FEDERAL COURT OF AUSTRALIA

Charan v Gleeson [2012] FCA 236

THE COURT ORDERS THAT:

1.    The appeal be dismissed.

2.    The appellants are to pay the costs of the respondent to be taxed if not agreed.

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

REASONS FOR JUDGMENT

INTRODUCTION

1    The appellants, Mr and Mrs Charan are the parents (the parents) of a bankrupt, Prashant Prashikar Charan (the son). A sequestration order was made against the son’s estate on 16 November 2006 on the basis of his failure to repay to the Office of State Revenue in New South Wales some 3 years earlier a sum slightly in excess of $14,000 which had been paid to him under a first home purchase subsidy scheme. The respondent (the Trustee) is the Trustee of the son’s bankrupt estate.

2    In late 2010, he claimed against the parents $195,445.07 transferred by the son in January 2003 after the son had sold a property at Woongarrah in respect of which the first home purchase grant had been advanced (the Woongarrah property). The sum was paid after discharging the first mortgage over the Woongarrah property. The parents then refinanced their own home and another property and used those proceeds to purchase a property at Lot 804, Flame Tree Street, Casula, in which Mrs Charan owned 13/20th shares and the son owned 7/20th shares (the Casula property).

3    In the decision under appeal (Gleeson v Charan & Anor [2011] FMCA 729) the Federal Magistrates Court declared that the payment of $195,445.07 by the son to his parents was void as against the Trustee by reason of and pursuant to s 120 and s 121 of the Bankruptcy Act 1966 (Cth) (BA). By this appeal, the parents challenge that declaration.

4    The evidence before the Federal Magistrates Court established that the Woongarrah property was purchased by the son for $130,000 in 2001 with the assistance of the first home owner’s grant of $14,000. In addition, he borrowed $120,000 from Seaforth Securities. In February 2002, the parents borrowed $165,000 from Wizard Home Loans. In January 2003, on the sale of the Woongarrah property for $345,000, the $120,000 loan was repaid to Seaforth Securities with the balance being paid to the parents. The Casula property was purchased in October 2003 for $240,000. That purchase was subject to other loans and mortgages.

5    The son occupied the Woongarrah property for only four or five months and thus did not, as a matter of law, qualify for the first home owner’s grant requiring occupation for at least six months on a continuous basis. As at the sale of the Woongarrah property in January 2003, it was clear that repayment of the first home owner’s grant was required. It was not made.

6    On 29 July 2004, the Office of State Revenue made demand on the son for repayment of the grant. He continued to fail to repay it and a bankruptcy notice was issued by the Commissioner of State Revenue on 13 April 2006.

7    That led to the sequestration order against his estate in November 2006. The date of the relevant act of bankruptcy was ultimately 11 August 2006 and the debt, including interest at that stage, totalled $21,151.57.

STATUTORY FRAMEWORK

8    Section 120 and s 121 BA (relevantly to this appeal) provide:

120    Undervalued transactions

Transfers that are void against trustee

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

(a)    the transfer took place in the period beginning 5 years before the commencement of the bankruptcy and ending on the date of the bankruptcy; and

(b)    the transferee gave no consideration for the transfer or gave consideration of less value than the market value of the property.

…

Protection of successors in title

(6)    This section does not affect the rights of a person who acquired property from the transferee in good faith and by giving consideration that was at least as valuable as the market value of the property.

Meaning of transfer of property and market value

(7)    For the purposes of this section:

(a)    transfer of property includes a payment of money; and

(b)    a person who does something that results in another person becoming the owner of property that did not previously exist is taken to have transferred the property to the other person; and

(c)    the market value of property transferred is its market value at the time of the transfer.

121    Transfers to defeat creditors

Transfers that are void

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

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

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

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

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

Note:    For the application of this section where consideration is given to a third party rather than the transferor, see section 121A.

Showing the transferor’s main purpose in making a transfer

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

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

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

Transfer not void if transferee acted in good faith

(4)    Despite subsection (1), a transfer of property is not void against the trustee if:

(a)    the consideration that the transferee gave for the transfer was at least as valuable as the market value of the property; and

(b)    the transferee did not know, and could not reasonably have inferred, that the transferor’s main purpose in making the transfer was the purpose described in paragraph (1)(b); and

(c)    the transferee could not reasonably have inferred that, at the time of the transfer, the transferor was, or was about to become, insolvent. (emphasis added)

…

Meaning of transfer of property and market value

(9)    For the purposes of this section:

(a)    transfer of property includes a payment of money; and

(b)    a person who does something that results in another person becoming the owner of property that did not previously exist is taken to have transferred the property to the other person; and

(c)    the market value of property transferred is its market value at the time of the transfer.

THE REASONING OF THE FEDERAL MAGISTRATES COURT

9    The submission for the Trustee before the Federal Magistrates Court (based on s 120(1)(b) BA) was quite simple. As the entire net proceeds of the Woongarrah property were paid to the parents, the parents could not have given the son any consideration for the debt owed by the son to the Commissioner of Stamp Duty. They had no role in the making of the grant on any versions of events.

10    At the hearing before his Honour, three affidavits sworn by the Trustee were read. The parents objected to reliance on the content of the affidavits as the Trustee was not made available for cross-examination. His Honour was satisfied that the unavailability of the Trustee was adequately explained. There had been considerable tolerance in granting a number of adjournments in favour of the parents while different legal representation was sought. In addition to these adjournments, there was an unsuccessful but time consuming complaint made to the Insolvency and Trustee Service Australia (ITSA) by Mrs Charan as noted in Charan v Gleeson [2010] FMCA 703 (at [20]-[22]). There continued to be ongoing applications for adjournments and escalating costs incurred as the matter proceeded.

11    Complaint is raised on appeal that the evidence of the Trustee was taken without his being available for cross-examination. There is, in my view, nothing of substance in this complaint. No argument has been advanced as to what aspect of the largely formal evidence of the Trustee would have been challenged, let alone successfully. There is no proper basis shown as to why that discretionary procedural ruling of the Federal Magistrate should be disturbed on appeal. Appellate courts must exercise caution in considering whether or not they ought to interfere with discretionary exercises of a primary court’s discretionary rulings on matters of practice and procedure: In Re Will of FB Gilbert (Dec’d) (1946) 46 SR (NSW) 318 (at 323) per Jordan CJ in a passage approved by Gibbs CJ, Aickin, Wilson and Brennan JJ, in Adam P Brown Male Fashions Pty Limited v Philip Morris Inc (1981) 148 CLR 170 (at 177) Sir Frederick Jordan originally said:

... I am of opinion that ... there is a material difference between an exercise of discretion on a point of practice or procedure and an exercise of discretion which determines substantive rights. In the former class of case, if a tight rein were not kept upon interference with the orders of Judges of first instance, the result would be disastrous to the proper administration of justice. The disposal of cases could be delayed interminably, and costs heaped up indefinitely, if a litigant with a long purse or a litigious disposition could, at will, in effect transfer all exercises of discretion in interlocutory applications from a Judge in Chambers to a Court of Appeal.

12    The Trustee satisfied his Honour that he had repeatedly sought, without success, information from the son and the parents as to the basis on which the son had paid $195,445.07 (including the grant) to the parents from the net proceeds of sale of the Woongarrah property.

13    Although there was no response, the parents argued before his Honour that they made advance payments for and on behalf of the son in respect of the Woongarrah property and that those payments were made not as a gift but as a loan which justified their receipt (by way of loan repayment) of the $195,445.07 from the settlement of the property sale on 31 January 2003.

14    There was an extensive examination of the competing evidence and argument on this topic by his Honour. The parents contended that they had paid $165,000 for and on behalf of the son to pay for the construction of the home on the property. The Trustee, however, pointed to competing evidence such as:

    the absence of any documentary evidence to prove that any payments were made by the parents in respect of the Woongarrah property;

    the absence of documentary evidence to prove that any payment made by the parents was pursuant to any loan agreement; and

    the absence of documentary evidence to prove that the parents required the son to repay any moneys they had paid.

15    There was no direct evidence from the son at all. There was no corroboration from him to prove that payments purportedly made by the parents for and on his behalf in relation to the purchase of the Woongarrah property were made pursuant to any loan agreement between the son and his parents. There was no direct support at all from the son for any aspect of the parents’ version of events before his Honour. On this topic, there was some evidence before his Honour that the son was estranged from the parents which might have explained his failure to voluntarily give corroborative evidence. But there was no evidence of any attempt made by the parents to call any corroborative evidence from the son.

16    In any event, and putting all those matters to one side, his Honour was satisfied (at [46]) that it was impossible for the parents to have given any consideration to the son for that part of the $195,445.07 paid to them on the sale of the Woongarrah property which represented the first home buyer’s grant of $14,000. That sum with interest should have been repaid direct to the Commissioner of Stamp Duty on the sale of the Woongarrah property from its net proceeds.

17    His Honour referred to s 5(2) BA and found (at [96]) that no attempt had been made to lead evidence that the bankrupt son was solvent at the relevant time of the transfer of funds on the sale of the property. His Honour accepted that there had been a falling out between the parents and the son which rendered provision of corroborative evidence from the son difficult to obtain but nevertheless his Honour was of the view that the insolvency at the relevant time had been established. On appeal this conclusion of insolvency is also directly challenged.

18    His Honour was not satisfied (at [98]) that the parents had proved that there was an actual or presumed intention on the part of the son that he would hold the property on trust for his parents.

19    His Honour also rejected (at [100]) the argument that the parents lent the consideration for the purchase of the Woongarrah property and that it was not intended to make a gift or advance of the money to the Bankrupt. At [100]-[103]) his Honour said:

100.    It is argued that the Respondents paid the consideration for the purchase of the property where it was not intended to make a gift or advancement of the money to the Bankrupt. In Williams v Peters (supra) per Muir JA at [23], his Honour said that a resulting trust can only arise in favour of a party making the relevant payment and it arises when the Court can discern an intention by that party to retain its interest in the sum paid. I am satisfied that there is no evidence that is contemporaneous with payment that supports the claim that the Respondents intended to retain an interest in the sum paid such as the term of the loan.

101.    A presumption of a resulting trust may operate where a person provides the purchase price of the property, which is conveyed into the name of the Bankrupt: Calverley v Green [1984] HCA 81; (1984) 155 CLR 242 at 246 – 247. In such circumstances, there is an absence of consideration by the person who has the legal title: Napier v Public Trustee (WA) (1980) 55 ALJR 1.

102.    There are relevantly two presumptions of a resulting trust and of advancement which are applicable to determine the beneficial ownership of the property. They operate to place the burden of proof on the person seeking to rebut the presumption: Nelson v Nelson [1995] HCA 25; (1995) 184 CLR 538. In either case the presumption may be rebutted by evidence of actual intention of the transferor or person providing the money at the time of the purchase: Nelson v Nelson (supra) at 574; Calverley v Green (supra) at 262. Evidence of intention of relevant parties may be drawn from contemporaneous statements of intention, subsequent provisions or inferred from facts as to subsequent dealings and of surrounding circumstances of transaction: Trustee of the property of Cummins (a bankrupt) v Cummins [2006] HCA 6; (2006) 227 CLR 278; Draper v Official Trustee in Bankruptcy [2006] FCAFC 157 at [30]; Rambaldi (as Trustee of the Bankrupt Estate of Volkov) v Volkov [2008] FCA 1957 per Ryan J at [37].

103.    In respect of certain relationships, equity presumes that any benefit which was provided for one party at the cost of the other has been provided by way of advancement. It is then presumed that the equitable interest follows the legal title. Such presumption is drawn in relationship of father and child: Calverley v Green (supra) at 247 and in capable of being drawn in relationship of mother and child: Nelson v Nelson (supra) at 548 – 549, 574, 585. This presumption or inference may be rebutted by evidence of a contrary intention: Sui Mei Huen v Official Receiver for and on behalf of the Official Trustee in Bankruptcy [2008] FCAFC 117 at [55]. When the presumption of advancement is rebutted, the resulting trust is ‘affirmed’ or ‘presumed’ and it is the resulting trust, not an express trust which is enforced by the Courts: Nelson v Nelson (supra) at 547 – 548; Calverley v Green (supra) at 251 – 252; Brown v Brown (1993) 31 NSWLR 582 at 589D – 590B. The onus is upon the person who seeks to rebut the presumption of advancement: Nelson v Nelson (supra) at 547 – 549; Calverley v Green (supra) at 274, 251 – 252. Where the relation between donor and donee is such that an obligation, either natural or assumed, on the part of the donor to provide for the donee can be inferred, an intention to give may be presumed. A transfer from parent to child is presumed to have been made by way of advancement. In Nelson v Nelson the High Court expressed preference for the approach that the presumption of advancement applies in the case of gifts by a mother.

20    The Federal Magistrate rejected the parents’ contention that they had rebutted the presumption of advancement (see Nelson v Nelson (1995) 184 CLR 538) due to the absence of evidence which might rebut it either partially or completely. His Honour was satisfied on the evidence that the parents did not make any formal pronouncement as to the funds advanced and they were therefore by way of a gift or advancement and not a loan.

21    The Federal Magistrate also considered a defence raised by the parents on the basis of an ‘equity of exoneration’. His Honour dismissed the equity of exoneration principle (at [107]-[112]). He was satisfied that the claim based on exoneration could not be sustained, saying (at [113]):

A person otherwise entitled to an equity of exoneration may lose that equity if they receive a tangible benefit from the transaction. For the equity to be defeated, the benefit to the co-owner or surety must flow directly from the loan itself. Based on the material before the Court which is set out in detail in the submissions, it is apparent that the [parents], by receiving from the [son] the amount of $195,445.07 was greater than the amount advanced by them as it clearly incorporated the $14,000 owed to the Office of State Revenue (also see para.[56] above) together with the other amounts sourced by the debtor himself that was pooled to build the house on the Woongarrah property. I am satisfied that any claim based on exoneration cannot be sustained.

22    His Honour was satisfied (at [115]) that all the elements of s 121 BA had been established and in the circumstances concluded (at [117]) that he was satisfied that he should make a declaration that the transfer of property being the payment of $195,445.07 from the son to his parents on or about 31 January 2003 became and was void against the Trustee by reason of and pursuant to s 120 and s 121 BA.

GROUNDS OF APPEAL

23    Some 22 grounds of appeal were originally drafted by Mrs Charan but in submissions belatedly filed for the parents, the grounds are reduced to the following:

‘1)    His Honour, with respect, erred in fact and in law when he found:

(a)    Paragraph 115(c): "lt can reasonably be inferred from all of the circumstances at the time of the transfer, the transferor was, or was about to become insolvent."…;

(b)    Paragraph 115(c): "The transferor's main purpose in making a transfer for the purposes of s.121(1)(b) can then be reasonably inferred." (existing appeal grounds 3, 12);

(c)    Paragraph 115(d): "The Respondents (transferee) could reasonably have inferred that at the time of the transfer, the transferor was, or was about to become, insolvent: s. 121(4)(c).";

(d)    Paragraph 100: "... I am satisfied that there is no evidence that is contemporaneous with payment that supports the claim that the Respondents intended to retain an interest in the sum paid such as the term of the loan.";

(e)    Paragraph 113: "... Based on the material before the Court which is set out in detail in the submissions, it is apparent that the Respondents, by receiving from the Bankrupt the amount of $195,445.07 was greater than the amount advanced by them as it clearly incorporated the $14,000 owed to the Office of State Revenue (also see para.[56] above) together with the other amounts sourced by the debtor himself that was pooled to build the house on the Woongarrah property. I am satisfied that any claim based on exoneration cannot be sustained." (existing ground 6).

(2)    His Honour failed to properly differentiate between the requirements of sections 120 and 121 of the Bankruptcy Act 1976 (Cth) and "rolled up" the different considerations into one - see further [114] and [115] of Reasons.

(3)    His Honour failed to consider the provisions of s120(4) of the Act.

(4)    His Honour erred in not making a Jones v Dunkel finding against the Trustee for not making himself available for cross-examination without providing any evidence whatsoever for the Trustee's alleged inability to attend notwithstanding having been provided with Notice by the Appellants.

(5)    His Honour's findings with regards to the Wizard Home Loans are unsustainable in light of the evidence.

(6)    There was no evidence before his Honour that the Respondents had benefitted in any way from the $14,000.00 OSR grant.’

24    To understand those grounds it is necessary to quote [113] and [115] of the decision below, ([100] appearing (in [18]) above). Those paragraphs read:

113.    A person otherwise entitled to an equity of exoneration may lose that equity if they receive a tangible benefit from the transaction. For the equity to be defeated, the benefit to the co-owner or surety must flow directly from the loan itself. Based on the material before the Court which is set out in detail in the submissions, it is apparent that the Respondents, by receiving from the Bankrupt the amount of $195,445.07 was greater than the amount advanced by them as it clearly incorporated the $14,000 owed to the Office of State Revenue (also see para.[56] above) together with the other amounts sourced by the debtor himself that was pooled to build the house on the Woongarrah property. I am satisfied that any claim based on exoneration cannot be sustained.

…

115.    There are a number of elements that arise in an application under s.121 that I find to have been established here:

a.    bankrupt: s.121(9) contains the definition of transfer of property.

b.    That the property would probably become part of the transferor’s estate or would probably have been available to creditors if the property had not been transferred: s.121(1)(a).

c.    It can reasonably be inferred from all of the circumstances at the time of the transfer, the transferor was, or was about to become insolvent. The transferor’s main purpose in making a transfer for the purposes of s.121(1)(b) can then be reasonably inferred.

d.    The Respondents (transferee) could reasonably have inferred that at the time of the transfer, the transferor was, or was about to become, insolvent: s.121(4)(c).

ARGUMENTS ON THE APPEAL AND ANALYSIS

25    The oral arguments on the appeal were not made by specific reference to the newly amended grounds seriatim. Rather, a list of general complaints was made about the reasoning of the decision under appeal. The complaints are considered below.

26    Some general matters may be disposed of first. The first is that it is significant that the son was not called to give evidence at the hearing and whilst the apparent distance between the parties might partly explain that fact, there was no evidence that the son could not be compelled to attend by way of subpoena to give evidence on the topics advanced only by the parents. Given the complete lack of documentary support for the topics advanced by the parents, the absence of the son to corroborate the parents’ account was not without significance. The absence of the corroboration was a reasonable basis on which his Honour was entitled to infer that the parents’ account could not be accepted. Given that the parents had the burden of proof to show that the funds received by them were in repayment of a loan rather than by an advance from the parents to the son, the conclusion reached by his Honour was entirely open to him.

27    Complaint has been raised as to the delay in the commencement of the bankruptcy proceedings. Although the Trustee did not commence proceedings against Mrs Charan before 10 November 2010, there was documentary evidence reasonably explaining this delay. From that it is apparent that:

    From 2007, Mrs Charan refused, despite repeated requests, to provide any information to assist the Trustee in determining the basis upon which the parents were paid the entire proceeds of sale from the Woongarrah property;

    By letter of 5 February 2008, the former solicitors for the trustee advised Mrs Charan’s then solicitors the basis on which a claim existed against the parents pursuant to s 120 and s 121 BA;

    In November 2009, rather than deal with the request for information advanced by the Trustee, Mrs Charan chose to lodge a complaint against the Trustee to ITSA. The Trustee was required to respond to this complaint before it was dismissed; and

    Throughout 2010, the Trustee successfully defended proceedings in the Federal Magistrates Court brought against him by Mrs Charan in which she unsuccessfully sought an order for the removal of a caveat lodged by the Trustee against the Casula property as well as damages for his alleged breach of statutory duties.

28    In relation to the complaint that there was no evidence before his Honour on which it could be inferred or concluded that the son was insolvent, the Trustee argues, correctly in my view, that it was open for that inference to be drawn by virtue of the fact that Mrs Charan herself informed the Trustee (by letter dated 23 February 2009) that:

my son … could not afford to meet the house and land repayments of $2400 per month. He was on casual employment and earning only $100 per month and sometimes he was out of employment for two to three months at a time.

29    She reinforced this by a letter dated 7 March 2009 to the Trustee informing him that ‘the reason for the sale was that he could not meet the repayments of the loan and the house’. There was no contrary evidence which might rebut the inference that in light of those circumstances the son was unable to meet his debts as and when they became due and payable.

30    The purchase of the Casula property has assumed significance in the arguments advanced by the parents on appeal. In particular, they argue that it would be highly improbable that the son would have acquired his interest in the Casula property if he was trying to avoid creditors. This argument was duly advanced before his Honour but, once again, his Honour did not have the benefit of hearing any evidence from the son to support that suggestion in any direct manner. Other explanations are equally open including the possibility that the issue simply did not occur to the son one way or the other. His Honour clearly placed little weight on the argument. In the absence of any evidence from the son, it was open to his Honour to treat the acquisition of the interest in the Casula property by the son as a neutral factor. Equally, his Honour was entitled to disregard arguments as to how the son obtained home loans from other entities in order to acquire the Woongarrah property. There is no tested evidence that accurate details of his financial position were disclosed in such loan applications.

31    I accept the Trustee’s submission that it was open to his Honour to infer from all the circumstances at or about the time of the transfer in January 2003 that the son was or was about to become insolvent. Indeed, the evidence given by Mrs Charan as well as the son in the statement of affairs submitted to the Trustee supported such a finding. The son himself confirmed in the statement of affairs that as at 6 January 2003 he was indebted to the ANZ Bank in the sum of $12,000.

32    From this finding, taken with his Honour’s rejection of the evidence of the parents that the advances made by them were by way of loan only, taken with the absence of the son to call evidence on the topic, it was a small step for his Honour to conclude for the purposes of s 121(1)(b) BA that the main purpose of the son in making the transfer to his parents was to prevent the sale proceeds from being divisible amongst his creditors. At the time of giving those proceeds to his parents, the son was aware that he could not afford to meet the house and land repayments of $2400 per month. He knew he was indebted to the ANZ Bank in the sum of $12,000 and was at least as a fact, indebted to the Commissioner of State Revenue in the sum of $14,000. While it is conceivable that other conclusions might have been drawn, the conclusion reached by his Honour was one that was open to him. That is and was sufficient to satisfy s 121(1) BA.

33    However, that conclusion could be set aside pursuant to s 121(4) BA so that the transfer of the funds would not be void if the parents were able to satisfy his Honour that they acted in good faith. Specifically, the onus was upon them to establish that:

(a)    The consideration they gave for receipt of those funds was at least as valuable as the market value of the property, the property being the funds payment;

(b)    They did not know and could not reasonably have inferred that the son’s main purpose in making the transfer was to defeat creditors; and

(c)    Could not reasonably have inferred that at the time of the transfer the son was or was about to become insolvent. (emphasis added)

34    These are the topics on which the parents bore the burden of proof and yet failed to satisfy his Honour. There appears to be no express finding to the effect that his Honour did not believe the evidence advanced for the parents (through Mrs Charan) that she was unaware that the son was insolvent or about to become insolvent at the time of the transfer of the sale proceeds to the parents. It seems clear, however, from the conclusions his Honour reached that he was not satisfied that the parents had discharged the onus they held pursuant to s 121(4)(c) BA. There was certainly evidence on which I have already touched on which his Honour might have reached that conclusion, albeit it that there is some uncertainty as to whether the parents, or particularly Mrs Charan, were aware at the actual time of the transfer of all aspects on which Mrs Charan later relied, namely, that:

    Her son was in casual employment only, earning only about $1,600 per month;

    Sometimes her son was out of employment for two to three months at a time;

    The Woongarrah property was sold as her son could not afford to meet the house and land repayments of $2,400 per month; and

    The reason for the sale was that the son could not meet the repayments of the land and the house.

35    In relation to the conclusion attacked at appeal ground 1(d), in my view it was open to his Honour to conclude that the parents and, in particular, Mrs Charan, failed to rebut the presumption of advancement as it was her evidence that any money paid to her son in respect of the Woongarrah property was done ‘to provide him with a start in life’. While that expression is perhaps ambiguous, there is no corroborative evidence that the ‘start in life’ was by way of a repayable loan only rather than a gift. Certainly, there were no terms of any loan articulated in the course of evidence or identified and accepted by his Honour.

36    As to the challenge on appeal ground 1(e), the conclusion reached at [113] of his Honour’s reasons was open. Based on the history of the matter as explained by the parents and on the basis that there was no other explanatory or contrary evidence lead by the son, there is no reason to think that the conclusion at [113] of his Honour’s reasons was incorrect when he said ‘I am satisfied that any claim based on exoneration cannot be sustained’.

37    It is also complained (by appeal ground 2) that his Honour failed to properly differentiate between the requirements of s 120 and s 121 BA but, rather, ‘rolled up’ the different considerations into one. A specific reference was made to [114] and [115], where his Honour said (and I repeat [115]) for convenience of reading):

114    The purpose of s 121 is to recover transfers of property by a person who later becomes a bankrupt, where the main purpose of the transfer was to defeat creditors and the property would probably have become part of the estate or would have been available to creditors if the property had not been transferred. This section enables the property to be recovered for the benefit of creditors generally and to enable a rateable distribution amongst creditors. An action under s 121 with respect to a property may be commenced by a Trustee at any time: s 127(4).

115    There are a number of elements that arise in an application under s 121 that I find to have been established here:

a)    That there was a transfer of property, by a person who later became a bankrupt: s 121(9) contains the definition of transfer of property.

b)    That the property would probably become part of the transferor's estate or would probably have been available to creditors if the property had not been transferred: s 121(1)(a).

c)    It can reasonably be inferred from all of the circumstances at the time of the transfer, the transferor was, or was about to become insolvent. The transferor's main purpose in making a transfer for the purposes of s 121(1)(b) can then be reasonably inferred.

d)    The Respondents (transferee) could reasonably have inferred that at the time of the transfer, the transferor was, or was about to become, insolvent: s 121(4)(c).

38    This ground was not developed in argument but that may be because while there is some force in the observation that, taken alone, these paragraphs might tend to mislead, the more complete analysis of the evidence by reference to the two sections was, nevertheless, sufficient to address the requirements of the BA. His Honour, first, clearly examined whether or not the transfer was void against the Trustee for the purpose of s 120 BA and then separately considered a defence or exception that may be available under s 121(4) BA. In that regard, it was necessary for the parents to establish that they had satisfied all of the elements of subs (1) BA including good faith, valuable consideration, no basis for reasonable inference that the main purpose of the transfer was to defeat creditors and, finally, no knowledge or reasonable basis for belief that the son was or was about to become insolvent. On the basis of the findings that his Honour reached separately on all of these topics, that onus was not discharged.

39    The conclusion in the previous paragraph also disposes of appeal ground 3 which is not made out.

40    I have addressed and rejected appeal ground 4 concerning the failure to call the Trustee (at [9]-[10]) above.

41    In relation to appeal ground 5, it is unclear what findings concerning the Wizard home loans are sought to be attacked. This was not an argument developed orally or in written submissions. The general contention in relation to these loans appears to be that the son could not have obtained home loans had he been insolvent. There is no evidence that the son truthfully disclosed his financial circumstances in making applications for finance. This ground is not made out.

42    Finally, appeal ground 6 is to the effect that there was no evidence before his Honour that the son, initially, and then the parents, benefitted in any way from the $14,000 Office of State Revenue Grant. I am unable to accept this submission for the following reasons.

43    The evidence from Mrs Charan, which was accepted, was that in October 2002 her son applied for and obtained a $14,000 first home owner’s grant in respect of his purchase of the Woongarrah property. On the sale of the Woongarrah property in January 2003, the son became liable by operation of law to repay to the Office of State Revenue the first home buyer’s grant because he failed to occupy the premises for the requisite period. Mrs Charan accepted that the entire proceeds of the sale of the property were paid to her and her husband on settlement in January 2003.

44    In argument, counsel for the parents suggested that ‘for all we know the son may have taken the $14,000 to the casino and gambled it away’. I reject this submission. There was a powerful uncontradicted inference that the funds were received for the purpose for which they were supplied and were invested in the property. The entire proceeds after payment out of secured creditors was then passed to the parents. There was no hint of evidence before his Honour that the funds were misused for some other theoretical purpose.

CONCLUSION

45    For those reasons, the appeal will be dismissed. It is a most regrettable state of affairs that the parents have been embroiled in such bitter disputation with the Trustee for so long. The costs of the litigation will dramatically exceed the $14,000 which was clearly due and payable by the son. Had sense prevailed at the outset, arrangements could have been reached to ensure repayment of that sum. As a result of the intransigence of the parents the costs to them of their disputation and that of the son over this relatively small amount will have severe consequences in the long term. The following orders are made:

1.    The appeal be dismissed.

2.    The appellants are to pay the costs of the respondent to be taxed if not agreed.

Associate:

Dated:    16 March 2012