at some time after the receipt was made out as the words have been added in a different ink and initialled.  It seems that Ms Ross on 2 August 1983 gave a power of attorney in favour of Mr Ward which was registered.  Apparently a second power of attorney was given to Mr Ward on 13 August 1984.  Ms Ross’ signature was witnessed by the solicitor.

115               From Ms Ross’ evidence it is clear that it was not her intention to purchase the property as trustee of the Doyalson Trust.  She understood that she was purchasing the property as trustee for Mr Ward beneficially.  On this basis the contribution by Mr Ward of the purchase price would lead to the conclusion, whether as a resulting trust or otherwise that Ms Ross was trustee of the property absolutely for Mr Ward.

116               Mr Ward resigned as appointor of the Doyalson Trust on 12 December 1985 and Ronald Norman Stonestreet replaced him.  Simon Ward was appointed the trustee by Mr Stonestreet on 11 November 2002. Before these changes, however, Ms Ross signed a Resolution of Trustee on 23 September 1983 purporting to vest the Doyalson Property in Robin Ward.  Presumably this was a document she signed at Mr Ward’s insistence.

117               Consistent with the view that Mr Ward was the beneficial owner the evidence shows that Mr Ward was in control of the Doyalson Property.  As noted, the property was tenanted, and although the cheques for the rent were made out to Ms Ross, they were addressed to Mr Ward’s office and she never received any of that money. In fact, the property appears to have been managed by Wyong First National  and by 8 July 2004, the account into which the rent was paid, namely Holicross Pty Limited T/F L J Ross, had a balance of $88,501.44. Also, a letter dated 14 May 1986 from Ms Ross (countersigned by Mr Ward) to Wyong First National requested all correspondence to go to him at his home, 6 Winton Street, Warrawee. It would seem that this request was acceded to, because among the documents in evidence was a rent statement from Wyong First National that was addressed to 6 Winton Street, Warrawee.   Indeed the rent statements for 1988 and 1989 were sent to “Mr L J Ross” at 6 Winton Street, Warrawee.

118               On 28 November 1988 Ms Ross signed a mortgage of the Doyalson Property in favour of Yonder Investments Ltd.  The mortgage purported to secure an advance of 160,000 Swiss Francs.   Ms Ross said that she recalled signing this mortgage and that Mr Ward had paid her $1,000 to sign it; however, she never saw the 160,000 Swiss Francs. Yonder lodged a caveat over the property on 30 November 1988.  A caveat had also previously been lodged by Dawnrays Investments Pty Ltd on 14 August 1984 pursuant to an alleged mortgage executed on 8 August 1984; however, it was withdrawn on 19 August 1986.  The evidence does not explain this transaction.  Ms Ross also said she was at no time aware that Mr Thomas Harper had a caveat over the Doyalson Property in relation to an Option to Purchase.  The applicant asserts that this has now lapsed due to the death of Mr Harper.

119               There is much to be said for the view that the Yonder transaction was a sham, that is to say that it disguised no real transaction at all but rather was a means whereby Mr Ward could retain control of the property in the event that creditors sought to get at his assets.  Interestingly, not only was a Banque Worms bank cheque dated 12 December 1988 to L.J Ross for 160,000 Swiss Franks found at Mr Ward’s home, but also a letter from Company Formations Far East Limited dated 2 May 1990 to Mr Ward in relation to the annual fee for administering Yonder Investments Ltd was found at his office. There is also a courier consignment note No.208568 dated 8 December 1988 from Mr Ward to Banque Worms in Hong Kong, which the applicant notes was shortly before the date of the purported mortgage to Yonder Investments.

120               In a letter from Filmcrew Pty Limited to Armando Y.C Chung & Co dated 21 October 1996, it was noted that the loan of 160,000 Swiss Franks was actually from Fitstar and not Yonder Investments Ltd. According to the letter, the debt was assigned by Yonder Investments to Fitstar on 15 August 1995 for $1. It is interesting to note that Fitstar and Yonder have the same directors.

121               Based upon this evidence,  it seems quite clear that Mr Ward purchased the Doyalson Property with his own cash, and had it placed in the name of Ms Ross. That appears to be Ms Ross’ understanding at least.  No mention appears to have been made of a trust at the time the property was purchased and it may be that the settlement purporting to set up the Doyalson Trust was brought into existence at a date later than the date it bears.  Indeed, the notion of a trust purchasing the property may well have been an afterthought.  This would explain why the initial trust account receipt showed an alteration naming the trust, an alteration obviously made later than the time the receipt was initially made out.

The mortgages registered over properties in favour of Fitstar

122               Reference has been made in dealing with the five properties to mortgages executed in favour of Fitstar.  I have no difficulty in finding that these mortgages were entered into with a view of putting the relevant properties beyond the reach of creditors while retaining control in Mr Ward.  It was no coincidence that these mortgages coincided with the taxation investigation and the issue of large assessments of income tax to Mr Ward.

123               Fitstar was a company registered in Hong Kong and administered, on the instructions of Mr Ward by a company known as Company Formations Far East Ltd in Hong Kong.  It ceased to administer the company on 23 May 2003 presumably when its accounts were not being paid by Mr Ward following his death.  In the financial statements of Fitstar for the years ended 1988 to 1996 the reported assets of the company were said to range from HK$1.7 million in 1988 to HK$3.8 million by 1996.  It is important that I deal now with the evidence concerning this company.  The applicant submits that Mr Ward in fact controlled Fitstar and that it was but Mr Ward’s alter ego.  Mr Ward, however, when he was alive, on the other hand attempted to distance himself from the company.

124               In the examination before George Kemp of the ATO on 30 October 1989, Mr Ward agreed that he knew of Fitstar, but said that it was through Ms Ross that he had heard about the company.  Indeed, Fitstar does not even appear in Mr Ward’s client list.  I should say here that it is most unlikely that Mr Ward heard of Fitstar through Ms Ross. However, some information concerning the company has come to light through investigations either by the ATO or the applicant.

125               In Mr Raymond Perkes’ affidavit evidence he said that Fitstar is a company registered in Hong Kong and that it was administered by a Hong Kong company known as Company Formations Far East Ltd. There is a fax from that company dated 23 October 2003 that states that it ceased to administer the affairs of Fitstar on 23 May 2003. Fitstar’s financial statements for the years ended 1988 to 1996, show, in addition to reported assets to the extent already noted, liabilities totalling approximately $2.8 million. No reference is made to the name of the creditor.  Apart from gains from exchange rate fluctuations, Fitstar always declared a loss in its financial statements.  A Hong Kong firm of auditors, Armando Y C Chung & Co ceased to act as auditors of Fitstar in 1998. 

126               In various proceedings during his life time Mr Ward protested that he knew nothing of Fitstar.  This is clearly not the case.  In evidence is a letter from Company Formations Far East Limited to Mr Ward in relation to Fitstar returning a Commonwealth Bank of Australia draft that was meant to be in payment of an invoice for services rendered because the draft required two signatures, where only one appeared.  It seems to be clear that Mr Ward personally paid Company Formations Far East Limited to administer Fitstar.  In evidence is a letter dated 6 July 1989 from that company to Mr Ward in relation to the annual charge for administering Fitstar.  There is also in evidence a letter dated 4 December 1987 from Fitstar to Abelitis & Co requesting them to act for Fitstar on a mortgage.  That firm was a firm also used by Mr Ward.

127               There is evidence that Mr Roseland of the ATO discovered various documents at Mr Ward’s home in Warrawee suggesting a strong link between Mr Ward and Fitstar. There was an unsigned letter from Fitstar to Zant offering to lend $110,000 dated 4 September 1987 and an unsigned letter from Fitstar to I.Abelitis & Co dated 10 September 1987 requesting Mr Abelitis to act on a mortgage. There was also a letter from an Edwardo Lopez of the Philippines to Mr Abelitis dated 28 September 1987 requesting him to act on a mortgage for Fitstar and claiming that Fitstar is his company. Finally there was a letter from Fitstar to Banque Worms in relation to a bank draft dated 7 December 1988 and signed by Mr Ward.  It must be asked why these documents would be at Mr Ward’s home, when he claimed no connection to the company.

128               So far as the connection between the Fitstar mortgages and the ATO audit is concerned, it should be noted that the McMahon’s Point mortgage was executed on 29 February 1988, the Long Jetty mortgage on 4 October 1987, the Ourimbah mortgages on 18 June 1988 and 3 February 1997, the Balmain mortgage on 18 January 1988 and the Doyalson mortgage on 28 November 1988.  By contrast, the ATO audit commenced in 1987.   The inference is almost irresistible that the Fitstar mortgages were each entered into in an attempt to defeat or delay the Commissioner of Taxation recovering outstanding tax through the sale of these properties.  No doubt, incidentally, the mortgages provided a further level of control for Mr Ward over the properties in question which were, in each case, held by trustees or companies.

129               Finally, the sequence of events in relation to the mortgage over the Long Jetty Property is also compelling in this regard. The mortgage was executed on 4 October 1987 from Zant to Fitstar as security for a purported loan of $110,000 and was registered.  Both a mortgage document and a cheque from Banque Worms drawn in favour of Zant in the amount of $110,000 were uncovered in searches of Mr Ward’s home.  It seems that an account was opened in the name of Zant with the Milsons Point branch of the National Australia Bank on 26 October 1987,  the cheque was deposited in a Zant account (it is not clear whether it was this one) and then three cheques totalling $110,000 were drawn upon that account in favour of a Ken Saunders between 4 and 5 November 1987.  Finally, on 6 November 1987, 10 November 1987 and 16 November 1987, application forms to remit a sum totalling $110,000 to an account with Swiss Bank Corporation were signed by “K.Saunders”.

130               The identity and whereabouts of this Mr Saunders is unknown.  Searches undertaken by the ATO failed to locate him.  The name was not to be found in the records of the ATO, the White Pages or the records maintained by the Department of Social Security. When asked about Mr Saunders, Mr Ward had also been somewhat vague. He told Mr Kemp under examination on 16 March 1989 that he had met Mr Saunders socially through a client, and then confirmed that Mr Saunders now lived in Lightning Ridge, although he was unable to produce his contact details. He denied ever having had business dealings with him or having paid monies to him.  I think it is more likely than not that the name Saunders was a name invented by Mr Ward as a disguise for himself.

131               The most likely conclusion is that in each mortgage the funds which purported to have been advanced by Fitstar were funds beneficially owned by Mr Ward and that these funds were passed around a circle to give the appearance of a real advance being made by Fitstar when actually Fitstar was acting as trustee or agent for Mr Ward.  It is not irrelevant that Fitstar, although a party to the present proceedings has not sought to defend the proceedings or sought to adduce evidence which was clearly within its knowledge showing that the mortgages were genuine.  The failure to do so enables the inference to be more readily drawn that Fitstar was merely the alter ego of Mr Ward and that the mortgages entered into were to assist Mr Ward in his plan to defeat, hinder or delay creditors.

Conclusion

132               I would order that the applicant file with the Court on or before a date to be fixed a draft of the orders which the applicant submits should be made and such as to reflect the reasons for judgment.  In addition to the making of declarations the draft short minutes of order will need to provide for ancillary orders to permit titles to be transferred to the applicant from the name of the bankrupt but subject to the interest of the St George Bank as mortgagee of the Ourimbah Property and the interest of any third party not being the alter ego of Mr Ward.  I would stand the matter over to a date to be fixed for the making of submissions as to the form of orders if the Court is of the view that further submissions are necessary.

Associate:

Dated:              23 December 2004